Law Report: Duty to pay foreign earnings to state bank not a debt

Camdex International Ltd v Bank of Zambia and another; Court of Appeal (Lord Justice Simon Brown, Lord Justice Otton, Lord Justice Phillips) 17 January 1997

A foreign company's obligation under the public law of its own country to lodge a proportion of its foreign currency earnings in that country's state bank's account in London did not create a debt enforceable by civil proceedings and capable of attachment by way of garnishee proceedings by a judgment creditor of the state bank.

The Court of Appeal dismissed an appeal by the plaintiff, Camdex International Ltd, against the refusal of Mr Justice Morison on 24 May 1996 to make absolute a garnishee order nisi whereby part of a judgment debt of US$120m obtained against the defendant, Bank of Zambia, would be satisfied by the garnishee, Zambia Consolidated Copper Mines Ltd (ZCCM).

Under Zambian law ZCCM, as Zambia's largest foreign currency earner, was required to pay 45 per cent of such earnings to the defendant bank, being credited in return with Zambian kwacha. The bank, as the state-owned central bank of Zambia, administered exchange control pursuant to the Bank of Zambia Act 1985. Under reg 3(1) of the Bank of Zambia (Foreign Currency) Regulations 1994, foreign currency income obtained by ZCCM was to be disposed of in accordance with written directions from the bank.

Camdex, as the assignee of rights held by the Central Bank of Kuwait against the Bank of Zambia under two deposit agreements, issued proceedings to recover part of the debt and on 18 September 1995 obtained summary judgment. Camdex then sought to garnish foreign exchange in ZCCM's hands to satisfy the bank's judgment debt in the UK.

But on 26 September 1995 the bank changed its directions to ZCCM, authorising it to receive its foreign currency earnings into its own bank account at the Zambia National Commercial Bank in London, and not the Bank of Zambia's. It was then to transfer by standing order 45 per cent of such earnings to the bank's account.

Under Order 49, rule 1(1) of the Rules of the Supreme Court, where a person (the judgment creditor) obtained a judgment or order for the payment by some other person (the judgment debtor) of a sum of money, and any other person in the jurisdiction (the garnishee) was indebted to the judgment debtor, the court might order the garnishee to pay the judgment debt.

Given that ZCCM was within the jurisdiction, the first question was whether ZCCM was "indebted to" the Bank of Zambia. That in turn depended on whether ZCCM's obligation to pay a proportion of its foreign exchange to the bank was one enforceable by civil action.

Mark Howard QC and Alan Roxburgh (Baker & McKenzie) for Camdex; Richard Salter QC and Daphne Loebl (Eversheds) for ZCCM; Michael Brindle QC and Richard Handyside (Lovell White Durrant) for the bank.

Lord Justice Simon Brown said it was clearly no coincidence that the direction of 26 September was given just eight days after Camdex had obtained summary judgment against the bank: plainly it was designed to hinder execution of the judgment debt. The question was whether, when ZCCM then breached that direction, by cancelling its standing order in favour of the bank, the bank had a civil cause of action against ZCCM.

There was no general principle that a statutory obligation to pay must give rise to a civil cause of action for the recovery of the money due. Each case must depend on its own facts. Here, it was impossible to conclude that a civil action was intended to lie for the recovery of foreign exchange due under the direction.

Regulation 3 of the 1994 Regulations, under which directions were to be given by the bank, was headed "Offences relating to foreign currency"; the entire mechanism for controlling the disposition of foreign currency was explicitly criminal.

There was not a word in the regulations suggesting the availability of any civil process of recovery, whether to the bank or anyone else. On this fundamental ground, Camdex's appeal must be dismissed.

Even if such a cause of action existed, his Lordship would hold the claim unenforceable in the English courts, since the courts had no power to entertain an action for the enforcement of the public law of a foreign state.

Paul Magrath, Barrister