On 17 July 2012, the Privy Council gave judgment in a case brought by FG Hemisphere, a Delaware corporation, against La Générale des Carrières et des Mines (“Gécamines“), a mining company owned by the Democratic Republic of Congo (“DRC“).

The judgment develops the law on the liability of state-owned corporations for debts owed by the State.  The Privy Council, by reference to a comprehensive range of English, US, French, Commonwealth and international case law, has issued an authoritative view on the matters to be taken into account when considering whether a state-owned entity may be equated to a State for the purposes of liability and enforcement. The Privy Council held that Gécamines was clearly an entity distinct from the State, and as such, FG Hemisphere was unable to enforce DRC debts against Gécamines’ assets.

This judgment follows the recent case of Democratic Republic of the Congo v. FG Hemisphere (FACV Nos. 5, 6 & 7 of 2010) in the Hong Kong Court of Final Appeal, and considers some of the same facts that arose in that case.  As previously reported here, in that case it was held that States enjoy absolute immunity in Hong Kong as a result of the sovereign immunity policy of the People’s Republic of China (in contrast to the restrictive policy of immunity which applies under the UK State Immunity Act 1978 and in many other jurisdictions). FG Hemisphere’s attempt to enforce its awards against DRC assets in China consequently failed.  Despite that judgment, the principles laid down by the Privy Council in this case in relation to when state-owned entities will be identified with the State (and, by extension, entitled to claim immunity) are likely to be highly influential in Hong Kong as well as other jurisdictions.


FG Hemisphere has purchased the assignment of two very substantial arbitration awards against the DRC, and has brought proceedings in a number of different jurisdictions around the world in pursuit of DRC assets against which the awards may be enforced.

FG Hemisphere brought proceedings against Gécamines in Jersey seeking to enforce against Gécamines’ shareholding in a Jersey joint venture company and certain income streams due from that company to Gécamines under contract.   The Royal Court of Jersey on 27 October 2010 upheld FG Hemisphere’s claim including a claim for injunctive relief, on the basis that Gécamines was at all material times an organ of and so to be equated with the DRC.  On 14 July 2011, the Jersey Court of Appeal upheld this judgment (by a majority).

Gécamines appealed to the Privy Council, the highest court of appeal for UK overseas territories and crown dependencies (as well as a number of Commonwealth countries).


The Judicial Committee of the Privy Council (also known as the “Board“) handed down its judgment on 17 July 2012.  The judgment sets down clear principles regarding the position of state-owned companies and the circumstances, if any, in which they and their assets may be equated with the State and its assets.

The lower Jersey courts had decided the case on the basis that whether Gécamines was an organ of the DRC was to be determined by a common law test derived from the English Court of Appeal’s decision in Trendtex Trading Corp v Central Bank of Nigeria [1977] 1 QB 529.  The Board, however, considered that significant developments since that judgment also needed to be taken into account.  In particular, the UK State Immunity Act 1978 (the “Act“) (which had been applied to Jersey), provided for an express distinction between, on the one hand, the State, and, on the other, a “separate entity” – identified by the Act as “any entity … distinct from the executive organs of the government of the State and capable of suing and being sued”.

The Board held that this distinction was central not only to the issue of whether the entity enjoyed immunity (which under the Act was principally a question of whether or not it was performing acts of a sovereign nature), but also to the questions of liability and enforcement raised in this case.

The starting point was therefore whether the entity (i) was distinct from the organs of State, and (ii) possessed legal personality.  The Board held that an entity’s constitution, control and functions were also relevant, but that “constitutional and factual control” and “the exercise of sovereign functions” (features common to many state-owned entities) do not without more convert a separate entity into an organ of the State.

As a general principle, the Board ruled that “where a separate juridical entity is formed by the State for what are on the face of it commercial or industrial purposes, with its own management and budget, the strong presumption is that its separate corporate status should be respected, and that it and the State forming it should not have to bear each other’s liabilities”.

Further, it would take “quite extreme circumstances to rebut this presumption”.  For a state-owned entity to be assimilated with a State, the affairs of the entity and the State would have to be “so closely intertwined and confused” that the entity could not properly be regarded for any significant purpose as distinct from the State.

The Board considered at some length the various connections and dealings between the DRC government and Gécamines.  On the evidence, Gécamines was not a “mere cypher” for the DRC government.  The Board concluded that it was a real and functioning corporate entity, having substantial assets and a substantial business, with its own budget and accounting, borrowings, debts and tax and other liabilities.  It was clearly distinct from the executive organs of government.

The Board also considered the question of the piercing of the corporate veil in these circumstances.  It held that there may be particular circumstances in which the State has so interfered with or behaved towards a state-owned entity that it would be appropriate to look through or past the entity to the State, so lifting the veil of incorporation.  This was not the case here, however, and nor was it the case that the company should be regarded as a sham or as having no meaningful existence.


This judgment helpfully clarifies the principles regarding enforcement of State debts against state-owned entities, and will no doubt be the authoritative statement of the law in this area for many years to come.

Its effect is that it will likely be even more difficult for creditors of States to seek to enforce against the assets of state-owned companies.  The circumstances in which a state-owned company will be regarded as equivalent to the State itself will now arise only in “quite extreme circumstances”.  It should therefore be borne in mind when dealing with States that the assets of such companies are very likely to be inaccessible, and vice versa.