Litigating in the Ivory Coast: A toxic shock

The group personal injury action against Trafigura, involving some 30,000 claimants, arose from the discharge of toxic waste from a tanker in 2006. Identifying and communicating effectively with the claimant group required establishing
an expansive network of local 'community representatives', some of whom exploited claimants by levying unwarranted charges.
One, Mr Gohourou, had been identified as a particular concern. The solicitors were responsible for the safe receipt and distribution of the £30m settlement. It was known that, as a consequence of government corruption (in which Gohourou had also been implicated), very little from an earlier Trafigura settlement with the government had reached the rightful claimants. The new fund was now also beginning to draw government attention.

It was concluded that the
fund should be received into
an account in the Ivory Coast. Following settlement, Gohourou, said to be acting for CNVDT
(an organisation purportedly representing victims), secured
a freezing order over the fund. The Ivory Coast's Court of Appeal then ordered the fund be paid over to CNVDT. Ultimately, a resolution was achieved by which CNVDT would retain
some £6m of the fund, leaving some 6,624 claimants receiving nothing.

Negligence was alleged in relation to the fund being paid into an Ivory Coast account on the grounds it was reasonably foreseeable that it would be vulnerable to fraudulent claims. The solicitors argued that the only foreseeable risk of fraud was in dispersing the fund to rightful claimants, not an attack on the fund itself. To hold otherwise would be to judge with hindsight an extraordinary sequence of events.

However, the court concluded that reliable information
known to the firm 'was not drawn together and assessed'. Significantly, this much was known: the country was volatile and with a weak rule of law; corruption among senior public officials and the judiciary was prevalent; damages paid to the government from the earlier settlement had not reached claimants; and government officials had demonstrated an interest in the fund.

Consequently, the solicitors should have appreciated that
the settlement was a likely
target if not deposited off-shore.

The court rejected arguments that the real cause of the loss
was not fraud but judicial corruption, or that judicial corruption was an intervening cause. It was sufficient that placing the settlement in the account was an 'effective cause' of the loss. The loss was also not too remote: to argue the fraud was facilitated by corrupt judicial decisions focused wrongly on characterising the type of loss through the means by which it came about.

The decision is a salutary lesson for firms involved in politically unstable jurisdictions, particularly in group litigation,
of the importance of thorough political risk analysis to ensure the safety of client funds.
While the territory might appear familiar, there can be a risk of complacency and the case highlights the importance
of always obtaining local,
expert advice.

Solicitors and their insurers will want to ensure where at all possible that client funds are only held outside jurisdictions where a risk has been identified. In such jurisdictions, knowing the rules is one thing: understanding how the rules of the game can be broken could be every bit as important.

Martin Jensen is a partner in the professional indemnity team at BLM @BLM_Law www.blmlaw.com