Summary

Where the question of sovereign immunity was addressed on an application for an order granting permission to serve out of the jurisdiction on a foreign state, but on the basis of a mistaken legal analysis, the court had a discretion to set aside the order, even where the mistake was an innocent one, but was not bound to do so where on a correct legal analysis the state was not in fact immune from suit. Civil Jurisdiction and Judgments Act 1982 s.31 dealt comprehensively with the recognition and enforcement of the judgments of foreign courts against states, as to both jurisdictional immunity and enforcement.

Facts

The applicant republic (R) applied to set aside an order granting the respondent (N) permission to serve the proceedings out of the jurisdiction, and sought in addition a declaration that the English court had no jurisdiction in respect of the claim brought against it by N. N, which was a hedge fund, had obtained a United States judgment against R in the sum of US$284,184,632.30 in respect of principal and interest on N's holdings in a series of bonds issued by R on which R had defaulted. N brought proceedings in England based on the judgment debt. N obtained permission to serve the proceedings out of the jurisdiction on the basis that R had waived its sovereign immunity by the terms of the agreement under which the bonds were issued, alternatively that the agreement and the bonds were commercial transactions for the purposes of the State Immunity Act 1978 s.3. On the application to set aside permission to serve out of the jurisdiction, N accepted that the waiver of immunity in the bond agreement only applied to proceedings in New York or Argentina and did not cover proceedings in England, and that the "commercial transactions" exception in s.3 of the 1978 Act did not apply because the claim was brought on the New York judgment, and not on the transactions on which the judgment was obtained. N sought to support the order on other grounds. N argued that the case of a foreign judgment against a state was covered by the Civil Jurisdiction and Judgments Act 1982 s.31(1); considering the terms applicable to the bonds R had submitted to the jurisdiction of the English court and thereby waived any immunity from suit. R argued that N was not entitled to raise new arguments in respect of immunity; the order to serve out should be discharged for non-disclosure on the without notice application; in any event N's claim was not justiciable in the English courts.

Held

(1) Section 31 of the 1982 Act dealt comprehensively with the recognition and enforcement of the judgments of foreign courts against states, as to both jurisdictional immunity and enforcement. The correct position was set out in Dicey, Morris & Collins, The Conflict of Laws (14th edn), vol.1, para.14-095. A foreign judgment against a state would be capable of enforcement in England if the foreign court would have had jurisdiction if it had applied the United Kingdom rules on sovereign immunity set out in the State Immunity Act 1978 s.2 to s.11, the effect of which was that a state was not immune where it submitted to the jurisdiction or where the proceedings related to a commercial transaction; and if under UK law the state was not immune from the processes of execution. The effect of s.31(4) of the 1982 Act was that as regards enforcement, the state had the procedural privileges extended by the 1978 Act. Further, the judgment would only be recognised and enforced if it would have been recognised and enforced against a non-state party, so that proceedings on the judgment remained subject to the various safeguards developed by the common law. The New York court would have had jurisdiction applying rules corresponding to the UK rules and therefore the requirements of s.31 were satisfied. (2) The terms of the bonds provided that a final non-appealable judgment, such as the New York judgment, was to be conclusive and binding upon R, and might be enforced in any courts to the jurisdiction of which R was or might be subject by a suit upon such judgment. Those contractual provisions went beyond waiver and amounted to a submission to the jurisdiction of the English court. (3) N was entitled to put forward a new case on immunity. Applications for permission to serve out of the jurisdiction on a foreign state had to show distinctly why the prospective defendant was not absolutely immune from suit. In a case where the question of sovereign immunity was addressed, but on the basis of a mistaken legal analysis, the court had a discretion to set aside the order, even where the mistake was an innocent one, but was not bound to do so where on a correct legal analysis the state was not in fact immune from suit. Applying that approach, permission to serve out of the jurisdiction was correctly sought and obtained on the basis of CPR r.6.20(9), the claim being one made to enforce a judgment. (4) The order for service out should not be set aside on grounds of non-disclosure, or in the court's discretion. (5) The principle of non-justiciability had no application to the instant case, Kuwait Airways Corp v Iraqi Airways Co (No6) (2002) UKHL 19, (2002) 2 AC 883 applied. Albeit involving a sovereign borrower, the case was firmly in the commercial sphere. The claim was for the enforcement of a judgment debt due under a regularly entered New York judgment. That did not require the English court to consider, or express a view upon, the appropriateness of R's acts leading up to its debt restructuring, or on the restructuring itself.

Applications refused