Summary

The Civil Jurisdiction and Judgments Act 1982 s.31 remained subject to the provisions of the State Immunity Act 1978 in respect of the circumstances in which the United Kingdom courts could exercise jurisdiction over states.

Facts

The appellant republic (R) appealed against a decision ((2009) EWHC 110 (Comm), (2009) QB 579) refusing to set aside an order granting the respondent (N) permission to serve the proceedings out of the jurisdiction. R had issued sovereign bonds denominated in US dollars under a fiscal agency agreement with a US bank. The agreement was governed by New York law and contained a submission to the jurisdiction of the New York courts and a waiver of immunity. R had subsequently declared a debt moratorium. N acquired a quantity of the bonds at a discount and issued proceedings in New York claiming that R had committed an event of default and obtained summary judgment for principal and interest in the sum of $284,184,632.30. N sought to enforce that judgment in England by an action on the judgment. N obtained leave to serve the proceedings on R out of the jurisdiction pursuant to CPR r.6.20(9) on the basis that it was a claim to enforce a judgment. R applied to set aside that order relying on sovereign immunity. Before the judge, N accepted that the two bases on which it had obtained leave to serve out, namely that there was a waiver of immunity in the fiscal agency agreement and that the proceedings related to a commercial transaction, were not sustainable. N advanced two new arguments: first, that the effect of the Civil Jurisdiction and Judgments Act 1982 s.31 was that a judgment against a state given by a court of an overseas country had to be recognised and enforced provided only that the requirements of s.31(1)(a) and s.31(1)(b) were fulfilled, which they were in the instant case; and secondly that the terms of the bonds themselves constituted a submission by R to the English court's jurisdiction for the purposes of the recognition and enforcement of the New York judgment. The judge accepted those arguments and held that N could rely on the new points to support the order for service out of the jurisdiction. R submitted that (1) the judge was wrong to hold as a matter of procedure that N could obtain permission to serve the proceedings on R on a basis of jurisdiction not advanced at the time of the original application; (2) N had to show that the case fell within one of the exceptions to the rule of sovereign immunity under the State Immunity Act 1978 and s.31 of the 1982 Act was only relevant to the substantive merits of a claim for recognition and enforcement of a foreign judgment against a state and was not relevant to the prior question of whether the English court had jurisdiction to hear the claim in the first place; (3) as a matter of interpretation of the bonds R had not submitted to the jurisdiction of the English courts within the meaning of s.2 of the 1978 Act.

Held

(1) The judge was wrong to hold that where the question of sovereign immunity was addressed, but on the basis of a mistaken legal analysis, the court was not bound to set aside the order for service out of the jurisdiction where on a correct legal analysis the state was not in fact immune from suit. Before the English court could exercise its jurisdiction against a state by granting permission to issue and serve the proceedings on the state it had to be shown, first, that the claim arguably fell within one or more of the stated grounds of what was then CPR r.6.20, and secondly that the claim was one in respect of which arguably there was no immunity from suit for the reason stated in the application to issue and serve out. Thus, if N incorrectly identified the basis on which it asserted that R was subject to the jurisdiction of the English court, then the basis for the exercise of the jurisdiction was incorrect. It was not a mere procedural error which could be cured under CPR r.3.10. The original order for service out was made upon an incorrect basis and had to be set aside for want of jurisdiction. No question of discretion arose. (2) Section 31 of the 1982 Act remained subject to the provisions of the 1978 Act in respect of the circumstances in which the UK courts could exercise jurisdiction over states. It was not a jurisdictional provision which created another exception to the general immunity rule set out in s.1 of the 1978 Act. The judge erred in holding that s.31 of the 1982 Act dealt comprehensively with the recognition and enforcement of the judgments of foreign courts against foreign states as to both jurisdictional immunity and enforcement. The UK courts would not have jurisdiction over a foreign state to recognise and enforce a judgment of a foreign court within the terms of s.31 unless it could be shown that, in respect of the state, one of the exceptions to immunity in the 1978 Act had been fulfilled. In practice that was likely to mean that the foreign state must have submitted to the jurisdiction of the UK courts in accordance with s.2 of the 1978 Act. (3) The bonds contained a submission to the New York courts and a waiver of immunity but those provisions did not amount to a submission to the jurisdiction of the English courts within s.2(1) of the 1978 Act.