Summary

The act of state doctrine did not apply to allegations of impropriety against foreign court decisions, whether in the case of particular decisions or in the case of a systemic dependency on the dictates or interference of the domestic government. A decision of the Amsterdam court of appeal refusing to recognise Russian court decisions annulling arbitration awards did not create an issue estoppel preventing the appellant from resisting enforcement of the awards in England.

Facts

The appellant (R), a state-owned Russian company, appealed against a decision ([2011] EWHC 1461 (Comm), [2012] 1 All E.R. (Comm) 479) determining preliminary issues in the claim of the respondent Luxembourg company (Y) to enforce four arbitration awards.

Y had been a member of a Russian group involved in oil production and trading. After the forced break up of the group in Russia, R had acquired the majority of its assets, but not Y. The awards were in respect of certain intra-group loans made by Y to a fellow subsidiary. Y sought repayment of the loans and the arbitrators in Russia held that it was entitled to repayment. The amount awarded by the four awards was about $425 million. The awards had been set aside by the Russian Arbitrazh Courts on R's application. R's case was that the loan agreements were part of an illegal scheme of tax evasion which had been held to be illegal and fraudulent by the Russian courts. Y's response was that the allegation of unlawful tax evasion was part of the Russian state’s unlawful campaign, with the assistance of the tax and judicial authorities, to acquire control of the group's assets. Y successfully enforced the awards in the Netherlands. The Amsterdam court of appeal held that the awards should be recognised for enforcement, while the Russian courts' decisions setting aside the awards should not be recognised because they resulted from partial and dependent judicial process. Y then brought further enforcement proceedings in England to recover post-award interest of $160 million. R resisted enforcement arguing that the awards had been set aside and that Y's allegations of a campaign of unlawful interference by the Russian state were not justiciable by virtue of the act of state doctrine. The judge held, as preliminary issues, that R was estopped by the decision of the Amsterdam court of appeal from denying that the Russian decisions setting aside the awards were partial and dependent, and that the doctrines of act of state or non-justiciability did not apply.

Y argued that the act of state doctrine was only engaged where the English court was required to adjudicate upon the actions of the foreign sovereign by determining that they were invalid or by granting a remedy in respect of those actions.

Held

(1) The act of state doctrine did not prevent an investigation of or adjudication upon the conduct of the judiciary of a foreign state, whether that conduct lay in the past or in the future, and whether or not its conduct in the past was relied upon as the foundation for an assessment of the risk as to its conduct in the future, AK Investment CJSC v Kyrgyz Mobil Tel Ltd [2011] UKPC 7, [2012] 1 W.L.R. 1804 considered and Jeyaretnam v Mahmood Times, May 21, 1992 and Skrine & Co v Euromoney Publications Plc [2002] I.L.Pr. 22 disapproved. Whereas in a proper case comity required, as a matter of restraint rather than abstention, that the lawfulness of the legislative or executive acts of a foreign friendly state acting within its territory should not be the subject of adjudication in the English courts, comity only cautioned that the judicial acts of a foreign state acting within its territory should not be challenged without cogent evidence. Judicial acts were not acts of state for the purposes of the act of state doctrine, Kuwait Airways Corp v Iraqi Airways Co (No.6) [2002] UKHL 19, [2002] 2 A.C. 883 and Lucasfilm Ltd v Ainsworth [2011] UKSC 39, [2012] 1 A.C. 208 considered. The act of state doctrine did not apply to allegations of impropriety against foreign court decisions, whether in the case of particular decisions or in the case of a systemic dependency on the dictates or interference of the domestic government. Nor was there an absence of justiciable standards by which to adjudicate such allegations (see paras 86-91 of judgment). (2) Y sought to show not only that certain events occurred in Russia as a matter of state policy, but also that such events were not to be regarded as valid or effective or lawful. If the acts were lawful and not wrongful, then they would be of no use to Y. What Y wished to show was that the whole campaign was unlawful, Kirkpatrick v Environmental Tectonics Corporation International (1990) 493 US 400 andBerezovsky v Abramovich [2011] EWCA Civ 153, [2011] 1 W.L.R. 2290considered. The act of state doctrine did not bar any part of Y's case. Whether the annulment decisions should be recognised was a judicial question raised in respect of judicial acts. On the way to resolving the question whether the annulment decisions were corrupt the court was asked to take into account other judicial decisions which were said to be equally corrupt. Y's case was not an abuse of process and did not involve a collateral attack on a previous decision where the act of state doctrine was relied on for rejecting a claim for judicial review, Yukos Oil Co v Financial Services Authority [2006] EWHC 2044 (Admin) considered (paras 95-137). (3) R was not estopped by the decision of the Amsterdam court of appeal from objecting to enforcement of the awards in England. The Dutch court held that the annulment decisions were not to be recognised because that would be contrary to Dutch public policy. The issue in England was not the same: it was whether the decisions were not to be recognised as contrary to English public policy, which was or might be different from Dutch public policy. There would have to be a trial of that issue (paras 138-157).

Appeal allowed