In this action the plaintiffs, a small firm of builders, claim against the Republic of Zaire the balance of an account due for building work done on the ambassador's official residence in The Bishop's Avenue, Hampstead. The defendants seek to set aside service of the writ on the ground that the Republic of Zaire is an independent sovereign state and is therefore entitled to sovereign immunity. Since the point is one of some general interest I was asked to give my judgment in open court.
Prior to January 1978, the plaintiffs had, according to their evidence, done a number of small building jobs for the defendants at the residence in Hampstead and at the embassy in Chesham Place. Then, on 10 January 1978, the plaintiffs agreed to carry out substantial works at the residence. The contract is in writing. It was signed, on behalf of the Embassy of the Republic of Zaire, by the ambassador himself. The contract price was £54,400. The work was to start the next day and was to be completed by 12
[1981] 1 All ER 1110 at 1112 May 1978. There were agreed variations amounting to £8,096á4366 in all. The defendants have paid £47,800 leaving a difference of £14,696á4366 which the plaintiffs claim in these proceedings.
The writ, with the statement of claim indorsed, was issued on 16 May 1979. The master gave leave, ex parte, to serve out of the jurisdiction in August 1979. But on 9 January 1980 he set aside service of the writ and stayed all further proceedings on the ground, as he put it, that the plaintiffs would have great difficulty in overcoming the obstacle of absolute immunity. Counsel for the defendants sought to support the master's decision on two grounds. In the first place he argued that prior to the passing of the State Immunity Act 1978, the rule of absolute immunity still prevailed in the case of actions in personam. It was only in the case of actions in rem that there had been any relaxation. He relied on Compania Naviera Vascongada v SS Cristina [1938] 1 All ER 719, [1938] AC 485, The Philippine Admiral [1976] 1 All ER 78, [1977] AC 373, Thai-Europe Tapioca Service Ltd v Government of Pakistan [1975] 3 All ER 961, [1975] 1 WLR 1485 and Uganda (Holdings) Ltd v Government of Uganda [1979] 1 Lloyd's Rep 481, in which Donaldson J followed the Thai-Europe case rather than the subsequent decision of the Court of Appeal in the Trendtex Trading Corpn Ltd v Central Bank of Nigeria [1977] 1 All ER 881, [1977] QB 529.
Second, counsel sought support for his argument from the provisions of the State Immunity Act 1978 itself. That Act does not apply directly to this case since it only came into force on 22 November 1978, some ten months after the contract between the plaintiffs and the defendants. But according to counsel's argument the clear inference from the way the Act was drafted is that Parliament was changing the law in respect of actions in personam, but not in respect of actions in rem; for s 3, which creates an exception to the general rule of immunity in the case of commercial transactions, only applies to transactions entered into after the coming into force of the Act; whereas s 10, which applies to actions in rem, applies to causes of action arising before the coming into force of the Act. This shows, so it was said, that whereas s 10 was confirming or codifying existing law, s 3 was creating new law.
As to counsel's first argument, it seems to me that the matter is concluded by the decision of the Court of Appeal in Trendtex. That case established, by a majority consisting of Lord Denning MR and Shaw LJ, the restrictive theory of sovereign immunity as part of English law. In other words, a foreign state is entitled to sovereign immunity in respect of its governmental acts but not in respect of its commercial transactions. Trendtex was itself an action in personam. It is impossible to treat the judgments of the majority in that case as being confined to actions in rem. It is true that Donaldson J in the Uganda case regarded the decision in Trendtex as being irreconcilable with the previous decision of the Court of Appeal in Thai-Europe. But the Uganda case is not the latest pronouncement in this field. The point has been considered afresh on at least two occasions by the Court of Appeal.
In Hispano Americana Mercantil SA v Central Bank of Nigeria [1979] 2 Lloyd's Rep 277 the question before the Court of Appeal was very similar to that in Trendtex, namely whether the plaintiffs were entitled to a Mareva injunction against the Central Bank of Nigeria. It was argued that the position had been changed since Trendtex by the State Immunity Act 1978. That argument was rejected. It was held that the Act was not retrospective. With regard to Trendtex, Lord Denning MR said (at 279):
'Apart from those two grounds, it seems to me that the international law remains as I stated it in the Trendtex case. We had before us a decision of the Provincial Court of Frankfurt in which (in a precisely similar case to ours) an injunction had been granted: and in the Trendtex case (operating as we thought in accordance with international law as it then stood) we granted an injunction. It seems to me that the latest statutes of the U.S. and of our Parliament are not sufficient to alter the international law as we stated it. It was suggested that the decision in Trendtex was per incuriam. But we have again been referred to the authorities on what would
[1981] 1 All ER 1110 at 1113 amount to per incuriam: and especially to what was said by myself in Miliangos v. George Frank (Textiles) Ltd ([1975] 1 All ER 1076, [1975] QB 487) … and by Lord Simon of Glaisdale when the case reached the House of Lords ([1975] 3 All ER 801, [1976] AC 443. All I would say about that is that Trendtex was not decided per incuriam. On the point of the injunction, as well as the point of sovereign immunity in regard to the Central Bank of Nigeria, Trendtex governs this case. It is precisely in point on an almost identical situation. The proper course for this Court to take is simply to follow Trendtex and hold that there is no sovereign immunity and that a Mareva injunction should go pending the ultimate decision.'
Waller and Cumming-Bruce LJJ agreed with Lord Denning MR.
The second case is I Congreso del Partido [1978] 1 All ER 1169, [1978] 1 QB 500. That was an action in rem. But what was said by Robert Goff J, at first instance is nevertheless relevant to the present case. After analysing the previous authorities, including The Philippine Admiral and Trendtex, he said ([1978] 1 All ER 1169 at 1191, [1975] QB 500 at 526):
'The result of the decision in The Philippine Admiral appears, therefore, to have been that the law was committed to two irreconcilable propositions. The first proposition was that, in the case of actions in personam, a foreign sovereign is absolutely entitled to invoke the doctrine of sovereign immunity. The second proposition was that, in the case of actions in rem against an ordinary trading ship, a foreign sovereign who owns the ship may, through execution on his property, effectively be held liable on a claim in personam. The anomaly can only be entirely avoided in one of two ways; either, as in English law before The Philippine Admiral, by adopting the absolute doctrine of sovereign immunity in respect of both actions in personam and actions in rem, or, as in most foreign jurisdictions (many of which, though they distinguish between rights in rem and rights in personam, do not have separate categories of actions in rem and actions in personam), by applying the restrictive doctrine to all actions, limiting sovereign immunity to the case of an actus jure imperii as opposed to an actus jure gestionis. The result of Trendtex Trading Corpn v Central Bank of Nigeria is that, subject to any appeal to the House of Lords, the restrictive doctrine of sovereign immunity is now applicable in all cases and so the anomaly has been removed.'
On appeal from that decision of Robert Goff J the Court of Appeal was divided as to the result (see p 1092, ante). But Lord Denning MR and Waller LJ were agreed as to the applicable principles. After referring to the Thai-Europe case [1975] 3 All ER 961, [1975] 1 WLR 1485 and the Uganda case [1979] 1 Lloyd's Rep 481 Lord Denning MR continued (see p 1100, ante):
'In Trendtex … however, Shaw LJ and I took a different view. I said of the restrictive theory: “It covers actions in personam. In those actions, too, the restrictive theory is more consonant with justice. So it should be applied to them. It should not be retained as an indefensible anomaly.” My view has been reinforced by several important events.'
Lord Denning MR then refers to the Foreign Sovereign Immunities Act of the United States of America, the State Immunity Act 1978 and the fact that the United Kingdom had ratified the European Conventions of 1926 and 1972 and then continued:
'In view of these developments I think it plain that the absolute doctrine is no longer part of international law. The restrictive theory holds the field in international law, and by reason of the doctrine of incorporation it should be applied by the English courts, not only in actions in rem but also in actions in personam.
Waller LJ did not, I think, expressly approve the passage I have quoted from the judgment of Robert Goff J, but it is clear from the whole tenor of his judgment that he
[1981] 1 All ER 1110 at 1114 was in substantial agreement with the judgment below; and there is certainly nothing to suggest in his judgment that he thought there was still a distinction between actions in rem and actions in personam. Both the Hispano case and the Congreso case are, I understand, on their way to the House of Lords. Unless the House of Lords decide otherwise, it seems to me to have been clearly established by successive decisions in the Court of Appeal that prior to the passing of the State Immunity Act 1978, a foreign state had no absolute immunity in the English courts, whether the action be in rem or in personam.
As for counsel's second argument, I was not convinced that there is any relevant distinction between s 3 and s 10 of the State Immunity Act 1978. It is clear that s 3 is not retrospective; no more I think is s 10; but even if it were, it would not be legitimate to infer that Parliament was intending to change the law by s 3. Parliament is of course presumed to know the state of the law. But there is no presumption that, by legislating, Parliament intends to change the law; and I do not see why that inference should be drawn in relation to one provision of an Act merely because other provisions in the same Act are said to have been given retrospective effect.
Assuming I am right that the defendants never had absolute immunity in English law, the only remaining question is whether, on the facts of the present case, the defendants were acting in a governmental capacity or whether they were acting in a private or commercial capacity. That is a question which often gives rise to difficulty, as it did in the Congreso case; but it gives rise to no such difficulty in the present case. On the facts alleged by the plaintiffs this is a simple case of the defendants' 'mere refusal to foot the bill for the work done', to use the language of Waller LJ, in the Congreso case (see p 1109, ante).
An almost identical question came before the Constitutional Court of the Federal Republic of Germany in Claim against the Empire of Iran (1963) 45 ILR 57. In that case a firm of builders in Cologne carried out certain repairs to the central heating system in the Iranian Embassy on the instructions of the ambassador. They claimed DM292. The question was whether the Iranian Empire could be sued. It was referred to the Constitutional Court. The court held, after an exhaustive review of the decisions in many other jurisdictions, that the contract for repairs was to be regarded as a non-sovereign function of the foreign state (see at 81). The Empire of Iran case is quoted extensively in both the judgments of the Court of Appeal in the Congreso case. To my mind, it is hard to imagine a clearer case of an act or transaction of a private or commercial nature than the repairs to the ambassador's residence. The case is on all fours with the Empire of Iran case. It follows that the defence of sovereign immunity is not available. No other ground for setting aside service of the writ has been advanced in the evidence or relied on by counsel. In my judgment this is a proper case for service out of the jurisdiction under RSC Ord 11, r 1(f).
According to the note to the master's judgment, he thought there might be some difficulty in effecting service. But I see no difficulty. Section 12 of the State Immunity Act 1978 provides for service on foreign states through the Foreign and Commonwealth Office. That section applies to any proceedings instituted after 22 November 1978 even though the proceedings relate to matter's which occurred before 22 November 1978 (see s 23(3) and (4)). These proceedings were not instituted until 16 May 1979. Accordingly s 12 applies. For the reasons I have endeavoured to give I would allow the appeal and give the plaintiff leave to serve out of the jurisdiction in accordance with s 12 of the 1978 Act.