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Queen's Bench Division (Commercial Court) (Transcript:Counsell) HEARING-DATES: 1 April 1993 1 April 1993 COUNSEL: B Rix QC and J Snider for the Plaintiffs; D Joseph for the Defendants PANEL: Saville J JUDGMENTBY-1: SAVILLE J JUDGMENT-1: SAVILLE J: In May 1992 the Plaintiffs obtained leave ex parte to serve a Writ out of the jurisdiction upon the Republic of Z and B Co Ltd. The claim advanced by the Plaintiffs against B Co Ltd was for amounts due to the Plaintiffs for the provision of goods, services and finance to B Co Ltd which is a "parastatal", ie a legal entity wholly owned by the State of Z. The claim against the latter is that in the autumn of 1991 the State made a legally binding agreement with the Plaintiffs to discharge this indebtedness of B Co Ltd. The Court granted leave to serve B Co Ltd out of the jurisdiction on the ground that the contracts in question fell to be performed in this country and so far as the State was concerned both on this ground and on the ground that the agreement with the State was made in London. B Co Ltd did not seek to defend the proceedings and in July 1992 the Plaintiffs obtained a default judgment against this party, which remains wholly unsatisfied. The State of Z entered an acknowledgment of service at the end of July 1991 but after the Plaintiffs had taken out an application for summary judgment the State issued an Order 12 rule 8 application, challenging the jurisdiction of the Court on the grounds both that the State of Z was entitled to state immunity and that England was not the appropriate forum for the resolution of the claim advanced against the State by the Plaintiffs. It so happens that the Order 12 rule 8 application was made out of time but the Plaintiffs do not seek to assert that this fact precludes the State from taking these points. The matter came before the Court at the end of August 1992 for directions. At this hearing those representing the State requested the Court to make directions enabling the question of forum non conveniens to be considered first, before either the question of state Immunity or the application for summary judgment. The request was based on the proposition that the question of forum non conveniens would not require a great deal of preparation or gathering of evidence, whereas the plea of state Immunity would require, in effect, the trying out of the Plaintiffs' claim, since the State denied that it had entered into the agreement alleged by the Plaintiffs, while the latter asserted that the agreement in question was of a kind that fell within the exceptions of immunity contained in Section 3 of the State immunity Act 1978. The Court on this occasion was not disposed to give such directions. Instead Gatehouse J ordered that evidence should be prepared on all three questions and that the Order 12 rule 8 applications should be listed together with the plaintiffs' application for summary judgment. The Order made by Gatehouse J made clear that the requirement put on the State to prepare to deal with the Plaintiffs' application for summary judgment was without prejudice to the objections of the State to the jurisdiction of the Court. On 23rd November 1992 the State of Z issued a Summons seeking an Order that the question of the appropriate forum for the hearing of the matter be decided at the forthcoming hearing and that the applications relating to sovereign immunity and summary judgment be stood out pending the resolution of this preliminary issue. In other words the State sought to reopen the directions given by Gatehouse J earlier in the year. Due to the pressure on Court time, it was not possible for me to rule on this application at the time, which was opposed by the Plaintiffs. I did, however, mention to the parties my preliminary view, which was that as a matter of Jurisdiction it seemed to me that any plea of state immunity would have to be dealt with before any other matters. I then adjourned the application so that it could be dealt with at the outset of the hearing fixed in consequence of the order of Gatehouse J. That hearing commenced before me on 10th February 1093. On this occasion the Plaintiffs made clear not only that they continued to oppose the application that forum non conveniens be heard first, but also that it was their submission that by making such an application the State was to be deemed to have submitted to the jurisdiction of the Court and so could no longer rely upon state immunity. In order for there to be no doubt about the position I then posed the following two questions to those representing the State: (1) Is the State formally applying to this Court to hear and determine, in advance of all other issues, whether or not England is the appropriate forum for the resolution of the Plaintiffs' claim? (2) Does the State submit to the jurisdiction of the English Court to hear and determine the matter set out in Question 1? In view of the potential consequences of any answers to these questions I gave the State time to consider what reply they should make. After considering the matter, those representing the State informed me that the answer to the first question was "yes" and that the answer to the second question was also "yes", though as regards the latter the affirmative answer was without prejudice to all questions of enforcement. It was explained to me that this qualification was designed to make clear that the State was not waiving such privileges as those contained in Section 13 of the State Immunity Act 1978. In the circumstances as they developed, therefore, the Court was faced with the following questions: (1) Was the State to be deemed to have submitted to the jurisdiction of the Court in the sense of having lost its right to rely on State Immunity? (2) If not, did the Court have jurisdiction to hear and determine the forum non conveniens question before dealing with the plea of State Immunity ? (3) If the Court did have such jurisdiction, was it appropriate to deal first with the question of forum non conveniens in the circumstances of the present case? (4) If the Court had jurisdiction to deal with forum non conveniens and it was appropriate to do so, was England the proper forum for the determination of the dispute? (5) If the State was not deemed to have submitted to the jurisdiction, was it immune from the jurisdiction on the grounds of State Immunity? (6) Depending on the answer to the foregoing questions, were the Plaintiffs entitled to summary judgment? Section 1 of the State Immunity Act 1978 provides that a State is immune from the jurisdiction of the Courts of the United Kingdom except as provided in the following provisions of Part 1 of the Act. Section 2(3) of the Act, which is in this Part, provides that a State is deemed to have submitted to the jurisdiction of the United Kingdom Courts and is thus not immune as respects proceedings in these Courts if (among other things) it has intervened or taken any step in those proceedings. Sub-section (4)(a) makes clear that sub-section (3) does not apply to intervention or any step "taken for the purpose only" of claiming immunity. In the present case the State, when applying under Order 12 rule 8, did so not only on the grounds of State Immunity, but also on the grounds of forum non conveniens. Thus it might be argued that that application on its own amounted to a step which was not taken for the purpose only of claiming immunity under the State Immunity Act. However, Mr Rix QC for the Plaintiffs was not disposed to advance that argument but was content to rely upon the submissions made by the State to Gatehouse J, to the application made by the State to me at the end of last year, to the renewal of that application before me at the outset of the hearing and to the answers given by the State to the questions which I posed. In his submission these matters, taken severally or together, amounted to a step taken in the proceedings by the State otherwise than for the purpose of claiming immunity. Mr Joseph for the State submitted that this was not so. In his submission the Plaintiffs' argument confused two separate kinds of jurisdiction, namely the jurisdiction to decide whether jurisdiction exists and the jurisdiction to try the matter on the merits. In his submission both the forum non conveniens question and the State Immunity question involved only the exercise of the first type of jurisdiction, so that there could be no question of the State submitting or being deemed to submit to the second type of jurisdiction. In support of his argument Mr Joseph relied upon the decision of the House of Lords in William & Glyn's Bank v Astro Dinamico Compania Naviera SA [1984] 1 All ER 760, [1984] 1 Lloyd's Rep 453. In that case the Plaintiffs had brought proceedings in this country on guarantees allegedly provided by foreign Defendants which contained English law and jurisdiction clauses. The Defendants denied the validity of the guarantees and contended that since they were invalid the English Court lacked jurisdiction over them; and they applied to set aside service of the proceedings on them on this ground. The Defendants had themselves brought proceedings in Greece against the Plaintiffs which raised the same issues as to the validity of the alleged guarantees. The Defendants relied upon these latter proceedings in support of a simultaneous application to stay the English proceedings until the outcome of the proceedings in Greece. Bingham J (as he then was) considered that he could not entertain the latter application before dealing with the former, for to do so would be to assume a jurisdiction which, if the Defendants were right on their first application, did not exist. Both the Court of Appeal and the House of Lords disagreed with this view on the grounds that in dealing with the second application the Court would not be assuming a jurisdiction to deal with the merits of the claim, but merely exercising the jurisdiction to decide whether the Court did have jurisdiction to deal with the merits. In considering whether or not to stay the proceedings pending the outcome in Greece the Court was merely deciding at what stage it would be appropriate to consider the challenge to the jurisdiction -- and not in any way exercising or assuming a jurisdiction to try the case on the merits. For the same reasons the House of Lords rejected the argument that by applying for a stay the Defendants had waived their objection to the "merits" jurisdiction of the Court. In the view of the House of Lords, the error into which Bingham J had fallen was to confuse two quite different types of jurisdiction, namely "jurisdiction" jurisdiction and "merits" jurisdiction. In my judgment it is the argument advanced by the State and not that of the Plaintiffs which contains a very similar error, by confusing the jurisdiction of the English Court to decide whether a State is immune from its process with another quite different kind of "jurisdiction" jurisdiction. If under the State Immunity Act a foreign sovereign is immune from the jurisdiction of the United Kingdom Courts, that is the end of the matter. In such a case the Court has no power to decide whether or not, for example, England is the convenient forum, nor any other questions (whether of jurisdiction or otherwise) that might arise in the context of litigation between non-sovereign bodies. Unlike the circumstances in the case cited, the forum non conveniens application cannot be described as being part and parcel of the exercise of the relevant jurisdiction, for the question whether a State is immune from suit has nothing whatever to do with the question whether England is the proper forum for the resolution of the dispute between the parties. It is for this reason that I concluded in A v Republic of X [1990] 2 Lloyd's Rep 520 at 524-525, that when a question of state immunity arises it must be finally determined at the outset, relying on the decision of the Court of Appeal in JH Rayner v Department of Trade [1989] Ch 72, [1988] 3 All ER 257. It is not permissible to proceed on the basis that the point can be determined later, for if immunity in fact exists the Court would ex hypothesi be purporting to exercise powers which it does not possess. In view of the foregoing it seems to me to be clear that (leaving aside the original Order 12 rule 8 Summons itself) the State, by thereafter making and pursuing its applications for the forum non conveniens question to be dealt with before the State Immunity question, has taken a step in the proceedings otherwise than for the purpose only of claiming immunity. Of course, by making such applications, the State has not submitted to the "merits" jurisdiction of the Court, nor did the Plaintiffs suggest that it had, since the applications concern a different challenge to the jurisdiction, but that is not the point. By applying to the Court to deal first with this other jurisdictional challenge the State, as expressly appears from the answer to the questions I posed, is necessarily accepting that the Court has power over the State in this regard and is asking the Court to exercise this power. In my judgment it inevitably follows that the State has done something by way of a step in the proceedings which cannot be described as only for the purpose of claiming State Immunity. For these reasons the answer to the first of the questions set out above is that the State is deemed to have submitted to the jurisdiction of the English Court within the meaning of Section 3 of the State immunity Act 1978. Accordingly the second and third questions do not fall to be decided, but it will be apparent that my view remains the same as that expressed in A v Republic of X [1990] 2 Lloyd's Rep 520. It is perhaps worth reflecting on the consequences were this not the position. If the Court embarked upon such an exercise and made orders against the State, including orders as to costs, but afterwards decided that the State was immune from jurisdiction, there would be no means of enforcing such orders which would in all probability be complete nullities. Save in a case where this course of action was taken at the instigation of the non-state party, this could hardly be described as productive of justice. It is convenient at this point to deal with an argument advanced by Mr Joseph to the effect that it would be unfair in the present case not to deal with the forum non conveniens argument first. As I understood it, his submission was that if state immunity was dealt with first and his Clients were unsuccessful, the Plaintiffs would be enabled to argue on forum non conveniens that since the Court had effectively already decided the case when considering state immunity this was a powerful factor in favour of keeping the matter in the English Courts. I am not persuaded by this, for even assuming (which I do not accept) that this could be described as productive of unfairness, such a situation would be the direct result of the State's own and ex hypothesi ill-conceived claim to state immunity. Since in my judgment the State is deemed to have submitted to the jurisdiction, the next question is whether England is the proper forum for the resolution of the dispute between the parties. On this topic Mr Joseph submitted that everything pointed to the Courts of Z as the proper forum. It was common ground that Z law was the law applicable to decide whether or not the State had entered into a legally enforceable agreement with the Plaintiffs and the rights and obligations arising out of any such agreement. Most of the contracts with B Co Ltd giving rise to the underlying indebtedness were expressly subject to the same law. The "centre of gravity" of the dispute was in the State of Z, with many of the discussions taking place in that country with Ministers and officials of the Z Government. The fact that the alleged agreement was made in London was of little materiality, for the discussions said to have resulted in an agreement might just as easily have taken place in Z as a follow up to earlier talks in that country. On their own these submissions might have some substance. However, there were two other matters that seemed to me to be of major importance. The first of these was that the Plaintiffs were not entitled to bring proceedings against the State in Z without the fiat of the Attorney General of Z. The material put before me by the State at the outset left me wholly unsatisfied whether or not that fiat would be forthcoming. Mr Joseph suggested that I could grant a stay conditional upon this happening, but I was not disposed to take this course, which seemed to me to be quite unfair to the Plaintiffs. However during the course of the hearing Mr Joseph was able after consulting his Clients to offer an assurance that the fiat would be forthcoming in terms that the Plaintiffs were able to accept. This particular obstacle was therefore removed. The second matter concerned the currency of the claim, which it is common ground is US Dollars. In proceedings in Z any judgment is likely to be given in the local currency which can hardly be described as a hard currency in view of the economic difficulties facing Z. Apart from this the Plaintiffs would require the consent of the Bank of Z before they could, as non-residents, remove any payment of any judgment debt from that jurisdiction. In the circumstances I regard this state of affairs as militating strongly against the proposition that the Z court would be a forum where the case could be suitably tried for the interests of all the parties and the ends of justice. It was Mr Joseph's submission that this particular obstacle was also overcome by an assurance given in one of the Affidavits relied upon by the State. Paragraphs 9 and 10 of this Affidavit are in the following terms:- "9. With regard to A Co Ltd action, the Government is willing to give an undertaking that, if it were to be unsuccessful in proceedings in Z, it would be prepared to satisfy the judgment in US Dollars, the decretal amount being given in local currency notwithstanding. 10. What is stated in paragraphs 1-8 is true to the best of my knowledge and belief while paragraph 8 is true on the basis of information given to me by the Principal Secretary, Ministry of Finance." I was not satisfied that the deponent had authority to offer a binding undertaking that the Government would satisfy any Z judgment in US dollars or that Paragraph 9 amounted to a satisfactory undertaking to this effect. As to the first of these matters, it seemed to me possible that Paragraph 10 of this affidavit contained a typographical error in that the second reference to Paragraph 8 was intended to be a reference to Paragraph 9. In these circumstances I suggested to Mr Joseph that he should seek an assurance from his Clients that the second reference to Paragraph 8 was indeed a mistake for Paragraph 9 and that the State did give a clear undertaking to satisfy any judgment in US Dollars. Neither assurance was forthcoming nor was any reason put forward for this state of affairs. In these circumstances I am satisfied that it would be quite unjust for me to conclude that the Z Court would be the appropriate forum. On the contrary, I am persuaded by Mr Rix that the English Commercial court is the forum where the matter can be suitably tried for the interests of both parties and the ends of justice. This Court is well used to dealing with questions of foreign law, many of the Plaintiffs' witnesses are here and I can see no injustice in the State litigating the dispute in this country. Indeed, as a result of Gatehouse J's Order, the evidence has already been collected and exchanged in English proceedings, although I should make clear that I do not regard this alone as a factor of any great significance. Furthermore, it is the case that the Z Court has no summary procedure so that however strong the Plaintiffs' case it would take years for it to be resolved. When these factors are added to the fact that in my judgment the only alternative forum suggested is inappropriate for the reasons given, it seems to me to follow that the Plaintiffs have discharged the burden of persuading the Court that the case should be tried here. The next question is that of state immunity. Since in my judgment the State has submitted to the jurisdiction, this question does not really arise and so I propose to deal with it shortly. It is the Plaintiffs' case that the State made an agreement with them that falls within the provisions of Section 3 of the State Immunity Act and in respect of which the State is accordingly not immune from the jurisdiction of this Court. For reasons stated earlier in this judgment and had there been no submission to the jurisdiction it would have been necessary for the Court finally to decide this question at the outset and before dealing with such matters as forum non conveniens. Having heard the evidence on this basis I am of the view that this question too is to be answered in favour of the Plaintiffs. On this question I had the advantage of hearing the oral evidence (including the cross-examination) of Mr Roshan Merali Dewji, the person who the Plaintiffs alleged made the agreement with a Dr Ben Moshi on behalf of the State in London on 18th September 1991. Having considered his evidence and the written evidence of the State (which had chosen not to avail themselves of the opportunity given to tender oral evidence) together with the contemporary correspondence and other materials put before me I find that on 18th September 1991 in London Dr Ben Moshi assured Mr Roshan Dewji that the State had taken over and would immediately discharge the indebtedness of B Co Ltd to the Plaintiffs, by realizing sufficient of the assets of B Co Ltd in Z and "externalizing" the funds so generated to the Plaintiffs. By "externalizing" Dr Moshi meant and was understood by Mr Dewji to mean that the Plaintiffs would be paid in London in the currency of the indebtedness, namely US Dollars. By "immediately" Dr Moshi meant, as he explained at the time, a period of two or three months. Mr Dewji would have preferred a shorter period, but in my judgment the parties were at one in agreeing that the Plaintiffs would be paid within a reasonable time which would not extend beyond the period suggested by Dr Moshi. I am also satisfied that as a matter of Z (and indeed English) law Dr Moshi had actual authority from the State to give this assurance. The material before me shows that for a long time the Plaintiffs had been pressing the State to make arrangements for payment of the indebtedness of their "parastatal" and to my mind the assurance given by Dr Moshi is wholly consistent with the other evidence in the case. The suggestion that Dr Moshi lacked authority was only raised a long time after the event notwithstanding that Dr Moshi's own telex confirming the discussion in London was copied both to the Z Treasury and the Prime Minister's Office. Dr Moshi was at the time the Principal Secretary in the Ministry of Agriculture and Livestock Development which in turn was responsible for the supervision of B Co Ltd. His own evidence (or at least one part of it) was to the effect that he mistakenly thought that he did have authority, but no explanation was suggested as to how this mistake arose nor to my mind is the existence of any such mistake consistent with the other evidence. I am further satisfied that as a matter of Z law the assurance given by the State in the circumstances in which it was given amounted to a promise legally binding on the State. As I have said the Plaintiffs had been pressing the State to deal with the indebtedness of this "parastatal" and had made it clear that they were not only contemplating legal proceedings or the seizure of B Co Ltd assets but also that their own bankers (who were pressing the Plaintiffs to get in the debt) were minded to take the matter up themselves. Indeed, not only had the Plaintiffs been seeking a meeting, but had made clear that while they were being driven to take such steps what they really wanted the State to do was to take over and discharge the indebtedness. To my mind it is clear from the evidence put before me that the Plaintiffs not only assented to the assurance but did so in return for forbearing to take the steps which they had been threatening to take. I should note at this point that my findings on Z law are based on the expert evidence of Mr Lakha, who now practises as a barrister in London but who formerly practised in Z. I accept the evidence of this witness who attended the hearing before me and who was cross-examined by Mr Joseph on behalf of the State. It was not suggested that any circumstances had arisen which afterwards discharged or modified the promise the State had made and it is not disputed that if (as I consider to be the case) the State is under an obligation to the Plaintiffs, this obligation to date remains unperformed. It remains to say that in my view the promise of the State formed part of a "commercial transaction" within the meaning of Section 3 of the State Immunity Act 1978 and indeed an obligation of the State which by virtue of a contract fell to be performed in part at least in the United Kingdom within the meaning of the same Section. It follows that were it necessary for me to do so, I would conclude on this ground that the defence of state immunity is not available to the State in these proceedings. There remains the question of the summary proceedings under Order 14. In this regard Mr Joseph submitted that were I to decide the state immunity and forum non conveniens questions against his Clients, then it would not be possible for the Plaintiffs to proceed with their Order 14 application unless and until the State decided to enter a new acknowledgement, since by virtue of Order 12 rule 8 the existing acknowledgement would cease to be of any effect. To my mind such a submission (which was raised for the first time at the hearing) runs counter not only to the Order of Gatehouse J but also to the fact that from the outset the State made it clear to the Plaintiffs that leaving aside state immunity and forum non conveniens it intended (if necessary) to defend the action. On this basis the Plaintiffs set about preparing for the hearing. In these circumstances I ruled at the end of the hearing that the State was now precluded from, in effect, frustrating the present application for summary judgment, though of course the State is free to play such part in the hearing of that application as it sees fit. I took the view that it was not appropriate for me to hear the submissions on this application until I had ruled on the other points in the case, and indeed I gave further directions allowing additional evidence to be put in, but in view of this judgment I am now disposed to make arrangements to listen to and rule upon the application for summary judgment. DISPOSITION: Judgment accordingly SOLICITORS: Clyde & Co; Denton Hall Burgin & Warrens |