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Recent Developments in the Law of Sovereign Immunity in the United Kingdom

Published online by Cambridge University Press:  27 February 2017

Rosalyn Higgins
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Extract

The last eighteen months have witnessed very significant changes in the interpretation and application of the doctrine of sovereign immunity by the English Courts. These changes are important not only as matters of historical and practical interest, but because they address many of the fundamental policy questions in a manner that has been unnecessary in U.S. practice because of the way in which the Tate Letter has channelled the development of the law along certain set patterns.

Type
Three Perspectives on Sovereign Immunity
Information
American Journal of International Law , Volume 71 , Issue 3 , July 1977 , pp. 423 - 437
Copyright
Copyright © The American Society of International Law 1977

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References

1 26 Dept. State Bull. 984 (1952).

2 Cf. The Charkieh (1873) L.R. 4 A&E 59 where a claim of immunity by the Khedive of Egypt was rejected by Sir Robert Phillimore, the decision turning in part on the fact that the vessel was chartered to a British subject and engaged in commerce and in part on the nonsovereign status of the Khedive.

3 (1880) 5.P.D. 197.

4 (1897) 4.p.D. 129.

5 Per Brett L.J. (1880) 5 P.D. 19 at 214.

6 [1920] P. 30.

7 [1924] P. 236. For earlier cases that appear on one reading to uphold this proposition, see The Jassy [1906] id. 207 (where the facts were virtually identical to those of The Parlement Beige, with the King of Romania here claiming immunity); and The Gagara [1919] id. 95.

8 E.g., Mighell v. Sultan of Johore [1884] 1 Q.B. 149; Compania Mercantil Argentina v. United States Shipping Board [1924] 131 L.T. 388; Bacchus S.R.L. v. Servicio Nacional del Trigo [1975] 1 Q.B, 438; Swiss Israel Trade Bank v. Government of Salta [1972] 1 Lloyd's Reports 497; United States and France v. Dollfus Mieg et Cie. and Bank of England 1952 A.C. 582 (H.L.).

9 [1975] 1 WLR 1492. Lord Denning formulated the following exceptions: First, “a foreign sovereign has no immunity in respect of land in England.” Second, “a foreign sovereign has no immunity in respect of trust funds here or money lodged for the payment of creditors.” Third, “a foreign sovereign has no immunity in respect of debts incurred here for services rendered to property here.” Fourth, “a foreign sovereign has no immunity when it enters into a commercial transaction with a trader here and a dispute arises which is properly within the terrirorial jurisdiction of our courts.” Id. 1490-91. On this last point, see infra p. 435.

10 [1976] 2 WLR 214, 70 AJIL 364 (1976).

11 [1976] 2 WLR 225. The Privy Council said it would not follow The Porto Alexandre because (1) it had been decided because its members (wrongly) thought they were bound so to decide by The Parlement Belge, (2) three of the five Law- Lords in The Cristina [1938] A.C. 485 thought it was doubtful whether sovereign immunity should extend to state-owned vessels engaged in ordinary commerce, (3) the trend of world opinion was against absolute immunity in rem, (4) “their Lordships themselves think that it is wrong that it should be so applied. In this country— and no doubt in most countries in the western world—the state can be sued in its own courts on commercial contracts into which it has entered and there is no apparent reason why foreign states should not be equally liable to be sued there in respect of 1 such transactions.” [1976] 2 WLR 232.

12 The Jassy, [1906] A.C. 207 was, said the Privy Council “indistinguishable from The Parlement Beige” (224); and in The Gagara [1919] A.C. 95 the question whether the ship was being used for merely trading purposes and that immunity should be refused on that ground “was not taken at all” (224).

13 In The Cristina [1938] A.C. 485, although immunity was granted (in circumstances that in this writer's view are open to criticism), “the question whether a sovereign state can claim immunity in an action in rem against a ship employed by it solely for trading purposes was never in issue at all” (226). In The Sultan of Johore v. Abubakar Tunku Aris Bendahar [1952] A.C.318, the Privy Council had declared the issue an open one; and MacKenna J. in Swiss Israel Trade Bank v. Government of Salta [1972] 1 Lloyd's Rep. 497 had also left open the question of whether a stateowned vessel used wholly or substantially for trade was immune from English jurisdiction.

14 [1976] 2 WLR 233; referring to [1938] A.C. 485.

15 [1976] 2 WLR 233.

16 [1977] 2 WLR 356, 16 ILM 471 (1977).

17 [1976] 1 WLR 868. He held that, although the Central Bank was incorporated by statute as a separate legal entity and without express provision as to its status as a department of state, this was not, following the judgment of Jenkins LJ. in Bacchus S.R.L v. Servicio National del Trigo [1957] 1 Q.B. 438 at 467, conclusive as to immunity. He found further that immunity was to be granted as the main functions of the Bank were to issue and control the national currency, to handle exchange control, and to act as state treasury: these functions made it the alter ego and a department of the state. One can, of course, agree with Jenkins L.J.'s point in Bacchus without following Donaldson J. in believing that function generally is a relevant test. It will be seen that Donaldson J. was not concerned with functions in the sense of identifying the nature of the particular transaction (which was clearly on that test commercial), but with the general role of the Bank unrelated to the transaction in question. Counsel in this case were: F. P. Neill Q.C., C. French Q.C., M. Pickering, Professor D. P. O'Connell (for the plaintiffs); and T. Bingham Q.C., and Professor A. Guest (for the defendants).

18 Alfred Dunhill v. Republic of Cuba, 96 S.Ct. 1854.

19 11 ILM 470 (1972); and see the excellent article by Sinclair The European Convention on State Immunity, 22 ICLQ 254 (1973).

20 28 USC §§1331-32; 1602-11, Pub. L. 94-583, 90 Stat. 2891, 15 ILM 1388 (1976). See also Official Documents section, infra pp. 595-601.

21 [1977] 2 WLR 356 at 367.

22 Id. 367.

23 A somewhat singular formulation. Assuming that the defendant's status is relevant at all (on which see below, infra p. 432), is the test whether international law would regard the defendant as a department of government? Or is this not, beyond the obvious question of, good faith, a matter for the forum? Cf. the formulation by Stephenson L.J.: “is the Bank, controlled as it now is by the Government of Nigeria, the sort of body which the law of nations, or if it differs, the law of this country, recognises as entided to the immunity which it accords to a sovereign state?” (Id. 374) This writer believes the robust view of Shaw L.J. on this point is to be preferred. The task, he declares, may be made somewhat easier by taking into account the view of the government but “it does not relieve a court before which the issue of sovereign immunity arises of the responsibility of examining all the relevant circumstances.” (Id. 383) He makes no reference to any status “under international law.“

24 Id. 371.

25 Id. 385

26 See The Charkieh (1873) L.R.A.&E 59.

27 Krajina v. Tass Agency [1949] 2 AER 274; Bacchus S.R.L. v. Servicio Nacional del Trigo [1957] 1 QB 438; Swiss Israel Trade Bank v. Government of Salta and Banco Provincial de Salta [1972] 1 Lloyds Rep. 497. In The Philippine Admiral the Privy Council noted that in Bacchus the Court of Appeal was divided as to whether the defendants were a department of state, but “none dpubted for a moment that if they were so to be regarded they were entitled to immunity” [1976] 2 WLR 216 at 223.

28 [1977] 2 WLR 375.

29 See Trendtex Trading Corporation v. Central Bank of Nigeria, [1976] 1 WLR 86, at 876-77.

30 Mellenger v. New Brunswick Corporation [1971] 1 WLR 606

31 Id. 609.

32 A shift to function as the relevant test is to be seen in the thoughtful judgment of MacKenna J. in Swiss Israel Trade Bank v. Government of Salta and Banco Pro* vincial de Salta [1972] 1 Lloyd's Rep. 497. Here the defendant Bank functioned as an ordinary commercial bank but in addition exercised certain official functions. Although the absolute immunity rule in respect of an in personam action prevailed, MacKenna J. looked to see whether in the exercise of the relevant functions the Bank was independent of government control, and found that it was.

33 Cf. the earlier statement of Lord Denning in Rahimtoola v. Nizam of Hyderabad that a separate legal entity which carried on commercial transactions for the state was an agent, and not an organ, of the government “and was not entitled to immunity” [1958] A.C. 379.

34 Krajina v. Tass Agency, [1949] 2 AER 274. Cf. The significantly greater emphasis placed on the role of the foreign attribution by Kerr J. in Rolimpex v. Czamikoto [awaiting entry into WLR]. Status was an issue in Rolimpex not for a claim of immunity but, conversely, because a Polish state-trading company sought to show sufficient distance from the Polish Government in order to rely on a clause which allowed reliance on force majeure in respect of government intervention.

35 [1977] 2 WLR 371 and see Rolimpex, supra note 34.

36 See Triquet v. Bath (1764), 3 Burrow 1481; Heathfield v. Chilton (1767), 4 Burrow 2016; Barbuit's Case, Forresters’ Cases in Equity 281; and discussion thereof, [1977] 2 WLR 377.

37 See R. v. Keyn (1876), 2 Ex. D. 202; and the most celebrated dictum, by Lord Atkin: “So far at any rate as the Courts of this country are concerned, international law has no validity save insofar as its principles are accepted and adopted by our own domestic law” Chung Chi Cheong v. The King [1939] A.C. 167. Lord Denning disarmingly notes—before going on to reject this proposition—“I myself accepted this without question in Reg. v. Immigration Officer, ex. p. Tharkar (1974), 1 QB 70.” [1977] 2 WLR 365.

38 Id. 380.

39 Id.

40 Id. 388.

41 “I now believe the doctrine of incorporation is correct. Otherwise I do not see that our Courts could ever recognise a change in the rules of international law.” Id. 365.

42 Id. 365.

43 Id. 388.

44 Id. 389.

45 Unreported. Counsel in this case were R. Alexander Q.C., B. Rix, and the present writer (for the plaintiffs) and T. Bingham Q.C., and B. Davenport (for the defendants).

46 See 68 AJIL 280, 311, 541 (1974).

47 Mambisa was described in the charter party as the owner of the vessel but ownership was in fact claimed by the Republic of Cuba.

48 The court found that under English choice of law rules the charters were both probably governed by Cuban law, as were the bills of lading.

49 The reasons were contested. The Cubans claimed that the Embassy in Santiago came under attack, and that the Ministry of Merchant Marine and Ports then became concerned for the safety of the Playa Larga and ordered its withdrawal; which decision the crew unanimously agreed with. The Chilean authorities emphasized the good order in Valparaiso port, the lack of danger there, and the fact that other east European vessels continued unloading after the coup. Goff J. found that both the Playa Larga and the Marble Islands could have unloaded at Valparaiso, though the decision not to was taken out of concern for the safety of the vessels; whereas the decision not to discharge at Callao was a “political decision taken by the Cuban Government.” Transcript, 9.

50 Cuba Law No. 1256.

51 From the detailed arguments on ownership, see Transcript, 11-12, 21-26.

52 By the time judgment was handed down, the Court of Appeal had given judgment in Trendtex, making it clear that the restricted doctrine of immunity applied in personam as well as in rem. Further, there was now confirmation by the Court of Appeal of the findings of the Privy Council (with its somewhat uncertain status in matters of precedent, with House of Lords’ decisions existing to the contrary) so far as actions in rem were concerned. Nonetheless, in an interesting passage obiter, Goff J. explained why he would in any event have felt free to reject The Porto Alexandre. In.a passage that contrasts most interestingly with the approach of Lord Denning and Shaw L.J. in Trendtex (though reaching the same conclusion) he relied on the reasoning of Lord Parker CJ. in Smith v. Leech Brain ir Co. Ltd. [1962] 2 Q.B. 405 at 415-6.

53 [1976] 2 WLR 214.

54 Transcript, 28.

55 Affidavit evidence of foreign law in a variety of jurisdictions was accepted by the court.

56 Close attention was paid to Victory Transport Inc. v. Comisaria General 336 F.2d 354 (2d. Cir. 1964); National City Bank v. Republic of China 348 U.S. 356 (1955); New York and Cuba Steamship Co. v. Republic of Korea, 132 F. Supp. 684; Dunhill v. Republic of Cuba, 96 S.Ct. 1854 (1976); Cabolent v. National Iranian Oil Co. 9 ILM 152 (1970); Empire of Iran Case (30 April 1963, BVerf GE 16); The Charente (Nyett Juridiskt Arkivl, 1942); and Trendtex v. Central Bank of Nigeria, (Frankfurt Comm. Ct, No 3/8 0.14/76, 1975). The 1962 European Convention on State Immunity and the 1976 U.S. Foreign Sovereign Immunities Act were also examined. Goff J. rejected the plaintiff's arguments on S. Ill of Dunhill and also noted that S. III only represented the views of four members of the Supreme Court: Transcript, 36. Cf. Lord Denning's reliance on Dunhill in Trendtex. [1977] 2 WLR 367.

57 In large part, the plaintiffs claimed, because in these circumstances a government was really making an act of state defense and had not hitherto been thought to be making assertions relevant to an immunity claim.

58 Conceptually distinct was the question of purpose or motive in the making of a transaction. The U.S. Foreign Sovereign Immunities Act 1976 makes clear that this is not relevant to a classification of an act as “commercial or otherwise.” See supra note 20, § 1603(d). See also Lord Denning in Trendtex, who rejected as relevant to a claim for immunity the fact that the cement purchased was to be used for building army barracks. [1977] 2 WLR 369.

59 Parallel arguments were also made in tort to cover the claim of wrongful conversion, i.e., that it was the nature of the relationship that fell to be determined and not the tortious act.

60 Transcript, 35.

61 Id. 33.

62 Id. 32.

63 Id. 33.

64 Id. 31. He offered two grounds for this view: first, that “such a plea will in any event depend upon the extent to which the defence is recognized in the relevant jurisdiction“; and second, that “the whole purpose of the doctrine of sovereign immunity is that the domestic courts of a foreign state should not even take cognizance of a dispute in which a foreign sovereign is impleaded.” Id.

65 These included questions relating to the freedom of the Court not to follow The Porto Alexandre; the admissability of evidence of foreign law; the significance for the central point of the Brussels Convention of 1926; the requirements of good faith in relation t& the drawing on the letters of credit when the goods had not been delivered; whether the problem of Mambisa's title should be tried as an issue in the actions; and—a point of considerable interest to the English commercial Bar and in respect of which Goff J's judgment is very closely reasoned—the correctness or otherwise of The Andrea Ursula [1971] 1 Lloyd's Rep. 145.

66 Italics added [1958] A.C. 379 at 422.

67 Order 11, rule 1. R.S.C. deals with circumstances in which service out of the jurisdiction may be allowed.

68 [1975] 1 WLR at 1492

69 For perceptive criticisms on this ground, see Markesinis, A “Breeze” of Change in the Law of Sovereign Immunity, 1976 Cambridge L.J. 198. In Rahimtoola, the proper law of the contract was English, providing a sufficient ground under 0.11 rule 1 for service out of the jurisdiction.

70 Thus, lack of “real connection” was a strong factor in The Imias, supra note 20, at 312. But see the trenchant criticism on this point among others, of Monroe Leigh. Id. 280. The new U.S. Immunities Act, in its definition of “commercial acts” in fact appears to circumscribe nonavailability of immunity to acts having a substantial territorial connection with the forum: See supra note 20, §1605(a)(2). Cf. however, the specific rejection of this as an “additional requirement” by the Frankfurt Commercial Court in the suit that Trendtex brought before it against the Nigerian Central Bank, Dec. 20, 1975, supra note 56. Note also that §1605(b) does not stipulate the need for any territorial connection “in any case in which a suit in admiralty is brought to enforce a maritime lien against a vessel or cargo of the foreign state, which maritime lien is based upon a commercial activity of the foreign state… .“

71 The leading English case is The Atlantic Star [1974] A.C. 436.

72 The United Kingdom is in fact not a party.

73 Transcript, 41.

74 The Jupiter [1924] 236.

75 [1954] 3 WLR 531.

76 Transcript, 20-21.