State immunity: the English court upholds prohibition on injunctive relief against states

Dechert LLP
Contact

Dechert LLP

Introduction

In a recent decision,1 the English High Court has confirmed that injunctive relief cannot be granted against states, notwithstanding that this restriction interferes with Article 6 (Right to a fair trial) of the European Convention of Human Rights (“ECHR”). This decision provides valuable guidance as to the circumstances in which a state will benefit from state immunity and what interim measures are available to parties that litigate against state entities.

The Facts

In March 2020, a Venezuelan navy patrol vessel, the BVL Naiguatá GC-23, sank following a collision with an ice-classed cruise liner, the RCGS Resolute.

Following the total loss of the Naiguatá, Venezuela commenced civil proceedings in the Dutch Curaçaoan and Venezuelan courts against the Resolute, its owners and head managers, and its protection and indemnity (“P&I”) insurers for a combined approximate total of €425 million.

The P&I insurers applied for an anti-suit injunction against Venezuela in the English High Court on the basis that Venezuela’s claims in the Dutch Curaçaoan and Venezuelan courts were, in substance, claims to enforce the terms of the contract of insurance for the Resolute. Accordingly, the P&I insurers argued that Venezuela was bound by the terms of the contract, which included London arbitration and English law clauses.

The Decision

In deciding whether to grant the anti-suit injunction, the court considered two central issues: (1) did Venezuela have immunity from the English court’s adjudicative jurisdiction and (2) did Venezuela have additional enforcement immunity from injunctive relief.

At an interim hearing, the court granted the anti-suit injunction sought by the P&I insurers, holding that Venezuela was neither immune from the court’s jurisdiction nor an anti-suit injunction.

At the final hearing, whilst the court agreed that Venezuela was not immune from jurisdiction, it concluded that Venezuela could not be made subject to an injunction. In reaching this decision, the court made the following key findings:

1. There is no blanket state immunity from the English court’s jurisdiction. Under s.1 of the UK State Immunity Act 1978 (“SIA”), a state is only immune from jurisdiction provided that one of the exceptions contained in the SIA does not apply. In this case, the judge held that two exceptions applied: (a) the commercial activity exception (s.3(1)(a) SIA) – Venezuela’s claims were commercial in nature, and were ordinary commercial claims brought in the civil courts; and (b) the arbitration exception (s.9 SIA) – Venezuela had agreed in writing to submit the dispute to arbitration, having adopted the terms of the Resolute insurance contract.

2. As for immunity from injunctive relief, under s.13(2)(a) SIA a state is immune from various “procedural privileges”, including injunctions. Although this interferes with a party’s right to a fair trial under Article 6 ECHR, the court held that this interference was justified because the restriction pursues “legitimate domestic objectives by proportionate means and does not impact the essence of that [Article 6] right”. In particular:

a. Under international law, there appears to be consensus that even where a court orders a coercive measure such as injunctive relief, a state will be immune to any criminal or financial penalties should it fail to comply.

b. English domestic policy justifies the interference with the ECHR in this instance. Remedies of a personal nature such as injunctions and orders for specific performance are not appropriate against states and it is an area of considerable international sensitivity, raising issues of comity2 and procedural propriety. Further, there may be other remedies available to a party seeking an injunction against a state, such as, in this case, compensation for breach of an arbitration agreement or declaratory relief.

3. Even if there was an unjustified interference with Article 6 ECHR, s.13(2)(a) SIA could not be interpreted (“read down”) to effectively carve out anti-suit injunctions and thereby become compatible with Article 6 ECHR. This exercise would involve amendment to the legislation, which the courts are not entitled to do.

Conclusions

This decision provides a succinct restatement of English law on state immunity as it relates to jurisdiction and the availability of injunctive relief against states. Subject to any appeal, it appears that the English courts will not grant injunctive relief against a state, even in instances where the state is engaging in non-sovereign (e.g. commercial) activities.

This will be welcome news to states involved in litigation in England; for those litigating against states, the decision may in some cases require a reappraisal of their litigation strategy.

 

Footnotes

1) UK P&I Club N.V. & Anor v República Bolivariana De Venezuela [2022] EWHC 1655 (Comm)

2) Whereby courts seek to recognise and enforce the laws and judicial decisions of another jurisdiction as a matter of courtesy or based on the need for reciprocity.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dechert LLP | Attorney Advertising

Written by:

Dechert LLP
Contact
more
less

Dechert LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.