The decision clarifies the role of the English courts and the UK executive branch in the recognition of foreign heads of state and the ability of English courts to adjudicate the lawfulness of executive and legislative acts of foreign states.
The UK Supreme Court (UKSC) recently issued its judgment in “Maduro Board” of the Central Bank of Venezuela v “Guaidó Board” of the Central Bank of Venezuela. The case concerns who controls Venezuela’s gold reserves of approximately US$1.95 billion held by the Bank of England, and proceeds of a gold swap contract of approximately US$120 million held by court-appointed receivers in England: the board of the Central Bank of Venezuela (the BCV) appointed by Nicolás Maduro, who claims to be the President of Venezuela (the Maduro Board); or the BCV board appointed by Juan Guaidó, who claims to be the interim President of Venezuela following his appointment by the National Assembly of Venezuela (the Guaidó Board)?
The answer involved two key issues:
- Who should be recognised as Venezuela’s head of state, Maduro or Guaidó?; and
- If Guaidó is recognised as head of state, is his appointment of the Guaidó Board and a related special attorney general valid? This question involved an antecedent issue of whether the foreign act of state doctrine permitted an English court to enquire as to the validity of the relevant acts under Venezuelan law.
Commercial Court and Court of Appeal Decisions
In the proceedings below, both the first instance judge in the Commercial Court, Teare J, and the Court of Appeal, had before them two statements from the executive branch of the UK government. The first was a statement from the then Foreign Secretary dated 4 February 2019 (the Foreign Secretary Statement), and the second was a 19 March 2020 letter from the Director for the Americas at the Foreign & Commonwealth Office (as the Foreign, Commonwealth and Development Office (FCDO) then was) (the FCO Letter) — collectively referred to as the Executive Statements.
At first instance, Teare J found that the Foreign Secretary Statement and/or the FCO Letter constituted recognition by the UK government since 4 February 2019 of Guaidó as the constitutional interim President of Venezuela. The judge held that in accordance with the “one voice” principle — pursuant to which the recognition of foreign governments and heads of state is a matter for the executive branch of the UK government and must be accepted by the English courts — the recognition in the Executive Statements was conclusive.
On the second issue, Teare J held that the foreign act of state doctrine precluded an English court from considering the validity and/or constitutionality of the legislative acts of the Venezuelan National Assembly and the executive acts of Guaidó pursuant to which the Guaidó Board and the special attorney general had been appointed. The judge held that those acts were non-justiciable and that the court was required to regard the acts as valid and effective without inquiry.
The Court of Appeal, however, took a different approach (see our previous blog post for a full analysis of the Court of Appeal’s decision). It concluded that, with respect to the recognition issue, the Executive Statements were not unequivocal and left open the possibility that the UK government recognises Guaidó as de jure President of Venezuela whilst concurrently and implicitly recognising Maduro as de facto President. The Court of Appeal interpreted the meaning of the Executive Statements by reference to extrinsic evidence, including, inter alia, continued diplomatic relations between the UK government and the Maduro regime and the UK government declining to accord diplomatic status to Guaidó’s representative in London. Accordingly, the Court of Appeal considered that the recognition issue would be best determined by posing further questions to the FCDO to clarify the statements made in the Foreign Secretary Statement and the FCO Letter. The Court of Appeal remitted the matter to the Commercial Court with appropriate directions.
The Court of Appeal considered it premature to decide the foreign act of state issue on the basis that it only arises if Guaidó is considered the sole head of state of Venezuela.
Appeal to the UK Supreme Court
The Guaidó Board appealed the Court of Appeal decision to the UKSC, arguing that the Court of Appeal erred:
- In its interpretation of the Executive Statements, which it had held recognised Guaidó as de jure interim President but left open the possibility of Maduro being recognised as de facto President
- In concluding that Maduro’s de facto recognition would require the Court of Appeal to treat Guaidó’s acts as nullities
- In holding that the act of state issue was not capable of being answered without first determining whether judgments of the Venezuelan Supreme Tribunal of Justice (the STJ) should be recognised by an English court
The Maduro Board was granted permission to cross-appeal on the foreign act of state issue. Subsequently, the UKSC granted the Foreign Secretary’s application for permission to intervene in the appeal.
Following a three-day hearing, the UKSC handed down its judgment on 20 December 2021. Lord Lloyd-Jones delivered the lead decision, with which Lord Reed, Lord Hodge, Lord Hamblen, and Lord Leggat agreed.
On the issue of recognition, the UKSC agreed with the Court of Appeal and Commercial Court that the issue should be determined in accordance with the “one voice” principle. However, it disagreed with the Court of Appeal’s application of the principle in four key respects.
- The language of the Executive Statements was not ambiguous or less than equivocal.
The UKSC disagreed with the Court of Appeal’s approach to the interpretation of the Executive Statements. It held that it is necessary to ascertain the UK government’s subjective intention from the words used in the Executive Statements in light of the context in which the relevant statements were made. The UKSC noted that the UK government provided the following response when expressly asked who it recognises as head of state and head of government of Venezuela: “the United Kingdom now recognises Juan Guaidó as the constitutional interim President of Venezuela, until credible presidential elections can be held.” Contrary to the Court of Appeal’s interpretation of the Executive Statements, the UKSC considered these statements, which said nothing about recognising Maduro, to be a clear and unequivocal recognition of Guaidó as President of Venezuela, and that it necessarily follows that Mr. Maduro is not recognised as President of Venezuela in any capacity.
- It was inappropriate for the Court of Appeal to interpret the Executive Statements by reference to extrinsic evidence.
The UKSC held that the Court of Appeal had erred in interpreting the Executive Statements with reference to extraneous materials and in relying on notions of implied recognition. It ruled that such an approach is inconsistent with the “one voice” principle and that the Court of Appeal should have refused to admit evidence to contradict an executive statement. The UKSC held that the question of recognition should turn on the subjective intention of the UK government as stated in a statement or certificate issued by the executive branch. When a statement is equivocal, the dealings which the UK government may have had or continue to have with different individuals in relation to a foreign government are irrelevant to the question of recognition. Any ambiguity in an executive statement should be resolved through a further request to the FCDO. In the absence of an express statement or certificate by the UK government, the recognition issue does not arise and the courts should conduct an inquiry as to whether the relevant entity in fact carries out functions of a government in accordance with the High Court’s decision in Republic of Somalia v Woodhouse Drake & Carey (Suisse) SA.
- There is no scope for English courts to apply the concept of implied de facto recognition.
The UKSC held that implied recognition of de facto heads of state / governments was a concept of international law that did not apply in English law. Accordingly, the UKSC held that it is not open to an English court to infer implied de facto recognition of a foreign head of state from the UK government’s conduct. The task of an English court is to interpret and apply any express statement by the UK government in relation to the status of a person claiming to be the head of state, and the “one voice” principle requires that such recognition by the executive branch of the UK government to be conclusive in England. An English court seeking to determine whether a person has been implicitly recognised as a de facto head of state, as the Court of Appeal had done, would be to “trespass into an area which is constitutionally within the exclusive competence of the executive”.
- The Court of Appeal’s reliance on the concepts of de jure and de facto recognition was misplaced.
The UKSC noted that the Court of Appeal’s reliance on the concepts of de jure and de facto recognition was misplaced. As the Foreign Secretary explained during the hearing, in the limited instances that the UK government did accord recognition, its recent practice has been to do so without using the terms de jure or de facto. The UKSC, therefore, concluded that whether such a distinction plays a useful role any longer before English courts was doubtful.
Thus, the UKSC held that the Court of Appeal had erred in finding that the Executive Statements were not conclusive as to who the UK government recognises as Venezuela’s head of state; the UK government has recognised Guaidó as the interim President of Venezuela since 4 February 2019. Accordingly, the UKSC held that, pursuant to the Executive Statements and the “one voice” principle, English courts should recognise Guaidó as Venezuela’s head of state.
This conclusion was confirmed by fresh statements from the FCDO following the Court of Appeal decision and in submissions by the Foreign Secretary before the UKSC. The statements and submissions, which the UKSC noted did not need to be in the form of a formal certificate to constitute an executive statement, made it clear that since 4 February 2019, the UK government has recognised Guaidó as constitutional interim President of Venezuela and does not recognise Maduro as President of Venezuela in any capacity.
Foreign Act of State
Following recognition of Mr. Guaidó as Venezuela’s head of state, the UKSC needed to determine whether the validity of the acts pursuant to which the Guaidó Board and the special attorney general had been appointed were justiciable in an English court, and if so, whether the acts were valid under Venezuelan law.
The first issue required consideration of the foreign act of state doctrine, and in particular a detailed examination of the UKSC’s treatment of this doctrine in Belhaj v Straw. Lord Neuberger’s judgment in Belhaj — which the UKSC recognised reflected the ratio decidendi of that case — set out four possible rules that had been treated as part of the foreign act of state doctrine.
- English courts will recognise and will not question the effect of a foreign state’s legislation or other laws in relation to any acts that take place or take effect within the territory of that foreign state (Rule 1).
- English courts will recognise and will not question the effect of an act of a foreign state’s executive in relation to any acts that take place or take effect within the territory of that state (Rule 2).
- English courts should not consider issues involving a challenge to the lawfulness of an act of a foreign state which is of a nature that a municipal judge cannot or ought not to rule on such act (e.g., making declarations of war and of peace). The English courts should also not consider issues that would require them to determine the legality of acts of a foreign government in the conduct of foreign affairs.
- English courts will not investigate acts of a foreign state which could embarrass the UK government in circumstances where the UK government communicates this position; Lord Neuberger indicated that this rule has not been clearly established.
Rule 2 was the most relevant to this case between the Maduro Board and the Guaidó Board: whether the English courts should recognise and not question the effect of the executive acts of Venezuela within its territory pursuant to which the Guaidó Board and the special attorney general had been appointed, irrespective of the lawfulness of those acts under Venezuelan law.
The initial question for the UKSC was whether such a rule does in fact exist. In answering this question, the UKSC had regard to the judgments of Lord Neuberger, Lord Mance, and Lord Sumption in Belhaj, as well as several previous decisions from the English courts. The UKSC concluded that a substantial body of judicial authority exists in support of Rule 2, including Lord Sumption’s “ringing endorsement” in Belhaj. The UKSC recognised that Rule 2 has the same premise as state immunity, i.e., the mutual respect for the equality of sovereign states, although unlike state immunity, Rule 2 is based on subject matter immunity rather than personal immunity. Rule 2 is an exclusionary rule that limits the power of English courts to decide certain issues as to the legality or validity of the conduct of foreign states within their proper jurisdiction. Thus, the UKSC confirmed the existence of Rule 2 in English law.
The UKSC then considered whether the executive acts of appointment relied on by the Guaidó Board fell within Rule 2. Relying on observations of Lord Neuberger and Lord Mance in Belhaj, the Maduro Board objected to the application of Rule 2 on the basis that the rule’s application should be confined to executive acts affecting property and, therefore, can have no application with respect to Guaidó’s appointments to the BCV board. The UKSC disagreed with imposing such a limitation on Rule 2 for several reasons, including the absence of judicial authority in support of such limitation and there being “no identifiable reason of principle why [Rule 2] should be limited to seizures of property.” The UKSC also rejected the Maduro Board’s argument that Rule 2 did not apply because of the extraterritorial effect of the appointments made by Mr. Guaidó. Accordingly, the UKSC confirmed that Rule 2 applies to an exercise of executive power such as the power of appointment to the BCV board.
The UKSC noted, however, that Rule 2 does not apply when English courts merely give effect to a judicial decision in which courts of the foreign state concerned, acting within their proper constitutional sphere, have declared the executive acts to be unlawful and nullities. This raised a question as to the status of judgments of the STJ that held relevant acts of Guaidó to be unlawful and invalid. The UKSC considered that the question of whether, and to what extent, the English courts should recognise or give effect to the STJ judgments fell outside the preliminary issues before the UKSC and would have to be remitted to the Commercial Court for further consideration. Nonetheless, the UKSC emphasised that domestic courts should refuse to recognise or give effect to foreign judgments if doing so would conflict with domestic public policy. Furthermore, due to the “one voice” principle, English courts will not recognise or give effect to the STJ judgments to the extent that the reasoning of the STJ depends on the view that Guaidó is not President of Venezuela, since such a position would conflict with the already established view of the UK executive branch.
The UKSC was also asked to consider Rule 1 of Lord Neuberger’s formulation in Belhaj, i.e., English courts will recognise and will not question the effect of a foreign state’s legislation or other laws in relation to any acts that take place or take effect within the territory of that foreign state. This issue was raised with respect to the Transition Statute passed by the National Assembly of Venezuela pursuant to which Guaidó was appointed interim President. The Maduro Board challenged the validity of the Transition Statute, while the Guaidó Board submitted that Rule 1 prevented an English court from enquiring as to the validity of the legislation. The UKSC confirmed the existence of Rule 1 in English law and held that it would prohibit a challenge before English courts to the lawfulness or the validity of the Transition Statute, except to the extent that there may exist a judicial ruling of the Venezuelan courts to which the English courts should give effect in accordance with domestic rules of private international law and public policy. The UKSC, however, held that Rule 1 is not necessary to the analysis of the case at hand since under Rule 2 (subject to the STJ judgments) the English courts cannot question the validity of Guaidó’s executive acts in appointing members of the Guaidó Board. Thus, whether the validity of the underlying legislation can be questioned is immaterial.
The UKSC’s decision is significant in several respects.
First, it clarifies the proper approach to recognition in England of foreign heads of state and heads of government. Pursuant to the “one voice” principle, any statement by the executive branch of the UK government as to who it recognises as head of state or head of government of a foreign state shall be conclusive, irrespective of the UK government’s diplomatic conduct. English courts must resolve any ambiguity in such statements with a request to the executive branch to clarify the matter; the court cannot seek to resolve the ambiguity through interpretation of the existing statements. Only if the executive branch of government does not, or refuses to, provide a statement or certificate can an English court make its own finding as to who the UK government recognises as head of state or head of government. Such finding must be done in accordance with the principles set out in Republic of Somalia v Woodhouse Drake & Carey (Suisse) SA.
Second, since its change of policy in 1980, the UK government has seldom recognised foreign governments or heads of state. The fact that the Foreign Secretary and the FCDO provided express statements on the situation in Venezuela may indicate a greater willingness on the part of the UK government to re-enter this space more frequently to issue statements of recognition. If so, that would, in light of the UKSC’s decision in this case between the Maduro Board and the Guaidó Board, provide greater clarity and certainty for parties faced with questions concerning the validity of acts of competing foreign governments or heads of state / government. Examples include the validity of natural resource concessions in territory with competing governments, competing instructions received with respect to assets in England, and the right to appoint legal and other representatives on behalf of a foreign state. Alternatively, the willingness to provide statements of recognition in this case may indicate the importance the UK government places on the situation in Venezuela.
Third, the UKSC’s decision has provided much-needed clarity on the foreign act of state doctrine. In particular, the UKSC confirmed that English courts cannot enquire as to the validity or lawfulness of a legislative or executive act of a foreign state performed in the territory of that state, irrespective of the subject matter; these rules are not restricted to acts concerning property in that foreign state. An exception to these rules, however, is when the courts of that foreign state have found the relevant legislative or executive act to be invalid or unlawful. In this case, the English courts will need to determine whether the judgment of that foreign court should be recognised in England. Thus, pursuant to the foreign act of state doctrine, legislative and executive acts of a foreign state are to be treated with a greater degree of deference than that afforded to judicial acts of that state. While the UKSC’s decision provides greater clarity to the foreign act of state doctrine as a matter of legal principle, its workability in practice remains to be seen. For instance, there may arise issues of conflicting legislative and executive acts, or issues as to which acts can properly be characterised as judicial. Difficulties may also arise when some or all members of the judicial branch have been appointed by a head of state or head of government not recognised by the UK government. These and other questions may need to be addressed in due course.
  UKSC 57.
  1 QB 54
  UKSC 57 at para. 98.
  UKSC 3.
  UKSC 3 at paras. 121-124.
  UKSC 57 at para. 140.