Neutral Citation Number: [2025] EWCA Civ 108
Case No: CA-2023-002278
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
KING’S BENCH DIVISION
COMMERCIAL COURT
Mrs Justice Cockerill
[2023] EWHC 2704 (Comm)
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: 12/02/2025
Before:
LORD JUSTICE LEWISON
LORD JUSTICE MALES
and
LORD JUSTICE ZACAROLI
Between:
| 1) HULLEY ENTERPRISES LIMITED (a company incorporated in the Isle of Man) |
Claimants/ Respondents |
| 2) YUKOS UNIVERSAL LIMITED (a company incorporated in the Isle of Man) |
|
| 3) VETERAN PETROLEUM LIMITED (a company incorporated in the Isle of Man) |
- and -
| THE RUSSIAN FEDERATION | Defendant/ Appellant |
--------------------
Vernon Flynn KC, Mark Wassouf, Cameron Miles & Maud Mullan (instructed by Pinna
Goldberg) for the Appellant
Jonathan Crow CVO KC, David Peters KC & Naomi Hart (instructed by Stephenson
Harwood LLP) for the Respondents
Hearing date: 15 January 2025
Approved Judgment
[Page 1]
This judgment was handed down remotely at 10.30am on 12 February 2025 by circulation to
the parties or their representatives by e-mail and by release to the National Archives.
.........................
[Page 2]
LORD JUSTICE MALES:
1. The issue on this appeal is whether the principle of issue estoppel applies to the
determination by an English court whether one of the exceptions to state immunity set
out in sections 2 to 11 of the State Immunity Act 1978 applies. Specifically, when a
foreign court has decided that a state has agreed in writing to submit a dispute to
arbitration, and the usual conditions for the application of issue estoppel are satisfied,
can the English court treat that decision as giving rise to an issue estoppel or must it
determine the issue for itself without regard to the decision of the foreign court?
2. Mrs Justice Cockerill held that there was an issue estoppel precluding the Russian
Federation (‘Russia’) from re-arguing the question whether it had agreed to submit the
dispute to arbitration, with the consequence that Russia’s challenge to the jurisdiction
of the English court on the ground of state immunity should be dismissed. Russia
challenges that conclusion, contending that issue estoppel has no application in these
circumstances.
3. I have concluded that the appeal should be dismissed. In short, I accept the submission
of Mr Jonathan Crow CVO KC for the respondent claimants that although the State
Immunity Act 1978 sets out comprehensively the exceptions to state immunity, it does
not prescribe how the court should decide whether any of the exceptions applies in any
given case. That question must be decided applying the ordinary principles of English
law, both substantive and procedural, and those principles include the principle of issue
estoppel.
Background
4. Although this dispute has a long and complex history, the facts relevant to this appeal
can be stated relatively shortly. I can take them from the judgment.
5. On 18th July 2014 an arbitral tribunal (comprised of L. Yves Fortier CC QC, Dr Charles
Poncet and Judge Stephen Schwebel) issued three materially identical awards declaring
that Russia had breached its obligations under Article 13(1) of the Energy Charter
Treaty and ordering it to pay damages exceeding a total of US $50 billion plus interest
to the claimants (the respondents to this appeal), who are the former majority
shareholders in OAO Yukos Oil Company.
6. On 10th November 2014 Russia commenced proceedings to set aside the awards in the
courts of the Netherlands, the arbitral seat. It did so on various grounds, including
challenges relating to the jurisdiction of the tribunal and the conduct of the arbitration.
One such challenge was that the tribunal did not have jurisdiction because there was no
binding arbitration agreement between the claimants and Russia (‘the no agreement
issue’). Another was that the awards were vitiated by fraud as a result of the claimants
having effectively bribed a witness to give evidence in their favour and failed to
disclose key documents (‘the procedural fraud issue’).
7. On 30th January 2015 the claimants issued proceedings in England seeking the
recognition and enforcement of the awards pursuant to section 101 of the Arbitration
Act 1996 which gives effect in this jurisdiction to the New York Convention. Russia
challenged the jurisdiction of the English court by an application filed on 25th
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September 2015. It contended that it was immune from such jurisdiction pursuant to
section 1 of the State Immunity Act 1978.
8. On 20th April 2016 the awards were set aside by the District Court of the Hague. The
claimants appealed from that decision to the Hague Court of Appeal. While the appeal
was pending, on 8th June 2016, the English enforcement proceedings were stayed by
consent.
9. In February 2020 the Hague Court of Appeal allowed the claimants’ appeal and
reinstated the awards. Among other things, it rejected Russia’s challenge to the awards
on the basis that there was no binding arbitration agreement between the claimants and
Russia, holding there was such an agreement. This is the decision which is said by the
claimants and was found by the judge to give rise to an issue estoppel.
10. Russia challenged the decision of the Hague Court of Appeal to reinstate the awards by
a cassation appeal to the Dutch Supreme Court. While this challenge was pending, on
6th July 2020, the claimants applied to lift the stay of the English enforcement
proceedings. Russia resisted that application, including (ironically in view of its present
stance) on the basis that its arguments in the cassation appeal overlapped substantially
with its challenge to the English jurisdiction, which was inefficient and created a risk
of inconsistent judgments on the same issues. The application to lift the stay was
rejected by Mr Justice Henshaw by a judgment dated 14th April 2021 ([2021] EWHC
894 (Comm)).
11. The judgment of the Dutch Supreme Court was delivered on 5th November 2021. The
court found that the Hague Court of Appeal’s rulings on Russia’s challenges to the
jurisdiction of the arbitral tribunal did not result in cassation (i.e. the decision of the
Court of Appeal on these issues, including whether there was a binding arbitration
agreement, was upheld), but that the Court of Appeal had erred on the issue of
procedural fraud. Accordingly, the Supreme Court quashed the Court of Appeal’s
judgments and referred the case to the Amsterdam Court of Appeal for further
consideration and decision.
12. Following the handing down of the Dutch Supreme Court judgment, the claimants
applied again to lift the stay of the English enforcement proceedings. In October 2022,
Mr Justice Butcher acceded to that application in part, lifting the stay ‘solely for the
purpose and to the extent necessary for the resolution of the Defendant’s Jurisdiction
Application’, and giving directions for the determination of two preliminary issues:
‘Issue 1: Whether and to what extent [Russia] is, by reason of
certain judgments of the Dutch courts, precluded from rearguing
the question of whether it has agreed in writing to submit to
arbitration the disputes that are the subject of the Awards; andIssue 2: Whether, if the answer to Issue is that [Russia] is so
precluded from rearguing the relevant question, the Jurisdiction
Application ought to be dismissed forthwith.’
13. Mr Justice Butcher granted permission for expert Dutch law evidence on the following
issue:
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‘whether and to what extent the determinations in the Dutch
Judgments are final and/or conclusive as a matter of Dutch law
as between the Claimants and the Defendant.’
14. Those preliminary issues came before Mrs Justice Cockerill. On 1st November 2023
she handed down the judgment which is the subject of this appeal.
15. Since her judgment, there have been further developments in the Dutch proceedings.
The Amsterdam Court of Appeal has rejected Russia’s case on procedural fraud and
has declined to make a reference to the CJEU. There is, however, a further appeal by
Russia from that decision on cassation grounds to the Dutch Supreme Court, which is
still pending.
State immunity
16. The general rule, set out in section 1 of the State Immunity Act 1978, is that a state is
immune from the jurisdiction of United Kingdom courts and that effect must be given
to this immunity even if the state does not appear to claim it:
‘General immunity from jurisdiction
(1) A State is immune from the jurisdiction of the courts of the
United Kingdom except as provided in the following provisions
of this Part of this Act.(2) A court shall give effect to the immunity conferred by this
section even though the State does not appear in the proceedings
in question.’
17. However, as section 1(1) itself makes clear, this general rule is subject to a series of
exceptions, which are set out in sections 2 to 11. If none of those provisions apply, the
court lacks adjudicative jurisdiction over the state.
18. The burden of proving that the claim falls within one of the exceptions to the general
immunity provided by section 1 lies on the claimant. This must be established on the
balance of probabilities as a preliminary issue: JH Rayner (Mincing Lane) Ltd v
Department of Trade and Industry [1989] Ch 72, 193-194 (Lord Justice Kerr) and 252
(Lord Justice Ralph Gibson); Shehabi v Kingdom of Bahrain [2024] EWCA Civ 1158
at [8]. As Lady Justice Simler put it in Zu Sayn-Wittgenstein-Sayn v His Majesty Juan
Carlos de Borbón y Borbón [2022] EWCA Civ 1595, [2023] 1 WLR 1162 at [21], ‘it
is for a claimant to establish, to the civil standard, an exemption to that immunity ....’
This results in a final, and not merely interlocutory, decision whether the state is
immune: The Prestige (Nos. 3 & 4) [2022] EWCA Civ 1589, [2022] 1 WLR 3434 at
[54].
19. It is sometimes said that the court must ‘satisfy itself’ that one of the exceptions applies.
Thus in Fang v Attorney General [2023] UKPC 21, 26 ITELR 273 at [170] the Privy
Council said that ‘an English court is bound to refuse to entertain any proceedings
against a state unless it is satisfied that the state concerned is not immune because it
falls within one of the exceptions set out in ss 2 to 11 of the Act.’ However, that is
simply another way of saying that this must be proved on the balance of probabilities.
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Generally speaking, a civil court in England and Wales is only satisfied that a fact
occurred, or that a state of affairs exists, when that is proved on the balance of
probabilities.
20. Although section 1 contains the general rule, to which the provisions of sections 2 to
11 are exceptions, that does not mean that they should be interpreted restrictively, in
the way that (for example) a contractual exceptions clause would be interpreted:
Shehabi at [24] and [25].
21. The 1978 Act has often been described as ‘comprehensive’. For example, in Alcom Ltd
v Republic of Colombia [1984] 1 AC 580, 600 Lord Diplock said that it ‘purports in
Part I to deal comprehensively with the jurisdiction of courts of law in the United
Kingdom both (1) to adjudicate upon claims against foreign states (“adjudicative
jurisdiction”); and (2) to enforce by legal process (“enforcement jurisdiction”)
judgments pronounced and orders made in the exercise of their adjudicative
jurisdiction’. Similarly, the Act was described by the Supreme Court in Argentum
Exploration Ltd v Republic of South Africa [2024] UKSC 16, [2024] 2 WLR 1259 at
[25] as ‘a new statutory scheme providing detailed and comprehensive rules governing
both adjudicative and enforcement jurisdiction in cases involving foreign and
Commonwealth states’ and by Lady Justice Simler in Zu Sayn-Wittgenstein-Sayn at
[13] as ‘a complete code’.
22. However, the limit of what is meant by ‘comprehensive’ in this context must be
recognised. The Act is comprehensive in that it sets out the only circumstances in which
a state may lose immunity from the adjudicative and enforcement jurisdiction of United
Kingdom courts. However, it says nothing about the legal principles by which it is to
be determined whether one of the exceptions to immunity applies. Those principles
must be found elsewhere. For example, as I have explained, the standard of proof which
must be satisfied if an exception is to be found to apply is the balance of probabilities,
that is to say that it is more likely than not that the exception applies. That is the ordinary
civil standard of proof, which is a creature of the common law.
23. Nor does the Act deal with the recognition or enforcement of judgments of foreign
courts given against states, a topic which is dealt with in section 31 of the Civil
Jurisdiction and Judgments Act 1982, which provides a self-contained scheme for
dealing with state immunity in proceedings for the recognition and enforcement of
foreign judgments against states (NML Capital Ltd v Republic of Argentina [2011]
UKSC 31, [2011] 2 AC 495). This section provides:
‘(1) A judgment given by a court of an overseas country against
a state other than the United Kingdom or the state to which that
court belongs shall be recognised and enforced in the United
Kingdom if, and only if—(a) it would be so recognised and enforced if it had not been
given against a state; and(b) that court would have had jurisdiction in the matter if it
had applied rules corresponding to those applicable to such
matters in the United Kingdom in accordance with sections 2
to 11 of the State Immunity Act 1978.
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(4) Sections 12, 13 and 14(3) and (4) of the State Immunity Act
1978 (service of process and procedural privileges) shall apply
to proceedings for the recognition or enforcement in the United
Kingdom of a judgment given by a court of an overseas country
(whether or not that judgment is within subsection (1) of this
section) as they apply to other proceedings. ...’
24. Although the State Immunity Act 1978 is a domestic statute, state immunity is a general
rule of customary international law. All states have an international law obligation to
give effect to such immunity in accordance with that general rule. As the International
Court of Justice explained in Jurisdictional Immunities of the State (Germany v Italy)
[2012] ICJ Rep 99:
‘56. Although there has been much debate regarding the origins
of State immunity and the identification of the principles
underlying that immunity in the past, the International Law
Commission concluded in 1980 that the rule of State immunity
had been “adopted as a general rule of customary international
law solidly rooted in the current practice of States” (Yearbook of
the International Law Commission, 1980, Vol II (2), p. 147, para
26). That conclusion was based upon an extensive survey of
State practice and, in the opinion of the Court, is confirmed by
the record of national legislation, judicial decisions, assertions of
a right to immunity and the comments of States on what became
the United Nations Convention. That practice shows that,
whether in claiming immunity for themselves or according it to
others, States generally proceed on the basis that there is a right
to immunity under international law, together with a
corresponding obligation on the part of other States to respect
and give effect to that immunity.’
25. The ICJ went on to explain at [57] that the rule of state immunity derives from the
principle of the sovereign equality of states, one of the fundamental principles of the
international legal order, so that exceptions to such immunity represent a departure from
that principle. Nevertheless international law recognises the existence of such
exceptions, as shown for example by the development of the restrictive theory of
immunity which distinguishes between ‘acta jure imperii’ and ‘acta jure gestionis’ (see
Argentum at [17] to [22]) and by the United Nations Convention to which the ICJ
referred.
26. The fact that states have an obligation to give effect to state immunity in accordance
with international law does not identify the exceptions to that immunity which
international law recognises. For that the English courts must look to sections 2 to 11
of the State Immunity Act 1978, although I note that the United Nations Convention
contains broadly similar exceptions.
27. The exception on which the claimants rely in this case is section 9 of the Act, which
provides:
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‘Arbitrations
(1) Where a State has agreed in writing to submit a dispute which
has arisen, or may arise, to arbitration, the State is not immune
as respects proceedings in the courts of the United Kingdom
which relate to the arbitration.(2) This section has effect subject to any contrary provision in
the arbitration agreement and does not apply to any arbitration
agreement between States.’
28. It is therefore necessary for a claimant relying on this exception to prove on the balance
of probabilities that (1) the state has agreed in writing to submit the dispute in question
to arbitration, (2) the proceedings in the United Kingdom relate to the arbitration, (3)
there is no contrary provision in the arbitration agreement, and (4) the arbitration
agreement is not between states. In the present case there is no dispute about the second,
third and fourth of these points. The issue is whether the state, Russia, has agreed in
writing to submit the dispute to arbitration, which I have called ‘the no agreement
issue’.
Issue estoppel
29. The term ‘issue estoppel’ appears to have originated in the Australian case of Hoysted
v Federal Commissioner of Taxation (1921) 29 CLR 537, 561 and was adopted by Lord
Justice Diplock in Thoday v Thoday [1964] P 181, although the concept is considerably
older: Duchess of Kingston’s Case (1776) 20 State Tr 355.
30. Referring to the concept of estoppel generally, Lord Justice Diplock explained that:
‘“Estoppel” merely means that, under the rules of the adversarial
system of procedure upon which the common law of England is
based, a party is not allowed, in certain circumstances, to prove
in litigation particular factual matters which, if proved, would
assist him to succeed as plaintiff or defendant in an action.’
31. However, he went on to say that issue estoppel, as a species of estoppel per rem
judicatam, was something different:
‘I do not think that any estoppel in its common law concept arises
in the present case. The particular type of estoppel relied upon
by the husband is estoppel per rem judicatam. This is a generic
term which in modern law includes two species. The first
species, which I will call “cause of action estoppel”, is that which
prevents a party to an action from asserting or denying as against
the other party, the existence of a particular cause of action, the
non-existence of or existence of which has been determined by
a court of competent jurisdiction in previous litigation between
the same parties. If the cause of action was determined to exist,
i.e. judgment was given upon it, it is said to be merged in the
judgment, or, for those who prefer Latin, transit in rem
judicatam. If it was determined not to exist, the unsuccessful
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plaintiff can no longer assert that it does; he is estopped per rem
judicatam. This is simply an application of the rule of public
policy expressed in the Latin maxim “Nemo debet bis vexari pro
una et eadem causa”. In this application of the maxim “causa”
bears its literal Latin meaning. The second species, which I will
call “issue estoppel”, is an extension of the same rule of public
policy. There are many causes of action which can only be
established by proving that two or more different conditions are
fulfilled. Such causes of action involve as many separate issues
between the parties as there are conditions to be fulfilled by the
plaintiff in order to establish his cause of action; and there may
be cases where the fulfilment of an identical condition is a
requirement common to 2 or more different causes of action. If
in litigation upon one such cause of action any of such separate
issues as to whether a particular condition has been fulfilled is
determined by a court of competent jurisdiction, either upon
evidence or upon admission by a party to the litigation, neither
party can, in subsequent litigation between one another upon any
cause of action which depends upon the fulfilment of the
identical condition, assert that the condition was fulfilled if the
court has in the first litigation determined that it was not, or deny
that it was fulfilled if the court in the first litigation determined
that it was.’
32. Lord Justice Diplock explained the concept of issue estoppel further in Mills v Cooper
[1967] 2 QB 459, 468-9:
‘That doctrine, so far as it affects civil proceedings, may be
stated thus: a party to civil proceedings is not entitled to make,
as against the other party, an assertion, whether of fact or of the
legal consequences of facts, the correctness of which is an
essential element in his cause of action or defence, if the same
assertion was an essential element in his previous cause of action
or defence in previous civil proceedings between the same
parties or their predecessors in title and was found by a court of
competent jurisdiction in such previous civil proceedings to be
incorrect, unless further material which is relevant to the
correctness or incorrectness of the assertion and could not by
reasonable diligence have been adduced by that party in the
previous proceedings has since become available to him.Whatever may be said of other rules of law to which the label of
“estoppel” is attached, “issue estoppel” is not a rule of evidence.
True, subject to the qualification I have stated, it has the effect
of preventing the parties “estopped” from calling evidence to
show that the assertion which is the subject of the “issue
estoppel” is incorrect, but that is because the existence of the
“issue estoppel” results in there being no issue in the subsequent
civil proceedings to which such evidence would be relevant.
[Page 9]
Issue estoppel is a particular application of the general rule of
public policy that there should be finality in litigation.’
33. Pausing here, I would note two points. First, Lord Justice Diplock distinguished issue
estoppel from ‘other rules of law to which the label of “estoppel” is attached’. Second,
when issue estoppel applies, that does not mean that there is no issue for the court to
decide, but only that the issue estoppel means, as a matter of law, that there is no issue
to which evidence contradicting the prior decision would be relevant – although I would
add that when the issue estoppel arises from the judgment of a foreign court there will
still need to be some evidence, for example to show what the foreign court decided and
that its decision was final and conclusive on the issue in question. Issue estoppel is
therefore a principle which enables the court to decide the issue in question, not a
principle which prevents it from making any decision on the point.
34. Issue estoppel in English law is an enforceable substantive right, as explained by the
Privy Council in Associated Electric & Gas Insurance Services Ltd v European
Reinsurance Co of Zurich [2003] UKPC 11, [2003] 1 WLR 1041. The issue in that case
was whether a previous arbitration award between the parties had given rise to an issue
estoppel and, if so, whether reliance on that issue estoppel was a form of enforcement
of the award. The Privy Council held that it was. Lord Hobhouse explained:
‘15. Their Lordships consider that, on the stated hypothesis [i.e.
that the plea of issue estoppel was sound], the argument of
European Re is correct. The Boyd award has conferred upon
them a right which is enforceable by later pleading an issue
estoppel. It is a species of the enforcement of the rights given by
the award just as much as would be a cause of action estoppel. It
is true that estoppels can be described as rules of evidence or as
rules of public policy to stop the abuse of process by relitigation.
But that is to look at how estoppels are given effect to not at what
is the nature of the private law right which the estoppel
recognises and protects. For example, a party who has attorned
to another is estopped from denying that he holds the relevant
goods for that other; the attornment has created a legal
relationship and legal rights which the attorning party must
recognise. The same applies to where arbitrators have, pursuant
to the submission of a dispute to them, decided an issue; that
decision then binds the parties and neither party can thereafter
dispute that decision. ...’
35. To similar effect, issue estoppel was described by Mr Justice Foxton in PJSC National
Bank Trust v Mints [2022] EWHC 871 (Comm), [2022] 1 WLR 3099 at [23(i)] as a rule
of substantive law applied by the second tribunal as to the legal effect of the
determination by the first tribunal.
36. The requirements for an issue estoppel to apply were summarised by Lord Justice
Clarke in The Good Challenger [2003] EWCA Civ 1668, [2004] 1 Lloyd’s Rep 67:
‘50. The authorities show that in order to establish an issue
estoppel four conditions must be satisfied, namely (1) that the
judgment must be given by a foreign court of competent
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jurisdiction; (2) that the judgment must be final and conclusive
and on the merits; (3) that there must be identity of parties; and
(4) that there must be identity of subject matter, which means
that the issue decided by the foreign court must be the same as
that arising in the English proceedings: see, in particular Carl
Zeiss Stiftung v Rayner C Keeler Ltd (No 2) [1967] 1 AC 853
(“the Carl Zeiss” case), The Sennar (No 2) [1985] 1 WLR 490,
especially per Lord Brandon at p 499, and Desert Sun Loan
Corporation v Hill [1996] 2 All ER 847.’
37. Lord Justice Clarke continued, with particular reference to the position where, as in that
case and in the present case, the issue estoppel is said to arise from the decision of a
foreign court:
‘54. The authorities establish that there must be “a full
contestation and a clear decision” on the issue in question. That
is made clear in the speech of Lord Wilberforce in the Carl Zeiss
case and (as the judge observed in paragraph 36) was echoed by
Lord Brandon in The Sennar (No 2). The cases also underline
four further important features of the approach of the courts to
issue estoppel, which I will consider in turn. They are as follows:i) It is irrelevant that the English court may form the view that
the decision of the foreign court was wrong either on the facts
or as a matter of English law.ii) The courts must be cautious before concluding that the
foreign court made a clear decision on the relevant issue
because the procedures of the court may be different and it
may not be easy to determine the precise identity of the issues
being determined.iii) The decision of the court must be necessary for its
decision.iv) The application of the principles of issue estoppel is
subject to the overriding consideration that it must work
justice and not injustice.’
38. Although Lord Justice Clarke said that it was irrelevant that the English court may form
the view that the decision of the foreign court was wrong, it is worth pointing out that
the result of giving effect to an issue estoppel may be that the English court will never
reach the stage of deciding what it would have decided on the issue in question in the
absence of the foreign court’s decision. Issue estoppel, when it applies, renders this
legally irrelevant. That will be the position in the present case if the plea of issue
estoppel is upheld. One reason for ordering a preliminary issue in this case was that, if
issue estoppel does apply, the delay and expense of a lengthy hearing to decide the no
agreement issue will be avoided.
39. The reason why the English court must be cautious before treating a foreign judgment
as giving rise to an issue estoppel was discussed by the Privy Council in Gol Linhas
[Page 11]
Aereas SA v MatlinPatterson Global Opportunities Partners (Cayman) II LLP [2022]
UKPC 21, [2023] Bus LR 1305:
‘38. The point has been made that there may be a need for
caution before finding an issue estoppel based on a foreign
judgment: see Carl Zeiss at p 918 (Lord Reid) and p 967 (Lord
Wilberforce); The Good Challenger, para 54(ii). The main
potential reason for such caution, in the words of Lord Reid in
Carl Zeiss at p 918, is that:“we are not familiar with modes of procedure in many foreign
countries, and it may not be easy to be sure that a particular
issue has been decided or that its decision was a basis of the
foreign judgment and not merely collateral ...”This should not, however, be regarded as a reason to decline to
treat a foreign judgment as conclusive where the domestic court
is able to reach a clear view on those matters. As observed in
Yukos Capital Sarl (JSC) v Rosneft Oil Co (No 2) [2011] EWHC
1461 (Comm); [2012] 1 All ER (Comm) 479, para 49:“... the [need] for caution ... is most likely to be relevant
when considering the precise identity of the issue determined,
whether it was necessary for the decision and whether there
has been a decision ‘on the merits’. Where differences in
procedure make these issues difficult to determine then the
court needs to exercise caution. However, if these matters are
clear then the need for caution does not arise”.”
40. Thus caution is necessary because it may be unclear precisely what the foreign court
has decided or what the effect of its decision is. That may well be the position if the
procedure of the foreign court is unfamiliar and the law which it applied is very different
from English law. But there is no particular need for caution if the English court,
assisted if necessary by the evidence of foreign law experts, is able to reach clear
conclusions about these matters, and if the law applied by the foreign court corresponds
to English law.
41. A qualification must be added to the conditions identified in The Good Challenger,
which is that issue estoppel will not apply if ‘special circumstances’ are established
(Arnold v National Westminster Bank Plc [1991] AC 93), although this may be simply
another way of saying that issue estoppel must work justice and not injustice, a point
also made by Lord Upjohn in the Carl Zeiss case at p.947:
‘As my noble and learned friend, Lord Reid, has already pointed
out there may be many reasons why a litigant in the earlier
litigation has not pressed or may even for good reason have
abandoned a particular issue. It may be most unjust to hold him
precluded from raising that issue in subsequent litigation and see
Lord Maugham’s observations in the New Brunswick case [New
Brunswick Railway Co v British and French Trust Corporation
Ltd [1939] AC 1, 21]. All estoppels are not odious but must be
[Page 12]
applied so as to work justice and not injustice and I think the
principle of issue estoppel must be applied to the circumstances
of the subsequent case with this overriding consideration in
mind.’
42. As Mr Justice Foxton observed in Czech Republic v Diag Human SE [2024] EWHC
2102 (Comm) at [224], this exception has generally been invoked when new evidence
not discoverable by due diligence becomes available, but is not limited to such
circumstances. Indeed, Arnold was not such a case.
The judgment of Mrs Justice Cockerill
43. Mrs Justice Cockerill acknowledged that there is no direct authority on the question
whether the decision of a foreign court can give rise to an issue estoppel when the
English court is deciding whether one of the exceptions to state immunity applies. She
considered that there is nothing in the State Immunity Act 1978 itself to disapply
substantive or procedural rules of English law, including issue estoppel, when the
application of the exceptions has to be decided. She held that, in order for an issue
estoppel to arise, the foreign judgment must satisfy the requirements for recognition
contained in section 31 of the Civil Jurisdiction and Judgments Act 1982 but that, if
they are satisfied, there is no reason in principle why there cannot be an issue estoppel.
Here, those requirements were satisfied because Russia had submitted to the
jurisdiction of the Dutch court by initiating the proceedings in the Netherlands.
Accordingly, if the Dutch court had applied rules corresponding to those contained in
sections 2 to 11 of the State Immunity Act 1978, as required by section 31(1)(b) of the
1982 Act, it would have had jurisdiction.
44. The judge then had to decide whether the requirements for issue estoppel were satisfied.
As to this, there were two issues. The first was whether the issue decided by the Dutch
court was the same issue (i.e. the no agreement issue) as the English court had to decide.
After bearing in mind the need for caution, she held that it was.
45. The second issue was whether the Dutch court had finally and conclusively decided the
no agreement issue. Russia argued that they had not: (1) because the Dutch decisions
lacked res judicata effect as a matter of Dutch law; (2) because the procedural fraud
issue remained live before the Dutch courts; and (3) because of the possibility of a
reference by the Dutch court to the CJEU on an issue of interpretation of the Energy
Charter Treaty. All of these matters were the subject of expert evidence. The judge
considered that evidence in detail and concluded that the Dutch decisions did have res
judicata effect as a matter of Dutch law; that this was so notwithstanding that the
procedural fraud issue remained live before the Dutch courts; and that there was no
relevant issue of interpretation capable of being referred by the Dutch court to the
CJEU.
46. As a result, the judge concluded that the conditions required to be satisfied for the
finding of an issue estoppel were met. Subject only to the question of special
circumstances, that conclusion is not challenged on this appeal.
47. It appears that the issue of special circumstances was raised somewhat obliquely before
the judge. She held, however, that there was no valid basis to invoke this exception and
that the recognition of an issue estoppel in the present case would not work injustice.
[Page 13]
48. The result was that by reason of the Dutch court judgments, Russia was precluded from
re-arguing the no agreement issue, with the consequence that the present case fell within
the exception to state immunity in section 9 of the State Immunity Act 1978: the
question was whether Russia had agreed in writing to submit to arbitration the disputes
which were the subject of the awards and that question was answered by the final and
conclusive decision of the Dutch courts. Accordingly Russia’s challenge to jurisdiction
based on state immunity was dismissed.
Submissions
49. Russia advances five grounds of appeal, as follows:
50. In his skeleton argument in support of the appeal, Mr Vernon Flynn KC summarised
his arguments on grounds one to three as follows:
[Page 14]
Where it applies, it does not result in the re-determination of an issue; indeed, per
Lord Justice Diplock in Mills v Cooper, it “results in there being no issue” for
determination at all. That being the case, a conclusion reached on the basis of an
issue estoppel can neither be a determination, nor one reached on a balance of
probabilities in accordance with the court’s obligation under section 1(2) SIA. Seen
in that context, the judge’s observation that there is no English authority in support
of the conclusion that issue estoppel applies in respect of a foreign judgment against
a foreign state on an issue of state immunity is unsurprising.
51. In oral submissions, however, Mr Flynn narrowed the scope of these submissions. He
accepted that issue estoppel could arise against a state other than on an issue of state
immunity. He accepted also that issue estoppel could arise against a state on an issue
of state immunity where the previous judgment was the judgment of an English (or
perhaps United Kingdom) court as distinct from a foreign court. Accordingly the
question of principle for decision is not whether the decision of a foreign court can
create an issue estoppel against a state, but the narrower question whether the decision
of a foreign court can create an issue estoppel to which effect will be given when the
English court is deciding whether a state is immune from its jurisdiction.
52. Accordingly Mr Flynn now accepts that in principle an issue estoppel can arise against
a state from the decision of a foreign court, and he does not challenge the judge’s
conclusion that the requirements for an issue estoppel are satisfied in this case, in
particular that the Dutch courts have finally and conclusively decided the no agreement
issue adversely to Russia. Russia’s case, therefore, is that there is something in the
nature of the decision which the court has to make when deciding whether one of the
exceptions to immunity applies under sections 2 to 11 of the State Immunity Act 1978
which rules out the application of issue estoppel in that particular context.
Can an English court base its decision as to the existence of state immunity on an issue
estoppel arising from the decision of a foreign court?
53. The essential foundation for Mr Flynn’s argument was that the English court has an
obligation contained in section 1 of the State Immunity Act 1978 to give effect to a
state’s immunity from jurisdiction unless it determines that one of the exceptions in
sections 2 to 11 applies, and that (as he submitted) a conclusion based on an issue
estoppel arising from a foreign judgment is not a determination at all. I would accept
that the English court has such an obligation. That is what the Act says. In giving effect
to such immunity, where it arises, the English court as an organ of the state is giving
effect to the United Kingdom’s obligations in international law.
[Page 15]
54. However, I do not accept that when the English court gives effect to an issue estoppel,
whether arising from an English or a foreign judgment, it is not making a determination
at all. Mr Flynn’s submission that there is no determination at all in such a case was
derived from Lord Justice Diplock’s statement in Mills v Cooper that ‘the existence of
the “issue estoppel” results in there being no issue in the subsequent civil proceedings’.
However, this is a partial and, as a result, misleading quotation. What Lord Justice
Diplock actually said (for the full passage see [32] above) was this:
‘True, subject to the qualification I have stated, it has the effect
of preventing the parties “estopped” from calling evidence to
show that the assertion which is the subject of the “issue
estoppel” is incorrect, but that is because the existence of the
“issue estoppel” results in there being no issue in the subsequent
civil proceedings to which such evidence would be relevant.’
55. The point is not that the court declines to make a decision, but that because of the issue
estoppel, evidence to contradict the previous judgment is not relevant. This is no more
than an application of the ordinary principle that the substantive law will determine
what evidence is relevant to decide an issue – just as, for example, when deciding an
issue about the meaning of a contract, evidence of the parties’ subjective beliefs about
its meaning will be irrelevant and inadmissible because the substantive law says that
the meaning must be determined objectively.
56. So here, in deciding that Russia is not immune, Mrs Justice Cockerill did not decline to
determine whether Russia had agreed in writing to submit the dispute in question to
arbitration. On the contrary, she determined that it had so agreed, applying the
substantive principle of English law that when the requirements for an issue estoppel
are satisfied, as they were in this case, the previous decision of a court of competent
jurisdiction is conclusive on the issue in question. As explained in Associated Electric
& Gas v European Re, an issue estoppel creates a substantive right which is recognised
and protected in English law. There is nothing in the State Immunity Act 1978 which
is capable of depriving a party of that right.
57. Equally, there is nothing in the Act which prescribes how the court is to determine
whether an exception applies. The fact that the question has to be decided on a final
basis at an early stage, as held by JH Rayner and The Prestige (Nos. 3 & 4), tells us
nothing about the legal principles which apply to the determination of that question.
That being so, the court must simply apply English law to that question, and that law
includes the law relating to issue estoppel. There is no basis in the Act to support a
conclusion that the question whether an exception applies has to be determined
according to English law but excluding the English law principle of issue estoppel. In
fact The Prestige (Nos. 3 & 4) is an example of the English court applying a principle
of English law, in that case the principle of conditional benefit, to decide whether a
state had agreed to submit to arbitration for the purpose of section 9 of the State
Immunity Act 1978. Moreover, as the question whether an exception applies falls to be
determined as a matter of English law, it is irrelevant that some other systems of law
may not recognise the concept of issue estoppel.
58. Some support for this approach can be seen in the decisions of Mrs Justice Cockerill
and of this court in Zhongshan Fucheng Investment Co Ltd v Federal Republic of
Nigeria [2023] EWCA Civ 867. In that case Nigeria challenged an arbitration award in
[Page 16]
favour of Zhongshan pursuant to section 67 of the Arbitration Act 1996, contending
that the arbitrators did not have jurisdiction. However, when Zhongshan applied for
security for costs and security for the award under section 70 of the Act, Nigeria
discontinued its challenge. Zhongshan then issued an application to enforce the award
under section 66 of the Act. The application was made without notice in accordance
with CPR 62.18, but Zhongshan’s evidence drew attention to potential arguments
which Nigeria might raise, including that it might rely on state immunity. The evidence
explained why, in the deponent’s view, those arguments should not succeed. Mrs
Justice Cockerill made the order for enforcement, but gave directions for Nigeria to
apply to set it aside on the ground of state immunity if so advised. Nigeria failed to
apply within the time specified, and then sought relief from sanction and an extension
of time.
59. Mrs Justice Cockerill rejected Nigeria’s submission that the Denton principles (Denton
v T.H. White Ltd [2014] EWCA Civ 906, [2014] 1 WLR 3926) did not apply to
Nigeria’s application because the court was required to determine an issue of state
immunity under section 1(2) of the State Immunity Act 1978 even if the state did not
appear. She held, applying the Denton principles, that it would be unjust to grant
Nigeria relief from sanctions, which meant that Nigeria was unable to pursue its claim
to state immunity.
60. Nigeria sought to appeal, contending that where any issue of state immunity arises, the
court is obliged to make a determination whether or not, on a balance of probabilities,
state immunity is established. It relied on cases such as JH Rayner and Zu Sayn-
Wittgenstein-Sayn. This court rejected that submission and refused permission to
appeal. Sir Julian Flaux C explained that, although Nigeria was entitled to challenge
jurisdiction on the ground of state immunity, it had to comply with the English court’s
procedural rules appropriate for and applicable to that application:
‘32. In other words, when the judge made the enforcement order,
she made a determination that, on the evidence before the Court,
she was satisfied that the award should be enforced and that there
was no arguable case for state immunity. There is nothing
surprising in that conclusion given that Nigeria had raised issues
of state immunity in the section 67 application which it had
abandoned and to seek to raise the same issues again would
arguably be an abuse of process. Of course, it was open to
Nigeria, given that the order was made ex parte, to make an
application to set aside the order on grounds of state immunity
or any other grounds, but if it wished to do so, it had to comply
with the procedural timetable laid down by the Court, which in
fact gave a generous period of 74 days for such an application to
be made.33. The suggestion that it was somehow open to Nigeria to fail
to comply with or disregard that timetable, but that the Court
would still have to make a determination as to state immunity, is
as startling as it is misconceived. Although, if state immunity is
established, the Court has no jurisdiction over the state in respect
of the substantive dispute, in relation to the prior determination
of whether state immunity arises at all, the Court does have
[Page 17]
jurisdiction, as Lord Sumption said in Benkharbouche v
Embassy of the Republic of Sudan [2017] UKSC 62; [2019] AC
777 at [19]:“Proceedings brought against a state entitled to immunity are
not a nullity. But the court’s jurisdiction to entertain the
proceedings is limited to examining the basis on which
immunity is asserted and determining whether it applies.”34. That jurisdiction must encompass the imposition of whatever
procedural rules are appropriate for that determination. This is
clear from what Kerr LJ said in JH Rayner where he spoke of
the issue of state immunity being determined “in whatever form
and by whatever procedure the court may consider appropriate”.
In the present case, Nigeria was given two months and fourteen
days under the CPR to make an application to set aside the
enforcement order and raise state immunity if so advised. If
Nigeria needed more time to make an application, it was
incumbent upon it to make an application in time under CPR
3.1(2)(a) for an extension of time. If such an application was not
made in time (as in the present case) then Nigeria would need to
seek relief from sanctions as the notes in the White Book make
clear and, if it could not satisfy the Denton criteria (as the judge
found here), then the sanction of not obtaining an extension of
time would follow, so that Nigeria could not raise state immunity
because it was too late. There is nothing in the CPR or the
authorities which suggests that these normal procedural
consequences do not follow merely because the defendant is a
state.’1
61. Thus the English court will apply its own procedural rules in deciding whether an
exception to state immunity applies. To that extent, therefore, the obligation to give
effect to state immunity contained in section 1 of the State Immunity Act 1978 is not
unqualified. Mr Flynn accepted this, but sought to distinguish Zhongshan on the basis
that issue estoppel is a rule of substantive law. I recognise, of course, that the issue
arising in Zhongshan was not the same as the issue before us because it was concerned
with procedural rather than substantive law. Nevertheless the case illustrates that the
1978 Act does not prescribe the way in which a question of state immunity must be
decided.
62. Mr Flynn relied on the principle that an estoppel cannot enlarge the jurisdiction of the
court. He cited employment tribunal cases such as Secretary of State for Employment v
Globe Elastic Thread Co Ltd [1980] AC 506, 519 for the proposition that an estoppel,
whatever force it might have as between employer and employee, could not confer upon
the tribunal jurisdiction beyond that given by the Act which established it. He relied
also on Republic of Yemen v Aziz [2005] EWCA Civ 745, [2005] ICR 1391, in which
the question arose whether an official had authority to instruct solicitors to enter a notice
1 Although this is a decision on permission to appeal, which it would not normally be permissible to cite, Lord ↩
Justice Underhill recorded in his judgment at [41] that he had directed an oral hearing because of (among other
reasons) the importance of state immunity. In my judgment, therefore, the judgment is citable.
[Page 18]
of appearance on behalf of the defendant state and thereby to submit to the jurisdiction
of the employment tribunal for the purposes of section 2 of the State Immunity Act
1978. Section 2 provides that:
‘Submission to jurisdiction
(1) A State is not immune as respects proceedings in respect of
which it has submitted to the jurisdiction of the courts of the
United Kingdom. ...(3) A State is deemed to have submitted—
(a) if it has instituted the proceedings; or
(b) subject to subsections (4) and (5) below, if it has
intervened or taken any step in the proceedings. ...(7) The head of a State’s diplomatic mission in the United
Kingdom, or the person for the time being performing his
functions, shall be deemed to have authority to submit on behalf
of the State in respect of any proceedings; and any person who
has entered into a contract on behalf of and with the authority of
a State shall be deemed to have authority to submit on its behalf
in respect of proceedings arising out of the contract.’
63. The claimant sought to sidestep the question whether the official had actual authority
to instruct the solicitors to enter a notice of appearance by relying on ostensible
authority. This court held, however, that ostensible authority has no place in deciding
whether there had been a submission for the purpose of section 2. Lord Justice Pill at
[53] approved the statement in Dickinson, Lindsay & Loonam’s State Immunity:
Selected Materials and Commentary (2004), para 4.024:
‘This deeming provision appears to have been intended to
resolve doubt as to whether the persons listed have authority to
submit. In other cases, the authority of the state’s representatives
must be established by evidence, if challenged. In such cases,
there can be no question of ostensible authority, this being a
species of estoppel and incapable therefore of extending the
court’s jurisdiction.’
64. Lord Justice Pill emphasised the express terms of subsection (7), which demonstrated
that the head of mission had deemed authority to submit on behalf of the state and,
therefore, that nobody else had such deemed authority. He concluded, at [58], that the
doctrine of ostensible authority did not apply, either to the solicitors or to the official,
adding that jurisdiction could not be created by an estoppel. It would therefore be
necessary to investigate the factual position whether the official had been acting with
the actual authority of the ambassador as the head of mission.
65. I would accept that, in general, an estoppel cannot enlarge a jurisdiction created by
statute and cannot create jurisdiction in circumstances where statute provides that the
court does not have such jurisdiction. Ostensible authority, which is a form of deemed
[Page 19]
authority where no actual authority exists, is a good example of that principle. However,
issue estoppel, despite the presence of the word ‘estoppel’, is different. It is simply a
convenient label for the legal principle that a previous decision of a court of competent
jurisdiction creates an enforceable legal right in English law, which principle is based
on the important public policy of finality in litigation. In this regard I have already
drawn attention to the fact that Lord Justice Diplock in Mills v Cooper distinguished
issue estoppel from other traditional forms of estoppel. In my judgment, therefore, to
apply the principle of issue estoppel in deciding whether a state has agreed in writing
to submit a dispute to arbitration does not offend against the rule that the court’s
jurisdiction cannot be enlarged or created by an estoppel.
66. Mr Flynn’s final submission on this issue was that both state immunity and issue
estoppel are principles of public policy, and that the principle of issue estoppel should
give way to state immunity because the latter is of a higher order of importance, being
concerned as it is with the United Kingdom’s international obligations. This was said
to lead to the conclusion that issue estoppel does not apply when the court is considering
whether an exception to immunity applies, so that the court must consider this question
without regard to the decision of the foreign court.
67. I do not accept this submission. The public policy of the United Kingdom so far as state
immunity is concerned is reflected in the provisions of the State Immunity Act 1978.
When a question of state immunity arises, the court is obliged to give effect to those
provisions, no more and no less. That means that it will need to decide whether an
exception to immunity applies, applying the ordinary rules of English law. Although
issue estoppel is founded on the principle of public policy that there should be finality
in litigation, it is (as I have explained) a rule of substantive law. When a court decides
that an exception to immunity applies as a result of an issue estoppel arising from a
decision of a foreign court, it is simply applying that rule as part of English law. There
is no question of making a choice between competing public policies. In any event,
even if such a choice arose, it is difficult to see how giving effect to a foreign judgment
against a state which satisfies the requirements for recognition and enforcement
contained in section 31 of the Civil Jurisdiction and Judgments Act 1982 (which I
consider further below) could offend against public policy.
68. For completeness on this issue I should record that the question whether a court can
base its decision as to the existence of state immunity on an issue estoppel arising from
the decision of a foreign court could have arisen for decision in the Singapore case of
Republic of India v Deutsche Telekom AG [2023] SGCA(I) 10. That case involved an
application by Deutsche Telekom to enforce in Singapore a foreign arbitral award made
against the Republic of India. The seat of the arbitration was Switzerland, where an
application by the Republic of India to set aside the award on the basis that the tribunal
did not have jurisdiction had been dismissed. The issue for decision in Singapore raised
the question of how an enforcement court should treat an earlier decision of the seat
court as to the validity of the award. The Singapore Court of Appeal held that the
decision of the seat court gave rise to an issue estoppel. Chief Justice Sundaresh Menon
gave the principal judgment, with which the other members of the court (including a
former Deputy President of the United Kingdom Supreme Court and a former Chief
Justice of the High Court of Australia) agreed. He said:
‘4. In our judgment, as a matter of Singapore law, transnational
issue estoppel does apply in the context of international
[Page 20]
commercial arbitration and its effect is to prevent the parties to a
prior decision of the seat court, in certain circumstances, from
re-litigating points that were previously raised and determined.
...’
69. The court’s reasoning was set out later in the judgment as follows:
‘97. It should be noted that when dealing with the question of the
enforcement of a foreign arbitral award, the New York
Convention does not operate in isolation because the domestic
law of the enforcement court also comes into play (UNCITRAL
Secretariat Guide on the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (New York, 1958)
(United Nations, 2016) at pp 2-3). The latter includes its conflict
of laws rules and how it treats judgments that are relevant and
rendered by other jurisdictions. Singapore’s conflict of laws
rules include the principle of transnational issue estoppel that
were laid down in Merck Sharpe [Merck Sharp & Dohme Corp
v Merck KGaA [2021] 1 SLR 1102]. It follows that the doctrine
of transnational issue estoppel will apply in the arbitral context
as “part of the residual domestic law applicable in setting aside
or enforcement proceedings” (see BAZ v BBA [2020] 5 SLR 266
at [37]). This is especially so because the IAA [International
Arbitration Act] is silent on this issue, and what is not governed
by it must necessarily be governed by the other rules of domestic
law (see Report of the United Nations Commission on
International Trade Law on the Work of its 18th Session (UN Doc
A/40/17/ 3-21 June 1985) at para 61).’
70. Although the Republic of India’s starting point was a challenge to the jurisdiction of
the Singapore court on the ground of state immunity, the Singapore State Immunity Act
1979 being in material respects to the same effect as the United Kingdom Act, and
although the issue was whether India had agreed in writing to submit the dispute to
arbitration, Mr Flynn was correct to point out that India did not suggest that issue
estoppel based on the decision of a foreign court (i.e. what the court described as
‘transnational issue estoppel’) could not apply specifically on the issue of state
immunity. He was therefore correct to submit that the argument which he advances in
the present case was not raised, and was not decided, by the Singapore Court of Appeal.
71. Nevertheless, the decision arose on materially the same facts as those of the present
case, with a legal framework materially the same as in England. The case confirms that
on matters not expressly governed by the applicable statute the court will apply its
domestic law, which (in the case of both Singapore and England) includes issue
estoppel. It confirms also that there is no reason why the decision of a foreign court
whether a state has agreed in writing to submit a dispute to arbitration should not give
rise to an issue estoppel. Mr Flynn therefore has to submit, as he does, that the fact that
the point arises on a claim for state immunity makes all the difference, and that the
argument which he advances in the present case was missed not only by counsel, but
by the distinguished members of the Singapore Court of Appeal.
Section 31 of the Civil Jurisdiction and Judgments Act 1982
[Page 21]
72. As well as supporting the judge’s reasoning, Mr Crow submitted that section 31 of the
Civil Jurisdiction and Judgments Act 1982 provides an alternative route to the same
outcome. He submitted that the Dutch judgment would be recognised and enforced if it
had not been given against a state, so that the condition in subsection (1)(a) was
satisfied; and that the Dutch court would have had jurisdiction if it had applied rules
corresponding to those contained in sections 2 to 11 of the State Immunity Act 1978
because Russia had initiated the Dutch court proceedings and had therefore submitted
to the jurisdiction of the Dutch court, so that the condition in subsection (1)(b) was
satisfied.
73. While I agree that the requirements of section 31 are satisfied, I do not accept this
submission. I agree with the judge, and with Mr Flynn, that section 31 is not directly
applicable in the present case. These are not proceedings for recognition or enforcement
of a judgment given by a foreign court. Rather, they are proceedings for recognition
and enforcement of a Dutch arbitration award in which the claimants invoke an issue
estoppel arising from Dutch court proceedings. The requirements for recognition or
enforcement of a foreign judgment set out in section 31 are relevant because no issue
estoppel will arise out of a foreign court judgment against a state unless that judgment
would be entitled to recognition and enforcement here.
74. The ordinary rule that for issue estoppel to arise as a result of a foreign judgment, the
foreign judgment must be entitled to recognition here, was explained by the Privy
Council in Gol Linhas v MatlinPatterson:
‘36. In Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967]
1 AC 853 the House of Lords held that issue estoppel can be
based on a foreign judgment. To give rise to such an issue
estoppel, three requirements must be satisfied: see DSV Silo-und
Verwaltungsgesellschaft mbH v Owners of The Sennar (The
Sennar) (No 2) [1985] 1 WLR 490, 499 (Lord Brandon); Good
Challenger Navegante SA v Metalexportimport SA (The “Good
Challenger”) [2003] EWCA Civ 1668; [2004] 1 Lloyd’s Rep 67,
para 50. First, the judgment must be entitled to recognition in
accordance with the domestic rules on the recognition of foreign
judgments. At common law, these rules require the judgment to
be (a) given by a court of a foreign country with jurisdiction to
give it and (b) final and conclusive on the merits. Second, the
parties in the two actions must be the same. Third, the issue
decided by the foreign court must be the same as the issue in the
domestic proceedings.’
75. Section 31 sets out the additional requirements for recognition and enforcement of a
foreign court judgment against a state, which must therefore be satisfied if it is sought
to invoke such a judgment as giving rise to an issue estoppel against that state.
76. I agree with Mr Crow that the requirements in section 31(1) are satisfied in the present
case. However, this does not provide a shortcut for the claimants. Rather it is an
additional requirement which they must satisfy, and do satisfy, in order for an issue
estoppel to arise from the decision of the Dutch court. The section does show, however,
that the United Kingdom is not opposed to the recognition and enforcement of
[Page 22]
judgments against states by foreign courts in cases where the requirements of section
31(1) are satisfied.
Special circumstances
77. Subject to the issue of special circumstances, which I consider next, I would therefore
hold that the decision of the Dutch court that Russia had agreed in writing to submit the
dispute to arbitration created an issue estoppel enforceable by the claimants and that
the judge was right to give effect to this issue estoppel when deciding whether the
exception to state immunity contained in section 9 of the State Immunity Act 1978
applied in this case.
78. As an alternative to his primary case, Mr Flynn submitted that issue estoppel resulting
from the decision of a foreign court ought not to apply to the determination whether an
exception to state immunity applies because the exceptional nature of state immunity
amounts to ‘special circumstances’. I would reject that submission. It amounts to saying
that issue estoppel will never apply to an issue of state immunity, so that the exception
for special circumstances would swallow the general rule.
79. I can see no justification for such an approach. Once it is determined, as in this case,
that an issue has been finally and conclusively decided by a foreign court of competent
jurisdiction, after a fair hearing in proceedings initiated by the state in which the point
was fully contested, and that the judgment of the foreign court would be entitled to
recognition under section 31 of the Civil Jurisdiction and Judgments Act 1982, I see no
reason why effect should not be given to the issue estoppel arising from that judgment.
That applies with particular force in the arbitration context when the judgment of the
foreign court is given in the arbitration seat, as in this case. To give effect to the issue
estoppel arising from that judgment, rather than putting the award creditor to the trouble
and expense of litigating the issue all over again, seems to me to be in accordance with
the demands of justice. It is also in accordance with another important public policy,
recognised internationally in the New York Convention, which is that awards, even
against states, should be honoured without delay and without the kind of trench warfare
seen in the present case. To apply the ‘overriding consideration’ referred to in Carl
Zeiss and The Good Challenger, the application of issue estoppel in this case will work
justice and not injustice.
80. There is nothing in the further matters raised as amounting to special circumstances,
namely the fact that the issue of procedural fraud remains live in the Dutch proceedings
and that there may be some possibility of a reference by the Dutch courts to the CJEU
of an issue of interpretation of the Energy Charter Treaty. At the time when the judge
dealt with these issues, the Dutch Supreme Court had remitted them to the Amsterdam
Court of Appeal. As it happens, the Amsterdam Court of Appeal has now rejected
Russia’s submissions on these issues. In circumstances where the only remaining issue
in the Dutch proceedings is an issue of procedural fraud in the conduct of the arbitration,
it is very hard to see how any issue of interpretation needing a reference to the CJEU
could arise. Mr Flynn was unable to explain how it might.
81. In any event, whatever surviving possibility there may be that the Dutch Supreme Court
will now reverse the decision of the Court of Appeal, or that there may be such a
reference, these issues have nothing to do with the question whether Russia agreed in
writing to submit the dispute to arbitration. That issue has been finally and conclusively
[Page 23]
determined by the Dutch courts, as the judge found, and that is not challenged by Russia
on this appeal. In those circumstances the matters now relied on cannot provide a reason
not to give effect to that determination by way of issue estoppel in deciding Russia’s
challenge to the jurisdiction of the English court. Whether they may be relevant at any
later stage of these proceedings is not a matter which we need to consider now.
82. While I have concluded, in agreement with the judge, that there are no special
circumstances in this case which would provide a reason not to give effect to the
decision of the Dutch courts, it is relevant to note that the fact that the question of special
circumstances needs to be considered demonstrates that the English court does not
blindly follow the decision of the foreign court which is said to give rise to the issue
estoppel. Instead it makes up its own mind whether special circumstances apply or, in
other words, it considers for itself the overriding question whether the application of
issue estoppel in any given case will work justice or injustice. As Mr Crow put it, the
English court does not abdicate its responsibility to decide whether state immunity
applies.
Treaty interpretation
83. Mr Flynn submitted, with respect somewhat faintly, that issues of interpretation of the
Energy Charter Treaty arise in this case, and that this is a reason why the English court
should decide for itself whether Russia has agreed to submit the dispute to arbitration,
without regard to the decision of the Dutch courts. Ultimately, however, he accepted
that this did not provide any reason in principle why issue estoppel should not apply if
his primary submissions fail, but was merely a further reason why the English court
should be cautious before giving effect to an issue estoppel.
84. In my judgment the judge adopted all appropriate caution and there is nothing in this
makeweight point. That is all the more so as Mr Flynn omitted to identify the issues of
interpretation of Article 45 of the Treaty which he said would need to be resolved.
Disposal
85. The judge was right to decide, applying the principle of issue estoppel, that Russia had
agreed in writing to submit the dispute to arbitration; that the exception to immunity in
section 9 of the State Immunity Act 1978 therefore applied; that Russia is therefore not
immune from the adjudicative jurisdiction of the English court; and that its challenge
to the jurisdiction of the English court must be dismissed. I would dismiss the appeal.
LORD JUSTICE ZACAROLI
86. I agree.
LORD JUSTICE LEWISON
87. I also agree.