Court of Appeal confirms foreign States have immunity against injunctions

The anti-suit injunction

The dispute arose out of a collision between a Venezuelan navy patrol vessel and the Resolute cruise liner, which caused the former to sink. The Resolute was insured by two P&I insurance clubs (UK P&I Club NV and United Kingdom Mutual Steam Ship Assurance Association Limited). Venezuela brought proceedings in Venezuela and Curaçao against the owners of the Resolute and the clubs. The clubs argued that the underlying contract of insurance contained a binding arbitration agreement.

The High Court agreed and granted an interim anti-suit injunction ordering Venezuela to discontinue court proceedings in favour of arbitration. States have immunity against injunctive relief in the English courts under s.13(2)(a) of the State Immunity Act 1978 (the SIA). However, HHJ Pelling held that an injunction could nevertheless be granted against Venezuela by reference to human rights law.  He reasoned that s.13(2)(a) of the SIA should be read restrictively, pursuant to s.3 of the Human Rights Act 1998, which requires legislation to be interpreted narrowly where this is necessary to make it compliant with the ECHR. He drew on the Supreme Court’s approach in Benkharbouche, where this ‘restrictive doctrine’ limited State immunity to sovereign acts as opposed to acts of a commercial nature.

Venezuela successfully challenged the interim injunction before the High Court. While Sir Ross Cranston agreed that Venezuela was bound to submit its claims to arbitration, he set aside the anti-suit injunction on the basis that s.13(2)(a) of the SIA applied, rejecting the clubs’ argument that it was incompatible with their right to a fair trial under Article 6 of the ECHR.

Compatibility with the ECHR

In a unanimous judgment, the Court of Appeal upheld Sir Ross Cranston’s decision and reasoning. Accepting that Article 6 of the ECHR was engaged, the question before the court was whether an interference with such right could be justified if s.13(2)(a) of the SIA lay “within the range of possible rules consistent with current international standards”. It held that s.13(2)(a) of the SIA fell within such range, and can be justified in the absence of a relevant rule of customary international law to the effect that States are not immune from injunctions.

In any case, the court was satisfied that s.13(2)(a) of the SIA constitutes a justifiable interference to Article 6 ECHR, purely by reference to the UK’s legitimate domestic policy.

Further, even if s.13(2)(a) of the SIA was otherwise incompatible with Article 6 ECHR, it was not within the competence of the courts to recraft it to include a carve-out for granting anti-suit injunctions against foreign States in respect of commercial acts of a non-sovereign nature.

Implications

The Court of Appeal’s judgment clarifies that the English courts cannot grant injunctions against foreign States.  By analogy, it is likely that an English-seated tribunal cannot do so either, unless there is a waiver of immunity in relation to enforcement (although conflicting authority on this point remains, as discussed in the recent decision of Butcher J in The Prestige).

Judgment: The clubs v Venezuela