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No anti-suit injunction available against a state

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Garvey Sarah
Sarah Garvey

Counsel

London

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12 July 2022

In the absence of consent by the state, a party will not be able to obtain an anti-suit injunction against a state (nor any other injunction or order for specific performance). Venezuela was entitled to claim immunity under the UK’s State Immunity Act 1978 (SIA) so the English court could not grant a permanent anti-suit injunction against Venezuela preventing it from pursuing foreign court proceedings in breach of an arbitration clause. The decision provides helpful clarity on this point and is likely to refocus attention on the precise language used in immunity waiver clauses in commercial contracts: UK P&I Club N.V. & Anor v Republica Bolivariana De Venezuela [2022] EWHC 1655 (Comm)

A collision between a naval vessel and a cruise liner

The backdrop to these proceedings was the loss of a Venezuelan navy vessel in 2020, following a collision with a tourist cruise liner (Resolute). In 2020, Venezuela brought civil claims against the cruise liner and its insurers, seeking compensation in relation to the collision in the courts of Dutch Curacao and in Venezuela. In February 2021 Resolute’s insurers sought an anti-suit injunction from the English courts against Venezuela on the basis the Curacao and Venezuela proceedings were brought in breach of a London arbitration clause contained in the contract of insurance. The English court granted an interim anti-suit injunction against Venezuela and, following this, the insurers started arbitration proceedings against Venezuela seeking declarations of non-liability and an award of equitable compensation in respect of any loss suffered by the initiation of the foreign proceedings. The insurers contended that the proceedings in Venezuela and Curacao were in substance claims to enforce the terms of the contract of insurance and the parties were bound by the arbitration clause in that contract.

This summary focuses on the arguments concerning immunity.

State is bound by arbitration clause in insurance contract

The court found that Venezuela’s civil foreign claims, were, in effect, actions against the liability insurers. Therefore, Venezuela was bound by the arbitration clause in the contract of insurance and must arbitrate its claims in London. Absent immunity, there were grounds for issuing an anti-suit injunction.

No immunity – commercial transaction and arbitration exceptions applied

Venezuela claimed immunity from the adjudicative jurisdiction of the court and stated that the immunity exception in s3(1)(a) SIA did not apply. This exception provides that a state is not immune from proceedings relating to a commercial transaction entered into by the state.1 Venezuela argued that the claims it sought to bring in Venezuela were not commercial as they related to military activity of the state as its vessel was patrolling as a coast guard at the time of the incident. The court disagreed, observing that it was the claims which arose out of the collision which the English court was being asked for relief in relation to. These claims were commercial in nature and were ordinary civil claims in private law. A private citizen could bring them. Consequently, the exception in s3(1)(a) applied.

The court briefly considered s9(1) SIA, which provides that, where the state has agreed in writing to subject a dispute to arbitration, the state is not immune from proceedings in the UK courts which relate to the arbitration. Given the insurance contract contains a London arbitration clause, the court considered that the s9(1) exception to immunity also applied.

The state remains immune from interim relief, however

The court considered whether s13(2)(a) SIA prevented the court granting interim relief (such as an anti-suit injunction) against a state, absent its consent.

  • s13(2) provides “Subject to subsections (3) and (4) below – (a) relief shall not be given against a State by way of injunction or order for specific performance or for the recovery of land or other property”.
  • s13(3) provides that s13(2) does not prevent relief being granted with the written consent of the state concerned.
  • s13(4) provides that s2(b) (which concerns any process of enforcement of a judgment or arbitration award) “does not prevent the issue of any process in respect of property which is for the time being in use or intended for use for commercial purposes”.

The court emphasised what has generally been the accepted understanding in this area, namely, that adjudicative immunity and enforcement immunity are different. Even if a state has submitted to the adjudicative jurisdiction of the English court (or is subject to one of the standard exceptions to immunity), this does not mean it is not immune from interim relief or enforcement measures.

There were interesting arguments in relation to the issuance of this injunctive relief against a state. Ultimately, the court concluded that article 6 ECHR was engaged by s13(2)(a), but interference with it is justified:

  • The insurers had argued that if a state’s non-sovereign (commercial) activity is immune from injunctive relief under s13(2)(a) SIA, then the insurers rights under article 6 ECHR (right of access to court) are engaged because it precludes claimants from obtaining an anti-suit injunction. The court agreed that article 6(1) was engaged in the present case, but could the bar to interim relief in s13(2)(a) be justified?
  • An interference with an article 6(1) right can be justified if it pursues a legitimate objective by proportionate means and does not impair the essence of the right. The insurers argued that s13(2)(a) could not be justified as a proportionate restriction on their article 6(1) right as it exceeds the requirements of customary international law in barring anti-suit injunctions in relation to non-sovereign (commercial) as well as sovereign acts. The court analysed in some detail the commonalities and the differences between approaches to this immunity taken in different jurisdictions. It concluded that the UK “is certainly not an outlier” in relation to s13(2)(a) and its interference with an article 6 right could be justified as a proportionate restriction as it lies within the range of possible rules consistent with current international standards.
  • The bar on interim relief could also be justified by reference to legitimate domestic policy, if pursued by proportionate means. The court noted the explanation given by the then Lord Chancellor, at the time of the passage of the State Immunity Bill through Parliament, was that remedies of a personal nature such as injunctions and orders for specific performance were not appropriate against states. Further, the court noted that the Government at the time resisted any extension of the exception to the post-judgment enforcement against commercial property without the consent of the state to include pre-judgment interlocutory injunctions.
  • Finally, the court acknowledged that principles of comity and international law were at play when considering immunity issues, especially in the enforcement context. The court concluded that “notwithstanding that s13(2)(a) interferes with an article 6 ECHR right, it pursues legitimate domestic objectives by proportionate means and does not impair the essence of that right”.

The court noted that although the insurers did not obtain an anti-suit injunction which might prevent parallel proceedings, this did not mean that their right to have the Venezuela claims determined by way of London arbitration was worthless. The judge observed that there may be compensation claims for breach of the arbitration agreement and also declaratory relief that could be relied upon to resist enforcement of any judgment which Venezuela may obtain in the foreign proceedings.

Comment

States and state actors will take comfort from this decision, which confirms that the English court will treat a state as being immune from injunctions, in particular anti-suit injunctions, and orders for specific performance, absent the state’s consent under s13(2)(a) SIA.

Commercial parties, on the other hand, will need to keep in mind that if a state starts an action in another court in breach of a contractually agreed disputes clause, then although it might be possible to get an order from the English court requiring the state to follow the contractual disputes mechanisms and possibly an order for compensation for losses suffered in resisting the foreign proceedings, it will not get an anti-suit injunction, absent consent. This decision provides helpful clarity on this point and is likely to encourage renewed focus on the precise language used in the negotiation of immunity waiver clauses in commercial contracts.

Footnotes

1The court noted the SIA provides some illustrations as to what constitutes a “commercial transaction”, including “any loan or other transaction for the provision of finance and any guarantee or indemnity in respect of any such transaction or of any other financial obligation’ and “any other transaction or activity (whether of a commercial, industrial, financial, professional or other similar character) into which a State enters or in which it engages otherwise than in the exercise of sovereign authority”.