Strand. London. WC2A 2LL
B e f o r e :
(Sitting as a Deputy Judge of the High Court)
| POCKET KINGS LTD
|- and -
|(1) SAFENAMES LTD
(2) COMMONWEALTH OF KENTUCKY
for the Claimant
Mr Christopher de Mauny (instructed by Franklins Solicitors LLP)
for the First Defendant The Second Defendant did not appear
Hearing date : 30th July 2009
Crown Copyright ©
Michael Furness QC;
"1. Pocket Kings Limited ("PKL") is engaged in the provision of online gaming services, and facilitates and licenses the use of the domain name fulltiltpoker.com ("the Domain Name"). Safenames Limited ("Safenames"), a company incorporated under the laws of England and Wales, provides PKL with various services pursuant to a Managed Services Agreement executed by Safenames on 26th May 2009 ("the Agreement"). The Agreement is governed by English Law. Clause 1.18.1 of Safenames' General Terms Applicable to All Services provides that the Agreement is subject to the exclusive jurisdiction of the courts of England and Wales. Safenames is contractually responsible for pointing the Domain Name at the correct domain name servers to the order of PKL, and is the Registrar of the Domain Name.
2. By Second Amended Complaint filed on 18th September 2008 in Civil Action No. 08-C1-1409 in Division II of the Franklin Circuit Court in Kentucky ("the Kentucky Proceedings"), the Commonwealth of Kentucky brought a civil in rem forfeiture claim against 141 domain names, one of which was the Domain Name. In the Kentucky Proceedings the Commonwealth of Kentucky is acting in its sovereign capacity and pursuant to its public law powers to enforce that State's criminal law and/or gaming regulatory legislation, and seeks the penal forfeiture of the Domain Name by the transfer thereof to the Commonwealth of Kentucky on the basis that: (1) the Domain Name has been used in the commission of multiple crimes and statutory violations within Kentucky, (2) unless forfeited in that way, the Domain Name will continue to be used in the commission of multiple crimes and statutory violations within Kentucky and (3) that the use of the Domain Name constitutes a public nuisance.
3. By Order dated 18 September 2008 made in the Kentucky Proceedings ("the Seizure Order"), Circuit Judge Thomas Wingate ordered inter alia that the 141 domain names, including the Domain Name, should immediately be transferred by their respective Registrars to an account of the Commonwealth of Kentucky. The Seizure Order provided that the said domain names were properly seized by the Commonwealth of Kentucky pursuant to Kentucky's criminal and/or penal legislation (namely, KRS 528.100). The Seizure Order included directions for its service of upon the Registrars of the domain names in question: in particular, for the service of the Seizure Order on Safenames as the Registrar of the Domain Name.
4. The Seizure Order was made in proceedings which had not been served on the parties who would be affected thereby (including PKL and Safenames) who had no opportunity to defend the same.
5. By emailed letter dated 19th September 2008 from Hurt, Crosbie & May PLLC (the Commonwealth of Kentucky's attorneys in the Kentucky Proceedings) to Safenames, which was received by Safenames in England, Safenames was purportedly served with a copy of the Seizure Order. The aforesaid letter asserted that Safenames was required by order of the Franklin Circuit Court to immediately transfer the Domain Name (and 4 other domain names) to the account of the Commonwealth of Kentucky.
6. Following a hearing on 26th September 2008 the Franklin Circuit Court directed the Commonwealth of Kentucky not to take any action relative to the operation or disposition of inter alia the Domain Name unless and until further ordered to do so by that court; however the court refused to stay the execution of the Seizure Order. By Order dated 16th October 2008 Circuit Judge Thomas Wingate reinstated the Seizure Order subject to various amendments, and ordered that a forfeiture hearing take place on 171" November 2008.
7. By letter dated 30th October 2008 PKL's solicitors asked Safenames to give an undertaking that it would not transfer the Domain Name to the Commonwealth of Kentucky or to any official thereof or to any agent or other person nominated for that purpose by the Franklin Circuit Court of the Commonwealth of Kentucky or to any other person. The letter also sought an undertaking that Safenames would not do any act that interferes with or inhibits PKL's use and enjoyment of the Domain Name. By the said letter PKL asserted and sought to enforce its contractual rights under the Agreement.
8. By letter dated 3rd November 2008 Safenames acknowledged that there was a conflict between the Seizure Order and its contractual duties owed to PKL, but Safenames refused to give the undertakings sought by PKL or any other comfort that the Domain Names would not be transferred."
The issues which arise
(a) Is Kentucky entitled to state immunity under the State Immunity Act 1978? If it is, then unless one of a number of exceptions in the Act apply to these proceedings, judgment may not be entered against it.
(b) If Kentucky is not a state within the meaning of the Act, has it been properly served both with the proceedings and with this application?
(c) Do the facts of the case justify the granting of the declaratory relief which Pocket Kings claims against Kentucky?
Is Kentucky a state for the purposes of the State Immunity Act 1978?
"1.- 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.
12.- Service of process and judgments in default of appearance.
(1) Any writ or other document required to be served for instituting proceedings against a State shall be served by being transmitted through the Foreign and Commonwealth Office to the Ministry of Foreign Affairs of the State and Service shall be deemed to have been effected when the writ or document is received at the Ministry.
14.- States entitled to immunities and privileges.
(1) The immunities and privileges conferred by this Part of this Act apply to any foreign or commonwealth State other than the United Kingdom; and references to a State include references to -
(a) the sovereign or other head of that State in his public capacity;
(b) the government of that State; and
(c) any department of that government,
but not to any entity (hereafter referred to as a "separate entity") which is distinct from the executive organs of the government of the State and capable of suing or being sued.
(2) A separate entity is immune from the jurisdiction of the courts of the United Kingdom if, and only if-
(a) the proceedings relate to anything done by it in the exercise of sovereign authority; and
(b) the circumstances are such that a State (or, in the case of proceedings to which section 10 above applies, a State which is not a party to the Brussels Convention) would have been so immune.
(5) Section 12 above applies to proceedings against the constituent territories of a federal State; and Her Majesty may by Order in Council provide for the other provisions of this Part of this Act to apply to any such constituent territory specified in the Order as they apply to a State.
(6) Where the provisions of this Part of this Act do not apply to a constituent territory by virtue of any such Order subsections (2) and (3) above shall apply to it as if it were a separate entity."
"It is now possible to consider the effect of these provisions on the position of a constituent state which is not the subject of [an Order in Council]. When such a state does something "in the exercise of sovereign authority", it is given the benefit of the same immunities as the state of which it forms a constituent part. It is not in dispute that the "sovereign authority" in section 14(2)(a) is a reference to the sovereign authority of the recognised state. In other words, when a constituent territory or other separate entity acts for and on behalf of the recognised State and effectively acts as if it was exercising the State's sovereign authority, it obtains the immunity that the State would have obtained had it acted on its own behalf.
Second, if it does not fail within the provisions of section 14(2)(a), the constituent territory or other separate entity has no immunity. It neither falls under section 14 nor does it obtain immunity under the Diplomatic Privileges Act 1964."
"Where no Order in Council has been enacted in respect of it, a constituent territory of a federal State is also to be treated as a separate entity, enjoying the same immunities when it acts in exercise of sovereign authority; the "sovereign authority" referred to in section 14(2)(a) is the sovereign authority of the recognised State."
BCCIv. Price Waterhouse is cited as authority for that proposition.
"Assuming, therefore, that section 14(2)(a) is intended to create an additional requirement for immunity, one must ask again what is meant by the reference to things done by the entity in the exercise of a sovereign authority which the entity does not possess. The best I can do, to convey what I believe to be the flavour of section 14(2)(a), is to assert that the entity is immune only if in some sense the act, although not done by the sovereign, is a manifestation of the sovereign's authority "
"The US Federal Government's powers over the 50 States are circumscribed by the US Constitution, as set forth in its Amendment X: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." US Const. Amend. X. The US Supreme Court has clarified that Amendment Ten reinforces that the States - and the people - are imbued generally with the powers not explicitly granted to the Federal Government. See e.g. Fry v. US, 421 US 542, 547n.7 (1975) (holding that the Amendment expressly declares the constitutional policy that Congress may not exercise power in a fashion that impairs the State's integrity or their ability to function effectively in a federal system)."
Mr Ihren goes on to say that among the powers reserved to state governments is the regulation of gambling.
The basis upon which one state is considered to be immune from the territorial jurisdiction of the courts of another state is that of "par in parem" which effectively means that the sovereign or governmental acts of one state are not matters upon which the courts of other states will adjudicate.
"The doctrine of state immunity is the product of the classical theory of international law. This taught that states were the only actors on the international plane, the rights of individuals were not the subject of international law. States were sovereign and equal: it followed that one state could not be impleaded in the national courts of another; par in parem non habet imperium. States were obliged to abstain from interfering in the internal affairs of one another."
As Mr Tager points out, the Commonwealth of Kentucky is not an actor on the international plane, and is not a state sovereign and equal to other states. So in the classic theory of public international law it is not a state and it does not, when exercising its own authority, exercise the authority of a sovereign state. This is important because, as Lord Phillips observed (ibid) at page 279H, the Act should be interpreted, so far as possible, in a manner which accords with public international law.
Has the Commonwealth of Kentucky been properly served?
Is Pocket Kings entitled to the declaratory relief which it seeks?
(a) doing so would amount to the exercise of the sovereign authority of the Commonwealth of Kentucky in the English Courts;
(b) doing so would amount to the enforcement of foreign penal law;
(c) doing so would amount to the enforcement of the public law of a foreign state and
(d) enforcement would be contrary to public policy because the Kentucky Proceedings constituted a breach of the rules of natural justice.
"English courts have no jurisdiction to entertain an action (1) for the enforcement either directly or indirectly of a penal, revenue or other public law of a foreign state or (2) founded upon an act of state."
"1 This in rem forfeiture action is brought by the Commonwealth exercising its police powers and pursuant to KRS §528.100 and common law against the Domain Defendants to stop illegal internet gambling that is occurring in the Commonwealth in blatant disregard for and violation of Kentucky anti-gambling law and public nuisance law."
(from the Kentucky's Second Amended Complaint)
"24 This Court has jurisdiction over this action because it is brought by the Commonwealth, in its Sovereign capacity and pursuant to its police powers, alleging exclusively Kentucky statutory and common law claims."
(Judgment of the Franklin Circuit Court dated 18lh September 2008)
"36 Seizure of the Domain Defendants is necessary to adequately protect the Commonwealth's legitimate governmental interests." (ibid)
"... seizure of the domain names serves a significant governmental purpose ..."
(Judgment of the Franklin Circuit Court dated 16th October 2008)
"Criminal forfeiture is part of a criminal sentence ... In contrast, a civil forfeiture is not punitive ... An in rem civil forfeiture is a remedial civil action, distinct from potentially punitive in personam civil claims such as fines. ... In the case of Ursety 518 US 267 at 284 the United States Supreme Court held that: 'Civil forfeitures ... are designed to do more than simply compensate the Government. Forfeitiures serve a variety of purposes, but are designed primarily to confiscate the property used in violation of the law, and to require disgorgement of the fruits of illegal conduct.'" (ibid)
"As possession of a gambling device may now constitute a crime under KRS 528.080, KRS 528.100 does not provide a civil in rem forfeiture proceeding, in my opinion. Indeed the plain language of the statute specifically states that for a gambling device to be forfeited, it must be "possessed or used in violation of this chapter".
(Judge Taylor in the Kentucky Court of Appeals)
The last quotation indicates a difference of view between the first instance judge and one of the two majority judges in the Court of Appeals. The other majority judge did not express a view on this point.
"On the authorities as they now stand the only category outside penal and revenue statutes which is the subject of an actual decision is the exercise or assertion of a sovereign right. There is no decision which binds this court to find that there is a rule which prevents the enforcement of all foreign public laws. The test laid down by the High Court of Australia is not only consistent with the English authorities , including the Equitoral Guinea case in the Court of Appeal, but is a helpful and practical test."
Should a declaration be granted