BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Strand, London, WC2A 2LL |
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B e f o r e :
(sitting as a Deputy Judge of the High Court)
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AELF MSN 242, LLC (a Puerto Rico limited liability company) |
Claimant |
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- and - |
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DE SURINAAMSE LUCHTVAART MAATSCHAPPIJ N.V. D.B.A. SURINAM AIRWAYS |
Defendant |
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Tom Stewart Coats (instructed by Bird & Bird LLP) for the Defendant
Hearing date: 22nd February 2022
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Crown Copyright ©
Peter MacDonald Eggers QC:
Introduction
(1) The finality of an order is an important principle in the administration of justice.
(2) An order takes effect from the time it is made and not when the order is perfected by sealing.
(3) Nevertheless, there is a particular jurisdiction - which must be carefully patrolled - which permits a judge to change his or her order between the handing down of the judgment and the subsequent sealing of the order.
(4) This jurisdiction is founded on the overriding objective in CPR rule 1.1.
(5) The power to reconsider an order is an exercise of judicial discretion.
(6) It is a jurisdiction which could be exercised on the judge's own initiative or on the application of one or both of the parties.
(7) In exercising this jurisdiction, there are two distinct questions which the Court must ask itself if it is asked by one of the parties to reconsider an order which has been pronounced but not yet been sealed: (a) whether the application to reconsider should be entertained in principle and whether there is a reasonably arguable basis for the application; and, if so, (b) whether or not the order should be changed in the exercise of the judicial discretion in accordance with the overriding objective.
(8) The Court's undoubted jurisdiction to reconsider its earlier order cannot be permitted to become a gateway for a second round of wide-ranging debate.
(1) If I did not consider the other grounds of SLM's jurisdiction application and I granted permission to appeal from my decision on the meaning and application of section 12(3) of the 1978 Act, the appeal might be allowed or dismissed. If dismissed, the substantive claim in the action would proceed. If allowed, the remaining grounds of the jurisdiction application would have to be determined. If the remaining grounds were determined in favour of SLM or AELF, there might be a further application for permission to appeal. In that event, the substantive claim would not be progressed after a long period of delay, a delay which is difficult to justify.
(2) If I considered and determined the other grounds of SLM's jurisdiction before deciding whether to grant permission to appeal on the section 12(3) issue, there might well be a further application for permission to appeal, whether by SLM or AELF, but in that event there would be only one appeal (if permission were granted). Of course, there might be no application for permission to appeal or it might be dismissed, in which case there would be no substantial delay in the pursuit of the substantive claim or at least any delay would be kept to a minimum.
(1) Is SLM entitled to rely on section 12(1) of the State Immunity Act 1978?
(2) If so, has service of the Claim Form been effected in a manner which was agreed in accordance with section 12(6) of the 1978 Act?
Section 12(1) of the State Immunity Act 1978
"Any writ or other document required to be served for instituting proceedings against a State shall be served by being transmitted through the Foreign, Commonwealth and Development 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.
"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."
(1) The law of State immunity depends on whether the conduct of the State is jure imperii (acts performed in the exercise of sovereign authority) or jure gestionis (acts performed in a private, i.e. non-sovereign, capacity). See Benkharbouche v Embassy of the Republic of Sudan [2017] UKSC 62; [2019] AC 777, para. 8-10.
(2) The availability of State immunity reflects a functional, rather than status-based, conception of a State.
(3) Given that the focus of the law of State immunity is on function rather than status or title, the term "State" in section 12(1) should be construed by reference to function rather than status or title and should include entities where the relevant conduct that gives rise to the proceedings is nominally performed by the entity but is in reality an exercise of governmental authority.
(4) The language of the definition of "State" in section 14(1) suggests a flexible and context-dependent meaning. The examples set out in section 14(1)(a)-(c) are not exhaustive.
(5) Although sections 14(3) to 14(6) support a narrower interpretation of "State" as excluding a "separate entity", these sections merely address some of the problems that arise if one excludes an entity exercising governmental functions from the definition of "State" and that they do not preclude a definition of "State" for the purposes of section 12(1) which includes a separate entity.
(6) There are sensible policy reasons for interpreting "State" in section 12(1) as including a "separate entity" where the proceedings relate to a sovereign act of the State in question: (a) without any provision for the separate entity exercising a State's sovereign authority to be served in accordance with section 12(1), there is no mechanism for the State to be given notice that its sovereign actions are the subject of foreign proceedings; (b) since the proceedings relate to a sovereign act, the separate entity should be entitled to the same procedural safeguards in the form of service under section 12(1) to ensure that the matter is properly drawn to the attention of the relevant decision-makers within the state's governmental apparatus; (c) service in accordance with section 12(1) allows the State to decide whether and how it wishes to engage with the proceedings; and (d) if there is no requirement to serve process in accordance with section 12(1), the decision whether to waive any immunity should be a matter for the State, not the separate entity.
(7) SLM's preferred interpretation would also be more consistent with the definition of "State" in Article 2(1)(b) of the UN Convention on Jurisdictional Immunities of States and their Property, which includes "agencies or instrumentalities of the State or other entities, to the extent that they are entitled to perform and are actually performing acts in the exercise of sovereign authority of the State".
(8) SLM accepts that it was the view of Butcher, J in Dynasty Co for Oil and Gas Trading Ltd v Kurdistan Regional Government of Iraq [2021] EWHC 952 (Comm), at para. 130, that "Entities, servants or agents distinct from the state as defined in section 14(1) are not, by that subsection, accorded the privilege in section 12" and that there "is no good reason for reading the SIA so as to afford them that privilege". However, this was obiter and in any event this decision should not be followed.
(9) In this case, the relevant act which was carried out in the exercise of sovereign authority was SLM's entry into the Settlement Agreement. According to the first witness statement of Mr Vrede, SLM is wholly-owned by the Republic of Suriname, SLM acts through a combination of its Directorate, its Supervisory Board and its shareholders in General Meeting; the Directorate and the Supervisory Board consist primarily of members of Suriname's governing political parties; SLM is an important part of the state-owned economy as both the flag carrier of Suriname and the only domestic airline that is permitted to operate routes to the European Union and the United States of America; the period prior to the Settlement Agreement was an extremely difficult time for both SLM and the Republic of Suriname as a result of the Covid-19 pandemic and the accompanying economic uncertainty for the travel and aviation sectors; the tourism sector, particularly tourists from The Netherlands, declined significantly as a result of the pandemic and the need to implement significant spending to deal with the pandemic affected the Government's ability to fund other parts of the economy, including SLM and its operations; the Settlement Agreement was executed pursuant to the approval of the Supervisory Board which is appointed and controlled by the Government.
(1) SLM's assertion that section 12(1) applies to it as a separate entity is misconceived because section 12(1) applies only to States and SLM is not a State, it is a separate entity, as provided for in the SIA at section 14(1).
(2) SLM is a commercial airline which is distinct from the executive organs of the government of Suriname and is capable of suing and being sued. By its Articles of Incorporation, the purpose of SLM is to conduct aviation business.
(3) The proceedings do not relate to an act done by SLM in the exercise of Suriname's sovereign authority. The proceedings concern SLM's failure to pay sums due under the Settlement Agreement which settled a dispute concerning sums alleged to be due to AELF under an aircraft lease agreement. The proceedings therefore concern commercial acts which are not an exercise of Suriname's sovereign authority. See Kuwait Airlines Corp v Iraqi Airways Co [1995] 1 WLR 1147, 1156, 1160-1164, where the House of Lords held that the removal of the aircraft from Kuwait to Iraq during the invasion of Kuwait was a governmental act but that the subsequent retention and use of the aircraft as part of its commercial fleet was not a governmental or sovereign act.
(4) Section 12(1) is concerned only with the procedural step of service of the proceedings. It is not concerned with the substantive immunity of a State from the jurisdiction of the English Courts which is provided for under section 1 of the 1978 Act. Section 14(2) extends state immunity to separate entities; it has nothing to do with the procedural step of service of the proceedings.
(5) By contrast, section 14(3) extends to a separate entity (other than a State's central bank or other monetary authority) which has submitted to the jurisdiction certain procedural privileges under sections 13(1)-(4) which apply "as if references to a State were references to that entity". There is an equivalent provision in section 14(4) in respect of a State's central bank or other monetary authority. There is no similar extension of the service provision under section 12(1) to separate entities.
(6) Further, section 14(5) provides that section 12 "applies to proceedings against the constituent territories of a federal State …". There is no provision that section 12 applies to separate entities.
(7) Sections 14(3)-(5) demonstrate that express provision would be required in the 1978 Act in order to extend the scope of section 12(1) to separate entities and there is no such provision.
(8) None of those considerations which justify the special provisions made for the service of originating process on States in sections 12(1)-(2) apply to a commercial corporate entity such as SLM.
(1) Section 1 provides that a State is immune from the jurisdiction of the courts of the United Kingdom, subject to specified exceptions. Section 1 appears under the heading "General immunity from jurisdiction".
(2) Sections 2-11 appear under the heading "Exceptions from immunity". These are the exceptions referred to in section 1.
(3) Section 12, together with section 13, appears under the heading "Procedure".
(4) The remaining provisions of Part I of the Act, including sections 13 and 14, appear under the heading "Supplementary provisions".
"Entities, servants or agents distinct from the state as defined in section 14(1) are not, by that subsection, accorded the privilege in section 12. There is no good reason for reading the SIA so as to afford them that privilege. In this regard, there is no question here of the circumvention of an immunity which the Act confers. The fact that individuals may be served otherwise than through the section 12 procedure does not prevent a claim for immunity if they were acting in their capacity as servants or agents of a state acting in the exercise of sovereign authority."
"It is apparent from Lord Wilberforce's statement of principle that the ultimate test of what constitutes an act jure imperii is whether the act in question is of its own character a governmental act, as opposed to an act which any private citizen can perform. It follows that, in the case of acts done by a separate entity, it is not enough that the entity should have acted on the directions of the state, because such an act need not possess the character of a governmental act. To attract immunity under section 14(2), therefore, what is done by the separate entity must be something which possesses that character. An example of such an act performed by a separate entity is to be found in Arango v. Guzman Travel Advisors Corporation (1980) 621 F.2d 1371 in which Dominicana (the national airline of the Dominican Republic), faced with a claim by a passenger in respect of inconvenience suffered in "involuntary rerouting," was held entitled to plead sovereign immunity under the United States Foreign Sovereign Immunities Act 1976, on the ground that it was impressed into service, by Dominican immigration officials acting pursuant to the country's laws, to perform the functions which led to the rerouting of the plaintiff. Reavley J., delivering the judgment of the court, said, at p. 1379:
"Dominicana acted merely as an arm or agent of the Dominican government in carrying out this assigned role, and, as such, is entitled to the same immunity from any liability arising from that governmental function as would inure to the government, itself." (Emphasis supplied.)
But where an act done by a separate entity of the state on the directions of the state does not possess the character of a governmental act, the entity will not be entitled to state immunity, though it may be able to invoke a substantive defence such as force majeure despite the fact that it is an entity of the state: see, e.g., C. Czarnikow Ltd. v. Centrala Handlu Zagranicznego Rolimpex [1979] A.C. 351. Likewise, in the absence of such character, the mere fact that the purpose or motive of the act was to serve the purposes of the state will not be sufficient to enable the separate entity to claim immunity under section 14(2) of the Act.
Section 12(6) of the State Immunity Act 1978
Subsection (1) above does not prevent the service of a writ or other document in any manner to which the State has agreed and subsections (2) and (4) above do not apply where service is effected in any such manner."
(1) The evidence relating to the agreement to accept service by the Bailiff upon Mr Vrede by appointment is in Ms Mónica Millán's first witness statement dated 29th July 2021, at paragraphs 9-11, and the email exchange between Ms Millán (on behalf of AELF) and Mr Vrede (on behalf of SLM) on 2nd June 2021.
(2) Mr Vrede's own evidence does not take issue with the fact that he had arranged an appointment with the Bailiff to enable the proceedings to be served. In his second witness statement dated 3rd February 2022, at paragraphs 11-12, Mr Vrede stated that he did not intend and was not authorised to agree to an alternative method of service to that provided for SLM under the 1978 Act. This assertion is not relevant given that Suriname is not a party to these proceedings.
(1) Mr Vrede only agreed to meet the Bailiff to receive the documents in an effort to be helpful in the difficult circumstances of the early pandemic (Mr Vrede's second witness statement, paragraph 8).
(2) By agreeing to meet the Bailiff at her home and to collect the documents from her, Mr Vrede did not intend to and was not authorised to agree to an alternative method of service to that required under the applicable rules or to waive any rights SLM had to be served in a particular manner (paragraphs 11-12 of his second witness statement).
(3) Furthermore, applying either party's definition of "State" for the purposes of section 12 of the 1978 Act, Mr Vrede's agreement to collect documents from the Bailiff cannot amount to a manner which the "State" has agreed since:
(a) Applying SLM's preferred interpretation of "State", neither party has adduced evidence to the effect that SLM was acting in the exercise of sovereign authority when Mr Vrede agreed to accept documents from the bailiff.
(b) Applying AELF's preferred interpretation of "State", SLM cannot be a State because it is a "separate entity".
Conclusion
(1) SLM was not entitled to be served with the Claim Form in accordance with section 12(1) of the State Immunity Act 1978, because SLM was a "separate entity" and a separate entity is not entitled to the privilege granted by section 12(1).
(2) If this conclusion is wrong, SLM nonetheless agreed to be served in the way it was served and so such service was effective in accordance with section 12(6).
(3) It follows that SLM's application contesting jurisdiction must be dismissed on these grounds in addition to its submission to jurisdiction and appearance within the meaning of section 12(3).