England and Wales Land Registry Adjudicator

 

 

REF/2008/0076

 

 

The Adjudicator to Her majesty’s Land Registry

LAND Registration act 2002

 

IN the matter of a reference from hm land registry

 

 

BETWEEN

 

The Republic of Croatia

 

APPLICANT

 

and

 

The Republic of Serbia

 

RESPONDENT

 

 

Property Address: 4 Zetland House, Marloes Road, London W8 5LB

Title Number: NGL216972

 

 

Before: Mr Cousins sitting as The Adjudicator to HM Land Registry

 

 

Sitting at: Procession House

On: Monday 20^th October 2008

 

 

Applicant Representation:               Mr James Crawford SC, instructed by Ince & Co, Solicitors

Respondent Representation:            Mr Daniel Margolin, instructed by Messrs Clyde & Co,  Solicitors

 

 

DECISION

 

KEYWORDS: Dismemberment of the Socialist Federal Republic of Yugoslavia; entry of restrictions; lex situs; private domestic law of England and Wales; occupation of property by a member of the Serbian diplomatic mission; principle of justiciability; “sufficient interest”; “right or claim”; Agreement on Succession Issues 2001 2262 (United Nations Treaty Series 253), Articles 3, 4, 5, 7 and 8, Annex B, Articles 2,3,4 and 5; United Kingdom Material on International Law (1996) 67 BYIL 708 – 709; Law Com No 254 “Land Registration for the 21^st Century - a Consultative Document” para. 6,59; Law Com No 271 “Land Registration for the Twenty-First Century - A Conveyancing Revolution”, Stationery Office July 2001, para. 6.49; State Immunity Act 1978 s.1, s.6(1), s.6(3), s.12(1), s.12(3), s.16(1)(b); Land Registration Act 2002, s.42, s.43, s.73(7); Land Registration Rules 2003Rule 93.

 

Cases referred to: AY Bank Limited (in Liquidation) v. Bosnia and Herzegovina, The Republic of Croatia, The Republic of Macedonia, The Republic of Slovenia, The Federal Republic of Yugoslavia (now Serbia and Montenegro), Embassy of Serbia and Montenegro, The National Bank of Serbia [2006] EWHC 830 (Ch); J H Watson (Mincing Lane Ltd) v. the Department of Trade and Industry [1989] Ch 72; [1990] 2 AC 418; Cook v Sprigg [1899] AC 572; Secretary of State in Council v. Kamachee Boye Sahaba (1859) 13 Mo. PCC, 2,; Buttes Gas v. Hammer [1982] AC888; Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5) [2002]2 AC 1101; R v Prime Minister of the United Kingdom, ex parte Campaign for Nuclear Disarmament [2002] EWHC 2777.

 

 

THE APPLICATION

1.                  By an application in Form RX1 dated 6^th February 2007 (“the Application”) the Republic of Croatia (“Croatia”) seeks to enter restrictions in Form N, alternatively in Form A and Form II pursuant to the provisions of section 42 of the Land Registration Act 2002 (“the LRA 2002”) over a leasehold ground floor flat known as and situate at 4 Zetland House, Marloes Road, London, London W8 (“the Property”).  The term granted by the lease is 84 years from 24^th December 1971. The leasehold interest in the property was registered on 5^th August 1974 at HM Land Registry under Title Number NGL 216972 in the name of “Socialist Federal Republic of Yugoslavia (Ministry of Defence)”. That name still remains specified as the registered proprietor despite the fact that the Socialist Federal Republic of Yugoslavia (“the SFRY”) is no longer is existence. The Applicant claims to have an interest, right or claim in the Property as a successor state to the SFRY.

 

2.         Notice of the application was served on the Republic of Serbia (“Serbia”).  By letter dated 16^th March 2007, the Defence Attaché of Serbia to the United Kingdom enclosed a formal document entitled “Complaint” by which Serbia objected to the entering of the restriction. First, Serbia stated that the Property was not included in the Agreement on Succession Issues adopted at the International Conference on 29^th June 2001 (“the ASI” [1]) and therefore is not covered by it.  Secondly, that it in effect has in interest in the Property by virtue of a 1984 rental agreement with SFRY which is now vested in Serbia as the legal successor state to the Federal Republic of Yugoslavia (“the FRY”).  No copy of the Rental Agreement has been produced.

 

3.         Croatia responded that, first, the ASI adopted at the International Conference specifically states that the list of consular and diplomatic properties listed in the agreement is subject to verification and amendment and that Serbia is not entitled to rely on its own failure to disclose the existence of the Property contrary to its obligations under the agreement. Secondly, in any event a rental agreement dated 1984 and made with the SFRY cannot assist in the determination of issues arising out of the dissolution of the SFRY in or about 1991-1992.

 

4.         Following the failure to dispose of Serbia’s objection by agreement, the Registrar referred the matter to the Adjudicator on 14^th January 2008 pursuant to the provisions of section 73(7) of the LRA 2002. The hearing of preliminary issues as to the efficacy of the Application took place on 20^th October 2008 in Procession House.  The submissions made by both sides have developed in sophistication since the Application was originally made and the objection lodged by Serbia. I should state that the assertion of continuity as the legal successor to the FRY is no longer maintained by Serbia, and other concessions have been made by both sides.

 

THE PRELIMINARY ISSUES

5.                  On 5^th August 2008 I made directions to determine the following preliminary issues (“the Preliminary Issues”).  These are as follows:-

 

(a)                which document(s) constitute(s) the ‘document required to be served for instituting proceedings’ for the purposes of section 12(1) State Immunity Act 1978 (“the SIA 1978”) in respect of the proceedings before the Adjudicator;

(b)               whether such document(s) have been validly served;

(c)                if such document(s) have not been validly served, whether the Respondent has ‘entered an appearance’ for the purposes of section 12(3) of the 1978 Act;

(d)               if such document(s) have been validly served, whether the Adjudicator has jurisdiction to determine a dispute of this nature between sovereign states.

 

Further directions were made as to the service of skeleton arguments prior to the hearing.

 

6.         I should state that Counsel for Serbia made a concession prior to the hearing that it did not for the purposes of the hearing of the Preliminary Issues make any submissions as sub-paragraphs (a) to (c), above, relating to service, but confined its arguments to  point (d) as to whether the Adjudicator has jurisdiction to determine the dispute.

 

THE BACKGROUND AND THE INTERNATIONAL LAW POSITION

7.                  In order to understand the basis of the Application made by Croatia and the objection made by Serbia and the jurisdictional point it is necessary to have some regard to the circumstances surrounding the dismemberment (or “dismembratio”) of the SFRY and the question of state succession arising from such dismemberment. For the purposes of the Preliminary Issues I set out my understanding of the position with regard to international law following such dismemberment. This historical analysis is agreed by Counsel for the purposes of this hearing.

 

8.                  The SFRY was formerly a federal state which underwent a process of dismemberment in 1991-1992. As a result of the declarations of independence of four of the six constituent republics (Croatia, the Republic of Slovenia, the Republic of Bosnia-Herzegovina and the former Yugoslav Republic of Macedonia) (“the FYROM”) it ceased to exist.

 

9.                  The other two constituent republics of the SFRY, Serbia and Montenegro together initially formed the FRY.  Subsequently in 2003 the constituent republics of the FRY (Serbia and Montenegro) entered in a State Union, and the FRY became known as Serbia and Montenegro.  In 2006, following a referendum, the State Union of Serbia and Montenegro was dissolved and Montenegro declared its independence.

 

10.              As a matter of international law the dismemberment of the SFRY meant that no State was recognised as constituting the continuation of the SFRY. Thus Croatia, Slovenia, Bosnia and Herzegovina, the FYROM and the FRY (and thereafter Serbia and Montenegro) are to be regarded as joint successors to the SFRY.

 

11.              In particular, Serbia (as with the State Union of Serbia and Montenegro, and the FRY before it) is not the continuation of the SFRY, but is joint successor to the SFRY together with the other former constituent republics of the SFRY.  In this regard, the Foreign and Commonwealth Office stated its position in 1996 when recognising the FRY:

 

“The UK is recognising the Federal Republic of Yugoslavia (FRY).  It comprises Serbia and Montenegro.  We used to call the FRY “FRY (Serbia and Montenegro)”.  Kosovo, Vojvodina and Sandjak are part of Serbia.  The FRY is not (not) the same as the former Yugoslavia.  Former Yugoslavia comprises Serbia and Montenegro (now the FRY), Bosnia (officially “Bosnia and Herzegovina”), Croatia, Slovenia and Macedonia.  Bosnia, Croatia etc are not (not) part of the FRY.  FRY is not (not) an acronym for former Yugoslavia…”[2]

 

12.              Following the changes brought about by the creation of the State Union of Serbia and Montenegro, and the subsequent declaration of independence of Montenegro, and the consequent emergence of Serbia as an independent state, the same position applies mutatis mutandis as regards Serbia.  In particular Serbia, as with the FRY before it, is not the “continuator” of the SFRY[3], but is one of the joint successors of the SFRY.  It is urged upon me by Leading Counsel for Croatia that this is properly a matter of which judicial notice can now be taken, in light of the public statements made by HMG and the discussion in the case of AY Bank Limited (in Liquidation) v. Bosnia and Herzegovina, The Republic of Croatia, The Republic of Macedonia, The Republic of Slovenia, The Federal Republic of Yugoslavia (now Serbia and Montenegro), Embassy of Serbia and Montenegro, The National Bank of Serbia.[4] (“the AY Bank Case”) I shall refer to this case in more detail below.

 

13.              Following various negotiations which had taken place to resolve questions of state succession arising from the dismemberment of the SFRY an agreement was reached on 10^th April 2001 at a meeting held at the Bank for International Settlements regarding the distribution of the assets of the SFRY. On 29^th June 2001, the then five States which had previously made up the SFRY entered into the ASI which dealt with questions of state succession arising from the dismemberment of the SFRY.  The ASI was subsequently ratified by each of the parties to it (in the case of Croatia on 25^th March 2004), and it was registered with the Secretary General of the United Nations on 2^nd June 2004 at which point it came into force. The process, and the overall effect of the ASI, are summarised in the judgment of the Chancellor in the AY Bank Case. [5]

 

14.       It is necessary to have regard to some of the detailed provisions of the ASI the first paragraph of which states as follows:

 

“Bosnia and Herzegovina, the Republic of Croatia, the Republic of Macedonia, the Republic of Slovenia and the Federal Republic of Yugoslavia, being in sovereign equality the five successor States to the former Socialist Federal Republic of Yugoslavia.”

 

15.              Article 3 contains a list of various Annexes in which the subject matter of each Annex is agreed. Annex B is concerned with diplomatic and consular properties.  So far as material, Articles 4, 5, 7 and 8 are in the following terms:

 

“Article 4

(1)        A Standing Joint Committee of senior representatives of each Successor State, who may be assisted by experts, is hereby established.

 

(2)        This Committee shall have as its principal tasks the monitoring of the effective implementation of this Agreement and serving as a forum in which issues arising in the course of its implementation may be discussed.  The Committee may as necessary make appropriate recommendations to the Governments of the successor States.

….

Article 5

(1)        Differences which may arise over the interpretation and application of this Agreement shall, in the first place, be resolved in discussion among the States concerned.

 

(2)        If the differences cannot be resolved in such discussions within one month of the first communication in the discussion the States concerned shall either:

 

(a)        refer the matter to an independent person of their choice, with a view to obtaining a speedy and authoritative determination of the matter which shall be respected and which may, as appropriate, indicate time specific limits for actions to be taken; or

 

(b)        refer the matter to the Standing Joint Committee established by Article 4 of this Agreement for resolution …

Article 7

This Agreement, together with any subsequent agreements called for in implementation of the Annexes to this Agreement, finally settles the mutual rights and obligations of the successor States in respect of succession issues covered by this Agreement.  The fact that it does not deal with certain other non-succession issues is without prejudice to the rights and obligations of the States parties to this Agreement in relation to those other matters.”

 

Article 8

Each successor State, on the basis of reciprocity, shall take the necessary measures in accordance with its internal law to ensure that the provision of this Agreement are recognised and effective in its courts, administrative tribunals, and agencies, and that the other successor states and their national have access to those courts, tribunals and agencies to secure the implementation of this Agreement.

 

 

16.     Annex B (“Diplomatic and Consular Properties”) contains the following material provisions:

 

“Article 2

(1) SFRY diplomatic and consular properties shall be distributed in kind (i.e. as properties) rather than by way of monetary payments. …

Article 3

Diplomatic and consular properties [………] shall be distributed in such a way that the total and final distribution in kind of diplomatic and consular properties [………..] reflects as closely as possible the following proportions by value for each State:

 

Bosnia and Herzegovina                                 15%

Croatia                                                                        23.5%

Macedonia                                                      8%

Slovenia                                                          14%

Federal Republic of Yugoslavia                     39.5%

Article 4

(1)        SFRY diplomatic and consular properties are set out in the list appended to this Annex.  That list groups properties according to their geographical regions. Each successor State shall, within each geographical region, be entitled to its proportionate shares as set out in Article 3.

 

(2)        The distribution of properties shall be by agreement between the 5 States.  To the extent that agreement on the distribution cannot be reached, the successor States shall adopt a procedure whereby any property selected by only one State will be acquired by that State, and where two or more States have selected the same property, those States will consult together as to which of them will acquire that property.

 

(3)        The basis for the proportionate distribution of properties is the valuation in the “Report dated 31 December 1992 on the valuation of the assets and liabilities of the former Socialist Federal Republic of Yugoslavia as at 31 December 1990”. …

Article 5

The successor States shall establish a Joint Committee composed of an equal number of representatives from each State to ensure the effective implementation of Articles 3 and 4 of this Annex.  The functions of the Joint Committee shall include:

 

(a)                verifying and as necessary amending the List referred to in Article 4(1);

(b)               assessing the legal status of each property, its physical condition, and any financial liabilities attaching to it; and

(c)                considering the valuation of property as the need arises.”

 

17.       Thus the ASI was designed to resolve on a comprehensive basis the question of succession to property arising from the dismemberment of the SFRY. In accordance with Article 2 of Annex B the SFRY’s diplomatic and consular properties should have been distributed in kind and in such a way as to reflect as closely as possible the proportions set out in Article 3 thereof. It is to be noted, however, that the Property does not appear on the list referred to in Article 4(1) of Annex B and contained in the Schedule (“the List”). It should also be noted that Serbia is not entitled to diplomatic or state immunity regarding its use or possession of the Property.  The fact that it is occupied by a member of the diplomatic mission of Serbia for private purposes does not render it immune from the jurisdiction of the English Courts under section 1 of the SIA 1978 (and see sections 6(1) and 16(1)(b)). In short it is not a diplomatic mission providing diplomatic immunity within the meaning of the SIA 1978.

 

18.              Finally, I should state that on 5^th June 2006 Serbia declared itself as the successor state of the State Union of Serbia and Montenegro in public international law with regard to international instruments.

 

THE RESTRICTIONS SOUGHT

19.              They are the following:-

(1)        In Form N – “No disposition of the registered estate (except a trust corporation) is to be registered without a written consent signed on behalf of [Croatia] by its conveyancer, Ince and Co……….”, alternatively,

(2)        In Form A - “No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises unless authorised by an order of the court”, and

(3)        In Form II - “No disposition of the registered estate is to be registered without a Certificate signed by the applicant for registration or his conveyancer that written notice of the disposition was given to [Croatia] at Ince & Co….”

 

THE JURISDICTION OF THE REGISTRAR

The provisions of the LRA 2002 and the 2003 Rules

20.       It is first necessary to turn to the relevant statutory framework of the LRA 2002 and the Land Registration Rules 2003 (“the 2003 Rules”).

 

21.       Section 42 of the LRA 2002, (“Power of registrar to enter”) provides as follows:

 

“(1)      The registrar may enter a restriction in the register if it appears to him that it is necessary or desirable to do so for the purpose of –

(a)        preventing invalidity or unlawfulness in relation to dispositions of a registered estate or charges;

(b)        securing that interests which are capable of being overreached on a disposition of a registered estate or charge are overreached, or

(c)        protecting a right or claim in relation to a registered estate or charge.”

 

22.       Section 43 of the LRA 2002 (“Applications”) provides, so far as material, as follows:

 

“(1)      A person may apply to the registrar for the entry of a restriction under section 42(1) if -

(a) he is the relevant registered proprietor, or a person entitled to be registered as such proprietor,

            (b) the relevant registered proprietor, or a person entitled to be registered as such proprietor, consents to the application, or

            (c) he otherwise has a sufficient interest in the making of the entry.

 

               (2)      Rules may -

            (a)  require the making of an application under subsection (1) in such circumstances, and by such person, as the rules may provide;

            (b)  make provision about the form of consent for the purposes of subsection (1)(b);

            (c)  provide for classes of person to be regarded as included in subsection (1)(c);

                                          (d) specify standard forms of restriction.”

 

23.              The relevant rule under the 2003 Rules is Rule 93 (“Persons regarded as having a sufficient interest to apply for a restriction”).  This provides that “the following persons are to be regarded as included in section 43(1)(c) of the [LRA 2002]” and then sets out 21 classes of such persons who are to be so regarded. Examples of these are the following:-

 

(a)        any person who has an interest in a registered estate held under a trust of land where a sole proprietor or a survivor of joint proprietors (unless a trust corporation) will not be able to give a valid receipt for capital money, and who is applying for a restriction in Form A to be entered in the register of that registered estate,

(b)        any person who has a sufficient interest in preventing a contravention of section 6(6) or section 6(8) of the Trusts of Land and Appointment of Trustees Act 1996 and who is applying for a restriction in order to prevent such a contravention,

(c)        any person who has an interest in a registered estate held under a trust of land where the powers of the trustees are limited by section 8 of the Trusts of Land and Appointment of Trustees Act 1996, and who is applying for a restriction in Form B to be entered in the register of that registered estate.”

 

24        Having regard to these provisions there is in effect a two-stage process to be followed.  The first stage is the application of the statutory code contained in Section 43 and Rule 93.  These provisions ground the basis upon which a person may make the application to the Registrar for the entry of the restriction on the register. Thus he must first demonstrate that, inter alia, he has a “sufficient interest in the making of the entry”, and the examples of such persons are then provided in Rule 93. Clearly if the applicant falls within one of the prescribed categories that person will not have to satisfy the Registrar that he/she has a sufficient interest in the making of the interest as “he or she will be regarded as doing so.”[6] Thereafter, if the first stage is satisfied then the provisions of the section 42 will apply whereby the registrar has the power to enter a restriction in order to protect a “right or claim”.

 

25.       Guidance for this can be found in Law Com No 254 “Land Registration for the 21^st Century - a Consultative Document”.[7]  The provisional recommendation made by the Law Commission at that stage was that a person entitled to apply for a restriction included “any person who could demonstrate that he or she had the benefit of a right or interests that should be protected by a restriction, such as an interest under a trust of land or the rights of a trustee in bankruptcy”. After the Consultation had been concluded Law Com No 271 was published. By that stage the decision had been made that there should be a two stage process.

 

26.       As to the first stage, it is clear in my judgment, and I so find, that by the use of the word “included” in the introduction to Rule 93 the definition of the classes of persons then so provided are examples of such persons who have a “sufficient interest” in making of the application. The definition of such classes of persons is not intended to be exhaustive or exclusive. This is, in effect, accepted by both Counsel. I am fortified in this interpretation when regard is had to statements made in Law Com No 271[8]. In other words there may be examples of other classes of persons not so defined and thus may not be excluded. This is subject, however, to the important caveat that such other classes of persons would still have to satisfy the test of having a “sufficient interest” in the making of such an application, (and see section 43(1)(c) – “otherwise has a sufficient interest…”). Thus once a person has made an application to the Registrar and can demonstrate that he (otherwise) has a “sufficient interest” in the making of the entry the Registrar may then enter a restriction in order to “protect a right or claim in relation to a registered estate or charge”.  If such a person is unable to demonstrate such a “sufficient interest” in the making of the entry then the Registrar is not obliged to make such an entry on the application at that point in time.

 

27.              If the Registrar is satisfied that the applicant has prima facie demonstrated that he has a sufficient interest then he must serve a notice on the registered proprietor as an essential pre-requisite to the second stage which is the exercise of his power to register the entry of the restriction under the provisions of Section 42(1). He may, however, only enter the restriction if, inter alia, it appears to him that it is necessary or desirable to do so for one of the purposes set out in Section 42(1)(a) to (c). If, of course, the registered proprietor then objects to such an entry there is a dispute which is referred to the Adjudicator. The decision is then reached by the Adjudicator as to whether the applicant is able to show that he has a right or claim which is capable of protection.

 

28.              It has been conceded by Leading Counsel for Croatia that the provisions of Section 42(1)(a) and (b) are not relevant in the present case. Sub-section (c) (“protecting a right or claim in relation to a registered estate or charge” (my italics)) is in point. Serbia contends that Croatia cannot demonstrate that, as a matter of the domestic law of England and Wales, it has any “right” or “claim” in relation to the registered estate in the Property. Serbia accepts that a claim in relation to a registered estate, or a right in relation to a registered estate, might encompass something beyond a right or claim to a registered estate.  It is, however, their case that the sort of right or claim which is contemplated by s.42(1)(c) must be a right or claim which is capable of recognition under the domestic law of England and Wales.  It is contended that Croatia cannot establish that it has any such right or claim in this jurisdiction on the facts of this case. I shall deal with this point, below.

 

THE CASES FOR THE RESPECTIVE PARTIES – A SUMMARY

            Croatia

29.       The case advanced by Croatia is that the Adjudicator has jurisdiction to determine the present dispute between the sovereign States of Serbia and Croatia for two reasons: - first, Serbia is not immune as regards the present proceedings; secondly, the issues raised by Croatia’s Application are justiciable on the basis that it has an interest in the Property in the context of the provision s of the ASI.  The ASI was a comprehensive attempt to resolve the succession issues arising out of the dismemberment of the former SRFY. Article 7 is an acknowledgement by the parties that the agreement finally settles the mutual rights and obligations of the successor States in respect of succession issues covered by the agreement. Under Croatian law the ASI has the effect of giving it (and the other successor States to the former SFRY) a legally recognised interest in the Property under Croatian domestic law (see below).

 

True construction of the provisions of the ASI

30.       As to the fact the Property is not listed in Annex B it is contended this is immaterial having regard to the general wording of the terms of the ASI. Leading Counsel submits that the List of properties is not a definitive list, but provisional only, when regard is had to Article 4(1) of Annex B. The reason for this is that in “identifying and determining the equitable distribution amongst themselves of rights, obligations, assets and liabilities of the former [SFRY]…” there is no limitation as to an identifiable list of property (see the third Recital on page 1 of the ASI).  Thus Leading Counsel contends that the acknowledgement set out in Article 2 of the ASI when referring to the successor States having an interest in State property and assets means that this is not limited to the properties listed, but applies generally to all of the diplomatic and consular properties of the SFRY, both specified and unspecified. This, it is asserted, provides a recognition that the successor States have an interest in the properties generally the subject matter of the ASI.  Leading Counsel finds further support for this interpretation when regard is had to the provisions of Article 5(a) of Annex B where the functions of the joint Committee shall include verifying and as necessary amending the List referred to in Article 4(1) of Annex B and appended thereto.  If more properties meeting the criteria of diplomatic and consular properties are identified, then the Committee should add them to the list and they should be capable of being distributed under the ASI.

 

An interest under Croatian law

31.       The Opinion of a Croatian qualified attorney (Mr Oleg Usokovic) was also produced during the hearing which confirms that Croatia has a legally recognised interest in the property under Croatian law. This is said to arise in it capacity as a successor State to SFRY and to be “recognised” in the ASI. It is not dependent upon the decision of the Committee referred to in Annex B, Article 4. Also it is said to be irrelevant that the property is not specified in the list of properties contained in the Appendix to Annex B. In short; -

 

"Under Croatian law the ASI has the effect of giving the Republic of Croatia and every other successor State to the former SFRY an interest in the due administration of the procedures set out or contemplated in Articles 4 and 5 of Annex B to the ASI." 

 

            Justiciability

32.              This then leads to the question of whether the Application is subject to the jurisdiction of the English courts. The simple and fundamental point on justiciability is the following: - it is submitted that Croatia has an interest recognised under the law of Croatia, and according to the terms of the ASI itself, as to the protection of Croatia's claim to the due distribution of the assets of the SFRY on its dissolution. Thus the question of who owns land in England and Wales simply cannot be non-justiciable in this jurisdiction. The effect of the restrictions sought to be entered by Croatia is solely to preserve the position of legal equality between Croatia and Serbia and the other successor States pending resolution of the question of entitlement in accordance with the mechanism contained within the provision of the ASI and to prevent any unauthorised disposition of the Property pending that resolution. 

 

33.              In particular, Leading Counsel contends that Croatia does not seek to give effect in the United Kingdom to the treaty. Thus I am not enjoined to resolve the merits of the dispute between Croatia and Serbia as to the entitlement to the Property or to apply the provision of the ASI. The fact that I am enjoined to take account of the ASI and its provision does not in any way involve giving effect to it as such. It does not offend against the principle of non-justiciability.  There is a clear distinction between giving effect to an unincorporated treaty, which does not form part of English law, and taking account of a treaty and exercising a power of discretion under English law. Thus all that is required is that I should take note of the fact that there exists a dispute between Croatia and Serbia as to the future disposition of the Property thereby providing Croatia with a “right or claim” within the meaning of Section 43(1)(c) of the LRA 2002. 

 

Restrictions entered against other registered titles

34.       Finally Leading Counsel for Croatia also relied on the fact that there are four instances where entries have been made by the Registrar in respect of properties registered in the name of a defunct state.  He produced during the course of the hearing a bundle of copy documents where it can be seen that restrictions have been entered in favour of Croatia on the registers of two properties where the name of the registered proprietor is described as being the SFRY.  The other two cases are where cautions had been entered prior to the coming into force of the LRA 2002 in favour of Slovenia, once again against the title of the SFRY. I should state at this stage that I consider that little turns on this as no information has been provided as to whether Serbia was ever notified of the applications made by Croatia for the entry of restrictions, or any evidence provided whether any objection was made.  I therefore do not propose to refer to this aspect again in this Decision.

Serbia

Justiciability

35.       Serbia no longer challenges immunity from jurisdiction under the SIA 1978.  On the question of justiciability it is submitted that no private domestic law rights or obligations can be derived from the provisions of an unincorporated treaty (see J H Watson (Mincing Lane Ltd) v. the Department of Trade and Industry [1989] Ch 72; [1990] 2 AC 418). Serbia contends that Croatia cannot have acquired in the context of English domestic law any right or claim to the Property, or any interest in the Property, by virtue of being one the successor States to the SFRY and/or under the provisions of ASI. Annex B to the ASI establishes machinery to determine the distribution in kind of the SFRY diplomatic and consular properties throughout the world.  It does not, however, on Serbia’s case, have the effect of conferring on any one or more of the successor States to the SFRY any sufficient interest in, or any right or claim to, property in this jurisdiction under the domestic law of England and Wales especially where such property does not appear on the List referred to in Article 4(1) of Annex B and appended in the Annex (see paragraph 16, above).

 

36.       More particularly, it is submitted that the availability of the machinery for which provision is made in Article 5 of Annex B does not confer on Croatia, or any of the other successor States to the SFRY, as a matter of domestic law in England and Wales, any proprietary interest in the Property or a “sufficient interest” therein within the meaning of section 43(1)(c) of the LRA 2002 and Rule 93 of the 2003 Rules enabling Croatia to make an application for the entry of a restriction against the title. Further, although Counsel for Serbia is willing to concede that a “right or claim” might encompass something beyond a right or claim to a registered estate, it is contended that Croatia cannot establish that it has a right or claim in relation to a registered estate within the meaning of section 42(1)(c) which is capable of being recognised under the law of England and Wales and therefore capable of being protected by an entry of a restriction on the register.

 

An interest under Croatian law

37.       With regard to the Opinion of Mr Uskokovic it is accepted by Counsel for Serbia that all the successor States have an interest in seeing that the provision of the ASI are adhered to in relation to the distribution in kind of properties of the former SFRY. It is not accepted, however, that the nature of the interest arising under the ASI in International Law gives rise to a sufficient interest in the making of a restriction in accordance with Section 43(1)(c).  In other words, it cannot give rise to an interest known in the domestic private law of England and Wales.  As to the assertion made by Mr. Uskokovic that the interest of Croatia, and its fellow successor States, in the due administration of the procedures provided for in the ASI, can give rise to an interest legally recognized as a matter of Croatian law, it is contended that the nature of that interest is not explained, nor, as a matter of Croatian law, how that interest arises.  Further, as the nature of such an interest is not easily intelligible to an English land lawyer it is necessary to explain how the nature of the interest as a matter of Croatian law can be translated as a concept in the context of English domestic land law.  This has not been done. Also it is not explained how the nature of the interest in the due administration of the ASI's procedures is promoted in a manner which ensures that its provisions are followed by the successor States. Thus, in short, it is contended that the intervention by Mr. Uskokovic does not assist in resolving the issues before the Court, and specifically as to whether Croatia can establish a sufficient interest in the making of the application for the relevant entry or the nature of Croatia’s right or claim.

 

THE DECISION ON THE TRUE CONSTRUCTION OF THE ASI

38.       In my judgment it is an essential pre-requisite to resolving the various issues upon which I am required to decide whether on the true construction of the terms of the ASI the Property falls within its provisions in any event. On this preliminary point I find as follows - the Property is not contained in the List in the Appendix to Annex B to the ASI. This I consider fatal to the Application.  Accordingly, I do not agree with the interpretation placed upon this treaty by Croatia to the effect that this is immaterial having regard to the general wording of the terms of the ASI and that the List of properties is not designed to be a definitive list, but provisional only, when regard is had to the provisions of Article 4(1), (see paragraph 30, above). I appreciate that it may be possible to argue that there is no apparent limitation as to the properties capable of being identified (see the third Recital on page 1 of the ASI and the acknowledgement set out in Article 2 of the ASI) but I disagree that this means that the ASI applies generally to all of the diplomatic and consular properties of the SFRY, both specified and unspecified. The ASI envisages a procedure to be undertaken in order to identify and resolve issues arising by the establishment of a Joint Committee (see Article 5(1) of Appendix B). On the assumption that such a Committee has been established to this end and a procedure embarked upon to try and resolve this issue, at the present time, as I understand it, there has been no resolution. The point, as I see it, is that the Property was not at the date of this Application included in the List, and still has not been so included.  This means therefore that it cannot properly form the subject of this Application, and that should be an end to the matter. 

 

JUSTICIABILITY

39.       If I am incorrect in this analysis as to the true construction of the ASI, then it is necessary to have regard to the broader aspects of justiciability and the authorities. The starting point on this issue is to be derived from dicta of Lord Halsbury in Cook v Sprigg[9]: - 

 

“It is a well-established principle of law that the transactions of independent States between each other are governed by other laws than those which municipal courts administer.”[10]

 

40.       Authority for the propositions made by Serbia are to be found in the following cases - In JH Rayner (Mincing Lane Ltd) v. Department of Trade and Industry[11] Lord Oliver held that:-

“It is axiomatic that municipal courts have not and cannot have the competence to adjudicate upon or to enforce the rights arising out of transactions entered into by independent sovereign states between themselves on the plane of international law.”[12]

 

In the same case Lord Templeman held as follows:-

“A treaty is a contract between the governments of two or more sovereign states. International law regulates the relations between sovereign states and determines the validity, the interpretation and the enforcement of treaties. A treaty to which Her Majesty’s Government is a party does not alter the laws of the United Kingdom. Except to the extent that a treaty becomes incorporated into the laws of the United Kingdom by statute, the courts of the United Kingdom have no power to enforce treaty rights and obligations at the behest of a sovereign government…..”  [13]

 

The AY Bank Case

41.       In this debate on justiciability, it is important to have regard to dicta of the Chancellor in the AY Bank Case.  In general terms the dispute in that case concerned issues of private international law affecting the rights of the AY Bank and other unsecured creditors of the former National Bank of Yugoslavia and the application of rules of English domestic law. At the time of dismemberment of the SFRY the successor States became beneficially entitled to the bank balances of the former National Bank of Yugoslavia. Thus there was no suggestion in that case that the proceedings were non-justiciable as the respondents, being foreign sovereign states, had interests in the broader sense in the assets available for distribution to the unsecured creditors of the bank, including themselves, and proofs of debt had been submitted.  This provides a clear distinction with the current situation where there is no claim, and nor could there be, to any form of beneficial entitlement on the part of Croatia in the Property and this is accepted by Leading Counsel. Thus proceedings in the AY Bank Case clearly fell within the scope of Section 6 (3) of the SIA 1978, and at least three of the States had submitted to the jurisdiction of the court the purposes of Section 2 of that Act.  The Chancellor then referred to the decisions to the House of Lords in the Buttes Gas v. Hammer [1982] AC888, and J H Rayner Case, to which reference has been made above.  What was in dispute, however, was the extent to which the principles applied to issues arising in the liquidation of the AY Bank and the ambit of any exceptions to such principles.[14]

 

42.       A number of points were made by the Chancellor in the AY Bank Case which are relevant to the present circumstances.  In paragraphs 32 and 33 (whilst recognising that there can be exceptions) he makes reference to the fact that the Courts in England will not adjudicate upon the transactions of foreign sovereign states:- 

 

‘Such impediment arises from a number of considerations, namely the principles of law applicable to such transactions is not the domestic law (including private international law) of England, the courts in England could not compel observance of their orders outside England and any attempt to do so might cause embarrassment to the United Kingdom in the conduct of its foreign affairs.  The impediment arises from judicial self-restraint and is a principle of English law.”

 

“Similarly the courts in England have no power to interpret or enforce treaties between foreign sovereign states, which have not been incorporated into the domestic law of England.  Such a treaty is governed by public international law, which, alone, determines it validity, interpretation and enforcement [he then refers to the judgments of Lord Templeman and Lord Oliver in the J H Rayner Case].”

 

43.       The Chancellor then at paragraph 40 made an analysis of the various so-called exceptions to the principle of non-justiciability the relevant one for these purposes being the third, namely, "…the enforcement of private rights for which the interpretation of an international treaty is incidental but necessary."

 

                        "41.  That the principle of Buttes Gas v Hammer…. admits of exceptions and was recognised by Lord Oliver [in the JH Rayner Case]. Lord Steyn in Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5) [2002] 2 AC 1101 considered that the principle was not 'a categorical rule'. In R v Prime Minister of the United Kingdom, ex parte Campaign for Nuclear Disarmament [2002] EWHC 2777 the Administrative Court was concerned with a claim to a declaration that in the light of the terms of one resolution of the Security Council of the United Nations it would be in breach of international law to take military action against Iraq otherwise than as expressly sanctioned by another. In paragraph 35 Simon Brown LJ referred to '...the court's [lack of] jurisdiction to rule on matters of international law unless in some way they are properly related to the court's determination of some domestic law right or interest.'"

 

44.       Reference is then made by the Chancellor to other dicta in the same case to the same effect. Then in paragraph 51 he then turns to the third suggested exception, namely that the principle of non-justiciability has no application where the dispute involves the enforcement of private law rights. He then said that in order to deal with the submission made on behalf of Serbia and Montenegro that there was no sufficient dispute as to private rights - "... it is necessary to consider in some detail what the nature of the underlying dispute is."

 

"52.  The relationship between the Bank and NBY was that of banker and customer. The balances standing to the credit of the NBY accounts were debts due by the Bank to NBY payable in accordance with the terms of the various accounts. They were and are situate in England. Whether or not they were regulated by English law the right to prove in the liquidation of the Bank arises under the domestic law of England and is situate in England. It is common ground that the dismembratio of SFRY caused it and NBY to cease to exist, the property rights of the latter vesting in the successor States. There is no dispute that there was a dismembratio but there may not be complete agreement as to when in the period 1991 to 1992 it occurred. It is by no means clear that it is necessary to fix the precise date, but if it is then that is a matter which this court is entitled to resolve."

 

45.       Then in paragraphs 53 and 54 the Chancellor went on to say as follows:

 

"Thus the amount of the debt due by the Bank to NBY was fixed at the time of its effective dissolution. If the effective dissolution was 30th June 1991 the balance was £15.7m, if it was 30th May 1992 the balance was £11.7m. The resolution of this issue has nothing to do with the ASI. Nor is it an issue of concern only to the successor states because the amount of the debt due by the Bank to NBY affects the amount of the dividend payable to other creditors. The subsequent transactions on the NBY accounts include those on which Serbia and Montenegro rely and the 1993 Set-Off and the 1994 Set-Off. The question is whether those transactions were effected with the authority of the account-holder. That is a question of English law, including private international law. If they were then they were valid with the consequences which English law prescribes. If they were not then the debt due by the Bank in respect of the NBY accounts is greater than £9.5m, the balance as at the commencement of the liquidation of the Bank. All these issues go to the amount of the debt due by the Bank in respect of the NBY accounts. As such they plainly relate to private law rights affecting all creditors and are properly to be determined by this court. The ASI is irrelevant to any such determination."

 

"At the time of the dismembratio the successor states became beneficially entitled to the benefit of the NBY balances...The conclusion of the ASI resolved the issue of the proportions in which the successor states are entitled to share in the debt due by the Bank to the former NBY."

 

46.       In conclusion as to issues of justiciability, and in particular in relation to the nature of the issues which arose, the Chancellor held in paragraph 57: -

 

"The issues which affect the amount of the debt due by the Bank to the former NBY are issues of private law because they affect the rights of the Bank and other unsecured creditors. The other issues do not involve the interpretation or enforcement of the ASI or interference with the dispute resolution procedure set up by the ASI but the application of rules of English law, including where appropriate principles of private international law. It matters not whether it is described as an exception to the general principle of non-justiciability or, as I prefer, an example of an area to which such principle does not extend. Either way I conclude that the nature of the issues arising in the liquidation, the evident intention behind both the ASI and the UN Resolution all go to show that all such issues are justiciable in this court."

 

47.       As Counsel for Serbia asserts, there are some important points of distinction between the nature of the subject matter which the Chancellor considered to be properly justiciable in the A.Y. Bank Case and the nature of the issues which arising in the present case. The issues which arose for determination in that case were principally issues as to the private law rights between successor States and the Bank which affected all creditors. At the time of the dismemberment of the SFRY the successor States became beneficially entitled to the bank balances in specific proportions set out in the ASI.  Whereas in relation to the distribution of diplomatic and consular property the ASI provided that there should be a distribution in kind.  The ASI does not provide for any form of beneficial entitlement in the various properties contained in the List. It was further submitted that none of the successor States can claim to have any right or interest in relation to the registered estate in the Property beyond an interest in seeing that the machinery provided for in the ASI is adhered to.    

 

            THE DECISION  ON JUSTICIABILITY

48.              Thus, having regard to these authorities and in particular to the dicta of the Chancellor in the AY Bank Case set out above, I find that as matter of general principle Croatia cannot have acquired on the plane of English domestic law any interest in the Property by virtue of the provisions of the ASI and/or as one of the successor States to the SFRY. It may be that Croatia has an interest recognised under the law of Croatia, accordance with the terms of the ASI, but I cannot accept that it is entitled as to the protection in this jurisdiction of its apparent claim in Croatian law to the due distribution of the assets of the SFRY on its dissolution. The ASI does not provide for any form of beneficial entitlement in the various properties contained in the List, and even less so in relation to other properties not contained in the List. If I accept that the basis of the Application made by Croatia has been validly made and that it is entitled to the entry of a restriction and then accede to its request to direct the Registrar to enter the restriction I would be substantively determining an apparent interest under Croatian law and/or under the ASI which does not give rise to any interest known in the English domestic law context. The lex situs governs, inter alia such matters as the capacity of the parties, and formalities of transactions as to land. 

 

49.              In short, in my judgment the claim made by Croatia for the entry of a restriction is non-justiciable in this jurisdiction. In my judgment this could only arise, if at all, as a matter of public international law.

 

50.              Further I do not accept that he effect of the restrictions sought to be entered by Croatia is solely to preserve the position of legal equality between Croatia and Serbia and the other successor States pending resolution of the question of entitlement in accordance with the mechanism contained within the provision of the ASI and in the meantime to prevent any unauthorised disposition of the Property pending that resolution.  Croatia has no interest known to English domestic law to protect.  Had it had the confidence in such a belief then presumably she would have commenced proceedings in the English courts to protect that interest seeking a declaration and/or a claim to the Property or a share of it.

 

THE PROVISIONS OF THE LRA 2002

‘Sufficient interest’

51.       This being so it is necessary to turn to the specific provisions of the LRA 2002, to which I have made reference above, and to construe the true meaning of the words  ‘sufficient interest in the making of the entry’ as contained in section 43(1)(c) of the LRA 2002 and the examples contained in Rule 93 of the 2003 Rules.  I find that all of these examples provided in the Rule are classes of private rights in relation to registered estates, arising under the domestic law of England and Wales, or instances of specific statutory provisions enacted for certain purposes. I further consider that the classes of persons prescribed who can make an application for the entry of restriction must demonstrate that such a person has a sufficient interest in the making of an application in the context of the lex situs i.e. the domestic private law in England and Wales. As I have found that the Application is not justiciable in this jurisdiction it follows that Croatia cannot demonstrate that she has any sufficient interest in making the application.

 

52.              Further, if I am incorrect in this analysis and Croatia is able to demonstrate that she has a sufficient interest in the making of the application it is then necessary to have regard to the second stage of the two stage process as to whether the Application can be construed as falling within the definition of a “right or claim” to a registered estate. I appreciate that these words are wide, particularly the word “claim”.  I consider, however, that such a right or claim must be limited in its breadth to a concept known to English land law.  I have above set out in some detail the principles of justiciability as they apply to foreign claims made in England and Wales and I am satisfied that Croatia has not demonstrated that any right or claim which she may have under Croatian law, or under the ASI as incorporated into Croatian law, as a right or claim which is capable of being recognised in the private domestic law of England and Wales in so far as the Property is concerned. The Property does not appear in the List of properties in Annex. The right or claim sought is therefore inchoate.

 

53.       I find that the restrictions sought are therefore inappropriate.  The first restriction in Form N is used usually where a mortgagee seeks to enter a restriction on the title.  Form A usually applies in the case where a person is seeking to claim a beneficial interest or trust. Finally, Form II again is usually used in the case where a beneficial interest is claimed. 

 

54.               In such circumstances I will direct the Registrar to cancel the original application. 

 

 

Dated this 3^rd day of December 2008

 

 

 

By Order of The Adjudicator to HM Land Registry