Heiser and Others v Republic of Iran [2019] EWHC 2074 (QB)

After a seven year jurisdictional battle, on 31 July the Court handed down judgment dismissing claims for recognition and enforcement of a series of US Judgments against Iranian State Defendants totalling over US$512 million (exclusive of interest).  Along the way the Court determined important questions regarding the application of f s. 31 of the Civil Jurisdiction and Judgments Act 1982 (“CJJA”), which sets out the jurisdictional requirements applicable to claims for recognition and enforcement of foreign judgments against state defendants.

The twin requirements of s. 31(1) CJJA are that: (a) the overseas judgment would have been so recognised and enforced if it had not been given against a State, and (b) that the overseas Court would have had jurisdiction in the matter if it had applied rules corresponding to those applicable to such matters in the UK in accordance with s. 2-11 of the State Immunity Act 1978.  These requirements are cumulative.  The burden of proof is on the Claimants to show they are each satisfied.

s. 31(1)(a) - Presence

As regards (a), the Claimants needed to show that the US Judgments would have been enforceable even if not entered against a State, this being a matter governed by English rules of private international law.  As the Judgment explains at para 60, those rules require either that the defendant had a presence in the overseas jurisdiction when the proceedings were instituted; or else some form of submission to the overseas Court.

This was the first case to hear full argument at the inter partes stage on how the “presence” requirement is to be satisfied in the case of a State Defendant. The difficulty for the Claimants was that, as the Judge explained, State-to-State business is conducted through official channels such as diplomatic missions, consulates and the like, but “no such Iranian presence has been in the United States since the 1980s when the Government of Iran was officially expelled from United States’ territory” (see paragraph 70 at footnote 20).  The Claimants therefore sought to identify entities in the US through which it argued the Iranian State could be found to be “present”, or failing that sought to argue that the requirement of “presence” should be ignored altogether in the case of State Defendants. 

The Judge had no difficulty rejecting the latter argument, which would have required the Court to simply ignore the express requirement of s. 31(1)(a), by which the requirement of presence was imported- see the various factors at paragraph 70 of the Judgment.  As the Judge explained, in the previous case of Adams v Cape [1990] 1 Ch 433, the Court of Appeal explained how the rules on presence as developed in the context of individual defendants were to be adapted and applied in the context of corporate defendants: the test being whether the company had established and maintained at its own expense a fixed place of business in the place where the Judgments were issued, and carried out the company’s business there for more than a minimal period of time (this being a multi-factorial test on all the evidence).  These requirements therefore similarly had to be adapted and applied in the context of State defendants.

In adapting the multi-factorial test to State Defendants, the Court was influenced by the definition of a “State” in the UN Convention on Jurisdictional Immunities of States and their Properties, and by the guidance in s. 14(1) of the State Immunity Act 1978 (under which  references to States include agencies and instrumentalities of the State and representatives thereof acting in that capacity, as opposed to separate entities distinct from the executive organs of the Government of the States), as applied by the Privy Council in the case of La Générale des Carrieres et des Mines (Gecamines) v FG Hemisphere Associates LLC [2012] 2 CLC 709 at [29].  In particular, where a separate entity is formed for what on the face of it are commercial or non-sovereign purposes, with its own management and budget, the “strong presumption is that its separate corporate status should be respected, and that it and the State forming it should not have to bear each other’s liabilities”, and it will take “quite extreme circumstances to displace this presumption”.  See paragraph 83 quoting the relevant passages from Gecamines.

Ultimately, the Claimants’ attempts to show presence failed on the facts.  The Claimants had therefore identified two entities in the US through which they argued the Defendants were “present”; however they had failed to adduce any admissible evidence to rebut the strong presumption which arises from their separate corporate status.  See paragraph 84 of the Judgment explaining that the admissible evidence adduced came “nowhere near the required threshold”.  An attempt to introduce a last-minute argument to the effect that the Iranian government was “present” in the US via its diplomatic mission to the United Nations in New York was rejected as it had been raised far too late and raised any number of new evidential enquiries- see paragraph 89.

s. 31(1)(b) – State Immunity

As regards limb (b) of s. 31(1) CJJA, this provides that the US Judgments could not be recognised or enforced unless the US Court would have had jurisdiction over the State Defendants “if it had applied” rules “corresponding to”  those applied in this jurisdiction under the State Immunity Act 1972 (“SIA”).  The difficulty here for the Claimants was that the US Courts had taken jurisdiction in tort claims regardless of the place in which the relevant acts/omissions were allegedly committed.  By contrast, applying rules corresponding to s. 5 of the SIA the State would have been immune from suit in tort claims unless these involved acts/omissions committed within the jurisdiction.  The Claimants therefore advanced various creative arguments on the meaning of “corresponding to” under s. 31(1)(b), and the meaning of “act” under s. 5 SIA.

Unlike limb (a), limb (b) has been the subject of authoritative guidance from the Supreme Court in the case of NML Capital Ltd v Republic of Argentina [2011] 2 AC 495, which the Judge cited at paragraph 102 and proceeded to apply.  In that case, the Supreme Court held that the natural meaning of “corresponding to” is that: “mutatis mutandis the foreign State would not have been immune if the foreign proceedings had been brought in the United Kingdom”.  As the Judge explained, the Claimants’ submissions were contrary to that guidance, and would have imported so much “elasticity” into s. 31(1)(b) as to effectively disregard the hypothesis which that section requires to be applied- see paragraph 108.

The Claimants also advanced alternative arguments along the lines that s. 31(1)(b) should be read down under s. 3 of the Human Rights Act 1998 if it did not produce the result which they were contending for, on the basis that such result would be contrary to customary international law and incompatible Art. 6 ECHR (by analogy with the very different case of Benkharbouche v Embassy of Sudan, in which aspects of the SIA relating to State Immunity over employment law claims were held incompatible with Art. 6).  The Judge had no hesitation rejecting that argument.  Amongst other things, the compatibility of s. 5 SIA with Art.6 ECHR had already been established by the European Court on Human Rights in the case of Al Adsani v UK - see para 130.  Moreover, the Supreme Court in Benkharbouche itself had considered that s. 5 was not inconsistent with customary international law in cases involving sovereign acts, since it merely introduced a further restriction to the doctrine of State Immunity in respect of such acts in cases where these were tortious and took place within the relevant jurisdiction- see paragraph 129 of the Judgment.

The Judge also rejected imaginative arguments based on interpreting the word “act” within the jurisdiction for s. 5 SIA purposes as if it had read “damage” within the jurisdiction; as well as a late attempt by the Claimants to bring the case within s. 3 of the SIA.

The Service Issues

Since the proceedings fell to be dismissed on the basis of the State Immunity Issues and non-compliance with the requirements of s. 31 CJJA, the further set of issues before the Judge relating to service technically did not arise. Nevertheless, the Judge went on to decide the issues of whether the English proceedings and default judgment therein had been served within the mandatory requirements of s. 12 SIA.

In so doing, the Judge gave valuable guidance on the meanings of “transmission” by the English FCO and “receipt at the Ministry” of Foreign Affairs of the State Defendant overseas.  In particular, the Judge held that physical “receipt” connotes more than just the leaving of documents at the Ministry and requires a positive act of assuming possession on the part of the Defendant.  Thus, where the Defendants refuse to receive documents, they cannot be held to have “received” them (see paragraph 236).  The Judgment also corrects a line of ex parte decisions in which the Court had been prepared to grant orders permitting service by email.  The requirements of s. 12 are mandatory, so no such order could be granted by way of alternative service, and service by email cannot be said to be already inherently permitted by s. 12 (see paragraph 239). 

Simon Rainey QC and Paul Henton acted for the successful defendants, instructed by Mark Howarth and Liz Wild of Eversheds Sutherland.