Thai-Europe Tapioca Service Ltd v Pakistan (The Harmattan) (Hanseat II)
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE LAWTON,LORD JUSTICE SCARMAN |
| Judgment Date | 15 July 1975 |
| Judgment citation (vLex) | [1975] EWCA Civ J0715-1 |
| Court | Court of Appeal (Civil Division) |
[1975] EWCA Civ J0715-1
The Master Of The Rolls (Lord Denning),
Lord Justice Lawton and
Lord Justice Scarman.
In The Supreme Court of Judicature
Court of Appeal
Appeal (by leave of Mr. Justice Cusack) by plaintiffs from order Mr. Justice Cusack on 20th November 1974.
Revised
Mr. BERNARD RIX (instructed by Messrs. Holman Fenwick & Willan) appeared on behalf of the Appellant Plaintiffs.
Mr. DAVID KEMP, Q. C., and Mr. ANTHONY HALLGARTEN (instructed by Messrs. Loxley, Sanderson and Morgan) appeared on behalf of the Respondent Defendants.
The plaintiffs are the dispondent owners of the vessel Harmattan. They carry on business in Hamburg in West Germany. On 30th September 1971 they let her on a voyage charter to a Polish company C. I. E. C. H. She was to proceed to Gdansk in Poland and there load a cargo of fertilisers in bags, carry it to Karachi in Pakistan and deliver it there. The charterparty was on the Gencon form and contained this provision about demurrage:-"Should the vessel be detained beyond the time allowed at loading and discharging ports demurrage to be paid by the chatterers respectively receivers at the rate of £400 per running day…. Demurrage/dispatch at the port of disonarge to be settled directly between the Owners/Receivers without any responsibility of the charterers." The charterparty also container this arbitration clause:- "Any dispute arising under this Charter Party shall be settled by arbitration in London in accordance with the law and procedure prevailing there."
On 16th October 1971 the Polish chatterers shipped the fertiliser on to the Harmattan at Gdansk. It was over 12,000 metric tons. The master issued a bill of lading on the Gencon bill form. It named chatterers C. I. E. C. H. as the shippers. The port of discharge was Karachi. The goods were consigned to the order of the National Bank of Pakistan with direction to notify the West Pakistan Agricultural Development Corporation at Lahore.
The bill of lading provided that "All the terms conditions liberties and exceptions of the Charter are herewith incorporated." But that, of course, did not incorporate the arbitration clause into the bill of lading, see The Annefield 1971 P. 168. The bill of lading was endorsed to the West Pakistan Agricultural Development Corporation. They took up the documents and paid for the goods. The property in the goods thereupon passed to the West Pakistan Agricultural Development Corporation.
The Corporation took the goods on the terms of the bill of lading which incorporated the terms of the charter party and the payment of demurrage, but not the arbitration clause. No doubt it was governed by English law, see The Niegos 1936 P. 90. But that was its only connection with England.
On 2nd December 1971 the Harmatten arrived at Karachi and gave notice of readiness. She had to wait for a berth, but the charter provided that "time lost in waiting for berth to count as discharging time." Five days later, on 6th or 7th December 1971, whilst she was still waiting, the port of Karachi was bombed by hostile aircraft from India. The Harmatten was hit and seriously damaged. She was subsequently taken to a discharging berth where the cargo was discharged and the West Pakistan Agricultural Development Corporation took delivery of it. Discharge was finally completed on 24th February 1972, a total of 83 days from the time she gave notice of readiness. So the cargo was taken off but the vessel itself became a constructive total loss. After allowing for lay time of 16 days, the shipowners said that demurrage was payable for 67 days at £400 a day. They claimed demurrage from the West Pakistan Agricultural Development Corporation on the ground that they were the receivers of the cargo and liable under the bill of lading, because it incorporated the terms of the charter-party that "demurrage" was to be settled directly between the owners and receivers. The claim was refused.
On 31st August 1973 the shipowners applied to the High Court in England for leave to issue a writ against the West Pakistan Development Corporation and to serve it out of the jurisdiction on the ground that the proper law of the contract was English law. The Master gave leave. On 4th September 1973 the shipowners issued the writ claiming damages in the sum of £26,968.61. Before the writ was served, however, the solicitors for theGovernment of Pakistan told the shipowners that the West Pakistan Agricultural Development Corporation no longer existed. It had been dissolved and had been succeeded by the Government of Pakistan, Ministry of Food & Agriculture Directorate of Agricultural Supplies (Import & Shipping Wing). So on 14th December 1973 the shipowners amended the writ and made the Government of Pakistan Ministry, Directorate &o. defendants instead of the West Pakistan Agricultural Development Corporation. Notice of the writ was given to the Directorate at Lahore. The Government of Pakistan, by its London solicitors, entered a conditional appearance and applied to set aside the writ. It claimed sovereign immunity.' On 23rd July 1974 the Master here set aside the writ. On 20th November 1974 the Judge affirmed the decision. The shipowners now appeal to this Court.
The solicitor to the Government of Pakistan at Islamabad has made an affidavit saying: "The Directorate of Agricultural Supplies has no corporate or other status save as a department attached to the Good and Agricultural division of the federal Government of Pakistan. The Directorate has no legal entity separate from the Government of Pakistan and it cannot sue or be sued by, the Government of Pakistan. The Government of Pakistan as a foreign sovereign state does not consent to submit to the jurisdiction of this Honourable Court and be impleaded in the present proceedings. The plaintiffs can, however, if they so desire and subject to the law of Pakistan, sue the Government of Pakistan in the Courts of Pakistan."
There has also been produced the Pakistan ordinance under which the West Pakistan Development Corporation carried on its commercial operations. It provided for its dissolution by Article 82. It gave the Government of Pakistan power to declare that the Corporation should be dissolved from a named date: and that from that date"(a) all properties, funds and dues which immediately before the said date were vested in or were realisable by the Corporation shall vest in and be realisable by the Government
(b) ail liabilities which Immediately before the said date were enforceable against the Corporation, shall be assumed by and be enforceable by the Government."
Under the powers of the ordinance the West Pakistan Agricultural Development Corporation was dissolved in 1972 and its liabilities assumed by the Government of Pakistan."
Now these shipowners, as I have said, seek to sue in England the Government of Pakistan. They have no contract at all with that Government. Their only right is by the law of Pakistan under the ordinance. The Government of Pakistan claims sovereign immunity. They are ready to let the claim be considered in the Courts of Pakistan, but not in England. The question is whether it is entitled to immunity.
Mr. Rix for the shipowners has taken us through a fascinating study of sovereign immunity and its development. But I do not think we need follow him today through all its ramifications. The general principle is undoubtedly that, except by consent, the Courts of this country will not issue their process so as to entertain a claim against a foreign sovereign for debt or damages. The reason is that, if the Courts here once entertained the claim, and in consequence gave judgment against the foreign sovereign, they could be called upon to enforce it by execution against its property here. Such execution might imperil our relations with that country and lead to repercussions impossible to foresee. 'We have quite recently had examples in our Courts where this general principle has been applied. One was the decision of this Court in Mellenger M. New Brunswick Development Corporation (1971) 1 W. L. R. 604. Another was the decision of Mr. Justice McKenna in Swiss Israel Trade Bank v. Government of Salta and Banco Provincial de Salta 1972 1 Lloyds Law Reports 497. The general principle has also been recognised by many European countries in the European Convention of 1972 on state Immunity. Article 13 says that a contracting state shall be entitled to immunity from the jurisdiction of the Court of another contracting state if the proceedings do not fall within certain exceptions: and that the Court shall decline to entertain such proceedings even if the state does not appear. It has also been recognised by the United States of America in the case of Isbrandsen Tankers against President of India, which is reported in 1971 446 Federal Reporter second series 1198. The Court of Appeals of the 2nd Circuit in New York upheld the claim to sovereign immunity. It gave this reason: "a judicial decision against the Government of a foreign nation could conceivably cause severe international repercussions, the natural consequences of which the Courts are in no position to predict."
So it seems to me that the general principle must be applied unless it copies within any of the recognised exceptions. But the exceptions are several and they are important, some are already recognised: others are becoming to be recognised. I will state some of them.
First, a foreign has no immunity in respect of land situate in England. If he takes a lease of land and fails to pay the rent, the lessor can institute proceedings for forfeiture. If he borrows money on mortgage of...
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