Wilhelm Finance Inc. v Ente Administrador Del Astillero Rio Santiago
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Teare |
| Judgment Date | 19 May 2009 |
| Neutral Citation | [2009] EWHC 1074 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 19 May 2009 |
| Docket Number | Case No: 2008 FOLIO 998 |
[2009] EWHC 1074 (Comm)
IN THE HIGH COURT OF JUSTICE
COMMERCIAL COURT
QUEEN'S BENCH DIVISION
Mr. Justice Teare
Case No: 2008 FOLIO 998
Nevil Phillips (instructed by Reed Smith) for the Claimant
Stewart Shackleton (solicitor advocate) of Eversheds LLP) for the Defendant
Hearing dates: 30 April 2009
Approved Judgment
MR.JUSTICE TEARE
Mr. Justice Teare:
This is an application by the Defendant to set aside an order made by Flaux J. on 25 November 2008 permitting substituted service on the Defendant. The grounds of the application are that the Defendant “is a State-owned entity (within the definition of a State for the purposes of the State Immunity Act 1978) and service on a State is only permitted via the method prescribed in s.12 of the State Immunity Act 1978 and rule 6.44 of the CPR, and accordingly the court has no jurisdiction either to make the Order or hear the proceedings unless and until validly served.”
By his order Flaux J. ordered that the Claimant was not obliged to adhere to the procedural requirements of s.12 of the State Immunity Act 1978 and rule 6.44 of the CPR. He gave the Claimant permission to serve the Claim Form by the alternative method of sending it by first class post to the Defendant's solicitors Eversheds LLP pursuant to CPR 6.15. The basis upon which that order was made appears from the witness statement of Mark Terence O'Neil dated 18 November 2008. Mr. O'Neil informed the court that Field J. had granted permission for the service of proceedings on the Defendant out of the jurisdiction at its address in Buenos Aires, Argentina and that the Defendant's solicitors Eversheds had taken the point that the Claimant was obliged to serve the proceedings only through diplomatic channels in accordance with s.12 of the State Immunity Act 1978 and/or CPR 6.44. He referred to s.14 of the State Immunity Act 1978 which excluded from the definition of State “any entity (hereinafter referred to as a separate entity) which is distinct from the executive organs of the government of the State and capable of suing and being sued” and submitted that the Defendant is a separate entity. He said that it is “a shipyard which entered into a shipbuilding contract with a private purchaser. It is not on any sensible view one of the executive organs of the government of the State”. By making his order Flaux J. accepted that submission but, because the application was ex parte, stated that the Defendant had the right to apply to set aside or vary the order.
The claim in this action is for a declaration that two Deeds arising out of a contract for the construction and sale of a ship are void. The shipbuilding contract described the Defendant as “a corporation organised and existing under the laws of Argentina” and the vessel to be built as a bulk carrier of about 27,000 DWT. Notwithstanding that the contract contains a condition precedent that the contract be approved by the Government of the Province of Buenos Aires the contract has every appearance of being a standard commercial contract.
S.12(1) of the State Immunity Act provides that any writ or other document required to be served for instituting proceedings against a State shall be served by being transmitted through the Foreign and Commonwealth Office to the Ministry of Foreign Affairs of the State. S.14(1) provides that 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;
c) any department of that government,
but not to any entity (hereinafter referred to as a separate entity) which is distinct from the executive organs of the government of the State and capable of suing and being sued.”
The question for the court to determine is therefore whether the Defendant is “a State” or a “separate entity”. The Act refers to two qualities which a separate entity must possess, namely, that it is distinct from the executive organs of the government of the State and is capable of suing or being sued. Before examining the evidence on this question it is necessary to refer to the guidance in the authorities as to the nature of a separate entity in section 14 of the State Immunity Act.
In Kuwait Airways Corporation v Iraqi Airways [1995] 1 WLR 1147 at p.1158. Lord Goff expressed the view that it was probable that the expression “separate entity” was intended to refer to an entity “of a state” and that such construction was reinforced by the description of a separate entity being “distinct from the executive organs of the government of the State”. In Propend Finance v Sing [1997] EWCA Civ 1433 the Court of Appeal followed this view. Thus the fact that an entity may be created by the state does not by itself cause the entity not to be a separate entity.
In I Congresso del Partido [1983] 1 AC 244 Lord Wilberforce referred (at p.262) to the difference in international law between acta iure imperii and acta iure gestionis. The former are sovereign or public acts and the latter are acts of a private law character such as a private citizen might have entered into. The distinction is between “an area of activity, trading or commercial, or otherwise of a private law character, in which the state has chosen to engage” and activities outside that area and “within the sphere of governmental or sovereign activity” (at p.267). Lord Wilberforce observed (at p.258) that “state controlled enterprises, with legal personality, ability to trade and to enter into contracts of private law, though wholly subject to the control of their state, are a well known feature of the modern commercial scene”. In that case a state trading enterprise was not a department of the Cuban state notwithstanding that it was subject to direction and control by the state which provided all the funds necessary for its operation.
In Propend Finance v Sing the Court of Appeal said that the concept of acta iure imperii was relevant to a determination of what bodies were part of the “State” and the “government” for the purposes of s.14(1) of the State Immunity Act. “Government” should be given a broad meaning commensurate with the concept of acta jure imperii. 1 I therefore approach the phrase “department of government” and the phrase “executive organs of government” in s.14(1) with that guidance in mind.
In Trendtex Trading v Bank of Nigeria [1977] 1 QB 529 at pp.564 and 575 it was observed by the Court of Appeal that where an entity has been created by the state the absence of a clear expression of an intent to confer the status of a government department was said to be a pointer to the conclusion that such status was not the intent of the state.
Finally, in The Altair [2008] 2 Lloyd's Rep. 90 Gross J. had to consider whether the Grain Board of Iraq was a department of the Ministry of Trade of the Republic of Iraq or was a separate entity. At paragraph 64 he cited the following principles from Dickson, Lindsay and Loonam, State Immunity: Selected Materials and Commentary:
a) The characterisation of a party to proceedings as a department of the government of a foreign sovereign State depends not on any single factor, but on a consideration of all relevant circumstances.
b) The status of the party under the law of its home state is one relevant factor but is not decisive. Nor is the presence of separate legal personality itself decisive against characterising a party as a department of government.
c) A detailed analysis of the constitution, function, powers and activities of the party and of its relationship with the state is likely to be essential. The existence of State control is not, however, a sufficient criterion.
d) The courts are likely to exercise caution before treating a party having separate legal personality as a department of government…”.
Gross J. added:
“The authors go on to say that there should not be a 'judicial no-man's land'; the principles to be applied in determining whether an entity is a 'department of government' should mirror those for determining whether the entity is a 'separate entity'.”
The evidence
Both parties adduced written evidence as to how the Defendant is viewed as a matter of Argentine law, in particular, whether the Defendant was “autarchycal” or economically independent. There was a considerable and lengthy dispute between the parties' Argentine lawyers on this point. However, it is to be noted that whether or not the Defendant is “autarchycal” or economically independent according to Argentine law will not necessarily determine the question whether, in English law and for the purposes of s.14 of the State Immunity Act 1978, the Defendant is to be regarded as a department of government or a separate entity.
As from 1953 there was a shipyard known as Astilleros y Fabricas Navales del Estado (AFNE). Decree No.10.627 of 1953 created AFNE as a state enterprise, “dependent” on the Naval Department of the Argentine state and directed by a board of directors led by a senior official of the Navy. Article 2 of the decree provided that it was to construct both merchant and naval vessels. Decree No.10.874 of 1953 provided that Astillero Rio Santiago, which was also “dependent” on the Naval Department, was to form part of AFNE. Article 2 provided that it was to be involved in the Navy's activities relating to the construction of war ships and merchant vessels. It was to be directed by a senior official or engineer of the Navy. 2
It was however common ground that the Defendant was created in...
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