IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
|Royal Courts of Justice
Strand, London, WC2A 2LL
|13 June 2003|
THE HONOURABLE MR JUSTICE STANLEY BURNTON
In the Matter of the Administration of Justice Act, 1920, Part II
And in the matter of Order 71 of the Rules of the Supreme Court (as set out in Schedule 1 to the CPR)
And in the matter of a judgment of the Federal Court of Nigeria, in the Abuja Judicial Division dated the 8th day of March 2001 obtained by the Claimant against the Defendants in proceedings numbered FHC/ABJ/CS/268/2000 in the sum of US $8,194,300 plus interest.
| AIC LIMITED
|– and –
|(1) THE FEDERAL GOVERNMENT OF NIGERIA
|(2) THE ATTORNEY GENERAL OF THE FEDERATION OF NIGERIA
|– and –
|(1) THE FEDERAL GOVERNMENT OF NIGERIA
|(2) THE ATTORNEY GENERAL OF THE FEDERATION OF NIGERIA
|(1) THE BANK OF ENGLAND
|(2) HSBC BANK PLC
Christopher Greenwood QC and Edmund King (instructed by Kendall Freeman) for the Judgment Debtors and the Central Bank of Nigeria
Chima Umezuruike and Razak Atunwa (instructed by Andrews Solicitors) for the Judgment Creditor
Hearing date: 16 May 2003
HTML VERSION OF APPROVED JUDGMENT
Mr Justice Stanley Burnton:
i. whether a judgment against a State may be registered under section 9 of the Administration of Justice Act 1920 and enforced in this country; and
ii. whether moneys in a bank account of a central bank that is a separate legal entity, belonging beneficially to the government of its state, are liable to execution if those moneys are used or intended for use for commercial purposes.
- The Claimant (“AIC”) alleges that it entered into an oral agreement with an Italian company, Aermacchi SPA, in May 1981 whereby it was appointed Aermacchi’s exclusive representative in Nigeria and Aermacchi agreed to pay it a commission of 10 per cent of its net sales in Nigeria; that subsequently, in 1983, Aermacchi was awarded a contract in the sum of US $81,943,000 by the Nigerian Government; and that accordingly Aermacchi became liable to pay AIC commission in the sum $8,194,300. That sum was not paid.
- In June 1983, AIC issued proceedings in Nigeria against Aermacchi and the Nigerian Federal Ministry of Defence, through its representative the Attorney General of the Federation of Nigeria, claiming against Aermacchi payment of the sum of $8,194,300, and against the Attorney General an injunction restraining the Federal Ministry of Defence from making any payment to Aermacchi unless the latter “set aside” the Claimant’s claim.
- In October 1989, AIC obtained judgment in its Nigerian proceedings against Aermacchi and the Attorney General for payment of its commission. That judgment was registered in this country under the 1920 Act. The registration and the Nigerian judgment against the Attorney General on which it was based were subsequently set aside.
- In September 2000, AIC began fresh proceedings in the Federal High Court of Nigeria against the Attorney General and the Federal Government of Nigeria, on the basis that during the first proceedings they had represented to AIC that payment of the sum of $8,194,300 due to Aermacchi would be withheld, and that it should therefore be paid to AIC.
- On 8 May 2001, judgment was given by the Federal High Court of Nigeria in those proceedings. By that judgment (“the Nigerian judgment”), the Federal High Court ordered the Federal Government of Nigeria and the Attorney General (“the Defendants”) to pay to AIC the sum of US $8,194,300 plus interest.
- On 27 August 2002, solicitors for AIC applied to this Court without notice for the registration of the Nigerian judgment pursuant to section 9(1) of the Administration of Justice Act 1920. On 11 September 2002, Master Yoxall ordered the registration of the Nigerian judgment under that Act. His order was in common form, ordering the Nigerian High Court judgment “to be registered as a judgment of the Queen’s Bench Division of Her Majesty’s High Court of Justice in England and Wales pursuant to Part II of the Administration of Justice Act 1920 for payment of the said amount of US $8,194,300 plus interest or its Naira equivalent at the time of payment”. The order provided that the Defendants should be at liberty to apply to set aside the registration. I shall refer to the order of 11 September 2002 as “the registration order”.
- The registration order was served on the Federal Government of Nigeria and its Attorney General on 7 November 2002.
- On 5 December 2002, AIC applied for third party debt orders in relation to bank accounts of the Federal Government of Nigeria and the Central Bank of Nigeria, including accounts with the Bank of England and HSBC Bank Plc. On 13 January 2003, Master Yoxall made interim third party debt orders that prohibited the third party banks from making any payment out of those accounts apart from any credit balance exceeding the sum of US $8,194,300. Those orders remain in force in relation to the accounts with the Bank of England and HSBC.
- On 25 March 2003, Master Yoxall ordered there to be a hearing on the questions of the Federal Government of Nigeria’s immunity from jurisdiction and its immunity from execution in respect of the bank accounts that had been attached by the orders of 13 January 2003.
- In April 2003, an application was made by the Attorney General and the Federal Government to the Court of Appeal of Nigeria for permission to appeal the Nigerian judgment out of time. A decision has not yet been given on that application.
- This is my judgment on the issues ordered to be determined by Master Yoxall’s order of 25 March 2003.
Immunity from jurisdiction
The submissions of the parties
- The submission of the Defendants is simply that the Court has no jurisdiction under the 1920 Act to register the original judgment against a state: the Defendants are immune from jurisdiction by virtue of section 1 of the State Immunity Act 1978, and none of the exceptions to immunity is applicable.
- AIC submits:
i. Section 1 of the State Immunity Act is inapplicable to the registration of a judgment under the 1920 Act, because registration is an act that does not involve any exercise by the court of its adjudicative jurisdiction.
ii. If section 1 is applicable, the proceedings in this court relate to “a commercial transaction entered into by a State” within the meaning of section 3(1)(a) of the State Immunity Act, on the basis that the transactions to which the Nigerian judgment relate were entered into by the state and were commercial.
Discussion: (a) Does section 1 of the State Immunity Act apply to the registration of a judgment under the 1920 Act?
“The State Immunity Act 1978, whose long title states as its first purpose to make new provision with respect to proceedings in the United Kingdom by or against other states, purports in Part I to deal comprehensively with the jurisdiction of courts of law in the United Kingdom both (1) to adjudicate upon claims against foreign states (“adjudicative jurisdiction”); and (2) to enforce by legal process (“enforcement jurisdiction”) judgments pronounced and orders made in the exercise of their adjudicative jurisdiction. …
… the Act … draws a clear distinction between the adjudicative jurisdiction and the enforcement jurisdiction of courts of law in the United Kingdom. Sections 2 to 11 deal with adjudicative jurisdiction. Sections 12 to 14 deal with procedure and of these, sections 13(2) to (6) and 14(3) and (4) deal in particular with enforcement jurisdiction. …”
- In Alcom, Lord Diplock used the terms “adjudicative jurisdiction” and “enforcement jurisdiction” as convenient shorthand references. Those expressions do not appear in the Act itself. Section 1 refers to an immunity not from the “adjudicative and enforcement jurisdictions” of the court, but from “the jurisdiction” simpliciter. It is noteworthy that Lord Diplock did not suggest that section 1 was concerned only with adjudicative jurisdiction. It clearly relates to the entirety of the jurisdiction of the court.
- The conversion of a judgment of the original court into a judgment of this court, enforceable by execution, requiring the defendant to pay a sum of money to the claimant, and requiring the defendant to pay the claimant’s costs incurred in relation to the registration of the judgment, is manifestly an exercise by the court of its jurisdiction. That is the effect of the registration of a judgment under the 1920 Act: see section 9(3)(a) and (c). Thus, even if the registration of a judgment were a purely administrative act, I should hold that it is subject to the immunity conferred by section 1.
- The fact that an act does not involve the exercise of judgment by the court does not mean that it is not the exercise of jurisdiction. The issue of a claim form may be said to be an administrative act; it is nonetheless an exercise of jurisdiction. By virtue of section 12(1) of the State Immunity Act, a claim form issued against a state has to be served by transmission through the Foreign and Commonwealth Office to the Ministry of Foreign Affairs of the state in question. The permission of the court is required under CPR Part 6 for such service. It is because the issue and service of a claim form against a state are subject to section 1 that “An application for permission under Section III of Part 6 must show distinctly … why the prospective defendant is not absolutely immune from suit”: see Civil Procedure (the White Book) at paragraph 6.21.24. If the application for permission does not show why the state is not immune, the court must give effect to section 1(2) by refusing permission for service out of the jurisdiction.
- The provisions of section 9 of the 1920 Act are essentially procedural. The Act created a less costly and more efficient means of enforcing a judgment of a superior court of a part of Her Majesty’s dominions outside the United Kingdom than a common law action on the judgment of that court. Both a successful common law action on such a judgment and the registration of a judgment have the same consequence: they bring into existence a judgment of the High Court which may be the subject of processes of execution in this country. The registration of a judgment under the 1920 Act on an application made without notice is at least as much an exercise of jurisdiction as the entering of a judgment in default of, say, the filing of an acknowledgment of service by a defendant. The entry of such a judgment might also be described as a non-adjudicative act.
- In any event, however, it is clear that the registration of a judgment under the 1920 Act is an adjudicative act. Section 9 of that Act confers a discretion on the court to order a judgment to be registered, not a duty. It provides:
“… The judgment creditor may apply to the High Court in England…to have the judgment registered in the Court, and on any such application the Court may, if in all the circumstances of the case they think that it is just and convenient that the judgment should be enforced in the United Kingdom, and subject to the provisions of this section, order the judgment to be registered accordingly.”
While the Master will normally order the registration of a judgment if the application for its registration, made under CPR Part 74, appears to be regular, he must nonetheless apply his judgment to the application and the written evidence in support in order to determine whether the requirements of the Act have been satisfied, and that it is just and convenient for the foreign judgment (an expression I use as including a Commonwealth judgment of a state other than the United Kingdom) to be enforced in this country. The fact that the application is made without notice does not mean that the court does not adjudicate on it: c.f. an application made without notice for injunctive relief. The old Rules of the Supreme Court required the Court hearing an ex parte application for the registration of a judgment to decide whether to direct a summons to be issued for the hearing of the application inter partes: see the original RSC Order 41A, which came into operation in 1922, and the later RSC Order 71. That decision too was adjudicative, and depended on the view taken by the Court as to the strength of the case for registration. The change in rules on the introduction of the CPR has not made the decision of the Court whether to order registration of a foreign judgment any the less an adjudication. While Part 74 of the CPR is silent on the issue of a hearing on notice before a foreign judgment is registered, paragraph 74.11.7 of Civil Procedure states:
“The application to register a judgment either under the 1920 Act or the 1933 Act should be made without notice by a witness statement or affidavit to the Master. It should be lodged in Room E214. It will then be checked in the Action Department before being submitted to a Master for him to consider the application who may, instead of dealing with the application without notice being served on any other party, direct that a claim form be filed and served. …”
- In my judgment, the registration of a judgment against a state under section 9 of the 1920 Act is within the scope of section 1 of the State Immunity Act 1978 on the clear wording of the latter Act.
- I add that it was assumed by those acting for AIC that the service of notice of an order for the registration of a judgment under the 1920 Act is the equivalent of a “writ or other document required to be served for instituting proceedings against a State” within the meaning of section 12(1) of the 1978 Act, and that an application by a State to set aside the registration is the equivalent of the entry of an appearance within the meaning of section 12(2). They relied on section 22(2) of the 1978 Act, which provides that references to entry of appearance and judgment in default of appearance include references to any corresponding procedures. It was on this basis that they applied to Master Yoxall for, and obtained, an order extending the Defendants’ time to apply to set aside the order for registration to 2 months from the date of service. In my judgment, those assumptions are unfounded. An application to set aside the registration of a judgment is not a “corresponding” procedure to an entry of appearance. An entry of appearance is an act that precedes a judgment, whereas an application to set aside a registration is made after judgment has been entered into. The registration of a foreign judgment is not the equivalent of a judgment in default of appearance: it precedes the service of any United Kingdom proceedings on the defendant. Section 12(4) and (5) cannot be made to apply to the registration of a judgment under the 1920 Act on an application made without notice to the defendant state. An application for the registration of a judgment against a state under the 1920 Act must be made by the issue and service of a claim form. The same must apply to an application for registration of a judgment against a state under the Foreign Judgments (Reciprocal Enforcement) Act 1933.
b. Do the proceedings relate to a commercial transaction entered into by a state?
- In my judgment, the proceedings resulting from an application to register a judgment under the 1920 Act relate not to the transaction or transactions underlying the original judgment, but to that judgment. The issues in such proceedings are concerned essentially with the question whether the original judgment was regular or not: see section 9(2)(a) to (f). The correctness of the original judgment on questions of law or fact is irrelevant. Section 9(2)(d), the fraud exception, is exceptional: in effect, a judgment obtained by fraud is treated as irregular, on the basis that “fraud unravels all”. The registering court is entitled to examine the nature of the cause of action underlying the original judgment only under section 9(2)(f), which is a narrow and seldom-applied exception concerned with illegality and the like.
- This conclusion is supported by reference to section 9 of the State Immunity Act, which applies where a state has entered into a written arbitration agreement, and excludes immunity “as respects proceedings in the courts of the United Kingdom which relate to the arbitration”. Most, if not all, arbitration agreements entered into by a state relate to commercial transactions entered into by that state. If, for the purposes of the Act, proceedings relating to the arbitration also relate to the underlying commercial transaction, it is difficult to see why section 9 was required.
- Furthermore, if Parliament had intended the State Immunity Act to include an exception from immunity relating to the registration of foreign judgments, it would have been illogical to limit it to commercial transactions entered into by the state (which is the consequence of AIC’s contentions), with no provision for the registration foreign judgments where the exception to immunity before the original court was the equivalent of one of the other exceptions to immunity in that Act.
- In Holland v Lampen-Wolfe  1 WLR 1573, Lord Millett, at 1587F to H, opined that the words “proceedings relating to” in section 3(1)(a) should be given a narrow construction. This is consistent with my above conclusion.
- It follows that, even if the underlying transaction between AIC and the Defendants were commercial, section 3(1)(a) of the State Immunity Act is inapplicable. There is in this case no other relevant exception to the immunity of a state from the jurisdiction of this court. It follows that the Nigerian judgment should not have been registered under the 1920 Act.
- This conclusion means it is unnecessary to consider whether any issue estoppel arising from the foreign judgment applies to the question whether the state defendant entered into a commercial transaction. Both parties in the present case assumed that this court must determine that question itself. My provisional view is that this is correct. However, in a case in which the claimant has obtained judgment from a foreign court on an alleged contract with the state defendant, but the defendant denies that it entered into the contract, this implies that this court might arrive at a conclusion inconsistent with the judgment of the foreign court on the merits. That would be an anomalous situation. It is an added reason for preferring the narrow interpretation of section 3(1)(a) of the State Immunity Act.
- The conclusion that the Defendants are immune from the proceedings for the registration of the judgment in this country is unsurprising. Leaving aside Admiralty proceedings and the like, the underlying principle of the State Immunity Act is that a state is not immune from the jurisdiction of the courts of the United Kingdom if it enters into commercial transactions or undertakes certain activities having some connection with this jurisdiction. Purely domestic activities of a foreign state are not the subject of any exception to immunity. Sections 3(1)(b), 4, 5, 6, 7, 8 and 11 all contain territorial qualifications to the exceptions to immunity to which they relate. Section 3(1)(a) does not include any such qualification, but even there the claimant wishing to bring proceedings must establish a basis for jurisdiction under CPR Part 6.20, normally under paragraphs (5) or (6), relating to contractual claims. Paragraph (5) requires that the contract be one which was made within the jurisdiction, or made by or through an agent trading or residing within the jurisdiction, or (in the case of a foreign state defendant) be one which the state has agreed should be governed by English Law or subject to the English courts having jurisdiction. Paragraph (6) is limited to breaches of contract committed within the jurisdiction. The Nigerian judgment in this case relates to a purely domestic matter, and I do not think that it was ever intended that the State Immunity Act should exclude immunity in such cases.
- This approach is consistent with authorities on restrictive sovereign immunity before the Act. In his great judgment in Trendtex Trading v Bank of Nigeria  1 QB 529, Lord Denning MR cited (as was his wont) two of his own earlier judgments. In Rahimtoola v. Nizam of Hyderabad  AC 379, 422, he said:
“If the dispute brings into question, for instance, the legislative or international transactions of a foreign government, or the policy of its executive, the court should grant immunity if asked to do so, because it does offend the dignity of a foreign sovereign to have the merits of such a dispute canvassed in the domestic courts of another country: but, if the dispute concerns, for instance, the commercial transactions of a foreign government (whether carried on by its own departments or agencies or by setting up separate legal entities), and it arises properly within the territorial jurisdiction of our courts, there is no ground for granting immunity.”
The italics are mine. In Thai-Europe Tapioca Service Ltd. v. Government of Pakistan, Directorate of Agricultural Supplies  1 W.L.R. 1485, Lord Denning said, at 1491:
“… a foreign sovereign has no immunity when it enters into a commercial transaction with a trader here and a dispute arises which is properly within the territorial jurisdiction of our courts. If a foreign government incorporates a legal entity which buys commodities on the London market; or if it has a state department which charters ships on the Baltic Exchange: it thereby enters into the market places of the world: and international comity requires that it should abide by the rules of the market.”
In Trendtex itself, he pithily summarised the principle of restrictive immunity at 558:
“If a government department goes into the market places of the world and buys boots or cement – as a commercial transaction – that government department should be subject to all the rules of the market place. The seller is not concerned with the purpose to which the purchaser intends to put the goods.
There is another answer. Trendtex here are not suing on the contracts of purchase. They are claiming on the letter of credit which is an entirely separate contract. It was a straightforward commercial transaction. The letter of credit was issued in London through a London bank in the ordinary course of commercial dealings. It is completely within the territorial jurisdiction of our courts. I do not think it is open to the Government of Nigeria to claim sovereign immunity in respect of it.”
- None of these citations suggests that the English courts would have jurisdiction in a case which was entirely domestic to a foreign state.
- The implication of my conclusions is that between 1978 and 1982 there was little if any scope for the registration of a judgment against a state under the 1920 Act. This is not surprising. The object of the 1920 Act was “to facilitate the reciprocal enforcement of judgments and awards in the United Kingdom and other parts of His Majesty’s Dominions or Territories under His Majesty’s protection”. It was passed at a time when the common law conferred absolute immunity on states, and when proceedings against the Crown for breach of contract, at least in this country, were by way of petition of right, and there was no means of bringing proceedings in tort against the Crown, other than by means of a nominated individual defendant. Furthermore, section 9 permits registration of a judgment only if it is “just and convenient that the judgment should be enforced in the United Kingdom”; but execution against the Crown would not have been available, and it could not therefore be just or convenient to enforce the judgment here. There can be no doubt, therefore, that Parliament when passing the 1920 Act did not have in mind the registration of a judgment against a foreign Dominion. It may be significant that the 1920 Act does not include any equivalent to section 4(3)(c) of the Foreign Judgments (Reciprocal Enforcement) Act 1933. In any event, however, any attempt to register a judgment against a state under the 1920 Act before Trendtex would have failed on the basis that it could not have been just or convenient to enforce that judgment against a state entitled to absolute immunity from the jurisdiction.
- It would seem, therefore, that between the coming into force of the State Immunity Act 1978 and that of section 31 of the Civil Jurisdiction Act 1982 there was no scope for the registration under the 1920 Act of a judgment of a foreign court against the government of the state to which it belonged. Section 4(3)(c) of the 1933 Act, to which I referred above, provides that on an application to set aside the registration of a judgment under that Act:
“… the courts of the country of the original court shall not be deemed to have had jurisdiction –(c) if the judgment debtor, being a defendant in the original proceedings, was a person who under the rules of public international law was entitled to immunity from the jurisdiction of the courts of the country of the original court and did not submit to the jurisdiction of that court.”
This may indicate that registration of a judgment of a foreign court against a state that had submitted to its jurisdiction was permissible; however, it may have been intended to relate only to natural persons entitled to immunity, such as diplomats. Section 4(3)(c) of the 1933 Act did not in terms qualify the then absolute immunity of states from the jurisdiction of the English Courts. (The 1932 Report of the Foreign Judgments (Reciprocal Enforcement) Committee, Cmd. 4213, casts no light on this point.) A claimant seeking the registration of a judgment against a state under the 1933 Act would have faced the obstacles of section 2(1)(b) of that Act, which precludes the registration of a judgment that cannot be enforced by execution in the country of the original court, and possibly of section 4(1)(v), which requires the registration of a judgment to be set aside if enforcement would be contrary to the public policy of the registering court. In any event, however, section 4(3)(c) of the 1933 Act could not apply to a judgment of a court against its own government or state, since no question of submission to the jurisdiction could arise in such a case. In addition, whatever the position was before 1978, on the basis of my conclusion as to the scope of section 3(1)(a) of the State Immunity Act, the absence of any statutory exception to state immunity in relation to proceedings to enforce foreign judgments meant that after 1978 there was little if any scope for the registration of a judgment against any state under the 1933 Act.
- It is not surprising, therefore, that there is no reported case of a judgment against a state being registered under either the 1920 Act or the 1933 Act.
- The law on the recognition and enforcement of foreign judgments against a state was changed by Section 31(1) of the Civil Jurisdiction Act 1982. It provides:
“(1) A judgment given by a court of an overseas country against a state other than the United Kingdom or the state to which that court belongs shall be recognised and enforced in the United Kingdom if, and only if -(a) it would be so recognised and enforced if it had not been given against a state; and
(b) that court would have had jurisdiction in the matter if it had applied rules corresponding to those applicable to such matters in the United Kingdom in accordance with
sections 2 to 11 of the State Immunity Act 1978.”
- Two classes of judgments of foreign courts are excluded from the scope of section 31(1): judgments against the United Kingdom and judgments of a court of an overseas country against the state to which the court belongs. Judgments of foreign courts against the United Kingdom may raise special issues. Specific provision is made in respect of judgments against the United Kingdom of courts in another state party to the European Convention on State Immunity by sections 18 and 19 of the State Immunity Act.
- Judgments of foreign courts against the state to which they belong are also subject to considerations that are not applicable to judgments against other states. For example, no question can arise of submission to the jurisdiction. Thus, the rule in section 2(3)(a) of the State Immunity Act, that a state is deemed to have submitted to the jurisdiction if it has instituted the proceedings, can have no rational application to proceedings instituted by a state in its own courts. Similarly, the defence by a foreign government of proceedings in its own courts can raise no issues of submission to the jurisdiction of those courts. Again, the question whether proceedings relate, for example, to a commercial matter will normally be irrelevant in proceedings against a state in its own courts. Section 31(1)(b) of the 1982 Act could not sensibly be applied to judgments against a state in such proceedings. There may well be other reasons for excluding such judgments from recognition or enforcement in this country, such as the sensitivities involved if a foreign government has to challenge the regularity of the proceedings of its own courts. It may well be, therefore, that such judgments are not recognisable or enforceable in this jurisdiction. This would be consistent with the view expressed by the learned editors of Dicey and Morris, 13th edition, at paragraph 14-095, that, subject to the exceptions specified in subsection (3) of the 1982 Act, section 31 deals comprehensively with the recognition and enforcement of the judgments of foreign courts against states.
- Lastly on this point, AIC relied on section 31(3) of the 1982 Act as indicating that registration of judgments against foreign states is available. Section 31(3) is as follows:
“(3) Nothing in subsection (1) shall affect the recognition or enforcement in the United Kingdom of a judgment to which Part I of the Foreign Judgments (Reciprocal Enforcement) Act 1933 applies by virtue of section 4 of the Carriage of Goods by Road Act 1965, section 17(4) of the Nuclear Installations Act 1965, section 166(4) of the Merchant Shipping (Oil Pollution) Act 1971, section 6 of the International Transport Conventions Act 1983 or section 5 of the Carriage of Passengers by Road Act 1974.”
- I derive no assistance from this provision. In the first place, all of the provisions to which section 31(3) refers provide that Part I of the 1933 Act is to apply to the judgments to which they relate “whether or not it would otherwise have so applied”. They do not therefore assist in determining whether a judgment against a state may be registered under the 1933 Act in other cases. Secondly, all of the statutes to which section 31(3) refers incorporate international conventions into English Law. The apparent object of section 31(3) is to prevent any possibility of section 31(1) causing a breach by the United Kingdom of its obligations under the conventions in question. It does not, of itself, indicate whether a judgment of a foreign court against a foreign state would be registrable under the 1933 Act even if the requirements for enforcement under the statutes to which it refers are satisfied: it leaves their registrability unaffected by section 31(1).
Conclusion on jurisdictional immunity
- For the reasons set out above, the Defendants are immune from the present proceedings, irrespective of the question whether the Nigerian judgment relates to a commercial transaction.
- This makes it unnecessary for me to decide whether the Nigerian judgment relates to a commercial transaction entered into by the Nigerian government. I have some difficulty in seeing that the Nigerian judgment does relate to a commercial transaction entered into by the Nigerian government in circumstances where the only commercial transaction into which it entered was that with Aermacchi, and, on the evidence before me, it undertook no relevant obligation to AIC, other than not to make a payment to Aermacchi that had been prohibited by an order of the Nigerian court. It is difficult to view that non-payment as an “activity” within the meaning of section 3(3)(c) of the State Immunity Act. In England, the proceedings against the Nigerian government would have been third party debt proceedings to enforce the judgment against Aermacchi rather than original proceedings.
- It is also strictly unnecessary for me to determine the issues as to immunity from execution, but since these have been argued in full I shall address them.
Immunity from execution
(a) General principles
- The general rule is that the property of a state may not be subject to execution: section 13(2)(b) of the State Immunity Act. That rule is subject to an exception in the case of property “which is for the time being in use or intended for use for commercial purposes”: section 13(4). The application of this exception to the bank accounts of a state was the subject of authoritative exegesis by Lord Diplock in Alcom at 602 to 604.
- The exception created by section 13(4) is itself subject to an exception in relation to the property of a State’s central bank. Section 14(4) is as follows:
“Property of a State’s central bank or other monetary authority shall not be regarded for the purposes of subsection (4) of section 13 above as in use or intended for use for commercial purposes; and where any such bank or authority is a separate entity subsections (1) to (3) of that section shall apply to it as if references to a State were references to the bank or authority.”
(b) The Bank of England accounts
- Two of these accounts are in the name of the Central Bank of Nigeria. The Defendants contend that they are immune from jurisdiction by virtue of section 14(4) of the State Immunity Act, irrespective of whether they are used or intended for use for commercial purposes and irrespective of whether the moneys in those accounts belong beneficially to the central bank or to the Federal Government of Nigeria. AIC contends that the moneys in those accounts belong beneficially to the Federal Government and are used or intended for use for commercial purposes.
- The debts owed by the Bank of England in relation to moneys in these bank accounts are choses in action, which are property within the meaning of section 14(4), just as they are property within the meaning of section 13, as held by the House of Lords in Alcom. A bank account in the name of a state’s central bank is property of that bank. Where, as in the case of Nigeria, the central bank is a separate legal entity, it cannot be relevant whether the moneys in such an account are beneficially the central bank’s or those of the state. Section 14(4) applies equally where the central bank is not a separate entity, and if it is not a separate entity its moneys will (unless held in trust for a third party) always belong both nominally and beneficially to the state. It follows that moneys in a bank account of a central bank with another bank are immune from execution irrespective of the source of the funds in the account or the use of the account or the purpose for which the account is maintained.
- This view of the effect of section 14(4) is supported by William Blair QC in his article The Legal Status of Central Bank Investments under English Law in  CLJ 374 at 380 to 381, and by Lady Fox QC in The Law of State Immunity at 393.
- In any event, AIC has neither established that the moneys in the Bank of England accounts in the name of the Central Bank of Nigeria belong beneficially to the Federal Government, nor that those accounts are used or intended for use for commercial purposes. The only evidence that the moneys in the accounts belong beneficially to the Federal Government is the provisions of the Central Bank of Nigeria Decree, Decree no. 24 of 1991 of the Laws of the Federation of Nigeria. AIC rely on provisions such as section 31 of that Decree, which provides that the Central Bank “shall be entrusted with Federal Government banking and foreign exchange transactions”, and “shall receive and disperse Federal Government moneys”. Such legislative provisions would not establish a trust under English law. They are consistent with the ordinary operation of a bank, which, although entrusted with moneys by its customers, is in the relationship of a debtor to a creditor so far as they are concerned. It is not suggested by AIC that the interpretation of the Nigerian Decree is subject to an interpretative approach different from that applicable to our own legislation.
- In relation to the use and purpose of the moneys in these accounts, the evidence of the Central Bank of Nigeria is that they are used to carry out its functions as a Central Bank of the State of Nigeria. That is consistent with the titles to both accounts, which are designated “Central Bank of Nigeria no. 3 Paris Club”.
- It follows that these accounts are immune from execution.
- The third account at the Bank of England is in the name of the Federal Government of Nigeria. It is the subject of a certificate of the High Commissioner dated 7 April 2003 that the funds deposited in it “are not in use nor intended for use for commercial purposes”.
- AIC contends that this certificate is ineffective for the purposes of section 13(5) of the State Immunity Act, on the ground that it is vague, and provides no particulars in support of the certification. Section 13(5) provides that the certificate of the head of a state’s diplomatic mission in the United Kingdom “to the effect that any property is not in use or intended for use by or on behalf of the State for commercial purposes shall be accepted as sufficient evidence of that fact unless the contrary is proved”. That provision contains no requirement that the certificate should provide any particulars of the use or intended use of the property in question: to the contrary, it specifies the effect of the requisite certificate. AIC has adduced no evidence to displace the certificate.
- It follows that none of the Bank of England accounts is liable to execution.
(c) The HSBC accounts
“I, Dr Christopher Kolade, High Commissioner of Nigeria, hereby certify that the funds deposited in the 16 HSBC Bank plc accounts listed in the attached schedule are not in use nor intended for use for commercial purposes.
All 16 of the accounts are dormant, and no payments have been made out of any of the accounts for at least 18 months.
In respect of all 16 accounts, the uses to which the Acting High Commissioner referred in his Certificate dated 23 January 2003 (in relation to the accounts listed in Schedule B of that Certificate) were in fact historical uses before the accounts became dormant. The accounts are no longer used for these purposes.”
- The test in section 13(4) of the State Immunity Act applies as at the date of the issue of process of execution against the property in question: the words “for the time being” make this clear. The use or intended use of property may change over time. In the case of a bank account, the onus is on the judgment creditor to show that the use or intended use of the account is, apart from minimal exceptions, for commercial purposes within the meaning of the Act: Lord Diplock in Alcom at page 604D-E. Evidence of recent use of an account wholly for commercial purposes over a significant period of time may lead to the conclusion that the account is used or intended for use wholly for commercial purposes; but the older the use in evidence, the weaker the inference that may be drawn as to the use or intended use of the account.
- The High Commissioner’s certificate is supplemented by the witness statement of Mr Francis Ogunyinka, the then Finance Attaché of the Nigeria High Commission in London, corrected by the witness statement of Mr Lerer dated 19 May 2003, as to the previous use of the accounts. That evidence shows that in respect of some accounts, such as 21229656, which was used for the purchase of books for Nigerian government schools, the previous use was commercial. In some cases, such as account 31163507, where the use was for scholarships, the use was clearly not commercial. In other cases no clear conclusion as to the nature of the previous use can be drawn. For example, account 36122968 was “used for the purpose of payment of expenses of Federal Government officials”. If payment was made direct to third parties for goods or services supplied to Federal Government employees, the payment would be commercial in nature; if the payment were made to employees pursuant to their contracts of employment to reimburse them for expenses they had incurred, the purpose would be non-commercial: see section 3(3) of the State Immunity Act.
- A mere statement that an account is dormant begs the question of the duration of the dormancy. In this case, however, the period of dormancy is specified in the certificate of the High Commissioner. If an account has been dormant for at least 18 months, it cannot be said to be presently used for any relevant purpose, and the previous use is weak evidence of the present intention as to its use. In this case, that evidence is insufficient to disprove the statement in the High Commissioner’s certificate.
- For the reasons set out above, even where there is evidence that an account was previously wholly used for commercial purposes, it does not establish that the present or intended use of that account is commercial.