Al-Kishtaini v Shanshal

A person within a sanctions regime because they were resident in the specified country when the regime came into force remains subject to the prohibition despite later changing residence, unless the required permission is obtained. A court should not construe emergency legislation narrowly where that would defeat its purpose and transfer the statutory discretion from the designated authority to the court.

Where a claimant must rely on an act prohibited by domestic law to establish a contractual or restitutionary claim, the common-law doctrine of illegality prevents recovery. The claimant’s intention, knowledge or absence of deliberate wrongdoing is immaterial. Applying that rule in these circumstances was compatible with the public-interest and general-interest exceptions in Article 1 of the First Protocol.

The respondent obtained judgment for DM 113,569 and interest, subject to set-off arising from the appellant’s counterclaim. The sum represented the alleged shortfall after the respondent transferred nearly US$500,000 to fund the appellant’s purchase of shares.

The appellant appealed on illegality and estoppel, and raised additional arguments concerning gift, settled account and interest. The respondent sought to amend his case on appeal to argue that the payment was not an order within the sanctions regime. The central issue was whether Article 2 of the Control of Gold, Securities, Payments and Credits (Republic of Iraq) Directions 1990 applied although the appellant had ceased to reside in Iraq before the transaction.

1. Appeal allowed. The Court of Appeal unanimously held that the claim for DM 113,569 depended upon an illegal payment and could not be recovered.
2. Lord Justice Mummery, with whom Lord Justice Rix and Mr Justice Holman agreed, construed section 2(1) of the Emergency Laws (Re-enactments and Repeals) Act 1964 and article 2 of the 1990 Directions according to their natural language. The relevant residence was residence when the Directions came into force or at a later time while they remained in force. The legislation contained no qualification ending the prohibition when a person later ceased to reside in Iraq.
3. The court rejected reliance on the Bank of England notices and correspondence as aids to construction. The statutory purpose was to maintain effective official control over transactions affected by sanctions. Allowing a person to escape the regime by changing residence would defeat that purpose. The discretion to grant permission belonged to the Treasury, acting through the Bank of England.
4. Applying Royal Boskalis Westminster NV v Mountain [1999] QB 674 and Soleimany v Soleimany [1999] QB 785, the claimant could not recover where proving the contractual or restitutionary right required reliance on his own illegal act. Following Archbolds (Freightage) Ltd v S Spanglett Ltd [1961] 1 QB 374, it was immaterial that the breach was inadvertent or that the claimant was unaware of the law.
5. The proposed amendment concerning an “order” was refused. The issue had not been pleaded or argued at trial, raised new factual questions and was introduced too late on appeal.
6. The application of the illegality doctrine was compatible with Article 1 of the First Protocol. The sanctions embodied a very high public interest, and the advance-permission procedure provided a proportionate means of balancing public control and private rights. The court did not decide that section 6(1) of the Human Rights Act 1998 could retrospectively be invoked in private litigation to remove the common-law defence.
7. The respondent was ordered to pay the appellant’s costs. The amendment application was dismissed and the application for permission to appeal to the House of Lords was refused.

1. Court of Appeal (Civil Division): Appeal from the order of Richards J dated 9 June 1999. Appeal allowed.
2. Queen’s Bench Division: Judgment for the claimant for DM 113,569 and interest, subject to set-off following an inquiry on the counterclaim.