AIG Capital Partners Inc & Anor. v Kazakhstan

A third-party debt order requires a debt owed by the third party to the judgment debtor. An ultimate beneficial interest does not itself create the necessary debtor-creditor relationship.

For the purposes of section 14(4) of the State Immunity Act 1978, “property” has a broad meaning. Property of a central bank includes any asset in which it has a legal, equitable or contractual interest, irrespective of the capacity in which, or purpose for which, it holds the asset. Such property is immune from enforcement in the United Kingdom.

The immunity may affect access to enforcement proceedings under Article 6, but is a legitimate and proportionate restriction. Assets held for a national fund were also held for sovereign, rather than commercial, purposes.

The claimants obtained an ICSID award against the Republic of Kazakhstan and registered it as a judgment in the High Court under section 1 of the Arbitration (International Investment Disputes) Act 1966. They sought final third-party debt and charging orders against cash and securities held in London by ABN AMRO Mellon Global Securities Services B.V. for the National Bank of Kazakhstan.

The National Bank intervened, contending that the assets were its property and immune from enforcement under sections 13(2)(b) and 14(4) of the State Immunity Act 1978. The central issues were whether the cash accounts represented debts owed to the Republic, how section 14(4) should be construed, whether Convention rights required a narrower construction, and whether the assets were used or intended for commercial purposes.

1. Third-party debt order. Under CPR Part 72.2, the relevant debt had to be owed by AAMGS to the judgment debtor, the Republic of Kazakhstan. The cash accounts were held in the name of the National Bank, and the contractual debt was owed to the National Bank under the Global Custody Agreement. The Republic’s ultimate beneficial interest did not create a debtor-creditor relationship with AAMGS. The interim third-party debt order therefore had to be discharged.
2. Construction of section 14(4). “Property” has the same broad meaning in sections 13 and 14. It includes real and personal property and any legal, equitable or contractual right or interest in an asset. Section 14(4) applies whenever a central bank has such an interest, whether the bank is a department of the State or a separate entity, and irrespective of the capacity in which it holds the property or the purpose for which it is held.
3. The effect of section 14(4) is that property of a State’s central bank or monetary authority cannot be treated as being in use or intended for use for commercial purposes under section 13(4). It therefore enjoys immunity from enforcement processes in the United Kingdom.
4. Convention rights. Enforcement of an ICSID award forms part of the overall trial for Article 6 purposes. Section 14(4) consequently affects access to the enforcement jurisdiction. The restriction is nevertheless legitimate and proportionate, having regard to international opinion, comity between States, the need for a clear rule and the continuing availability of possible enforcement elsewhere. Article 1 of Protocol 1 was not engaged because the award was always subject to the existing law on State and central-bank immunity.
5. Application to the assets. The National Bank had contractual rights in the cash accounts and a beneficial interest in the securities. The London assets were therefore its property for section 14(4) purposes. Alternatively, they were property of the Republic, but were held as part of the National Fund for sovereign purposes. Investment and trading designed to preserve and enhance that fund did not make them commercial property under section 13(4).
6. The interim charging order and interim third-party debt order were both discharged.