AY Bank Ltd v Bosnia & Herzegovina & Ors

The English courts may determine private-law rights situated in England even where resolving them requires reference to an unincorporated treaty or events involving foreign states. The principle of non-justiciability prevents adjudication on the validity, interpretation or enforcement of international obligations operating solely on the international plane. It does not prevent the court from determining the amount of a debt owed by an English bank, the authority for transactions on its accounts, or the parties’ rights in the bank’s liquidation. An unincorporated treaty may be considered as part of the factual and legal context and recognised or implemented where necessary to determine domestic rights. The treaty’s allocation of assets between successor states may therefore be applied without interpreting, enforcing or varying it between those states.

AY Bank Ltd was in creditors’ voluntary liquidation. Its liquidators sought directions concerning balances in accounts held in the name of the former National Bank of Yugoslavia, embassy accounts and a suspense account. The successor states of the former Socialist Federal Republic of Yugoslavia claimed interests in the assets under the Agreement on Succession Issues, while Serbia and Montenegro claimed that the balances represented later deposits belonging to it alone.

Several successor states also challenged set-offs made in 1993 and 1994, contending that the National Bank of Serbia had no authority to dispose of assets of the former National Bank of Yugoslavia. Serbia and Montenegro applied for directions that the issues were non-justiciable because they involved interpretation or enforcement of an unincorporated treaty and transactions between foreign sovereign states. The central issue was whether the disputed questions could be determined in the English liquidation.

1. Application dismissed. The application by Serbia and Montenegro that the issues were non-justiciable was dismissed. The court made no order on Slovenia’s disclosure application and directed that the issues be defined by pleadings and followed by disclosure.
2. The principle of non-justiciability prevents English courts from adjudicating upon transactions of foreign sovereign states or interpreting and enforcing unincorporated treaties as instruments of public international law. That principle is one of judicial self-restraint and is subject to proper limits. The court considered Buttes Gas v Hammer [1982] AC 888, JH Rayner (Mincing Lane) Ltd v Department of Trade and Industry [1990] 2 AC 418, Westland’s Helicopters Ltd v Arab Organisation for Industrialisation [1995] QB 282 and British Airways Board v Laker Airways Ltd [1985] AC 58.
3. The court was entitled to determine issues affecting the private-law rights of the bank and its unsecured creditors. The balances were debts owed by an English bank and the right to prove in its liquidation arose under English domestic law. The court could determine when the dismemberment of the former state became effective, whether later transactions were authorised by the account-holder, and the resulting amount of the debt.
4. The Agreement on Succession Issues was relevant to the proportions in which successor states were entitled to share in the debt. Applying those proportions did not amount to interpreting, enforcing or varying the treaty between sovereign states. It constituted recognition and implementation of the treaty in domestic proceedings, consistent with the context supplied by UN Security Council Resolution 1022.
5. Any equitable accounting consequences of the set-offs would arise from English law applied to the operation of the accounts, not from interference with the treaty committees or the treaty’s dispute-resolution machinery.

This was a first-instance decision. The judgment records that an administration order had previously been made and later discharged, followed by the Bank’s creditors’ voluntary liquidation. The present applications concerned directions in that liquidation.