Wilhelm Finance Inc v Ente Administrador Del Astillero Rio Santiago

For the purposes of the State Immunity Act 1978, state ownership, control, financing or the appointment of directors does not by itself make an entity a department of government. The court must examine its constitution, functions, powers, activities and relationship with the state.

An entity is a separate entity under section 14 where it is distinct from the executive organs of government and has capacity to sue and be sued. Commercial functions of a kind that a private company might perform are strong evidence of that distinction. Work performed for a state, including construction or repair of warships, does not become sovereign merely because the state requires or benefits from it. Alternative service was therefore valid under CPR 6.15 and did not conflict with section 12.

The claimant sought declarations that two deeds arising from a shipbuilding contract were void. An earlier order permitted service of the claim form by first-class post on the defendant’s solicitors under CPR 6.15, dispensing with service through diplomatic channels under section 12 of the State Immunity Act 1978.

The defendant applied to set that order aside, arguing that it was a state or department of government and that service was therefore governed exclusively by section 12 and CPR 6.44. It also alleged material non-disclosure concerning the contractual jurisdiction clause. The central issue was whether the defendant was a separate entity within section 14(1), possessing capacity to sue and be sued and being distinct from the executive organs of government.

1. Application dismissed. The order permitting alternative service on the defendant’s solicitors was not set aside.
2. Section 14(1) requires two qualities: the entity must be distinct from the executive organs of the government of the state and capable of suing or being sued. The court applied the guidance in Kuwait Airways Corporation v Iraqi Airways [1995] 1 WLR 1147, Propend Finance v Sing [1997] EWCA Civ 1433, I Congresso del Partido [1983] 1 AC 244, Trendtex Trading v Bank of Nigeria [1977] 1 QB 529 and The Altair [2008] 2 Lloyd’s Rep. 90. The inquiry is fact-sensitive and requires consideration of the entity’s constitution, function, powers, activities and relationship with the state.
3. The defendant was state-owned and subject to substantial governmental control and financial support. Those matters showed that it was an entity of the state, but did not determine whether it was a department of government. Its power to act in public and private areas, determine commercial policy, enter contracts and operate a shipyard supported the conclusion that it was distinct from the executive organs.
4. The court was not persuaded that the Argentine decision in Milantic compelled the conclusion that the defendant lacked capacity to sue or be sued. Hierarchical dependence, state ownership, financial dependence, representation by the provincial Attorney General and the absence of separate assets did not logically or necessarily produce that result. The defendant had been sued in Argentina, contracted in its own name, had a domicile and had power to sign agreements.
5. The commercial character of the defendant’s functions remained relevant. Construction and repair of vessels for the Argentine Navy could be performed pursuant to governmental contracts without becoming sovereign acts. The work was of a kind that a private shipyard might perform.
6. The alleged non-disclosure concerned the application before Field J. for service out of the jurisdiction, not the application before Flaux J. for alternative service. No sufficient ground for setting aside Flaux J.’s order was established.

First-instance decision. The judgment records earlier orders by Field J. permitting service out of the jurisdiction and by Flaux J. permitting alternative service, but no appeal from either order was determined in this judgment.