NML Capital Limited v Republic of Argentina

A foreign judgment against a state is recognised and enforced under section 31 of the Civil Jurisdiction and Judgments Act 1982 where the ordinary recognition requirements are satisfied and the foreign court would have had jurisdiction under rules corresponding to sections 2–11 of the State Immunity Act 1978. Section 31 supplies an alternative immunity scheme, not an additional hurdle.

A state may submit by prior written agreement. An agreement permitting enforcement in any otherwise competent court, coupled with an immunity waiver, constitutes submission. By a majority, proceedings on a foreign judgment do not themselves relate to the underlying commercial transaction under section 3. The absence of immunity may be established at the inter partes stage even where different grounds were advanced when permission for service was obtained.

NML Capital Limited v Republic of Argentina concerned bonds issued by Argentina and governed by New York law. After Argentina defaulted, NML obtained summary judgment for approximately US$284 million in the United States District Court. NML then brought a common-law action in England on that judgment.

Blair J held that Argentina was not immune and permitted NML to rely on grounds which had not appeared in its original application for permission to serve out: [2009] EWHC 110 (Comm); [2009] QB 579. The Court of Appeal reversed that decision and held Argentina immune: [2010] EWCA Civ 41; [2011] 1 QB 8.

The Supreme Court considered whether immunity was excluded by section 3 or section 2 of the State Immunity Act 1978, or by section 31 of the Civil Jurisdiction and Judgments Act 1982. It also considered whether NML could advance new grounds against immunity at the inter partes hearing.

Appeal allowed unanimously. Argentina was not entitled to state immunity from the English proceedings on the New York judgment. The Court of Appeal’s decision was reversed.

1. By a majority, comprising Lord Mance and Lord Collins, with whom Lord Walker agreed, section 3(1)(a) of the State Immunity Act 1978 did not apply. Common-law proceedings to enforce a foreign judgment relate to that judgment, rather than to the commercial transaction underlying it. The recognition and enforcement of foreign judgments is a distinct field involving such matters as the foreign court’s jurisdiction, natural justice, fraud and public policy. Lord Phillips and Lord Clarke disagreed on this issue. They considered that the practical object of the proceedings was to enforce liability under the commercial bonds, so the proceedings also related to the underlying commercial transaction.

2. All members of the court agreed that section 31 of the Civil Jurisdiction and Judgments Act 1982 provided an independent and comprehensive scheme. A foreign judgment against a foreign state must be recognised and enforced where it would ordinarily be recognised and where the foreign court would have possessed jurisdiction under rules corresponding to sections 2–11 of the 1978 Act. Section 31 does not impose a further requirement that the English enforcement proceedings themselves fall within an exception in the 1978 Act. The New York proceedings concerned commercial bonds and were brought pursuant to Argentina’s submission to New York jurisdiction, so the statutory conditions were satisfied.

3. All members also agreed that Argentina had submitted to English jurisdiction within section 2(2) of the 1978 Act. The bonds provided that the New York judgment could be enforced in any court to whose jurisdiction Argentina was or might be subject. They also contained an irrevocable waiver of immunity for that purpose. England was such a jurisdiction because, apart from immunity, the procedural rules permitted an action to enforce a foreign judgment. Each paragraph of the clause independently, and both together, amounted to submission.

4. Lord Collins, with whom Lord Walker agreed, held that Parker v Schuller (1901) 17 TLR 299 had no application. The procedural rules require identification of the ground for service out, but no equivalent rule requires the grounds for denying state immunity to be stated once and for all. Lord Clarke agreed. Lord Phillips, Lord Mance and Lord Clarke also concluded that the rule in Parker v Schuller should no longer be followed. The court may permit reliance on a valid alternative basis where this causes no irremediable prejudice and avoids pointless duplication, delay and expense.

5. The removal of adjudicative immunity did not itself eliminate the separate protections governing execution against state property. Section 31(4) preserves the relevant service and execution provisions of the 1978 Act.

• United Kingdom Supreme Court: In NML Capital Limited v Republic of Argentina [2011] UKSC 31, the court unanimously allowed NML’s appeal and reversed the Court of Appeal.
• Court of Appeal: In [2010] EWCA Civ 41; [2011] 1 QB 8, the court reversed Blair J and held that Argentina enjoyed state immunity. It also held that NML could not rely on the new grounds advanced at the inter partes hearing.
• Commercial Court: In [2009] EWHC 110 (Comm); [2009] QB 579, Blair J rejected Argentina’s procedural objection and held that section 31 and the bond provisions prevented Argentina from claiming immunity.