The European Union & Anor v The Syrian Arab Republic

A state that has contractually submitted disputes to the English courts and waived immunity cannot rely on sovereign immunity. A loan or financing transaction is also a commercial transaction for the purposes of the State Immunity Act 1978.

The special statutory route for service on a state applies to documents instituting proceedings. Once proceedings have been validly commenced, the court may authorise alternative service of later documents where there is good reason, including actual notice and the state’s deliberate non-participation.

Permission for summary judgment without an acknowledgment of service or defence may be granted where service and jurisdiction are established. A claimant may properly seek summary judgment because it may be more readily enforceable abroad than default judgment.

A guarantor’s subrogated rights are governed by the law governing its duty to pay. Where payment extinguishes the creditor’s rights, the guarantor may sue the debtor in its own name.

The European Union, represented by the European Investment Bank, sought permission to apply for summary judgment and summary judgment against Syria. The claim arose from six English-law loan agreements under which the Bank had advanced funds to Syria. The European Union had guaranteed Syria’s repayment obligations and had paid the Bank after Syria defaulted.

Syria had not acknowledged service, filed a defence, or appeared. The court considered jurisdiction, state immunity, service of the summary-judgment application, permission under CPR 24.4(1), the applicable law of subrogation, and whether Syria had a realistic defence. The claimed debt included principal, contractual interest and default interest.

The central questions were whether the European Union could sue in its own name by subrogation and whether the procedural and substantive conditions for summary judgment were satisfied.

1. Alternative service and permission were granted, and summary judgment was entered for the European Union. The contractual English jurisdiction clauses were an unambiguous prior submission to jurisdiction and waiver of immunity within section 2(2) of the State Immunity Act 1978. Independently, the loans were commercial transactions within section 3. Syria therefore had no sustainable immunity objection.

2. Section 12(1) of the Act and CPR 6.44 concern service of the claim form and documents required to institute proceedings. They do not prescribe service of later procedural documents once proceedings have been validly served on a state. Syria had failed to give an address for service. CPR 6.27 therefore enabled the court to apply CPR 6.15 to the application notice and evidence.

3. There was good reason to validate alternative service. The application and evidence had reached Syria by email and fax, and copies were successfully delivered to the relevant Syrian ministries. Syria had notice of the hearing but had chosen not to participate. Service by those alternative methods was authorised; dispensing with service under CPR 6.28 was unnecessary. The approach was consistent with [2016] EWCA Civ 177 and [2013] 1 WLR 2043.

4. Permission under CPR 24.4(1) was appropriate. The claim had been validly served, the court had jurisdiction, the period for a jurisdiction challenge had expired, and summary judgment could be more readily enforced internationally than a default judgment.

5. Under Article 13 of the Rome Convention, the law governing the European Union’s duty under the guarantees determined its right of subrogation. The guarantees were most closely connected with Belgium because the European Union’s payment was the characteristic performance and its central administration was there. Under Belgian law, whose relevant provisions were identical to Luxembourg law, payment under the guarantees gave the European Union subrogated rights against Syria.

6. This was extinguished-rights subrogation. The Bank had been paid and the European Union could enforce the replicated loan rights in its own name without joining the Bank. Syria had no realistic prospect of defending the debt. Potential sanctions did not provide a defence because a derogation could be sought for a payment due under a pre-sanctions contract, and any allegation concerning undisbursed funds had never been articulated as a damages claim.

7. Judgment was entered for €190,535,079.44, with a declaration entitling the European Union to further contractual interest until payment. Costs were to follow the event.

High Court (Commercial Court): This was a first-instance determination. Earlier in the proceedings, Teare J had made an order enabling service of the claim form and associated instituting documents on Syria through the statutory mechanism for service on a state.