Boru Hatlari Ile Petrol Taşima AŞ and others v Tepe Insaat Sanayii AS

Enforcement immunity under the State Immunity Act 1978 requires the asset first to be shown to be property of a State under section 13(2)(b). Only then does the commercial-use qualification in section 13(4) arise. Property means a proprietary or other legally ascertainable interest recognised by domestic law and capable of enforcement. Mere possession or control, including governmental control over a separate state-owned entity, is insufficient. The provisions concerning possession or control in sections 6 and 10 do not expand section 13(2)(b). Shares owned by a separate entity for its own account remain available for execution unless the State has its own proprietary or legal interest.

Tepe obtained arbitration awards exceeding USD 100 million against Botaş and sought enforcement against shares held by Botaş in two Jersey subsidiaries, TPIC and BIL. The Jersey courts granted an interim arrêt entre mains and rejected Botaş’s claim that the shares were immune from enforcement under the State Immunity Act 1978, as extended to Jersey. The Royal Court analysed the claim principally under section 6, while the Court of Appeal rejected it on differing reasoning. The central issue before the Board was whether the shares were property of Turkey under section 13(2)(b), because of the Turkish State’s alleged proprietary or regulatory control.

Appeal dismissed. Lord Mance delivered the judgment of the Board.

1. Statutory sequence. Section 13(2)(b) makes State ownership or another legally enforceable State interest a threshold requirement. The court must first decide whether the asset is property of the State. Only then does it consider whether the property is in use or intended for use for commercial purposes under section 13(4). A functional inquiry into the asset’s use cannot replace the threshold question.
2. Meaning of property. Property includes real and personal property and legally ascertainable legal, equitable or contractual interests capable of realisation. The concept is determined by the domestic law governing the relevant asset, rather than by an autonomous international definition. Alcom Ltd v Republic of Colombia [1984] AC 580 and AIG Capital Partners Inc v Republic of Kazakhstan [2005] EWHC 2239 (Comm) supported that approach.
3. Separate entities. Shares held by Botaş in Jersey for its own account were Botaş’s property. Turkish law imposed restrictions and obligations affecting Botaş’s dealings, but did not give Turkey a proprietary, legal or direct interest in the shares. Mere State control or possession could not make the same shares State property. The distinction between adjudicatory and enforcement immunity was material: sections 6 and 10 expressly address possession and control in different contexts, while section 13(2)(b) concerns property against which execution can lie.
4. Alternative control analysis. Although unnecessary to the result, the Board considered that the alleged control would not have sufficed in any event. The cases concerning requisition involved actual possession or direction of an asset, unlike shares held and managed for the separate entity’s own account. Compania Naviera Vascongado v Steamship “Cristina” [1938] AC 485 was therefore distinguishable, while USA and Republic of France v Dollfus Mieg et Cie SA [1952] AC 582 illustrated the limited relevance of control to assets requiring no management.
5. The Board advised that the appeal be dismissed. The parties had 21 days to make submissions on costs; failing such submissions, costs would be borne by Botaş.

• Privy Council: Appeal dismissed. The Board advised that Botaş should bear the costs unless contrary submissions were made within 21 days.
• Court of Appeal of Jersey: Rejected Botaş’s challenge to the interim arrêt entre mains, applying reasoning which differed in some respects from that of the Royal Court.
• Royal Court of Jersey: Granted the interim enforcement order and rejected Botaş’s State-immunity challenge.