Dynasty Company for Oil and Gas Trading Ltd v Kurdistan Regional Government of Iraq & Anor

For a constituent territory of a federal state to claim immunity under section 14(2) of the State Immunity Act 1978, it must show that it acted in the exercise of the recognised state’s sovereign authority and that the relevant acts were sovereign rather than commercial. Constitutional allocation of authority may satisfy the requirement that the territory act for and on behalf of the state, even if the federal government opposes the territory’s exercise of that authority. The character of an act is assessed in context by its juridical nature, not its motive. Decisions controlling participation in long-term exploitation contracts for public natural resources may be sovereign acts. Immunity extends to officials acting for an immune separate entity. Such officials may be served by ordinary process. Claims concerning the exercise of public powers fall outside the Brussels Recast Regulation and, alternatively, the natural forum was the Kurdistan Region.

Dynasty, an Iraqi company, claimed against the Kurdistan Regional Government of Iraq and Dr Ashti Hawrami, its former Minister for Natural Resources. The claim arose from an alleged refusal to consent to a change of control under production sharing contracts concerning oil and gas blocks in the Kurdistan Region. Dynasty advanced English-law and Iraqi-law claims, including conspiracy, unlawful interference, intimidation and alleged breaches of Iraqi law.

Dr Hawrami challenged the court’s jurisdiction under CPR Part 11 on state immunity, service, foreign act of state and forum non conveniens grounds. The central issues were whether the Kurdistan Regional Government had exercised Iraq’s sovereign authority, whether the impugned acts were sovereign, whether Dr Hawrami personally shared the immunity, whether service was valid, whether the claim fell within the Brussels Recast Regulation, and whether the proceedings should be stayed.

1. State immunity. A separate entity under section 14(2) of the State Immunity Act 1978 must establish both that the proceedings relate to acts done in the exercise of sovereign authority and that the circumstances are such that the state would have been immune. The requirement is not satisfied merely because conduct is governmental in character. The entity must also show that it exercised the authority of the recognised state.
2. The relevant test is whether the constituent territory acted for and on behalf of the recognised state. A constitutional allocation of responsibility may satisfy that test. The federal government’s opposition to the territory’s exercise of constitutionally allocated powers does not necessarily prevent the territory from acting for and on behalf of the state. The burden of proving the statutory conditions rests on the separate entity.
3. The court was entitled to construe the Iraqi Constitution. The foreign act of state doctrine did not prevent that enquiry because the validity of the Constitution was not being questioned. The Constitution allocated management of oil and gas in fields other than “present fields” to the regions through Articles 110, 112, 115 and 121. Article 112 Second did not confer exclusive legislative authority on the federal government or give it a veto over regional action.
4. The entry into the production sharing contracts was an act jure imperii. The contracts concerned publicly owned natural resources, were entered into under constitutional and statutory powers, and contained provisions which a private person could not grant, including compulsory purchase, tax exemptions and pipeline rights. A decision whether to permit a change of control under such a long-term contract had the same sovereign character.
5. The juridical character of the act, considered in its context, determines whether it is jure imperii or jure gestionis; the state’s motive is not determinative except insofar as it sheds light on that character. Dr Hawrami acted for and on behalf of the KRG in his official capacity. His immunity therefore followed from the KRG’s immunity, since otherwise the statutory immunity could be circumvented.
6. Service under section 12 of the State Immunity Act 1978 was not required for a servant or agent of a state, constituent territory or separate entity. Ordinary service was valid, leaving the individual to assert immunity if appropriate.
7. The claim fell outside Article 1 of the Brussels Recast Regulation because it concerned the exercise of public powers and the liability of an entity exercising state authority. The court therefore had a discretion to stay the proceedings. Applying Spiliada Maritime Corporation v Cansulex Ltd [1987] 1 AC 460, the courts of the Kurdistan Region were the natural forum. Dynasty had not shown by cogent evidence a real risk that justice would not be done there.
8. The court declared that it had no jurisdiction pursuant to the State Immunity Act 1978. Had immunity not been established, the proceedings would have been stayed on forum non conveniens grounds. The precise form of the orders was left for further submissions.