Crane Bank Limited & Ors v DFCU Bank Limited & Ors

The Court of Appeal allowed the appellants' appeal in part. The court held that the foreign act of state rule prevents English courts from adjudicating on the lawfulness of executive acts of a foreign state performed within that state's territory, but that established exceptions to the rule may be realistically arguable and suitable for trial. The court concluded that there were serious issues to be tried that the sale of Crane Bank Limited's assets by the Bank of Uganda acting as receiver could be characterised as commercial activity (the Commercial Activity Exception) and that English public policy against bribery and corruption might disapply the rule (the Public Policy Exception). The court rejected the appellants' contention that the Kirkpatrick Exception applied and rejected the contention that application of the rule engaged Article 6 ECHR such that the case could not be dismissed on jurisdictional grounds.

Background and parties

The appellants were Crane Bank Limited (a former Ugandan bank) and certain shareholders; the primary respondents were DFCU Bank Limited and related entities and persons. The appellants alleged that senior Ugandan officials and officers of the Bank of Uganda engaged in a corrupt scheme to seize CBL and sell its assets at an undervalue, that DFCU Bank joined that scheme as purchaser, and sued in England for conspiracy to injure by unlawful means, dishonest assistance, knowing receipt and an account of profits under Ugandan law.

Procedural history

• The claim was commenced in England and the respondents applied under CPR Part 11, asserting there was no serious issue to be tried because the foreign act of state rule barred the claims. HH Judge Pelling KC held that the English court had no jurisdiction and set aside service: see HH Judge Pelling KC [2022] EWHC 2266 (Comm). The appellants appealed to the Court of Appeal, which heard the matter on 3–5 April 2023.

Issues

1. Whether the sale of CBL's assets by the Bank of Uganda as receiver fell within the Commercial Activity Exception to the foreign act of state rule.
2. Whether the Public Policy Exception (refusing recognition or protection of acts contrary to English public policy, including serious corruption) applied.
3. Whether the Kirkpatrick Exception applied so that fact-finding as to bribery could be undertaken without adjudicating the validity of Ugandan executive acts.
4. Whether application of the foreign act of state rule gave rise to an Article 6 ECHR issue under the Human Rights Act 1998 s.6.

Reasoning and conclusions

The court began from the Supreme Court's exposition of the foreign act of state rule in Maduro and the authorities describing its exceptions. On the Commercial Activity Exception the court analysed the role of the Bank of Uganda under the Ugandan Financial Institutions Act 2004 (notably ss.94 and 95) and the form of the purchase agreement and side letter. Although the receiver was a central bank and acted for public purposes, the sale was in form a standard commercial sale and the Bank of Uganda, acting as receiver, stood in the position of an agent or receiver obliged to obtain proper value. Applying the tests in The Playa Larga, Kuwait Airways and Trendtex, the court held it was at least realistically arguable that the sale was commercial and that the judge was wrong to exclude that possibility on a Part 11 application.

On the Kirkpatrick Exception the court concluded that this claim, read as a whole, required the court to adjudicate on the lawfulness of the Bank of Uganda's executive acts under Ugandan law; the exception did not apply to avoid inquiry into the legal validity of those acts, and the Judge was right to refuse jurisdiction on that ground.

On the Public Policy Exception the court noted the narrow but flexible nature of the exception, considered domestic and international materials referred to in the pleadings (including the United Nations Convention Against Corruption and the Bribery Act 2010), and concluded that it was arguable that English public policy against corruption could disapply the foreign act of state rule where corruption is central to the illegality alleged. That question, the court held, should be determined at trial rather than on summary jurisdictional disposal.

Finally, the court rejected the appellants' Article 6 argument. It accepted the view in Belhaj that the foreign act of state rule operates as a substantive limitation under domestic law rather than a purely procedural bar engaging Article 6, and that Strasbourg authority supports that distinction.

Disposition

The Court of Appeal allowed the appeal in part: it held there were serious issues to be tried on the Commercial Activity and Public Policy Exceptions but that the Kirkpatrick Exception and the Article 6 challenge did not give rise to serious issues. The matter was remitted for trial on those issues capable of being tried in this jurisdiction.

Appeal allowed in part. The Court of Appeal held that (i) it was at least realistically arguable that the Bank of Uganda's sale of Crane Bank's assets as receiver was commercial activity and thus might fall within the Commercial Activity Exception to the foreign act of state rule; (ii) it was at least arguable that English public policy against bribery and corruption could disapply the rule in respect of core allegations of corruption (the Public Policy Exception); (iii) the Kirkpatrick Exception did not apply because the pleaded causes of action required adjudication of the lawfulness under Ugandan law of the Bank of Uganda's executive acts; and (iv) the foreign act of state rule is a substantive domestic limitation rather than a procedural bar engaging Article 6 ECHR, so the Article 6 challenge failed.

This is an appeal from the Commercial Court (KBD), HH Judge Pelling KC, [2022] EWHC 2266 (Comm), in which the judge dismissed permission to proceed on grounds that the foreign act of state rule barred the claims. Permission to serve out of the jurisdiction had been granted previously and permission to appeal was given; the Court of Appeal delivered judgment at [2023] EWCA Civ 886 on 26 July 2023.