Crane Bank Limited & Ors v DFCU Bank Limited & Ors

The foreign act of state rule does not prevent an English court from considering an act merely because it occurred within a wider sovereign course of conduct. The court must assess the character of the particular act. A sale by a state body acting as receiver may be commercial, even where the receivership arose from sovereign regulatory powers.

The public policy exception is narrow but flexible. It is at least arguable that English public policy against corrupting foreign public officials can disapply the rule where corruption is central to the alleged illegality. The existence and scope of that policy should ordinarily be determined at trial where the issue is developing. By contrast, the rule applies where adjudication requires determination of the lawfulness of foreign sovereign acts, and it is a substantive domestic limitation which does not engage Article 6.

The appellants alleged that officials of the Bank of Uganda corruptly used regulatory powers to take control of Crane Bank Limited, place it in receivership, and procure a sale of its assets to DFCU Bank at an undervalue. The claims, governed by Ugandan law, included unlawful means conspiracy, dishonest assistance and knowing receipt.

The Commercial Court held that the foreign act of state rule barred the claims and set aside service on the respondents: [2022] EWHC 2266 (Comm). On appeal, the issues were whether the sale by the Bank of Uganda as receiver was commercial, whether alleged corruption engaged the public policy exception, whether the claim fell within the Kirkpatrick exception, and whether Article 6 applied.

1. Appeal allowed. There were serious issues to be tried as to whether the claims based on the asset sale fell within the commercial activity exception and/or the public policy exception. The jurisdiction challenge should therefore have been dismissed.

2. The relevant inquiry for the commercial activity exception is the character of the particular act. Its governmental context, purpose or motive is not conclusive. A course of conduct initially sovereign in character may subsequently include commercial acts. The sale of assets by a receiver is ordinarily a commercial act capable of performance by a private receiver. Here, the Bank of Uganda became Crane Bank’s agent as receiver, and the agreement was in form a conventional commercial sale. Its statutory role, public-interest purposes and the associated regulatory dispensations raised an arguable contrary case, but did not make the sale necessarily sovereign.

3. The public policy exception is exceptional and narrow, but it is ultimately governed by domestic public-policy considerations and remains capable of development. It is arguable that English public policy, including that reflected in the Bribery Act 2010, rejects the corruption of foreign public officials. The alleged corruption was central to the pleaded wrongdoing, not incidental. Whether the policy exists in this context, requires egregious corruption, or calls for a balancing exercise should be resolved at trial rather than summarily.

4. The Kirkpatrick exception did not assist the appellants. Each pleaded cause of action required the court to determine the lawfulness under Ugandan law of acts by the Bank of Uganda and its officials, including the alleged bribed sale at an undervalue. The lawfulness of those sovereign acts was therefore part of the subject matter of the claims.

5. Article 6 of the European Convention on Human Rights was not engaged. The foreign act of state rule is a substantive domestic limitation on the claim, rather than a procedural immunity or bar requiring a proportionality assessment.

• Court of Appeal (Civil Division): Allowed the appeal. The claims raised serious issues to be tried under the commercial activity and public policy exceptions to the foreign act of state rule.
• High Court, Commercial Court: Held that the foreign act of state rule barred the claims, declared that the court lacked jurisdiction, and set aside service on the respondents: [2022] EWHC 2266 (Comm).