NML Capital Ltd v The Republic of Argentina

In this case, the Republic of Argentina is sued in the English court on a judgment debt. The judgment in question was granted in favour of NML Capital Limited (“NML”), which is a hedge fund, by the United States District Court for the Southern District of New York on 18 December 2006. It is in the sum of US$284,184,632.30 in respect of principal and interest on NML’s holdings in a series of bonds issued by Argentina. On 2 April 2008, Mr Justice David Steel made an order granting NML permission to serve the proceedings out of the jurisdiction. In accordance with the usual practice, the order was made by the judge on the papers, the defendant being entitled to apply after service to set the order aside. That is the nature of the present application, Argentina seeking in addition a declaration that the Court has no jurisdiction in respect of the claim brought against it by NML.

In brief, Argentina argues that as a sovereign state, it is immune from suit in the English courts under s. 1 of the State Immunity Act 1978 which provides that, “A State is immune from the jurisdiction of the courts of the United Kingdom except as provided in the following provisions of this Part of this Act”. It says that NML put its case on the loss of immunity before the judge on a legally unsustainable basis—a point which NML now accepts. It says further that NML cannot rely on the arguments it now raises in respect of immunity, since these were not put at the time, the consequence being that NML must start again.

NML says that the matter is governed by s. 31(1) Civil Jurisdiction and Judgments Act 1982 which provides for the circumstances in which a foreign judgment may be enforced in the United Kingdom against a state. Alternatively, it relies on the terms of the bonds. It says that the fact that these points were not raised in the application to the judge does not prevent them being raised now. Argentina has two other arguments. It says that the order should be discharged because of non-disclosure on the application for permission to serve out. Finally, it says that NML’s claim is not justiciable in the English courts, because it would involve trespassing upon the legislative or international acts of Argentina, a sovereign foreign state. Both these points are disputed by NML.

The New York judgment arises out of a claim by NML for breaches of a Fiscal Agency Agreement dated 19 October 1994 between Argentina and Bankers Trust Company pursuant to which series of bonds were issued by Argentina. The series in question comprise holdings in 12% Global Bonds which mature on 1 February 2020, and 10.25% Global Bonds which mature on 21 July 2030.

There is a considerable amount of evidence filed by both parties, but particularly by Argentina. According to the evidence filed on its behalf, on 24 December 2001 Argentina was compelled (by its financial, social and political circumstances) to declare a moratorium on interest and principal payments on its debt, including its external bond debt. In the weeks preceding the moratorium, it was forced to introduce restrictions on the withdrawal of domestic bank deposits. Widespread riots and street demonstrations erupted on the streets of Buenos Aires. The depth of the crisis may be seen in the fact that in the period from 19 December 2001 to 1 January 2002, five people held the office of President of the Republic of Argentina. In January 2002, Congress declared a public emergency and passed an Emergency Law authorising all necessary measures to deal with the country’s debt.

NML is a company incorporated in the Cayman Islands, and is an affiliate of Elliott Associates LP, a New York based hedge fund, which among other things trades in distressed sovereign debt. Argentina’s evidence is that the bonds in question were purchased by NML’s affiliates at various times from 6 June 2001 to 2 September 2003 at an aggregate price of 55.37% and 62.82% of the face value of the respective series. In November 2003, NML declared Events of Default under the Fiscal Agency Agreement in respect of the bonds, relying on the December 2001 moratorium and subsequent failures by Argentina to pay interest as it fell due on the bonds. Shortly afterwards, it issued the New York proceedings seeking accelerated payment of the principal amounts of the bonds, as well as the interest that had by that time fallen due.

Meanwhile, Argentina was seeking to restructure its external debt to a sustainable level. Its evidence is that these efforts were actively encouraged by the G-7 nations, as well as by international financial institutions such as the IMF and the World Bank. The final step in the restructuring came in 2005. On 14 January 2005, Argentina launched an exchange offer pursuant to which bondholders could exchange a large number of different series of bonds for new debt that Argentina would issue. I am told that the exchange offer was accepted by holders of 76.15% of the aggregate eligible debt, making it the largest sovereign debt restructuring in history.

The 2005 exchange offer contained a “most favoured bondholder” clause, which provided that if Argentina were to offer better terms to “holdouts”—in other words parties which refused to participate in the restructuring—it would be required to give the same improved terms to those creditors who had previously accepted the exchange offer. Its evidence is that the purpose of the offer was to achieve, to the extent possible within the constraints of Argentina’s limited resources, a global solution that would satisfy on the basis of fair and equitable treatment for comparable creditors the rights of all the bondholders. A related aim, it is said, was to avoid a race to litigate, in which professional litigators might seek (i) to secure payment in full and (ii) thereafter strip Argentina’s remaining assets, destroying any prospect of further investment to the detriment not only of the other bondholders but also of Argentina and its people.

Argentina describes NML as a “holdout”. That description is disputed by NML, which contests the account given by Argentina in certain respects. But it is the case that NML declined to participate in the 2005 exchange offer, preferring to pursue the New York proceedings instead. On 11 May 2006, Judge Thomas P. Griesa, who I am told is responsible for overseeing all actions in the US District Court for the Southern District of New York against Argentina relating to its 2001 debt default, granted NML a motion for summary judgment, and on 18 December 2006 entered judgment in NML’s favour in the figure I have already mentioned, namely US$284,184,632.30 plus interest compounded annually. There are on-going enforcement related proceedings in New York, and I am told that the judge has made comments critical of Argentina in this context. In any case, NML now wants to enforce the judgment in this country, which is what has given rise to the current proceedings.

As is well known, there are no statutory provisions allowing for the mutual recognition and enforcement of judgments of the courts of England and the United States. Such a claim brought in the English courts is in the form of a common law action on the foreign judgment, here the New York judgment of 18 December 2006. A “foreign judgment given by a court of competent jurisdiction over the defendant is treated by the common law as imposing a legal obligation on the judgment debtor which will be enforced in an action on the judgment by an English court in which the defendant will not be permitted to reopen issues of either fact or law which have been decided against him by the foreign court” (Owens Bank Ltd v Bracco [1992] 2 AC 443 (HL) per Lord Bridge at 484A-C). On 14 March 2008, NML applied to the Commercial Court (as I have said on the papers and without notice in the usual way) for permission to serve on Argentina a claim claiming the amount of the New York judgment. The jurisdictional basis of the claim was that it was a claim to enforce a judgment, under the provisions of what was then CPR rule 6.20(9).

In the material submitted to the judge, NML set out the basis upon which it asserted that Argentina, as a sovereign state, was nevertheless not immune from the jurisdiction of the English Courts. In a witness statement dated 14 March 2008, which contained the evidence upon which NML relied in support of its application to serve out, it was stated that, “By the terms of the [Fiscal Agency] Agreement, Argentina waived and agreed not to plead any claim it might otherwise have to sovereign immunity and in any event NML’s claim is based upon the Agreement and the Bonds, which are “commercial transactions” for the purposes of sections 3(1) and 3(3) of the State Immunity Act 1978. Argentina therefore has no immunity in respect of these transactions”.

The draft particulars of claim exhibited to the witness statement plead in paragraph 8 under the heading “Waiver of Immunity” that, “By section 22 of the [Fiscal Agency] Agreement Argentina waived and agreed not to plead any immunity in respect of these proceedings. Further and in any event the Agreement and the Bonds are “commercial transactions” for the purposes of the State Immunity Act 1978 (the ‘SIA’) sections 3(1) and (3), in respect of which a state is not immune. In the circumstances, Argentina has no immunity in respect of these proceedings”. A paragraph in these terms was reproduced in the Particulars of Claim as served.

On the basis of this material, Mr Justice David Steel gave permission to serve out on 2 April 2008. On 15 May 2008, NML issued the claim form, and on 24 June 2008 the proceedings were sent by the British Embassy in Buenos Aires to Argentina’s Foreign Ministry. Argentina’s application to set aside the order of 2 April 2008 was issued on 5 September 2008.

Argentina’s skeleton argument for this hearing demonstrated why both of the grounds relied on by NML in the material placed before the judge were wrong. In brief, the waiver of immunity in section 22 of the Fiscal Agency Agreement in terms only applies to proceedings in New York or Argentina. It does not cover proceedings in England. The “commercial transactions” exception in s. 3(1)(a) State Immunity Act 1978 does not apply because the claim is brought on the New York judgment, and not on the transactions on which the judgment was obtained. On this point, see AIC Ltd v The Federal Government of Nigeria [2003] EWHC 1357 (QB) at [24]–[28] per Stanley Burnton J; Svenska Petroleum Exploration AB v Government of the Republic of Lithuania [2006] 1 Lloyd’s Rep 181 at [50] per Gloster J, upheld by the Court of Appeal in [2007] QB 886 at [134]-[137] per Moore-Bick LJ. The subject matter of the present proceedings is the New York judgment—the Fiscal Agency Agreement and the bonds are the source of the legal relationship which gave rise to the New York judgment.

At the hearing, Mr Jonathan Nash QC for NML very properly accepted that the grounds relied on as regards sovereign immunity in the application for permission to serve out were wrong (though in respect of the “commercial transactions” point, he reserved the right to argue in a higher court that the authorities I have just cited were incorrectly decided).

He put NML’s case on sovereign immunity on a different basis, arguing that the case of a foreign judgment against a state is covered by s. 31(1) of the Civil Jurisdiction and Judgments Act 1982. NML’s other point is that looking at the terms applicable to the bonds (as opposed to section 22 of the Fiscal Agency Agreement which had been relied on earlier) Argentina has submitted to the jurisdiction of the English Court and has waived any immunity from suit which it might otherwise be entitled to invoke in relation to the English proceedings. (This latter point had been trailed in correspondence for some months and came as no surprise to Argentina.)

Mr Anthony Trace QC representing Argentina argues that having put its case on sovereign immunity in one way when obtaining the order for permission to serve out of the jurisdiction, it is impermissible for NML to rely upon these new points in resisting Argentina’s application to set aside the order. That was indeed his main point, and I will have to consider it in detail. Before doing so, I shall set out my conclusions as to NML’s case on sovereign immunity on the two grounds which are now relied on.

The argument based on s. 31(1) Civil Jurisdiction and Judgments Act 1982 was only raised a few days before the hearing, and at his request I gave Mr Trace QC a short adjournment to consider it further. In Mr Nash’s absence, NML was represented at the further hearing by Mr Andrew Onslow QC.

Section 31 appears in the part of the 1982 Act relating to the recognition and enforcement of judgments, the section being entitled “Overseas judgments given against states etc”. The section provides as follows:

NML submits that s.31(1) of the 1982 Act introduced a new and comprehensive (“…if, and only if…”) statutory framework for the recognition and enforcement in the United Kingdom of judgments of foreign courts against states. The intention underlying s. 31(1), it submits, is obvious and sensible—if English proceedings are brought for the simple purpose of obtaining the recognition and enforcement of a foreign judgment given in circumstances which would not have entitled the foreign state to assert immunity from jurisdiction had the proceedings been before the English court, then the state should not be entitled to assert immunity from jurisdiction for the purposes of the recognition and enforcement of that judgment in this country either.

Thus, NML submits, in relation to the recognition and enforcement of the New York judgment, the relevant question is that raised by s. 31(1)(b)—would the New York court have had jurisdiction in the matter if it had applied rules corresponding to those applicable in the UK in accordance with sections 2 to 11 of the State Immunity Act 1978? If the answer to this question is ‘yes’, then the effect of s. 31(1) is that the defendant foreign state is not entitled to claim sovereign immunity in proceedings brought in the English court for the recognition and enforcement of the judgment of the foreign court.

Argentina, on the other hand, submits that this result cannot be correct for the main reason that s. 31 Civil Jurisdiction and Judgments Act 1982 must be read subject to the law of state immunity. There cannot be, it was submitted, a situation in which a foreign judgment “trumps” a provision as fundamental as that of s. 1 of the State Immunity Act 1978. Section 31 is only relevant if the English court otherwise has adjudicative jurisdiction in respect of these proceedings in accordance with the exceptions in sections 2 to 11 of the 1978 Act. If the determination of the proceedings requires the exercise by the court of its adjudicative jurisdiction, as it does in this case, the s.1 immunity applies.

In essence therefore, each side had simple but diametrically opposed positions. NML’s position was that s. 31 governs cases in which a state is sued in this country on a foreign judgment. If the foreign court had jurisdiction on the basis of rules corresponding to those applied here, the judgment has to be recognised and enforced here. Argentina on the other hand submits that the prior question is whether the case falls within one of the 1978 Act exceptions from immunity. Unless it does, the state is entitled to immunity in the usual way. Section 31 is relevant to the substantive merits of a claim, but is not relevant to the anterior question of whether the English court has jurisdiction to hear the claim or application in the first place.

Perhaps surprisingly (given that the provision has been in force for over twenty five years) there is no case that directly decides this point, though there is text book authority. Before coming to that, I shall deal with some of the arguments invoked by the parties in support of their positions. Argentina cites Grovit v De Nederlandsche Bank NV [2006] 1 WLR 3323, in which a libel claim against the Dutch central bank was struck out on the grounds that the bank was immune from suit under the State Immunity Act 1978. It had been argued for the claimant that the English court had jurisdiction under Council Regulation (EC) 44/2001 (the Judgments Regulation). However Tugendhat J held (see para [47]) that the Judgments Regulation like the Brussels Convention before it was to be read as subject to the international law of state immunity, and not as precluding reliance upon state immunity (the point was not considered on appeal). But as NML pointed out, the present case is different, because s. 31, unlike the jurisdictional rules in the Judgments Regulation, specifically addresses enforcement actions against foreign states and the immunities that arise in that context. So the Grovit decision does not provide an answer in the present case.

Both parties sought support in the provisions of s.31(4), which provides that s. 12 of the State Immunity Act 1978 (which contains rules for service of process on a state) and ss. 13 and 14(3) and (4) of the Act (which contain certain procedural privileges enjoyed by states, separate entities and central banks) “shall apply to proceedings for the recognition or enforcement in the United Kingdom of a judgment given by a court of an overseas country (whether or not that judgment is within subsection (1) of this section) as they apply to other proceedings”. This is an important provision in the context of the enforcement of foreign judgments against a state. A state has procedural privileges under the State Immunity Act 1978 which relate among other things to enforcement and which are quite distinct from its jurisdictional immunity. Section 31(4) is intended to make it clear that these privileges apply equally to proceedings for the recognition and enforcement of a foreign judgment as they do to a UK judgment.

For that reason, in my view the following statement in Dicey, Morris & Collins, The Conflict of Laws, 14^th edn, vol 1, para 14-095 is a correct summary of the position: “A foreign judgment against a State will be capable of enforcement in England, if both of the following conditions are fulfilled: first, that the foreign court would have had jurisdiction if it had applied the United Kingdom rules on sovereign immunity set out in Sections 2 to 11 of the State Immunity Act 1978, the effect of which is that a State is not immune (inter alia) where it submits to the jurisdiction or where the proceedings relate to a commercial transaction; second, that under United Kingdom law the State is not immune from the processes of execution.” The editors continue, “Section 31(4) of the 1982 Act gives to judgments against foreign States the benefit of (inter alia) the immunities from execution contained in ss.13 and 14(3), (4) of the 1978 Act; their effect is that there can be no execution against sovereign property without the written consent of the foreign State unless the property is in use or intended for use for commercial purposes”. These propositions are in my view consistent with NML’s case, rather than that of Argentina.

Mr Trace QC submitted that it is a principle of legal policy that UK legislation should be presumed to be intended to conform to international law and should be so interpreted and applied, so far as its language permits. I do not think that this is a controversial proposition. He went on to argue that, as a matter of construction, s. 31 Civil Jurisdiction and Judgments Act 1982 should not be interpreted as abrogating the law of state immunity set out in s.1 of the State Immunity Act 1978. NML’s case, he submitted, was that, in effect, there has been an implied repeal in part of s. 1 of the 1978 Act, and cited authority showing the restrictive view the courts have taken as regards implied repeal. I did not understand NML—at least in its written argument—to be suggesting that this was a case of implied repeal, and I do not think that it is. A more persuasive way of looking at the matter is simply that the 1978 Act did not deal with the recognition and enforcement of foreign judgments against states (other than in a limited way the United Kingdom, as to which see Part II). These are now dealt with by s. 31. This is how it is put in Cheshire, North & Fawcett, Private International Law, 14^th edn, pp.588-589.

I would accept as correct the following statement of the law in Dicey, Morris & Collins, ibid, at para 14-095, as follows:

Mr Trace QC submits that this would be a far reaching result. On the other hand, commenting on the provision shortly after its enactment, Mr Lawrence Collins (now Collins LJ) said that s.31 was “designed to render foreign judgments against foreign States more easily enforceable in the United Kingdom” (Collins, The Civil Jurisdiction and Judgments Act 1982, London, Butterworths, 1983, page 140). Such recognition may be regarded as an example of the “singularly generous” position adopted by English law as regards foreign judgments (Dicey, Morris & Collins, ibid, para 14-019). In any case, the foreign judgment is only recognised and enforced here if the court giving it would have had jurisdiction applying sovereign immunity rules corresponding to those applicable in the UK. The state concerned is not subjected to a lighter or different regime. Further, as I have pointed out, the effect of s. 31 (4) is that as regards enforcement, the state has the procedural privileges extended by the 1978 Act. Finally, the judgment will only be recognised and enforced here if it would have been recognised and enforced against a non-state party, so that proceedings on the judgment remain subject to the various safeguards developed by the common law.

Mr Trace QC submits in the alternative that the words “recognise and enforce” in s. 31 Civil Jurisdiction and Judgments Act 1982 should be construed in this context so as not to include a common law action on a foreign judgment but to encompass only applications within the various statutory regimes for registration of foreign judgments. I see no reason to limit it in this way. Dickinson, Lindsay & Loonam, State Immunity, para 4.130, consider the provision to apply to the recognition and enforcement of a judgment at common law, and I agree with their view.

There is (as I understand it) no dispute that the New York court would have had jurisdiction in the matter if it had applied rules corresponding to those applicable in the UK in accordance with sections 2 to 11 of the 1978 Act. In brief, that follows from the express submission to its jurisdiction by Argentina contained in clause 22 of the Fiscal Agency Agreement and/or the fact that the Fiscal Agency Agreement and the bonds are “commercial transactions” within the meaning of s. 3(3) State Immunity Act 1978 (this subsection expressly extends to loans and other transactions for the provision of finance). It follows that the requirements of s. 31 are satisfied in this case.

NML has a further point, submitting that there is an express submission to the jurisdiction of the English Court in the terms applicable to the bonds. It says that on this “secondary and independent basis … Argentina is also prevented from invoking State immunity in relation to the present proceedings”. The terms of the bonds are exhibited to the Fiscal Agency Agreement and are the same in both series relevant to this claim. They provide that:

NML puts particular emphasis on the last sentence of the first paragraph, submitting that the New York Judgment is “a Related Judgment” and that the present proceedings are proceedings brought in an “Other Court” for the sole purpose of enabling NML to enforce the Related Judgment. It further submits that the waiver of sovereign immunity in the following paragraph is relevant as a matter of construction to give effect to what it submits is a submission to the jurisdiction of the English court as an “Other Court”.

Argentina points out that the bonds are governed by New York law, under which (as is common ground) express contractual terms that purport to waive sovereign immunity are narrowly construed in favour of the sovereign. It submits that the terms NML seeks to rely on are a “waiver” of sovereign immunity in relation to proceedings brought for the purpose of enforcing a “Related Judgment”, but do not amount to a submission to the English jurisdiction for the purposes of s. 2 of the State Immunity Act 1978.

Whether a waiver of immunity in contractual documentation amounts to a submission to the jurisdiction of the English Court under s. 2(1) of the State Immunity Act 1978 will depend on the construction of the documentation as a “prior written agreement” under s. 2(2), which in the present case is found in the relevant terms of the bonds. When a state submits to the Court’s jurisdiction, it necessarily waives its jurisdictional immunity. But the converse is not necessarily true. The distinction is shown by Gloster J’s analysis in Svenska Petroleum Exploration AB v Government of the Republic of Lithuania [2006] 1 Lloyd’s Rep 181 at paras [37] – [38] in which she said that:

On appeal, Moore-Bick LJ giving the judgment of the Court agreed with her conclusion—[2007] QB 886 at para [128]. In the present case however, the contractual provisions go beyond waiver. The terms of the bonds provide that a final non-appealable judgment—and the New York judgment is such a judgment—shall be conclusive and binding upon Argentina, and may be enforced in any courts to the jurisdiction of which the Republic is or may be subject by a suit upon such judgment. The English court is such a court, and the method by which a New York judgment is enforced in it is by a suit upon such judgment.

Mr Trace QC points out that the bonds deal expressly in the first sentence with submission to the jurisdiction of the courts of New York and Argentina. In other words, the language of submission to the jurisdiction is used elsewhere, but there is no similar language where the provisions deal with “Other Courts”. Further, he says that the sentence emphasised by NML referring to enforcement in courts to the jurisdiction of which Argentina “is or may be subject”, suggests that the jurisdictional question is left open rather that determined by this passage. Finally he submits that these clauses are subject to close negotiation, and it is not for the court to fill any gaps.

I entirely accept the last point. In a sovereign bond issue, clauses dealing with jurisdiction, governing law and waiver of immunity go together, and will receive the closest attention from the lawyers for the parties. The final terms reflect the balance of the negotiations and the commercial bargaining position of the respective parties at the time, and the court should construe the terms in that light. On the other hand, in this instance Argentina unambiguously agreed that a final judgment on the bonds in New York should be enforceable against Argentina in other courts in which it might be amenable to a suit on the judgment. The provision goes considerably beyond a waiver of immunity, which in this case is not a freestanding one, and that seems to me to distinguish this case from Svenska. The position is analogous to s. 31 Civil Jurisdiction and Judgments Act 1982 discussed above, and I have concluded that NML’s construction is the right one.

I have said that since the conditions in s. 31(1) Civil Jurisdiction and Judgments Act 1982 are satisfied in respect of the New York judgment, Argentina cannot claim jurisdictional immunity in these proceedings. Further, there was a submission to the jurisdiction of the English Court in the terms applicable to the bonds. But neither of these points was relied upon in making the application to the Judge for permission to serve the proceedings on Argentina out of the jurisdiction. Can NML rely on them now? Argentina says no, arguing that the position is the same as it is in respect of the jurisdictional “gateways” in CPR Pt 6. NML says yes, because the scope of the permission to serve out of the jurisdiction is in no way defined by the particular basis on which sovereign immunity is excluded.

In its skeleton argument, NML says that “it is important to keep in mind that there is no requirement for a claimant to plead in its Particulars of Claim the basis on which it says state immunity does not arise; and this plea forms no part of a claimant’s cause of action”. This is correct as far as it goes. But the requirement is that, “An application for permission under Sect. III of Pt 6 must show distinctly: (a) why the prospective defendant is not absolutely immune from suit; (b) under which heading of r.6.20 the action falls”—see the White Book, Volume 1, p. 201, paragraph 6.21.24, under the heading “Actions against foreign states”. (This commentary is still applicable notwithstanding the amendments to Part 6 which came into effect on 1 October 2008: see page 35 of the Special Supplement to the 2008 Edition of the White Book for CPR Part 6 (under the heading “Effect of rule (r.6.36)”). The equivalent of r.6.20 in the amended Part 6 is r.6.36.)

Relying on the commentary in the White Book, Argentina submits that NML was required to set out in its application for permission to serve out of the jurisdiction the basis upon which it asserts that the English court has, in respect of this claim, jurisdiction over Argentina. How else, it asks, is the court to be satisfied that it is appropriate for the claim to be served on a foreign state? See also the leading treatise, The Law of State Immunity, by Hazel Fox CMG QC, 2^nd ed. (2008), page 313.

In AIC Ltd v The Federal Government of Nigeria, ibid, at [19], Stanley Burnton J expressly approved the White Book commentary saying that:

That is what might be called the first prong of Argentina’s argument, which proceeds to address the consequences of failure to comply with these requirements. It points out that there is authority to the effect that a party who obtains permission to serve a defendant out of the jurisdiction on one basis (i.e. under one sub-paragraph of what was CPR Rule 6.20) cannot rely on another basis when resisting an application contesting jurisdiction. In Albon (trading as NA Carriage Co) v Naza Motor Trading Sdn Bhd [2007] 1 WLR 2489 at [16], Lightman J referred to the court’s jurisdiction to cure or allow to be cured purely mechanistic irregularities in the application for permission if there is good reason or cause to do so, but said that:

On the basis on which it decided the ABCI case referred to in this passage, the Court of Appeal did not have to deal directly with this issue. It said only that a submission based on a different gateway “would have faced the difficulty that it would involve asking the Court to uphold service out on a basis which was neither addressed nor considered on the original application” (ABCI (formerly Arab Business Consortium International Finance and Investment Co) v Banque Franco-Tunisienne [2002] 1 Lloyd's Rep 511, Judge Chambers QC, affirmed by the Court of Appeal [2003] 2 Lloyd's Rep 146: the passage cited is from para [22] of the judgment of the Court given by Mance LJ). Mr Nash QC in his submissions did not dispute the accuracy of the law as stated by Lightman J in this passage.

Another of the cases referred to in it deals with causes of action in this context. In Youell v Kara Mara Shipping Co Ltd [2000] 2 Lloyd’s Rep 102, Aikens J said at [79] that it “is very well established that if a claimant in English proceedings needs permission to serve those proceedings on a potential defendant out of the jurisdiction, then the claimant must take care to include all the causes of action on which he relies in the originating process for which he seeks leave to be served on the foreign defendant. That is the basis on which the court decides whether it will exercise this ‘exorbitant’ jurisdiction on the foreign defendant. It is also the basis on which a foreign defendant can decide whether to take part in the English proceedings or to challenge them. This strict rule was recently reconfirmed by the Court of Appeal in DVA v Voest: see page 290 per Hobhouse LJ”.

On this basis, Argentina submits that it is not permissible for NML to rely, in resisting this application by Argentina, on a basis for immunity that was not set out and relied upon at its application for permission to serve out of the jurisdiction. To permit it to do so, it is submitted, would be to allow NML to circumvent the requirements of the permission to serve out procedure which is designed to ensure that the court, when considering permission, and the defendant, when considering whether to challenge the jurisdiction, are fully apprised of the basis upon which it is said that the defendant lacks immunity and that the court has jurisdiction. Accordingly, it is submitted, NML needs to apply for a new permission to serve out of the jurisdiction if it wishes to rely on either the s. 31 or the bonds point. If that permission is obtained, NML will need to re-serve the proceedings in accordance with the mandatory provisions of s. 12 of the State Immunity Act.

NML points out that Albon and the other cases cited in it were not concerned with sovereign immunity. It submits that these cases are founded on the principle that the court exercises long-arm jurisdiction only over the specific claims identified in CPR Part 6. The permission which is granted ex parte is not a general permission but a permission limited to and defined by the specific claim falling within a specific paragraph of CPR Part 6. The basis on which state immunity is excluded is in a different category. The court in giving permission at the ex parte stage is proceeding on the basis that the state is not immune, but the particular basis on which immunity is excluded is not a necessary part of the permission—the scope of the permission is in no way defined by the particular basis on which sovereign immunity is excluded. State immunity is akin to the other, non-defining matters required to be considered by the court on the ex parte application, and reconsidered by the court, usually on fuller evidence and argument, at the inter partes hearing, like the requirement that the claimant has a “good arguable case”, and forum non conveniens points.

There appears to be no case law dealing with this point, and it is not an altogether easy one. My conclusions are as follows. I agree with Mr Trace QC that the requirement in the commentary to the White Book (that applications for permission under Part 6 have to show distinctly why the prospective defendant is not absolutely immune from suit) has to be observed. Otherwise, as he says, how is the court to assess the matter? NML accepts, obviously rightly, that if there is any question of deliberate non-disclosure or a deliberate misleading of the court on the issue, the without notice order would be very likely to be set aside on usual principles. There is no question of that here. In my view, in a case like this where the question of sovereign immunity is addressed, but on the basis of a mistaken legal analysis, the court has a discretion to set aside the order even where the mistake is an innocent one. But departing from Argentina’s submissions at this point, the court is not in my view bound to do so where on a correct legal analysis the state is not in fact immune from suit. Issues such as whether the state in question had suffered any prejudice by the mistake would doubtless be relevant to the outcome. I would not therefore extend the principle established in the cases dealing with the jurisdictional gateways and pleaded causes of action to this type of situation.

Applying that approach to the present facts, permission to serve out of the jurisdiction was correctly sought and obtained on the basis of r. 6.20(9), the claim being one “made to enforce any judgment or arbitral award”. There was no defect in the cause of action pleaded—this continues to be NML’s sole cause of action. It was clearly asserted, albeit on a basis that is now accepted to be incorrect, that Argentina has no immunity in respect of these proceedings. As I have held, Argentina has no immunity because the effect of s.31 Civil Jurisdiction and Judgments Act 1982 is that since the New York court had jurisdiction applying rules corresponding to those in the State Immunity Act 1978, the English court has to recognise and enforce its judgment. Alternatively, the terms of the bonds have the same effect. In those circumstances, to require NML to re-apply for permission to re-serve Argentina under the procedure set out in s. 12 of the 1978 Act, when in fact Argentina has no immunity from suit, would be pointless and a waste of costs for both parties. I do not consider that I am required to take that course, and I do not propose to do so.

There is no dispute about the governing principle. NML’s application for permission to serve out was made without notice, and it was under a duty to set out the facts relevant to the grant of permission fully, with care and in sufficient detail to enable the Court to reach a properly informed decision. This included a duty, in particular, to disclose anything that might cast doubt on the Court’s jurisdiction or on NML’s entitlement to an order for permission to serve out. Failure to comply with this duty would be of itself sufficient for the Court (in its discretion) to set aside service.

A number of specific instances are advanced by Argentina in this respect:

The draft order accompanying NML’s application for permission to serve out of the jurisdiction contained two errors as to the dates by which Argentina was required to file its acknowledgment of service and make any jurisdictional challenge. These errors resulted in the order of 2 April 2008 giving Argentina less time than it was entitled to for responding to service of the proceedings. This mistake should not have been made, but in the event, Argentina has had no difficulty in responding, and I do not think that permission should be set aside on this ground.

NML failed to advert to any of the arguments to counter the assertion that Argentina had, by the terms of the Fiscal Agency Agreement, “waived” any claim it might otherwise have to state immunity, or that the claim is “based upon” the FAA and the Bonds which are “commercial transactions” for the purposes of s. 3 of the 1978 Act. Though this is correct, it merely followed from the mistaken legal analysis that NML has since acknowledged. As I have said, there is no question of any deliberate misleading in this respect.

To quote Argentina’s skeleton argument, NML failed to put before the Court “any of the facts and matters later explained in Argentina’s evidence in connection with (i) Argentina’s economic and financial crisis, (ii) the 2001 moratorium, (iii) the social and political crisis that surrounded it, (iv) the circumstances in which NML acquired the Bonds (at a time when default was inevitable or had already taken place), (v) the nature of NML’s business (it is a “vulture fund”), (vi) the circumstances of the 2005 Exchange Offer (the largest sovereign debt restructuring in history, accepted by over 76% of eligible creditors), (vii) NML’s refusal to participate in the 2005 Exchange Offer and (viii) NML’s campaign of aggressive litigation (including on-going enforcement related proceedings in New York)”. It is correct that these matters were not put before the Court, but I agree with Mr Nash QC that there was no reason for NML to anticipate that they would be raised by Argentina. They were not apparently raised before the New York court. Furthermore, they go to the justiciability defence, which as appears below, I do not consider is open on these facts.

NML made an unjustified assertion that Argentina “has” assets in the jurisdiction of the courts of England and Wales against which NML could execute any English judgment. What the witness statement in question in fact says is that “NML believes that Argentina either has or may at some time in the future have assets in this jurisdiction”. NML has sought to justify this statement on the basis that it is “sceptical” as to Argentina’s assertion’s about its assets, and that it had in mind future attempts by Argentina to raise money on the London market. But money raised in London might or might not become an asset in England depending on the source and destination of the funds. So far as I can see, there was no basis for the statement of belief that Argentina has assets in this country, and I consider this to be a matter of legitimate criticism of the evidence which NML placed before the court. But as against that, the position is that “a claimant seeking to enforce a foreign judgment by action does not have to show that there are assets in the jurisdiction. To require him to do so would be tantamount to construing the rule as if it were limited in that way. The claimant must … ordinarily show … that he can reasonably expect a benefit from such a judgment. Otherwise there would be no useful purpose in the proceedings” (Tasarruf Mevduati Sigorta Fonu v Demirel [2007] 1 WLR 2508 at [29], per Sir Anthony Clarke MR). It is difficult in my view to contend that a creditor who has obtained judgment in New York in respect of a bond issue cannot reasonably expect a benefit from enforcing the judgment in England or that there is no useful purpose in such proceedings. The remarks of the Court of Appeal at para [40] about global business seem equally in point here.

I conclude that neither individually nor collectively do these points make good the submission that the order for service out should be set aside on grounds of non-disclosure, or in the Court’s discretion, so far as that is relied on separately.

I have already noted that the non-justiciability point was not apparently raised before the New York Court on the basis of act of state or any analogous doctrine. Be that as it may, Argentina seeks to do so now. It submits that the 2001 moratorium arose out of an internationally recognised national emergency. It says that the 2002 Emergency Law and subsequent laws make explicit that the measures adopted were only “to the extent necessary for the operation of the National State”. Its evidence is that difficult policy decisions were made in the context of the constraints on Argentina’s limited resources and its dealings, as a state, with international financial entities such as the IMF, other states and creditors in an attempt to treat Argentina’s creditors pari passu while safeguarding the primary needs of economic survival of Argentina and its people. It says that effect was given to this approach in the 2005 exchange offer. On that basis, it submits that the consequence of granting NML the English judgment it seeks would be to reverse, nullify or undermine the effect of those policy decisions taken by Argentina, in extremis and in extraordinary circumstances. It submits that, applying the legal principle of non-justiciability in these particular circumstances, the court should “abstain from meddling in, trespassing upon, undermining, or otherwise calling into question the legislative or international acts of Argentina, a foreign state, in the exercise of its sovereign authority or the policy and decisions of its executive in that regard”.

A defendant arguing that a claim against him is non-justiciable should take the point at the outset, since it is potentially determinative of the claim in question, regardless of the merits. On the other hand, that is not a strict requirement, because it may be that the question can only be properly considered once the issues as to justiciability have been properly defined on the pleadings: see Kuwait Airways Corp v Iraqi Airways Co [1995] 1 WLR 1147 (HL) at 1167G-1168B. Mr Trace QC invited me to deal with the question now if I felt able to do so, otherwise leave it to be pleaded out in the defence (if the proceedings are allowed to continue) reserving the right to do the latter in any event. Given the view I take, I do propose to deal with the point now.

The principle that some cases may be treated as non-justiciable in the English courts was articulated in Buttes Gas & Oil Co v Hammer [1982] AC 888. The Court of Appeal pointed out in Kuwait Airways Corpn v Iraq Airways Co (Nos 4 & 5) [2002] 2 AC 883 at [265], that the non-justiciability principle can only be understood in relation to earlier authority on the act of state doctrine, to which it is related. The Buttes Gas case was a defamation action, the plaintiff being an oil company and the defendant being an oil man, Dr Armand Hammer. If it had entertained the proceedings, the case would have involved the English court considering a boundary dispute as to territorial waters in the Arabian Gulf between various sovereign states, and examining the motives of sovereign rulers (see [1982] AC 888 at 937). The court decided that it would exercise judicial restraint and abstain from deciding the issues. In the central passage of his judgment, Lord Wilberforce stated at [1982] AC 888 at 938A-C that:

The Kuwait Airways case arose out of the first Gulf war. The issue was whether the court should recognise an Iraqi Revolutionary Command Council Resolution which purported to legitimise the seizure by Iraq of Kuwait Airways’ fleet of aircraft. In substance, Iraq was praying in aid its own law to defend the claim. Upholding the decision of the Court of Appeal, the House of Lords held that the English Court should decline as a matter of public policy to recognise the Resolution: see [2002] 2 AC 883 at 1081B, para [27], per Lord Nicholls.

Distinguishing the various situations in which foreign legislative acts may be raised by way of defence to what might otherwise be a wrong, at [2002] 2 AC 883, 971H, the Court of Appeal analysed the Buttes Gas principle at [319] as follows:

Even taking the facts as they are asserted to be, it is plain in my view that the principle of non-justiciability has no application to a case like the present. None of the indicia identified in this passage from the Kuwait Airways case has any bearing on a claim to enforce a judgment given in respect of an issuer’s obligations under a bond issue. Albeit involving a sovereign borrower, this is firmly a case in the commercial sphere. The claim is for the enforcement of a judgment debt due under a regularly entered judgment of the New York court. I agree with NML’s submission that it does not require the English court to consider, or express a view upon, the appropriateness of Argentina’s acts leading up to its debt restructuring, or on the restructuring itself. I should add in deference to the arguments of Mr Trace QC and his colleagues (to which I am greatly indebted) that as is well known, some of the practical problems created by a rescheduling supported by most but not all of the bondholders are addressed for the future by the incorporation of collective action clauses (majority enforcement and majority restructuring provisions) in sovereign bond contracts as encouraged by the International Monetary Fund and others following the 2001 moratorium. But so far as this case is concerned, there is in my view no legal impediment to the bringing of this action on the New York judgment, and the application must be dismissed.