The European Union & Anor v The Syrian Arab Republic

There is before me today the hearing of two applications. First of all, an application by the Claimants, the first Claimant being the European Union, represented by the European Investment Bank, and the second Claimant being the European Investment Bank (“the Bank”), for permission to apply for summary judgment against the Defendant, which is the Syrian Arab Republic ("Syria"), pursuant to CPR 24.4(1), in the absence of an acknowledgment of service or defence and, secondly, an application by the first Claimant, that is the European Union, for summary judgment on its claim pursuant to CPR 24.2.

There is an alternative claim made by the second Claimant, the Bank, although in the event that secondary application was not pursued, at least with any vigour, on the basis of the primary submission that the correct claimant was the European Union.

The European Union is the guarantor of Syria's repayment obligations under six Loan Agreements entered into between Syria and the Bank between 10th September 2003 and 8th December 2008 ("Loan Agreements").

From at least 23rd July 1996, being the date on which the Council of the European Union adopted Regulation No. 1488/96 the EU has adopted a policy of providing financial assistance to countries in the Mediterranean region to support their economic, social and administrative reform. In furtherance of that policy the Bank entered into six Loan Agreements with Syria (collectively the “Loan Agreements”) in the period 10th September 2003 to 8th September 2008:

By an agreement with number 22193, dated 10th November 2003 and varied on subsequent dates, namely 2nd September 2005, 27th February 2007, 16th October 2007, and by an agreement dated 28th July 2008, the Bank agreed to make €40 million available to Syria for the purpose of co-financing agreed capital investment projects to be carried out by small and medium sized enterprises in Syria (“the First Loan Agreement").

By an agreement with number 22751, dated 1st November 2004 and varied on 7th May 2008 and 22nd February 2009, the Bank agreed to make €200 million available to Syria for the purposes of co-financing the construction of the Deir Ali power plant located south of Damascus ("the Second Loan Agreement").

By an agreement with number 23334, dated 16th December 2005 and varied on 21st September 2008, the Bank agreed to make €100 million available to Syria for the purpose of co-financing a telecommunications project extending the fixed line telephone network to rural areas in Syria ("the Third Loan Agreement").

By an agreement with number 23496, dated 31st May 2006 and varied on 5th November 2009, the Bank agreed to make €45 million available to Syria for the purpose of co-financing the development of a new water and waste water infrastructure in municipalities south of Damascus ("the Fourth Loan Agreement").

By an agreement with number 24252, dated 6th December 2007 and varied by agreements dated 18th March 2010 and 25th November 2010, the Bank agreed to make an additional €80 million available to Syria for the purpose of co-financing projects to be carried out by private sector entities in Syria ("the Fifth Loan Agreement").

By an agreement with number 24725, dated 8th December 2008, the Bank agreed to make €275 million available to Syria for the purpose of co-financing the construction of an extension to the Deir Ali power plant "(the Sixth Loan Agreement").

Save in certain identified respects, each the Loan Agreements contained the following terms:

By Articles 1.01, 1.02 and 1.04 the Bank makes the specified sums available to Syria to be disbursed in tranches upon request and upon the satisfaction of specified conditions. A disbursement request is to specify whether the requested tranche is to bear a fixed or floating rate of interest, such rates being set pursuant to Article 3.01, save that the Fourth Loan Agreement makes no provision for floating rate interest;

By Article 2.01 the loan comprises the aggregate of the amounts disbursed by the Bank under the Loan Agreement;

By Article 3.01: (a) interest is payable on the outstanding balance of each fixed rate tranche at the rate specified in the applicable disbursement notice issued by the Bank; and (b) in all the Loan Agreements other than the Fourth Loan Agreement, interest is payable on the outstanding balance of each floating rate tranche at a floating interest rate determined by the Bank;

By Article 3.02, interest shall accrue on any overdue sum from the due date to the date of payment at the higher (for any given relevant period) of: (i) a rate equal to EURIBOR, plus 2%; or (ii) the fixed rate payable under Article 3.01, plus 0.25%. Under the Third Loan Agreement the latter rate is applicable only to overdue fixed rate tranches;

By Article 4.01 Syria is to repay the loan in instalments in accordance with amortisation tables provided by the bank;

By Articles 8.01 and 8.02 Syria is to pay all taxes, duties, fees and professional costs arising out of the execution or implement of the Loan Agreement or any related document;

By Article 10.01 the Loan Agreement shall be governed by English law, and by Article 10.02 all disputes concerning it shall be submitted to the Courts of England. The Bank and Syria waive any immunity from or right to object to the English Court's jurisdiction and a decision of the Court shall be conclusive and binding on both parties without restriction or reservation.

The Bank has disbursed sums to Syria under the Loan Agreements totalling €364,853,821.75, comprising: (a) €27,450,000 under the First Loan Agreement (“the First Loan”); (b) €200 million under the Second Loan Agreement (“the Second Loan”); (c) €54,386,860.75 under the Third Loan Agreement (“the Third Loan”); (d) €1 million under the Fourth Loan Agreement (“the Fourth Loan”); (e) €31,998,961 under the Fifth Loan Agreement (“the Fifth Loan”); and (f) €50 million under the Sixth Loan Agreement (“the Sixth Loan”).

Each of the loans was guaranteed by the EU, the relevant guarantees having been granted pursuant to the decisions of the Council of the European Union (acting together in one instance with the European Parliament).

The relevant decisions and guarantees are identified in paragraphs 11 to 53 of the Particulars of Claim, to which I have had regard. In summary:

On 22nd December 1999, the Council of the European Union issued Decision 2000/24/EC (“the 2000 Decision”), by which it determined that the EU would grant the Bank a guarantee for loans made by the bank from its own resources to countries including Syria.

Pursuant to the 2000 Decision, on 24th July 2000 the EU and the Bank entered into a guarantee agreement (“the 2000 Guarantee”). On 2nd September 2005 the EU and the Bank entered into a materially identical guarantee (“the 2005 Guarantee”), which cancelled and replaced the 2000 Guarantee.

On 19th December 2006 the Council of the European Union issued Decision 2006/1016/EC (“the 2006 Decision”), by which it determined that the EU would grant the Bank a further guarantee for loans and guarantees issued by the Bank to countries including Syria between 1st February 2007 and 31st December 2013.

Pursuant to the 2006 Decision, on 29th August 2007, the EU and the Bank entered into a guarantee agreement (“the 2007 Guarantee”).

On 25th October 2011, the Council of the European Union and the European Parliament issued Decision 1080/2011/EU, by which it was determined that the EU would grant the Bank a further guarantee for loans and guarantees issued by the Bank to countries including Syria between the 1st February 2007 and the 31st December 2013, including those within the remit of the 2006 Decision (“the 2011 Decision”).

Pursuant to the 2011 Decision on 22nd November 2011 the EU and the Bank entered into a further guarantee agreement (“the 2011 Guarantee”).

It was an express term of each of the Guarantees that, to the extent that the EU made any payment under the Guarantees, the EU would be subrogated to the rights that the Bank held against the relevant guaranteed party.

In this action, and in relation to the claim for summary judgment before me today, the European Union now seeks to recover from Syria the sums it has paid out to the Bank on a subrogated basis. In this regard, since November 2011, Syria has failed to make payments to the Bank under Loan Agreements as they have fallen due and the European Union has accordingly indemnified the Bank for its losses under the Loan Agreements. So the claim that is advanced today before me by the European Union is for the sums it has paid out to the Bank on a subrogated basis, together with further contractual interest accruing until the date of payment. As at 16th May 2018 the amount claimed was €189,866,309.83.

The claim form and Particulars of Claim were issued on 11th August 2017 and served on Syria on 22nd September 2017, by the statutory mechanism required when instituting proceedings on a State (see the order of Teare J dated 2nd February 2018). In this regard the Claimants were unable to rely on the contractual service mechanisms contained in the Loan Agreements, because Syria's nominated agents for service, variously the Syrian ambassador to the United Kingdom and to the European Union, had been withdrawn and/or removed before these proceedings were issued.

I will come on to the question of service in more detail in due course, but in summary, Syria was served with the present application and a supporting third statement of a Mr Caisley by e-mail on 25th May 2018, and by fax, by four separate transmissions made between the 29th and the 30th May 2018. In each case the documents were sent under cover of a letter specifying the date of this hearing. A copy was also sent by international courier to the Syrian Ministry of Foreign Affairs, ("the SMFA"), in Damascus, although delivery was refused.

Pursuant to notification clauses in the Loan Agreements copies of the application were also sent on 30th May 2018 to inter alia the Syrian Ministries of Economy and Foreign Trade, Finance, Electricity, Housing and Construction, and Communications and Technology. Each of these was successfully delivered.

Syria has not filed an acknowledgment of service or a defence, and nor has it engaged with these proceedings; Syria has not appeared before me today.

The Claimants' applications are supported by the third statement of Mr Caisley and the second statement of Ms Garvey. Mr Caisley's third statement sets out the background to the claim and explains the basis on which the applications are brought, whilst Ms Garvey's second statement is an updating statement which describes the steps taken to serve Syria with this application.

As I have said, the Loan Agreements contain materially identical terms, in the terms that I have identified. Pursuant to Article 5.03 of each Loan Agreement, Syria is obliged to make payments of sums due, including principal repayment and interest twice annually, on 15th June and 15th December, unless otherwise specified by the Bank. There is before me a repayment schedule that has been prepared.

As I say, since November 2011, Syria has failed to make the scheduled payments of principal and interest under the Loan Agreements. The Bank has made calls on the European Union under the Guarantees I have identified, in relation to the amounts that have fallen due under the Loan Agreements but remain unpaid. The European Union has paid each call made on it under the guarantees. That is all set out in detail in Appendix 1 to the Particulars of Claim, to which I have had regard.

I should say at this point, as it will be relevant to the application in relation to summary judgment, that at various times, acting through the Central Bank of Syria, Syria has acknowledged in correspondence that sums are due and owing under the Loan Agreements and I have had sight of the relevant letters which are described and identified in Mr Caisley's third statement. In particular, on 17th August 2011, Syria's Planning and International Cooperation Commission wrote to the Bank requesting that the Central Bank of Syria, (CBS), represent Syria in correspondence with the Bank in relation to the Loan Agreements. CBS is wholly owned by Syria and operates under a guarantee of the Syrian state.

In the course of this correspondence, I am satisfied that Syria has acknowledged sums are due under certain of the Loan Agreements including as follows:

By a letter dated 9th October 2012 in response to a letter from the Bank, dated 14th September 2012, Syria stated its "genuine intention to fulfil all the obligations on the Syria debt" to the Bank. SWIFT documents showing attempted payments by Syria under the Second, Third and Sixth loan agreements totalling €7,795,419 were attached to this letter.

By a letter dated 20th January 2013, in response to a letter from the Bank dated 8th January 2013, Syria stated it had ordered payment in favour of the Bank in respect of "claims from 30-11-2011" under the Sixth Loan Agreement and a SWIFT document showing attempted payment of €349,225 by Syria was attached.

By a letter dated 28th January 2014 in response to a letter from the Bank dated 15th January 2014, Syria stated that it ordered payment in favour of the Bank in respect of "claims from 30th November 2011", under the Second, Third, Fourth and Sixth Loan Agreements. SWIFT documents showing attempted payments by Syria under the Second, Third, Fourth and Sixth loan agreements, totalling €22,140,999 were attached to this letter.

By letters dated 18th January 2015 and 17th March 2015, Syria stated it had ordered payment in favour of the Bank in respect of "part of [its] obligations" under the Second Loan Agreement. SWIFT documents showing an attempted payment of €16,701,028.72 made by Syria were attached to those letters.

In terms of the outstanding liability, I have already identified that the liability that was outstanding as at the date of the claim form was €185,572,515.86 which was fully broken down at Appendix 1 to the Particulars of Claim. Between that date, 11th August 2017 and the date of the hearing of this application, i.e. today, 29th June 2018, further default interest has accrued, in the amount of €4,962,563.58, and I have been provided with an updated version of Appendix 1 to the Particulars of Claim as at today's date which evidences how that is calculated.

As I have already identified, each of the Loan Agreements contained an identical English law governing law clause in Article 10.1 and a jurisdiction clause in Article 10.02 by which the Bank and Syria submitted to the jurisdiction of the English Court and waived any immunity or right to object to the English Court's jurisdiction. The European Union claims a right of subrogation under those Loan Agreements.

I am satisfied that in those circumstances, the English Court has jurisdiction over these proceedings, pursuant to CPR 6.33(2)(b)(v), on the basis inter alia that Syria is a party to a jurisdiction agreement within the meaning of Article 25 of the Brussels Regulation (recast) and the Court's permission was not required to serve the proceedings out of the jurisdiction.

I should briefly address the position in relation to sovereign immunity. This is not a claim in which any issue of sovereign immunity arises for reasons which are summarised by Mr Caisley in his third witness statement. The immunity of sovereign states before the English Court is governed by the State Immunity Act 1978, the ("SIA 1978").

So far as relevant, that provides in section 1:

Then in Section 2:

Then in Section 3:

It will be seen therefore that were Syria to assert sovereign immunity, that claim or assertion would fail for two reasons. First of all, Syria has submitted to this jurisdiction by virtue of Article 10.02 in each of the Loan Agreements, which I am satisfied constitutes a waiver of immunity, and an unambiguous prior agreement to submit to the jurisdiction, within the meaning of section 2(2) of the SIA 1978.

In this regard for the avoidance of doubt I will quote Article 10.02, which provides as follows:

For a similar clause which was agreed to be an effective submission to the jurisdiction within the meaning of section 2 of the State Immunity Act, see the case of A Company and Republic of X [1990] 2 Lloyd’s Rep. 520 at 522 per Saville J.

Secondly, and in any event, these proceedings that are before me relate to commercial transactions within the meaning of section 3(1)(a) of SIA 1978 to which no immunity attaches. The term "commercial transactions" is defined in section 3(3)(b) to include any loan or transaction for the provision of finance and includes loan transactions that are entered into by the state in the exercise of sovereign authority. See Orascom Telecom Holding SAE v Republic of Chad & Ors [2008] 2 Lloyd’s Rep. 396 at [14] per Burton J.

In any event, Syria has not attempted to challenge the jurisdiction of the English Court in these proceedings. For the reasons that I have identified above, had it done so, any such challenge would necessarily have failed.

Pursuant to the order of Teare J dated 2nd February 2018, these proceedings were served on Syria on 22nd September 2017. Service was effected by transmission of the claim form, Particulars of Claim and other documents required under CPR 6.44 by e-mail from the Foreign and Commonwealth Office to the SMFA, that is the Syrian Ministry of Foreign Affairs, consistent with the mandatory mechanism for instituting proceedings against a state under section 12(1) of the SIA 1978.

The Claimants’ application to Teare J was undertaken in the context of the fact that the SMFA had, and has, repeatedly refused to accept delivery of documents relating to this claim. An international courier instructed by the Foreign and Commonwealth Office made four attempts to deliver copies of the claim form, Particulars of Claim and other documents required under CPR 6.4 to the SMFA and on each occasion the SMFA refused to take delivery.

In that context, the Claimants’ solicitors had also made significant efforts to bring the proceedings themselves to Syria's attention by other means. Copies of the claim form and Particulars of Claim have been sent to the SMFA by various methods including e-mail and international courier instructed by the Claimants’ solicitors and further copies have also been sent by courier to the Syrian embassies in Vienna, Prague and Brussels.

Set against the background of the Order of Teare J of 2nd February 2018, there has already been found to be valid service of those proceedings for the purpose of the State Immunity Act. Pursuant to section 12(2) of the State Immunity Act 1978, any time for entering an appearance shall begin two months after service on a state.

CPR 6 BPD.8 also extends the period for filing an acknowledgment of service to 23 days following the service of Particulars of Claim.

The time for Syria to enter an acknowledgment of service or a defence in these proceedings accordingly began on 22nd November 2017 and expired on 15th December 2017. Syria has not filed an acknowledgment of service, or a defence, nor taken any steps to acknowledge or participate in the proceedings. That brings me on to the question of the service of the documents that relate to the applications that are before me today.

In this regard, so far as service of the claim form is concerned, and as already foreshadowed and dealt with by Teare J, section 12(1) of the State Immunity Act 1978 provides as follows.

Now, that is concerned with service of a writ or now in modern terminology a claim form or other document required to be served for instituting proceedings. It will be seen that in the context of the State Immunity Act 1978 the words "or other document" are linked to documents which are required to be served for instituting proceedings. In other words, for another document to be relevant, it is one that is required to be served for instituting proceedings.

However, in the Civil Procedure Rules that exist, there is a provision relating to a service of a claim form or other document on a State, namely CPR 6.44. CPR 6.44 provides:

It was submitted to me today by Mr Beltrami, QC, who appears on behalf of the Claimants, that this provision of the CPR is directed at service of the claim form, or other document required to be served for instituting proceedings. In other words the words "or other document" are referring to documents of the nature which are identified in section 12(1) of the State Immunity Act 1978. It is those documents, i.e., claim form or other document, required to be served for instituting proceedings, which must follow the service procedure set out in CPR 6.44. It seems to me that that is the proper and right construction of CPR 6.44. Therefore, CPR 6.44 is not concerned with service of documentation once proceedings have been served upon a State.

That raises the question of how documents are to be served on a State once the proceedings have been commenced. The State has been properly served, as has been found by Teare J to be the case in relation to the Defendant in these proceedings.

In many instances, and indeed probably the normal position, will be that that difficulty will not arise, because of the fact that the served State is required to provide an address for service. That is the effect of CPR 6.23(1):

However, as I have already foreshadowed, Syria has chosen not to take part in these proceedings and therefore has not complied with CPR 6.23.

Set against that background, the question arises as to whether or not there are any particular provisions of the CPR which deal with service of other documentation in proceedings. Of course, there are the provisions of CPR 6.40(1), which contain general provisions about method of service of a claim form or other document on a party out of the jurisdiction. Again, those relate to claim forms and other documents which I again take to be referring to documents required to be served for instituting proceedings. Whether that is right or not, the position is in any event that there has been no attempt to make service of this application and supporting documents by the procedures identified under CPR 6.40(1).

Against that background, the Claimants make two applications before me in relation to service of the application notice and supporting material. First of all, an application for an order under CPR 6.27, which is:

That directs one back to CPR 6.15, which provides:

So the effect of CPR 6.27 is to apply CPR 6.15 to any document in the proceedings so that the Court may, if it considers that there is good reason to authorise service by a method or at a place not otherwise permitted by that part, make an order permitting service of the documents concerned by an alternative method or at an alternative place.

The alternative application made on behalf of the Claimants is under CPR 6.28, to dispense with service of the application. CPR 6.28 provides that:

The notes in the White Book 2018 at paragraph 6.28.1 note that this rule gives the Court an unfettered discretion, whereas under CPR 6.16, which is concerned with the claim form, the power to dispense with service of a claim form, whether prospectively or retrospectively may be granted "in exceptional circumstances". Obviously, though, that unfettered discretion must be exercised judicially and so far as the application for service by an alternative method or an alternative means is concerned, it is necessary to demonstrate that there is a good reason to authorise service in that way.

In that regard, I have been taken to the measures which have been taken in order to bring the application to the attention of Syria and the supporting documents in this regard, as is dealt with in the second witness statement of Ms Garvey of Allen & Overy (the solicitors for the Claimants). They arranged for the summary judgment application notice, including the draft order and the third witness statement of Mr Caisley to be sent to Syria by e-mail on 25th May 2018 at 11.18 hours. Those documents were sent to an e-mail address, "info@mofaex.gov.sy" listed on the SMFA website. A covering letter was also sent by e-mail. The covering letter explained that as the exhibit accompanying Mr Caisley's third witness statement was too large to be sent by e-mail, it would be sent by fax and by courier. It also noted that the application was listed to be heard in the Commercial Court in London on 29th June 2018, as indeed it has been heard today.

No e-mail delivery failure notification message was received by Allen & Overy in response to that, in contrast to a previous notification failure that had occurred on 28th January 2018 as was addressed by Ms Garvey in her first witness statement. In those circumstances, it would appear that that e-mail and the materials attached to that e-mail were indeed received. Allen & Overy also arranged for the application, Mr Caisley's third witness statement and the exhibit, to be sent by fax to the fax number which is listed on SMFA's website as the fax number for SMFA's Damascus office. The covering letter, and its enclosures span more than 560 pages which necessitated the pages being sent in four separate tranches. After several attempts, all four tranches were indeed successfully transmitted. I am satisfied, in those circumstances, that Syria has had notice of the application and received copies of the evidence filed in support of the application by fax. It has also received the application of Mr Caisley's third witness statement by e-mail.

Yet, further, Allen & Overy arranged for the application of Mr Caisley's third witness statement and exhibit to be sent by courier to the SMFA in Syria. The courier, which is DHL in this case, made three attempts to deliver the documents to the SMFA in Damascus. From the reports received from DHL on the first attempt on 31st May 2018, delivery was refused by officials at the SMFA. DHL asked Allen & Overy for instructions to assist with a further attempt at delivery, and Allen & Overy provided DHL with the contact details of the foreign minister and the details of the individual who had previously accepted delivery of the service pack from Allen & Overy. However, DHL subsequently informed Allen & Overy that on a second delivery attempt on 3rd June no one at the SMFA was willing to accept delivery. Allen & Overy then gave further instructions to DHL who made a third delivery attempt on 14th June 2018, which was also unsuccessful with the package being returned to Allen & Overy.

There are, within the Loan Agreements, notification clauses requiring disputes under the agreement to be notified to certain Syrian government departments in Syria. It was in that context that Allen & Overy also arranged for notification letters to be couriered by DHL to the relevant offices in Syria. Allen & Overy arranged further copies of the service pack, the application, Mr Caisley's witness statement and the exhibit to be enclosed with the notification letters. The notification letters also stated that the application was listed to be heard in London on 29th June 2018. On 30th May 2018, the notification letters and their enclosures were sent to the relevant addresses in Syria including to the Syrian Ministries of Finance, Electricity, Housing Construction, Communications and Technology, and Economy and Foreign Trade. According to DHL, the documents were delivered successfully to each of these Ministries.

In terms of the applicable authorities in relation to CPR 6.15, and for present purposes applications under CPR 6.27 as well, the principles were recently summarised by the Court of Appeal in Barton v Wright Hassall LLP [2016] EWCA Civ 177 at [19] where Floyd LJ, with whom Black LJ and Moylan J agreed, said this:

The references to Abela are to the decision of the Supreme Court in Abela v Baadarani [2013] 1 WLR 2043 where Lord Clarke gave guidance in relation to the applicable principles under CPR 6.15 - see in particular paragraphs [23] and [33] – [38].

Applying those principles to the present case, I am satisfied, first of all, that the application notice and supporting documents have been brought to the attention of Syria and that the circumstances in which it has not been possible to serve in other ways has been the result of the fact that Syria has chosen not to take part in these proceedings to date. I consider that in those circumstances, and in circumstances where I am satisfied that Syria is well aware of the application, the content of that application, the supporting material witness statements and today’s hearing, this is an appropriate case to make an order under CPR 6.27 by way of service by an alternative method, there being good reason to do so.

The alternative method is service by the methods which have in fact been deployed in this case, as I have identified, namely, the service by reference to the e-mail address and service by fax in the terms which was successfully undertaken; and service by provision of copies of the notification letters to the relevant offices in Syria, as I have identified. In those circumstances, it is not necessary to dispense with service. However, that would have been an alternative to the order which I have made, which is to allow service by alternative means.

The Claimants' preliminary application is for the Court's permission to apply for summary judgment against Syria in the absence of an acknowledgment of service or a defence, pursuant to CPR 24.4(1).

CPR 24.4(1) provides as follows:

In this regard the following guidance can be derived from the authorities:

The purposes of the rule are to ensure that no application for summary judgment is made before a defendant has had an opportunity to participate in the proceedings - see Citicorp Trustee Company Limited v Al Sanea [2017] EWHC 2845 (Comm) at [59]; and to protect a defendant who wishes to challenge the Court's jurisdiction from having to engage on the merits pending such application - see Speed Investments v Formula One Holdings [2005] 1WLR 1233 and Trafigura Beheer BV v Rembrandt Limited [2017] EWHC 3100 (Comm) at [14].

Generally permission should be granted only where the Court is satisfied that the claim has been validly served and that the Court has jurisdiction to hear it - see Philips v Avena [2005] EWHC 3333 (Ch) at [22] - [23], Citicorp Trustee Company Limited v Al Sanea at [46] and Trafigura Beheer BV v Rembrandt Limited at [13]. As was said in Citicorp Trustee Company Limited v Al Sanea, once those conditions are met there is generally no reason why the Court should prevent a claimant with a legitimate claim from seeking summary judgment.

The fact that a summary judgment may be more readily enforced in other jurisdictions than a default judgment is a proper reason for seeking permission under CPR 24.4(1) - see for example, Trafigura Beheer BV v Rembrandt Limited at [10] and BOC Aviation Limited v Kingfisher Airlines Limited [2018] EWHC 194 (Comm) at [4].

I should also add that there is no requirement for a party to have obtained permission under CPR 24.4(1) before issuing a summary judgment application, as Andrew Baker QC, as he then was, stated in FBN Bank (UK) Ltd v Leaf Tobacco A Michailides SA [2017] EWHC 3017 (Comm) at [17], where it was expressly confirmed, rightly in my view, that the two applications may be made in the same notice.

The Claimants make three points as to why they submit permission to apply for summary judgment ought to be granted in this case:

The proceedings were validly served on Syria on 22nd September 2017 and the Claimants have taken significant further steps to bring the proceedings to Syria's attention. Reliance is placed on what is said by Mr Caisley in his third statement at paragraph 27 about the likelihood that Syria is aware of these proceedings and that Syria has chosen not to engage with them. I have already identified that I am satisfied that Syria has notice of these proceedings and the conclusion to be drawn from Syria’s non-appearance is that Syria has chosen not to engage in these proceedings.

The time for acknowledging service, and therefore disputing the Court's jurisdiction, has lapsed. That is clearly the case, and for the reasons that I have already identified I am satisfied that any such application, i.e., one challenging jurisdiction, would have had no real prospect of success.

The Claimants seek summary judgment because they anticipate that summary judgment will be more readily enforceable in other jurisdictions than a default judgment. That is dealt with by Mr Caisley at paragraph 12 of his third witness statement. As I have identified from the case law, I am satisfied that that is indeed an entirely proper basis on which to make an application under CPR 24.4(1). I also consider it would be unjust in the circumstances to refuse permission to apply for summary judgment, in circumstances where Syria has chosen not to engage in the proceedings.

For those three reasons, which are advanced on behalf of the Claimant, and which I am satisfied justify the granting of permission, I consider this is an appropriate case for permission to be granted, and I so order.

That then leads on then to the question of summary judgment. The European Union seeks summary judgment on its claim against Syria for all sums due to it under the Loan Agreements in its right of subrogation. I have already identified that the material in relation to that is addressed in Mr Caisley's third witness statement, in particular at paragraphs 29 to 52.

The applicable principles are well known and well established, and for present purposes are summarised by Lewison J (as he then was) in Easyair Limited v Opal Telecom [2009] EWHC 339 (Ch) at [15], as approved by the Court of Appeal in AC Ward & Sons Limited v Catlin (Five) Limited [2009] EWCA (Civ) 1098 at [24]. In summary:

The Court must consider whether the defendant has a realistic, as opposed to a fanciful prospect of success;

A realistic claim is one that carries some degree of conviction. This means a claim that is more than merely arguable;

In reaching its conclusion, the Court must not conduct a 'mini trial' (see for example Swain v Hillman [2001] 2 All ER 91);

This does not mean that the Court must take at face value and without analysis everything that a party says in its statements before the Court. In some cases it may be clear there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents;

The Court must take into account not only the evidence actually placed before it but also the evidence that can reasonably be expected to be available at trial;

The Court should hesitate about making a final decision where reasonable grounds exist for believing that a full investigation into the facts of the case would add to or alter the evidence and so affect the outcome of the case;

If the application gives rise to a short point of law or construction and the Court is satisfied it has before it all the evidence necessary for its proper determination, it should grasp the nettle and decide it.

The Claimants' pleaded case is that the European Union's right of subrogation to the rights of the Bank under the Loan Agreements arises under the law of Belgium, alternatively the law of Luxembourg. The substantive provisions of each law are identical, and for present purposes it does not therefore ultimately matter which law is applicable.

Each of the Loan Agreements were entered into before 17th December 2009, and they are therefore contracts to which the Rome Convention applies, as incorporated into English law under the Contracts (Applicable Law) Act 1990. Article 13 of the Rome Convention provides as follows:

Accordingly, the law which governs the right of subrogation is that of the Guarantees, since it is the Guarantees that give rise to the European Union's duty to satisfy the Bank - see in this regard Dicey, Morris & Collins on the Conflict of Laws (15th edn., 2017) at [32-163].

The Guarantees themselves do not contain choice of law clauses. Their governing law is accordingly to be determined pursuant to Article 4 of the Rome Convention or, in respect of the 2010 Guarantee, Rome I. The Loan Agreements are contracts falling within the scope of both the Rome Convention (which governs "contractual obligations in any situation involving a choice of law between the law of different countries": see Article 1(1)), and Rome I (which applies "in situations involving a conflict of laws to contractual obligations in civil and commercial matters": see Article 1(1)).

Article 4 in each of the Rome Convention and in Rome I provides in relevant respects as follows:

Article 19 of Rome I provides:

Whilst it will be seen that the provisions are structured differently, Article 4 of the Rome Convention and of Rome I are of identical effect in the present case, in so far as they each identify the governing law as the country in which the party that effects the characteristic performance of the contract has its central administration (which, pursuant to Article 19 of Rome I is the habitual residence of a corporate or unincorporated body).

It is well established that the characteristic performance under a guarantee is that of payment of money by the guarantor (see for example Samcrete Egypt Engineers v Land Rover Exports [2002] CLC 533 at [38], per Potter LJ). It follows that the governing law is the law of the country where the European Union has its central administration. In that regard the Claimants' evidence is that the European Union central administration is in Belgium (see in this regard paragraph 55 of Mr Caisley's third witness statement).

I have before me evidence of the relevant provisions of the Belgian Civil Code (“the BCC”), and the identical provisions of the Luxembourg Civil Code, (“the LCC”). In the context of this application reliance is placed in particular on the following provisions:

It is said therefore that as a matter of either Belgian or Luxembourg law, upon payment of the sums under the guarantees the European Union was subrogated by operation of law to all of the rights which the bank had against Syria, under the terms of the Loan Agreements. Those rights are themselves governed by English law, pursuant to the choice of law clause at Article 10.01 of each of the Loan Agreements.

I have carefully considered the evidence that is before me in relation to Belgian and Luxembourg law, and I am satisfied that the position is indeed as stated by the Claimant in relation to subrogation and the European Union.

That then raises the question as to the entity that is entitled to bring this claim in relation to which Syria would be under an obligation. The basis on which the claim is brought by the European Union is that of subrogation. In this regard, it is important to appreciate that there are different types of subrogation. See in this regard the decision of Burton J in Alliance Bank JSC v Aquanta Corporation [2011] EWHC 3281 (Comm), in particular at [21] - [23]:

i) The first is when such claimant is compellable by law to pay the third party's debt. This will arise most usually in the case of a guarantee where the surety is so compelled because of his obligation under the guarantee to pay off the debtor's debt (see Mitchell and Watterson at paragraph 1.06 and Andrews and Millett Law of Guarantees (5th Ed) at 456): it will also arise where there is a claim of contribution by a fellow judgment debtor as in Niru Battery (above).

ii) The second scenario is submitted by Mr MacLean (although Mr Slade does not agree with this) to be where the subrogated claimant has been authorised by the debtor to pay the creditor, or his act in so discharging the debtor is ratified by the debtor (see paragraph 2.18 of Mitchell and Watterson).”

I am myself grateful to Mr Beltrami QC for identifying that the present case is one of type 1 subrogation or Extinguished Rights subrogation, where the creditor may sue in his own name. I am therefore satisfied that the appropriate claimant in this case, who does indeed have subrogated rights to sue in its own name, is the first Claimant, the European Union.

I am satisfied that there is no real prospect of Syria successfully defending this claim. For the reasons that I have already foreshadowed, the sums were loaned. They fell due for repayment. Various tranches have not been repaid in the amounts which have been identified in the evidence that is before me, and also at various stages Syria has acknowledged if not the entirety of the indebtedness, then nevertheless the fact that it is indebted in relation to various sums which are due under the Loan Agreements, but which it has not paid. I am satisfied that there are no available defences to Syria in this regard.

In this regard, I should say for completeness, that the Claimants have drawn to my attention in accordance with standard practice (see, for example, Standard Chartered (Bank Hong) Kong Limited v Independent Power Tanzania Limited [2016] EWHC 2908 (Comm) at [11]) any potential defences to the claim that Syria might have sought to raise. These are addressed in paragraphs 63 to 72 of Mr Caisley's third statement. They relate to any potential impact of sanctions and, secondly, disbursement requests made by Syria in 2011.

In relation to the first point, on 9 May 2011 the Council for the European Union issued Regulation No. 442/2011, by which it imposed sanctions against certain individuals and entities associated with the Al-Assad family and others identified as responsible for benefitting from or supporting the governing regime in Syria. These sanctions were extended throughout 2011, including by EU Council Regulation No. 1150/2011. A consolidated version of the sanctions came into force on 19th January 2012 by EU Council Regulation No. 36/2012 as amended (the "Consolidated Sanctions Regulation"). It appears that similar sanctions have also been imposed on Syria by other organisations and countries, including the United States and the Arab League.

At various times between 2011 and 2014, the Central Bank of Syria has sought the assistance of the Bank, that is the second Claimant, to release funds that have been frozen as a result of such sanctions. This includes the substantial funds that it appears have been held by the Central Bank of Syria in bank accounts located within the European Union, including Banque SBA (France) and Banca Ubae SpA (Italy), and I have had drawn to my attention correspondence in that regard.

Notwithstanding such sanctions, it has not been suggested by Syria to date that the imposition of sanctions, in any way shape or form, might be said to suspend the obligation to make payment under the Loan Agreements. Indeed, even if any such argument had been raised, it is pointed out that to the extent that if Syria wished to make payment from a frozen bank account, it could apply for a derogation from the consolidated sanctions regime to the extent necessary. In that regard Article 20 of the Consolidated Sanctions Regulation provides that the competent authority of each Member State may authorise the release of frozen funds provided that a payment is due under a contract or agreement which was concluded before the date on which the paying party became subject to sanctions.

It seems to me, in such circumstances, that even if Syria were to identify any point in relation to sanctions impinging upon its ability to make payment, it could seek derogation in relation to that matter. I am satisfied that there is nothing in relation to the potential impact of sanctions which gives rise to any defence which has any real prospect of success in relation to the claims that are brought by the European Union before me today.

During 2011, Syria made disbursement requests to the Bank in relation to the Third, Fifth and Sixth Loan Agreements on 28th August 2011, 6th April 2011 and 27th March 2011. Whilst the Bank engaged in correspondence with Syria in relation to these disbursement requests the Bank did not make any disbursements, because the Bank understood, I am told, at the time that it was under no obligation to do so. I have had examples of that correspondence placed before me. In this regard on 4th October 2011, Syria via its EU ambassador stated that it had considered that it had met its contractual obligations for disbursement in respect of the Sixth Loan Agreement and that the Bank's failure to reimburse was "a violation of the bank [sic] [legal obligations]". By EU Council Regulation No. 1150/2011 dated 14th November 2011 the Bank was prohibited from making any disbursement under or in connection with any Loan Agreements. On 28th November 2011, the Bank sent a letter to the Planning and International Cooperation Commission in Syria referring to the prohibition on the Bank contained in the EU Council Regulation 1150/2011 and stating that the Bank had suspended further disbursements of all ongoing loans as a result.

It appears, therefore, from that correspondence, that there was in 2011 an allegation by Syria of a breach of contract by the Bank in not acceding to a draw-down request in respect of the Sixth Loan Agreement. I should say that the Bank does not accept it was in breach of contract.

However, were the Bank's actions to give rise to a viable claim any such claim would be a claim in damages; but no such claim in damages has ever been articulated still less advanced, notwithstanding Syria having had the opportunity to do so had it wished to do so.

I am therefore satisfied that there is no potential defence which stands any real prospect of success and that there is no real prospect of the Defendant successfully defending the claims, which ultimately are claims in debt that have, at least in part, been previously acknowledged.

I am also satisfied that there is no other reason, still less a compelling reason, why the case should be disposed of at a trial. Accordingly, I grant the European Union permission to apply for summary judgment and give summary judgment to the European Union against Syria in the sum of €190,535,079.44 and make a declaration that the European Union is entitled to payment of such further contractual interest as may accrue until the date of payment by Syria.

In relation to costs, the Claimants, specifically the European Union, are the successful party, and on normal principles, under the CPR costs should follow the event. I will hear counsel for the Claimants after this judgment in relation to such costs and to the final form of the Order which I shall make.