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

The Second Defendant (‘Dr Hawrami’) has made an application challenging the jurisdiction of the court under CPR Part 11. This judgment decides on that challenge.

The Claimant (‘Dynasty’) is a company existing under the law of Iraq. It is a joint venture which was formed in 2018 by two private energy companies in Kurdistan, namely South Kurdistan for Oil and Gas Services Limited (‘South Kurdistan’) and Tigris Holding.

Dynasty has brought proceedings against the First Defendant, the Kurdistan Regional Government of Iraq (the ‘KRG’), and Dr Hawrami, who was from 2006 until July

The essential claim made in those proceedings is that the KRG, acting through Dr Hawrami, wrongfully failed to provide consent to a change of control in favour of Dynasty in connexion with two production sharing contracts (‘PSCs’) which had previously been entered into by the KRG with other parties.

The Claim Form was served, or purportedly served – there is an issue about whether it constituted valid service – on Dr Hawrami at Heathrow Airport on 31 October 2019. The KRG has not been served with the Claim Form.

On 14 November 2019 Dr Hawrami filed an Acknowledgment of Service indicating his intention to contest the jurisdiction of the English Court. His Part 11 challenge was issued on 12 December 2019.

The grounds on which Dr Hawrami contests the jurisdiction of the English Court can be grouped under four heads, as follows:

Before I turn to consider these issues, it is necessary to set out the background in more detail.

The Kurdistan Region of Iraq (‘KRI’) is a largely autonomous region in Iraq. It borders Syria to the west, Iran to the east and Turkey to the north. It has an area of approximately 40,000 square kilometres. The KRG is the elected government of the KRI.

Under the constitution of Iraq (the ‘Constitution’), Iraq is a federal state. The Constitution provides special recognition to the KRI. Article 117 First provides that the KRI is recognised ‘as a federal region’. Although other regions were intended to be recognised as components of the federation, only the KRI is recognised in the Constitution itself, and in fact no other regions have been formed.

The regulation of oil and gas in the KRI is carried out pursuant to the Kurdistan

As envisaged and provided for in the KROGL, the KRG has entered into a number of PSCs. A PSC is typically an agreement whereby a government or state entity authorises a contracting party to develop and exploit a state’s natural resources in a given block, without granting title to the natural resources in the ground, and on terms that include provision for the recovery of costs incurred by the contractor out of production, if it is sufficient to do so, and for the sharing of any production between them. Under such agreements, the state has no payment obligations, and the risk of the development resides with the contractor.

The PSCs relevant to the present case relate to two contiguous oil and gas blocks within the KRI known as the Kurdamir Block and the Topkhana Block, and I will refer to them as the ‘Kurdamir PSC’ and the ‘Topkhana PSC’ respectively.

The Kurdamir PSC was concluded in February 2008 between the KRG and

The Topkhana PSC was concluded in August 2011 between the KRG and another SPV, Talisman (Block K39) BV (‘Talisman 39’), also owned by Talisman Energy Inc. In December 2014, with the consent of the KRG, Talisman 39 and Talisman 44 were acquired by Repsol Exploración SA, a wholly owned subsidiary of Repsol SA

The Kurdamir and Topkhana PSCs were in similar terms. It is convenient to refer to some of the terms of the Kurdamir PSC. That agreement, when originally concluded in 2008, was signed on behalf of the KRG by Dr Hawrami as Minister for Natural Resources and by Nechirvan Barzani, then the Prime Minister of the KRG.

The Kurdamir PSC defined ‘the Government’ as being the KRG. In the Recitals to the Kurdamir PSC appeared the following:

Article 2 was entitled ‘Scope of the Contract’. It provided in part:

Article 6 provided for the Term of the Contract. This involved an exploration period of up to seven years, and then a development period of 20 years, with an automatic right to a five year extension of that period.

In Article 17 there were provisions as to use of land and existing infrastructure. These included:

Article 18 provided for the KRG to assist the Contractor, and enumerated a number of areas for such assistance, including securing any necessary permits (i) for the use and installation of means of transportation and communication, (ii) in matters of customs,

Under Article 30.3 the Contractor was exempted from export taxes in relation to any petroleum to which the Contractor was entitled under the Contract; and Article 31.1 contained an exemption from all taxes as a result of income, assets and activities under the Contract. Article 33 provided for the Government to obtain permits or rights for the transportation of any oil through pipelines. Article 34 provided for unitisation, to cover a situation in which a reservoir extended under two different adjacent blocks.

Article 39 contained provisions in relation to assignment and change of control.

Article 41 provided for a waiver by the KRG of sovereign immunity. Article 42 provided for the resolution of disputes, by negotiation, mediation, arbitration in London, and in some cases, by expert determination. Article 43.1 provided that the Contract and any dispute arising therefrom or thereunder should be governed by English law.

Under Articles 43.2-43.6 were various provisions as to fiscal stability. In particular Articles 43.2 and 43.3 provided:

From about 2015 Repsol was indicating an intention to sell its interest in the two blocks. On 1 March 2019 Repsol entered a Sale & Purchase Agreement (or ‘SPA’) with Dynasty. The SPA was a share sale, whereby Dynasty intended to purchase all of the issued share capital of Talisman 39 and Talisman 44. The SPA is stated to be governed by English law and subject to an exclusive jurisdiction clause in favour of the courts of England and Wales. It defined ‘Government’ as the KRG. Relevantly for present purposes, the SPA provided as follows in clauses 2.3 and 2.8.

It is Dynasty’s case that the KRG unreasonably refused to agree to the change in control which would have occurred had the SPA been implemented, with the result that the SPA was terminated. The nature of this case is most conveniently summarised by reference to the Substituted Particulars of Claim in the action.

Dynasty pleads that Repsol wrote to Dr Hawrami on 8 March 2019 to request consent to the Change of Control under the two relevant PSCs, referring to the SPA, and making it clear that the SPA was conditional on the receipt of such consent. On 18 March 2019 Dr Hawrami, on behalf of the KRG, wrote to Repsol with a list of information which was required. That information was not, Dynasty contends, a requirement of the KROGL, nor was it necessary or proportionate. Dynasty also contends that the Ministry of Natural Resources (‘MNR’) irrationally and unreasonably refused to meet with Dynasty to discuss the information requirements.

Dynasty pleads that on 7 May 2019, Dr Hawrami attended a meeting at the InterContinental Hotel on Park Lane, London, at which Repsol and the senior management of WesternZagros were present. Dynasty contends that at that meeting

Dynasty also contends that Hiwa Awat Ali, who is executive Director and a shareholder in Dynasty, was unlawfully intimidated by Dr Hawrami and the KRG. It is Dynasty’s case that the Deputy Prime Minister of the KRG, Qubad Talabani, ‘acting as an agent of Dr Hawrami’ demanded, on 3 May 2019, that Dynasty cancel the SPA; that Mr Ali responded that it would not do so; and that Mr Talabani then responded that if it did not ‘they’ (by which was understood the KRG and Dr Hawrami) would not let Mr Ali set foot in Kurdistan again. It is further alleged that

The claim set out in the Substituted Particulars of Claim is put primarily on the basis of alleged wrongs as a matter of English law, namely:

Alternatively, claims are put forward on the basis of Iraqi law, namely:

The first basis on which Dr Hawrami challenges the jurisdiction of the court is that he contends that he is immune from the present proceedings by reason of the provisions of the SIA.

Before turning to consider the issues which arise in this connexion, it is convenient to set out the most relevant provisions of the SIA.

It was common ground between the parties that: (i) the KRI is a constituent territory of a federal state (viz. the State of Iraq); (ii) no Order in Council has been issued in relation to the KRI for the purposes of s. 14(5) of the SIA; and (iii), in consequence, pursuant to s. 14(6) of the SIA, the KRG, as the government of the KRI, could claim immunity in accordance with, and only in the circumstances provided for by, s. 14(2) of the SIA, as a separate entity.

Importantly, furthermore, in Bank of Credit and Commerce International (Overseas)Ltd v Price Waterhouse [1997] 4 All ER 108, it was accepted that the reference to sovereign authority in s. 14(2)(a) of the SIA is to the sovereign authority of the state recognised by Her Majesty’s Government (at 112f-g). That was agreed to be correct by both sides in the present case. Accordingly, it was common ground that the KRG will only have acted ‘in the exercise of sovereign authority’ for the purposes of s. 14(2), if it acted in the exercise of the sovereign authority of the State of Iraq.

Against that background, the issues which arise as to whether Dr Hawrami has immunity in respect of the relevant acts are as follows.

The broad issue here is whether the relevant acts were in the exercise of the sovereignty of the state of Iraq. It raises the question of what is entailed by the requirement that a separate entity, as defined by s. 14(1) of the SIA, must be exercising the recognised state’s sovereign authority in order for it to claim immunity. Specifically, what is entailed by that requirement when one is considering the acts of the constituent territories of a federal state?

It is Dr Hawrami’s case that in respect of the relevant acts the KRG (and he on its behalf) was exercising an authority conferred on it by the Constitution of Iraq, which had allocated to the KRG the right and ability to exercise this aspect of the sovereignty of Iraq.

This contention is denied by Dynasty, on a number of bases. As a result of the positions of the parties the main sub-issues which arise under this heading can be identified as follows.

The first argument which needs to be addressed is Dr Hawrami’s ‘threshold point’. The argument is that if the court were to accept in answer to Issue 2 that the relevant acts were ‘acts in the exercise of sovereign authority’, which depends on whether they were governmental acts rather than acts which any private citizen can perform, then the sovereign authority in question must have been that of Iraq, because no other entity had ‘sovereignty’, because sovereignty of its nature resides in an independent territorial unit, the state.

This is an ingenious argument, but I do not accept it. It is the case that in order for an act to be one in respect of which a state may claim immunity, it must be an act jure imperii not an act jure gestionis, and that indeed involves considering whether it is a governmental or public act or one which private citizens can perform. However, in s.

The fact that the acts may in themselves be ones which a private person could not perform, does not itself answer the discrete question of whether they were done in the exercise of the authority of the recognised state. That requires an investigation of the authority by which the separate entity was performing the relevant acts.

The fact that acts of a separate entity are governmental and can be said to be acta jure imperii does not of itself mean that they must be acts in the exercise of the sovereign authority of the recognised state is supported by both Pocket Kings Ltd v SafenamesLtd [2010] Ch 438, and by Pearl Petroleum Co Ltd v Kurdistan Regional Governmentof Iraq [2016] 4 WLR 2 at [30-38]. I will return to consider the reasoning in those two cases in due course, but I consider that they are correct in this respect.

I turn to consider what Dynasty called its own threshold point, namely the contention that in order to satisfy the test under s. 14(2)(a) of exercising the sovereign authority of the recognised state ‘the constituent territory or separate entity must be acting as or for and on behalf of the state said to be impleaded’, and that this is not satisfied simply by showing a constitutional competence to act.

Dynasty cited a number of authorities as to the origin of the doctrine of state immunity lying in the sovereign equality of states, and that the foundational rule is that a state should not be directly or indirectly impleaded in the courts of a foreign state against its will. What this meant was that entities other than the state itself would only be accorded immunity if they are acting with the authority of the State such that the action ‘impleaded the state’ itself. Dynasty argued that this requirement had been expressed in a number of different ways.

Ultimately, there appeared to be little dispute between the parties in relation to the relevant legal test as to whether a separate entity can claim state immunity under s. 14(2). Dynasty itself commended what Laddie J said in BCCI, namely (at 112):

The dispute between the parties was not so much as to the test but as to how it can be shown that a separate entity acts ‘for and on behalf of’ the recognised state. In this regard, Dynasty contended that it would not be enough for the KRG to have acted pursuant to a constitutional competence or permission to act. Dr Hawrami countered that his case had never been that the KRG was acting pursuant to a mere competence or permission to act; rather that the Constitution conferred on the KRG the authority to exploit and manage oil and gas resources within the KRI, and that this results in the KRG exercising the sovereign authority of Iraq over the natural resources in the KRI. To that case as well, Dynasty contended, as part of its threshold argument, that a constitutional conferring of authority over oil and gas resources would still not meet the test in s. 14(2), because that required matters to be done at the behest or with the support of the state, and the KRG’s actions were being performed without any instructions from or support from the federal government of Iraq, and in opposition to that government’s wishes.

Insofar as Dynasty contended that a constitutional allocation of responsibility could never, of itself, be sufficient to mean that a constituent territory was acting for and on behalf of the recognised state, I do not accept the argument. It seems to me quite possible that the constitution of a state may allocate a responsibility to a constituent territory, perhaps because it is regarded as being in the interests of the state as a whole that that constituent territory should exercise those powers. I do not see why, in principle, that cannot amount to the constituent territory acting for and on behalf of the state.

Furthermore, I do not consider that, in the case of a constitutional allocation of responsibility, the fact that the government of the recognised state opposes the exercise by the separate entity of its powers, necessarily means that that separate entity is not acting ‘for and on behalf of’ the state. The government of a recognised federal state cannot be identified with the state itself. It is not difficult to conceive of a situation where, perhaps because of a change of political complexion of the central government, its attitude to the exercise of powers by a constituent territory changes. That would not, in my view, necessarily affect the question of whether those powers were constitutionally exercised by the constituent territory for and on behalf of the state.

In these respects, the position of constituent territories or political subdivisions of a state may be different from that of many other ‘separate entities’ within s. 14(1) SIA. In the case of many such entities – for example private or state-owned companies – there will usually be no question of their acting ‘for and on behalf of’ the state, unless they are doing so at the direction of the state through its government. In the case of constituent territories, however, it may be possible to characterise their acts as being

In this regard it is to be noted that one of the experts called by Dynasty itself, Prof Kelly, gave evidence that:

The recognition of possibility (3), as a distinct basis for the international assertion of the authority of the state is, I consider, consistent with the view I have expressed in the previous paragraphs. While, of course, Prof Kelly’s view is in no sense determinative of how the SIA should be construed and given effect to, it is an indication that the view which I have expressed is consistent with internationally accepted norms.

It is necessary to consider in more detail, however, the grounds on which Mr Waller QC for Dynasty nevertheless resisted an approach which looks to whether a constituent territory is constitutionally empowered to act in a particular sphere to determine whether it is acting ‘for and on behalf of’ the state. He submitted that this approach would tend to obliterate the distinction between a state and a constituent territory, which is carefully preserved by the SIA. He submitted that in most cases, a constituent territory will be acting with constitutional authority, and if this were the touchstone, then constituent territories would almost invariably have immunity, even though they had not been made the subject of an Order in Council. That, he submitted, was clearly not intended by Parliament.

I consider that there are a number of answers to these points. In the first place, the correct approach will be to look at whether the constitution, properly regarded, confers on the constituent territory an authority to act on behalf of the state in a sovereign matter. Not every ‘constitutional competence’ or permission to act will meet this test. Secondly, even if the correct approach were simply to look at constitutional competence, this would not eliminate the distinction between states or constituent territories which have been made the subject of an Order in Council on the one hand and constituent territories which have not been made the subject of such an Order on the other. The former have immunity ratione personae. They need show nothing other than who they are in order to be entitled to the immunities conferred by the Act. Constituent territories which are not the subject of an Order in Council and which are ‘separate entities’ need by contrast to prove, the burden being on them, that the two conditions in s. 14(2) are met: KAC v Iraqi Airways Co. at 1161E, per Lord Goff; Dickinson et al., State Immunity, para. 4.103. Thirdly, while it is clearly correct that Parliament intended that the immunity of constituent territories should be more restricted than that afforded to states, Parliament clearly also provided that they are entitled to immunity ‘if, and only if’, the two requirements in s. 14(2) are met. That gives no indication that it will or should be rare for a constituent territory to be able to assert immunity.

I should also address directly that part of Dynasty’s case which was that, to accord immunity to a constituent territory on the basis of a constitutional allocation of responsibility of relevant powers even in circumstances where the recognised state, as represented by the federal government, opposes the exercise of such powers by the constituent territory, would be inconsistent with the rationale of sovereign immunity, which is to avoid impleading the state. My understanding of the argument was that, if the federal government has not directed, authorised or approved such exercise of powers, then an action which complains of that exercise will not ‘implead’ the state, because it does not concern the state: the state will not be liable in the action, its legal rights will not be affected, and it will not be responsible, legally or morally, for what the constituent territory did.

I do not accept this argument. While it is undoubtedly correct that the underlying rationale for sovereign immunity is to prevent the impleading of sovereign states, I do not consider that it is legitimate to import a distinct test of whether the sovereign will be ‘impleaded’ into s. 14(2). If the two conditions there set out are met, then the separate entity can assert immunity. Those two conditions are not framed in terms of whether the state is ‘impleaded’. In any event, in a case in which a constituent territory is, pursuant to the constitution of the state, authorised and entitled to exercise the state’s sovereign authority in a particular area, then I think that it can be said, without inaccuracy, that an action in relation to the exercise of such authority by the constituent territory does, at least indirectly, ‘implead the state’.

Having rejected the two ‘threshold arguments’ considered above, I consider that it is, in principle, open to a constituent territory to seek to show, by reference to the constitution of the relevant state, that it is exercising the sovereign authority of the state. I would accordingly proceed to examine the arguments as to the position under the Iraqi Constitution.

At this point, however, as I have said, Dr Hawrami raises another preliminary issue. This argument, which was a late runner at the hearing, is that an enquiry by the court into the constitutional authority and validity of the KRG’s acts is impermissible by reason of the doctrine of act of state. Specifically, the argument is that such an examination would contravene the first of the rules identified in the judgment of Lord Neuberger PSC in Belhaj v Straw [2017] AC 964, at 1111 ([121]), namely:

Dr Hawrami’s argument was that an investigation of whether the KRG had the constitutional authority to manage oil and gas resources within KRI would involve an investigation into the effect of the Iraqi Constitution, and, further, that Dynasty’s case involved the assertion that the KROGL was invalid because there was no constitutional authority for it. Both aspects would involve a contravention of Lord Neuberger’s first rule. Accordingly, the court could not embark on any investigation of the constitutional position and because of this should dismiss the action.

As Mr Waller QC for Dynasty submitted, this is a striking argument. On this basis, because Dr Hawrami asserts that the KRG, though a separate entity, can take advantage of sovereign immunity because it was acting on behalf the state, yet that claim cannot be examined, with the result that Dynasty’s action is dismissed. I agree with Mr Waller that the argument should be rejected. If it were actually the case that the court could not investigate the constitutional position to see whether the acts of the KRG were in the exercise of the sovereign authority of the state, then I consider that the consequence would be that Dr Hawrami’s claim to state immunity would fail. In the case of a separate entity, unlike the position of the state itself, it is for that entity to prove that it is entitled to assert immunity pursuant to s. 14. Here, the only basis on which it is contended by Dr Hawrami that the KRG is so entitled is by reason of the allocation of relevant authority to it under the Constitution. If that cannot be shown because of the impossibility of the court’s investigating the claim, then in my judgment Dr Hawrami would have failed to discharge the burden which rests on him of establishing any entitlement to immunity.

In fact, however, I do not consider that the court is prevented from carrying out the necessary investigation by reason of Lord Neuberger’s first rule in Belhaj v Straw or by any aspect of the doctrine of act of state. The validity of the Iraqi Constitution is not questioned by either party, and the court is not being called upon to say otherwise.

In saying this, Elias LJ was agreeing with Arden LJ in paragraph [74]. Their reasoning (which was referred to with approval by Lord Mance JSC in Belhaj v Straw at 1092D/E para. [73(iii)]) appears to me to be applicable in the present case: the fact that in that case there was undoubted jurisdiction over the claim in the action, whereas here the need to construe the Constitution arises in the context of a claim to sovereign immunity, is an immaterial distinction.

As to the further submission made on behalf of Dr Hawrami that the doctrine of act of state is brought into play because Dynasty’s position involves a contention that the KROGL is invalid, I do not consider that this advances Dr Hawrami’s case. As is shown by Lord Mance’s statement in paragraph 73(iii) of Belhaj v Straw, the English courts are entitled to assess whether a foreign law is legal under the local constitution. But in any event, it is not the contention of either party that the KRG had no power to pass the KROGL or to enter the PSCs. Clearly that is not Dr Hawrami’s position. As to Dynasty, its position is that the KRG did have that power, not pursuant to the Constitution, but under a de facto power which predated the Constitution. In those circumstances, I cannot see that Lord Neuberger’s rule 1 is infringed.

I turn to the question of whether the KRG is allocated constitutional authority to exercise the powers of the Iraqi state in the relevant respects, which may be said to be the management of natural oil and gas in the KRI.

This is an issue which the court naturally approaches with circumspection. It is a contentious, and politically-charged, issue in Iraq. It is one which the Iraqi Federal Supreme Court has not pronounced upon, and there were some suggestions in the evidence that it may have avoided doing so because of the sensitivity of the issue. Nevertheless, it is an issue which I consider unavoidably arises on this application, given the positions of the parties and my conclusions in relation to the ‘threshold issues’ considered above. Necessarily my decision on the point has to be made on the basis of the materials which have been presented to the court on this application. Clearly, moreover, as was pointed out by Elias LJ in Al-Jedda, the decision of the court on this question will have no effect on the courts of Iraq.

Both parties made detailed submissions in relation to the meaning and effect of the Constitution of Iraq. That Constitution was negotiated in 2005. It was approved in a referendum by the Iraqi people on 15 October 2005, and entered into force after its subsequent publication in the Official Gazette of Iraq, in 2006. The parties proceeded on the unsurprising basis that the meaning and effect of the Constitution was to be gathered primarily by considering the text and its context. There was also some reference to subsequent events as indicating the proper interpretation of the Constitution.

For the purposes of assisting the court in understanding and construing the Constitution, each party called expert witnesses. Dr Hawrami called Ambassador Peter W. Galbraith and Professor Brendan O’Leary. Ambassador Galbraith is a retired US ambassador. He has a long-standing involvement with the Iraqi Kurds, and as a result was asked by the Kurdish leaders to assist them to devise a strategy to ensure that the KRI shared powers with the government in Baghdad in a post-Saddam Iraq. He had accordingly retired from the government in November 2003, and had become an adviser to the Kurdish political parties. During the key period of the negotiation of the Iraqi Constitution, in June to August 2005, he was in Baghdad and Erbil with the leaders of the Iraqi Kurds, who he met before and after each of the relevant meetings. He drafted some of the language which the Kurdish leadership proposed for inclusion in the text of the Constitution.

Professor O’Leary is Lauder Professor of Political Science at the University of Pennsylvania. As well as his academic work he frequently acts as an international constitutional advisor. Between 2003 and 2009 he was a constitutional advisor to the KRG. He advised the KRG leadership in 2004, and in 2005 during the making of the Constitution.

Dynasty called Professor Marc Weller and Professor Michael J Kelly. Professor Weller is Professor in International Law and International Constitutional Studies at the University of Cambridge. He was Deputy Director for International Studies (1995-2000) and Director of the Lauterpacht Centre for International Law (20102016) in the University of Cambridge.

Professor Kelly is Senator Allen A. Sekt Professor in Law at the Creighton University School of Law. He has worked and published extensively on international and comparative law in general and genocide research in particular.

All of these experts were very well qualified to assist the court, and sought to do so. Dynasty suggested in relation to Ambassador Galbraith and Prof. O’Leary that because of their association with the Iraqi Kurds over many years, and their involvement in advising them in relation to the formulation of the Constitution, they lacked an independent perspective and were, as it was put, ‘marking their own homework’. This was clearly a matter which I bore in mind, but I did not consider that it significantly affected the weight to be accorded to their evidence, which depended rather on its cogency.

In addition to the evidence of these four experts, I was shown a number of other materials which the parties contended assisted in understanding and construing the Constitution. These included, in particular, an Opinion of James Crawford, at that point Whewell Professor of International Law at the University of Cambridge and now a Judge of the ICJ, dated 29 January 2008, an article by AS Deeks and MS Burton entitled ‘Iraq’s Constitution: A Drafting History’, and a speech, later published, by Professor Nicholas ‘Fink’ Haysom, who in 2005 had been Chief Constitutional Advisor for the United Nations Assistance Mission for Iraq (‘UNAMI’), called ‘Forging an Inclusive and Enduring Social Contract’.

The relevant background can be briefly summarised as follows. After the defeat of Saddam Hussain in the First Gulf War in February 1991, there was an uprising of the people in the KRI. The Iraqi army then moved north, leading to an exodus of Kurdistan’s population. This led to the re-intervention of the allies in Iraq, and to the establishment of a ‘no-fly zone’ which kept Iraqi forces out of the KRI. In May 1992 elections were held in the KRI, and voters chose a parliament which in turn chose a Prime Minister and Council of Ministers. This Kurdistan Regional Government, which for a period of time split into two rival administrations before reuniting in 2003, conducted the business of government, paying salaries, providing security, running a judicial system, and entering into contracts including for the exploitation of hydrocarbons in the KRI.

In 2003 the people of the KRI aligned themselves with the USA in the war against the government of Saddam Hussain in Baghdad, and the KRG’s military force, the peshmerga, was active in the Second Gulf War. After the overthrow of Saddam Hussain a US-led Coalition Provisional Authority assumed authority in Arab Iraq. With US encouragement the Kurds decided to reintegrate with Iraq.

In March 2004 a Transitional Administrative Law (or TAL) was promulgated by the Coalition Provisional Authority with a view to facilitating governance until a ‘permanent and legitimate constitution achieving full democracy should enter into force’. The TAL established a structure of Regions, Governorates and Municipalities operating within what was described as a federal system. It recognised a Kurdistan Regional Government as the official government of the territories which that government had administered on 19 March 2003, and stated that that government

Significantly, the TAL contained provisions as to how a new constitution should be adopted. To be ratified the draft constitution had to pass a referendum with a qualified majority. Ratification required a majority of voters in Iraq to support the text, and further (Article 61(c)) ratification would ‘be successful… if a majority of the voters in Iraq approve and if two-thirds of the voters in three or more governorates’ did not reject it. Professor O’Leary explained the significance of this, as follows. Iraq then had 18 governorates. 10, including Baghdad, had Shi’a Arab majorities. The Kurds had, and maintain, an overwhelming demographically concentrated majority in three governorates – Duhok, Erbil and Sulaymaniyah. There were enough Kurds in the Kirkuk governorate to prevent the formation of a negative qualified majority of two thirds there. In addition, Kurds comprised significant portions of the electorate in the governorates of Nineva and Diyala. What this meant was that if the Kurds, in the three governorates which largely overlapped with the KRI and in Kirkuk, rejected the draft, it would not be ratified.

Iraq-wide elections were held in January 2005, to what would become the constitutional convention as well as the transitional parliament. Most Sunni Arab leaders boycotted those elections. Professor O’Leary describes this as the Sunni Arab leaders having ‘largely excluded themselves, bar the Iraqi Islamic Party, from participating in the critical decision-making’ for which they ‘paid the price in loss of power over the drafting process [of the new Constitution]’. In those same elections, meanwhile, Kurdish voters endorsed a coalition of their key parties within the KRI and outside it. This coalition, led by the Kurdistan Democratic Party (‘KDP’) and the Patriotic Union of Kurdistan (‘PUK’), had sought a mandate to act as Kurdistan’s negotiating tribunes. Given the provisions of the TAL as to ratification of the Constitution, and the demographic position which I have already described, this meant, according to Professor O’Leary, that ‘the Kurdish leadership therefore had a comprehensive veto power over the content of the constitution: if they instructed their voters to reject the draft it would fail to be ratified’.

The process of negotiating the terms of the Constitution took place in June to late August 2005. Ambassador Galbraith describes the following features of the process. In early August 2005, Iraq’s political leaders, meeting in the headquarters of Masoud Barzani (President of the KRG) in Baghdad, took over the process of constitutionwriting from the formal constitution-drafting committee and began working on a draft modelled on the TAL. On 12 August, Masoud Barzani met Shi’ite leader, Abdul Aziz

According to Ambassador Galbraith, the USA was deeply unhappy with the Barzanial Hakim deal, and US Ambassador Khalilzad made a series of proposals designed to restore federal control. These proposals were rebuffed. However, an approach was made to the Kurdish negotiators by Ahmed Chalabi, an Iraqi exile and member of the Shi’ite leadership, suggesting the addition of language which came to be incorporated as Article 112 Second. Ambassador Galbraith says that he was prepared to recommend the inclusion of language of this sort because he considered it ‘to be mostly aspirational, not operational’. Above all, he says, he ‘thought it didn’t do anything’, and did not compromise what would be achieved by the text which would be Article 112 First. On that basis Masoud Barzani agreed to its inclusion.

What was to be Article 115 was included in the text on 21 August. There was not much discussion about it at that point. That, Ambassador Galbraith says, is because its substance was a part of what the two key political leaders had agreed on 12 August. Article 121 Second was not a late arrival, and was essentially the same as Article 54 of the TAL.

After the main text of the draft Constitution had been finalised between the political leaders in August, and approved by parliament, and just before the referendum, the text of what were to be Articles 113 and 142 were added. In the referendum held on 15 October 2005, the Constitution was ratified by the required double majority: by a 79-21% margin in overall votes, and with majorities in 15 governorates.

The most relevant provisions of the Constitution are set out in Annex 1 to this judgment.

Dr Hawrami’s contention is that the Constitution directly confers upon the KRI, and the KRG as its government, the authority to exploit and manage oil and gas resources located within the region. He makes the following particular points:

Dynasty’s contentions can be summarised as follows:

I recognise that there are cogent points made on both sides. One possible course, which Dynasty submitted the court might take, if I found the arguments balanced and difficult to resolve in the absence of a relevant decision by the Iraqi courts, would be to conclude that Dr Hawrami (and the KRG) had failed to discharge the burden of proof which rests on him. I take the view, however, that, on the basis of the material presented to me, Dr Hawrami’s position is distinctly more persuasive, and for that reason I do not consider that it is open to me to decide the matter in the way adumbrated by Dynasty. My reasons for concluding that Dr Hawrami’s case is to be preferred follow, grouped under four heads.

In the first place, I consider that the meaning of the text of the Constitution put forward on behalf of Dr Hawrami is both the simpler and more natural construction of its terms.

The starting point is that Article 110, in clear contrast to the terms of Article 25 of the TAL, did not include the management of oil and gas within the areas of the exclusive competence of the federal government. Given the structure of the succeeding provisions of the Constitution this is, and must have been appreciated to be, a change of considerable significance.

Article 111, which deals with ownership of oil and gas, is not part of Article 110. Furthermore, it does not specify a role for the federal government. Its wording may well have been deliberately ambiguous, so as to allow different parties to put different meanings on it, but even if it is taken to mean that the oil and gas of Iraq belongs to all the people of Iraq wherever in Iraq they may be, it does not deal with the issue of who may manage those resources. On the contrary, the fact that Article 112 deals with management of at least present fields highlights that Article 111 does not.

Article 112 First provides for the management of ‘present fields’ to be undertaken by the federal government with the producing governorates and regional governments. In agreement with Professor Crawford’s Opinion (paragraph 20) I consider that the ordinary interpretation of ‘present fields’ means fields already under production, and that this is supported by the use of the word ‘extracted’ and the reference to ‘producing’ governorates. I do not consider that this language embraces areas which were not producing at the date of the adoption of the Constitution. In light of the evidence of Ambassador Galbraith, it appears to be the case that those involved in negotiating the Constitution understood ‘present fields’ not to include any fields located in the KRI.

Given that Article 112 First only applies to ‘present fields’ it does not afford a basis for saying that the federal government has exclusive powers to manage future fields. On that basis, Article 115, and Article 121, are applicable, and provide that a power not exclusively allocated to the federal government will belong to the authorities of the regions and governorates.

Article 112 Second provides that the federal government is ‘with the producing regional and governorate governments’ to formulate necessary strategic policies in a way that achieves the highest benefit to the Iraqi people using advanced market principles and encouraging investment. That does not, however, state that it is a precondition to anything being done in relation to ‘present fields’, or future fields, that such strategic policies should have been formulated. I agree with Professor Crawford’s analysis (paragraph 24), as follows:

The argument that Article 112 creates a sui generis regime, where the powers are neither exclusive to the federal government nor shared, and thus not subject to Article 115 (and 121 Second), is unconvincing given: (i) the sharing arrangements specified in Articles 112 and 113, (ii) the clear terms of Article 115, (iii) the absence of any reference in the text of the Constitution to the existence of a third category or the exemption of Articles 112 and 113 from Article 115, and (iv) the fact that Article 112 is placed between Article 110 and 114, which undoubtedly set out powers which fall within the dichotomy referred to in Article 115. It would be more persuasive to suggest that there might, on a proper understanding, be within Article 112 (and Article 113) certain exclusive powers of the federal government. But even if that were correct, I do not consider that the management of non-present fields could be identified as such an exclusive power given the way that Article 112 is expressed.

Secondly, if the interpretation of the relevant articles which I have set out above suggests a considerable degree of success on the part of the Kurds in relation to the allocation of state powers over oil and gas in the KRI, this is unsurprising, given the powerful bargaining position with which the Kurdish politicians went into the negotiations, described above. The degree of Kurdish influence on those negotiations is tellingly described by one of Dynasty’s own experts, Professor Weller, as follows:

Consistently with this, the view of Professor Haysom, as expressed in May 2006 in a speech in Canada to a conference held under the auspices of the International Peace Academy, was that the ‘constitutional text ha[d] been most deeply influenced by the drive for autonomy of the Kurdish community’, and that this was particularly ‘reflected in those portions of the text that divide the responsibilities and rights of federal government vis-à-vis subnational units’, which, in his view ‘can be characterised as providing for an underresourced and underpowered federal government’. He also said:

The significance of this is that, just after the ratification of the Constitution, wellplaced observers considered that the Iraqi Kurds had indeed converted their bargaining position into a favourable allocation of state powers in relation to natural resources. Prof. Haysom was at that time assisting the constitutional committee working under Article 142, to produce a set of proposed amendments to the

Thirdly, I do not consider that it can be said that the KRG was, in the relevant respects, acting pursuant to its own sovereignty, as opposed to that of Iraq. The Constitution is the source of sovereign authority in Iraq, and is the preeminent and supreme law in Iraq. There was no suggestion before me that it is invalid. As discussed above, it allocates the constitutional power in relation to the management of oil and gas in other than ‘present fields’ to the regions. That is the source of the KRG’s power to exercise sovereignty in that regard. This excludes the notion that it was exercising its own sovereignty.

The case that the KRG was exercising its own sovereignty is in any event a problematic one. It is clearly the case that in the period 1992-2004 the KRG exercised, de facto, the powers of a sovereign, including in relation to natural resources in the KRI. However, in 2004, with the TAL, authority in relation to natural resources was allocated to the federal government. For that reason alone it is not clear that there was any continuing sovereignty in the KRI which could be exercised by the KRG. Moreover, with the Constitution, authority was re-allocated, as part of a ‘fresh start’ for Iraq. The Constitution did not retain or preserve existing separate sovereignties. Furthermore, the KROGL expressly states that it is made in accordance with the Constitution (see in particular Articles 2, 3 and 5 of KROGL, especially Article 3 Third and Fourth).

Dynasty argued that the position was not materially different from that found to obtain in Pocket Kings Ltd v Safenames Ltd [2010] Ch 438, and, in relation to the same subject matter as the present case, in Pearl Petroleum Co Ltd v KurdistanRegional Government of Iraq [2016] 4 WLR 2. In relation to the former, even if the decision in that case is correct that the authority by which the Commonwealth of Kentucky regulates gambling within the Commonwealth is an exercise of its own authority (paragraph [20]), the constitutional position in relation to Iraq and the KRI is not the same.

As regards the latter, what Dynasty relies on is paragraph [37] of Burton J’s judgment. There Burton J said that the entry into of the relevant exploitation agreement was ‘an exercise of the sovereign authority of the KRG itself, not of Iraq’. He said further, ‘They [ie the KRG] would say so [viz that it was acting in its own right], and, because the FGI [ie the Federal Government of Iraq] alleges that the KRG has had no right to do what they have done, the FGI would also assert that what was done was not done by way of exercise of the sovereign authority of Iraq’.

Mr Dunning QC contended that that passage was based on a misunderstanding of Professor Crawford’s Opinion, and in particular the statement in paragraph 43 that, in the absence of agreed strategic policies pursuant to Article 112 Second of the Constitution, the KRG was entitled ‘to proceed in the exercise of its own

Be that as it may, in relation to the specific conclusion reached by Burton J in paragraph [37] of his judgment in Pearl to which I have referred I do not, with respect, consider it to be correct. It was, it is right to say, only one of many points considered by Burton J, and it was not in any event determinative of whether the KRG could, in that case, be subject to a peremptory order because of the KRG’s submission to the jurisdiction. Moreover the point was not, Mr Dunning told me, subject to the same degree of evidence and argument as it has been here. In the present case, furthermore, it is Dr Hawrami’s clear position that the KRG was not acting ‘in its own right’, if by that is meant acting otherwise than in exercise of powers of the state of Iraq allocated to it under the Constitution. Furthermore, I consider that Mr Dunning is correct to say that in focussing on whether the Federal Government would contend that the KRG had no right to do what it had done, rather than whether the Constitution provided that the KRG had the relevant powers, Burton J’s reasoning does not meet the way in which Dr Hawrami here contends that the KRG (and he) are entitled to claim immunity.

Fourthly, I do not consider the fact that the KRI has not adopted a regional constitution assists Dynasty’s case. It is true that the Constitution of Iraq, by Article 120, requires regions, and thus the KRI, to adopt a regional constitution. It does not, however, lay down any time frame within which that is to be done; and nor does it say that until such a constitution is adopted, the government of the region cannot act. The operation of Article 112 (and Article 115), in particular, is not made conditional upon the adoption of a regional constitution.

For these reasons, I consider that the KRG’s relevant acts, assuming that that they were in themselves sovereign acts, were done in exercise of the sovereign authority of the state of Iraq.

The issue of whether the relevant acts were acts done in the exercise of sovereign authority arises at two stages of the analysis. Given that the KRG is a ‘separate entity’ within s. 14 of the SIA, it will not have immunity unless the proceedings ‘relate to anything done by it in the exercise of sovereign authority’ (s. 14(2)(a)). In addition it will not be immune unless the circumstances are such that a State would have been so immune (s. 14(2)(b)) which itself entails that the exception in s. 3 is not applicable. As was recognised by Dynasty, however, in cases such as the present in which only the commercial exception within s. 3 would potentially be applicable in relation to the immunity of a state, the two tests under s. 14(2)(a) and (b) can be conflated.

The question of whether or not proceedings ‘relate to anything done in the exercise of sovereign authority’ requires the Court to consider:

The question to be addressed in deciding whether an act is jure imperii was formulated by Lord Wilberforce in I Congreso del Partido [1983] 1 AC 244 (at common law), as follows:

In Kuwait Airways Lord Goff, having quoted from Lord Wilberforce’s speech in I Congreso said (at 1160A):

The issue is as to the character of the act, not the motivation for it. Lord Sumption in Benkharbouche v Embassy of the Republic of Sudan [2019] AC 777, said, at [8]:

In Holland v Lampen-Wolfe [2000] 1 WLR 1573, Lord Hope re-emphasised that: ‘It is the nature of the act that determines whether it is to be characterised as jure imperii or jure gestionis. The process of characterisation requires that the act must be considered in its context.” (at 1577B/C)

In that case the writing of a memo, alleged to be defamatory, by the defendant, who was a civilian educational services officer with responsibility for educational training programmes provided to military personnel and their families at a US base in England, was held to be an act jure imperii. At 1587C/D Lord Millett expressed the matter in this way:

Relatively few cases have been decided in this jurisdiction relating to the exploitation of state-owned natural resources. The issue was considered, albeit briefly, and without a concluded view being expressed, in Svenska PetroleumExploration AB v Government of the Republic of Lithuania (No. 2) [2007] QB 886. At [133] Moore-Bick LJ said:

In Pearl v KRG, to which I have already referred, Burton J was presented with an issue as to whether those proceedings related to anything done by the KRG in the exercise of sovereign authority. The ‘Heads of Agreement’ which the parties had entered into in that case, and which Burton J had to consider was in many respects similar to the PSCs in the present case. At paragraph [36], having referred to Svenskav Lithuania, he said:

Some further assistance can be gained from a consideration of certain Federal Court decisions from the United States. These have to be treated with care, but are of some interest, given the similarity of the ‘commercial activity’ exception in s.

In IAMAW v OPEC 477 F. Supp. 553 (C.D. Cal., 1979) it was said (at 567-8) that ‘The control over a nation’s natural resources stems from the nature of sovereignty … The defendants’ control over their oil resources is an especially sovereign function because oil, as their primary, if not sole, revenue-producing resource, is crucial to the welfare of their nations’ peoples…’ Similarly, in In reSedco, Inc 543 F. Supp. 561 (S.D. Tex., 1982), it was said, in the context of conduct of Pemex, a Mexican State-owned oil company, (at 566) that ‘A very basic attribute of sovereignty is the control over its mineral resources and short of actually selling these resources on the world market, decisions and conduct concerning them are uniquely governmental in nature.’ In Jones v Petty Ray Geophysical Geosource 722 F. Supp. 343 (S.D. Tex., 1989) the In re Sedco, Inc approach was followed, and it was held that a petroleum production sharing agreement between Sudan and an energy company was not a ‘commercial activity’. More recently, in RSM Prod. Corp. vFridman, 643 F. Supp. 2d. 382 (S.D.N.Y., 2009), it was found that the Deputy Prime Minister of Granada, in denying the plaintiff’s application for a licence to conduct oil and gas exploration off the coast of Granada, had ‘exercised a right that is “peculiar to sovereigns”’, because ‘ “licensing the exploitation of natural resources is a sovereign activity”…’ (at 399).

In my judgment, the entry into by the KRG of the PSCs were ‘sovereign or public acts’, or acts jure imperii, and not ‘private acts’. They concerned the exploitation of the natural resources of the KRI. There is no doubt that those resources were publicly, and not privately, owned, whatever the precise meaning which is given to Article 111 of the Constitution; and only a government, acting on behalf of the public, could enter into contracts such as these in relation to the exploitation of such resources. They were entered into pursuant to powers which, as I have found, were allocated to the KRG under the Constitution, and under the KROGL, which was enacted to give effect to those powers. Moreover, the terms of those contracts contain a number of provisions which it is apparent that no private person could make, including promises in relation to such matters as compulsory purchase, planning consents, customs, tax exemptions and pipeline rights. The parties to those agreements also considered it expedient to include a waiver of the KRG’s sovereign immunity. Consistently with the decision of Burton J in relation to the ‘Heads of Agreement’ with which he was faced in Pearl v KRG, I conclude that the entry into of the PSCs was in the exercise of sovereign authority.

Dynasty contends, however, that even if the entry into of the PSCs was a sovereign act, the same does not apply to decisions to sanction, or not sanction or consent to, a transfer of control of the contracting entities. I do not consider that this is correct. A decision as to whether or not a new party should be permitted to become a replacement party to a long term contract for the exploitation of natural resources

The further issue arises as to whether Dr Hawrami himself is protected by the immunity to which, as I have found, the KRG is entitled in respect of the relevant acts. In this regard, there is no dispute that Dr Hawrami, at all times material to

Dynasty contends that an individual who acts as the servant, agent or employee of a ‘separate entity’ within the meaning of s. 14 of the SIA is not entitled to immunity, even though the ‘separate entity’ is immune in respect of the relevant acts. This, Dynasty says, is at least the case where the ‘separate entity’ has not acted on the instructions or at the behest of the government of the State but rather pursuant to a constitutional entitlement to act.

It is convenient to start with the position of servants, agents, officials or functionaries of the state itself. The SIA does not expressly provide for the case where suit is brought against any such agents of a foreign state. There was authority at common law (and in other countries), however, that a foreign state’s right to immunity could not be circumvented by suing its servants or agents. Consistently with this it has been held that the immunity provided for by s. 1 of the SIA extends to the servants or agents of foreign states who are sued in respect of matters where they were acting in discharge or purported discharge of their duties as such (see PropendFinance Pty Ltd v Sing (1997) 111 ILR 611; Jones v Ministry of the Interior of theKingdom of Saudi Arabia [2007] 1 AC 270).

As it was put extra-judicially by Lord Lloyd-Jones in the 2018 Grotius Lecture to the BIICL:

In relation to the position of servants, agents or other functionaries or officials of separate entities ‘distinct from the executive organs of the government of the State

In Grovit v De Nederlandsche Bank NV [2006] 1 WLR 3323 it was accepted (para. [62]) that the employees of a separate entity (viz. the central bank of the Netherlands) would be entitled to immunity in respect of acts done in the exercise of sovereign authority. In my judgment, though this was a matter of concession, it was a correct concession. Were it not the case, then there could be a simple circumvention of the immunity to which a separate entity, acting ex hypothesi in the exercise of sovereign authority, was entitled pursuant to s. 14(2) SIA.

The argument put forward by Mr Waller QC for Dynasty was that individuals who were servants or agents of a separate entity should, at most, be entitled to immunity where that entity was acting on behalf of the state pursuant to a delegation of a function to it by the government of the state, and not in a case of a constitutional allocation of a function to the separate entity. This appeared to me, in essence, an attempt to revisit Dynasty’s ‘threshold’ argument which I have considered and rejected above. Once it is recognised, as I have concluded it should be, that a separate entity may be entitled to immunity if it is exercising sovereign authority pursuant to a constitutional allocation to it of such authority, then I consider that its servants or agents should be entitled to the same immunity, for otherwise it would lead to the circumvention of the immunity which it has been found that the entity should have.

Dr Hawrami contends that the service of the Claim Form effected upon him at Heathrow Airport was invalid and ineffective because he should have been served by the method set out in s. 12(1) SIA. That sub-section provides:

By way of background to the present point, in PCL v The Y RegionalGovernment of X [2015] EWHC 68 (Comm), which was an earlier decision in the same litigation as the decision in Pearl Petroleum v KRG to which I have already referred, it was held by Hamblen J that, because of the terms of s. 14(5) of the SIA, and because the KRI is a constituent territory of the federal republic of Iraq, the KRG was entitled to insist on service by means of the method prescribed by s. 12 of the SIA. That required service on the Ministry of Foreign Affairs of Iraq, located in Baghdad. That, as Mr Dunning QC informed me, was what had happened after the decision of Hamblen J in that earlier litigation. That earlier litigation, and Hamblen J’s decision, did not involve service on an individual servant or agent of the KRG, but it was Dr Hawrami’s case before me that, just as the KRG would have to be served via the Ministry of Foreign Affairs in Baghdad, so should he have been.

Dynasty contends that Dr Hawrami’s case in relation to service is wrong for three reasons. First, it contends that s. 12 does not apply to service of proceedings on servants or agents of states. Secondly, whether or not the first point is correct, s. 12 does not apply to service of proceedings on servants or agents of constituent territories of states. And thirdly, if s. 12 could in principle apply to servants or agents of states or constituent territories, it would not apply on the facts of the present case.

I will start with the position of servants or agents of states (not, for the avoidance of doubt, including the head of state amongst such servants or agents). In my judgment, there is no requirement that such servants or agents should be served by the method prescribed in s. 12. This is the view expressed in Fox and Webb The Law of State Immunity (3^rd ed revised), where at p. 231 it is stated:

This is also the preferred view, expressed in Dickinson et al. State Immunity para.

I consider that these statements are correct. Entities, servants or agents distinct from the State as defined in s. 14(1) are not, by that sub-section, accorded the privilege in s. 12. There is no good reason for reading the SIA so as to afford them that privilege. In this regard, there is no question here of the circumvention of an immunity which the Act confers. The fact that individuals may be served otherwise than through the s. 12 procedure does not prevent a claim for immunity if they were acting in their capacity as servants or agents of a state acting in the exercise of sovereign authority.

That s. 12 should not apply to service on servants or agents of States is supported by practical considerations. It would be productive of uncertainty if it did apply. While it can be reliably said whether an entity falls within the meaning of State in s. 14(1), it may not be known by a claimant at the time of issue and service of proceedings whether an individual (a) was a servant or agent of the State, or was such an agent at the relevant time, and (b) will contend that (s)he was acting on behalf of the State. Certainty is better achieved by the individual being served by ordinary process, and then being able to assert immunity if appropriate. In addition, while the

Given my conclusion in relation to service on servants or agents of States, I consider that the same must apply to the servants or agents of ‘constituent territories of a federal State’ (as that term is used in s. 14(5)) and a fortiori in relation to the servants or agents of separate entities which are not constituent territories. There is no express provision in the SIA that such persons should be served in accordance with the s. 12 procedure and there are various practical considerations, similar to those I have outlined above in relation to the servants or agents of states, why they should not.

For the sake of completeness I should add that I did not find the two cases upon which Dr Hawrami relied in support of the contention that servants or agents of a State should be served in accordance with s. 12 to be of assistance in that regard. In

Dr Hawrami further contends that the claim against him is not justiciable on the basis of the doctrine known as foreign act of state. Specifically, he relies on what was described as the ‘second rule’ in Lord Neuberger’s summary of the doctrine in Belhajv Straw at paragraphs 120-124. That ‘second rule’ was formulated by Lord Neuberger as that:

Dynasty’s primary position is that Dr Hawrami’s reliance on act of state adds nothing to his case on sovereign immunity. While Dr Hawrami contended that there might be circumstances in which he could have lost in relation to sovereign immunity but the doctrine of act of state would still be applicable, as I have found that he is entitled to assert immunity, reliance on the act of state doctrine in the present case does not further assist him.

The doctrine of act of state, and in particular its ‘second rule’, is in various ways controversial. The Supreme Court in Belhaj v Straw did not have to decide any issue in relation to property rights, and left open the scope of any ‘second rule’ in that area (see paragraphs [136]-[143] in the judgment of Lord Neuberger, with whom Lady Hale and Lords Wilson and Clarke were in agreement). By comparison with the complexity of the issues involved, the points on the doctrine of act of state were argued rather briefly before me. Furthermore, on at least one of Dynasty’s arguments, it would be premature to seek to make a determination on the issue of act of state at this stage in the proceedings.

In light of these matters I consider that it is unnecessary for me to express views on the issue of the potential application of the doctrine, and that it would be better for such matters to be decided in a case in which they were important to the result.

Dr Hawrami contends that the present action should be permanently stayed on the basis that the courts of the KRI are clearly and distinctly more appropriate for the trial of the action.

This challenge gives rise to two distinct issues. The first is whether the court has a discretion to stay, or whether instead the present case is subject to the regime of the Brussels Recast Regulation. The second is whether, if the Brussels Recast Regulation is not applicable, whether the court should exercise its discretion to stay.

Dynasty’s first response to this part of Dr Hawrami’s application is to contend that Dr Hawrami is precluded from seeking a stay because: (i) the present is a ‘civil

Dr Hawrami now accepts, for the purposes of this application, that Dynasty can show that he was domiciled in England. He does not dispute that, if the action against him is a ‘civil or commercial matter’ within the Recast Regulation, then the claims against him cannot be stayed. The issue is whether the present action comes within the scope of the Recast Regulation.

By Article 1 of the Recast Regulation it is provided:

Dr Hawrami submits that the present action is not a ‘civil or commercial matter’.

I was referred to a number of authorities on the boundary of ‘civil and commercial matters’ where the acts or omissions complained of are those of a public authority or public official. A helpful summary of much of the jurisprudence is provided by Briggs: Civil Jurisdiction and Judgments (6^th ed), at 2.31-2.35.

At para. 2.35 Prof. Briggs attempts a summary of the law, of which the first two elements are stated as follows:

Dr Hawrami relied in particular on the case of Grovit v De Nederlandsche BankNV [2006] 1 WLR 3323 (Tugendhat J), and [2008] 1 WLR 51 (Court of Appeal). In that case, one of the companies in a group which operated money transaction offices applied for registration in the Netherlands. In response the defendant, the Central Bank of the Netherlands, sent a letter to the London office of another company in the same group, stating its intention not to register the company and giving reasons. The claimants sued the bank and two of its officers for libel. Both at first instance and in the Court of Appeal it was held that the claim was not a ‘civil or commercial matter’. This was notwithstanding that it was formulated on the pleadings simply as a claim in defamation. In the Court of Appeal, Dyson LJ, having referred to a passage in an earlier edition of Civil Jurisdiction and Judgments than the one referred to above, said, at [13] that he found valuable:

At para. [16] Dyson LJ, having considered both Sonntag v Waidmann [1993] ECR I-1963 and Lechouritou v Germany [2007] IL Pr 14, said that he considered that the Judge had clearly reached the correct decision in holding that the claim was not a civil or commercial matter. He said:

Similarly, at [21]-[22] May LJ said:

In my judgment, the present case is one which falls outside the scope of ‘civil or commercial matters’ because it is concerned with the exercise of public powers. I reach this conclusion having regard in particular to the following:

Considering these matters, the case is, in my view, one which falls on the same side of the dividing line as Grovit v Nederlandsche Bank, and where, in Prof Briggs’s phrase, Dr Hawrami performed the functions out of which the claim is brought as a matter of public law. I consider that this qualifies the claim as an ‘administrative matter’ for the purposes of Article 1 of the Recast Regulation, and even if not ‘administrative’ is nevertheless not a ‘civil or commercial’ matter.

Thus far I have not considered whether the present case falls within the State authority clause added to the Recast Regulation. As is apparent from Lechouritou vGermany, the issue of whether an act was in the exercise of State authority was relevant before the recasting of the Regulation, to the question of whether the case was a ‘civil or commercial’ matter. The addition of the State authority clause certainly reinforced that; and may have expanded the scope of the second sentence of Article 1.

I have already held that the acts in question were acts or omissions in the exercise of sovereign authority, and were acta jure imperii, such as to entitle Dr Hawrami to claim the benefit of state immunity under the SIA. I consider that the corollary of that is that the case falls within the State authority clause of Article 1 of the Recast Regulation. The possible arguments against that conclusion appear to me to be twofold. First, that the relevant clause speaks of the liability of ‘the State’, whereas here, subject to the second point considered below, the liability would be of the government of a constituent territory of a State. I do not consider that that should mean that the State authority clause is inapplicable. Ex hypothesi, the constituent territory was exercising State authority and performing acts or omissions jure imperii. The clause should in my view be read as saying that actions involving the liability of an entity exercising State authority and performing acta jure imperii do not fall within the scope of the Recast Regulation. In other words, if an entity is exercising State authority, then it is its liability which is being referred to in the phrase ‘the liability of the State’, whether or not it is the State itself or a constituent territory of a State.

The second possible argument is that it might be said that a claim against a servant, agent or functionary of a State-actor does not involve ‘the liability of the State’. In the present case, however, it is alleged both that Dr Hawrami is himself liable, and also that the KRG is vicariously liable for his acts, so this argument does not appear to arise here, as there is undoubtedly an alleged liability of the entity which exercised State authority. In any event, a State-actor will very often in reality have to stand behind its servants or agents, if they are sued in respect of acts done on behalf of the State. It is accordingly likely that an action against servants or agents of a Stateactor will in practice involve ‘the liability of the State’.

I therefore conclude that the present case falls within the State authority clause of Article 1, and thus, for that further or additional reason, falls outside the scope of the Recast Regulation.

On the basis that the terms of the Recast Regulation are not applicable to the case, Dr Hawrami applies for a stay of the present proceedings on the basis of forum non conveniens.

The principles applicable are familiar, and were stated in Spiliada MaritimeCorporation v Cansulex Ltd [1987] 1 AC 460. For present purposes, they are as follows:

There are thus two stages involved, on which the burden of proof differs. I will proceed to deal with the two stages below, as there was an issue between the parties about each.

In relation to the question of whether there is another forum which may be said to be the natural forum, or that with which the action has the closest and most real connexion, I have reached the clear conclusion that there is: the courts of the KRI. The evidence indicates that the courts of the KRI are available to hear any claim against the KRG and one of its ministers. The matters which have led me to the conclusion that those courts constitute the forum with which the action has the closest and most real connexion can be summarised under five heads.

Connexions of Parties with particular places In relation to the connexions of the parties with particular places, Dynasty’s connexions are with Iraq and the KRI. Dynasty is an Iraqi company. It has its base of operations in the KRI, and is controlled by Kurdish shareholders. Its literature describes it as ‘a joint venture between two of Kurdistan’s leading private energy companies’.

In relation to Dr Hawrami, he has dual nationality: British and Iraqi. He is, or may be treated for these purposes, as being domiciled in the UK. But he was at the material times a Minister of the KRG. It is Dynasty’s evidence that he has a residential and a business address in Erbil. It seems clear that he spent time in both places.

Where the relevant events occurred The events with which the claim is concerned appear to have occurred largely in the KRI. The relevant correspondence during 2019 was addressed to and from the MNR or other parts of the KRG in Erbil. At least some was addressed personally to persons physically present in Erbil: for example the letter to the Prime Minister of 25 July 2019. Most communications sent by Repsol were sent from the ‘Country Manager – Kurdistan’, Mr De Los Reyes, and if he was not in the KRI, there is no suggestion on the communications that he was in England. The communications sent by Dynasty appear clearly to have been sent by persons in the KRI. The phone call which Dynasty contends took place on 3 May 2019 between the Deputy Prime Minister, Qubad Talabani, and Hiwa Ali was between two people who were in the KRI. The meetings between Hiwa Ali with Mr Lahur took place in Sulaymaniyah.

Dynasty relies heavily on the meeting between Dr Hawrami and Repsol and WesternZagros at the Intercontinental Hotel in London on 7 May 2019. Dr Hawrami contends that it was a without prejudice meeting and reference should not be made to it. Be that as it may, the fact that this meeting was in London appears adventitious, and a matter of convenience: it was a meeting involving representatives of Spain- and Canada- based international oil companies, with representatives of the KRG.

Although Dynasty contends that Dr Hawrami was masterminding the conduct of the KRG, and from England, it is part of Dynasty’s case that he was conspiring with the KRG, which must include other members of the Regional Council, who were in the KRI. It is also inherent in Dynasty’s pleaded case that the decision not to approve a change of control only finally became effective after the letter to the Prime Minister of 25 July 2019 went without response. Accordingly, Dr Hawrami was not, on Dynasty’s own case, the only person involved on behalf of the KRG.

Applicable law The law which is to be applied to the issues, consistently with my decision that the Recast Regulation does not apply because the matter is not a ‘civil or commercial’ one, and considering that the Rome II Regulation contains a similar exception, is to be determined in accordance with the Private International Law (Miscellaneous Provisions) Act 1995. Under s. 11 (1) of that Act, the general rule in relation to claims in tort or delict is that the applicable law is the law of the country in which the events constituting the tort or delict in question occurred. Under s. 11(2), where elements of those events occur in different countries, the applicable law is, relevantly, ‘the law of the country in which the most significant element or elements of those events occurred.’

Given the nature of the test, it is not possible to form any concluded view at this stage as to what is the applicable law. My provisional view, however, is that the applicable law is the law of Iraq, and in particular the law of the KRI. I say this because it appears to me on the material at present that the most significant elements of the events constituting the alleged torts or delicts occurred in the KRI. In this regard I have had regard to the points I have made above, as to where events occurred. In addition, there is a strong argument that the final decision as to whether a change of control should occur lay, pursuant to KROGL, with the Regional Council, and there was no suggestion that a decision by the Regional Council would be made anywhere other than in the KRI. The meeting in London on 7 May 2019 was one at which no representative of Dynasty was present. While it is Dynasty’s case that that meeting evidenced the fact that Dr Hawrami’s mind was – unreasonably - made up, it does not appear to have any particular juridical significance in constituting the torts or delicts alleged. Finally, if any loss was suffered by Dynasty as a result of the lack of consent to a change of control, that loss was, on the evidence, clearly suffered in the KRI.

My provisional view that the applicable law is the law of the KRI has this significance: it is, other things being equal, preferable that issues are decided by courts applying their own law. The weight of the point is not to be overstated, because it is of course commonplace for courts to apply other laws, but it is a factor which points towards the courts of the KRI as being the most appropriate forum.

Dynasty contends that, if the applicable law is the law of the KRI, that does not have even the significance I have accorded it in the previous paragraph because the courts of the KRI would have to have regard to English law. I do not consider that this point has any cogency. The alternative claims which Dynasty pleads in the Substituted Particulars of Claim under Iraqi law do not appear to be based on the terms of the PSCs or English legal standards incorporated into the PSCs, but on Iraqi law concepts of fault. In any event, insofar as reliance was placed, in the context of Iraqi law claims, on the requirement in the PSCs that consent should not be unreasonably withheld, I am not persuaded that considerations of English law would occupy any significant time. This is because it seems likely that, if the KRG’s conduct was justified in accordance with KROGL, then it would be regarded as a reasonable ground for withholding consent.

Documents and witnesses In relation to the location of documents, the position appeared to me as follows. Any documents of the KRG, including of the MNR, will be in the KRI, and many may be in Kurdish. Dynasty’s documents, to the extent that it has any, will probably be in the KRI. Documents relating to quantum, including the value of the PSC, would appear likely to be predominantly in the KRI. Dr Hawrami may have his own documents here, but it seems likely that any which are not electronic, and thus easily transportable, will not be very numerous. I did not understand Dynasty to suggest otherwise.

As to witnesses, Dynasty’s evidence identifies 13 witnesses it may call, and anticipates that Dr Hawrami / the KRG might call 9. Apart from Dr Hawrami, there was no suggestion that the other witnesses for him/the KRG are based anywhere other than in the KRI. Those witnesses include the President of the KRG, Nechirvan Barzani, the Prime Minister, Masrour Barzani, the Deputy Prime Minister, Qubad Talabani, and Mr Lahur, Head of Intelligence. It seems to me that it might be disruptive to the government of the KRI if all those witnesses had to give evidence in England. In any event, it would clearly be more convenient for them to give evidence in the KRI. The witnesses Dynasty considers that it might call include 5 from Repsol and 2 from WesternZagros. I agree with Mr Dunning QC that it is by no means clear that those companies will agree to or facilitate their employees giving evidence. Of the other witnesses, with one possible exception, I understood them all to be based in the KRI.

The overall shape of the case The underlying subject matter of the claim, which is the right to exploit resources in the region of the KRI, and which Iraqi Kurdish interests (viz Dynasty and its shareholders) wish to enjoy, is strongly suggestive of the KRI as being the natural forum.

It is the case that the relevant PSCs were governed by English law; but Dynasty was not a party to them. It is also the case that the SPA with Repsol was governed by English law, but the KRG was not party to it. I agree with the submission made on behalf of Dr Hawrami that it is useful to pose the question of whether persons in the position of Dynasty had, in the absence of a contract with the KRG, a reasonable expectation that English law and English jurisdiction would apply to any claim that they might have against the KRG in respect of a refusal to allow them to participate in PSCs regarding the KRI’s natural resources. In my view the answer to that question is that they would not.

Accordingly my conclusion as to the first stage of the enquiry is the case has its closest and more real connexion with the KRI and the courts of the KRI are the natural forum for its resolution.

I therefore turn to the second stage of the enquiry. In relation to this, guidance was given by the Privy Council in Altimo Holdings and Investment Ltd v KyrgyzMobil Tel Ltd [2012] 1 WLR 1804. The Privy Council rejected the argument that, at the second stage, the claimant had to show that justice would not be done in the foreign jurisdiction. At paras. 95-101 Lord Collins, giving the judgment of the Board, said:

Some consideration to what might or might not constitute ‘cogent evidence’ was given by Andrew Smith J in Ferrexpo v Gilson Investments Ltd [2012] EWHC 721 (Comm). The judge there rejected the submission that because there was evidence from a distinguished expert as to a risk of injustice that would suffice to establish one. While recognising that allegations of the risks of injustice in the foreign forum are ones on which it may be difficult for the claimant to present ‘direct or primary evidence’ (para. [43]) he continued, at [44]:

I was also referred by both sides to, and found helpful, the commentary of Prof. Briggs in Civil Jurisdiction and Judgments (6^th ed). At para. 4.30, in relation to the second stage of the Spiliada test, he says:

At para 4.35, in considering ‘direct attacks on the integrity of the foreign court’, he comments on the general difficulties of an English court conducting ‘some kind of quality audit’ of the judicial systems of friendly states, and the absence of ‘judicially manageable standards by which this could be done’. Subsequently, having referred to the development of the law ratified in Altimo Holdings, Prof Briggs says:

Aspects of the cautions enunciated by Prof Briggs are in my view well founded. The bar should not be set too low. It must be borne in mind that in being invited by the claimant to act on a risk that justice will not be done in the other forum, the court is also being invited to take the risk of other undesirable results, including that the case is tried in a forum other than the natural one in circumstances where justice could in fact have been done in the natural forum, as well as acting in a manner which may be contrary to comity.

In addition, as the passage quoted indicates, there are reasons for circumspection in having regard to general statements as to a country’s legal system, even coming from reputable organisations. Unless the court can see what underpins such statements, it is very difficult to place weight upon them. General statements are easily made, but may embody an opinion by the author with which others might not agree, based on evidence which others might not find convincing.

Against that background I turn to consider the case made by Dynasty as to why it would be unjust for a stay to be granted. It had two principal aspects. First that the courts of the KRI lack independence; and second, that the courts of the KRI lack competence. I will take them in turn.

The first is that the courts are not independent of the executive or at least of the political parties, and would not find in favour of Dynasty and against the government in a matter of the present magnitude and sensitivity. In relation to this case as to the lack of independence of the KRI courts, Dynasty relied principally on a report from Prof. Gerges. While I do not doubt Prof Gerges’ expertise in relation to international relations in the Middle East and on Islamist violence, there was, I thought, considerable force in the point made on Dr Hawrami’s behalf that he was not shown to have any particular expertise in relation to the justice system within the KRI. He is not a lawyer, and clearly not one practising in the KRI. He does not list any publications in his CV relating to Kurdish matters. His report contains occasions where he seems to suggest that matters relate to the KRI when in fact they occurred in other parts of Iraq. This is notwithstanding that there are apparently cogent grounds for care being taken to distinguish evidence relating to the KRI from that relating to the remainder of Iraq, or the wider region, not least in the terms of the House of

Prof. Gerges referred to, and Mr Kimmins QC relied upon, a number of comments in publications about the judicial system in the KRI. With the exception of two matters, to which I will return, the – relatively short – comments applicable to the judicial system in the KRI are unspecific as to the basis of their statements (eg. in the US Department of State’s Country Reports, the second part of the sentence ‘The

Dynasty also relied on various matters which it said showed the power and influence of Dr Hawrami, for example his closeness to the Prime Minister and the President of the KRI. I will not go through this material. Suffice it to say that none of it appeared to me to demonstrate that Dr Hawrami had influence over the courts of the KRI.

For his part, Dr Hawrami relied upon an expert report from Mr Taher, and evidence from Mr Aziz, who represents the MNR in proceedings brought against an affiliate of Dynasty under the same management, Tigris Energy, in the courts of the KRI. Mr Taher is the head of a litigation practice in the KRI and gives examples of pursuing claims against companies associated with one of the main KRI political parties and of overturning administrative decisions taken by ministries of the KRG. Mr Kimmins criticised Mr Taher’s report on the basis that he had exhibited no documents and given inadequate details, but it appears to me that I cannot ignore it. As to Mr Aziz, he gives evidence that more than 85 cases were commenced against the KRG and its instrumentalities in the Erbil Administrative Court during 2019, and says that there would have been further cases brought in the Sulaymaniyah

Dr Hawrami also relied on the fact that one of Dynasty’s shareholders, South Kurdistan, and Tigris Energy, had both commenced proceedings in the courts of the KRI against the MNR in the last few years. On behalf of Dr Hawrami it was submitted that this indicated that these entities did not regard those courts as likely to be so biased in favour of the MNR that there was no point in suing. There appeared to be some force in this. I did not regard as convincing Mr Jalal’s statement that Tigris Energy had known that it would not get a fair trial but had commenced proceedings only as a matter of principle.

There were two aspects of the material exhibited by Prof Gerges which need to be separately considered. The first of these related to an incident at the beginning of 2014, concerning a Mr Shwan Sabir. I was shown two reports which referred to this. One was a piece written by Kawa Hassan entitled ‘Kurdistan’s Politicized Society Confronts a Sultanistic System’. This was published by the Carnegie Endowment for International Peace, under a general disclaimer that the views were the author’s own. It recounts that Shwan Sabir, ‘a judge and investigator in the regional judiciary council’, used his Facebook page to criticise the High Judicial Council for not being impartial and to argue that courts in Kurdistan were not independent. It is said that after a complaint from the council, the court in Erbil ruled that he should be arrested,

It is difficult to place a great deal of reliance on this. The reports appear to be at least third hand. The nature of what Mr Sabir posted is rather differently summarised, as is his position. In each case the account was transmitted through someone who appears to have had – and this is not intended critically – a wider agenda.

The other example was what Mr Kimmins QC referred to as evidence of ‘mass resignations’ from the judiciary. The basis for this is a report by the Tahrir Institute for Middle East Policy, dated December 2019. It recounts the resignation of Judge Latif Sheikh Moustafa from the regional judicial council, on the basis that he was protesting the intervention of the region’s two main political parties in judicial appointments. The author (Kamal Chomami) says that this resignation ‘comes after four other resignations of senior judges for similar reasons in the past four years’. There is, however, no indication of who these other judges were, or any more specific identification of the reasons. I was given no account of the origin, purpose or composition of the Tahrir Institute for Middle East Policy. I have no reason to doubt that its objectives are worthy. However, it appears clear from the article itself that it has political aims in view. For example, an extension by the Consultative Council of Masoud Barzani’s term of office is described as ‘illegal’, and the article contains a series of criticisms of the effect of the dominance of the two parties, the KDP and the PUK, and of the weakness of the opposition to them.

A report by a press organisation, Peregraf, of a press conference with Judge Moustafa tends to suggest, as does the Chomani piece, that his primary concern was that the two political parties had divided the ten appointments to the Council of Cassation 50/50 between them. Mr Dunning QC suggested that a reason for this might be that Judge Moustafa had had political affiliations himself, other than with the two main parties; and in any event submitted that judicial systems in which appointments may be heavily influenced by party affiliations are by no means unknown in fora whose fairness is not open to doubt. He also made the point that there is material to indicate that Dynasty and its shareholders have strong ties with one of the two political parties, namely the PUK (DJS6, Insider’s View Bulletin, 29 September 2020).

Having considered the arguments made and material presented, I have concluded that it has not been shown by cogent evidence that there is a real risk that the courts of the KRI are so lacking in independence of the KRG that they will not do justice in accordance with the applicable law. In reaching this assessment, the following matters are most significant: (1) that Prof Gerges was not shown to have specific expertise in relation to the KRI; (2) that there is evidence from practising lawyers in the KRI which indicates that the courts are prepared to decide cases against the government; (3) that there are significant questions as to the reliability and objectivity or as to the basis of various statements made by commentators; and significantly (4) there is no evidence of any case or cases being decided unjustly or perversely because a lack of independence on the part of the judiciary means that it will not decide cases against the government or governmental agencies irrespective of the merits. While it cannot be said that there is no evidence of a risk, I do not consider that what there is, carefully considered and taken as a whole, amounts to cogent evidence of a real risk.

The other aspect of Dynasty’s case on the second stage of the Spiliada test was that the courts of the KRI lack the competence to deal with the present case. This aspect was not much emphasised in Dynasty’s written or oral submissions. It suffices to say that, taking into account the evidence of Mr Taher and Mr Aziz, and also that Mrs Al Qurnawi accepts that she has never practised before the courts of the KRI, I was not persuaded that there was a real risk that justice could not be obtained in the courts of the KRI by reason of their incompetence or the insufficiency of their procedures to deal with a case of this nature.

On the basis of these considerations, and in the exercise of my overall discretion, had I not found that Dr Hawrami was entitled to immunity, I would have stayed these proceedings.

For the reasons I have set out above, I will make a declaration that the court has no jurisdiction pursuant to the SIA. Further, had Dr Hawrami not been entitled to avail himself of immunity, I would have stayed the proceedings on the grounds of forum non conveniens.

I will receive submissions from the parties as to the precise form of the orders which should be made, if they are not the subject of agreement.