Grovit v De Nederlandsche Bank & Ors

On 15th February 2005 Stefan Grovit issued a claim against the three Defendants for libel contained in a letter dated 16th July 2004. The first Defendant is the central bank of The Netherlands. The second Defendant is the head of the Bank’s Money Transaction and Trust Office Department, and the third Defendant is a supervisor in that department.

The Claim Form carried the statement that the High Court has power under Council Regulation (EC) number 44/2001 of 22nd December 2000 (on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters) to hear the claim. I shall refer to this as the Judgements Regulation.

On the same date similar proceedings were issued by two other claimants, Dominic Thorncroft and Felix Grovit. On 6th September 2005 solicitors on behalf of all three Defendants issued an Application Notice in each of the three actions. The applications, which are now before the Court, are for a declaration that the Court has no jurisdiction in these matters on the grounds that the Defendants are entitled to immunity under the State Immunity Act 1978 (“the 1978 Act”) and/or at common law, with consequential orders to dispose of the proceedings by a strike out or stay, or as may be appropriate.

It will be necessary to consider the 1978 Act in more detail, but section 2 of the Act provides that state immunity may be lost by submission to the jurisdiction of the Court. By section 2(3) a state is deemed to have submitted subject to sub-sections (4), if it has intervened or taken any step in the proceedings, unless the only intervention made is for the purpose of claming immunity. Accordingly, the Application Notice on the part of the Defendants does not claim any other relief, or rely upon any other grounds for the relief that it does claim. Should the application that the Defendants make fail, they have made clear that there would be other applications that they would be minded to make to bring the proceedings to an end, based on allegations of abuse of process (relying on Jameel v Dow Jones [2005] EWCA Civ 75; [2005] QB 946). These are not matters which can arise for consideration by me at this stage.

Mr Stefan Grovit describes himself as follows in his Particulars of Claim:

“The Claimant is the Business Development Manager of Transcheq Express Inc “(Transcheq)”, a money transfer company. Transcheq is a Panamanian company registered at UK Companies House with an office at 85, Cromwell Road, London… The Claimant lives and works in London. Transcheq is a company associated with the Chequepoint Group (“Chequepoint”) through a common holding company. Chequepoint operates Bureau de Change outlets in Europe Harada Ltd (“Harada”) is an Irish company, registered at UK Companies House, whose offices are at 85 Cromwell Road, London… it is part of Chequepoint and operates Bureau de Change outlets in the UK. Carigna Investments NV (“Carigna”) is part of Chequepoint. It is a Dutch Antilles company with offices at 16 Damrak, Amsterdam, Netherlands. Until 26th October 2004 when it was closed by the First Defendant it operated a Bureau de Change outlet in Holland and was the agent for Transcheq in Holland.”

Under the heading Publication, the following allegations are made in the Particulars of Claim. It is said that each of the three Defendants published or caused to be published the letter dated 16th July in the form of a fax sent to a machine at the offices of Harada in London. The fax was in Dutch. It was translated into English. It was read in full in Dutch by the translator and in English by five individuals three of whom are identified as working for the company that carried out the translation. It is alleged that there was a subsequent publication of the letter to an employee of Harada during the course of her preparation of letters written in response to the first Defendant which were dated 21st July and 27th July 2004. In the case of the claim by Mr Stefan Grovit the other two publishees are Mr Felix Grovit and Mr Dominic Thorncroft.

The Dutch original version of the fax is headed with the name of the Bank and is signed by the Second and Third Defendants. Their job titles appear under their signatures. It covers ten very closely typed pages. A substantial extract from it is set out as the words complained of in the Particulars of Claim. This includes the title to the letter, which gives the gist of it in one sentence. It reads as follows:

“Re: Intention to decide that the trustworthiness of directors and joint policy making executives is open to question, intention not to allow entry in the registry, and also invitation to notify position”

The letter continues as follows:

“Gentlemen,

In view of the request for entry in the register as intended in article 2 and in article 48 (section 2) and article 44, section 1 of the Act concerning Money Transaction Offices (AMTO) of Carigna… Chequepoint (CP), [the Bank] would like to inform you of the following considerations.

The assessment of the trustworthiness of the directors and the joint policy-making executives of CP is an important aspect in the assessment of your request concerning registration. [The Bank] intends to decide that the trustworthiness of the directors and joint policy-making executives of CP is no longer beyond doubt.

F. Grovit (Grovit Sr.)

S.C. I .Grovit (Grovit Jr)…

D J E T Thorncroft …

By virtue of article 2, section 1a of the AMTO and article 2, section 1b of the AMTO, [the Bank] intends to:

Reject the request of CP to be entered in the AMTO registry for the execution of money transfer transactions:

Delete the registration of CP in the AMTO registry for executing the activities as listed in Article 1, Section C sub 1 and 2 of the AMTO

The aforesaid intentions are based on the reasons set forth below.”

Detailed factual allegations are then set out on the basis of which the Bank states that it has reached the intention that it sets out at the beginning of the letter.

Under the heading Defamatory Meaning, the Particulars of Claim include the following:

“In their natural and ordinary meaning the words referred to … meant and were understood to mean that the Claimant:

is a dishonest fraudster who is directly responsible for a number of fraudulent acts committed by him on behalf of Carigna in relation to its tax declarations to the Dutch tax authorities; and/or

has, for several years failed to comply with legal requirements for his own personal benefit; and/or

deliberately misrepresents facts for his own personal benefit; and/or

is not honest, law abiding, open, truthful, prudent or punctual and is lacking in integrity; and/or

in the premises, is not a fit or proper person to be granted registration by the Dutch National Bank for the execution of money transfer transactions”.

Under the heading Damages there is a claim for aggravated damages against all three Defendants. It is stated that by a letter dated 19th July 2004 from the Amsterdam Tax Department to the Bank, the Amsterdam Tax Department responded to enquiries made of it by it by the Bank. It is stated that contrary to the allegations in the words complained of the Amsterdam Tax Department stated that Carigna’s conduct did not amount to offences under Dutch legislation, that there was no evidence of Carigna having any criminal intent in relation to its corporate tax filings, that Carigna’s conduct which had led to the imposition of certain fines could not be qualified as an offence and that the management of Chequepoint could not be qualified as intentionally filing an incorrect tax return and could not be said to have committed an offence under Dutch legislation. Accordingly, (so it is stated in the pleading), it is to be inferred from the foregoing that the Defendants and each of them published or caused to be published the words complained of knowing they were false or recklessly not caring whether they were true or false and/or with the dominant or improper motive of injuring the Claimant.

In support of the Defendants’ application there is a witness statement of Professor Doctor Arnoldus Schilder, RA, who is one of the five members of the Governing Board of the Bank. He confirms that the Bank is the Central Bank of the Netherlands and that the Second and Third Defendants are and were employees of the Bank. He sets out an outline of the legal status and functions of the Bank, and in particular, its functions in relation to the supervision of money transaction offices. He states that the letter dated 16th July, which he refers to as “The Intended Decision Letter”, was drawn up and despatched by the Bank to Carigna as part of the applicable statutory procedure in the Netherlands, and in the exercise of governmental functions. He states that the Bank is a public limited liability company capable of suing and being sued in its own name in the Netherlands. The Kingdom of the Netherlands is the sole shareholder.

Professor Doctor Schilder states that the functions of the Bank are set out in the Bank Act 1998, Chapter 2 Division 1. The operations and functions of the Bank are twofold. It is an integral part of the European System of Central Banks in respect of the tasks and duties which the Treaty establishing the European Community confers upon that system. Secondly, it is an autonomous administrative authority under Dutch law. That is an administrative authority, not being an advisory body, entrusted with public authority which acts independently from the Minister. The Bank is such an authority in so far as it performs tasks which include supervising financial institutions in pursuance of the statutory regulations set out in the Bank Act 1998 Section 4(1).

He summarises the position stating:

“The statements in the Intended Decision Letter complained of by the Claimant were made by [the Bank] in its role as an administrative authority carrying out governmental supervisory functions, delegated to it by the Dutch government, to protect the integrity of the financial system in the Netherlands. Thus, [the Bank] was exercising sovereign authority. It is therefore respectfully submitted that [the Bank] and its employees are immune from the jurisdiction of the English Court as regards these proceedings”.

It is not necessary to set out the provisions of Dutch law referred to in any detail because it is accepted by the Claimants that the Bank carried out the functions and is constituted in the way described by Professor Doctor Schilder.

There is before me a witness statement dated 16th November 2005 made at the request of the Claimants by a Dutch lawyer Joseph van Vlijmen. His instructions were to identify under Dutch law the circumstances where the act of an employee or group of employees will be taken to be within the scope of his or her employment rendering the employer liable. He concludes that an employer is liable for the acts of an employee if the employee in question has committed a fault, if a relationship of subordination exists and if there is a sufficient professional link between the employees work and the fault. This applies to government bodies.

There is a witness statement dated 16th November 2005 and filed on behalf of the Claimant by Mr Ralph Odle who is also a Dutch lawyer. His instructions were to identify the source and derivation of the rules and regulations to be applied by the Bank in exercising its delegated supervisory duties and powers as an administrative authority to regulate money transaction offices pursuant to the Dutch legislation known as AMTO within the framework of the General Administrative Law Act and the Bank Act 1998. He states that the Dutch legislation referred to by Professor Doctor Schilder implements the EC Money Laundering Directives (Directives 91/308 and 2001/97) and Directive EC 2000/12. He also identifies the source and the derivation of the Dutch data protection legislation as EC Data Protection Directive no 95/46 of 24 October 1995. None of this gives rise to any issue which I have to decide at this stage of the proceedings.

The Judgments Regulation on jurisdiction in civil and commercial matters supersedes, so far as the United Kingdom and the Netherlands are concerned, the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters concluded on 27th September 1968 and amended from time to time (the “Brussels Convention”). The Judgments Regulation includes the following (as does the Brussels Convention):

“Article 1

This regulation shall apply in civil and commercial matters whatever the nature of the court or tribunal. It shall not extend in particular, to revenue customs or administrative matters …

Article 2

Subject to this Regulation, persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that member state…

Article 5

A person domiciled in a Member State may, in another Member State, be sued: … (3) in matters relating to tort…in the courts for the place where the harmful event occurred… ”

It is by reliance on Article 5 (3) that the proceedings are brought in this court in England. There can be no dispute that a libel action can in principle be brought in the courts of a Member State in which the words complained of are put into circulation and read by a person who understands the language in which it is written. Whether or not the Claimants were entitled to bring proceedings in this court in England pursuant to the Judgments Regulation Art 5(3) (which is an issue in this case), none of the arguments raised before me in this Court would be a bar to them being able, at their own option, to sue the Bank in the Netherlands under Article 2, and the Second and Third Defendants also, assuming they are domiciled there.

By way of background the evidence before me includes an explanation given on both sides as to why the letter of 16th July 2004 was faxed in the way it was. There is a dispute about the reasons for this which does not require to be resolved for the purposes of this application. Also by way of background, I have been informed of subsequent events in relation to the matters to which the July letter refers. There was a Final Decision Letter on 12th October 2004 which came to the conclusion, notice of which had been given in the Intended Decision Letter. Dutch law provides means by which a person aggrieved by such a decision can challenge it through the Dutch courts. I am told that Carigna did challenge it, although the three personal Claimants, I am told did not. Carigna brought proceedings which were heard in the District Court of Rotterdam on 22nd October 2004. An application for an interim order suspending the Bank’s final decision was refused by that court. I am told that the Bank reconsidered its decision on the basis of an objection by Carigna, and on 6th January 2005 the Bank concluded that the objection was unfounded and upheld its earlier decision. Carigna challenged that decision by the Bank in the administrative chamber of the District Court of Rotterdam on 16th February 2005. Those proceedings are currently pending. In the event that Carigna’s application to the court should be unsuccessful, Carigna will have a right of appeal to the Trade and Industry Appeal Tribunal, which is an administrative court.

There is therefore no question of any claim before me on the part of the Bank or its employees that they are immune from being sued at all in respect of the decisions made and the publication of the letter. The immunity that they claim in this Court is immunity from being sued in this jurisdiction.

Also by way of background it is to be noted that the General Administrative Law Act of the Netherlands provides for what in English law would be referred to as natural justice or due process, or as in the European Convention on Human Rights, provisions for a fair hearing. That Act requires that before the Bank decides not to register an applicant it should give the applicant an opportunity to express its view, either in person or in writing, and that it give the same opportunity to any person whose integrity has been assessed.

Of course, if the libel proceedings were to continue in this jurisdiction (or for that matter in the Netherlands if recommenced under Article 2 of the Judgments Regulation), the Bank and its employees could, if so advised, claim an immunity under English libel law in the form of the public policy defence known as qualified privilege. If they chose to do that, there would, so I understand, be a Reply alleging malice along the lines of the matters pleaded in the claim for aggravated damages. At this stage there is in fact no issue of malice in relation to the cause of action in libel. Libel is a tort of strict liability, the ingredients being the ones pleaded in the Particulars of Claim. These are communication (referred to as ‘publication’) by the defendant, to at least one person other than the Claimant, of words which both refer to the Claimant, and are defamatory of him. The state of mind of a Defendant is not relevant (except as to damages) if the defence relied on is truth (or justification as it is commonly known).

The three Claimants in these libel proceedings have, I am told, also commenced civil proceedings in Amsterdam against the Bank on 19th October 2005, claiming a declaration that the Bank acted unlawfully in relation to the 16th July letter, and in other respects, for which they claim damages.

There is a basic principle of English common law that a foreign state is immune from the jurisdiction of the courts of this country, subject to certain exceptions, and that the immunity extends to persons carrying out acts in the exercise of the sovereign authority of the state. In the words of Lord Clyde in Holland v Lampen-Wolfe [2000] 1 WLR 1573 at p1580:

“It is has been recognised that there is an international principle that sovereign states cannot claim jurisdiction over each other. In I Congreso del Partido [1983] 1 A.C. 244, 262 Lord Wilberforce was content to find the basis for this in the (albeit analytical) maxim par in parem non habet imperium. More generally, as can be seen from the speeches in Compania Naviera Vascongado v. S.S. Cristina [1938] A.C. 485, the principle has been attributed not only to that maxim but to such ideas as comity or reciprocity, the practicability of enforcement, or the respect for the dignity of other states. As matters stand I consider that we have to proceed upon the assumption that the eventual basis for the principle is to be found in such international considerations.”

For the purposes of the present case what is important is that this is a rule of public international law, and that it became a part of English common law long ago for that reason: see Trendtex Trading Corporation v Central Bank of Nigeria [1977] QB 529, 553-4, 567-569, 578-579 (CA).

The principle in English law has evolved, from being one of absolute immunity to one of immunity subject to exceptions, partly by the development of international law, which the common law followed (see Trendtex above and I Congreso del Partido [1983] AC 244) and partly by statute in the form of the State Immunity Act 1978.

The provisions of the State Immunity Act 1978 upon which the Defendants rely are the following:

“1(1) A State is immune from the jurisdiction of the courts of the United Kingdom except as provided in the following provisions of this Part of this Act….

14 (1) The immunities and privileges conferred by this Part of this Act apply to any foreign or commonwealth State other than the United Kingdom; and references to a State include references to:

(a)

the sovereign or other head of that State in his public capacity

(b)

the government of that State; and

(c)

any department of that government, but not to any entity (hereafter referred to as a “separate entity”) which is distinct from the executive organs of the government of the State and capable of suing or being sued.

(2)

A separate entity is immune from the jurisdiction of the courts of the United Kingdom if, and only if—

(a)

the proceedings relate to anything done by it in the exercise of sovereign authority; and

(b)

the circumstances are such that a State (or, in the case of proceedings to which section 10 above applies, a State which is not a party to the Brussels Convention) would have been so immune.”

THE CONTENTIONS OF THE PARTIES

It is not submitted that the Bank, still less the Second and Third Defendants, are a State within the meaning of Section 14 (1). What is submitted is that the Bank is a separate entity as defined in that subsection, namely an entity which is distinct from the executive organs of the government of a state which is capable of suing or being sued. Accordingly it does not have immunity by reason of its status or, in the Latin phrase ratione personae. The immunity claimed is under Section 14 (2). This immunity is said to arise by reason of the subject matter of the impugned actions, or, in the Latin phrase, ratione materiae. It is submitted that the proceedings relate to things done by the Bank in the exercise of sovereign authority, and if they had been done by the state directly the state would have been immune from being sued in this country pursuant to s.1 of the 1978 Act.

For the Claimants it is submitted that because they allege that the letter was written maliciously, that takes the case outside s.14 (2) (a) of the 1978 Act. It is submitted that a letter written maliciously cannot be a thing done in the exercise of sovereign authority. Further, or alternatively, the 1978 Act does not provide immunity to employees of a separate entity, in any event when they are acting maliciously. The Claimants also submit that where the Judgments Regulation (in this case Article 5(3)) applies, it precludes a party from invoking state immunity, or, alternatively that Article 6 of the European Convention of Human Rights (“ECHR”) as applied by the Human Rights Act 1998 precludes a claim for state immunity on the facts of this case.

Alternatively, both parties submit that to the extent that the matter is to be determined under the common law precisely the same arguments apply.

Although put last in the Claimants’ argument, the submission that state immunity cannot be raised in proceedings served in accordance with the Regulation Art 5(3) is logically the first point.

This is a novel submission. The possibility that there may be a problem is raised briefly by the editors of Cheshire & North’s Private International Law 13th ed 1999 at p402 and mentioned even more briefly in Briggs and Rees on Civil Jurisdiction and Judgments 4th ed (2005) at para 4.09. It does not appear in other academic commentaries on the Regulation, or in the commentaries on the Brussels Convention, including those of Professors Jenard and Schlosser, to which attention was directed in the Civil Jurisdiction and Judgments Act 1982 when the Brussels Convention became part of English law.

The point can be divided into two issues: Is the Regulation to be read subject to, or as excluding, the doctrine of state immunity in international law? Are the present proceedings a civil matter within Art 1 (which sets out the scope of the Regulation)?

The argument of Mr Kennelly for the Claimants is that the words of the Regulation (set out above at para 18) are plain. Both the Bank and the individual Defendants are persons (which is common ground), and if jurisdiction is established under the Regulation, that is the end of the matter. Mr Kennelly did not have to address me on what the position would be if one of the defendants were a state.

He submits, and there is no dispute, that the provisions of the Regulation are mandatory. He accepts that state immunity is a doctrine of international law, and submits that while EU law has regard to international law, it is not subject to it, except in the cases expressly provided for by the Convention. He cites Owusu v Jackson [2005] ECR I-1383 para 37:

“It must be observed that Art 2 of the Brussels Convention is mandatory in nature and that, according to its terms, there can be no derogation from the principle it lays down except in the cases expressly provided for by the Convention…”

Briggs and Rees suggest that it is expressly provided for by the Convention. They suggest precedence may be accorded to the Basle Convention (The European Convention on State Immunity drawn up within the Council of Europe and opened to signature by the member states of the Council in 1972 at Basle: ETS No 074). This results from the express exception in Art 71 of the Regulation:

“This Regulation shall not affect any conventions to which the Member States are parties and which, in relation to particular matters, govern jurisdiction …”

The Basle Convention (which the Act 1978 implements), Article 33, provides: “Nothing in the present Convention shall affect existing or future international agreements in special fields which relate to matters dealt with in the present Convention”.

The Brussels Convention was in existence in 1972. Mr Barnes QC referred me to an Explanatory Report prepared by a committee of experts and submitted to the Committee of Ministers of the Council of Europe. The Brussels Convention is not mentioned in the Basle Convention, or in the Explanatory Report (para 118 is the commentary upon Article 33), and the Regulation does not in terms mention the Basle Convention.

Mr Kennelly accepts that the Basle Convention does govern jurisdiction, but he argues that it is not made clear in Art 71 of the Regulation that precedence is to be accorded to the Basle Convention.

Mr Barnes QC submits that the Judgements Regulation does not affect or detract from state immunity. He adopts the suggestion of Briggs and Rees, based on Art 71, only with hesitation. His concern is that the state immunity is a rule of international law which is fundamental, and applies whether or not a state is party to the Basle Convention. The principle of international law existed before any convention. Whether or not reference to that Convention might provide a solution to the problem in the present case, it might not always do so.

Mr Barnes QC submits that the Judgements Regulation is (like the Brussels Convention before it) to be interpreted subject to international law. The principle he relies on has just been restated by the House of Lords in A (FC) and others (FC) (Appellants) v. Secretary of State for the Home Department [2005] UKHL 71 para 29:

“29.

Article 31 of the Vienna Convention on the Law of Treaties, reflecting principles of customary international law, provides in article 31(3)(c) that in interpreting a treaty there shall be taken into account, together with the context, any relevant rules of international law applicable in the relations between the parties. The European Court has recognised this principle (Golder v United Kingdom (1975) 1 EHRR 524, para 29, HN v Poland (Application No 77710/01, 13 September 2005, unreported, para 75)), and in Al-Adsani v United Kingdom (2001) 34 EHRR 273, para 55, it said (footnotes omitted):

‘55. The Court must next assess whether the restriction was proportionate to the aim pursued. It recalls that the Convention has to be interpreted in the light of the rules set out in the Vienna Convention of 23 May 1969 on the Law of Treaties, and that Article 31(3)(c) of that treaty indicates that account is to be taken of 'any relevant rules of international law applicable in the relations between the parties'. The Convention, in including Article 6, cannot be interpreted in a vacuum. The Court must be mindful of the Convention's special character as a human rights treaty, and it must also take the relevant rules of international law into account. The Convention should so far as possible be interpreted in harmony with other rules of international law of which it forms part, including those relating to the grant of State immunity.’

The Court has in its decisions invoked a wide range of international instruments, including the United Nations Convention on the Rights of the Child 1989 and the Beijing Rules (V v United Kingdom (1999) 30 EHRR 121, paras 76- 77), the Council of Europe Standard Minimum Rules for the Treatment of Prisoners (S v Switzerland (1991) 14 EHRR 670, para 48) and the 1975 Declaration referred to in para 31 below (Ireland v United Kingdom (1978) 2 EHRR 25, para 167). More pertinently to these appeals, the Court has repeatedly invoked the provisions of the Torture Convention: see, for example, Aydin v Turkey (1997) 25 EHRR 251, para 103; Selmouni v France (1999) 29 EHRR 403, para 97.”

So far as EU law is concerned, Mr Barnes QC relies on the statement in Poulsen and Diva Case C-286/90 [1992] ECR 1-06019 para 9:

“As a preliminary point, it must be observed, first that the European Community must respect international law in the exercise of its powers and that consequently Art 6 [of Council Regulation (EEC) No 3094/86 laying down technical measures for the conservation of fish stocks] above mentioned must be interpreted, and its scope limited, in the light of the relevant rules of the international law of the sea”.

Mr Kennelly submits that that statement is limited to its context, and in particular to a convention to which the EU was itself a party. I do not so read it.

Mr Barnes QC also points to the Civil Jurisdiction and Judgments Act 1982 s31. He submits that this shows that Parliament assumed that state immunity would continue to apply, including to entities separate from states, after the Brussels Convention became part of English law,. It reads:

“31(1) A judgment given by a court of an overseas country against a state other than the United Kingdom or the state to which that court belongs shall be recognised and enforced in the United Kingdom if, and only if … (b) that court would have had jurisdiction in the matter if it had applied rules corresponding to those applicable to such matters in the United Kingdom in accordance with sections 2 to 11 of the State Immunity Act 1978.

(2)

References in subsection (1) to a judgment given against a state include references to judgments of any of the following descriptions given in relation to a state – … (c) judgments against any … [entity which is distinct from the executive organs of government] given in proceedings relating to anything done by it in the exercise of the sovereign authority of the state”.

Mr Barnes QC also pointed to the far reaching consequences if it were held that the state immunity could not relied upon by a person sued in accordance with the Regulation, including in particular diplomats, judges and officers of states whose offices have hitherto been accepted as according them the immunity of the state.

In my judgment the submissions for the Defendants are to be preferred. The Judgments Regulation (like the Brussels Convention) is to be read subject to the international law of state immunity, and not as precluding reliance upon state immunity.

In case I am wrong in this conclusion, I consider next whether these proceedings are a civil matter within the meaning of the Judgments Regulation.

For the Defendants it is submitted that the test of whether a case is or is not a civil matter is to be determined partly by the characterisation of the claim itself, and partly by the context in which it is brought, in particular where the claim is brought against a public authority.

Mr Barnes QC refers to Sonntag v Waidmann C-172/91, [1993] ECR I-1963, in particular at para 20. In that case the ECJ was asked the question:

“2.

(a) Where the holder of a public office who has caused injury to another person by reason of an unlawful breach of his official duties is personally sued by that person for damages, does such an action constitute a civil matter within the meaning of the first sentence of the first paragraph of Article 1 of the Convention?”

There were two considerations addressed in answering that question. The first does not assist in the present case: it arose out of the fact that the claim happened to be brought in the course of criminal proceedings. That fact was held to be immaterial. The second consideration arose out of the fact that the claim was against a teacher who had the status of a civil servant.

The answer to the question given by the Court was as follows:

“17 It must next be determined whether an action for damages against a teacher in a State school who caused injury to a pupil during a school trip as a result of a breach of his official duties constitutes a "civil matter" within the meaning of the first sentence of the first paragraph of Article 1 of the Convention.

18 As the Court has consistently held (see, in particular, Case 29/76 LTU v Eurocontrol [1976] ECR 1541, paragraphs 3 and 4; Case 133/78 Gourdain v Nadler [1979] ECR 733, paragraph 3; and Case 814/79 Netherlands v Rueffer [1980] 3807, paragraphs 7 and 8), the concept of "civil matters" in Article 1 of the Convention must be regarded as an independent concept to be interpreted by reference, first, to the objectives and scheme of the Convention and, secondly, to the general principles which stem from the corpus of the national legal systems.

19 …

20 It follows from the judgments in the LTU and Rueffer cases, cited above, that such an action falls outside the scope of the Convention only where the author of the damage against whom it is brought must be regarded as a public authority which acted in the exercise of public powers.

21 The first point to be noted in that respect is that the fact that a teacher has the status of civil servant and acts in that capacity is not conclusive. Even though he acts on behalf of the State, a civil servant does not always exercise public powers.

22 Secondly, in the majority of the legal systems of the Member States the conduct of a teacher in a State school, in his function as a person in charge of pupils during a school trip, does not constitute an exercise of public powers, since such conduct does not entail the exercise of any powers going beyond those existing under the rules applicable to relations between private individuals.

23 Thirdly, a teacher in a State school assumes the same functions vis-à-vis his pupils, in a case such as that in point in the main proceedings, as those assumed by a teacher in a private school.

24 Fourthly, the Court has already held, although in a different factual and legal context, in Case 66/85 Lawrie-Blum v Land Baden-Wuerttemberg [1986] ECR 2121, paragraph 28 in conjunction with paragraph 24, that a teacher does not exercise public powers even when he awards marks to pupils and participates in the decisions on whether they should move to a higher class. That must be so a fortiori in relation to the duty of a teacher, as a person in charge of pupils, to supervise them during a school trip.

25 Finally, it should be added that even if the activity of supervising pupils is characterized in the Contracting State of origin of the teacher concerned as an exercise of public powers, that fact does not affect the characterization of the dispute in the main proceedings in the light of Article 1 of the Convention.

26 It follows from all the foregoing considerations that the action for damages brought in the main proceedings against the State-school teacher by the parties seeking enforcement is covered by the term "civil matters" within the meaning of the first sentence of the first paragraph of Article 1 of the Convention .”

Mr Barnes also referred to other cases in which the ECJ considered whether claims brought by public authorities were civil matters, namely Gemeente Steenbergen v Baten Case C-271/00, [2002] ECR I-10489 at para 28 and Verein fur Konsumenteninformation v Henkel Case C-167/00, [2002] ECR I-8111 at para 26. In these cases the Court re-affirmed what it had stated in the Sonntag judgment at para

In Verein fur Konsumenteninformation the Court said that the concept of a civil matter was “to be interpreted by reference, first, to the objectives and, secondly, to the general principles which stem from the national legal systems as a whole”.

Mr Barnes QC submits that in the present case the First Defendant is a public authority, and that it appears from the Particulars of Claim and the letter complained of, that all three Defendants are sued as having acted in the exercise of public powers. Accordingly, he submits that the case is not a civil matter.

Mr Kennelly submits first, that the claim is overwhelmingly private in nature, being a defamation action. Second he submits that it will be his clients’ case that (on the basis of Dutch law as set out in the witness statement referred to in para 16 above) the malicious acts of the Second and Third Defendants were not acts done in the exercise of public powers.

Mr Kennelly’s second point can be put on one side at once. First, the Particulars of Claim does not distinguish between the three Defendants, and the Bank can be liable (as sued) only if the acts of the Second and Third Defendants were acts in the exercise of their duties for which the Bank is liable. There is accordingly no suggestion in the claim that the acts of the Second and Third Defendants were not acts in the exercise of the Bank’s powers. This point might not be conclusive, since the claims could have been brought against each Defendant separately or against the Second and Third Defendants without the Bank. Mr Kennelly notes that in Al-Adsani v United Kingdom (2001) 34 EHRR 273at para 58 the ECtHR accepted that the ill treatment alleged by the applicant against Kuwait in his pleadings in the domestic court, namely repeated beatings by prison guards over a period of days with the aim of extracting a confession, can properly be categorized as torture. On the strength of that he asks me to accept that the allegations of malice alleged by the Claimants in relation to aggravated damages can properly be said to mean that the Defendants, or at least the Second and Third Defendants, were not acting in the exercise of public powers.

If Mr Kennelly is correct, then the issue of whether the Defendants enjoy immunity might be decided on a false basis. The allegation at present pleaded in support of the claim for aggravated damages is very similar to an allegation of malice, such as might be advanced in response to a defense of qualified privilege. It is well established that such allegations are very difficult to prove for reasons given in Horrocks v Lowe [1975] AC 135. It is therefore not uncommon for defendants faced with such allegations to apply to strike them out. I express no view as to whether, in this case, any such application would succeed. The point is that, if the court is simply to assume the truth of such allegations (and that they take the case outside the scope of the exercise of public powers), then that assumption may prove false within a very short time of the court having held that there is no state immunity. But by that time it would be too late to rectify the injustice.

In my judgment it would not be right for me to decide this important issue of state immunity on an assumption of the kind suggested.

Mr Kennelly’s first point (that a defamation action is overwhelmingly private in nature) is at first sight attractive. However, I am addressing this point only on the hypothesis that I was wrong to hold that state immunity was unavailable in a case where service has been affected pursuant to the Judgments Regulation Art 5(3). I remind myself that I must interpret the concept of a civil matter by reference, first, to the objectives of the Regulation and, secondly, to the general principles which stem from the national legal systems as a whole.

The objectives of the Regulation, as set out in the Recitals, give no support to the view that it was intended to enable claimants to implead natural or legal persons in proceedings relating to anything done by them in the exercise of the sovereign authority of foreign state. And the general principles of law include the principle of state immunity in public international law. In the light of those considerations, and the guidance in para 20 of Sonntag, I have no hesitation in holding that this action, brought on this Intended Decision Letter (which was written against the public law background set out above) is not a civil matter within the meaning of the Regulation.

I have referred to this issue arising in this case where service has been affected pursuant to the Judgments Regulation Art 5(3). It could arise in other cases under the Judgments Regulation. Suppose, for example, that one of the Defendants, exercising the right of freedom of movement and employed by the Bank, happened to be domiciled in England (as provided in Art 59). That defendant could then be sued in England, if the Claimants are right.

Mr Kennelly accepts that if he fails on the point under the Judgments Regulation, the Bank must enjoy state immunity in this case if it adopted the acts of its employees. He also accepts that, in principle, employees of the Bank may enjoy state immunity, in relation to acts done in the exercise of sovereign authority. But he submits that the alleged malice means that they cannot rely on s.14(2) because the Claimants’ case is that they were not carrying on the business of the state.

Mr Barnes QC submits that the authorities clearly establish that states, separate entities, and their employees, can all enjoy state immunity even in cases where there are allegations of malice made against them, including serious criminal conduct, subject only to cases where the allegation is one of torture, or another international crime, or a breach of jus cogens. He relies on the decision of the Court of Appeal in Jones v Ministry of Interior of Saudi Arabia [2004] EWCA Civ 1394; [2005] QB 699. The position is fully explained in the judgment of Mance LJ, and succinctly summarised by Lord Phillips of Worth Matravers MR. After summarising the position in relation to immunity ratione personae, he went as follows:

“105 The dignity of a state may also be affronted if those who are or were its officials are impleaded in relation to the conduct of its affairs before the courts of another state. In those circumstances the state can normally extend the cloak of its own immunity over those officials. It can be said that to implead those officials amounts, indirectly, to impleading the state. Where immunity is accorded in these circumstances it is on the grounds of the subject matter of the litigation or ratione materiae. As the Latin terms are used in some of the authorities that I shall be discussing I propose to adopt them in this judgment.

106 Where a state official infringes the law of the state in the course of carrying out the business of the state, the state is not thereby precluded from claiming immunity ratione materiae.

107 These general principles of public international law are reflected in the approach of this court in Propend Finance Pty Ltd v Sing 111 ILR 611 to the interpretation of the State Immunity Act 1978. Mance LJ has summarised the relevant parts of that decision and the authorities upon which it was based. I need add only that in the Propend case the claim to immunity was raised in contempt proceedings. The conduct in issue was the act of faxing information to Australia in breach of an undertaking given to the High Court. This appeal raises the issue of whether the reasoning in the Propend case applies where the conduct alleged against a state official is not merely unlawful but amounts to torture.

108 The crime of torture has acquired a special status under international law. It is an international crime or a breach of jus cogens.”

In addition to Propend (in which the defendant’s act of sending a fax was a contempt of court) the English cases include Holland v Lampen-Wolfe [2000] 1 WLR 1573. That was a claim for libel allegedly published in a letter by an officer at a US airbase, where there was also an allegation that the libel was published maliciously (1582F). Lord Clyde said (at p 1580E) that “It is the nature and character of the activity on which the claim is based which has to be studied, rather than the motive or purpose of it”. Another English case where the claim to immunity was upheld was Zoernsch v Waldock [1964] 1 WLR 675 (CA), where the Defendants were accused of negligence and corruption.

Foreign cases discussed in Jones paras 34-35 included allegations of very serious illegality and malicious conduct: Herbage v Meese (1990) F Supp 60 at 67 (perjury to obtain an extradition); Jaffe v Miller (1993) 95 ILR 446 at 460-462 (conspiracy to kidnap and pervert the course of justice). In Chuidian v Philippine National Bank (1990) 912 F.2d 1695 a Philippine government official was alleged to have ordered the Bank to dishonour a letter of credit out of malice towards the claimant. (The Court of Appeal for the Ninth Circuit held, at 1106-7 [10] – [11], that the most that this established was a convergence between the defendant’s personal interest and his official duty and authority, and that did not serve to make his action any less an action of his sovereign).

I accept Mr Kennelly’s submission that the reasoning in Jones is not in principle confined to torture. The case does recognise a distinction between acts performed in an official capacity, and acts outside the scope of any proper exercise of sovereign authority: see for example paras 38-39. But it is clear from the judgments that the cases referred to above are cited in Jones without there being any doubt cast upon them at all. And the allegations of malice in this case correspond to, or fall well below, the seriousness of some of the allegations in the other cases, both English and foreign, in which the claim for state immunity has been upheld.

It follows that in my judgment all three Defendants enjoy state immunity under s.14(2) of the 1978 Act, subject to Mr Kennelly’s final point under Art 6 of the ECHR.

The submission for the Claimant is as follows. The relevant provisions of the HRA are as follows. The Human Rights Act 1988 s3(1) provides that:

“So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights.”

Article 6(1) ECHR provides, so far as is material:

“(1)

In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law.”

The European Court of Human Rights (“ECtHR”) has accepted that a plea of state immunity does in principle interfere with Article 6 rights: see e.g. McElhinney v Ireland [2002] 34 EHRR 13, para 26; Fogarty v United Kingdom [2002] 34 EHRR 12, para 28; and Al-Adsani v United Kingdom [2002] 34 EHRR 273 para 52.

As Mance LJ put it in Jones at paras 82-83:

“The European Court of Human Rights in Al-Adsani was concerned with the immunity from civil proceedings of the State of Kuwait, which the majority correctly described as a form of immunity ratione personae (cf paragraph 63). In the light of the reasoning in Al-Adsani, there can be no doubt … that article 6(1) is also prima facie engaged in a case such as the present. If the claimants are to be denied access to the English courts, this must be shown to be in pursuit of a legitimate aim and to be proportionate.

Approaching the matter from this angle, when one compares (a) a state’s claim to immunity ratione personae, which was the issue before the European Court in Al-Adsani, with (b) a state’s claim to immunity ratione materiae in respect of a claim against one of its officials, I see important distinctions. Above all, I find it impossible to identify any settled international principle affording the state the right to claim immunity in respect of claims directed against such an official, rather than against the state itself or its head or diplomats.”

It is conceded that in the cases referred to above, the ECtHR also accepted that a defence of state immunity fulfilled the legitimate aim: “of complying with international law to promote comity and good relations between States through respect of another State’s sovereignty” (McElhinney, para 35; Fogarty, para 34; Al– Adsani, para 54). The ECtHR also accepted that the plea was, on the facts of those cases, proportionate since it reflected the existing state of generally recognised rules of public international law. For these reasons, the ECtHR held that there was no violation of Article 6 in each of the above decisions.

Mr Kennelly submits that the requirement that the scope of the immunity conferred should be proportionate has been a clear requirement of the ECtHR case-law since the first case considering state immunities, namely Waite and Kennedy v Germany [2000] 30 EHRR 261 (a case involving putative employment law proceedings against the European Space Agency) at para 59 where the ECtHR stated:

“.... Furthermore, a limitation will not be compatible with Article 6(1) if it does not pursue a legitimate aim and if there is not a reasonable relationship of proportionality between the means employed and the aim sought to be achieved.”

Mr Kennelly submits that the slim majority reasoning of Al Adsani helps to illuminate the rationale of Jones. Jones concerned a claim against the Emir of Kuwait and his Government, but the ECtHR emphasised at para 62 and, effectively, at para 65 that it was different in kind to a criminal complaint against an individual. The majority ECtHR decision (reached 9:8) essentially turned upon the conclusion that official state torture (as opposed to unauthorised acts of mistreatment) still benefited from the defence of state immunity.

Mr Kennelly also accepts that in Holland the House of Lords established, in the words of Lord Hope of Craighead at pp1577G-158G:

“In the absence of any directly relevant authority to the contrary, … article 6 of the Convention does not preclude a state from granting immunity to a foreign state in accordance with its international law obligations in respect of acts which can properly be characterised as jure imperii.”

Mr Kennelly accepts that, but for the arguments under the directly applicable Judgments Regulation, the Bank is entitled to rely on state immunity rationae materiae under s14(2) of the 1978 Act, such being in pursuit of legitimate aims recognised by public international law and proportionate in general terms.

However, to apply state immunity to the Bank’s employees is, he submits, disproportionate and cannot be justified. He invites me to note that the Act does not even address the subject of employees. He draws attention to the detailed consideration given by Mance LJ to all the relevant factors of Mr Jones’s case available to the Court of Appeal, before reaching the conclusion at para 96 that the matter had to be remitted to the court below for further argument.

One of the factors considered relevant by Mance LJ (paras 85-86) when considering proportionality was the availability of an effective domestic remedy in the state in question. No one has suggested that there is a lack of an effective domestic remedy in the Netherlands for the matters the subject of the present action. Mance LJ also regarded as relevant the gravity of each of the different allegations made by the claimants in Jones (para 98).

The Claimants point to a number of factors to show what they submit is the disproportionate impact of the proposed bar, including the following:

The ECtHR in Al-Adjani considered the issue of proportionality in paras 55-66. In doing so it focussed on matters of principle rather than on facts particular to the applicant’s case. It adopted a similar approach in McElhinney: see paras 36-40. In Fogarty (in which the applicant complained that she had been discriminated against as an applicant for employment by the US embassy in London) the court adopted a similar approach while remarking, at para 38, upon the sensitivity of issues relating to recruitment of staff at foreign embassies and missions. In the corresponding part of the judgment in Waite the ECtHR regarded it as a material factor that the applicants had available to them reasonable alternative means to protect effectively their rights under the Convention (para 67).

It is not clear that in every case where state immunity is claimed it is necessary for the court to conduct a full review of all the facts of the case with a view to deciding the issue of proportionality. In most cases that is likely to be a waste of time. The ECHR appears to have conducted a more limited review of such matters than is commonly required in deciding proportionality, on account of the high importance it attached to the principle of state immunity. In the House of Lords in Holland Lord Hope of Craighead and Clyde adopted a similar approach (delivering their speeches only a few months before the Human Rights Act had come into force): see p1578C, and 1581CE, none of the other speeches refer to proportionality, although in Lord Millett’s case that was because he considered Art 6 was not engaged: p1588 (the Court of Appeal in Jones held Lord Millett’s view to be wrong: paras 82, 100, 135). The review considered at paras 96-98 of Jones (which was the first of the English cases on this issue decided after the Human Rights Act had come into force) was in the context of an allegation of torture, which was treated as being of a different order of seriousness from the allegations in other cases.

If I am required to consider all the factors relied upon by the Claimants, then in my judgment these factors do not establish that it would be disproportionate to allow reliance on state immunity by any of the defendants. If I accepted them as having any weight, that would reduce the doctrine of state immunity to little more than a variant of the doctrine of forum non conveniens. That doctrine has no place in the scheme of the Judgments Regulation.

It seems to me that what is required for the integrity of the financial system of the Netherlands, and whether or not an official might believe that a person has committed any of the acts in relation to Dutch tax and other matters referred to in the words complained of, and the Dutch law on the scope of an employee’s employment, are all matters on which the Dutch courts would very much better placed to adjudicate than an English court. But the point is more fundamental. The issues raised in this action relate to the exercise of a sovereign authority. Comity and respect for the dignity of other states make it wholly proportionate that the Claimants should be precluded from raising these matters in an English court. In terms of the gravity of the allegations made against the Defendants by these Claimants, there is no comparison with the allegations of torture considered in Jones.

It follows that the claim for state immunity made on behalf of each of the three Defendants in all three actions succeeds.