Three Part Series: UK Freezing Orders Against a Foreign State

First Tuesday Update is our monthly take on current issues in commercial disputes, international arbitration, and judgment enforcement. Today's update is the first in a three-part series that examines whether English courts can issue a worldwide freezing order against a foreign state in support of efforts to enforce an arbitral award or foreign judgment.

We focus today on the procedure in England to enforce arbitral awards and foreign judgments against foreign states. Future updates will consider whether the rules on state immunity from execution bar the grant of a worldwide freezing order against a state, and then the principles that otherwise govern the grant of such orders. Most of the first and last updates will also be relevant to those interested in enforcement against non-state entities.

Recognition and Enforcement of Arbitral Awards

In England, there are various processes to recognize and enforce arbitral awards. It should be noted that Brexit has not affected the applicable processes.

Most awards are governed by the Arbitration Act 1996. In particular, Sections 100–103 give effect to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (NY Convention). By Section 101(1), an award made, in pursuance of an arbitration agreement, in the territory of one of the 171 states other than the UK which are currently party to the NY Convention, "shall be recognised as binding on the persons as between whom it was made." In essence, recognition will allow a party to the award to rely on it in subsequent proceedings in England, including to support a set-off defense.

Sections 101(2)-(3) then set out two mechanisms to enable the award to be enforced in England:

• First, the award creditor can seek the court’s permission to enforce the award. Such permission gives the creditor access to the same enforcement mechanisms as are available in respect of English judgments.
• Second, where such permission is given, the creditor may go further and obtain a judgment of the court itself in the same terms as the award. In essence, this will 'convert' the award into an English judgment. An advantage to this mechanism is that non-payment of the award (and thus of the new English judgment) may be a contempt of court, whereas it has been held that the contempt rules do not apply where the creditor has merely obtained permission to enforce.¹

It should be noted that Section 103 sets out various grounds for refusing enforcement, in line with the NY Convention itself (e.g. invalidity of the arbitration agreement, inadequate notice of proceedings, improper constitution of the tribunal, and so on).

Meanwhile, awards rendered in proceedings under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States 1965 (ICSID Convention) are enforceable under the Arbitration (International Investment Disputes) Act 1966. That Act establishes a procedure to register an ICSID award in England. Once registered, the award has the same force and effect for the purposes of execution as if it had been a judgment of the English High Court.

In sum, there is essentially a two-stage process to enforce an award:

• First, the creditor must apply for permission to enforce an NY Convention award (and possibly to convert it to a judgment) or for registration of an ICSID award.
• Thereafter, the creditor may proceed to utilize the court's execution powers to obtain payment.

Recognition and Enforcement of Foreign Judgments

Foreign judgments against foreign states are similarly capable of being recognized and enforced in England. In particular, Section 31 of the Civil Jurisdiction and Judgments Act 1982 applies to judgments given by a foreign court against any state, except the UK or the state to which the foreign court itself belongs (e.g. to a US judgment against Canada, but not to a US judgment against the UK or the US). Per Section 31, such judgments "shall" be recognized and enforced in England in the circumstances discussed below.

Those circumstances are that the judgment "shall" be recognized and enforced "if, and only if" (i) it would be so recognized and enforced if it had not been given against a state² and (ii) the foreign court would have had jurisdiction in respect of the underlying proceedings giving rise to the judgment if it had applied the UK rules on sovereign immunity. As Lord Philips of the Supreme Court put it, "Section 31 provides for recognition of a foreign judgment against a state where there exists a connection between the subject matter of that judgment and the [foreign] forum state that is equivalent to one that would give rise to an exception to immunity in [the UK]."³ In this regard, it should be noted that the UK rules permit suit against a state inter alia where it submits to the jurisdiction of the English courts or where the proceedings relate to a commercial transaction.

State Immunity in Relation to the Recognition Stage

A court faced with an application to recognize (in the broad sense) an award/judgment against a foreign state will have regard to the State Immunity Act 1978 (SIA). By Section 1, the general rule is that states are immune from the jurisdiction of the English courts unless the action falls within the scope of one of several exceptions set out in the Act. Those exceptions concern both immunity from adjudication and immunity from execution.⁴ This month's note focuses on the former.

For present purposes, the exception set out in Section 9 is of particular relevance: where a state has agreed in writing to submit disputes to arbitration, the state is not immune in relation to English court proceedings "which relate to the arbitration." This includes actions seeking permission to enforce an NY Convention award or to register an ICSID award.⁵

As to foreign judgments, the Supreme Court has held that Section 31 of the Civil Jurisdiction and Judgments Act 1982 (discussed above) creates its own exception to the general rule of state immunity, which is separate from and additional to those set out in the SIA.⁶

State Immunity in Relation to the Execution Stage

Our next update in this series will address execution immunity in the context of an application for a freezing order to support enforcement of an arbitral award or foreign judgment.

Conclusion

In sum, there are various mechanisms available in England to enable the enforcement against foreign states of arbitral awards and foreign judgments. When the award or judgment has been recognized (in the broad sense), the creditor can then proceed to the execution stage.

Endnotes

¹ ASM Shipping Ltd of India v TTMI Ltd of England [2007] EWHC 927 (Comm), at [26].

² Examples of where this requirement would be met include where the defendant is “present” within the state to which the foreign court belongs, or has submitted to the jurisdiction of that court. It has been held that one way to establish “presence” would be to have an embassy in the foreign state. See Estate of Michael Heiser and 121 Others v The Islamic Republic of Iran, The Iranian Ministry of Information and Security [2019] EWHC 2074 (QB), at [60] and [70(6)].

³ NML Capital Ltd v Republic of Argentina [2011] UKSC 31, at [47].

⁴ Alcom Ltd v Republic of Colombia [1984] AC 580, at p 600F.

5 Svenska Petroleum Exploration AB v Government of the Republic of Lithuania and another (No 2) [2006] EWCA Civ 1529, at [117]. That decision was subsequently approved by the same court in the context of ICSID Convention arbitration, in ETI Euro Telecom International NV v Republic of Bolivia and another [2008] EWCA Civ 880, at [114].

⁶ NML Capital Ltd v Republic of Argentina [2011] UKSC 31. However, the execution of foreign judgments remains subject to various provisions of the SIA.