01/02/2024

‘Resolute’ appeal underscores absolute barrier to injunctive relief against states, even in commercial disputes

On 20 December 2023, the Court of Appeal handed down judgment in UK P&I Club & Anor v Republica Bolivariana de Venezuela [2023] EWCA Civ 1497. It was the first occasion the Court of Appeal had the opportunity to consider the inter-relationship between article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms and the absolute barrier to the grant of any form of injunctive relief against states under s 13(2)(a) of the State Immunity Act 1978 (“SIA”), even where such states are subject to the jurisdiction of the court, whether by virtue of the commercial activity exception in s 3 of the SIA or otherwise.

The case arises out of the total loss of a Venezuelan navy patrol vessel, the BVL Naiguatá GC-23, on 30 March 2020 in waters off the coast of Venezuela. The loss was the result of an altercation and then collision with the RCGS Resolute, an ice-classed cruise liner. Following the loss of the Naiguatá, Venezuela brought substantial civil claims in two different jurisdictions in relation to the collision against various defendants including the Resolute’s P&I insurers (“the Clubs”). In response, the Clubs sought anti-suit injunctions to restrain Venezuela from pursuing its claims otherwise than in London arbitration (applying the analysis articulated in The Hari Bhum (No 1) [2003] EWHC 3158 (Comm), [2004] 1 Lloyd’s Rep 206 (Moore-Bick J) and [2004] EWCA Civ 1598, [2005] 1 Lloyds Rep 67). The Clubs also commenced London arbitration proceedings against Venezuela, seeking substantive relief in relation to the underlying merits of Venezuela’s claims.

The High Court held that Venezuela did not have immunity from the English Court’s adjudicative jurisdiction under s 1 of the SIA, because the commercial exception in s 3(1)(a) of the SIA applied. Moreover, Venezuela was to be treated as having agreed in writing to submit the relevant disputes to arbitration in London within the meaning of s 9 of the SIA. However, notwithstanding this, the High Court refused to grant an anti-suit injunction in light of the absolute barrier to the grant of any form of injunctive relief against states under s 13(2)(a) of the SIA.

Following an appeal hearing in December 2023 solely on the issue of injunctive relief, the Court of Appeal (Sir Geoffrey Vos MR, with whom Popplewell LJ and Phillips LJ agreed) dismissed the appeal. Its conclusion was premised on three central findings.

• First, relying on obiter dicta of Lord Sumption in Benkharbouche v Secretary of State for Foreign and Commonwealth Affairs [2017] UKSC 62, [2019] AC 777, it held that an interference with a person’s article 6 rights can be justified where the provision conferring state immunity on the defendant falls “within the range of possible rules consistent with international practices”. It was not necessary for there to be an established rule of international law. In reaching this conclusion, it observed that “[c]omity and the promotion of good relations between states are important”. Applying this test, it held that the interference with the Clubs’ article 6 rights by s 13(2)(a) could be justified because “section 13(2)(a) has been replicated in a number of other states”.
• Second, the Court of Appeal appeared to conclude that the immunity in s 13(2)(a) does not fall under the umbrella of immunity from adjudication or immunity from enforcement. It did, however, characterise injunctions as “inextricably connected with enforcement and with the threat of criminal and financial sanctions”.
• Third, the court held that making states immune to anti-suit injunctions is justified and rendered proportionate by (i) international sensitivity and comity, (ii) the policy of not wanting to threaten states with coercive action and the potential of criminal and financial sanctions, and (iii) the ability to declare that those seeking an anti-suit injunction were contractually entitled to have their dispute determined by arbitration – as in this case, where the High Court held that the lack of an injunction did not render worthless the Clubs’ declared right to have Venezuela’s claims determined by way of London arbitration.

The Court of Appeal’s approach upholds the absolute barrier to the grant of any form of injunctive relief against states under s 13(2)(a) of the SIA, even in commercial disputes. Further, its approach arguably gives the courts in England and Wales considerable latitude to uphold a plea of state immunity, so long as the state can show that the immunity on which it relies falls within a range of possible rules consistent with international practices.

As to the London arbitration – which remains ongoing – the Court of Appeal observed that compensation for breach of the arbitration agreement and declaratory relief in the arbitration could be relied upon to resist enforcement of judgments obtained by Venezuela in its proceedings.

David Lewis KC, Alexander Thompson and Courtney Grafton appeared for the Clubs, instructed by Kennedys Law LLP.