Court will ordinarily apply English law in absence of evidence of relevant foreign law, unless defendant shows it would be inappropriate to do so

The High Court has held that where a claim was, in principle, governed by foreign law, but the claimant had not pleaded or proved the content of that law, the court would apply English law to the claim. The claimant had pleaded a viable cause of action which could be determined under English law, and the defendant had not raised any basis for a contention that it would be inappropriate to do so: Iranian Offshore Engineering and Construction Company v Dean Investment Holdings SA [2018] EWHC 2759 (Comm).

This decision confirms that, in most cases, the court will apply English law to a claim unless the claimant pleads and proves the content of a relevant foreign law or the defendant shows that it would be inappropriate to apply English law eg because that would be too strained or artificial in the particular circumstances.

A defendant cannot therefore merely assert that a foreign law applies and thereby put the burden on the claimant to plead and prove the content of that law.

Maryam Oghanna, an associate in our disputes team, considers the decision further below.

Background

The claimant brought claims of an alleged fraud which induced payments to purchase an offshore drilling rig, totalling USD$87million. The claims against the fifth and sixth defendants arose from acts that allegedly took place in Iran and the UAE, and caused damage in Iran. The claimant did not plead any case as to which country's law applied to its claims.

The fifth and sixth defendants pleaded that the claims against them were governed by Iranian Law, but did not plead any case as to the content of Iranian law. Their defence reserved the right to amend after seeking expert evidence on Iranian law. No party had sought expert advice on Iranian law at the point of the pre-trial review (seven weeks before trial).

The claimant did not dispute that, in principle, its claims were governed by Iranian law, but it said this was irrelevant as neither side had pleaded any Iranian law.

The claimant relied on the general common law principle, sometimes referred to as an evidential presumption of English law, which is stated as Rule 25(2) in Dicey, Morris & Collins, "The Conflict of Laws". Rule 25 states:

1. In any case in which foreign law applies, the law must be pleaded and proved as a fact to the satisfaction of the judge by expert evidence or sometimes by certain other means.
2. In the absence of satisfactory evidence of foreign law, the court will apply English law to such a case.

Dicey goes on to note, however, that there may be cases in which the application of English law will be too strained or artificial to be appropriate. Where that is the case, it suggests, the court may regard a party who has pleaded but failed to prove foreign law as having failed to establish its case.

At the pre-trial review hearing, the question arose as to whether it was open to the defendants to contend that English law should not apply in default under Rule 25(2). More specifically, whether the defendants could argue at trial that the claimant had to plead and prove the principles of Iranian law that govern its claims and that, since it had not done so, the claims must fail.

The claimant sought an order to confirm that Rule 25(2) would apply at trial.

Decision

The High Court (Baker J) at the pre-trial review found in favour of the claimant, confirming that Rule 25(2) would apply at trial and that the defendants could not contend otherwise. Although this was subject to the defendant making a successful application to amend the pleadings for trial, the court did not encourage such an application and indicated the view that such an application would be very unlikely to succeed.

The judge's analysis of the applicable principles was, in summary, as follows:

• It is not necessary for a claimant to plead the intention to rely on Rule 25(2), as it is a default position and applies unless there is a reason for it not to apply;
• Where the claimant neither needs nor chooses to plead foreign law and can plead a complete and viable cause of action if the claim be determined under English law, a contention that it would not be appropriate to determine the claim under English law is "a reasoned denial of liability" which should be properly pleaded;
• Even where (in principle) the law governing a claim might be a foreign law, a contention that it is inappropriate to apply Rule 25(2) must be based on matters which are particular to the claim in question;
• There is no absolute rule precluding reliance at trial on a contention that ought to have been pleaded, as the court could allow a late amendment, or reliance at trial on an unpleaded case, or the court could raise the point of its own motion – though it would rarely be fair for that to occur very close to trial.

His analysis was, he said, supported by the obiter remarks of Arden LJ (as she was then) in OPO v MLA [2014] EWCA Civ 1277 and Brownlie v Four Seasons Holdings Inc [2015] EWCA Civ 665, where she expressed the view that, in the absence of evidence as to foreign law, the presumption of foreign law being the same as English law should apply.

The defendants relied on Belhaj v Straw [2014] EWCA Civ 1394 in support of their contention that, where a claim was governed by foreign law, the claimant had to plead a case under foreign law. However, Baker J said he did not interpret Belhaj as laying down a rule of general application to that effect. If it did, it was obiter and was not consistent with the Court of Appeal's approach in OPO v MLA, which he found compelling. Accordingly, he would decline to follow it.

Regarding the current case, Baker J found that:

• The claims, as pleaded by the claimant, did not involve or imply the advancement of a case as to the content of Iranian law. There was therefore no requirement for the claimant to plead the content of foreign law.
• The defendants had not pleaded any case denying the appropriateness of applying Rule 25(2) at trial. The fact that a foreign law was, in principle, the applicable law to a claim self-evidently did not disapply Rule 25(2). It did not, without more, render it too strained or artificial to judge the claim at trial by reference to English law in the absence of evidence as to the foreign law.
• The defendants had merely reserved the right to amend their defence after having taken advice on Iranian law. The clear message conveyed was that their plea that Iranian law applied was immaterial unless some other case as to the content of Iranian law was pleaded. That had not been done.