English High Court provides guidance on waiver of sovereign immunity

In a recent decision in the case High Commissioner for Pakistan In the United Kingdom ("Pakistan") v National Westminster Bank (the "Bank"), the English High Court considered the scope of sovereign immunity provided by section 1 of the English State Immunity Act 1978 (the "1978 Act").

The case concerned competing claims by India, descendants of an Indian Prince (together, the "Interested Parties"), and Pakistan on a sum of money deposited into a bank account in 1948, following the end of British rule in India.

It was not necessary for the court to decide the question of whether Pakistan had waived sovereign immunity in order to answer the questions before it. However, the Court took the opportunity to examine whether Pakistan's conduct in the proceedings had amounted to a waiver of immunity under s.2 of the 1978 Act with respect to the Interested Parties as well as the Bank.

The Court considered that once sovereign immunity is waived by a State instituting proceedings, it is waived for the duration of those proceedings, including any new claims that the State could have predicted would arise from the original proceedings.

The Court's discussion in this case sheds some light on the boundaries of an area of law that has seen limited judicial consideration. It remains to be seen whether Pakistan will appeal, and so give a higher court an opportunity to provide further guidance.

In 1948, during the period following the end of British rule in what is now India, Pakistan and Bangladesh, £1million was transferred by the Prince of the then-independent state of Hyderabad to the Bank, and it was placed into an account opened in the name of the High Commissioner of Pakistan (a Mr Rahimtoola). Hyderabad was annexed to India shortly thereafter, and the ownership of the money was disputed. Parties claiming ownership included Pakistan, India and the descendants of the Prince of Hyderabad. At the time, the Bank suggested interpleader proceedings to compel the Interested Parties to determine ownership of the disputed sum; however Pakistan refused to waive its immunity from jurisdiction.

Proceedings were brought in 1954 against the Bank by the Prince's heir and the state of Hyderabad claiming the money. A concurrent writ was also served on Mr Rahimtoola, who had since become Pakistan's Ambassador to France. Mr Rahimtoola applied successfully to have the proceedings against him set aside and those against the Bank stayed on the grounds of Pakistan's sovereign immunity.

In 2013, Pakistan applied to have the stay lifted. In response, the Bank wrote to the Interested Parties and sought to interplead them, and shortly after Pakistan issued a Notice of Discontinuance in respect of the same proceedings it had resurrected, in order to maintain its immunity in the proceedings. This judgment concerned whether the Notice of Discontinuance should be set aside, and whether the Interested Parties could be joined. The Court found both in the affirmative.

Waiver for the entirety of the proceedings

However, the Court also addressed the question of the extent to which Pakistan had waived sovereign immunity. In his judgment, Henderson J considered that once Pakistan had waived its immunity by bringing the action against the Bank in 2013, its submission to jurisdiction extended to all decisions made concerning those proceedings, which it could reasonably have predicted. He noted that submission to jurisdiction as defined in s 2 (3)(a) of the 1978 Act was irrevocable, and would "continue until the proceedings have run their course". It was therefore not open to Pakistan to partially submit or partially waive immunity in respect of a matter, or to temporarily waive immunity.

New Claims that are "entirely predictable"

In finding that Pakistan's submission to the jurisdiction of the court was a complete one, the Court considered that Pakistan's "waiver extended to any new claim which might be made by amendment in the proceedings." ([74]). He rejected Pakistan's submission that the interpleader proceedings would have taken the form of separate proceedings, as this could not be reconciled with the "clear wording" of RSC Order 17 and Part 23 of the Civil Procedure Rules which included such an application as part of the original proceedings.

However "any new claim" was limited to those that were "entirely predictable". This term is not defined in the judgment, though the Court considered on the facts of the case that, given the history of the dispute, it was "entirely predictable" that the Bank would seek to interplead the Interested Parties.

Some guidance on the meaning of "entirely predictable" can be taken from two points mentioned in support of the Court's conclusion. Firstly, in support of the limitation to "predictable" claims, the Court referred to Yendall v Commonwealth of Australia (1984) 107 ILR 590. In that case, the Australian Court found that the State of Australia could not be considered to waive immunity with respect to new claims if it "would not have waived its immunity if such an allegation had been included in the original application". This indicates that predictability is to be considered in light of the State's knowledge of the claim when it first decided to waive immunity.

Secondly, it was noted that any waiver of immunity only concerns the adjudicative functions of the court, rather than its enforcement functions. The ability to enforce a judgment or decision against a State was, he considered, "the subject of far-reaching procedural privileges conferred by section 13 [of the 1978 Act]". Therefore while a State that has waived immunity with respect to a claim must submit to adjudication until the claim has been decided, the waiver ends once the decision is handed down and before enforcement proceedings begin.

Comment

Although the discussion was obiter, the Court has provided some useful guidance on an area of law that has seen limited judicial consideration. However, the extent to which new claims against a State will be considered "entirely predictable" is likely to require further development. It remains to be seen whether Pakistan will appeal, and so give a higher court an opportunity to consider the scope of section 2 of the 1978 Act. Further, the court's confirmation that any such waiver extends only to the adjudicative function of the court and not to any subsequent enforcement action constitutes an important practical limitation.

For further information, please contact Andrew Cannon, Partner, Hannah Ambrose, Professional Support Lawyer, or your usual Herbert Smith Freehills contact.