Argentina Not Immune From Claims Relating To Distressed Debt

In the important decision in NML Capital Ltd v Argentina [2011] UKSC 31, 6 July 2011, the Supreme Court considered whether Argentina was immune from the English courts' jurisdiction to recognise and enforce a judgment obtained against it by NML in New York.

The Supreme Court overruled the Court of Appeal, holding that Argentina was not entitled to immunity in relation to proceedings for the recognition of the New York judgment. The judgment is good news for those contracting with foreign states who may find themselves having to enforce a foreign judgment against the state in England.

The claimant, NML Capital Ltd (NML) appealed against a Court of Appeal finding that the English courts had no jurisdiction to recognise and enforce a New York judgment against the defendant, the Republic of Argentina (Argentina).

The claim arose out of New York law governed sovereign bonds which had been issued by Argentina and bought, at a significant discount, by NML (a vulture fund) after the Argentinian financial collapse. NML had called an event of default on the bonds and obtained a New York judgment against Argentina for over USD 284 million. NML then sought to have the judgment recognised and enforced in England. By way of a brief reminder, the State Immunity Act 1978 (SIA) provides that a foreign state is immune from the jurisdiction of the English courts subject to certain exceptions contained in the SIA. One notable exception is that the foreign state will not be immune if it has submitted to the jurisdiction of the English courts and consented to enforcement. Meanwhile, s31 Civil Jurisdiction and Judgments Act 1982 (CJJA) provides that a judgment given in the courts of an overseas country against a state (other than the UK or the state to which the court belongs) should be recognised and enforced in the UK subject to certain conditions, in particular that:

"(a) it would be so recognised and enforced if it had not been given against a state; and

(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 ss2-11 of the [SIA]."

A key issue between the parties was whether, as NML contended, s31 introduced a new and comprehensive statutory framework for the recognition and enforcement in the UK of judgments of foreign courts against states, independent of the SIA; or whether, as Argentina contended, s31 remained subject to the provisions of the...