Supreme Court Reviews Sovereign Immunity

NML Capital v Argentina [2011] UKSC 31

In this case, the Supreme Court had to decide whether NML, a vulture fund, was entitled to enforce a New York judgment ordering Argentina to make payment of the principal and interest due under sovereign bonds on which Argentina had defaulted in 2003. The Supreme Court's judgement that NML were entitled to enforce this action in the UK courts sheds light on the current standing of sovereign immunity under English law.

The background facts

In 1994, the Republic of Argentina issued a series of sovereign bonds subject to New York law pursuant to a fiscal agency agreement under which it agreed a waiver of immunity. The terms of the bonds provided that a final judgment in New York would be enforceable against the defendant in other courts in which it might be amenable to a suit on the judgment. Between June 2001 and September 2003, NML bought a number of bonds at a discounted rate. Argentina defaulted on the interest payments on its bonds and sought a general restructuring of its external debt, but NML refused to take part in any restructuring offer and commenced proceedings in New York seeking to recover principal and interest due under the bonds (US$284,184,632.30). On 18 December 2006, the US District Court of the Southern District of New York entered judgment against Argentina in favour of NML for the sum claimed.

NML sought and obtained permission from the High Court in London to serve proceedings out of the jurisdiction on Argentina. NML brought the claim for the enforcement of the New York judgment.

Argentina sought to set aside this order and to obtain a declaration that the Court had no jurisdiction in respect of the claim brought against it by NML, arguing that as a sovereign state, it was immune from suit under section 1 of the State Immunity Act 1978 (the "1978 Act") which says that a "state is immune from the jurisdiction of the courts of the UK except as provided in the following provisions of this Part of the Act."

At the hearing of that application, NML said that the New York court would have had jurisdiction in the matter, applying state immunity rules corresponding to those applicable in the United Kingdom, and therefore its judgment was recognised and enforceable in England under section 31(1) of the Civil Jurisdiction and Judgments Act 1982 (the "1982 Act") which provides for the circumstances in which a foreign judgment may be enforced in the UK against a state. NML also added that the...