Three Part Series: UK Freezing Orders Against A Foreign State, Part Two

• Jurisdiction: United States,Federal
• Law Firm: Steptoe & Johnson
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution, Court Procedure, Sovereign Immunity: Public Sector Government, Trials & Appeals & Compensation
• Author: Mr Thomas Innes, Steven Davidson, Michael Baratz and Molly Bruder Fox
• Published date: 19 April 2023

First Tuesday Update is our monthly take on current issues in commercial disputes, international arbitration, and judgment enforcement. Today's update is the second in a three-part series that examines whether English courts can issue a worldwide freezing order against a foreign state in support of efforts to enforce an arbitral award or foreign judgment.

Last month, we looked at the procedure in England to enforce arbitral awards and foreign judgments against foreign states (link). Today, we consider whether the rules on state immunity from execution bar the grant of a worldwide freezing order against a state. Our next update will then consider the principles that otherwise govern the grant of such orders.

Introduction

A freezing order is a form of injunction by which an English court can restrain a debtor from disposing of or dealing with their assets until such time as the award/judgment is paid/enforced. This can apply to assets both within England and Wales and abroad. A freezing order is a powerful tool to support an enforcement strategy. However, the creditor must overcome various hurdles to obtain such an order. In the context of an action against a foreign state, this includes the rules on state immunity.

State Immunity in Relation to the Execution Stage

As explained in our last update, by Section 1 of the State Immunity Act 1978 (SIA), the general rule is that states are immune from the jurisdiction of the English courts unless the action falls within the scope of one of several exceptions set out in the Act. Those exceptions concern both immunity from adjudication and immunity from execution. Today, our focus is on the latter.

SIA Sections 13(2)-(4) deal with the type of measures that may be taken against states for the execution of awards/judgments. These provisions can be divided in two:

• First, "relief shall not be given against a State by way of injunction or order for specific performance or for the recovery of land or other property" (Section 13(2)(a)), unless the state has consented to such relief being given (Section 13(3)).
• Second, "the property of a State shall not be subject to any process for the enforcement of a judgment or arbitration award ." (Section 13(2)(b)), unless the state has consented to such process being issued (Section 13(3)) or the enforcement process is "in respect of property which is for the time being in use or intended for use for commercial purposes" (Section 13(4)).

The Consent Exception

As noted above, the prohibition on injunctive relief is disapplied where the state has consented to such relief being given. However, by Section 13(3), a provision merely submitting to the jurisdiction of the English courts is not to be regarded as a consent for such purposes. The scope of a consent will depend on an interpretation of the specific clause. By way of example, in A Company Ltd v. Republic of X (1990),¹ there was a waiver to the effect: "The Ministry of Finance hereby waives whatever defence it may have of sovereign immunity for itself or its property ." (our emphasis). The High Court held that such waiver "amounted to the agreement and consent of the State that its property can be made the subject of a freezing injunction."

Other...