Cross-border disputes: English Court declines to recognise/enforce US Court Judgments v. Iran arising from terrorist incidents (and also rules on validity of service)

Before the UK Courts will recognise/enforce a foreign Court Judgment against a State, two requirements must generally be met pursuant to Section 31 of the Civil Jurisdiction and Judgments Act 1982:

• that the foreign Judgment would be so recognised/enforced if it had not been given against a State (i.e. the ordinary pre-requisites for the recognition/enforceability of a foreign Judgment are satisfied); and
• (in the absence of submission to enforcement proceedings in the UK by suit on the foreign Court Judgment) that the State would not have been immune from suit had the foreign Court applied rules corresponding to Sections 2-11 of the UK State Immunity Act 1978 (the "SIA"), since one of the exceptions to immunity would have applied.

In Estate of Michael Heiser & 121 Ors v (1) Islamic Republic of Iran (2) Iranian Ministry of Information & Security [2019] EWHC 2074 (QB), the English High Court ruled that these criteria were not satisfied in respect of twelve US Court Judgments arising out of terrorist incidents in a number of countries in the Middle East in which Iran was alleged to have been involved, and so it could not enforce them.  That was for the following reasons:

• In order for a US Court Judgment to be recognised/enforced in England, the common law required that, in the absence of any form of submission to the US Courts, the judgment debtor was present (or resident) in the US at the time the proceedings were instituted.  Iran had neither submitted to the US Courts, and nor was it present (or resident) in the US.
• Further and in any event the US Court, applying rules corresponding to Sections 2-11 of the UK SIA (which meant applying those provisions but replacing references to the UK with references to the US), would have determined that Iran was immune from suit save in respect of matters leading to one of the US Court Judgments.  That was because none of the exceptions to immunity would have applied in respect of the other eleven, in particular:
  • the relevant acts/omissions, save in respect of the one US Court Judgment, had not occurred within the US for the purposes of Section 5; and
  • the state financial sponsorship of terrorism found by the US Courts did not amount to a "commercial transaction", and in any event the US proceedings leading to the Judgments did not "relate to" such a transaction, for the purposes of Section 3(1)(a).

The Court also considered the rules which are applicable when serving documents on a State, and addressed the question of whether service of the claim form, and of the Judgment subsequently entered in default, had been validly effected in the circumstances of the case.  It decided that:

• the claim form and accompanying documents had been validly served pursuant to Section 12(1) of the SIA since they were handed over within the Ministry of Foreign Affairs ("MFA") compound, and that was sufficient for them to have been "transmitted" through the Foreign and Commonwealth Office and "received at the Ministry";
• the Judgment in default that had subsequently been obtained had, by contrast, not been validly served pursuant to Section 12(5) of the SIA since:
  • the MFA had refused to accept those papers when attempts were made to deliver them and as such, contrary to Certain Underwriters at Lloyd's of London v Syrian Arab Republic and Ors [2018] EWHC 385 (Comm), they could not have been "received", and
  • notwithstanding a contrary statement in the order obtained "without notice" and also contrary to The European Union v Syrian Arab Republic [2018] EWHC 181 (Comm), service could not in fact have been effected by email as the word "received" involved some act of volition and Iran had not expressly agreed to accept email service.

The Judgment demonstrates the importance of agreeing in advance appropriate:

• forum selection agreements;
• waivers of immunity (in respect of suit, enforcement and/or forms of remedy/relief); and
• methods by which documents may be served

if, unlike in this case, it is possible to do so – for example when transacting with a State.

Following this Judgment, difficulties may be encountered by a party seeking to serve documents on a State if, in the absence of an agreement on service methods, a State refused to accept those papers (or otherwise sought to avoid its legal obligations by obstructing service via the diplomatic route).  Given the existence of conflicting first instance judgments as to the validity of service (and other similar issues) in such circumstances, the issue will probably be considered by the Court of Appeal in another case before too long – not least because it is particularly pertinent if service of the papers in question cannot be dispensed with. 

In that respect, following the recent Court of Appeal Judgment in General Dynamics United Kingdom Ltd v Libya [2019] EWCA Civ 1110 and pending any Supreme Court Judgment on the issue, service of an order obtained "without notice" permitting enforcement of an arbitration award or (obiter) registering a foreign Court Judgment can, in theory, be dispensed with, albeit only in exceptional circumstances.  However, the Court of Appeal also indicated (obiter) that this is not the case for a claim form in proceedings:

• to determine an underlying dispute; or
• to enforce a foreign Court judgment by means of a claim made on the judgment debt (rather than via a registration process).