In its recent judgment in Zhongshan Fucheng Investment Co Ltd v The Federal Republic of Nigeria, the English Court of Appeal clarified the interplay between state immunity from jurisdiction and the CPR’s provision for ex parte, summary enforcement of arbitral awards.
According to the Court of Appeal, a court’s duty to determine jurisdictional immunity of its own motion does not demand a full hearing in every case – and does not prevent a court from imposing appropriate procedural limits and timetables on states seeking to invoke immunity.
Following usual practice: the enforcement proceedings in the High Court
These proceedings concerned an application by a Chinese company, Zhongshan Fucheng Investment Co Ltd, to enforce an investor-state arbitral award obtained in the context of an ad hoc BIT arbitration against Nigeria. In accordance with the general procedure for enforcing arbitral awards in CPR 62.18, the enforcement application was made without notice to Nigeria. In those proceedings, the fact that Nigeria might attempt to rely on immunity under the State Immunity Act 1978 (SIA) was put before the court as part of the applicant’s usual duty of full and frank disclosure. But the judge, Cockerill J, was satisfied that potential immunity arguments had no merit due to the exception in s.9 SIA for arbitration-related court proceedings.
Cockerill J therefore followed usual practice by making an enforcement order ex parte and on the papers, with provision for Nigeria to apply to set aside or vary the order (including on the basis of any immunity arguments) within a set time limit. Despite being served with the order, Nigeria missed the deadline to respond. It then sought successive extensions, during which period further deadlines were missed. In December 2022, Cockerill J heard the two applications for extensions of time and, applying the CPR’s strict approach to relief from sanctions, dismissed them in an ex tempore judgment.
The court’s duty to determine immunity of its own motion: Nigeria’s appeal
On appeal, Nigeria submitted that the High Court had a duty to determine jurisdictional immunity of its own motion and that it had failed in that duty by proceeding, without a full hearing, to find that state immunity was prima facie not available to Nigeria.
Nigeria relied on s.1(2) SIA, which provides: ‘A court shall give effect to the immunity conferred by this section even though the State does not appear in the proceedings in question.’
Males LJ refused permission to appeal. Nigeria attempted to reopen the decision on the exceptional basis of CPR 52.30.
The Court of Appeal’s judgment
The Court of Appeal rejected Nigeria’s argument, deeming it ‘as startling as it is misconceived’. As Cockerill J had observed at first instance, Nigeria’s argument taken to its logical endpoint was an assertion that procedural rules simply do not apply to a state which wishes to invoke immunity. There was a specific timeline in place to deal with challenges to enforcement, including state immunity, and an explicit opportunity provided to raise immunity arguments. Nigeria did not use that opportunity.
The Court of Appeal held that in the circumstances of this case, the court had not disregarded its duty to determine immunity of its own motion. Those circumstances were:
- the immunity arguments were apparent and disclosed by the party seeking enforcement;
- the party seeking enforcement made a prima facie case for non-application of state immunity;
- the High Court regarded that case as sufficient to make an ex parte enforcement order; and
- Nigeria had every opportunity to make an application within time to set aside the order but did not do so even though it was well aware of the time limit.
Of course, if state immunity is established, a court has no jurisdiction over the state in respect of the substantive dispute. But the Court of Appeal emphasised that the court does have jurisdiction to determine whether state immunity arises at all. And that jurisdiction ‘must encompass the imposition of whatever procedural rules are appropriate for that determination’.
Conclusion and observations
The Court of Appeal in Zhongshan has underlined the importance of ‘speedy finality’ in the enforcement of arbitral awards by rejecting Nigeria’s plea that it should be able to resurrect immunity arguments despite consistent, and repeated, non-compliance with the procedural timetable. The judgment had to weigh in the balance two interests – a state’s entitlement to invoke jurisdictional immunity, on the one hand, and respect for the efficacy and finality of arbitral awards, on the other hand.
In that respect, the Court of Appeal has taken a firm stance which clarifies and confirms the availability in the UK of summary enforcement orders in an appropriate case, with provision preserving the state’s ability to move to set aside or vary those orders, including on immunity grounds.
For further information, please contact:
Ben Carroll, Partner, Linklaters
ben.carroll@linklaters.com
