Three former Yukos majority shareholders (the “Shareholders”) initiated enforcement proceedings in England, in the latest instalment of the Shareholders’ long-running international efforts to enforce arbitral awards with an approximate value of $50 billion.  The Court of Appeal considered whether the State immunity Act 1978 (“SIA”) prevented a final and binding determination by a foreign court to give rise to issue estoppel against a State party in English proceedings.  It held that when the requirements for an issue estoppel are satisfied, the previous decision of a court of competent jurisdiction was conclusive.

Background:

As is well-known, the Shareholders obtained an UNCITRAL arbitral award of over $50 billion in proceedings brought under the Energy Charter Treaty.  Russia applied to have the awards set aside in the Netherlands (the seat of arbitration).  The Shareholders had initiated enforcement proceedings in England, but the English proceedings stayed due to the ongoing Dutch proceedings.  In November 2021, the Dutch Supreme Court gave judgment rejecting Russia’s set-aside application.  The stay was lifted in October 2022 for the sole purpose of resolving Russia’s State immunity defence in the English enforcement proceedings.  Russia challenged the jurisdiction of the English court on the ground of State immunity.

On 1 November 2023, the High Court (Cockerill J) found that Russia was precluded from arguing before the English courts that the arbitral tribunal did not have jurisdiction, by reason of an issue estoppel arising out of the Dutch courts’ judgments.  Cockerill J held that the SIA is subject to procedural and substantive common law rules, including issue estoppel, and there is no principle of law that issue estoppel could not arise in the context of public international law (such as in relation to the interpretation of an international treaty).  She also held that, in order for an issue estoppel to arise from a foreign judgment issued against a foreign State, the requirements for recognition of such judgments, contained in s. 31 of the Civil Jurisdiction and Judgments Act, must also be satisfied

Russia subsequently appealed the High Court judgment to the Court of Appeal, on various grounds which were distilled to a single preliminary issue: when a foreign court has decided that a State has agreed in writing to submit a dispute to arbitration, and the usual conditions for the application of issue estoppel are satisfied, can: (a) an English court treat that decision as giving rise to an issue estoppel, or (b) must it determine the issue for itself (i.e., de novo) without regard to the decision of the foreign court?

Court’s Decision:

The Court of Appeal (Lord Males, Lord Lewison, Lord Zacaroli) unanimously dismissed Russia’s appeal.  In doing so, it noted inter alia as follows:

(1)  While the SIA sets out comprehensively the exceptions to state immunity (in ss. 2 to 11 of the SIA), it does not prescribe how the English court should decide whether any of the exceptions applies in any given case. That question must be decided by applying the ordinary principles of English law—both substantive and procedural—and those principles include the principle of issue estoppel.

(2)  Cockerill J had not (as Russia had argued) declined to determine whether Russia had agreed to submit the underlying dispute to arbitration. Instead, she had determined that Russia had so agreed, applying the substantive principle of issue estoppel. The relevant question had been determined by the previous decision of a court of competent jurisdiction (i.e., the Dutch Supreme Court in 2021), which the Court of Appeal confirmed to be conclusive on the issue; and

(3)  State immunity and/or treaty interpretation did not constitute “special circumstances” militating against the application of issue estoppel in any event. To give effect to the issue estoppel arising from such a judgment was in the interests of justice as it would: (i) avoid putting the award creditors to the trouble and expense of litigating the relevant issue again, and (ii) be in accordance with the important public policy that arbitral awards, even against sovereign States, “should be honoured without delay and without the kind of trench warfare seen in the present case”.