Interpreting the State Immunities Act: no immunity from common law principles

Insight

21.02.2025

The Court of Appeal has handed down judgment in Hulley Enterprises Ltd & others v The Russian Federation [2025] EWCA Civ 108, rejecting Russia’s claim to sovereign immunity in enforcement proceedings. In doing so, the appeal court examined the novel interplay between common law issue estoppel and the State Immunities Act 1978 (SIA 1978).

Key takeaways

The Court of Appeal confirmed that state immunity in the UK has no special status beyond that set out in SIA 1978. It will not be given any precedence over other principles of public policy. If the appeal court had concluded otherwise, it would have represented a significant change to the law.
Issues determined in foreign judgments (by courts with competent jurisdiction) cannot be re-litigated in the English courts under the principle of issue estoppel.
The Court of Appeal’s decision provides reassurance to parties seeking to enforce awards against states that points determining immunity will not be re-litigated.

What was the background?

This decision is the latest development in the long-running “Yukos” case, in which Hulley Enterprises represents the former majority shareholders of Yukos Oil Company. Since securing arbitral awards exceeding $50 billion in 2014, Hulley Enterprises has sought recognition and enforcement of the awards in the English courts. At the same time, Russia has challenged the awards on jurisdictional grounds in the Dutch courts. As a result, the English enforcement proceedings were stayed pending the outcome of the Dutch proceedings.

In November 2023, Hulley Enterprises sought to lift the stay and appeared before Mrs Justice Cockerill on preliminary issues. In her judgment, Cockerill J held that the Dutch court had already ruled on Russia’s challenge to the tribunal’s jurisdiction, specifically its argument on submission that no binding agreement existed between the parties. Applying the principle of “issue estoppel”, where a factual determination made by a competent court cannot be re-litigated, the judge found that Russia was precluded from re-arguing this point before the English courts. As a result of this, Russia could not claim state immunity as submission is one of the statutory exceptions (s9, SIA 1978).

What did the Court of Appeal decide?

Russia appealed this decision on the basis that issue estoppel should have no application in determining whether an exception to immunity under the SIA 1978 arises. The Court of Appeal did not agree. Lord Justice Males observed at [3] that, when determining whether an exception to immunity applies under SIA 1978, “that question must be decided applying the ordinary principles of English law, both substantive and procedural”.

Males LJ went on to note that the SIA 1978 “says nothing about the legal principles by which it is to be determined whether one of the exceptions to immunity applies”, but that common law principles must apply. By way of illustration, the judge noted that the balance of probabilities test (the standard of proof utilised by a court when determining immunities exceptions) is an uncontroversial application of common law principles to interpretation of the SIA 1978. Issue estoppel should be treated no differently.

One of Russia’s more interesting arguments was that “the principle of issue estoppel should give way to state immunity because the latter is of a higher order of importance, being concerned as it is with the United Kingdom’s international obligations”. This did not wash. Lord Justice Males (at [66]) refused to afford the UK’s public policy of state immunity any overriding significance expanding beyond the text of the SIA 1978 and refused the appeal.

While this judgment may be legally uncontroversial, it comes at a time of shifting dynamics for state and diplomatic immunity in the UK. Recent decisions suggest that the acts of states and their diplomats will continue to face more scrutiny than the international community has come to expect.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.