Arbitration

Conflict of laws – International law – Attachment orders – Expropriation – Freezing injunctions

E.T.I. Euro Telecom International NV v (1) Bolivia (2) Empresa Nacional De Telecomunicaciones Entel SA CA: (Civ Div) (Lords Justice Tuckey, Lawrence Collins, Stanley Burnton): 28 July 2008

The appellant Netherlands company (E) appealed against a decision ([2008] EWHC 1689 (Comm)) setting aside freezing orders granted in favour of E against the respondent Republic of Bolivia (B) and a Bolivian telecommunications company (T).

E had obtained a 50% ­holding in T and management control when T had been privatised. E’s case was that B had subsequently begun to take measures to renationalise T, which adversely affected the value of E’s investment in T and were intended to expropriate E’s interest in T without paying fair compensation. E submitted to the International Centre for Settlement of Investment Disputes (ICSID) a request for arbitration against B, pursuant to the Netherlands/Bolivia bilateral ­investment treaty seeking ­compensation for its injuries allegedly arising from B’s conduct.

ICSID initiated arbitration ­proceedings in which B did not ­participate. B then proclaimed a nationalisation decree in respect of E’s interest in T. E’s case was that it was clear that nothing would be paid for the expropriated shares. E had obtained an ex parte order of ­attachment in New York in aid of the ICSID arbitration, in respect of certain bank deposits held in New York in T’s name. E then obtained without notice a freezing order in respect of about US$50 million held on deposit in London in T’s name, pursuant to section 25 of the Civil Jurisdiction and Judgments Act 1982. The judge ­discharged the freezing order, holding that it was not made ‘in relation to’ the US proceedings in the sense required by section 25 of the 1982 act as extended by the Civil Jurisdiction and Judgments Act 1982 (Interim Relief) Order 1997 and that section 25 of the 1982 act as implemented by the 1997 order did not extend to making an order in support of ICSID arbitrations.

E submitted that (1) a proceeding could be ‘substantive’ even if its sole purpose was to assist some other ­proceeding not concerned with the final merits, that the proceedings in New York were concerned with the dispute as to whether the ICSID ­arbitration could be made effective by preserving assets which B could use to pay a future award, and that the key question was whether the purpose of the order made in New York would be assisted by the making of the freezing order; (2) that there was nothing in the 1997 order which prevented it ­applying to arbitration proceedings; ­(3) that the judge had erred in holding that if there had been jurisdiction it would not have been expedient to grant relief under section 25 of the 1982 act because of the terms of the ICSID Convention and Rules; and (4) that the judge had erred in holding that B was entitled to sovereign immunity.

Held: (1) The foreign proceedings to which section 25 of the 1982 act and the 1997 order were referring were proceedings on the substance of the matter. That appeared from the ­legislative purpose of section 25 of the 1982 act and the heading of the ­section, Owners of Cargo Lately Laden on Board the Siskina v Distos Compania Naviera SA [1979] AC 210 HL considered. The application of section 25 of the 1982 act to foreign ­substantive proceedings was ­confirmed by many references in ­decisions on section 25 of the 1982 act, Credit Suisse Fides Trust SA v Cuoghi [1998] QB 818 CA (Civ Div), Refco Inc v Eastern Trading Co [1999] 1 Lloyd’s Rep 159 CA (Civ Div), and Motorola Credit Corp v Uzan (No6) [2003] EWCA Civ 752, [2004] 1 WLR 113 considered. The notion of ­substantive proceedings might have to be given a liberal interpretation to ensure international judicial co-operation, Kensington International Ltd v Congo [2007] EWCA Civ 1128, [2008] 1 WLR 1144 considered.

On any view, the English ­proceedings were not in aid of, or related to, any substantive ­proceedings in New York, however ­liberally those expressions were ­interpreted. The New York attachment proceedings constituted interim relief to protect assets pending the ­outcome of the ICSID arbitration. They were directed solely at assets in New York and proceedings in England directed at assets in England could not be ancillary to the New York ­attachment.

(2) On the proper construction of section 25(3) of the 1982 act and the 1997 order, arbitral proceedings were not ‘proceedings’ within the meaning of those provisions. The decisive consideration was that the power in section 25(3)(c) of the 1982 act to extend section 25 of the 1982 act to ­arbitration proceedings had been repealed by the Arbitration Act 1996. Since section 25(3)(c) of the 1982 act dealt separately with arbitration, it was plain that arbitration was not intended to be included in section 25(3)(b) of the 1982 act. The 1996 act contained power to make an order extending section 44 of that act to ICSID ­arbitrations but no such order had been made. That was not because no such order was needed but because of the nature of the regime established by the ICSID convention and rules.

(3) The effect of the ICSID ­convention and rules was that ­provisional measures might be sought only from the ICSID tribunal itself, and not from national courts, unless the parties agreed otherwise. Such ­agreement would of itself normally make an interim order under section 25 of the 1982 act inexpedient, and also make it unnecessary to consider all the other circumstances.

(4) B was entitled to state immunity under section 13(2) of the State Immunity Act 1978. If the injunction could not stand against B because of its immunity, it could not stand against T.

Appeal dismissed.

Gabriel Moss QC, Marcus Haywood (instructed by Orrick, Herrington & Sutcliffe) for the appellant; Joe Smouha QC, Paul McGrath (instructed by Stephenson Harwood) for the first respondent; Jeffrey Gruder QC (instructed by Reed Smith) for the second respondent.