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Act of state: who decides what’s out of bounds?

Continuing our review of the past year, Alison Macdonald looks at a fascinating decision about whether act of state/non-justiciability can be waived

By Legal Support Service · On February 2, 2017


As we identified in our review of 2016, many of the significant recent PIL cases in the English courts have involved the courts in mapping the territory which belongs to different decision-makers. The decision-makers in question are often the courts and the executive – such as in the diplomatic immunity saga which we covered here. But in High Commissioner for Pakistan in the United Kingdom v National Westminster Bank and others [2016] EWHC 1465 (Ch), one of our Top 10 of 2016, the question was not the respective roles of the courts and the executive, but rather the roles of the court and the parties themselves. In particular, do the courts always have to be the final arbiter of whether a claim is barred by the doctrine of act of state, or can a party’s conduct be construed as a waiver of any act of state objections, allowing a claim to proceed which might otherwise be barred?

The history of the case

The case concerned rival claims to beneficial ownership of £35 million which, since 1948, had been sitting in a NatWest bank account in London in the name of the first High Commissioner for Pakistan in the United Kingdom. The money was deposited following the end of British rule in India: the fascinating historical background is set out in a previous decision in the same litigation. Competing claims were advanced by Pakistan, India, and the descendants of an Indian prince. For complex reasons set out in the previous decision, what the court described as a ‘legal stalemate’ had prevailed since the decision of the House of Lords in Rahimtoola v Nizam of Hyderabad [1958] AC 379, preventing the English courts from deciding the question of beneficial ownership of the funds.

do the courts always have to be the final arbiter of whether a claim is barred by the doctrine of act of state

Then in 2013, Pakistan commenced proceedings against the Bank: but it then sought to discontinue them. The commencement of those proceedings counted, of course, as a waiver of Pakistan’s sovereign immunity (by reason of s.2 of the State Immunity Act 1978, which provides that (i) a State is not immune in respect of proceedings in respect of which it has submitted to the jurisdiction of the UK courts, and (ii) instituting proceedings is deemed to amount to submission to the jurisdiction.) And in the previous decision, the court held that once that waiver had occurred, it could not be revoked: the waiver applied for the duration of the proceedings. Accordingly, Pakistan’s notice of discontinuance was set aside, and the case carried on.

The 2016 decision

Having lost on the state immunity point, Pakistan then sought to resist the court’s jurisdiction on the basis of the doctrines of act of state / non-justiciability. This was an unusual situation: the party which had brought the claim was itself arguing that the court should refrain from exercising jurisdiction over the subject matter of the claim. This is, for obvious reasons, an argument usually made by a defendant, not a claimant. (It made sense for Pakistan, the claimant, to raise this point in the circumstances of the case because, as the court explained, if the issue is non-justiciable then ‘Pakistan’s right to the Fund will then be indefeasible, because no action can be taken in a municipal court to displace her legal title … Looked at in this way, the plea is one of the ways in which Pakistan seeks to eliminate rival claims to the Fund.’ [91])

the English courts will not investigate the propriety of an act of a foreign government performed in the course of its relations with another State

The doctrine of ‘act of state’ contains a number of different strands. The court (Henderson J) began by reviewing the authorities on act of state and noting that the doctrine was in the course of development. [83] Given the imminent examination of the act of state doctrine by the Supreme Court in Belhaj (see our summary of the Supreme Court’s subsequent decision), Henderson J did not attempt a comprehensive analysis, but identified the relevant strand of act of state as requiring “that the English courts will not investigate the propriety of an act of a foreign government performed in the course of its relations with another State or to enforce any right alleged to have been created by such an act.” (As defined by the editors of The Conflict of Laws, Dicey Morris and Collins, 15th edition, para. 5-045).

The court used ‘act of state’ and ‘non-justiciability’ fairly interchangeably: the latter being a consequence of a conclusion that the act of state doctrine applied in a particular case. (There are, of course, many other unrelated reasons why the subject-matter of a particular case may be said to be non-justiciable, although the scope of the non-justiciability doctrine has been considerably narrowed over recent years).

The court concluded that it would not be right, at that early stage of the case, to rule out the possibility that the transactions which led to the opening of the disputed bank account were conducted at governmental level, and thus potentially engaged the act of state doctrine.

In light of this possibility, the key conclusions on act of state were:

  • Territoriality: the court refused to rule out the application of the act of state doctrine on the basis that the relevant acts took place in London rather than the sovereign territories of Pakistan and/or Hyderabad:

…if the true basis of this part of the doctrine lies in the essential non-justiciability of transactions at governmental level, I have some difficulty in understanding why territoriality, as such, should have any part to play in the determination of the issue. What matters is the nature and quality of the transactions in question, not where they took place. [86]

  • Who decides? India argued that ‘since Pakistan irrevocably waived her sovereign immunity by starting the present action, it is an abuse of process for Pakistan to seek to prevent adjudication by the court upon the issue which she has herself brought before it.’ [88] Rejecting this argument, the court concluded that:

The difficulty with this submission, in my judgment, it that, whereas sovereign immunity is capable of being waived, the principle of act of state or non-justiciability is not. If the court lacks jurisdiction to determine an issue, such jurisdiction cannot be conferred upon it by the parties, and the court is in principle obliged to investigate the question itself even if the parties do not wish to do so, or even if it would otherwise be an abuse of process for a party to ask the court to do so. [89]

In this respect, sovereign immunity and act of state are critically different: ‘sovereign immunity acts as a procedural bar, which the party entitled to invoke it may waive, whereas the doctrine of act of state goes to the substantive adjudicative competence of the court.’ [89]

The decision highlights the conceptual difference between state immunity, which ‘belongs’ to the State and can be waived by it, and the act of state doctrine, which must be investigated by the court itself in order to determine the limits of its own jurisdiction.

Legal Support Service

Legal Support Service

The Legal Support Service provide research and paralegal support to Matrix members – whether by finding legal information (cases, legislation, articles, reports etc), producing bundles of authorities for court, or carrying out more substantial research. They also collate daily current awareness bulletins, covering Matrix’s major areas of practice, manage our intranet and extranets and administer the freelance research panel.




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