Sovereign enforcement


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The Supreme Court has considered the “commercial purposes” exception to state immunity in a claim brought by a US judgment creditor against Iraq.

In Servaas Inc. v Rafidain Bank [2012] UKSC 40, the appellant sought to attach a debt due to Iraq under a scheme of arrangement on the liquidation of the Iraqi state controlled bank, Rafidain. Iraq directed that the payment was to be made directly to the Development Fund for Iraq. It was claimed that the original debts had arisen from commercial ventures, rather than as an exercise of sovereign authority. The onus was on the applicant to rebut the statutory presumption, arising from the certificate of the Iraqi Ambassador, that the property was to be used for sovereign and not commercial purposes, as only the former would give rise to immunity.

The Supreme Court held that the origin of the debt was not relevant to the decision as to whether the property was in use for commercial purposes. The property would only be subject to enforcement where it was currently “in use” or “intended for use” for a commercial transaction. Accordingly, the property remained immune from enforcement.

Paul Howcroft, Partner, Fladgate LLP (phowcroft@fladgate.com)

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