Key takeaways
Issue estoppel can limit enforcement options
Prior rulings may block relitigation of key points.
State immunity remains a complex barrier
Exceptions apply in a limited way, particularly in arbitration matters.
Careful drafting reduces enforcement challenges
Clear clauses help navigate immunity and estoppel risks.
Hulley Enterprises Ltd & others -v- The Russian Federation [2025] EWCA Civ 108
The Court of Appeal has held that findings by the Dutch Court that the Russian Federation (Russia) had agreed in writing to submit its disputes with the claimants in this case to arbitration meant that Russia could not re-argue that same issue before the English courts in an attempt to challenge the English Courts’ jurisdiction.
The background facts
In July 2014 an arbitral tribunal issued three materially identical awards declaring that Russia had breached its obligations under Article 13(1) of the Energy Charter Treaty and ordering it to pay damages of more than US $50 billion plus interest to the claimants, Hulley Enterprises Ltd, Yukos Universal Ltd and Veteran Petroleum Ltd (the respondents to the appeal), who are the former majority shareholders in OAO Yukos Oil Company.
In November 2014, Russia commenced proceedings to set aside the awards in the courts of the Netherlands, the arbitral seat. It did so on various grounds, including procedural fraud in the arbitration on the part of the claimants, and also that the tribunal did not have jurisdiction because there was no binding arbitration agreement between the claimants and Russia.
In January 2015, the claimants issues proceedings in England, seeking to have the awards recognised and enforced pursuant to s.101 Arbitration Act 1996, which gives effect in England and Wales to the New York Convention. Russia challenged the jurisdiction of the English Court, contending that it was immune from English court jurisdiction pursuant to s.1 State Immunity Act 1978 (SIA 1978).
In April 2016, the District Court of the Hague set aside the awards. The claimants appealed that decision and, pending the outcome of the appeal, the English enforcement proceedings were stayed by consent.
In February 2020, the Hague Court of Appeal reinstated the awards. In allowing the claimants’ appeal, it dismissed among other things Russia’s argument that there was no binding arbitration agreement between the parties as well as the allegation of procedural fraud.
Russia challenged the Hague Court of Appeal’s decision by an appeal to the Dutch Supreme Court. While that appeal was pending, the claimants applied to lift the stay of the English enforcement proceedings. Russia resisted the application on the basis that the issues in play overlapped substantially with its challenge to the Dutch Supreme Court. In April 2021, the English Court declined to lift the stay.
In November 2021, the Dutch Supreme Court upheld the Court of Appeal decision on the issue of a binding arbitration agreement but found that the Court of Appeal had erred on the issue of procedural fraud. The Court of Appeal judgment was, therefore, quashed and the matter remitted back to the Amsterdam Court of Appeal for further consideration and decision.
In October 2021, the claimants succeeded in getting the stay of English proceedings partly lifted solely to allow the Court to determine, by way of preliminary issues, the jurisdictional matters arising.
The primary question for the English Commercial Court was whether and to what extent the judgments of the Dutch courts precluded Russia from rearguing the question of whether it had agreed in writing to submit the relevant disputes to arbitration.
State immunity
The general rule, set out in s.1 SIA 1978, is that a state is immune from the jurisdiction of the UK courts, subject to a series of exceptions. The burden of proving that the claim falls within one of the exceptions lies on the claimant, who has to establish its case on the balance of probabilities.
The SIA 1978 does not deal with the recognition or enforcement of judgments of foreign courts given against a state. That is dealt with in s.31 Civil Jurisdiction and Judgments Act 1982 (CJJA 1982), which provides that such a judgment will be recognised and enforced by the UK courts only if it would be recognised and enforced if it had not been given against a state and that court would have had jurisdiction according to the applicable rules.
The exception on which the claimants relied was the arbitration exception in s.9 SIA 1978. This requires the claimant relying on the exception to prove on the balance of probabilities that:
The state has agreed in writing to submit the disputes in question to arbitration.
The proceedings in the UK relate to the arbitration.
There is no contrary provision in the arbitration agreement. And
The arbitration agreement is not between two or more states.
Here, the only disputed issue was whether Russia had agreed in writing to submit the disputes in question to arbitration.
The Commercial Court decision
The Commercial Court held that an issue estoppel precluded Russia from rearguing the “no arbitration agreement” issue and that, as a result, its challenge to the jurisdiction of the English Court on the grounds of state immunity should be dismissed.
In very general terms, under English common law, where a particular issue arising in litigation has been conclusively decided in earlier proceedings between the same parties, then that issue cannot be re-opened in the later proceedings. This is known as “issue estoppel”. Issue estoppel prevents the re-litigation of specific issues already decided, even if the cause of action is different. Issue estoppel in English law is an enforceable substantive right and was described by the Court in PJSC National Bank Trust -v- Mints [2022] EWHC 871 (Comm) as a rule of substantive law applied by the second tribunal as to the legal effect of the determination by the first tribunal.
The Commercial Court noted that there was no direct authority on whether the decision of a foreign court could give rise to an issue estoppel when the English Court was deciding whether one of the exceptions to state immunity under the SIA 1978 applied. However, there was nothing in the SIA 1978 to indicate that issue estoppel was to be disapplied when considering the statutory exceptions to immunity.
The Court found that the requirements of issue estoppel were satisfied. Firstly, the issue decided by the Dutch Court was the same issue, i.e. whether Russia had agreed in writing to arbitrate the relevant disputes. Secondly, on the evidence, the Dutch Court had finally and conclusively decided this issue and the Dutch court decisions had res judicata effect as a matter of Dutch law. This was so irrespective of the fact that the procedural fraud issue remained live before the Dutch courts. There were no special circumstances in this case to disregard the Dutch court decisions. Therefore, Russia was precluded from re-arguing the “no arbitration agreement” issue.
Subsequent developments
Following the Commercial Court decision, the Amsterdam Court of Appeal rejected Russia’s case on procedural fraud and declined to make a reference to the CJEU. An appeal is pending from this decision by Russia to the Dutch Supreme Court.
Russia subsequently appealed the Commercial Court decision to the English Court of Appeal.
The Court of Appeal decision
It was accepted that, in principle, an issue estoppel can arise against a state from the decision of a foreign court. It was also accepted that the requirements for an issue estoppel were satisfied in this case, in particular that the Dutch courts had finally and conclusively decided the “no arbitration agreement” issue against Russia.
Therefore, the primary focus of the appeal was whether, as Russia argued, the English Court had a duty to determine for itself whether one of the exceptions to state immunity under the SIA 1978 applied (in this case, the arbitration exception), rather than rely on the decision of the foreign court in that regard and allow issue estoppel to prevent it from making it own determination on the issue.
The Court of Appeal disagreed with this line of argument. It was not correct to say that when the English Court gave effect to an issue estoppel, whether arising from an English or foreign judgment, it was not making a determination at all. The point was not that the Court declined to make a decision, it was that because of the issue estoppel, evidence to contradict the previous judgment was not relevant.
In deciding that Russia was not immune, the Commercial Court did not decline to determine whether Russia had agreed in writing to submit the dispute in question to arbitration. Rather, the Court had determined that Russia had so agreed, applying the substantive principle of English law that when the requirements for an issue estoppel were satisfied, the previous decision of a court of competent jurisdiction was conclusive on the relevant issue.
The Court of Appeal added that issue estoppel created a substantive right which was recognised and protected in English law. There was nothing in the SIA 1978 which was capable of depriving a party of that right. There was also nothing in the SIA 1978 to prescribe how a court should decide whether an exception to immunity applied.
The Court of Appeal also dismissed the argument that, on grounds of public policy, issue estoppel should give way to state immunity, which was more important. Rather, the Court was obliged to give effect to the provisions of the SIA 1978, no more no less. When the Court decided that an exception to immunity applied as an issue estoppel arising from a decision of a foreign court, it was simply applying the public policy of having finality in litigation.
The Court of Appeal further noted that the requirements of s.31 CJJA 1982 were also satisfied. It agreed with the Commercial Court that there were no special circumstances in this case which provided a reason not to give effect to the decisions of the Dutch Court.
The appeal was, therefore, dismissed.
Comment
The fact that the question of special circumstances needed to be considered demonstrated that the English Court does not “blindly” follow a decision of the foreign court which was said to give rise to issue estoppel. Instead, it considers for itself the overriding question whether the application of issue estoppel in any given case will work justice or injustice.
