Court of Appeal Imposes Conditions on Argentina Appeal in Landmark Case on Foreign Judgment Enforcement

Citation: [2024] EWCA Civ 139
Judgment on

Introduction

The case of Palladian Partners LP & Ors v The Republic of Argentina & Anor ([2024] EWCA Civ 139) serves as a significant example of the complexities involved in enforcing foreign judgments against sovereign states. Central to the decision is the application of conditions to the permission to appeal, as provided by Civil Procedure Rules (CPR) 52.6(2)(b) and 52.18(1)(c), and the assessment of whether there exists a “compelling reason” for such imposition under the CPR 52.18(2).

Key Facts

The Republic of Argentina appealed a High Court judgment that ordered specific performance and payment concerning EUR-denominated GDP-linked securities issued in 2005 and 2010. The Court of Appeal granted permission to appeal, subject to a condition, which Argentina sought to reconsider. The condition required Argentina to pay approximately 20% of the judgment sum to be held in escrow. The dispute centered on whether a compelling reason for the imposition of this condition existed, given the history of Argentina’s defaults and challenges in enforcing previous judgments against it.

The principled approach focused on the application of Civil Procedure Rules concerning the imposition of conditions on permission to appeal. Specific issues discussed include:

  1. Compelling Reason for Imposition of Condition: Following the guidelines of Hammond Suddards Solicitors v Agrichem International Holdings Ltd [2001], Days Medical Aids Ltd v Pihsiang Machinery Manufacturing Co Ltd [2004], and Sunico A/S v Commissioners for HMRC [2014], the Court considered whether there existed a “compelling reason” to impose a condition as required under CPR 52.18(2).

  2. Factors Impacting the Imposition of a Condition: The decision highlighted specific factors that might point to the imposition of a condition, extrapolated from Sunico [2014], including enforcement difficulties in a foreign jurisdiction, the appellant’s financial resources, confidence in the appellant’s disclosure of financial affairs, and previous breaches or cynical non-payment.

  3. Stifling the Appeal: A major factor taken into account was whether the imposition of a condition would stifle the appeal (Sunico [2014]). In Argentina’s case, they stated that they would be able to pay the escrow amount without stifling the appeal.

  4. Discretionary Power of the Court: The Court has the discretionary power to impose conditions, even if there exists a compelling reason (Hammond Suddards Solicitors v Agrichem International Holdings Ltd [2001]).

  5. Consideration of Past Behavior: The Court of Appeals considered past defaults and Argentina’s conduct in other proceedings, aligning with precedents from cases such as NML Capital Ltd v Republic of Argentina and Bison Bee LLC v the Republic of Argentina to evaluate the probability of future compliance with judicial orders.

Outcomes

The Court of Appeal concluded that there was a compelling reason to impose the condition on Argentina, based on its history of defaults, recalcitrance as a debtor, and the practical difficulties inherent in enforcing a judgment against it. Taking into consideration the contemporaneous economic challenges faced by Argentina, and its assurance that the payment of the condition from the existing budget, albeit painful, was feasible, the Court chose to uphold the imposed condition to mitigate the risk of non-compliance and potential need for arduous enforcement.

Conclusion

The judgment of the Court of Appeal in Palladian Partners LP & Ors v The Republic of Argentina & Anor is a reflection of the balance courts attempt to strike between enforcing judgments and acknowledging the sovereign realities of states as defendants. By mandating a condition on the permission to appeal, the Court aims to ensure that the appellant shows good faith in its pursuit of litigation, while safeguarding the respondent’s interests against recalcitrant behaviour and probable enforcement hurdles. This significant decision provides guidance on when and how conditions can be used as an effective judicial tool in civil appeals involving state actors.