Landmark Ruling Confirms Issue Estoppel Against Foreign States in Hulley Enterprises Limited v The Russian Federation: Implications for State Immunity and Cost Management

Introduction

The ruling by Mrs. Justice Cockerill in Hulley Enterprises Limited & Ors v The Russian Federation, case number CL-2015-000396, delivered on the 1st of November 2023, offers an insightful look into several legal principles, particularly those relating to issue estoppel against foreign states and the application of the State Immunity Act. This article dissects the key components of the case, examining the legal reasonings and principles applied, and summarises the outcome and its implications.

Key Facts

The case concerns an application made by the Russian Federation for permission to appeal against a commercial court ruling. The application was grounded on six different bases. Mrs. Justice Cockerill examined each in turn, paying particular attention to the issue estoppel applicable to a foreign state, the role of the State Immunity Act, and the Civil Jurisdiction and Judgments Act. Additionally, specific attention was given to costs, the potential impact of sanctions, and the management of ongoing litigation.

Legal Principles

The court delved into several legal principles:

Issue Estoppel

The most notable principle in this case is the application of issue estoppel against a foreign state — a previously undetermined legal issue. The court’s conclusion, as reasoned by Mrs. Justice Cockerill, was that issue estoppel is indeed applicable against a foreign state, anchoring this conclusion in “fundamental principle and logic” as well as in the presumption that nothing in the State Immunity Act 1978 displaces ordinary English law principles.

State Immunity

Mrs. Justice Cockerill considered the wider implications of the State Immunity Act, confirming that it does not, by its nature, disapply English common law principles unless explicitly stated. Therefore, the traditionally held principles of English law, including issue estoppel, still apply to foreign states unless the Act specifically provides otherwise.

Civil Jurisdiction and Judgments Act

The court also dispensed with the Russian Federation’s arguments concerning the Civil Jurisdiction and Judgments Act, indicating no real prospect of success. The ruling underscores a clear understanding of how section 31 of the Civil Jurisdiction and Judgments Act interconnects with the analysis at hand and was properly considered, dismissing the Russian Federation’s interpretation.

Costs and Proportionality

The court discussed the principles related to costs and the proportionality of the payments on account, acknowledging the reputability of the solicitors involved but highlighting the need for detailed assessment, and consequently ordered a lower sum than that sought by the claimants.

Payment Difficulties

In considering the Russian Federation’s indicated difficulties in adhering to payment orders due to sanctions, Mrs. Justice Cockerill declined to adjust the order based on evidence submitted, stating the potential for future court adjustments if material difficulties are proven.

Outcomes

Permission to appeal was refused on all grounds, with Mrs. Justice Cockerill firmly indicating no real prospect of success across the board. On the subject of costs, the court granted a payment on account of £1.5 million to the claimants, a reduction from the £1.8 million sought but an increase over the maximum of £550,000 suggested by the defendants.

Conclusion

The ruling in Hulley Enterprises Limited & Ors v The Russian Federation serves as a landmark decision in the confirmation of issue estoppel’s applicability to foreign states. The judgment reinforces the position that unless specifically legislated, the principles of English common law, including those of estoppel and state immunity, remain unimpeded by the State Immunity Act. Moreover, the handling of costs and payments stresses the significance of proportionality and reasoned judgment in the face of large claims and potential difficulties in payment due to international sanctions. This analysis will assist UK legal professionals in better understanding the intersection of issue estoppel, state immunity, and cost management principles when dealing with cases involving foreign states.