Part II Preliminary Topics, 8 Exclusion of Foreign Law
Uglješa Grušić, Christian Heinze, Louise Merrett, Alex Mills, Carmen Otero García-Castrillón, Zheng Sophia Tang, Katarina Trimmings, Lara WalkerEdited By: Paul Torremans, James J. Fawcett
- Choice of law clauses — Exclusion of foreign law — Limitations on jurisdiction
It is obvious that circumstances will occasionally arise in which the law of the forum must be preferred to the foreign law that would normally be applicable to the case. An outstanding example of this is the civil law doctrine of ordre public under which any domestic rule designed to protect the public welfare must prevail over an inconsistent foreign rule. The danger of a doctrine so vague as this is that it may be interpreted to embrace such a multitude of domestic rules as to provide a fatally easy excuse for the application of the law of the forum and thus to defeat the underlying purpose of private international law. The analogous English doctrine, though less unruly, is indeed not above suspicion in this respect. Summarily stated, it withholds all recognition from any foreign law or judgment which is repugnant to the distinctive policy of English law, and it refuses to enforce any foreign law or judgment which is of a penal, revenue or other public law nature.1 Furthermore, foreign expropriatory laws will, in some circumstances, not be recognised, and, in other circumstances, although recognised, will not be enforced. Finally, the mandatory rules of the forum may be applied, with the result that, to that extent, a foreign law is excluded.
We will now deal separately with these four2 cases. Before we proceed, it is worth recalling that much of private international law in England is now of European origin. European References(p. 115) Union private international law instruments, generally speaking, apply in civil and commercial matters, and allow English courts, within certain limits, to refuse to recognise any foreign law or judgment which is contrary to English public policy and to apply English overriding mandatory provisions. While there is a degree of similarity in this area between the traditional English doctrines and rules and the related doctrines and rules of European Union private international law, these do not necessarily have the same meaning and effect.
Dicey, Morris and Collins3 employs a three-fold classification of foreign laws which will not be enforced, either directly or indirectly, by English courts, ie revenue laws, penal laws and other public laws. This classification, which was adopted by Lord Denning in A-G of New Zealand v Ortiz,4 has been endorsed by the Court of Appeal on a number of occasions,5 has been given the support of the House of Lords in Re State of Norway’s Applications (Nos 1 and 2),6 and was enshrined in statutory form for the area of tort choice of law by the Private International Law (Miscellaneous Provisions) Act 1995.7 The same classification has also been adopted by the High Court of Australia,8 the Court of Appeal in New Zealand9 and in the High Court in Ireland.10 “Public laws” is, seemingly, the umbrella concept which encompasses both revenue and penal laws, but also allows for a category of “other public laws”.11 The common thread running through the exclusionary rule in relation to revenue, penal and other public laws is that laws will not be enforced if they involve an exercise or assertion of sovereign authority by one state within the territory of another.12 If the exclusionary rule References(p. 116) applies it has been said that, in conceptual terms, what the court is doing is declining to exercise its jurisdiction.13 Whether the claim brought in the English courts is one which involves the enforcement of a foreign revenue, penal or other public law is an issue to be determined according to the criteria of English law.14 It is irrelevant whether a foreign law so regards it.15 The three related concepts of revenue, penal and other public laws will now be examined.
(a) Foreign revenue laws16
(i) The prohibition on enforcement
Although it has been generally accepted, at any rate since the time of Lord Mansfield,17 that no action lies in England for the enforcement of a foreign revenue law, authority for the proposition long remained a little nebulous, with the issue only being raised clearly on just one or two occasions.18 All doubts were, however, stilled in 1955 by the decision of the House of Lords in Government of India v Taylor,19 where, after a company, registered in England but carrying on business in India, had gone into voluntary liquidation, a demand was made on it by the Indian Commissioner of Income Tax for the payment of a large sum of income tax in respect of the capital gain derived from the earlier sale of the business. The Commissioner claimed to prove for this debt in the liquidation, but his claim was rejected by the liquidator and by the lower courts. It was argued for the appellants in the House of Lords that the alleged rule excluding the recognition of foreign revenue laws did not extend to taxes similar to those imposed in England, but was confined to penal laws, and that in any event it demanded modification in the case of a foreign country belonging to the Commonwealth. Further, it was said that the rule, even if accepted in toto, did not apply to liquidation proceedings, for a liquidator is under a statutory duty to discharge all the “liabilities” of the company, which is a word of wide import not confined to debts directly enforceable by action.
These arguments were rejected. Their Lordships were unanimous in holding that the rule expressed by Lord Mansfield rested on a solid basis of authority and convenience.20 They also References(p. 117) held, with one dissentient,21 that the duty of a liquidator in the winding up of a company is confined to the discharge of such liabilities as are legally enforceable.
(ii) Indirect enforcement
The rule that no action lies to recover foreign taxes is not affected by the identity of the claimant or by the form in which the action is brought. “In every case the substance of the claim must be scrutinised, and if it then appears that it is really a suit brought for the purpose of collecting the debts of a foreign revenue it must be rejected.”22 That an indirect evasion of the rule will not be tolerated is well illustrated by Rossano v Manufacturers’ Life Insurance Co Ltd:23
The plaintiff was an Egyptian national resident in Alexandria, who brought an action to recover money due under three policies of life insurance issued by the defendant, an insurance company with a head office in Toronto and branches in many other countries. The first two policies required payment in London in pounds sterling; the third directed payment at New York in dollars.
One defence raised by the defendant was that two garnishee orders24 had been served on three of its branches in Cairo which would render it responsible for the payment of certain taxes alleged to be due from the plaintiff to the Egyptian government if it paid him before he had satisfied this fiscal liability. The defence failed, for to allow the garnishee orders, which related solely to taxation debts, to defeat the plaintiff’s cause of action would constitute an indirect enforcement of a foreign revenue law. The obvious result of dismissing the action would be the recovery of the taxes by the Egyptian government.25
However, the prohibition on indirect enforcement of foreign revenue laws does not prevent an English court from assisting a foreign state to obtain evidence against one of that state’s taxpayers. Thus an English court will accede to a request by a foreign state that witnesses in England give oral evidence pursuant to the Evidence (Proceedings in Other Jurisdictions) Act 1975,26 even though this is in connection with proceedings in the foreign state against one of its taxpayers.27 Seemingly, this is the case regardless of whether the taxpayer supports the request.
It is questionable whether the general ban on indirect enforcement is not too rigid. If, for instance, in the Rossano case the defendants had in fact paid the taxes due to the government, would not an action based upon the unjust enrichment of the plaintiff have succeeded? It References(p. 118) may even be questioned whether such a decision as that reached in Municipal Council of Sydney v Bull,28 where the plaintiff failed in its bid to recover a contribution imposed by a local statute in respect of certain street improvements effected in the area where the defendant owned property, accords with the practice of states and their subordinate bodies to furnish services in return for payment.
The narrow dividing line is illustrated by Brokaw v Seatrain UK Ltd:29
In this case goods were shipped from the USA to England in an American ship. Whilst the ship was at sea, the US Treasury served a notice of levy, in respect of taxes unpaid by the owners of the goods, on the shipowners demanding that the goods should be surrendered. When the ship arrived at Southampton, the shipowners refused to deliver the goods to the consignee, who claimed delivery or their value.
By reason of interpleader proceedings, the court had to consider the claim of the US Treasury, which was rejected on the basis that to allow it amounted to indirect enforcement of a foreign revenue law by seizure of goods. However, had the notice of levy been effective to reduce the goods into the possession of the US Treasury, their claim would have been upheld, for the court would then have been enforcing a possessory title rather than a revenue law.
(iii) Recognition of a foreign revenue law
This rule that no action will lie at the instance of a foreign state to enforce a revenue law does not mean, despite what Lord Mansfield said in Holman v Johnson,30 that such a law is to be totally ignored.31 Refusal to enforce it implies no disclaimer of its lawful existence, and circumstances may require that its existence be recognised. Thus, on the ground that public policy demands the maintenance of harmonious relations with other nations, the courts will not countenance any transaction, such as a fraudulent tax-evasion scheme, which is knowingly designed to violate a revenue law of a foreign and friendly state.32 If personal representatives have had personally to pay taxes on a foreign estate under foreign revenue laws, those foreign laws will be recognised here so as to enable the personal representatives to be indemnified from assets of the estate situated here.33 Furthermore, in such cases the personal representatives should be given leave to remit the assets to the foreign country for payment of the taxes.34
(b) Foreign penal laws35
It is well settled that an English court will not lend its aid to the enforcement, either directly or indirectly, of a foreign penal law.36 The imposition of a penalty normally reflects the References(p. 119) exercise by a state of its sovereign power, and it is an obvious principle that an act of sovereignty can have no effect in the territory of another state.
(i) The meaning of a penalty
The word “penalty” is equivocal, and if understood without qualification it comprises penalties to the enforcement of which there can be no objection, as for example one incorporated in a commercial contract with the object of securing its performance.37 What, therefore, is the meaning of the word in the present context? The answer given by the Privy Council in Huntington v Attrill,38 the leading English authority on the subject, is that it is limited to a fine or other exaction imposed by the state for some violation of public order of a criminal complexion.39 Applying this definition, an order made pursuant to a criminal statute confiscating a convicted person’s assets will not be enforced,40 nor will a restraint order,41 nor will an order committing a person to prison for contempt of court.42 Nor will an order for contempt of court arising out of an action between private parties be enforceable.43 Lord Denning MR has indicated44 that, in the context of recognition of foreign judgments, a judgment for exemplary damages or damages for “resistance abusive” under French law is not to be denied recognition as being in respect of “a penalty”. The courts in many common law countries have come to the same conclusion in relation to a judgment for punitive damages.45 It may well be, therefore, that a foreign law as to exemplary or punitive damages will be applied here and will not be castigated as a penal law.46 On the other hand, there is a statutory prohibition on the enforcement of foreign judgments for multiple damages,47 such as treble damages under the USA anti-trust laws. These laws have been described as penal at common law.48 More recently, the References(p. 120) Court of Appeal has accepted, obiter, that this is arguable but found it unnecessary to decide the point.49
(ii) Examples of the prohibition on indirect enforcement of a penal law
An example of an attempt to enforce a foreign penalty indirectly is Banco de Vizcaya v Don Alfonso de Borbón y Austria50 where the facts were these:
The former King of Spain had bought certain securities with his own money and had instructed that they should be held by a London bank to the order of his agents, the Banco de Vizcaya, a Spanish concern. The Spanish Republican Government later decreed that all his property, wherever situated, should be confiscated and that anything deposited with Spanish banks should be delivered to the Treasury. The plaintiffs claimed delivery of the securities from the London bank on the ground that they had a contractual right of recovery by virtue of the instructions given by King Alfonso at the time of the original deposit.
Lawrence J held that the plaintiffs were not in reality asserting their own contractual rights as they originally existed, but the rights of the Spanish Republic. Therefore their claim failed, since to countenance it would in effect be to enforce an admittedly penal law of the Republic.
A more recent case to discuss the question of enforcement of a foreign penal law is A-G of New Zealand v Ortiz:51
A Maori carved door was removed from New Zealand without permission of the appropriate authorities and was eventually offered for sale by the first defendant by auction in London. The Attorney-General of New Zealand (the plaintiff) alleged that the state was the owner of the door and sought an injunction in the English courts restraining the sale and an order for delivery up of the door. The basis of this claim was a New Zealand statute which, in certain circumstances, provided for the forfeiture, without compensation, of historic articles.
Staughton J, at first instance, gave judgment for the plaintiff. The Court of Appeal allowed an appeal on the basis of a point of construction of the New Zealand statute.52 It was held that the statute only provided for the forfeiture of historic articles when the goods had been seized by the appropriate New Zealand authorities, and this had not happened in the present case. However, the Court of Appeal went on to discuss the wider point of the nature of the New Zealand statute. Lord Justices Ackner and O’Conner held, obiter, that the New Zealand statute was a penal law and, therefore, would not be enforced in England.53 The claim was made by the Attorney-General on behalf of the state, the cause of action concerned a public right—the preservation of historic articles within New Zealand, and vindication of the right was sought through forfeiture of the property without compensation.54 Lord Denning expressed himself in different terms; he regarded the New Zealand statute as coming within the category of an “other public law”55 rather than a penal law.56
References(p. 121) (iii) Characterisation of the foreign law/right of action
It is undeniable that the English court must itself characterise the alleged penal, revenue or other public law, but regard will be had to the attitude adopted in the courts in the foreign jurisdiction.57 According to the Privy Council in Huntington v Attrill58 nothing can be regarded as a penalty unless it is “recoverable at the instance of the State, or of an official duly authorised to prosecute on its behalf, or of a member of the public in the character of a common informer”.59 The facts of the case were as follows:
A New York statute, designed, inter alia, to protect the public against company promoters, provided that the directors of a corporation should be personally liable for its debts on proof that false reports of its financial condition had been published. Sums recoverable under this provision were payable to creditors in satisfaction pro tanto of their claims. A creditor instituted a suit under the statute in a New York court and obtained judgment for a large sum. He later brought an action on the judgment in Ontario. The New York courts had decided that actions brought under the statute were of a penal character.
The Privy Council held, first, that it was for the Ontario court to put its own interpretation on the statutory provision; and, secondly, that the statute was remedial, not penal, since it permitted a subject to enforce a liability in his own interests and for the protection of his own private rights.60
In United States of America v Inkley,61 the Court of Appeal was faced with a more complex case involving an action by a foreign state, but which was clothed in civil form.
An action was brought by the US government for enforcement of a judgment for the amount of an appearance bond plus interest obtained in a federal court in Florida, sitting as a civil court, against the defendant who had been released on bail but had subsequently failed to appear to answer criminal charges.
The Court of Appeal refused to enforce the judgment on the basis that this was an action by a foreign state to enforce the execution of its own public/penal law. Dicey, Morris and Collins’s three-fold classification of the exclusionary rule was adopted. “Public laws” was seen as the wide overall exclusionary category, and a foreign penal law will necessarily also be a foreign public law. Whether the right of action which it is sought to have enforced in England is public or private was said to depend on three considerations: the party in whose favour the References(p. 122) right is created; the purpose of the law on which the right is based; the general context of the case as a whole. The Court of Appeal held62 that the action was concerned with the right of the US government to ensure the due observance of its criminal law; the purpose of the action was part of a public law process aimed to ensure the attendance of persons accused of crime before the criminal courts; the general context was criminal or penal. The essentially public/penal law nature of the action was not affected by the fact that it was dressed up in civil form. Applying these considerations to the facts of the case it was concluded that: “Notwithstanding its civil clothing, the purpose of the action initiated by the writ issued in this case was the due execution by the United States of America of a public law process aimed to ensure the attendance of persons accused of crime before the criminal courts.”63
In United States Securities and Exchange Commission v Manterfield64 the Court of Appeal addressed the question whether a worldwide freezing order, obtained by a US regulatory body in support of US proceedings for, inter alia, the recovery of money allegedly misappropriated by the defendant and its return to defrauded investors, fell within the exclusionary rule.65 The court held that the substance of the claim for disgorgement was not penal in nature and that the worldwide freezing order should be continued. This case is an example of a wider rule that when a public or regulatory body brings civil proceedings on behalf of a group or class of victims, it is not seeking to enforce a foreign penal or other public law.66
(iv) Recognition of foreign penal laws
The enforcement of a foreign penal law must be distinguished from its application or recognition.67 Although enforcement will not be allowed, it is going too far to assert that “the penal laws of one country cannot be taken notice of in another”.68 This is scarcely true for, subject to the possible intervention of the doctrine of public policy,69 such a law must be regarded as operative even in English proceedings if it is part of the foreign legal system which, according to the relevant rule for the choice of law, governs the transaction that is sub judice.70 If, for example, a Ruritanian statute makes the export of certain raw materials a crime punishable by fine and confiscation of property, in no circumstances will the fine be recoverable by an action in England. Nevertheless, if a Ruritanian businessman, by a contract that falls to be governed by the law of that country, agrees to sell the prohibited materials to an Englishman, an action brought against him in England for non-delivery must necessarily fail. The illegality of the contract according to its governing law, though springing from a crime and from a penal law devoid of extraterritorial effect, cannot be ignored. The same is true for a penal law of the place of performance of a contract which prohibits the performance of the contract.71
References(p. 123) (c) Other foreign public laws72
Judicial and statutory adoption73 of Dicey, Morris and Collins’s three-fold classification of foreign laws which will not be enforced means that this third category is now firmly established. What we are concerned with here are public laws which are not revenue or penal ones. It is not difficult to find examples of “other public laws”: import and export regulations; trading with the enemy legislation; price control regulations; and anti-trust legislation.74 However, it is much more difficult to give a precise definition to the concept of “public laws”, since the common law does not as yet recognise any clear distinction between public and private laws.75 In A-G of New Zealand v Ortiz76 Lord Denning admitted that the concept of “other public laws” was very uncertain, but went on to explain that they are laws which are eiusdem generis with penal or revenue laws.77 He found a common thread underlying these three categories in the principles applied in international law; in particular, in the principle that laws will not be enforced if they involve an exercise by a government of its sovereignty beyond the limits of its authority, ie beyond its own frontiers.78 He concluded that legislation providing for the automatic forfeiture to the state of works of art should they be exported would come within this principle, and, accordingly, within the category of other public laws. In Camdex International Ltd v Bank of Zambia (No 2),79 the Court of Appeal held that the English courts would not entertain proceedings to enforce a civil cause of action that, it was argued,80 the Bank of Zambia had under Zambian law against a Zambian mining company to recover foreign exchange due under a direction issued by the bank, on the basis that this would constitute enforcement of Zambian public law. In giving the direction the bank was exercising its authority under a Zambian statute as the agent responsible for administering exchange control. That legislation was part of the public law of Zambia enforceable by right of the authority of the Zambian state rather than by way of a private right in the bank.
The exclusion of other public laws has been accepted by the High Court of Australia and the Court of Appeal in New Zealand in the Spycatcher cases,81 which involved the important issues of confidentiality and state security. The Attorney-General of the United Kingdom sought, inter alia, injunctions in Australia and New Zealand to prevent publication in those respective countries of the whole or parts of Spycatcher, the memoirs of Peter Wright—a former intelligence officer of the British Security Services. The Attorney-General’s argument, References(p. 124) that Wright was acting in breach of duties of confidence (fiduciary and contractual) owed to the United Kingdom government, was assumed to be correct. One of the defences in both cases was that the Australian and New Zealand courts will not enforce a foreign penal or other public law.
Both the Australian and New Zealand courts refused to grant the relief sought, albeit on different grounds. The High Court of Australia regarded the action as one whereby the United Kingdom government sought to protect the efficiency of its Security Services as part of the defence of the country; as such, it fell within the exclusion of “other public laws”. The majority of the court also suggested that rather than referring to “public laws”, it would be more apt to refer to “public interests” or “governmental interests” to signify that the exclusionary rule applies to claims enforcing the interests of a foreign sovereign which arise from the exercise of certain powers peculiar to government, and that the rule rendered unenforceable actions to enforce the governmental interests of a foreign state. The Court of Appeal in Government of Iran v Barakat82 held that the test laid down by the High Court of Australia is not only consistent with the English authorities but is “a helpful and practical test”.83 The New Zealand Court of Appeal, however, took a different view in the Spycatcher case. The duty of confidentiality was said to arise from the relationship between the parties as employer and employee. An action for damages (an injunction having earlier been refused on the basis that the contents of the book were already in the public domain) was therefore not barred by the exclusionary rule in relation to foreign penal or other public laws. Nonetheless, this was not thought to be a proper case for protecting the United Kingdom’s security secrets since there had been prior publication abroad of the information in Spycatcher; moreover, the New Zealand public interest justified publication.
In contrast, the Ontario Court of Appeal has regarded the public law exception as resting on a rather shaky foundation, without though closing the door on such an exception.84 On the assumption that there was such an exception, a US law which allows the US government to bring an action for compensation under a US statute for the cost of cleaning up environmental damage was not regarded as being a public law.85 There were two reasons for this. First, the claim was concerned with clearing up damage in the USA.86 Secondly, although asserted by a public authority the action was said to be so close to a claim for nuisance that it was in substance of a commercial or private law character. Relevant to this was the fact that such an action could be brought between private parties or against the government.
There is some controversy over whether an English court “will refuse to enforce all public laws . . . or whether the court should only refuse to enforce a foreign public law if enforcement is contrary to public policy”.87 The uncertainty over this is reflected in the wording of References(p. 125) the Private International Law (Miscellaneous Provisions) Act 1995.88 This does not simply provide an exception to the normal statutory tort choice of law rules for cases involving a foreign penal, revenue or other public law. It qualifies this by referring to a foreign penal, revenue or other public law “as would not otherwise be enforceable under the law of the forum”. This deliberately does not answer the question when such a foreign law would not be enforceable at common law.
(d) Effect of European Union private international law
It is now necessary to consider the extent to which the rule against the enforcement of foreign revenue, penal and other public laws has been affected by the United Kingdom membership of the European Union. European Union private international law instruments apply in “civil and commercial matters”; revenue, customs and administrative matters are often expressly mentioned as matters that are not civil and commercial and, therefore, outside the scope of these instruments.89 These concepts are given an autonomous meaning, and do not necessarily correspond to the traditional English concepts of foreign revenue, penal and others public laws. This is clear if one compares the traditional English rule against the indirect enforcement of foreign revenue laws with the approach of European Union private international law.
In QRS 1 ApS v Fransden90 the Court of Appeal held that the English exclusionary rule had not been affected by the United Kingdom becoming a Contracting State to the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters of 1968 (the Brussels Convention), now replaced for virtually all purposes by the Brussels I Regulation Recast.91 The facts of this case were as follows:
The plaintiffs, Danish companies, were owned by the defendant who stripped their assets, which led to the plaintiffs being put into liquidation. The Danish tax authorities claimed against the plaintiffs substantial sums in respect of taxes and interest. As the only creditors, the tax authorities appointed a liquidator and funded the action brought by the plaintiffs against the defendant in England. The claims were for restitution of the value of their assets and, in the alternative, for damages arising out of the defendant’s negligence in allowing the plaintiffs to suffer loss as a result of asset stripping.
This claim undeniably fell foul of the English exclusionary rule. The Court of Appeal held that this was a revenue matter within the meaning of Article 1 of the Brussels Convention.92 As such, it fell outside the scope of that Convention.93 Moreover, the English exclusionary rule was held to be not incompatible with the EEC Treaty.94
But this case cannot be regarded as a good authority any more because it goes against the recent decision of the Court of Justice of the European Union in HMRC v Sunico ApS.95
Here, the United Kingdom tax authorities brought proceedings in England against a number of persons domiciled in Denmark, alleging that they had been involved in a VAT fraud which had led to the evasion of output VAT to the detriment of the United Kingdom Treasury. Since the defendants had not incurred liability under United Kingdom VAT legislation, the action was based on tortious conspiracy to defraud, and the amount of damages claimed was equal to the unlawfully evaded tax.
The CJEU held that the concept of “civil and commercial matters” covered an action whereby a public authority of one Member State claimed in another Member State damages for loss caused by a tortious conspiracy to defraud. This was essentially because the action was based on ordinary private law of tort.
Another example of the English exclusionary rule being affected by European Union law is the Insolvency Regulation.96 Article 2(12) of the Regulation provides that the term “foreign creditor” includes tax authorities and social security authorities of Member States, who are thereby given the right to lodge their claims in insolvency proceedings conducted in other Member States, provided that the proceedings come within the scope of the Regulation.97 Another striking example is provided by European Union Directives providing for mutual assistance and recovery as between Member States in relation to duties and taxes.98
A somewhat troublesome question is the extent to which foreign expropriatory legislation is recognised in England when it is directed, not against a particular person, as in Don Alfonso’s case,99 or a particular item, as in the Ortiz case,100 but against national property generally. It would seem that legislation of this nature may take four forms.101
First, requisition, which term is generally confined to the seizure of property in the public interest for a limited period, usually until the end of some emergency, and in return for compensation.
Secondly, nationalisation, which is the permanent absorption of property into public ownership in furtherance of some political aim and in return for compensation.
Thirdly, compulsory acquisition, which is the permanent seizure of property in fulfilment of some economic or social aim, and in exchange for compensation.
Fourthly, confiscation, which is the permanent seizure of private property without payment of compensation.102
References(p. 127) The main question of private international law in this connection is the extent to which, in the eyes of English law, a decree of a foreign state implementing one of these forms of expropriation affects property belonging either to nationals of that state or to aliens.
The general principles that have a bearing on the question defy simple harmonisation, for against the principles that neither foreign legislation nor foreign penal laws have extraterritorial effect, stands the equally fundamental doctrine that a foreign sovereign cannot normally be impleaded.103 If, for instance, the Ruritanian government obtains possession of jewellery held by a London bank on the ground that it falls within the scope of a Ruritanian decree of confiscation and if the decree is not regarded by English law as applicable to property in England, how can this view be rendered effective against a sovereign power that is immune from the jurisdiction?
Another obstacle to a simple generalisation of the law is the doubt whether all forms of property stand on the same footing for the purpose of determining the effect of expropriation. The suggestion, for instance, by no means unsupported by authority, has been made that a merchant ship stands in a category of its own, since it has a permanent situs in the country to which it belongs.104 If this is correct, a state which requisitions or confiscates its national ships exercises a quasi-territorial, not an extra-territorial, act of authority.
If an English judge is required to determine the effect of foreign expropriatory legislation, his decision will depend on three main factors, namely the interpretation of the foreign legislation; the situs of the property at the time of the legislative decree; and the question whether the foreign sovereign was in actual possession or control of the property outside his territory at the time when the facts giving rise to the litigation occurred. The present law appears to be as follows.
(a) Property within the foreign jurisdiction at time of decree
The English courts recognise without hesitation that the ownership of property is conclusively and finally determined by the terms of the foreign decree of expropriation if the property is situated within the jurisdiction of the sovereign at the time of the decree, notwithstanding that it is later brought to England and is still there at the time of the action. For instance, in Luther v Sagor:105
Timber, situated in Russia and belonging to the plaintiff, a private company incorporated according to the law of Russia, was seized by the Soviet authorities under a decree that had nationalised all profits belonging to industrial and commercial establishments. Part of the timber was later brought to England and there sold to the defendants by a Soviet agent. The plaintiff sued for damages in what is now called conversion (formerly trover) on the ground that the ownership of the timber was still vested in it.
The Court of Appeal, on grounds which were not identical, found for the defendant.
In the view of Warrington LJ, no sovereign state must sit in judgment upon the acts of another foreign state affecting property within its own territory.106 Bankes LJ found it impossible to References(p. 128) ignore the law of Russia, the law of the situs at the time of the decree, under which the seller had acquired a good title to the goods.107 Scrutton LJ, following perhaps a more doubtful line of reasoning, argued that, since the doctrine of immunity would have prevented any investigation of the Russian sovereign’s title had the timber been found in England in the possession of a Russian official, it followed that no such investigation was possible where possession had been given to a private purchaser. “What the court cannot do directly, it cannot do indirectly.”108
But surely the simple and decisive justification of the decision is the rule that a title to movables, valid according to the law of the situs at the time of its acquisition, is recognised by English law.109 The law of the situs must prevail in such circumstances unless the rule of that law under which the title has been acquired is so immoral or so alien to the principles of justice as understood in England that it must be disregarded as being contrary to public policy. The Court of Appeal considered this objection, but found it impossible to regard the nationalisation decree as anything else but the expression of a policy designed, whether mistakenly or not, to promote the best interests of Russians. This can be contrasted with Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5)110 where an Iraqi resolution divesting the Kuwaiti owners of aircraft situated in Iraq of their title was not simply a governmental expropriation of property within its territory, but was part of an attempt to extinguish every vestige of Kuwait as a separate state. The House of Lords held that enforcement or recognition of the resolution would be manifestly contrary to the public policy of English law.111
The principle of Luther v Sagor was followed by the House of Lords in Williams and Humbert Ltd v W and H Trade Marks (Jersey) Ltd.112 One point that should be noted from the outset about this case is that at first instance and in the Court of Appeal the case was regarded as one of confiscation of property, ie expropriation without payment, whereas the House of Lords treated it as a case of compulsory acquisition, ie expropriation with payment. Nonetheless, the principle in Luther v Sagor was still applied in all three courts. The facts of the case, according to the House of Lords, were as follows:
The Spanish government compulsorily acquired all the shares of a company incorporated in Spain, Rumasa, and of the subsidiary companies of Rumasa incorporated in Spain, including two banks—“Jerez” and “Norte”. Rumasa also held all the shares in an English company, Williams and Humbert; this company was now, therefore, indirectly controlled by the Spanish government. The plaintiffs, the English company and the three above-named Spanish companies, at the instigation of the Spanish government, brought actions in England against the defendants, the original owners of the Spanish companies, the Mateos family, and a Jersey company, for the return of property (in the form of trade marks and money), which it was alleged had been improperly diverted from the English company and one of the Spanish companies, and for damages. The defendants argued that the proceedings were an attempt to enforce a foreign penal law and/or it would be contrary to public policy to grant the relief sought.
References(p. 129) Nourse J ordered that the defence be struck out, as disclosing no reasonable defence, and this was upheld by a majority of the Court of Appeal. There were appeals to the House of Lords.
The House of Lords unanimously dismissed the appeals. Lord Templeman, with whom the other Law Lords concurred, examined the decision in Luther v Sagor and then stated the principle that “an English court will recognise the compulsory acquisition law of a foreign state and will recognise the change of title to property which has come under the control of a foreign state and will recognise the consequences of that change of title”.113 Here, the property was the shares in the Spanish companies and this property was situated in Spain, the companies being incorporated there. The change in ownership of the shares was, accordingly, recognised. The Spanish government would have no right to confiscate the English property, ie the shares in Williams and Humbert; but, according to Lord Templeman, it did not purport to do so, since this property would remain in the ownership of Rumasa, one of the Spanish companies.114 In reality though, the Spanish government would control Williams and Humbert. The Spanish government would, therefore, be able to achieve by indirect means (confiscation of Rumasa) what it could not achieve by direct confiscation.
When it came to the specific allegation that what was involved was enforcement of a foreign penal law, Lord Templeman doubted if the Spanish law could be regarded as penal.115 Even if it was accepted that it was a penal law there was no attempt directly to enforce this law in England,116 since the objective of the law, to acquire and control various companies, had already been achieved in Spain. Nor was there an attempt indirectly to enforce the Spanish law, since the actions were brought by the companies, and under well-established principles of company law these were distinct entities from the Spanish government which owned the companies.117 If the argument that it was a penal law were to be accepted, it would produce the anarchic result that none of the companies could pursue actions outside Spain and wrongdoers vis à vis the companies would be released from liability.118
The Williams and Humbert case is also interesting for its discussion at first instance119 and in the Court of Appeal120 of foreign confiscatory laws. The Court of Appeal121 agreed with Nourse J, at first instance, that confiscatory laws should be classified as follows:
A. Foreign confiscatory laws which, by reason of their being discriminatory on grounds of race, religion or the like, constitute so grave an infringement of human rights that they ought not to be recognised as laws at all.
B. Foreign laws which discriminate against nationals of this country in time of war by purporting to confiscate their moveable property situated in the foreign state.
Class 2 laws,122 which will be recognised, but to which effect will not be given:
(p. 130) Class 3 laws, to which effect will be given provided they do not fall within Class 1: Foreign laws which confiscate property in the foreign state and where title has been perfected there.123
It was argued, at first instance, by counsel for the defence that there was a further category within Class 1 of foreign confiscatory laws which are aimed at confiscating the property of particular individuals or classes of individuals,124 but Nourse J denied the existence of any such category. It was at this point that it was argued, unsuccessfully,125 that on the facts of the case there was an attempt to enforce a foreign confiscatory law which was penal or a public law (Class 2A).
One final point to note about the Williams and Humbert case is that, seemingly, it introduces a principle that, for reasons of comity, a party cannot plead in a case of compulsory acquisition that the foreign government has acted in an oppressive way.126 Neither will the English courts consider the merits of the compulsory acquisition or the motives of the foreign government.127 What is new is the suggestion that such matters cannot even be pleaded by a party.
The last question which has to be asked is whether the principle of Luther v Sagor applies where the confiscated property, though situated within the jurisdiction of the confiscating state, belongs to aliens. This was the main issue raised in Anglo-Iranian Oil Co v Jaffrate, better known as The Rose Mary,128 where the court took the view that Luther v Sagor does not condone the confiscation of movables belonging to an owner who is not a national of the confiscating state unless adequate compensation is paid to him in return. It has subsequently been held by Upjohn J, however, that neither the nationality of the dispossessed owner nor the payment of compensation to him affects the general principle laid down in Luther v Sagor and other cases.129 The principle is that English law recognises the extra-territorial effectiveness of confiscatory legislation passed by a foreign state in respect of movables situated within its territory or of contracts governed by its law, unless the doctrine of public policy intervenes.
(b) Property outside the foreign jurisdiction at time of decree
If the property was outside the territory of the confiscating or requisitioning sovereign at the time of the decree, whether in England, in a foreign country or on the high seas, the first task of the judge is to construe the decree in order to ascertain whether it is in terms confined to property within the jurisdiction or whether it purports to affect property outside the territory. It is for the judge to form his own opinion on this question after hearing the evidence of expert witnesses.
If he comes to the conclusion that the decree was neither expressly nor implicitly directed against property in other countries or on the high seas, then the question is no longer References(p. 131) significant. This was the substantial basis of the House of Lords decision in Lecouturier v Rey.130 Under a French statute, the Carthusian monks had been expelled from France and deprived of their property. They continued, but now in Spain, to manufacture the liqueur known as Chartreuse, according to its original secret formula. Their Lordships held that the monks, rather than the French liquidator, were still free to exploit in England the reputation which Chartreuse had obtained there. The statute neither expressly nor by implication affected property outside France.
If, on the other hand, the judge comes to the conclusion that the foreign legislation is intended to have extra-territorial operation, the first general principle to be considered is that legislation has no extra-territorial effect. Broadly speaking, jurisdiction is coincident with power, and how can power be exerted within the territory of another sovereign?131
The clear implication of the territorial principle is that property situated, say, in England cannot be affected by a foreign decree of expropriation and that the rights of the owner remain unimpaired. Thus a Cuban law purporting to confiscate the copyright (situated in England) in certain Cuban musical works has been held to be ineffective.132 The only doubt is whether the decree is effective against a national of the foreign state, since historical authority is not lacking for the view that the right to expropriate property may be based on the allegiance of its owner as well as upon its situs.133 Whether this view is justifiable or not, it has found few adherents.134 Thus in one case Maugham J held that a Soviet confiscatory decree was ineffective with regard to property in England although the owner was a Soviet subject at the time of the decree.135 The application of the principle, however, that the legislative power of a state is only territorial, may be frustrated by the impact of the equally well-established principle136 that a foreign state or sovereign cannot normally be impleaded, for if the sovereign is in possession or control of the expropriated property, even though it may be in England, the owner is unable to enforce his rights.137
If property is not in the possession or control of the foreign state at the time of the proceedings and if it was outside the territorial jurisdiction of that state at the time of the expropriatory decree, it is now established that the rights of the owner are unaffected.138 A contrary rule would conflict not only with the principle that legislative power is territorial, but also in the particular case of confiscation with the doctrine that the penal laws of another country will not be indirectly enforced in England.139 Since the foreign state is not in possession at the time of the proceedings, the principle that the state is immune from the jurisdiction of the References(p. 132) court has no application, for if the foreign state commences the proceedings this amounts to submission and there is no immunity.140
(c) Requisition of property
Owing to the decision of Atkinson J in Lorentzen v Lydden & Co,141 it was for some time doubtful whether an extra-territorial effect should not be attributed to the requisition, as distinct from the confiscation, of property by a foreign state. In that case the public policy exception was used in a positive way to give effect to a foreign government’s act of requisition in relation to property situated in England. However, in Bank voor Handel en Scheepvaart NV v Slatford,142 Devlin J followed an earlier Scots decision143 in preference to that of Atkinson J. Devlin J favoured “the simple rule that generally property in England is subject to English law and to none other”.144 The position is now finally settled by the Court of Appeal in Peer International Corpn v Termidor Music Publishers Ltd,145 where this simple rule was applied and Lorentzen v Lydden was overruled. It was held that the public policy exception could not be used in a positive way to give effect to a foreign government’s confiscatory act in relation to property situated in England, ie to give that act a validity that it would not otherwise have. The Court distinguished Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5),146 which was concerned with the very different situation where public policy was used in a negative way to deny recognition to a foreign government’s confiscatory act in relation to property situated in that country, ie to deny that act a validity that it would otherwise have. The Peer case involved confiscation but it supports the wider principle that English law will not enforce foreign laws that purport to have extra-territorial effect, a principle that applies equally to non-confiscatory cases as it does to confiscatory cases.
3. Foreign Laws Repugnant to English Public Policy147
It is a well-established principle that any action brought in this country is subject to the English doctrine of public policy. Certain heads of the domestic doctrine of public policy command such respect, and certain foreign laws and institutions seem so repugnant to English notions and ideals, that the English view must prevail in proceedings in this country, for Scarman J has said that “an English court will refuse to apply a law which outrages its References(p. 133) sense of justice and decency”.148 However, he also struck a note of caution in suggesting that “before it exercises such power it must consider the relevant foreign law as a whole”.149
The occasional exclusion of a foreign law on the grounds of public policy is no doubt inevitable, but the English domestic doctrine of public policy covers a multitude of sins varying in their degree of turpitude, and it is essential to resist the suggestion that an action concerning a transaction governed by a foreign law must necessarily fail because it would have failed had the governing law been English. Judges in the past have now and then expressed somewhat extravagant views on the matter. Thus, for instance, in a restraint of trade case,150 Fry J seemed to suggest that every limb of the domestic doctrine must apply in every action in England. This can scarcely be so. The conception of public policy is, and should be, narrower and more limited in private international law than in internal law.151 A transaction that is valid by its foreign governing law should not be nullified on this ground unless its enforcement would offend some moral, social or economic principle so sacrosanct in English eyes as to require its maintenance at all costs and without exception. In the words of Cardozo J in a New York case:
We are not so provincial as to say that every solution of a problem is wrong because we deal with it otherwise at home . . . The courts are not free to refuse to enforce a foreign right at the pleasure of the judges, to suit the individual notion of expediency or fairness. They do not close their doors unless help would violate some fundamental principle of justice, some prevalent conception of good morals, some deep-rooted tradition of the common weal.152
English courts should not invoke public policy save in cases where foreign law is manifestly incompatible with public policy.153
The particular rule of public policy that the defendant invokes may be of this overriding nature and therefore enforceable in all actions. Or it may be local in the sense that it represents some feature of internal policy. If so, it must be confined to cases where the governing law is English.154 The mere fact that, for example, a contract, governed by a foreign law, infringes some rule of English domestic law such as the need for consideration to support a simple contract will not prevent its enforcement in England.155
To ascertain whether it is all-pervading or merely local, it must be examined “in the light of its history, the purpose of its adoption, the object to be accomplished by it, and the local conditions”.156 Perhaps the most important question to ask in each case is—what is the rule designed to prevent?157 Presumably, for instance, the policy underlying the rule which invalidates a promise by an employee not to compete against his employer in the future is to further the economic well-being of the country by enabling every person freely to exploit References(p. 134) in England the trade that he has learnt. If so, only a rigid doctrinaire would claim that this particular rule is of universal application, designed to control relations between employers and employees in other countries. The English prohibition of contracts in restraint of trade is only concerned with freedom of trade in England.158
If the court decides that, having regard to the particular circumstances, the distinctive policy of English law is in truth affected, then the incompatible foreign rule must, indeed, be totally excluded. Some of the older decisions, however, have perhaps tended to invoke the domestic doctrine of public policy in all its ramifications with remorseless determination.
Kaufman v Gerson159 provides a striking example of insularity.
The husband of the defendant had misappropriated money entrusted to him by the plaintiff. By a contract made and to be performed in France the defendant agreed to pay to the plaintiff by instalments out of her own money the full amount misappropriated, in consideration that the plaintiff would refrain from prosecuting the husband for what was a crime by French law. Both the plaintiff and defendant were French nationals domiciled in France; the misappropriation had occurred in France; the contract was valid by French law.
This contract could scarcely be regarded as offensive to some fundamental principle of justice, for there is nothing particularly reprehensible in allowing a person to escape criminal proceedings at the price of paying full compensation to the sufferer. Nevertheless, an action for the recovery of instalments still due was dismissed on the ground that “to enforce a contract so procured would be to contravene what by the law of this country is deemed an essential moral interest”.160
In Addison v Brown,161 however, a less insular interpretation was put on the reservation of public policy.
A wife sued her husband to recover arrears of maintenance due under a contract that was governed by Californian law. It was expressly agreed that neither party would apply to any court for the variation of the contract and that if in fact it were varied by any court in subsequent divorce proceedings it would nevertheless remain in force as written. Ten years later the husband obtained a divorce in California, and the contract, far from being varied, was incorporated in the judgment.
The contract, since it contained an agreement by the parties to oust the jurisdiction of the court, was contrary to the doctrine of public policy as understood in England, and it was therefore pleaded that the action was not maintainable. Streatfield J, however, refused to treat this particular segment of the doctrine as being of universal application. He said that there could be no objection in England to an agreement that purports to oust the jurisdiction of a foreign court.162
The principle that emerges in Addison v Brown is that, in order to apply the English domestic rules on public policy to an agreement, it must be shown that the agreement relates to England, in some important way. The same principle was applied, in a different context, in Trendtex Trading Corpn v Crédit Suisse.163 There, the House of Lords held that, since an References(p. 135) assignment of a cause of action savoured of champerty, it was contrary to public policy and therefore void. A crucial point in the case was that the assignment related to an English cause of action.
It is no easy matter to classify those cases in which the English court will refuse to enforce a foreign acquired right, on the ground that its enforcement would affront some moral principle the maintenance of which admits of no possible compromise. However, the following is suggested as the probable classification.
Lord Nicholls in Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5)164 has said that “the courts of this country must have a residual power, to be exercised exceptionally and with the greatest circumspection, to disregard a provision in the foreign law when to do otherwise would affront basic principles of justice and fairness which the courts seek to apply in the administration of justice in this country”.165 Two particular instances of this, namely a breach of human rights and a fundamental breach of international law, will be considered below. However, this principle cannot be confined to one particular category of unacceptable laws.166 The established rule, which will be stated later,167 that a foreign judgment cannot be recognised in England if it offends the principles of natural justice, as, for example, if the defendant was denied the opportunity of presenting his case to the foreign court, exemplifies this aspect of English public policy. Another example is the rule that a contract obtained by a class of duress so unconscionable that it will cause the English court, as a matter of public policy, to override the law governing the contract, is unenforceable in England.168 Consistent with this, a foreign judgment granted in respect of a contract entered into under undue influence, duress or coercion may be refused enforcement in England on the ground of public policy.169 As a final example, to permit a party which has not acted in good faith in relation to the purchase of stolen goods to benefit from a foreign limitation period as against a party who had no knowledge of the whereabouts of stolen goods and no possibility of recovering them, was against English public policy as expressed in the Limitation Act 1980.170
It cannot be doubted that a contract or other transaction which is objectionable in English eyes on the ground that it tends to promote sexual immorality,171 such as a contract for prostitution, will receive no judicial recognition in England, though it may be innocuous according References(p. 136) to its foreign governing law.172 Similarly, an agreement to be performed abroad involving payment for the use of personal influence in securing a contract will not be enforced in England, at least not in the situation where the foreign place of performance applies the same public policy.173 Neither, in this age of commercial fraud, will a contract drafted to deceive third parties be enforced.174 On the other hand, Canadian courts have held that the enforcement of contracts relating to gambling debts would not violate Canadian concepts of essential judicial morality,175 nor would enforcement of a foreign judgment for treble or punitive damages,176 or for excessive damages.177
(iii) Where a transaction prejudices the interests of the United Kingdom or its good relations with foreign powers
An example of the first part of the above statement is the prohibition of business with an alien enemy.178 In one case, for instance, an English company, owning mines in Spain, made a contract in 1910 for the delivery by instalments spread over a number of years of minerals to a German company.179 The contract contained a suspensory clause which provided that in the event of war the obligations of the parties should be suspended during hostilities. The English company brought an action in 1916 claiming a declaration that the contract was not merely suspended but was abrogated by the existence of a state of war between Great Britain and Germany. The objection was taken that this was a German contract and that therefore it fell to be governed by German law. It was argued that illegality according to English law was irrelevant. What had to be shown was that the contract was illegal by German law. It was held, however, that the German character of the contract had no bearing on this question. “It is illegal for a British subject to become bound in a manner which sins against the public policy of the King’s realm”,180 and it has long been established that the prohibition of trading with an alien enemy rests on public policy. It seems that payment in breach of United Nations sanctions as enacted in the relevant domestic law is akin to trading with the enemy for the purposes of public policy.181
Support for the second part of our statement may be derived from the rule that it is contrary to public policy for persons in England to enter into an engagement with the avowed object of causing injury to a friendly government,182 as, for example, by raising a loan to further a revolt,183 by an agreement to import liquor contrary to a prohibition law,184 to defraud its References(p. 137) revenue185 or to export a prohibited commodity.186 Such conduct is a breach of international comity and tends to injure the relations of the British government with friendly powers. It is not, however, contrary to public policy to enforce a contract which is illegal and/or void by the law of a foreign and friendly state when the contract was made in England and involved the performance exclusively in England of acts entirely lawful under English law.187 Nor is it against public policy to enforce a contract, judgment or arbitral award between nationals of two foreign countries, both friendly to the United Kingdom, even though the two foreign states are enemies of each other.188 A court in this country cannot set itself up as a judge of the rights and wrongs of a controversy between two countries friendly to us.189
Gross infringements of human rights are one instance, and an important instance, of a provision of a foreign law, which if recognised or enforced would affront basic principles of justice and fairness which the courts seek to apply in the administration of justice in this country.190 A German decree during the Nazi era depriving Jewish émigrés of their German nationality and, consequentially, leading to the confiscation of their property is an example of a law which constitutes so grave an infringement of human rights that the English courts ought to refuse to recognise it as a law at all.191 An English court will not apply a foreign law that involves such a grave infringement of human rights.192 Nowadays, human rights are protected under the European Convention on Human Rights.193 In recent years human rights law has been used to cast light on the public policy defence to recognition and enforcement of foreign judgments.194
References(p. 138) (v) A fundamental breach of international law
As far back as 1973, the House of Lords accepted that it is part of English public policy that our courts should give effect to clearly established rules of international law.195 The leading case developing this category of public policy is Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5).196
Following the Iraq invasion of Kuwait in 1990, aircraft belonging to the claimant, Kuwait Airways Corporation, were seized and flown by the defendant, Iraqi Airways Company, to Iraq. The Revolutionary Command Council of Iraq (RCC) passed Resolution 369 which purported to divest the claimant of its title to its aircraft and transfer this to the defendant. This was part and parcel of the Iraqi seizure of Kuwait and its assets and the assimilation of these assets into the structure of Iraq. The claimant brought proceedings in England for return of the aircraft or payment of their value, and damages.
Mance J gave judgment for the claimant on liability. The Court of Appeal dismissed the defendant’s appeal against this decision. The House of Lords, affirming this decision, held that in appropriate circumstances it is legitimate for an English court to have regard to the content of international law when deciding whether to recognise a foreign law.197 The judiciary does not have to shut its eyes to a breach of international law when the breach is plain and, indeed, acknowledged.198 The acceptability of a foreign law must be judged by contemporary standards.199 This was not simply a governmental expropriation of property within its territory, it was part of an attempt to extinguish every vestige of Kuwait as a separate state. Expropriation in such circumstances was not acceptable in today’s world. Iraq’s invasion of Kuwait and seizure of its assets were gross violations of established rules of international law of fundamental importance. Enforcement or recognition of Resolution 369 therefore would be manifestly contrary to the public policy of English law.200 In the case of a fundamental breach of international law, no connection with England is needed for the public policy exception to operate, since it is not based on a principle of English public policy which is domestic in character.201 In this case public policy operated as an exception to the tort choice of law rules.202 The House of Lords then applied the tort choice of law rules on the footing that the transfer of title purportedly made by Resolution 369 was to be disregarded.203 This was because it was contrary to public policy to apply Iraqi law as the lex situs to exclude References(p. 139) claims it would otherwise have under Iraqi law as the law of the place where the tort was committed.204 In other words, the court applied the law of the place where the tort was committed minus that part of it which was against public policy to recognise. The upshot was that there was actionability under the law of Iraq.
Any attempt to classify the foreign laws that are offensive to the English concept of public policy is not easy to reconcile with decisions on the measure of recognition to be given to a foreign status. The short answer, no doubt, is that, though the court must recognise the existence of a person’s status as fixed by the law of his foreign domicile, it need not necessarily give effect to the results or incidents attributed to it by that law, including the capacities and incapacities of the person affected.205 The problem, however, is to determine what incidents may be accepted, what must be repudiated. Obviously an incident must be repudiated if it is contrary to a positive rule of English internal law. Again, a remedy permitted by the foreign law of the status will not be granted if English law is not adapted to its enforcement. Thus, an English court was quite prepared to recognise that under Greek law a father should provide his daughter with a dowry, though the nature of the daughter’s right was such that it should not be enforced here.206 Finally, a foreign status or incident of status will be disregarded if it offends the English doctrine of public policy. So far as English internal law is concerned, it has long been settled that a judge is no longer free to invent new heads of public policy. He may expound, but must not expand, this branch of the law.207 In the field of private international law, however, exposition has gradually blossomed into expansion to such an extent that apparently the judges now feel free to exclude the law of the domicile whenever208 they feel it proper to do so in the circumstances.
The ancestry of this extreme view may be traced back to Worms v De Valdor209 in 1880. That case was concerned with the French status of prodigality which arises when a court appoints an adviser, a conseil judicaire, to safeguard the interests of an adult person of extravagant habits. The court may prohibit him from compromising claims, borrowing or receiving money, alienating or mortgaging property and bringing or defending actions without the collaboration of his adviser. The question in Worms v De Valdor was whether an action for the cancellation of certain bills of exchange, brought by a prodigal in his own name and without the assistance of his conseil judiciaire, could succeed. Fry J, unaided by expert evidence, made his own researches into French law and concluded that the appointment of a conseil judiciaire neither changed the status of a prodigal nor subjected him to a personal disqualification. Had it done so, the judge intimated that he would have disregarded the disqualification as being penal in nature. He did in fact allow the action to proceed, but on the ground, it would seem, that whether the prodigal could sue in England in his own name was a procedural question determinable by English law as that of the forum.
In the case of Re Selot’s Trusts,210 the question was whether the status of prodigality, imposed on the plaintiff by the French law of his domicile, precluded his recovery of a legacy bequeathed References(p. 140) to him by an English will. Farwell J, affecting to follow Worms v De Valdor, held that the disability of the prodigal to bring an action without the assistance of his legal adviser was a penal restriction that had no effect in English proceedings. What the judge overlooked was that this was not the ratio decidendi of Fry J in the earlier case.211
A later case concerned with a status of incompetence is Re Langley’s Settlement Trusts.212 The Court of Appeal held that the joint exercise of a power to withdraw part of settled funds by the settlor and his wife was effective, even though the settlor was disqualified as incompetent by the law of his residence and domicile, California. The exercise complied with English law which governed the settlement that created the power, since the document had been signed by a man who was not incompetent in the eyes of English internal law. It also complied with the law that governed the man’s status, for the wife in signing the document had obeyed the express directions of the Californian court.
What, however, is more pertinent to the present discussion is that the Court of Appeal gave an alternative reason for the decision. The principle, it was said, is that it is a matter of judicial discretion whether a foreign status shall be recognised.213 Had the only facet of the Californian law requiring investigation in the present case been the ban placed on the settlor’s right to withdraw the settled funds, the court would have exercised its discretion against the recognition of his status of incompetence. But in order that the law may be reasonably certain and predictable it has long been established that judicial discretion must be exercised in accordance with settled rules, not in an arbitrary or capricious manner. It is not an unfettered discretion, but one, as Lord Eldon said in a specific performance case, that “must be regulated upon grounds that will make it judicial”.214 What, therefore, was the particular head of public policy that justified the rejection of the Californian status? The Court of Appeal, affirming Buckley J in the court below, classified the status as penal since it deprived the settlor of his power to deal with a valuable interest. The word “penal”, said Buckley J, “means law of a kind which deprives the person affected of his rights or property in a way which adversely affects his interests”.215 But this is to attribute to the word a meaning that is warranted neither by the dictionary nor by the nature of the particular status. The object of the Californian order was not to penalise the invalid, but to protect him against the machinations of “artful or designing persons”.216 Similarly, the subjection of a spendthrift to the status of prodigality is designed to protect him against his own extravagance. It would seem, therefore, that to stigmatise as penal any law which deprives him of a valuable interest is to invent a new head of public policy that is supported by no authority except the doubtful decision of Farwell J in Re Selot’s Trusts. It is a proposition that scarcely accords with the views expressed in Luther v Sagor.217
Moreover, the proposition that a judge has a free discretion to exclude a foreign status or its incidents if he considers that in the particular circumstances it will adversely affect a person’s right to deal with his property cannot be accepted with any degree of complacency. Its impact References(p. 141) on the doctrine of public policy would, at first sight, be disastrous, for what has been laboriously shaped into a reasonably ordered form would become once more amorphous and indeterminate. It is difficult to disagree with the criticism that it is “a revolutionary innovation in our private international law”,218 and that “the courts might just as well abandon any attempt to formulate and apply defined rules of law if these can be overridden by an undefinable discretion”.219
However, this whole problem of a free discretion is perhaps, at the moment, more apparent than real. The most common situation where the recognition of a foreign status arises is in cases involving the effect of a foreign divorce, annulment or legal separation. But, as will be seen below, the whole area of recognition of foreign divorces, etc is now put on a legislative basis and it is clear that recognition cannot be refused on the ground of a lack of substantial justice.
(d) Recognition of foreign divorces, etc220
At one time, the discretion to refuse to recognise a foreign status applied in the context of recognition of foreign divorces, annulments and legal separations. It was said that there was a power to refuse to recognise a foreign divorce “which offends against English ideas of substantial justice”.221 The inherent difficulty in defining this concept was a cause for concern, as was the width of the doctrine.222 However, in the case of divorces, etc granted in a European Union Member State, recognition is now dealt with by a Union Regulation and, in the case of divorces granted outside a European Union Member State, is now put on a statutory basis. Under the relevant Regulation223 recognition has to be given to foreign divorces, etc unless one of a limited list of grounds of non-recognition applies. Similarly, under the relevant statute224 recognition has to be given to foreign divorces, etc unless the court exercises its discretion on a limited listed number of grounds to deny recognition. With both Regulation and statute these grounds do not contain any provision allowing the courts to refuse recognition on the basis of want of substantial justice. It is possible, though, to refuse recognition in cases where there has been, in effect, a denial of natural justice,225 and in cases where recognition would be “manifestly contrary to public policy”.226 It is not entirely clear whether References(p. 142) the use of the common law concept of public policy as one of the statutory grounds of non-recognition and the exclusion of the concept of substantial justice represents a shift in substance or merely one of terminology.227 However, it is clear that the courts have been willing to use public policy as a ground for non-recognition of foreign divorces in circumstances where one might have expected a reluctance to do so. Thus in Joyce v Joyce228 public policy was used as a ground229 for non-recognition of a Quebec divorce, even though this involved criticism of the laws and procedure of a foreign and friendly country as being unfair to the respondent. In Vervaeke v Smith230 a foreign nullity decree was refused recognition in the House of Lords on the basis of public policy, where there was no unfairness to the respondent. No criticism was made of the foreign law.231 Rather, their Lordships were concerned to uphold the English policy of maintaining the validity of sham marriages, which was to be preferred to the Belgian policy, and that this policy should not be avoided by petitioners going abroad to obtain a nullity decree,232 especially when the petitioner had previously put forward a bogus case in England which had failed. A policy of upholding sham marriages is odd enough, but to give this policy overriding force in an international context is even stranger. More recently, however, in Golubovich v Golubovich233 the Court of Appeal allowed the appeal against a judgment refusing recognition to a Russian divorce on the grounds that the husband had fraudulently misled the English court by forging the divorce and had disregarded orders, in particular an interim injunction, made by the English court. The Court of Appeal held that the judge’s task was to determine whether it would be manifestly contrary to public policy to grant recognition. The divorce was recognized because it had been validly made by the Russian court and, furthermore, the wife would be able to pursue her claim for financial relief in England following the recognition of the divorce. The court further stated that, absent a breach of the rules of natural justice, to refuse recognition of a decree of divorce pronounced by a court in another jurisdiction within the Council of Europe must be regarded as truly exceptional.
Most European Union private international law instruments allow the English courts to refuse to recognise any foreign law or judgment which is contrary to English public policy. But this does not mean that the English courts would have necessarily reached the same results in the cases discussed above had those cases fell to be decided under the private international law rules of European Union law. European Union private international law instruments emphasise the exceptional nature of the doctrine of public policy. For example, the Rome I Regulation on the law applicable to contractual obligations states, in Article 21, that “[t]he application of a provision of the law of any country specified by this Regulation may be refused only if such application is manifestly incompatible with the public policy (ordre public) of the forum”. The meaning References(p. 143) and effect of this provision is clarified in Recital 37, according to which public policy is engaged only “in exceptional circumstances”.234 Furthermore, in Krombach v Bamberski,235 the leading decision on public policy as a defence to recognition and enforcement of foreign judgments under the Brussels/Lugano system, the European Court of Justice held that national courts must give public policy a meaning which is appropriate in the context of European Union private international law, and the Court of Justice may intervene if they fail to do so. Thus we are left with the position whereby the courts of the Member States determine, according to their own conceptions, what public policy requires, but there are limits to that concept which are subject to review by the Court of Justice. These limits are a matter for interpretation of European Union private international law. Furthermore, some of the cases discussed above, especially those concerning transactions that prejudice the relations of the United Kingdom with foreign powers, now fall within Article 9(3) of the Rome I Regulation which is concerned with the application of overriding mandatory provisions of the law of the place of performance. The operation of this Article, and its relationship with the doctrine of public policy, is uncertain and discussed in more detail in the chapter dealing with choice of law for contractual obligations.236
The concept of mandatory rules has only recently been introduced into English law. Mandatory rules of the forum have been described by the Law Commissions as domestic rules which “are regarded as so important that as a matter of construction or policy they must apply in any action before a court of the forum, even where the issues are in principle governed by a foreign law selected by a choice of law rule”.237 A useful definition is also provided in Article 9(1) of the Rome I Regulation on the law applicable to contractual obligations according to which “overriding mandatory provisions are provisions the respect for which is regarded as crucial by a country for safeguarding its public interests, such as its political, social or economic organisation, to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable”. The statutory and European Union rules on choice of law in respect of trusts,238 contracts239 and torts240 all have rules providing for the application of the mandatory rules of the forum. Some mandatory rules are of purely domestic origin; others implement European Union law. An example of English mandatory rules is provided by the controls on exemption clauses contained in the Unfair Contract Terms Act 1977; the Act itself stipulates241 that, in certain circumstances, these controls shall apply despite the parties’ choice of a foreign law to govern the contract. Another example of English mandatory rules is provided by the Employment Rights Act 1996; the Act provides242 that the governing law of the employment contract is immaterial for the purposes of the Act; the exact territorial scope of this employment legislation is left to be determined by the courts.243 An example of References(p. 144) English mandatory rules of European origin is provided by the Commercial Agents (Council Directive) Regulations 1993,244 certain provisions of which have been held by the European Court of Justice in the Ingmar case to be of a mandatory nature and applicable whenever the legal relationship in question has a sufficient connection with the European Union.245 The concept of mandatory rules is a positive one; the concern is to apply a particular mandatory rule. This contrasts with the exclusionary rules previously examined in this chapter where the concern is that a foreign rule should not be applied, ie they are negative concepts.246 However, the effect of the application of a mandatory rule of English law is that a foreign domestic law, which would otherwise govern under choice of law rules, is not applied. To that extent application of mandatory rules can be regarded as an exclusionary concept. At the same time, and this brings out the essentially different nature of mandatory rules, there can be circumstances where the concern is to apply the mandatory rules of a foreign country, rather than those of the forum. The statutory rules on choice of law for trusts and contracts247 provide for the application of foreign mandatory rules. Naturally, under these particular provisions it is not a case of the exclusion of a foreign law, but of its application.
1 See Holder (1968) 17 ICLQ 926; FA Mann (1971) I Hague Recueil 115, 172–81; Carter (1984) 55 BYBIL 111; Carter (1989) 48 CLJ 417; Lipstein, in Banakas (ed), United Kingdom Law in the 1980s (1988) 38 and Forsyth, in ibid, 94; Collins (2007) 326 Hague Recueil 9.
2 There are also the doctrines of Crown Act of State and foreign Act of State, which are beyond the scope of this book. On Crown Act of State see, eg, Johnstone v Pedlar  2 AC 262, HL; A-G v Nissan  AC 179, HL; Al-Jedda v Secretary of State for Defence  EWCA Civ 758,  QB 773; Rahmatullah v Secretary of State for Defence  UKSC 1,  2 WLR 287. On foreign Act of State see, eg, Buttes Gas and Oil Co v Hammer (No 3)  AC 888, HL; Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5)  UKHL 19,  2 AC 883; Yukos Capital Sarl v OJSC Rosneft Oil Co  EWCA Civ 855,  QB 458; Belhaj v Straw  UKSC 3,  2 WLR 456. See generally Dicey, Morris and Collins, paras 5-043–5-053; McLachlan, Foreign Relations Law (2014). See also Shergill v Khaira  UKSC 33,  AC 359, –.
5 See Williams and Humbert Ltd v W and H Trade Marks (Jersey) Ltd  AC 368 at 394, 401; see also in the House of Lords the judgment of Lord Mackay at 437, cf Lord Templeman at 428; Re State of Norway’s Application  QB 433 at 477–8; United States of America v Inkley  QB 255 at 265–6; Camdex International Ltd v Bank of Zambia (No 2) (1997) CLC 714; Mbasogo v Logo Ltd  EWCA Civ 1370 at ,  QB 846; United States Securities and Exchange Commission v Manterfield  EWCA Civ 27 at ,  1 WLR 172.
12 Re State of Norway’s Applications (Nos 1 and 2)  1 AC 723 at 807–8, HL. See also Camdex International Ltd v Bank of Zambia (No 2) (1997) CLC 714 at 723, 734, CA; City of Gotha v Sotheby’s, 9 September 1998, HC; Mbasogo v Logo Ltd  EWCA Civ 1370 at , , , , ,  QB 846; Briggs (2006) 77 BYBIL 554 and (2007) 123 LQR 182; Knight (2008) 19 KLJ 176; Mills (2007) 66 CLJ 3; Scott  LMCLQ 296 and (2007) 2 J Priv Int L 309; Whomersley (2009) 125 LQR 227; Tasarruff v Demirel  EWHC 3354 (Ch) at ,  IL Pr 8; affd without discussion of this point  EWCA Civ 799,  1 WLR 2508, leave to appeal to the House of Lords dismissed  1 WLR 3066; United States Securities and Exchange Commission v Manterfield  EWCA Civ 27 at ,  1 WLR 172; Pocket Kings Ltd v Safenames Ltd  EWHC 2529 (Ch) at –,  Ch 438; JSC BTA Bank v Ablyazov  EWHC 202 (Comm) at ,  2 All ER (Comm) 10. See also President of the State of Equatorial Guinea v Royal Bank of Scotland International  UKPC 7 at –; Briggs (2006) 77 BYBIL 554; Dickinson (2006) 122 LQR 569. But an English court will not restrain voluntary compliance with a foreign public law, provided it does not involve committing any wrong under English law: Carey Group plc and others v AIB Group (UK) plc  EWHC 567 (Ch),  Ch 304.
13 Re State of Norway’s Applications (Nos 1 and 2)  1 AC 723 at 807–8, HL. The practical consequence is that the claim will be struck out as not justiciable. This means that the test in relation to the issue of exclusion is whether the claimant has a real prospect of succeeding (a serious issue to be tried) on the claim, rather than showing a good arguable case: Tasarruff v Demirel  EWHC 3354 (Ch) at ,  IL Pr 8; affd without discussion of this point  EWCA Civ 799,  1 WLR 2508, leave to appeal to the House of Lords dismissed  1 WLR 3066. It also means that a decision by a court to decline to exercise jurisdiction to enforce, directly or indirectly, foreign revenue, penal or other public laws is not a determination of the cause of action on the merits: Relfo Ltd v Varsani  EWHC 2297 (Ch); affd without discussion of this point  EWCA Civ 560,  1 WLR 1402.
15 Tasarruff v Demirel  EWHC 3354 (Ch) at ,  IL Pr 8; affd without discussion of this point  EWCA Civ 799,  1 WLR 2508, leave to appeal to the House of Lords dismissed  1 WLR 3066.
16 See especially M Mann (1954) 3 ICLQ 465 and (1955) 4 ICLQ 564, and the judgment of Kingsmill Moore J in the Irish case of Peter Buchanan Ltd and Macharg v McVey  AC 516 n,  IR 89, SC. See also Albrecht (1953) 30 BYBIL 454, 459–65; Castel (1964) 42 Can Bar Rev 277; Stoel (1967) 16 ICLQ 663, 671 et seq; Smart (1986) 35 ICLQ 704; Briggs  Sing JLS 280; Basedow and others (2004) 6 YBPIL 1.
18 See, eg, Municipal Council of Sydney v Bull  1 KB 7; Re Visser  Ch 877. See also The Eva  P 454; King of the Hellenes v Brostrom (1923) 16 Lloyd’s Rep 167 and 190; Metal Industries (Salvage) v Owners of the S T Harle 1962 SLT 114; cf The Acrux  P 391; Webb (1965) 28 MLR 591.
19  AC 491; see also Williams and Humbert Ltd v W and H Trade Marks (Jersey) Ltd  AC 368 at 428, HL; discussed infra, pp 128–30; USA v Harden  SCR 366, (1963) 41 DLR (2d) 721; Rothwells v Connell (1993) 119 ALR 538 at 548–9, QCA.
20 But the rule will only operate if the English court classifies the claim as a tax or revenue claim, eg, Weir v Lohr (1967) 65 DLR (2d) 717, Man QB; Connor v Connor  1 NZLR 632, NZSC; the former case also indicates that the rule may well not operate between the states of a federal country; see also Permanent Trustee Co (Canberra) Ltd v Finlayson (1967) 9 FLR 424, ACT SC; revsd on another point (1968) 122 CLR 338.
22 Peter Buchanan Ltd and Macharg v McVey  AC 516 n at 529,  IR 89 at 107, SC; approved by the House of Lords in Government of India v Taylor  AC 491; QRS 1 ApS v Frandsen  1 WLR 2169, CA; Air India Ltd v CaribjetInc  2 All ER (Comm) 76; see also Tullow Uganda Ltd v Heritage Oil and Gas Ltd, Heritage Oil plc  EWHC 1656 (Comm) at ,  1 All ER (Comm) 22. But see on the first two of these cases Williams and Humbert Ltd v W and H Trade Marks (Jersey) Ltd  AC 368 at 440, HL. In Re Lord Cable  1 WLR 7 at 13 it is suggested that proceedings in England by a foreign government for direct enforcement of that government’s currency control regulations, even against a citizen of that country, would be contrary to the principle of non-enforcement of foreign revenue laws; but cf Kahler v Midland Bank Ltd  AC 24 at 46–7, 57, HL; see also A-G of New Zealand v Ortiz  AC 1 at 24 (per Lord Denning MR in the Court of Appeal).
25 See, eg, Peter Buchanan Ltd and Mackay v McVey  AC 516 n,  IR 89, SC; Williams and Humbert Ltd v W and H Trade Marks (Jersey) Ltd  AC 368 at 437–41, HL; cf Ayres v Evans (1981) 39 ALR 129, FCA.
31 Regazzoni v KC Sethia (1944) Ltd  2 QB 490 at 515, CA; affd  AC 301 at 319, HL; X, Y and Z v The Bank  2 Lloyd’s Rep 535 at 546–7; cf Sharif v Azad  1 QB 605 at 617, CA; Mackender v Feldia AG  2 QB 590 at 601, CA. See also Bank of Ireland v Meeneghan  1 ILRM 96.
36 Ogden v Folliott (1790) 3 Term Rep 726, 100 ER 825; Wolff v Oxholm (1817) 6 M & S 92, 105 ER 1177; Huntington v Attrill  AC 150, PC; Frankfurther v WL Exner Ltd  Ch 629; Empresa Exportadora de Azúcar v Industria Azucarera Nacional SA, The Playa Larga  2 Lloyd’s Rep 171, CA; X, Y and Z v The Bank  2 Lloyd’s Rep 535; A-G of New Zealand v Ortiz  AC 1, CA; Williams and Humbert Ltd v W and H Trade Marks (Jersey) Ltd  AC 368, HL. For Canada see Pro Swing Inc v Elta Golf Inc  SCR 612, (2007) 273 DLR (4th) 663.
39 See also Lewis v Eliades  EWCA Civ 1758 at ,  1 WLR 692, leave to appeal to the House of Lords refused  1 WLR 1393—a penalty “normally means a sum payable to the state, and not to a private plaintiff”, referring to SA Consortium General Textiles v Sun and Sand Agencies Ltd  QB 279 at 299–300 (per Lord Denning MR), CA; Schemmer v Property Resources Ltd  Ch 273.
40 See United States of America v Abacha  EWCA Civ 1291,  1 WLR 1917 (concerning proceedings in the USA to forfeit assets which had allegedly been involved in money laundering offences within its jurisdiction).
44 SA Consortium General Textiles v Sun and Sand Agencies Ltd  QB 279 at 299–300, CA; see also Pencil Hill Ltd v US Citta Di Palermo SpA, 19 January 2016, HC—foreign arbitration award enforced where the arbitrators awarded the claimant a reduced additional sum in place of a contractual penalty, representing 25 per cent of the penalty claimed; cf JSC VTB Bank v Skurikhin  EWHC 271 (Comm) at —arguable that an excessive award of interest in a Russian judgment between private parties was not recoverable on the ground that it was punitive in effect. Discussed infra, pp 574–5.
45 Old North State Brewing Co v Newlands Services Inc (1998) 155 DLR (4th) 250; Benefit Strategies Group Inc v Prider  SASC 194, (2005) 91 SASR 544; Doe v Howard  VSC 75; cf Schnabel v Yung Lui  NSWSC 15—punitive damages constituting a penal award because of a public element (failure to comply with a US court order). Compare Re the Enforcement of a United States Judgment for Damages (Case IX ZR 149/91)  IL Pr 602, German Federal Supreme Court—enforcement of a foreign judgment awarding a sum in respect of exemplary and punitive damages contrary to German public policy.
47 Protection of Trading Interests Act 1980, s 5; discussed infra, pp 553–5. Under the 1980 Act the Secretary of State can make orders prohibiting persons in the United Kingdom from complying with foreign extra-territorial measures which are damaging to United Kingdom trading interests; see ss 1–3.
48 British Airways Board v Laker Airways Ltd  QB 142 at 163 (per Parker J), and in the Court of Appeal at 201 (per Donaldson MR); Paterson  UBCLR 241. But cf Old North State Brewing Co v Newlands Services Inc (1998) 155 DLR (4th) 250, BC CA (treble damages based on an unfair and deceptive trade practice statute not anti-trust).
49 Lewis v Eliades  EWCA Civ 1758 at ,  1 WLR 692; see also Service Temps Inc v MacLeod  CSOH 162 at –, 2014 SLT 375; Scott (2013) 84 BYBIL 523. Discussed infra, pp 554–5.
56 On appeal to the House of Lords, the decision of the Court of Appeal was upheld solely on the narrow point of construction of the New Zealand statute. The Law Lords, at 45–9 (per Lord Brightman), having heard no argument on the point relating to the enforcement of a penal law, declined to express any opinion on the correctness of the obiter dicta on this matter in the Court of Appeal. The result of the case is to leave a problem over the return of unlawfully exported cultural heritage. But see now Islamic Republic of Iran v Barakat  EWCA Civ 1374,  QB 22; Briggs (2007) 78 BYBIL 628; Knight (2008) 19 KLJ 176; Rogerson (2008) 67 CLJ 246; Rushworth  LMCLQ 123—claim to allow recovery of Iranian cultural heritage allowed in the situation where, under the foreign law, the claimant enjoyed both title to and an immediate right to possession of the historic artefacts without having to seize them. For attempts to solve the problem by international arrangements, see the Commonwealth Scheme for the Protection of the Material Cultural Heritage, 1993; O’Keefe (1995) 44 ICLQ 147; the UNIDROIT Convention on the International Return of Stolen or Illegally Exported Cultural Objects (1995) 34 ILM 1322. For the position within the European Union see Directive 2014/60/EU of the European Parliament and of the Council of 15 May 2014 on the return of cultural objects unlawfully removed from the territory of a Member State and amending Regulation (EU) No 1024/2012 (Recast) OJ L 159/1, implemented in the United Kingdom by SI 1994/501, SI 1997/1719, SI 2001/3972 and SI 2015/1926. See generally Roodt, Private International Law, Art and Cultural Heritage (2015).
64  EWCA Civ 27,  1 WLR 172; Briggs (2009) 80 BYBIL 628. Distinguished in Pocket Kings Ltd v Safenames Ltd  EWHC 2529 (Ch),  Ch 438—a civil order from a Kentucky court for the forfeiture of an Internet domain name used for illegal online gambling in that state held to be penal in nature.
65 The claimant in the US proceedings also sought a civil monetary penalty; it also gave an undertaking that, if successful at trial in the USA, it would not seek to enforce in England any judgment relating to penalties. The court accepted this undertaking and was concerned with the disgorgement aspect of the claim alone.
72 See generally Baade, in Lipstein (ed), International Encyclopedia of Comparative Law (1986), Vol 3, Chapter 12; (1995) 30 Texas Int LJ 429. For an exception in Australia and the USA see the Australia-United States Free Trade Agreement, Art 14.7, Hogan-Doran (2006) 80 ALJ 361.
79 (1997) CLC 714, CA; Briggs (1997) 68 BYBIL 369. The issue of enforcement of a foreign public law arose in the context of garnishment (now called a third party debt order) of a debt, see infra, pp 1292–3.
81 In Australia: A-G (UK) v Heinemann Publishers Australia Pty Ltd (No 2) (1988) 165 CLR 30, HCA; see also Trade Practices Commission v Australia Meat Holdings Pty Ltd (1988) 83 ALR 299 at 360–3, FCA; Robb Evans v European Bank Ltd  NSWCA 82. In New Zealand: A-G for the United Kingdom v Wellington Newspapers Ltd  1 NZLR 129, NZCA. Criticised by FA Mann (1988) 104 LQR 497; Carter (1989) 48 CLJ 417, 430–1; Collier (1989) 48 CLJ 33; see also Lord Keith in A-G v Guardian Newspapers Ltd (No 2)  1 AC 109, 264–5, HL. The exclusion of “other public laws” has also been accepted in Hong Kong in a different context: Nonus Asia Ltd v Standard Chartered Bank  1 HKLR 396.
83 Ibid, at . See also Pocket Kings Ltd v Safenames Ltd  EWHC 2529 (Ch) at ,  Ch 438; JSC BTA Bank v Ablyazov  EWHC 202 (Comm) at ,  2 All ER (Comm) 10. In an earlier case, Mbasogo v Logo Ltd  EWCA Civ 1370 at ,  QB 846, the Court of Appeal found it unnecessary to express a view as to whether the decision of the Australian High Court would be correct as a matter of English law. In President of the State of Equatorial Guinea v Royal Bank of Scotland International  UKPC 7 at –, the Privy Council approved, at least tentatively, the approach of the High Court of Australia.
87 Collins, Proceedings of the Special Public Bill Committee, Private International Law (Miscellaneous Provisions) Bill, Further Memorandum HL Paper 36 (1995), p 68. The former view is seemingly supported by Lord Denning in the Ortiz case; the latter by Staughton J in the same case, by Brennan J in the High Court of Australia in the Spycatcher case at 50–2, and by the Court of Appeal in Islamic Republic of Iran v Barakat  EWCA Civ 1374,  QB 22. See generally Vischer (1992) I Hague Recueil 9, 150–3.
93 The Court of Appeal also held that if it had been a matter within the scope of the Convention, the English exclusionary rule could not be invoked because it would impair the effectiveness of the Convention,  1 WLR 2169 at 2177–8, CA.
95 Case C-49/12 EU:C:2013:545,  QB 391; Collins (2014) 130 LQR 353. See also Case C-266/01 Préservatrice foncière TIARD SA v Netherlands  ECR I-4867 and Case C-265/02 Frahuil SA v Assitalia SpA  ECR I-1543 (both cases concerned guarantee of payment of customs duties); Case C-406/09 Realchemie Nederland BV v Bayer CropScience AG  ECR I-9773 (concerning the recognition and enforcement of an order imposing a fine); discussed infra, pp 204–6.
98 Council Directive 2010/24/EU of 16 March 2010 concerning mutual assistance for the recovery of claims relating to taxes, duties and other measures OJ 2010 L 84/1; implemented in the United Kingdom by Finance Act 2011, s 87 and sch 25 and MARD Regulations SI 2011/2931.
101 See I Congreso del Partido  1 All ER 1092 at 1103, CA; revsd on a different point  1 AC 244; Williams and Humbert Ltd v W and H Trade Marks (Jersey) Ltd  AC 368, HL; infra, pp 128–9.
105  3 KB 532 at 548, CA. Followed in Princess Olga Paley v Weisz  1 KB 718, CA; and see Oppenheimer v Cattermole  AC 249 at 282–3, HL; Buttes Gas and Oil Co v Hammer (No 3)  AC 888 at 931, HL; Williams and Humbert Ltd v W and H Trade Marks (Jersey) Ltd  AC 368, HL; Westland Ltd v AOI  QB 282. Cf Carl Zeiss Stiftung v Rayner and Keeler Ltd (No 2)  1 AC 853, HL. Quaere whether the decision would be the same if the owner escaped with his property from the country after the decree but before he had been deprived of possession by the local authorities.
109 See the remarks of Devlin J in Bank voor Handel en Scheepvaart NV v Slatford  1 QB 248 at 260. See also Peer International Corpn v Termidor Music Publishers Ltd  EWCA Civ 1156,  Ch 212.
110  UKHL 19,  2 AC 883; Briggs (2002) 73 BYBIL 400 and 490; Carruthers and Crawford (2003) 52 ICLQ 761; O’Keefe (2002) 61 CLJ 499; Peel (2003) 119 LQR 1; Rogerson (2003) 265 CLP 265; discussed further infra, pp 138–9; distinguished in Peer International Corpn v Termidor Music Publishers Ltd  EWCA Civ 1156,  Ch 212.
111 Public policy operated as an exception to tort choice of law rules, but if there had been an action asserting title to the aircraft, public policy would have operated as an exception to the lex situs rule,  UKHL 19 at  (per Lord Scott),  2 AC 883.
129 Re Helbert Wagg & Co Ltd  Ch 323; see also Empresa Nacional de Telecomunicaciones SA v Deutsche Bank AG  EWHC 2579 (QB),  1 All ER (Comm) 649. However, see O’Connell (1955) 4 ICLQ 267, 270; Wortley, Expropriation in Public International Law (1959), pp 33–6, 95; FA Mann (1954) 70 LQR 181, 188–90.
131 Jabbour (F & K) v Custodian of Israeli Absentee Property  1 WLR 139 at 150, and authorities there cited; Williams and Humbert Ltd v W and H Trade Marks (Jersey) Ltd  AC 368 at 427–8, HL.
132 Peer International Corpn v Termidor Music Publishers Ltd  EWCA Civ 1156,  Ch 212; Osborne (2004) 63 CLJ 567. See also Société Eram Shipping Co Ltd v Cie Internationale de Navigation  UKHL 30 at , ,  1 AC 260.
137 Eg Compañía Naviera Vascongado v SS Cristina  AC 485, HL; though there would now not appear to be immunity in such a case involving a ship used for commercial purposes, by reason of the State Immunity Act 1978, s 10(2).
138 Tallinna Laevauhisus (A/S) v Estonian State Steamship Line (1947) 80 Lloyd’s Rep 99, CA; Novello & Co Ltd v Hinrichsen Edition Ltd  Ch 595; Bank voor Handel en Scheepvaart NV v Slatford  1 QB 248.
147 On this subject see Kahn-Freund (1953) 39 Grotius Society 39; Lloyd, Public Policy (1953), Chapter 5; Nygh (1964) 13 ICLQ 39; Kahn-Freund (1974) IV Hague Recueil 139, 426–31; FA Mann, Foreign Affairs in English Courts (1986), Chapter 8; Sammartano and Morse, Public Policy in Transnational Relationships (1992); Lagarde, in Lipstein (ed), International Encyclopedia of Comparative Law (1986), Vol 3, Chapter 11; Bucher (1993) II Hague Recueil 13; Carter (1993) 42 ICLQ 1; Enonchong (1996) 45 ICLQ 633; Leslie  Jur Rev 477; Blom (2003) 50 NILR 373; Meidanis (2005) 30 ELR 95; Mills (2008) 4 J Priv Int L 201; Kramberger-Škerl (2011) 7 J Priv Int L 461; Chong (2012) 128 LQR 88; Oster (2015) 11 J Priv Int L 542. See also Application of the Convention of 1902 Governing the Guardianship of Infants (Netherlands v Sweden)  ICJ Reports 55.
150 Rousillon v Rousillon (1880) 14 Ch D 351 at 369. Actually the governing law in the circumstances of the case was English law. Therefore, of course, the domestic doctrine applied. Cf Duarte v Black and Decker Corp  EWHC 2720 (QB),  1 All ER (Comm) 401; Timms v Nicol 1968 (1) SA 299, Rhod HC.
159  1 KB 591, CA, reversing Wright J  2 KB 114. The decision was not followed in the Canadian case of National Surety Co v Larsen  4 DLR 918, BC CA; but see K(E) v K(D) (2004) 257 DLR (4th) 549, BC CA.
163  AC 679, HL; Thornley (1982) 41 CLJ 29. See also Sigurdson v Farrow (1981) 121 DLR (3d) 183, Alta QB; Fraser v Buckle  1 IR 1, SC. For the changing English domestic law attitude towards some instances of champerty see Giles v Thompson  1 AC 142, HL.
168 Royal Boskalis Westminster NV v Mountain  QB 674 at 729 (per Phillips LJ), CA. See, eg, Kaufman v Gerson  1 KB 591, CA, supra, p 134. Cf Dimskal Shipping Co SA v International Transport Workers Federation  2 AC 152, HL involving a different type of duress (ie economic). See also Société des Hôtels Réunis SA v Hawker (1913) 29 TLR 578; Kahler v Midland Bank Ltd  AC 24 at 44–5, HL; cf Luther v Sagor  3 KB 532 at 558–9, CA.
169 Israel Discount Bank of New York v Hadjipateras  1 WLR 137, CA; infra, p 574. For public policy as a defence to recognition and enforcement of foreign judgments under the traditional English rules see Vervaeke v Smith  1 AC 145, HL; generally infra, pp 573–6. For public policy as a defence to recognition and enforcement of foreign judgments under the Brussels I Regulation Recast see generally infra, pp 626–32.
173 Lemenda Trading Co Ltd v African Middle East Petroleum Co Ltd  QB 448; Carter (1988) BYBIL 356. See also Westacre v Jugoimport  1 QB 288, CA discussed further infra, pp 674–5; Apple Corps Ltd v Apple Computer Inc  FSR 431; Tekron Resources Ltd v Guinea Investment Co Ltd  EWHC 2577 (QB),  2 Lloyd’s Rep 26.
175 Boardwalk Regency Corpn v Maalouf (1992) 88 DLR (4th) 612, Ont CA; Auerbach v Resorts International Hotel Inc (1991) 89 DLR (4th) 688, Que CA. These cases involved enforcement of foreign judgments, see infra, pp 573–6.
176 Old North State Brewing Co v Newlands Services Inc  4 WWR 573, BC CA; discussed infra, p 575. See also Benefit Strategies Group Inc v Prider  SASC 194, (2005) 91 SASR 544; cf Schnabel v Yung Lui  NSWSC 15.
186 Regazzoni v K C Sethia (1944) Ltd  AC 301, HL. For a critical study of this decision, see FA Mann (1958) 21 MLR 130. Cf Trinidad Shipping Co v Alston  AC 888, PC; Dalmia Dairy Industries Ltd v National Bank of Pakistan  2 Lloyd’s Rep 223 at 267–8, CA; Soleimany v Soleimany  QB 785, CA; Mahonia Ltd v JP Morgan Chase Bank  2 Lloyd’s Rep 911—extended to where the illegal purpose is known to just one party.
190 Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5)  UKHL 19 at  (per Lord Nicholls, Lords Hoffmann and Scott concurring),  (per Lord Steyn),  (per Lord Hope),  2 AC 883.
191 Oppenheimer v Cattermole  AC 249 at 277–8, HL. This proposition was cited with approval in Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5) at  (per Lord Nicholls),  (per Lord Steyn),  (per Lord Hope). For other cases arising out of the Nazi era contrast Re Meyer  P 298 with Igra v Igra  P 404. For early examples of foreign laws or status offending English conceptions of human liberty and freedom of action see in relation to slavery, see Sommersett’s Case (1772) 20 State Tr 1; Forbes v Cochrane (1824) 2 B & C 448 at 467, 107 ER 450; Regazzoni v K C Sethia (1944) Ltd  2 QB 490 at 524, CA; cf Santos v Illidge (1860) 8 CBNS 861. See also Gotha City v Sotheby’s (No 2) (1998) Times, 8 October, CA. US courts have refused to enforce English libel judgments on the basis that English libel law provides inadequate freedom of speech: Bachchan v India Abroad Publications Inc 588 NYS 2d 661 (Sup Ct NY 1992); Matusevitch v Telnikoff  IL Pr 181, US District Ct for the District of Columbia; Maltby (1994) 94 Col LR 1978; Devgun (1994) 23 Anglo-Am LR 195. For the link between constitutional guarantees and public policy in Canada see Pro Swing Inc v Elta Golf Inc  SCR 612 at –, (2007) 273 DLR (4th) 663.
192 See the parallel situation where there was a fundamental breach of international law, discussed below. See also Skrine & Co v Euromoney Publications plc  EMLR 15, CA—a contribution action following settlement of claims abroad.
194 Both under the Brussels/Lugano system (discussed infra, pp 628–30), and the traditional English rules on recognition and enforcement (discussed infra, pp 576 and 580–2). See also the use of human rights law when considering the public policy defence under the EU Insolvency Regulation (Reg 2015/848) in C-341/04 Eurofood IFSC Ltd  ECR I-3813 at .
196  UKHL 19,  2 AC 883. Their Lordships, at  (per Lord Nicholls, with whose judgment Lord Hoffmann concurred, as did Lord Scott on the public policy/recognition and enforcement point), at  (per Lord Steyn),  (per Lord Hope) placed reliance on Oppenheimer v Cattermole  AC 249, HL. The Kuwait Airways case also involved important points in relation to tort choice of law, which are discussed infra, pp 870–1.
200 Ibid, at  (per Lord Nicholls), at  (per Lord Steyn), at  (per Lord Hope). It would also be contrary to United Kingdom obligations under the UN Charter: Lord Nicholls at ; Lord Steyn at , at  (per Lord Hope).
201 Ibid, at – (per Lord Hope). There was a clear connection between Resolution 369, which was part of the law of the place where the tort was committed (which is what the court was concerned with in a tort choice of law case), and the breach of international law.
202 Ibid, at  (per Lord Nicholls),  (per Lord Steyn), – (per Lord Hope). Public policy would have operated as an exception to the lex situs rule if there had been an action asserting title to the aircraft, at  (per Lord Scott).
206 Phrantzes v Argenti  2 QB 19; supra, pp 90–1; Webb (1960) 23 MLR 446; Carter (1960) 36 BYBIL 412; and see Shahnaz v Rizwan  1 QB 390—recognition of deferred dower; cf Re Macartney  1 Ch 522; Khalij Commercial Bank Ltd v Woods (1985) 17 DLR (4th) 358, Ont SC.
211 The two decisions have sometimes been said to support the proposition that a foreign status unknown to English law will not be recognised in England. See, eg, Republica de Guatemala v Nunez  1 KB 669 at 701, CA. The proposition is unfounded. For example, the married status of the parties to a polygamous marriage is recognised and, indeed, English courts will grant matrimonial relief to the parties to such a marriage. So also was the status arising from a foreign adoption or a foreign legitimation per subsequens matrimonium recognised before those institutions were accepted by English internal law.
221 Middleton v Middleton  P 62 at 69; see also Gray (otherwise Formosa) v Formosa  P 259, CA; Lepre v Lepre  P 52. For the reintroduction of this concept, but now in the area of enforcement of foreign commercial judgments, see Adams v Cape Industries plc  Ch 433 at 557 et seq, CA; discussed infra, p 578.
222 See Carter (1962) 38 BYBIL 497; Lewis (1963) 12 ICLQ 298; Blom-Cooper (1963) 26 MLR 94; Carter (1965–1966) 41 BYBIL 445; Unger (1966) 29 MLR 327. See also Varanand v Varanand (1964) 108 Sol Jo 693, cited in Qureshi v Qureshi  Fam 173 at 201.
223 Council Regulation (EC) No 2201/2003 of 27 November 2003 concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility OJ 2003 L 338/1 (Brussels II bis), Art 22; discussed infra, pp 1002–5.
226 Brussels II bis, Art 22(a); Family Law Act 1986, s 51(3)(c). There are a number of other circumstances in which public policy issues arise, in the context of family law. A foreign law of domicile governing capacity to marry may not be recognised if it is repugnant to English public policy: Cheni v Cheni  P 85 at 98–9, infra, p 921; see also Westminster City Council v C  EWCA Civ 198,  Fam 11. Restraint on remarriage after a foreign divorce may be regarded as penal, so that the restriction will be regarded as inoperative outside the jurisdiction in which it was imposed, see infra, pp 926–7.
227 See Vervaeke v Smith  1 AC 145 at 164 (per Lord Simon, who seems to regard the two concepts as being, in substance, the same), HL. The Law Commission regards the courts’ treatment of the two concepts as involving the same approach, Law Com No 137 (1984), para 2.26.
228  Fam 93; cf Igra v Igra  P 404 at 412. The public policy defence did not succeed in Sabbagh v Sabbagh  FLR 29; Eroglu v Eroglu  2 FLR 287; Kellman v Kellman  1 FLR 785.
229 It was also decided that there had been a denial of the opportunity to take part in the proceedings under s 8(2)(a)(ii) of the Recognition of Divorces and Legal Separations Act 1971; now s 51(3)(a)(ii) of the Family Law Act 1986.
243 See Lawson v Serco Ltd  UKHL 3,  1 All ER 823; Duncombe v Secretary of State for Children, Schools and Families  UKSC 36,  4 All ER 1020; Ravat v Halliburton Manufacturing & Services Ltd  UKSC 1,  2 All ER 905.
244 SI 1993/3053, implementing Council Directive 86/653/EEC of 18 December 1986 on the coordination of the laws of the Member States relating to self-employed commercial agents OJ L 382/17 into United Kingdom law.
245 Case C-381/98 Ingmar GB Ltd v Eaton Leonard Technologies Inc  ECR I-9305. See also Case C-184/12 United Antwerp Maritime Agencies (Unamar) NV v Navigation Maritime Bulgare EU:C:2013:663,  1 Lloyd’s Rep 161.
246 See Peer International Corpn v Termidor Music Publishers Ltd  EWCA Civ 1156,  Ch 212; discussed supra, p 131. But see the argument that public policy in contract cases sometimes operates as a positive concept, the concern being to apply English law, infra, pp 748–9. See generally Blom (2003) 50 NILR 373, 379–82.