UK Court of Appeal Affirms That Issue Estoppel May Preclude States from Re-Arguing State Immunity Issues in an Enforcement Context
Client Alert | February 18, 2025
The Court of Appeal judgment means that States can be prevented by the doctrine of issue estoppel from relitigating state immunity issues before the English courts if those issues have already been decided in another forum. As such, the judgment provides a potential shortcut through otherwise lengthy and expensive proceedings on questions of state immunity.
- Executive Summary
On 12 February 2025, the UK’s Court of Appeal issued an important ruling in the area of judgment and arbitral award enforcement: Hulley Enterprises Ltd & Ors v The Russian Federation [2025] EWCA 108 (the CA Judgment).
The CA Judgment affirms the High Court’s earlier decision (the HC Judgment)[1] that the doctrine of issue estoppel can apply to arguments on state immunity. The decision is especially important in the field of judgment and award enforcement because, according to the CA Judgment, those seeking to enforce against a State can rely upon prior decisions—including those of foreign courts—in deciding issues that underpin a claim for state immunity. That is subject to establishing (i) the standard common law requirements for an issue estoppel,[2] and (ii) the requirements for recognition of a foreign judgment issued against a foreign State set out in s. 31 of the Civil Jurisdiction and Judgments Act 1982 (the CJJA).[3]
The CA Judgment means States will be prevented from relitigating certain state immunity issues before the English courts so that an English court can base its decision as to the existence of state immunity on an issue estoppel arising from the decision of a foreign court. As such, it provides a potential shortcut through otherwise lengthy and expensive proceedings on questions of state immunity.
- Relevant Background
The claimants in the case (the Hulley Claimants) obtained three materially identical arbitral awards (the Awards) against Russia in 2014. The Awards ordered Russia to pay damages exceeding USD 50 billion (plus interest) for Russia’s violations of the Energy Charter Treaty stemming from Russia’s unlawful expropriation of Yukos Oil Company in which the Hulley Claimants were majority shareholders. Following the issuance of the Awards, a sprawling set of set-aside and enforcement proceedings has unfolded across multiple jurisdictions.
As to the set-aside proceedings: in 2014, Russia applied to set the Awards aside in the courts of the arbitral seat, the Netherlands. The Awards were set aside at first instance by the Hague District Court in 2016 on jurisdictional grounds because it found that there was no binding arbitration agreement between the Hulley Claimants and Russia.[4] However, the Hulley Claimants successfully appealed that decision, and the Awards were re-instated by the Hague Court of Appeal in 2020.[5] Russia then appealed that decision to the Dutch Supreme Court,[6] which, in 2021, upheld most of the Hague Court of Appeal’s findings but remitted one issue to the Amsterdam Court of Appeal for further consideration.[7] According to the CA Judgment, while the Amsterdam Court of Appeal has ruled in the Hulley Claimants’ favour on the outstanding issue, a further appeal to the Dutch Supreme Court remained pending as of the date of the CA Judgment.[8]
Meanwhile, in 2015, before the Hague District Court had set the Awards aside, the Hulley Claimants had applied for recognition and enforcement of the Awards in the UK. Those proceedings were then stayed by consent following the set-aside decision of the Hague District Court in 2016.[9] After the Dutch Supreme Court judgment was handed down in 2021, the stay was lifted partially and solely for the purpose of resolving Russia’s state immunity defence (emanating from jurisdictional issues). Directions were given by Mr Justice Butcher for determination of certain preliminary issues centred around whether Russia was precluded, by reason of an issue estoppel arising out of the Dutch courts’ judgments, from arguing that the arbitral tribunal did not have jurisdiction.
The core of the Dutch courts’ jurisdictional finding was that, contrary to Russia’s submissions, there was a binding arbitration agreement between the Hulley Claimants and Russia. Consequently, in the English proceedings considering these preliminary jurisdictional issues, the Hulley Claimants argued that the Dutch courts’ determination on jurisdiction also resolved the question of whether the arbitration exception under s. 9 of the UK State Immunity Act 1978 (the SIA)[10] applied; Russia counterargued that that question had to be the subject of further consideration de novo by the English courts.[11]
- The High Court Judgment
The preliminary jurisdictional issues were the subject of a two-day hearing before Mrs Justice Cockerill DBE on 4–5 October 2023, and the HC Judgment was handed down on 1 November 2023.
Cockerill J ruled in favour of the Hulley Claimants in reliance of the Dutch courts’ jurisdictional determinations. She held that the SIA is subject to procedural and substantive common law rules, including issue estoppel, and there was no principle of law that issue estoppel could not arise in the context of public international law (such as in relation to the interpretation of an international treaty).[12] She also held that, in order for an issue estoppel to arise from a foreign judgment issued against a foreign State, the requirements for recognition of such judgments, contained in s. 31 of the CJJA, must also be satisfied.[13]
Applying those principles, Cockerill J found that the Dutch Supreme Court’s 2021 decision—dismissing Russia’s challenge to the Awards and finding a binding agreement to arbitrate—created an issue estoppel. Russia was therefore estopped from re-arguing before the English courts the question of whether it had agreed to submit the dispute to arbitration. Consequently, Cockerill J dismissed Russia’s challenge to the jurisdiction of the English courts on the grounds of state immunity.
- The Court of Appeal Judgment
Russia appealed the HC Judgment to the Court of Appeal on five grounds,[14] which were distilled down to a single primary issue: when a foreign court has decided that a State has agreed in writing to submit a dispute to arbitration, and the usual conditions for the application of issue estoppel are satisfied, can: (a) the English court treat that decision as giving rise to an issue estoppel, or (b) must it determine the issue for itself (i.e., de novo) without regard to the decision of the foreign court?
The appeal was heard on 15 January 2025 and the CA Judgment was handed down on 12 February 2025. Lord Males, Lord Lewison, and Lord Zacaroli unanimously dismissed Russia’s appeal, with Lord Males delivering the lead judgment.
The Court of Appeal noted that, while the SIA sets out comprehensively the exceptions to state immunity (in ss. 2 to 11 of the SIA), it does not prescribe how the English court should decide whether any of the exceptions applies in any given case.[15] That question must be decided by applying the ordinary principles of English law—both substantive and procedural—and those principles include the principle of issue estoppel.[16]
Thus, when Cockerill J had decided to give effect to an issue estoppel arising from the Dutch Supreme Court’s 2021 judgment, she had not (as Russia had maintained) declined to determine whether Russia had agreed to submit the underlying dispute to arbitration. Instead, the Judge had determined that Russia had so agreed, applying the substantive principle of issue estoppel. In short: the relevant question had been determined by the previous decision of a court of competent jurisdiction (i.e., the Dutch Supreme Court in 2021), which the Court of Appeal confirmed to be conclusive on the issue in question.[17]
The Court of Appeal also rejected Russia’s arguments that issues of state immunity and/or treaty interpretation constituted “special circumstances” militating against the application of issue estoppel in any event. In doing so, the Court of Appeal noted that to give effect to the issue estoppel arising from such a judgment would be in the interests of justice as it would: (i) avoid putting the Hulley Claimants to the trouble and expense of litigating the relevant issue again, and (ii) be in accordance with the important public policy that arbitral awards, even against sovereign States, “should be honoured without delay and without the kind of trench warfare seen in the present case”.[18]
- Comment
The CA Judgment is significant. It confirms that determinations of foreign courts—in particular, of the courts of the arbitral seat—can give rise to an issue estoppel when English courts are deciding the same issues within the context of a sovereign immunity defence. In practice, it is often the case that the set-aside proceedings at the seat of the arbitration will settle the question of whether the tribunal in question had jurisdiction (i.e., effectively the very same question that arises under s. 9 of the SIA as to whether the arbitration exception applies). The CA Judgment, thus, paves the way for award creditors to rely upon such final determinations of foreign courts to cut short a State’s assertion of adjudicative immunity in enforcement proceedings before the English courts.
Accordingly, the CA Judgment means that: (i) the timeline for obtaining an enforceable recognition and enforcement order against a State (entitling the award creditor to start the execution process against the State’s assets) can be much shorter, and (ii) the additional costs and expenses of re-running complex and already-decided jurisdictional arguments before the English courts can be avoided.
On the whole, the CA Judgment is positive news for parties looking to enforce awards against foreign States in the UK and re-affirms the UK’s pro-enforcement stance in accordance with other recent decisions.[19]
We note that the CA Judgment may be subject to a further appeal to the UK Supreme Court.
[1] Hulley Enterprises Ltd & Ors v The Russian Federation [2023] EWHC 2704 (Comm).
[2] Being that (i) the judgment (which is alleged to form the basis of the issue estoppel) must have been given by a foreign court of competent jurisdiction; (ii) the judgment (which is alleged to form the basis of the issue estoppel) must be final and conclusive and on the merits; (iii) there must be identity of parties; (iv) there must be identity of subject matter (i.e., the issue decided by the foreign court must be the same as the one arising in the English proceedings); and (v) “special circumstances”, militating against the application of issue estoppel, must not exist (see CA Judgment, paras. 36, 41).
[3] Being that (i) the judgment (which is alleged to form the basis of the issue estoppel) would be recognised and enforced if it had not been given against a State; and (ii) that the foreign court would have had jurisdiction in the matter if it had applied rules corresponding to those applicable to such matters in the UK in accordance with ss. 2–11 of the State Immunity Act 1978 (see CA Judgment, paras. 23, 72–76).
[4] CA Judgment, para. 8.
[5] CA Judgment, para. 9.
[6] Raising challenges as to the conduct of the arbitration alongside its jurisdictional objections.
[7] CA Judgment, para. 11. The one issue that had been remitted to the Amsterdam Court of Appeal was whether the Awards were vitiated by fraud as a result of the Hulley Claimants having (allegedly) effectively bribed a witness to give evidence in their favour and failed to disclose key documents.
[8] CA Judgment, para. 15.
[9] CA Judgment, paras. 7–8.
[10] Section 9(1) of the SIA provides that “[w]here a State has agreed in writing to submit a dispute which has arisen, or may arise, to arbitration, the State is not immune as respects proceedings in the courts of the United Kingdom which relate to the arbitration”.
[11] CA Judgment, para. 12.
[12] HC Judgment, paras. 19–40, 53–55.
[13] HC Judgment, paras. 41–48.
[14] The five grounds of appeal advanced by Russia were: (1) issue estoppel is not applicable in respect of a foreign judgment against a state, not least on an issue of state immunity; (2) there is no scope for issue estoppel to apply when determining whether state immunity is available under the SIA; (3) s. 31 of the CJJA is not available as an “overlay” for a common law issue estoppel determination; (4) special circumstances militate against the application of issue estoppel in any event because of (i) the extant fraud challenge wherein the Awards are liable to be set aside; (ii) the existence of a potential reference to, and determination by, the Court of Justice of the European Union that there was no jurisdictional basis for the Awards; and (iii) the primacy which ought to be given to the exceptional nature of state immunity; and (5) the requirement for an English court to identify the true and proper construction of a treaty itself militates against the application of issue estoppel on such a matter (see CA Judgment, para. 49).
[15] CA Judgment, paras. 3, 57.
[16] CA Judgment, paras. 3, 57.
[17] CA Judgment, para. 56.
[18] CA Judgment, paras. 77–84.
[19] See further our client alerts on the decisions in Infrastructure Services Luxembourg SARL & Anor v Kingdom of Spain and Border Timbers Ltd & Anor v Republic of Zimbabwe [2024] EWCA Civ 1257 (here); Infrastructure Services Luxembourg SARL & Anor v Kingdom of Spain [2023] EWHC 1226 (Comm) (here); and Micula & Ors v Romania [2020] UKSC 5 (here).
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn lawyer with whom you usually work, any member of the firm’s International Arbitration, Judgment and Arbitral Award Enforcement, or Transnational Litigation practice groups, or the authors in London:
Piers Plumptre (+44 20 7071 4271, pplumptre@gibsondunn.com)
Ceyda Knoebel (+44 20 7071 4243, cknoebel@gibsondunn.com)
Theo Tyrrell (+44 20 7071 4016, ttyrrell@gibsondunn.com)
Dimitar Arabov ( +44 20 7071 4063, darabov@gibsondunn.com)
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