English Court of Appeal finds good arguable case that public policy exception applies to the foreign Act of State Doctrine allowing Ukraine to argue duress in claim under Eurobonds

In Ukraine v The Law Debenture Trust Corporation plc [2018] EWCA Civ 2026 the English Court of Appeal (the Court) partially upheld an appeal in favour of the state of Ukraine (Ukraine), reversing in part the summary judgment granted to The Law Debenture Trust Corporation plc (the Claimant) by the Commercial Court.

The Claimant brought the claim as the trustee of notes with a nominal value of US$3 billion (the Notes) after Ukraine defaulted on the payment of principal and the final instalment of interest. The sole subscriber of the Notes was the Russian Federation (Russia).

In allowing the appeal in part, the Court found that there was a good arguable case that the public policy exception applied to the foreign act of state doctrine and that Ukraine’s defence of duress – based on allegations of breaches of ius cogens norms of international law and treaty provisions by Russia – was therefore justiciable.

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English Court finds that the foreign act of state doctrine may apply to arbitration proceedings

In the decision of Reliance Industries Limited & Ors v The Union of India [2018] EWHC 822 (Comm) the English Commercial Court (the Court) considered a number of challenges to an arbitration award brought under sections 67, 68 and 69 of the Arbitration Act 1996 (the 1996 Act). In relation to certain of the challenges made under sections 67 and 68, the Court considered the doctrine of foreign act of state. The Court found that aspects of the doctrine are no less applicable to arbitration proceedings than litigation. It also held, obiter, that where parties including a foreign state ask a tribunal to determine the validity of that foreign state’s act, there can be no objection to the tribunal doing so. Also obiter, the Court considered that a failure to raise act of state in objection to the determination of an issue which has been put to the tribunal, could constitute a waiver of that right to object.

The judgment provides some helpful clarification on the applicability of the foreign act of state doctrine to arbitration and may be of considerable significance to parties which contract with sovereign counterparts.

The Court also considered challenges to the Award under the 1996 Act on various other bases and, in doing so, reiterated the English court’s reluctance to interfere with decisions of arbitral tribunals.  A separate blog post on these other aspects of the judgment can be found here.

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