Yukos saga continues: English Court of Appeal confirms applicability of issue estoppel, arising from a foreign court judgment, to state immunity

In Hulley Enterprises Ltd v The Russian Federation [2025] EWCA Civ 108, the English Court of Appeal confirmed that a foreign court’s judgment can create an issue estoppel that can be given effect by an English court when deciding whether a state is immune from the English court’s adjudicative jurisdiction.

Background

This case arises from an appeal of a decision by the English High Court that Russia did not have state immunity under the State Immunity Act 1978 (SIA) in relation to the enforcement, in England, of arbitral awards relating to the well-known, high value, Yukos expropriation dispute. That decision involved a question on whether one of the exceptions to state immunity from the adjudicative decision of the English court, under ss 2-11, SIA applied.

If such an exception applied, Russia’s claim for immunity would fail. The exception to state immunity that Yukos’ majority shareholders (the Claimants) relied on was s.9 SIA: that Russia had agreed in writing to submit the dispute to arbitration, and the court proceedings related to that arbitration. The Dutch courts (being those of the seat) had previously found that Russia had submitted to arbitration in writing.

Accordingly, the Claimants submitted that an ‘issue estoppel’ arose from the decision of the Dutch court. which precluded Russia from denying that it had agreed to arbitration.

The key issue

In short, the case therefore raised an important point of principle: whether issue estoppel could apply in the context of the English court determining whether an exception to state immunity under s.2-11 SIA applied? The High Court essentially held that it could and that there was such an issue estoppel with the consequence that Russia’s challenge to the English court’s jurisdiction should be dismissed. Russia appealed this decision.

The Court of Appeal’s decision

Russia’s main argument was that: the English court has an obligation, in section 1 SIA, to give effect to a state’s immunity unless it ‘determines’ that one of the exceptions in sections 2 to 11 SIA applies; and that a conclusion based on an issue estoppel arising from a foreign judgment is not a ‘determination’ [53]. The Court of Appeal accepted that the English court has such an obligation but rejected Russia’s argument. [54].

The Court held that, in this context, if an English court gives effect to an issue estoppel, it is not that the English court declines to make a decision, but that because of the issue estoppel, evidence to contradict the previous judgment is not relevant. [55].

Accordingly, the English court would still be making a ‘determination’ in such cases. When the High Court determined that Russia had agreed to arbitration in writing, it did so but by way of applying the substantive principle of English law that when the requirements for an issue estoppel are satisfied, the previous decision of a court of competent jurisdiction is conclusive on the issue in question [56].

Further, the Court of Appeal held that the SIA does not prescribe how the court is to determine whether an exception under the SIA applies. The English court must simply apply English law (including its own procedural rules) to that question and the substantive law includes the law relating to issue estoppel [57, 61].

In the Court’s view, a foreign judgment could, therefore, be deployed in such a way. This would of, course, be subject to the usual requirements of issue estoppel being met. One important clarification made by the Court in that respect was, however, that, as one of these general conditions is that the foreign judgment must be entitled to recognition in England, this will, where the situation involves a foreign judgment against a state, include meeting the additional requirements of s.31 Civil Jurisdiction and Judgments Act (CJJA) - which sets out specific conditions for the recognition of foreign judgments against states [72-76].

Other arguments relied on by Russia

Russia also attempted to rely on an argument that state immunity formed a higher rule of public policy than issue estoppel which the latter should give way to. The Court rejected this argument at [67], denying that there was any choice between competing policies and, in any event observing that, if s.31 CJJA was met, the argument was even weaker.

Finally, Russia also tried to plead “special circumstances” in that Russia argued that the issue estoppel resulting from a foreign court’s decision should not apply to the determination of whether an exception to state immunity applies because the exceptional nature of state immunity amounts to ‘special circumstances’ [78].

Insofar as Russia pleaded this as applying generally to an assessment of state immunity, the Court rejected it because it would amount to saying that will never apply to an issue of state immunity — such an exception for ‘special circumstances’ would swallow the general approach considered by the Court. [78-79]. Nor were there any ad hoc special circumstances; the fact that some issues of alleged procedural fraud in the conduct of arbitration, or the interpretation of the Energy Charter Treaty, potentially remained live in the Netherlands were not relevant to the issue of Russia’s consent to arbitration (these issues had been finally and conclusively determined in Dutch courts at the time the English Court of Appeal heard this case) [80-82].

Comment

The Court of Appeal’s judgment is important. It confirms that a foreign court’s decision can create an issue estoppel in the context of assessing state immunity to adjudicative jurisdiction under the SIA. In the specific context of arbitration awards, that could be said to effect a more “arbitration friendly” outcome insofar as it is a conclusion which narrows the ability of award debtor states to re-open points of jurisdiction determined at the seat of arbitration. Since the judgment, an application for permission to appeal the decision has, however, been lodged by Russia at the UKSC.

Click here for a copy of the judgment.

Ali Amerjee would like to thank Jason Czerwiec for his assistance in preparing this article.