Issue Estoppel and State Immunity: Recognizing Foreign Decisions under the State Immunity Act 1978

Introduction

This commentary addresses the Court of Appeal’s decision in Hulley Enterprises Ltd & Ors v The Russian Federation ([2025] EWCA Civ 108). The dispute stems from a long-running set of proceedings initiated by the former shareholders of OAO Yukos Oil Company (“the claimants”) to enforce large arbitral awards against the Russian Federation (“Russia”). Central to the appeal was whether an English court, when determining if a state is immune under the State Immunity Act 1978 (“the 1978 Act”), can treat a finding by a foreign court that there was a valid arbitration agreement as giving rise to an issue estoppel and thereby preclude relitigation of that same question in England.

In short, the judgment clarifies that:

A foreign court’s determination that a state agreed to arbitrate a dispute can, in principle, create an issue estoppel in English proceedings.
Such an issue estoppel is not inconsistent with the requirement under the 1978 Act that the English court “give effect to state immunity” or satisfy itself of the relevant exceptions.
The ordinary principles of English common law remain applicable, and these principles include recognition of issue estoppel, even when state immunity is in issue.

Summary of the Judgment

Lord Justice Males, delivering the lead judgment, upheld the ruling of Mrs Justice Cockerill, who found that the Russian Federation was precluded by issue estoppel from arguing again that it had not agreed to submit the Yukos shareholders’ claims to arbitration. Specifically:

The Dutch courts—having jurisdiction as the seat of arbitration—had previously ruled that Russia had agreed in writing to submit these disputes to arbitration.
That decision was final and conclusive on the question of the parties’ arbitration agreement.
The Russian Federation could not re-litigate this “no agreement” point in England, satisfying the section 9 exception of the 1978 Act—which states that a country is not immune when it has agreed in writing to settle the dispute by arbitration.
Consequently, the Russian Federation’s claim of immunity from English jurisdiction was dismissed.

Analysis

A. Precedents Cited

The Court conducted a thorough review of several landmark precedents and doctrinal principles:

Issue Estoppel Origins: References were made to Thoday v Thoday [1964] P 181 and Mills v Cooper [1967] 2 QB 459, which explained that “issue estoppel” prevents parties from re-litigating an issue of fact or law that has already been conclusively decided.
Recognition of Foreign Judgments: The Court relied on Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] 1 AC 853 and The Sennar (No 2) [1985] 1 WLR 490 for the principle that, under English law, the final judgment of a foreign court of competent jurisdiction can give rise to an issue estoppel, provided it is final and conclusive, on the merits, and involves the same parties and the same issues.
State Immunity Act 1978: The judgment cites authorities such as JH Rayner (Mincing Lane) Ltd v Department of Trade and Industry [1989] Ch 72, Zu Sayn-Wittgenstein-Sayn v Juan Carlos de Borbón y Borbón [2022] EWCA Civ 1595, and Shehabi v Kingdom of Bahrain [2024] EWCA Civ 1158 for the rule that courts must be satisfied that an exception under sections 2 to 11 of the 1978 Act applies before it can exercise jurisdiction over a state.
Section 31 of the Civil Jurisdiction and Judgments Act 1982: The Court highlighted how section 31 provides the criteria for recognizing and enforcing foreign judgments against states. The foreign court must have had jurisdiction in personam based on principles corresponding to the 1978 Act.
Zhongshan Fucheng Investment Co Ltd v Federal Republic of Nigeria [2023] EWCA Civ 867: Although not directly about issue estoppel, this case confirmed that English procedural rules apply to immunity questions. The state still must comply with the court’s procedures, indicating that not every aspect of immunity automatically overrides procedural norms.

B. Legal Reasoning

The Court’s reasoning centers on reconciling the obligation under section 1 of the 1978 Act to “give effect” to immunity, with the doctrine of issue estoppel under English common law. The Court emphasized:

Nothing in the 1978 Act Displaces Common Law: The Act does not prescribe the method by which a court “satisfies” itself that an exception to immunity arises. Instead, the usual common law rules—here, issue estoppel—can be used to determine that question.
“Determination” Includes Applying Issue Estoppel: Responding to the argument that giving effect to a foreign ruling on issue estoppel is not a “determination,” the Court explained that the existence of an issue estoppel is itself the method by which the court reaches its conclusion. It does not mean the English court abdicates its responsibility. Rather, it recognizes a substantive legal right established by the foreign judgment.
Public Policy Harmonization: State immunity is itself a policy of protecting the sovereignty of states from suit. Issue estoppel, by contrast, is a principle grounded in the public policy of finality in litigation. According to the Court, these two policies do not inherently clash when the statutory framework is properly applied. Where the requirements for issue estoppel are met, giving effect to the foreign judgment neither offends the Act nor sacrifices the duty to respect immunity.
Special Circumstances: An English court can refuse an issue estoppel if “special circumstances” would make the outcome unjust. However, the Court noted that the mere existence of a state immunity argument is not, in and of itself, a special circumstance. Here, Russia’s additional contentions—such as pending fraud issues in Dutch courts or possible future references to the CJEU—did not reopen the question of whether Russia agreed to arbitrate because that point had been conclusively decided in the Netherlands.

C. Impact

This judgment is significant in clarifying that English courts may treat a foreign court’s final and conclusive decision on the existence of an arbitration agreement as binding via issue estoppel, even where state immunity is invoked. The key impacts include:

A Streamlined Enforcement Process: Parties seeking to enforce arbitral awards in England against foreign states can rely on foreign judgments (particularly from the seat court). This reduces the need to re-litigate already determined questions of arbitrability and fosters efficiency in cross-border disputes.
Greater Certainty for Commercial Actors: The “finality in litigation” principle gains added traction, promising that states which fully participated in foreign seat proceedings cannot simply re-argue jurisdictional points in England.
Guidance on Exceptions to Immunity: By reaffirming that courts must evaluate the section 9 exception under the 1978 Act on a “balance of probabilities” and that standard common law doctrines apply, the ruling helps align the 1978 Act with conventional procedural and substantive rules.
Clarification of Procedural and Substantive Issues: The Court solidifies the concept that compliance with local procedural norms—even against a state—remains paramount, undercutting attempts to rely on immunity as a universal bar to procedure.

Complex Concepts Simplified

Below are simplified explanations of some of the legal concepts at play:

State Immunity: A long-established international law principle that generally prevents one state from being sued in the courts of another state without its consent. However, exceptions exist under the State Immunity Act 1978, such as the express agreement to arbitrate in writing.
Issue Estoppel: A principle preventing parties from re-litigating an issue (a specific fact or legal question) that has already been resolved in prior litigation between the same parties. It promotes finality and efficiency in dispute resolution.
Section 9 of the State Immunity Act 1978: This section carves out an exception from immunity for states that have agreed in writing to arbitrate a dispute. If a state has entered into a valid arbitration agreement, the English courts can exercise jurisdiction to recognize or enforce any resulting award.
Recognition of Foreign Judgments: Under English law, a foreign judgment can be recognized if the foreign court had jurisdiction under the English conflict-of-laws rules and the judgment is final and conclusive on the merits. Where the defendant is a state, section 31 of the Civil Jurisdiction and Judgments Act 1982 adds further requirements to ensure that jurisdiction is properly established.

Conclusion

The Court of Appeal’s judgment in Hulley Enterprises Ltd & Ors v The Russian Federation reinforces that, under English law, the courts can rely on a foreign court’s final and conclusive determination relating to an exception to state immunity—particularly a finding that a state agreed to arbitrate. The ruling clarifies that applying issue estoppel does not undermine the English court’s obligation under the 1978 Act to ensure that an exception to immunity exists, because the concept of issue estoppel merely reflects an ordinary application of English substantive law.

For future disputes, this decision provides vital guidance: if a state has litigated an arbitration agreement issue in the seat court, an award creditor can invoke that final foreign judgment in English enforcement proceedings. From a practical standpoint, this should reduce duplicative arguments and help expedite recognition of large arbitral awards, advancing both the 1978 Act’s framework and the policy favoring finality in international arbitration.