West LB AG v Philippine National Bank

• Judgment Date: 10 August 2012
• Date: 10 August 2012
• Docket Number: Originating Summons No 134 of 2004
• Court: High Court (Singapore)

West LB AG

Plaintiff

and

Philippine National Bank and others

Defendant

[2012] SGHC 162

Andrew Ang J

Originating Summons No 134 of 2004

High Court

Civil Procedure—Interpleader—Competing claims to funds held in escrow bank account

Conflict of Laws—Choice of law—Involuntary assignment of debt—Law governing legal effect of foreign garnishee order over foreign debt

Conflict of Laws—Foreign judgments—Whether foreign judgment in rem or in personam in nature—Whether foreign court had jurisdiction to issue judgment in rem

Conflict of Laws—Foreign judgments—Whether recognition of foreign judgment tantamount to indirect enforcement of foreign penal law

International Law—Act of state doctrine—Non-applicability to foreign judicial proceedings

The plaintiff bank sought interpleader relief in relation to certain sums of money totalling US$16.8 m and £4.2 m (‘the Funds’), which were held in an escrow account with the plaintiff bank. The proceedings involved a four-way tussle for entitlement to the Funds involving (a)the first defendant, the Philippine National Bank (‘PNB’); (b)the second to sixth defendants, which were foundations established in Vaduz, Liechtenstein and Panama (‘the Foundations’); (c)the seventh defendants, human rights victims (‘the HRVs’) who suffered human rights abuses during the rule of Ferdinand E Marcos who was the former President of the Philippines before his exile in 1986; and (d)the tenth defendant, the Republic of the Philippines (‘the Republic’).

The Funds were originally part of a pool of assets held in various Swiss bank accounts (‘the Swiss Deposits’) of which the Foundations were the named holders. The Republic believed that the Swiss Deposits were originally state-owned assets, which had been siphoned away by Ferdinand E Marcos during his tenure as President. In 1986, the Republic sought assistance from the Swiss authorities for the return of the Swiss Deposits. Pursuant to international mutual assistance procedures, the Swiss Deposits were released in 1998 to PNB to hold as escrow agent pending a final decision of the Philippines courts in relation to the entitlement to the Swiss Deposits. PNB deposited the Swiss Deposits in various Singapore banks, including the Funds, which were deposited with the plaintiff bank. In 2003, following forfeiture proceedings brought pursuant to Republic Act 1379 of the Philippines (‘RA 1379’), the Philippines Supreme Court ordered the Swiss Deposits to be forfeited in favour of the Republic (‘the Forfeiture Judgment’).

In the meantime, a class action was commenced in Hawaii on behalf of the HRVs against Ferdinand E Marcos for the human rights infringements suffered during his rule. The District Court of Hawaii ruled in favour of the HRVs and entered judgment for in excess of US$1.9 b against the estate of Ferdinand E Marcos and, in July 1995, ordered the assignment, for the HRVs' benefit, of all rights, title and interest in the Swiss Deposits. As this was not complied with, the Clerk of the District Court of Hawaii, Walter A Y Chinn, executed an assignment on behalf of the estate of Ferdinand E Marcos to this effect (‘the Chinn Assignment’).

The Republic and PNB relied on the proceedings between the Swiss and Philippines authorities to prove their claims. PNB claimed that as escrow agent, it had legal title to the Funds and was entitled to repayment of them. The Republic relied on the series of events beginning from its request for the release of the Funds by the Swiss authorities to the subsequent determination of the entitlement to the Funds in the Forfeiture Judgment - a process the Republic termed ‘the Green Line’. It argued that based on the act of state doctrine, the Green Line was unimpeachable and, therefore, the Republic was entitled to the Funds. On the other hand, the HRVs relied on the Chinn Assignment to prove their asserted title to the Funds. Finally, the Foundations' claim was premised on their status as the original legal owners of the Funds; they sought to impeach the other parties' claims and argued that, in the event, the Funds had to revert back to them.

Held, allowing the first defendant's claim and dismissing the claims by the second to tenth defendants:

(1) The act of state doctrine limited, for prudential reasons, the forum court from inquiring into the validity and propriety of the sovereign acts of a foreign state. The doctrine only applied where the ‘act’ in question was a public governmental act and the subject-matter of the act was located within the foreign sovereign's territory. Further, the doctrine would only apply if the outcome of the case turned upon the effect of official action by a foreign sovereign: at [38], [39] and [42].

(2) The act of state doctrine was inapplicable on the facts because the HRVs' and the Foundations' challenge against the Republic's case related to the legal effect of the Forfeiture Judgment, which was not a legislative or executive act. Further, there was no issue arising for determination by the court as to the propriety of any foreign sovereign act: at [43] and [44].

(3) A judgment in rem determined the status of a thing or person and was binding on the world. By contrast, a judgment in personam bound only parties to the proceedings. Whether a foreign judgment was in rem or in personam was to be determined by the forum court, considering the nature of the proceedings culminating in the foreign judgment, the substance of the judgment and its intended effect: at [46] and [47].

(4) On the facts, the in rem nature of the Forfeiture Judgment was discernible from, inter alia,the Philippines Supreme Court's intention to finally determine the ownership of the Funds and the wording of RA 1379, which clearly indicated that the forfeiture proceedings were directed against the res in question: at [45], [59], [60] and [63].

(5) It was essential to the recognition of a foreign judgment in rem that the res should have been situated in the foreign country concerned at the time of the proceedings. On the facts, the court was unable to grant recognition to the Forfeiture Judgment as the Funds were not in the Philippines at the material time: at [54] and [63].

(6) It was trite that a forum court would not enforce a foreign judgment if to do so would amount to a direct or indirect enforcement of a penal law, revenue law or other public law of the foreign state. On the facts, RA 1379 was clearly penal in nature as, inter alia,it did not apply to re-vest originally state-owned property in the State, but vested property in the State by virtue of the forfeiture: at [67], [70], [73] and [74].

(7) A court seeking to discover the lex causae typically embarked on a three-stage inquiry involving (a)characterisation of the relevant issue; (b)selection of the choice of law rule which laid down a ‘connecting factor’ for that particular issue; and (c)identification of the system of law which was tied by that connecting factor to the relevant issue. This process was to be undertaken in a broad internationalist spirit in accordance with the principles of conflict of laws of the forum: at [78] and [79].

(8) As the court was ultimately concerned with determining who had proprietary entitlement to the Funds, the issue was more appropriately framed in property, rather than contractual, terms, viz, whether the Chinn Assignment effectively vested in the HRVs proprietary rights to the Funds: at [81].

(9) The law governing this issue was the proper law of the debt, ie,Swiss law, which bore the closest and most significant connection with the Swiss Deposits at the material time. Although the lex situs and the proper law of the debt coincided on the facts, Swiss law did not apply as the lex situs because the situs of the debt was not an appropriate connecting factor in such cases: at [83], [96], [97] and [99] to [101].

(10) As the Chinn Assignment did not vest in the HRVs any proprietary right, interest or title to the Funds under Swiss law, the HRVs' claim failed: at [106].

(11) PNB held legal title to the Funds as trustee of the same. Such title was not divested when the Funds were ordered to be held by PNB's solicitors as escrow agents pending determination of title to the Funds since it was clear that such order was intended to release the applicant from the proceedings as soon as possible, and was not in and of itself a determination of title: at [113] and [115].

AG of New Zealand v Ortiz [1984] AC 1 (refd)

Banco de Vizcaya v Don Alfonso de Borbon y Austria [1935] 1 KB 140 (refd)

Banco Nacional de Cuba v Peter L F Sabbatino 376 US 398 (1964) (refd)

Burt v Claude Cousins & Co Ltd [1971] 2 QB 426 (refd)

Calyon v Irene Michailaidis [2009] UKPC 34 (folld)

De La Rue v Hernu, Peron & Stockwell Ltd [1936] 2 KB 164 (refd)

Deutsche Schachtbau-und Tiefbohrgesellschaft mb H v Shell International Petroleum Co Ltd [1990] 1 AC 295 (refd)

Government of the Islamic Republic of Iran v The Barakat Galleries Ltd [2009] QB 22 (refd)

Harington v Hoggart (1830) 1 B & Ad 577; 109 ER 902 (refd)

Honduras Aircraft Registry Ltd v Government of Honduras 131 F.3 d 157 (11 th Cir, 1997) (refd)

Huntington v Attrill [1893] AC 150 (refd)

Kuwait Oil Tanker Co SAK v Qabazard [2004] 1 AC 300 (refd)

Louis Castrique v William Imrie (1870) LR 4 HL 414 (folld)

Macmillan Inc v Bishopsgate Investment Trust plc (No 3) [1996] 1 WLR 387 (folld)

Minna Craig Steamship Co v Chartered Mercantile Bank of India London and China [1897] 1 QB 55 (refd)

Murakami Takako v Wiryadi Louise Maria [2007] 4 SLR (R) 565; [2007] 4 SLR 565 (folld)

Pattni v Ali [2007] 2 AC 85 (refd)

Potters v Loppert [1973] Ch 399 (refd)

Power Curber International Ltd v National Bank of Kuwait SAK [1981] 1 WLR 1233 (refd)

Raiffeisen Zentralbank Österreich AG v Five Star Trading LLC [2001] QB 825 (folld)

Relfo Ltd v Bhimji Velji Jadva Varsani [2008] 4 SLR (R) 657; [2008] 4 SLR 657 (refd)

Republic of the Philippines...