WestLB AG v Philippine National Bank & Others

JurisdictionSingapore
JudgeKan Ting Chiu J
Judgment Date27 December 2006
Neutral Citation[2006] SGHC 234
Citation[2006] SGHC 234
Defendant CounselAlan Thio and Jerome Robert (Rajah & Tann),Kenneth Tan SC and Soh Wei Chi (Kenneth Tan Partnership)
Published date28 December 2006
Plaintiff CounselHarry Elias SC, S Suressh and Sharmini Selvaratnam (Harry Elias Partnership)
Date27 December 2006
Docket NumberOriginating Summons No 134 of 2004 (Summons No 3874 of 2006)
CourtHigh Court (Singapore)
Subject MatterWhether State having locus standi to make application,International Law,Whether State submitting to jurisdiction of Singapore courts by its own action by praying for certain sums of money held in escrow to be released to it,Sections 3 and 5 State Immunity Act (Cap 313, 1985 Rev Ed),Sections 3 and 4(7) State Immunity Act (Cap 313, 1985 Rev Ed),Whether State submitting to jurisdiction of Singapore courts through agent bank,Sovereign immunity,Whether application concerning State engaging in commercial transaction thereby excluding State from immunity pursuant to s 5 State Immunity Act,Application by foreign State to stay interpleader proceedings pursuant to s 3 State Immunity Act,Whether State's claim forming basis of application illusory or manifestly defective,Sections 3(1), 4(1), 4(3), 4(4) and 4(5) State Immunity Act (Cap 313, 1985 Rev Ed),Whether agent bank having authority to submit on behalf of State to jurisdiction of Singapore courts,Whether such prayer amounting to taking step in proceedings,Section 3 State Immunity Act (Cap 313, 1985 Rev Ed)

27 December 2006

Judgment reserved.

Kan Ting Chiu J:

1 The issue before me is whether interpleader proceedings filed by the plaintiff, WestLB AG (“WestLB”) on 30 January 2004 are to be stayed on an application filed by the Republic of the Philippines (“the Republic”) on 22 August 2006.

2 These proceedings are the result of actions taken by the Republic following the downfall of President Ferdinand Marcos in February 1986. The actions taken were many and interesting, but it is not necessary to set them out in this judgment. The principal events relevant to the issue before this court are:-

(a) in February 1986, the Presidential Commission on Good Government (“PCGG”) was set up in the Philippines to assist the President to recover “all the ill-gotten wealth accumulated by former President Ferdinand E Marcos, his immediate family, relatives, subordinates and close assistants”;

(b) in April 1986, the Republic filed a request with the Swiss authorities for assistance under Swiss legislation known as the International Mutual Assistance in Criminal Proceedings (“IMAC”) to freeze assets in some bank accounts in Switzerland;

(c) in December 1990, the Swiss Federal Supreme Court confirmed the decisions of lower courts to freeze assets in bank accounts held in the name of the Maler Foundation, the Avertina Foundation, the Palmy Foundation, the Vibur Foundation and the Aguamina Corporation (the 2nd to 6th defendants herein respectively). These assets were frozen, and were to be transferred to the Republic when a competent Philippines court has rendered a final and binding decision on the restitution of the funds or their confiscation;

(d) subsequently, the PCGG applied to the Swiss authorities for the assets to be transferred to the Philippine National Bank (“PNB”, the 1st defendant herein) as escrow agent, pending the determination of the restitution or forfeiture of the assets. This application was granted with a condition that the funds were to be placed with institutions with a Standard and Poor’s rating of at least “AA”;

(e) the assets in the frozen accounts were released by the Swiss banks to PNB which placed them in several “AA” rated banks including the plaintiff, WestLB, in August 1998;

(f) in the Philippines, the Republic took legal action which resulted in the Philippines Supreme Court forfeiting the assets in favour of the Republic on 15 July 2003. The decision was affirmed by the full court on 18 November 2003;

(g) pursuant to the decision of 15 July 2003, PNB requested WestLB to pay to it the money in the frozen accounts with WestLB, which stood at about US$100 m. WestLB released about US$75 m to PNB;

(h) in September 2003, WestLB received a claim from the 7th defendant herein, described as the Plaintiffs in the Estate of Ferdinand E Marcos Human Rights Litigation, followed by claims from the other defendants;

(i) on 30 January 2004, WestLB commenced proceedings for interpleader relief, naming nine defendants. The 1st defendant is PNB, the 2nd to 6th defendants are the foundations which were account holders of the frozen Swiss accounts. The other defendants, the 8th and the 9th defendants, withdrew from this action and took no further part in the proceedings from 16 March 2006;

(j) pursuant to an Order of Court of 24 March 2004 made in these proceedings, WestLB transferred the assets in the frozen accounts into an escrow account held by Drew & Napier LLC which was at that time the solicitors of PNB. This transfer did not affect the existing inter pleader proceedings, which carried on, even after the second transfer referred to in (l) below;

(k) in August 2005, PNB applied for the interpleader proceedings to be stayed on the ground of forum non conveniens. This application was dismissed on 21 October 2005;

(l) by an Order of Court dated 22 February 2006, Drew & Napier LLC transferred the assets into an escrow account established by Harry Elias Partnership, the current solicitors for PNB acting in place of Drew & Napier LLC. (Harry Elias Partnership acted in place of Drew & Napier LLC with effect from 4 October 2005);

(m) on 8 March 2006, the Republic filed an application for orders that:

1. The Republic of the Philippines be added as a Defendant to these proceedings;

2. The [proceedings] be amended accordingly by adding the Republic of the Philippines as a Defendant for the purposes of the Republic of the Philippines asserting its interest in the Funds and asserting state immunity in respect of the same;

and the orders were obtained on 11 May 2006, and the Republic became the 10th defendant;

(n) on 22 August 2006, the Republic applied for orders:

1. That the claims of the 1st Defendants, the 2nd to 6th Defendants and the 7th Defendants to the subject matter of these proceedings (“the Funds”) be stayed pursuant to section 3 of the State Immunity Act (Cap 313);

2. That the Funds be released to the Republic of Philippines;

3. Costs; and

4. Such further or other ancillary directions that this Honourable Court deems fit or necessary to give.

3 In the interest of uniformity of expression, the balance of the assets from the frozen accounts now held in the escrow account established by Harry Elias Partnership will be referred to herein as “the Funds”.

The Republic’s application

4 The Republic’s application is founded on the principle of state immunity embodied in s 3(1) of the State Immunity Act (Cap 313, 1985 Rev Ed) (“SIA”).

A State is immune from the jurisdiction of the courts of Singapore except as provided in the following provisions of this Part.

5 The 2nd to 7th defendants (“the defendants”) objected to the application. They objected at two levels, the first whether the Republic was entitled to make the application, and the second whether the application should be allowed.

6 The objection at the first level was related to the Republic’s right and interest in the Funds. Essentially the point was that the Republic did not have a sufficient interest in the Funds to assert state immunity over their disposal. While the Republic relied on the decision of the Philippines Supreme Court which forfeited the Funds to the Republic, the effect of the decision was challenged on the ground that the 2nd to 6th defendants were not parties before the Philippines Supreme Court, and whether the Republic’s right to the Funds was a right in personam or a right in rem.

7 These are substantive questions that have to be addressed in the substantive hearing, if the proceedings are to proceed, and are not stayed. But for the present purposes, the question whether the Republic has the requisite locus standi to apply for a stay has to be considered at this preliminary stage.

8 This does not require that the Republic’s right and interest in the Funds to be conclusively determined. The test to be applied to establish a state’s right to assert state immunity in a dispute has been considered by the Privy Council in Juan Ysmael & Co Inc v Government of the Republic of Indonesia [1955] AC 72.

9 The short facts of the case is that a vessel was arrested by a process of court in Hong Kong. The government of Indonesia entered appearance under protest and applied to set aside the proceedings on the ground that it was the owner of the vessel having purchased it from an agent of the appellants, the party which arrested the vessel, and therefore the proceedings impleaded on the state immunity of Indonesia. The claim of the government was based on the evidence in the affidavits of two persons. The appellants obtained leave to cross-examine them, but when they failed to avail themselves to be cross-examined, their affidavits were expunged. When the main action went for trial, the trial court dismissed the government’s claim for immunity and gave judgment in favour of the appellants. The government appealed against the decision, and succeeded. The Appeal Court held that the trial judge was wrong in dismissing the government’s motion for dismissal.

10 The appellant brought the matter to the Privy Council, which reversed the decision of the Appeal Court. Earl Jowitt who delivered the judgment of the Privy Council explained the rule of state immunity and highlighted the inherent difficulty that may arise. He noted at pages 86 and 87:

The rule according to a foreign sovereign government immunity against being sued has been considered and applied in many cases. The basis of the rule is that it is beneath the dignity of a foreign sovereign government to submit to the jurisdiction of an alien court, and that no government should be faced with the alternative of either submitting to such indignity or losing its property.

Where the foreign sovereign State is directly impleaded the writ will be set aside, but where the foreign sovereign State is not a party to the proceedings, but claims that it is interested in the property to which the action relates and is therefore indirectly impleaded, a difficult question arises as to how far the foreign sovereign government must go in establishing its right to the interest claimed. Plainly if the foreign government is required as a condition of obtaining immunity to prove its title to the property in question the immunity ceases to be of any practical effect.

11 The problem does not arise when the state is made a party in the proceedings because the inclusion of the state as a party would be an acknowledgement of the state’s interest in the subject matter of the dispute.

12 Earl Jowitt was concerned over an earlier decision, The Jupiter [1924] P 236, where Scrutton LJ stated that he was content to uphold a claim for state immunity on a sovereign’s bare assertion of ownership. Earl Jowitt disagreed with Scrutton LJ, and stated in pages 89-90:

In their Lordships’ opinion the view of Scrutton L.J. that a mere assertion of a claim by a foreign government to a property the subject of an action compels the court to stay the action and decline jurisdiction is against the weight of authority, and cannot...

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