Privy Council rules in favour of Tepe in relation to landmark state immunity case

24 Oct 2018 | 04:17 pm | 1 min. read

International law firm Pinsent Masons has secured a successful result for Turkish construction company, Tepe in relation to its landmark US$100 million state immunity case.

The decision handed down by the Judicial Committee of the Privy Council has far-reaching implications for both States SOEs and those who contract with them.

The case arose out of the attempts to enforce two arbitral awards against crude oil transportation company Botaş. The awards – which had been unsuccessfully challenged by Botas at the seat of the arbitration in Paris – amounted to approximately USD$100 million, and had remained unpaid since they were awarded.

The Privy Council determined that a State cannot invoke sovereign immunity under the 1978 State Immunity Act in respect of assets owned by an SOE which were the subject of enforcement proceedings.  The State asserted that it was ultimately able to exercise control over the assets and therefore the assets were property of the State. The Privy Council found that although Botaş was wholly owned by the Turkish State, its assets were not State Property for the purposes of the SIA.

The Pinsent Masons team was led by international construction partners Mark Roe and Adrian Elliott, and supported by associates Cecile Tangy and Michael Cottrell.

Mark Roe notes the Privy Council's decision has important repercussions for companies which do business with states and SOEs:

"The Privy Council has brought some welcome clarity to the circumstances in which State immunity can be invoked in the English courts. It makes it very clear that assets owned by a SOE are the property of that SOE, and not property of the state.

“The decision highlights the importance of establishing at the outset with whom you contract. The Privy Council has reaffirmed other recent English court decisions that even those SOEs which are subject to very extensive state control retain separate legal personality, even if they appear little more than a mere cypher. In these circumstances you would have no recourse against the assets of the state if it's actually the SOE you've contracted with.

"This decision may also encourage States to place their assets in SOEs. States can confidently place their assets in the ownership of separate entities which they own and are able to exercise a high degree of control over, safe in the knowledge that they are not available for enforcement in the UK by a third party which is seeking to enforce a judgment or award against the state.”

For further analysis on the decision, visit https://www.out-law.com/en/articles/2018/october/sovereign-immunity-assets-state-owned-entities-enforcement-/

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Mark Roe

Partner, Head of International Arbitration

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