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	England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> PCL & Ors v The Y Regional Government of X [2015] EWHC 68 (Comm) (23 January 2015) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2015/68.html Cite as: [2015] WLR(D) 138, [2015] EWHC 68 (Comm), [2015] 1 WLR 3948, [2015] WLR 3948, [2015] 1 Lloyd's Rep 483

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Rolls Building, Fetter Lane, London, EC4A 1NL
		23/01/2015

Mr Justice Hamblen:

Introduction

1. The Defendant ("the YRG") applies to set aside without notice orders made by Phillips J on 18 November 2014 (the "November Order") permitting the Claimants to serve an arbitration claim form and other documents on the YRG at the address of their solicitors in the jurisdiction ("WilmerHale") and by Flaux J on 18 December 2014 (the "December Order") setting down an expedited timetable for the determination of the arbitration claim, and abridging the time for filing an acknowledgment of service to 3 business days.
2. The YRG contends that the court had no power to make the Orders by reason of the mandatory provisions of s.12 of the State Immunity Act 1978 ("SIA"). Further or alternatively, the Orders should be set aside for failure to make full and fair disclosure.

Background

3. The Claimants and the YRG are parties to ongoing LCIA arbitration proceedings in London. The arbitration was commenced in October 2013 pursuant to an arbitration clause contained in a contract made in 2007 between the Second Claimant and the YRG. The contract concerns the exploitation of hydrocarbon resources in the Y region of country X. In the arbitration, the Claimants seek payment for petroleum products allegedly sold and delivered to the YRG. The claim is disputed by the YRG, who has brought a counterclaim for in excess of US$6 billion.
4. On 17 October 2014 the arbitration Tribunal made an order requiring the YRG to pay to the Claimants US$100 million within 30 days of the date of the order and directed that if that sum was not so paid the order should be peremptory.
5. The YRG did not comply with the order and on 12 December 2014 the Tribunal gave the Claimants permission to apply to the Court pursuant to s.42 of the Arbitration Act 1996 ("the 1996 Act") for the enforcement of the order.
6. The Claimants had written to the Tribunal seeking permission on 6 November 2014. On 7 November 2014 the Claimants' solicitors, Freshfields, wrote to WilmerHale, asking for confirmation that they were authorised to accept service on behalf of the YRG. On 11 November 2014 WilmerHale responded, saying Freshfields' request was premature. In anticipation of permission being granted by the Tribunal, on 12 November 2014 the Claimants issued an application notice for an order for permission to serve the arbitration claim form on WilmerHale. That application was granted by the November Order on 18 November 2014.
7. The November Order was sent to WilmerHale on 12 December 2014 following the Tribunal's grant of permission that day. It was accompanied by the arbitration claim form requesting the Court to order the YRG to comply with the Tribunal's peremptory order and the first affidavit of Mr Reza Mohtashami of Freshfields in support of that application. It was also on 12 December 2014 that the Claimants issued their without notice application for the December Order.
8. There followed correspondence between WilmerHale and Freshfields in which the applicability of the SIA and the failure to disclose this to the Court was raised and debated. WilmerHale sent copies of that correspondence to the Court but it does not appear to have been placed before Flaux J before he made the December Order on the papers on 18 December 2014. Freshfields did not forward that correspondence to the Court until after the December Order was made, although on that same day it had written to the Commercial Court Listing Office contending that s.12 of the SIA did not apply.
9. On 22 December 2014 the YRG issued the present application and filed an acknowledgment of service, indicating its intention to dispute the Court's jurisdiction pursuant to CPR 11(2).

The SIA and the relevant service provisions of the CPR

10. S.12(1) of the SIA provides that:

"Any writ or other document required to be served for instituting proceedings against a State shall be served by being transmitted through the Foreign and Commonwealth Office to the Ministry of Foreign Affairs of the State and Service shall be deemed to have been effected when the writ or document is received at the Ministry." (emphasis added)

11. S.12(2) of the SIA provides for a mandatory minimum period of two months before the time for acknowledging service begins to run:

"Any time for entering an appearance (whether prescribed by rules of court or otherwise) shall begin to run two months after the date on which the writ or document is received as aforesaid." (emphasis added)

12. S.12(6) provides an exception to these mandatory provisions:

"Subsection (1) above does not prevent the service of a writ or other document in any manner to which the State has agreed and subsections (2) and (4) above do not apply where service is effected in any such manner."

13. S.12(3) provides that the right to rely on s.12(1) may be lost through appearance in the proceedings:

"A State which appears in proceedings cannot thereafter object that subsection (1) above has not been complied with".

14. S.12(7) makes it clear that the requirements of s.12(1) do not absolve the claimant from having to seek permission to serve proceedings out of the jurisdiction:

"… and subsection (1) above shall not be construed as affecting any rules of court whereby leave is required for the service of process outside the jurisdiction."

15. SS. 14(2) and s 14(5) provide, respectively:

"(2) A separate entity is immune from the jurisdiction of the courts of the United Kingdom if, and only if—

(a) the proceedings relate to anything done by it in the exercise of sovereign authority; and

(b) the circumstances are such that a State (or, in the case of proceedings to which section 10 above applies, a State which is not a party to the Brussels Convention) would have been so immune.

(5) Section 12 above applies to proceedings against the constituent territories of a federal State; …" (emphasis added).

16. For the purpose of the present application only the Claimants are prepared to proceed on the basis that the Y region of X is a constituent territory of a federal state for the purposes of s.14(5) of the SIA. In those circumstances it was not necessary for the YRG to develop its submissions under s.14(2), although it reserved its right to do so hereafter.
17. In relation to service, CPR 62.4 provides that "unless the court orders otherwise an arbitration claim form must be served on the defendant within 1 month from the date of issue". CPR 62.5(1) provides for the circumstances in which the Court may give permission to serve an arbitration claim form out of the jurisdiction, and CPR 62.5(3) states:

"Rules 6.40 to 6.46 apply to the service of an arbitration claim form under paragraph (1)."

18. PD 62.4 also addresses service of an arbitration claim form and provides that the Court may exercise its powers under rule 6.15 to permit service of the claim form "at the address of a party's solicitor or representative acting for that party in the arbitration". It was this power to order alternative service which was relied upon in this case, thereby avoiding the need for permission to serve out of the jurisdiction.
19. CPR 6.44 sets out the procedure which applies "where a party wishes to serve the claim form or other document on a State". The documents must be filed in the Central Office of the Royal Courts of Justice for transmission by the Senior Master to the Foreign and Commonwealth Office with a request for them to be served. The accompanying notes in the White Book, Vol I, p 334, state:

"Except where there is agreement to the contrary under s. 12(6) of the Act, the requirements are mandatory and good service cannot be made without adhering to them (Kuwait Airways Corp v Iraqi Airways Co (No. 2) [1995] 1 WLR 1147; [1995] 3 All ER 694, HL)."

20. As explained in Fox & Webb, The Law of State Immunity (3rd ed) at p 233:

"In the absence of agreement, section 12 procedure is mandatory and exclusive

Failing such agreement in relation to the claim form, the special diplomatic procedure provided in the statute is the exclusive and mandatory method for service on the foreign State. Peter Gibson J so held when he dismissed the Westminster Council's application to register charges in the Land Register against the Republic of Iran on the ground that due to the absence of diplomatic relations between UK and Iran and the unwillingness of Sweden as the protecting power to serve the documents, no service in accordance with section 12 of the SIA was practicable."

21. The decision of Peter Gibson J referred to is Westminster City Council v Government of Iran [1986] 1 WLR 979. In that case, the Government of Iran was aware of the proceedings in question, but the statutory method of service was impractical. Nonetheless, the Court held it had no power to rule on the matter before it, because s.12(1) was not (and, in the circumstances, could not be) complied with.

The Issues

22. The issues which arise may be stated as follows:

(1) Whether s.12(1) does not apply because the Claimants are not "instituting proceedings".

(2) Whether the YRG has agreed to service on WilmerHale for the purposes of s.2(6).

(3) Whether the YRG has waived its right to rely on s.12 by acknowledging service.

(4) Whether the November and December Orders should be set aside for failure to make full and frank disclosure.

(1) Whether s. 12(1) does not apply because the Claimants are not "instituting proceedings".

23. S.12(1) of the SIA regulates the service of "any writ or other document required to be served for instituting proceedings".
24. In the present case, the relevant rules include the following:

(1) CPR 62.2 which defines an "arbitration claim" as inter alia "any application to the court under the 1996 Act"; and

(2) CPR 62.3(1) – headed "Starting the claim" – which states that:

Except where paragraph (2) applies an arbitration claim must be started by the issue of an arbitration claim form in accordance with the Part 8 procedure (emphasis added).

25. In the present case the Claimants made an "arbitration claim" in the form of an "application to the court under the 1996 Act" (s.42). It did so by issuing an "arbitration claim form" and thereby "started" its claim in accordance with the requirements of CPR 62.2 and 3.
26. The arbitration claim thereby "started" was given a Folio no. 1508 and comprises the first and the only Court proceedings relating to the arbitration between the parties.
27. The purpose of the arbitration claim is to seek to persuade the Court to exercise its discretion to make a Court order pursuant to s.42 of the 1996 Act. The only way of invoking the powers of the Court to make such an order was by making such an application to the Court.
28. In my judgment the Claimants were thereby "instituting proceedings" within the meaning of s.12(1). Although the proceedings thereby instituted may be ancillary to existing arbitration proceedings they are nevertheless distinct proceedings brought in Court for the purpose of invoking the powers of and obtaining an order from the Court. The arbitration claim form is the document which institutes those proceedings and it is "must be served" for that purpose, as CPR 62.4(2) makes clear.
29. The Claimant's main arguments to the contrary are:

(1) The purpose underlying s.12 is to guard against the risk of a judgment in default being entered against a State. To that end the restriction of the special requirements of service makes perfect sense. However, once a State has been properly served with the initiating document and is therefore aware of the existence of the proceedings there is no need for the slow, cumbersome process envisaged by s.12(1).

(2) S.12(1) would not apply to interlocutory applications made during the course of ordinary Court proceedings which have already been commenced. It similarly does not apply to interlocutory or ancillary applications made to the Court in aid of already instituted arbitration proceedings. There is no justification for a blanket approach treating all applications made by arbitration claim form as involving "instituting" proceedings. Where the application is ancillary to an existing arbitration in the UK subject to the 1996 Act then it should not be regarded as so doing.

(3) As a matter of substance the application under s.42 of the 1996 Act is not "instituting proceedings" against anyone. It is an application made to the Court in support of existing arbitration proceedings.

(4) The consequence of the YRG's argument would be that on every occasion when an application was made to the Court during an arbitration to which a State was party the cumbersome process of s.12(1) service would have to be followed. This is unnecessary and it IS also undesirable given the potential it gives for a disobliging party to use this to sabotage the orderly and efficient processes of the arbitration.

30. As to (1), the wording of s.12(1) is general and unqualified. It is not limited to proceedings seeking judgment. Further, there is authority applying it to other types of proceedings - see, for example, Norsk Hydro ASA v State Property Fund of Ukraine [2002] Bus LR 558 (enforcement proceedings) and the Westminster City Council case (proceedings for registering charges over land).
31. The Claimants' argument is very similar to that considered and rejected by Gross J in the Norsk Hydro case. In that case it was argued that s.12(2) was limited to the court's "adjudicative jurisdiction" and that it therefore did not cover proceedings for enforcement. As Gross J observed at [25]:

"…(3) The rationale for doing so, Mr Walker submits, is that the "generous" time period furnished by section 12(2), is appropriate in the case of the service of claims on states; of these, the state may know nothing until service is effected. By contrast, in the case of enforcement, ex hypothesi, the state affected will or should be aware of the matter giving rise to the judgment or award; there is accordingly no warrant for the application of the two-month period in this context. I am, with respect, unable to accept this argument and do not think that the discussion in the Alcom case [1984] 1 AC 580 is of assistance here.

(4) As it seems to me, section 12 means what it says. It deals with procedure. It is not to be confined to the court's "adjudicative jurisdiction". The two month period is an acknowledgement of the reality that states do take time to react to legal proceedings…"

32. The "reality" acknowledged by the prescribed two-month period applies to any legal proceedings which are instituted, not merely to proceedings of a particular (but unspecified) type. This is further supported by the observations of Fox & Webb at p 231:

"The principle underlying the time limits in section 12 is clearly to ensure that the foreign State has adequate time and opportunity to respond to the conduct of proceedings in the English court of whatever nature which affect its interests. This general principle is well illustrated by Westminster City Council v Government of the Islamic Republic of Iran where Peter Gibson J held that the reference in section 12(1) to 'any other document' included the notice to all interested parties required to be given where registration of a land charge pursuant to the Land Registration Act 1925 was disputed" (emphasis added).

33. It is also supported by the reasoning of Peter Gibson J in the Westminster City Council case in which he stated:

"[Counsel for the claimant] submitted that despite the mandatory nature of section 12(1) it had no application because the originating summons was not a document required to be served for instituting proceedings against a state, but was merely a document chosen as a convenient method of bringing the matter before the court in compliance with the Chief Land Registrar's order. I regret that I cannot accept this. It is true that the Chief Land Registrar by his order was not insisting on an originating summons and that any other appropriate originating process could have been used, although in my judgment the originating summons was the correct form: see R.SC, Ord. 5, r. 3. But whatever originating process was chosen, it must have been envisaged that the city council would be instituting proceedings as plaintiff and the only other known interested party, the Iranian government, would be defendant, and that by analogy with rule 300 of the Land Registration Rules 1925 the Iranian government would be served with the proceedings, so that it could participate in the hearing before the court. It seems to me, therefore, that the wording of the opening words of section 12(1) of the State Immunity Act 1978 is satisfied in the present case".

34. In this case the originating process was, as required under the CPR, an arbitration claim form. That arbitration claim form envisaged that the Claimants would be instituting proceedings as claimants and serving the YRG as defendant with those proceedings so that it could participate in the hearing before the Court.
35. As to (2), it is correct that s.12(1) would not apply to interlocutory applications in existing Court proceedings. They involve no initiation of Court proceedings. However, the Claimants' application does involve the initiation of such proceedings. Whilst those Court proceedings are, as the 1996 Act states, "in relation to arbitral proceedings", they are nevertheless separate proceedings involving the invocation of the Court's procedures and powers.
36. Once proceedings have been started following the issue and service of an arbitration claim form then applications within those proceedings would not be subject to s.12(1). But the initiation of those proceedings is so subject.
37. The Claimants could not satisfactorily identify any "bright line" to be drawn between those proceedings which do and those which do not involve "instituting" proceedings. Nor is there any justification for the drawing of the suggested or indeed any line in the unqualified wording of s.12(1). Moreover, the line suggested is inconsistent with the Norsk Hydro decision where the application related to already instituted arbitration proceedings. The fact that the arbitration proceedings in question in that case were foreign proceedings does not provide a principled distinction.
38. Further, if, as the Norsk Hydro case decides, s.12 applies to enforcement proceedings then the present case may be said to be a fortiori. As the YRG submits, it would be odd if the procedural rights conferred by Parliament in s.12 of the SIA were available in the case of enforcement of a final award for payment (as in Norsk Hydro case) but withdrawn in the case of enforcement of a peremptory but non-final order for payment.
39. Yet further, the consequence of the Claimants' argument would be to impute to Parliament an unlikely intention to confer the procedural rights in s 12 in respect of:

(1) claims under CPR Part 7;

(2) applications pursuant to orders made by the Chief Land Registrar;

(3) applications under the 1996 Act and CPR Part 62 to enforce arbitration awards;

(4) but not an application under s.42(1) of the 1996 Act, which has been brought by way of an arbitration claim form.

40. As to (3), the Claimants' application to the Court under s.42 is in substance "instituting proceedings" against the YRG. It involves bringing the YRG before the Court for the first time in order to participate in Court proceedings brought for the purpose of obtaining a Court order.
41. As to (4), there is force in the Claimants' contention that the requirements of s.12(1) and (2) could cause delay and potentially disruption where the Court's ancillary powers are invoked in relation to an ongoing arbitration. However, as the YRG submitted, that is a consequence of agreeing to arbitrate against a State or constituent territory of a State in this country and therefore subject to the SIA. Further, these difficulties should not be exaggerated. In urgent cases the Court's ancillary powers can be invoked on a without notice basis with service to take effect thereafter. Moreover, as already observed, applications within existing arbitration claim proceedings would not be subject to s.12(1).
42. In conclusion, notwithstanding all the Claimants' arguments, I am satisfied that their application does involve "instituting proceedings" under s.12(1) of the SIA.

(2) Whether the YRG has agreed to alternative service for the purposes of s. 12(6).

43. The Claimants rely on WilmerHale's letter to the LCIA of 25 October 2013 in which they responded to the Claimants' Request for Arbitration and stated that:

"…we hereby confirm that [WilmerHale] is instructed to represent [the YRG] in this arbitration.

Accordingly any further communications directed to the YRG in relation to this matter should be sent to [WilmerHale]"

44. The Claimants submit that this constitutes authorisation not merely to receive documents and communications in the arbitration but also any documents relating to Court proceedings connected with the arbitration. They submit that this is consistent with the evident purpose of the letter of ensuring the efficient prosecution of the arbitration process.
45. In my judgment the authorisation provided by the letter is clearly stated to apply to "this arbitration". Court proceedings are not arbitration proceedings. The fact that those Court proceedings may be in relation to and in support of the arbitration proceedings does not remove that clear distinction. That distinction is borne out by the Court rules relating to arbitration applications and the need for the issue and service of an arbitration claim form.
46. The logic of the Claimants' case is that in cases where solicitors are instructed to act and receive documents on behalf of a party in relation to an arbitration there is an agreement to accept service of any related Court proceedings and therefore no need, for example, for an order for service out of the jurisdiction under CPR 62.5 or for alternative service under PD 62.4. However, the foundational premise of PD 62.4 is that an order is required notwithstanding that there is a solicitor acting for the defendant in the arbitration.
47. That the 25 October 2013 letter would not be reasonably understood as constituting an agreement to service of Court proceedings is borne out by the actions of the Claimants' own solicitors, Freshfields. Thus, the Claimants' evidence in the November Application, verified at that time by a statement of truth signed by Mr Mohtashami of Freshfields, stated as follows:

"On 7 November 2014, the Claimants wrote to Wilmer Hale seeking confirmation that they were authorised to accept service of an arbitration claim form on behalf of the Defendant … Wilmer Hale responded on 11 November 2014 refusing to provide the requested confirmation … There is no justifiable basis for such refusal …" (emphasis added).

48. The verified premise of the application was therefore that because WilmerHale were not authorised to accept service on behalf of the YRG and had refused to do so, in response to a specific request from Freshfields, the Claimants required the permission of the Court.
49. The agreement required for the purpose of s.12(6) is one as to the "manner" of "service of a writ or other document". The 25 October 2013 letter, written a year earlier, addressed to the LCIA, in the context of and relating to the arbitration, neither seeks to nor does address issues of service of arbitration claim forms or the manner of such service.
50. Further, even if there was such an agreement in October 2013 it no longer applied in November 2014 when WilmerHale (in response to a specific request) had declined to confirm that they were authorised to accept service by the method contemplated by the Claimants.
51. I accordingly conclude that there was no or no operative agreement as to the manner of service under s.12(6).

(3) Whether the YRG has waived its right to rely on s. 12 by acknowledging service.

52. At the time of the SIA a defendant acknowledged service of proceedings by entering an appearance. That is now done by an acknowledgment of service.
53. In the present case the YRG did file an acknowledgment of service, albeit on the express basis of challenging jurisdiction. The Claimants contend that that amounts to an appearance in the proceedings with the consequence set out in s.12(3).
54. Under the CPR a defendant who wishes to dispute the Court's jurisdiction is required to file an acknowledgment of service - see CPR 11(2).
55. In order to challenge jurisdiction on the grounds of invalid service in reliance on its rights under s.12(1) the YRG therefore had to acknowledge service. It follows that the consequence of the Claimants' argument is therefore that by invoking its rights under s.12(1) by the means required under the Court's rules the YRG lost those rights. That would be an absurd and unjust result which is most unlikely to have been intended by Parliament. That is made all the more clear by the fact that it was not a result which followed at the time that the SIA was enacted.
56. Under the Court's rules at the time of the SIA a defendant did not need to enter an appearance in order to challenge jurisdiction. Under RSC Order 12 rules 7 and 8 it could make such an application without entering an appearance or within 14 days of having entered a conditional appearance (which required the leave of the court). If, instead, he chose to enter an (unconditional) appearance one can well understand why he should thereby lose any right to rely on s.12(1).
57. Under the CPR a defendant who wishes to dispute the Court's jurisdiction must file an acknowledgment of service and make an application within 14 days of such filing as required under CPR 11 (or within 28 days in Commercial Court proceedings - see CPR 58.7(2)). If that application succeeds then the claim form and/or its service is likely to be set aside - see 11(6). If the application fails then the acknowledgment of service ceases to have effect and a further acknowledgment of service may then be filed - see 11(7).
58. The acknowledgment of service form contains a box to be ticked if you intend to dispute the Court's jurisdiction. This should be done where it is intended. The application to dispute jurisdiction must be made within 14/28 days thereafter. If that is not done then any right to dispute jurisdiction is lost.
59. Under the CPR the functional equivalent of entering an (unconditional) appearance under the 1978 RSC is therefore filing an acknowledgment of service and failing to make an application disputing the Court's jurisdiction within the requisite period.
60. The obviously sensible construction of s.12(3) given the changes in civil procedure since 1978 is to hold that a State "appears" in proceedings when it files an acknowledgment of service and does not issue an application to dispute the Court's jurisdiction within the requisite period.
61. The word "appears" is sufficiently broad to be construed in this manner.
62. If necessary, the same conclusion can be reached by giving s.12(3) an updated construction. As stated by Lord Clarke in NML Capital Ltd v Argentina [2011] 2 AC 495 at [142-144] in a case concerning other provisions of the SIA:

"142 It is stated in Bennion on Statutory Interpretation, 5th ed (2008), at section 288 that, unless a contrary intention appears, an enactment is intended to develop in meaning with developing circumstances and should be given what Bennion calls an updating construction to allow for changes since the Act was initially framed. Bennion distinguishes that case, which he calls the usual case, from the comparatively rare case of the Act which is intended to be of unchanging effect. The commentary to section 288 states that the court must, in interpreting an Act, make allowances for the fact that the surrounding legal conditions prevailing on the date of its passing have changed.

143 That approach seems to me to be entirely consistent with that of Baroness Hale of Richmond JSC in Yemshaw v Hounslow London Borough Council (Secretary of State for Communities and Local Government intervening) [2011] 1 WLR 433, paras 25–28, where she was considering whether words such as "violence" in a statute could be given an updated meaning. She concluded that the question was whether an updated meaning was consistent with the statutory purpose …

144 In my opinion it is appropriate and consistent with the statutory purpose of the 1978 Act to give it an updated meaning. The question is whether, viewed at the time the question arises, particular proceedings for the enforcement of a particular foreign judgment are proceedings "relating to a commercial transaction". At the time the 1978 Act was enacted there was no machinery for seeking permission to serve proceedings out of the jurisdiction in respect of a claim to enforce either an arbitration award or a foreign judgment. It could thus be said with force that at that time it was not contemplated that proceedings could be brought in England on a foreign judgment, at any rate unless the defendant accepted service of them." (emphasis added).

63. As the NML Capital case makes clear, the SIA is not one of those rare acts which is meant to be of unchanging effect. So far as necessary, it should be given an updated meaning to allow for procedural changes since it was enacted. In the present case that means construing "appears" in s.12(3) in the manner set out above.
64. The Claimants place reliance on s.22(2) which provides that:

"In this Act references to entry of appearance and judgments in default of appearance include references to any corresponding procedures".

65. They argued that the "corresponding procedure" to entry of appearance is now acknowledgment of service and s.12(3) therefore includes reference to that procedure. In my judgment s.22(2) was directed at such "corresponding procedures" as may have existed at the time of the SIA. It was not seeking presciently to address any possible future "corresponding procedures". In any event the operative word in s.12(3) is "appears" not "entry of appearance". Further, if s.22(2) is relevant and applicable then the "corresponding procedure" for the purpose of s.12(3) is that set out in paragraph 60 above.
66. The Claimants also suggest that a State defendant could always write to the Court raising the issue of s.12(1) and is not compelled to file an acknowledgement of service. However, filing an acknowledgement of service and issuing an application is the prescribed method of challenging jurisdiction. A letter to the Court is no substitute for that, as is well illustrated by the present case which has involved a 1 day hearing with representation by senior QCs on both sides.
67. The Claimants further contend that challenging service under s.12(1) is not a challenge to the jurisdiction. It does not assert that the Court has no jurisdiction over either the subject matter of the claim or the party to it. However, proper and valid service is a jurisdictional matter and is clearly included within the "Procedure for disputing the court's jurisdiction" set out in CPR 11 and expressly so in relation to the orders which may be made thereunder - see 11(6).
68. The Claimants also rely on a passage in Dickinson on State Immunity para.4.8.1 which suggests that filing an acknowledgement of service even to dispute jurisdiction would constitute an "appearance" and preclude a State from reliance on s.12(1). However, in that passage there is no analysis or consideration of any of the contrary arguments set out above and I respectfully disagree.
69. In my judgment the Claimant's "Catch 22" construction of s.12(3) cannot be correct. It should be construed in the manner set out above. That is consistent with the statutory purpose of s.12, namely, confer an important procedural right on state entities, which can be foregone either: (i) by doing the functional equivalent of entering an unconditional appearance under the old rules of procedure, or (ii) by an agreement to an alternative method of service. It is also in accordance with the fundamental feature of the scheme of CPR Part 11, namely, that a "defendant who files an acknowledgment of service does not, by doing so, lose any right that he may have to dispute the court's jurisdiction": CPR 11(3).
70. There was no "Catch 22" at the time of the SIA and the Act should not be construed as having now created one.
71. For all these reasons I conclude that the YRG has not lost its right to object that s.12(1) has not been complied with.
72. It follows that all the Claimants' arguments on s.12 fail and that the YRG is entitled to insist on its right that service be carried out in accordance with s.12(1) and (2).

(4) Whether the November and December Orders should be set aside for failure to make full and frank disclosure.

73. In the light of my conclusion on Issues (1) to (3) it is not necessary to determine this issue. However, since it was fully argued I shall briefly do so.
74. The importance of making full and frank disclosure on without notice applications is well established and has been repeatedly emphasised by the Court - see, for example, Bank Mellat v Nikpour [1985] FSR 87 at p92; Brink's Mat Ltd v Elcombe [1988] 1 WLR 1350 at p 1357; Arena Corporation Ltd v Schroeder [2003] EWHC 1089 (Ch) at [213].
75. As stated by Bingham J in Siporex Trade SA v Comdel Commodities Ltd [1986] 2 Lloyd's Rep 428 at p 437:

"[The applicant] must disclose all facts which reasonably could or would be taken into account by the Judge in deciding whether to grant the application. It is no excuse for an applicant to say that he was not aware of the importance of matters he has omitted to state. If the duty of full and fair disclosure is not observed the Court may discharge the injunction even if after full enquiry the view is taken that the order made was just and convenient and would probably have been made even if there had been full disclosure."

76. In the present case it is now accepted that the Claimants failed to make full and frank disclosure in relation to the November Order in that they failed to draw to the Court's attention s.12 of the SIA and its potential applicability.
77. The explanation given in Mr Mohtashami's evidence is that the potential applicability of Section12 SIA did not occur to Freshfields.
78. Although the YRG may not be a State, its title states that it is a "government" and it is accepted that Freshfields were well aware of the publicly available information relating to it. This shows it to be a self-governing region which is recognised as a federal region in the country's constitution which also acknowledges that the YRG has sovereign powers. It has an elected parliament, a president and a department of foreign relations with representative offices abroad. It also has its own military forces.
79. In the light of the publicly available information known to the Claimants' advisers the potential applicability of Section 12 SIA should clearly have occurred to them.
80. Further, the potential applicability of Section 12 SIA was of fundamental importance to the application which was being made. That application concerned both method of service (the mandatory subject matter of s.12(1)) and time for acknowledgment of service (the mandatory subject matter of s.12(2)). The application was presented to the Court as a straightforward application under PD 62.4 which could and should be dealt with on the papers. There was no suggestion that there was anything unusual about the application being made. In fact the application raised serious and substantial issues, as the present application and hearing has borne out. There is no doubt that if the applicability of s.12 had been brought to the Court's attention there would have been no question of it being dealt with on the papers. At the very least an oral hearing would have been required and the outcome of any such hearing is far from clear even on a without notice basis.
81. The Claimants were therefore in breach of duty when they made their application for the November Order. Given what Freshfields knew and should have known and the fundamental importance of the disclosure to the application being made I regard that breach as being seriously culpable. As is accepted, the duty is a continuing one and the Claimants remained in breach of duty thereafter. They were in further breach of duty when they issued their application for the December Order on 12 December 2014 without reference to the potential applicability of the SIA.
82. Freshfields were first alerted to the SIA issues by WilmerHale's letter of 16 December 2014. The YRG were highly critical of Freshfields' conduct thereafter and submitted that they were in deliberate breach of duty. I reject that allegation. Freshfields considered the position in the light of WilmerHale's letter. That understandably took time. They eventually responded with a letter to the Court and to WilmerHale of 18 December 2014 in which they rejected the applicability of s.12 for the reasons stated therein. Although they were criticised for not ensuring that all WilmerHale's correspondence was put before the Court, since they were told by WilmerHale that they had put it before the Court I consider that this criticism is unjustified. They were also criticised for not proactively going back before the Court and requesting that the November Order be set aside. However, the whole matter was before the Court as part of the application for the December Order. As far as Freshfields were aware all relevant correspondence relating to the applicability of the SIA was before the Court and the Court was therefore in a position to consider what should be done in relation to the existing November Order and the requested December Order. In the event it appears that through a mix up at the Court Office none of the relevant correspondence was before Flaux J when he made the December Order on 18 December 2104, but that could not have been foreseen.
83. Subject to one matter I therefore do not consider that the Claimants continued to be in breach of duty after they had written to the Court on 18 December 2014. That matter is the potential applicability of s.12(2) to the December Order. In circumstances where the Claimants were asking the Court to abridge the time for acknowledgment of service I consider that they should have drawn the Court's attention to the potential effect of s.12(2) if the SIA applied. On their own case they were asking the Court to make an order which might well facilitate depriving the YRG of any right it may have to rely on the SIA.
84. I recognise that this is not a case in which injunctive or equivalent relief was being sought, that (if the Claimants are right on s.12(1) or s.12(6)) no significant advantage would have been obtained and that this is not a case of deliberate breach. Nevertheless the duty of full and frank disclosure is of the first importance and in all the circumstances I consider that the non-disclosures in this case are sufficiently serious to warrant setting aside the orders obtained. This was a seriously culpable non-disclosure by extremely experienced and well-resourced solicitors in relation to matters of fundamental importance to the applications being made. If the November Order is set aside then the December Order must equally be so regardless of whether there are independent grounds for so doing.
85. Accordingly, had I found for the Claimants on any or all of Issues (1) to (3) I would nevertheless have set the Orders aside to mark the Court's disapproval of the serious non-disclosure made.
86. For completeness I would add that if the Claimants' case had succeeded on s.12(3) but not otherwise then it would be an even clearer case for setting aside the Orders. In such circumstances the Claimants would be taking advantage of a Catch 22 which should never have arisen and only did arise because of their non-disclosures.

Conclusion

87. For the reasons outlined above the YRG's application succeeds and the November and December Orders should be set aside.