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On 16 January 2015 the Chancery Division of the High Court (Henderson J) held that the claimant, Pakistan, had waived state immunity by virtue of bringing the claim and had submitted to the court’s jurisdiction. The court also exercised its power under CPR r 38.4 to set aside a notice of discontinuance issued by Pakistan in relation to the claim.

The proceedings related to a fund worth approximately £35m and held in a National Westminster Bank account since 1948, having been frozen following the House of Lords judgment in Rahimtoola v Nizam of Hyderabad [1958] AC 379. The claimants to the fund included the states of India and Pakistan as well as certain relatives of the Nizam of Hyderabad (the princes). No agreement on the fund distribution had been reached. Pakistan subsequently served notice of discontinuance of the claim. The princes and the state of India applied to be joined as parties to the claim. The princes, India and the bank also applied to set aside the notice of discontinuance.

Henderson J held that:

• The princes and India should be joined as parties to bank’s application to set aside the notice of discontinuance.
  • Service of the notice of discontinuance without the permission of the court pursuant to CPR r 38.2 had not automatically terminated the proceedings in such a way as to deprive the court of its jurisdiction under CPR 19.2(2) to add new parties. The proceedings remained alive at least for the purposes of the bank’s application to set aside the notice of discontinuance and for the issue of costs arising from the discontinuance.
  • The court had to consider whether it was desirable to add new parties so it could resolve all the matters in dispute. It also had to consider whether there was an issue involving the new party and an existing party which was connected to the matters in dispute in the original proceedings, and whether it was again desirable to add the new party so that the court could resolve that issue.
  • The interested parties here had a clear interest in resolution of the underlying dispute. Once Pakistan had started the proceedings against the bank, and the bank had indicated its intention to interplead, each of them incurred significant time, trouble and legal costs in considering what position to adopt, preparing and filing evidence, and generally preparing for the hearing of the bank’s interpleader application.
• The notice of discontinuance should be set aside.
  • “The main objective which Pakistan hoped to achieve by service of the Notice of Discontinuance was to preserve the sovereign immunity which it had waived as against the Bank by initiating the present action in June 2013, and which Pakistan perceived it was likely to lose as against the Interested Parties if the Bank’s interpleader application proceeded to a hearing and they were joined as parties to the proceedings”.
  • Pakistan argued that the express power conferred on the court to set aside a notice of discontinuance under CPR r 38.4(1) should be construed as extending no further than the inherent power to set aside such notices for abuse of process which the House of Lords had recognised in Castanho v Brown & Root (UK) Ltd[1981] AC 557. This was rejected.
  • “The CPR formed an entirely new procedural code, the provisions of which should as a matter of principle be construed in their new context, and not by reference to previous case law on provisions in the superseded RSC. In some areas, of course, cases on the old rules may continue to have strong persuasive authority, but the primary obligation of the court is to construe any rule in the CPR, and exercise any power given to it by the Rules, so as to further the overriding objective. Thus I consider that the court should approach an application to set aside a notice of discontinuance under rule 38.4(1) on the basis that the court has a discretion which it should exercise with the aim of giving effect to the overriding objective of dealing with the case justly and at proportionate cost”.
• Obiter (as this question did not have to be answered in the present case), in accordance with ss. 1 and 2 of the State Immunity Act 1978 Pakistan was deemed to have submitted to the jurisdiction of the English court by instituting the present action, and the submission would extend to any appeal from a decision of the English court in that action.
  • “… a waiver of sovereign immunity by submission to the jurisdiction of the court must be irrevocable, and must extend to procedural steps properly taken, and orders of an interim nature made by the court, in the conduct of the relevant proceedings, as well as to the final determination of the proceedings by the court and any appeal therefrom. A submission to the jurisdiction of the court cannot be partial in relation to proceedings which a foreign state has instituted or to which it has submitted, nor can it be of a temporary nature. Once made, it must continue until the proceedings have run their course. There appears to be surprisingly little authority on this point, but it is in my judgment implicit in section 2 of the 1978 Act, and gains some support from the decision of the Employment Appeal Tribunal in Yendall v Commonwealth of Australia (1984) 107 ILR 590 where Popplewell J said at 599 that a waiver of immunity, once given, could not be withdrawn. The waiver therefore extended to any new claim which might be made by amendment in the proceedings”.
  • Therefore, “Pakistan’s waiver of sovereign immunity in submitting to the jurisdiction of the English court by starting its action against the Bank would clearly have extended to any interpleader proceedings set in motion by the Bank and to the subsequent determination by the court of beneficial title to the disputed funds. It was entirely predictable that Pakistan’s claim would lead the Bank to interplead, and by pleading its beneficial title to the money Pakistan must in my judgment be taken to have intended that the English court would adjudicate on that question. Accordingly, procedural steps taken to that end, within the same action, would clearly have fallen within the scope of Pakistan’s irrevocable waiver of immunity”.

The High Commissioner for Pakistan in the United Kingdom v National Westminster Bank plc and others [2015] EWHC 55 (Ch), 16 January 2015