STATE IMMUNITY BILL [H.L.]

HL Deb 16 March 1978 vol 389 cc1491-540

4.3 p.m.

House again in Committee.

The LORD CHANCELLOR moved Amendment No. 4: Page 2, line 2, leave out from (" agreement ") to (" but ") in line 3.

The noble and learned Lord said: I was venturing to say that I myself had in mind applying for a mobility allowance after my recent movements. The purpose of this Amendment is to delete the requirement that the prior written agreement to the waiver of immunity by the State must be between the parties to the dispute. The written agreement to waiver could have been made between the State concerned and the parties to the original contract. The right in that contract could have been acquired by another person either by assignment or succession, and that person might wish to sue the State on the basis of the original waiver. We now think that there is no reason, as a matter either of general principle or under the Convention, why this waiver must be contained in an agreement between the parties.

As to leaving out the words, "or by an international agreement ", the qualifying phrase in Clause 2 (2) is more likely to apply to ordinary written agreements rather than international agreements. Therefore, it is better to bring that qualifying phrase into closer proximity with the type of written agreement to which it is intended to refer. It is also awkward to retain the reference in subsection (2) to an international agreement since it is itself a written agreement. Consequently, we now think it better to delete the reference to an international agreement in subsection (2) and have a further subsection at the end of Clause 18(1), providing that in Clauses 2(2) and 14(4) the word "agreement" includes an international agreement to which the State concerned is a party. When we come to it we will see that this has been sought to be done in Amendment 34 to Clause 18. Although international agreements are normally between States they can, of course, be between international organisations and States. I do not think it has more significance than being merely a tidying up provision. I beg to move.

Lord WILBERFORCE

I am not sure whether what I want to say arises under this Amendment or under Amendment No. 34, but since the words "international agreement" appear in Clause 2(2) perhaps I might ask the noble and learned Lord the Lord Chancellor what the expression means. I confess I find it puzzling. An agreement between States I can see as an international agreement, but from what the noble and learned Lord just said it seemed that he was including within international agreements agreements other than those between States. If so, I find the words a little lacking in precision. If the noble and learned Lord prefers to help me when we come to Amendment No. 34 I shall be equally happy.

The LORD CHANCELLOR

Perhaps we can revert to the point when we come to Amendment No. 34.

On Question, Amendment agreed to.

Baroness ELLES moved Amendment No. 5: Page 2, line 3, leave out from ("agreement;") to end of line 5.

The noble Baroness said: The words that this Amendment seeks to delete refer to a provision in an agreement which has been governed by the law of the United Kingdom which is not to be regarded as a submission. In my submission these two lines are retrogressive and no longer reflective of the current position in international law. Provision for an agreement to be governed by a particular legal system—and we are, after all, discussing agreements which will be governed by municipal law and not by national law—may not be identical with or subsumed to submission to the jurisdiction of the courts applying that law, but it surely may be one of the elements that the court may take into account when considering the intentions of the parties as to interpretation, jurisdiction or validity of an agreement.

If the words which the Amendment seeks to delete remain in the Bill it seems to me—and of course I may be wrong—that it would mean that where there is a choice of clause the State party to the agreement may not be sued in an English court unless the agreement falls within Clauses 3 to 5 of the Bill as it now stands. Surely that cannot be the intended effect. A more helpful view in the light of current international practice would be to include a new conditional clause governing prior agreement or prior written agreement by which it is expressly understood that where an agreement is to be governed by the law of the United Kingdom that would be an implied waiver of immunity from suit. I think this would be very much more in line with current practice, and I would welcome the consideration of the noble and learned Lord to that suggestion. If we are to follow the less narrow concept of the United States Act which refers to a prior agreement to submit, whether explicit or implicit, the choice of law governing the agreement must be one of the conditions which will be taken into account. Surely this is a reasonable concept or assumption for a court to make.

Finally, is it not time that if a State trading company is going to engage as a private individual it should be treated as any other private individual in the English courts? I refer now to the provision of Order 11, rule 1(f)(iii) of the Supreme Court where it is written: It is within the court's jurisdiction to order service abroad of a writ where a contract is by its terms or by implication to be governed by English law. Every contract has a proper law. It is a law which the parties, either expressly or implied, have chosen to govern their contractual relationships. It would seem right that these words to which I have referred should be deleted, and either no comment is made in the Bill, or some alternative, such as I have proposed, should be considered. I beg to move.

The LORD CHANCELLOR

As the noble Baroness, Lady Elles, has said, the Amendment seeks to omit from Clause 2(2), which deals with waiver of immunity, words which provide that a term in a contract that it is to be governed by United Kingdom law are not to be regarded as a submission to United Kingdom jurisdiction. The effect of the Amendment is, I imagine, intended to be that an agreement by a foreign State that a contract is to be governed by the law of the United Kingdom is to be treated as an agreement to waive immunity from the jurisdiction of United Kingdom courts. It is doubtful whether the Amendment would have that effect. The mere omission of the words in Clause 2(2), which at present provide that such an agreement is not to be regarded as a submission, would not, I think, by itself turn such an agreement into a submission. But perhaps that point could be looked at.

But looking at it as a matter of principle, English law treats a provision in a contract that it is to be governed by English law as an implied agreement that the contract is to be adjudicated upon by English courts. However, I am advised that that rule is a peculiarity of English law which is not widely found elsewhere. There is not an equivalent rule in Scotland—and I say this in fear and trembling, in the presence of the Solicitor-General for Scotland. The assumption of jurisdiction by English courts, on the basis of such a contractual term—for instance, as the noble Baroness said, under Order 11, rule 1(1)(f) of the Rules of the Supreme Court—is apparently widely regarded abroad as an excessive assumption of jurisdiction.

The proposed Amendment, which has been moved, would go a step further and imply that an agreement that a contract is to be governed by English law is not only to be treated as an agreement to the jurisdiction of our courts but is to be treated as such by a State which would otherwise be immune from that jurisdiction. Internationally, we feel that this would be difficult to justify, more particularly since, if the Government Amendment No. 9, which is the crucial Amendment of those in my name and which I shall be moving before long, is accepted, immunity will in practice apply only to certain sovereign acts, and the waiver of immunity from jurisdiction would accordingly be inferred in relation to such a sovereign act. My submission is that where a foreign State acts in a sovereign capacity, and not in a commercial capacity, nothing less than an express waiver of its immunity from jurisdiction should be effective. I am sorry to sound so unpatriotic and unloyal in my commitment to the English view on this but we are dealing here very much with the international scene and the need for international comity.

Lord DENNING

I would join forces with the Amendment. I do not agree with the noble and learned Lord the Lord Chancellor when he says that, when an agreement is to be governed by English law, it necessarily means that the parties submit to the jurisdiction of the English courts—quite the contrary. We have had cases in which there was an agreement to be governed by English law, which would not necessarily be by arbitration in London. So I do not agree with the premise on which the noble and learned Lord makes his objection. But apart from that, it is surely sufficient just to have an agreement to submit to the English courts. That is good enough without having this qualification that it is not to be a submission; it is to be governed by English law. I see no reason whatever for this qualification. If it is, expressedly or impliedly, a submission to the jurisdiction, that should be good enough. So that I support the Amendment.

Lord WILBERFORCE

I find myself in agreement with the noble and learned Lord, Lord Denning. There is liable to be confusion on this subject, between jurisdiction and immunity. They are two quite different things. Order 11, to which the noble and learned Lord the Lord Chancellor referred, is not dealing with immunity; it is dealing with conditions by which foreigners, foreign States or individuals can be brought by service before English courts. Even when that order has been complied with, it is still possible for the person concerned to raise the question of immunity. The two questions are quite different.

Therefore, I rather agree that the last two lines of subsection (2) are inappropriate here. They are words appropriate to jurisdiction, but not to immunity. They are tied up, to a very large extent, with the bigger question of waiver and submission. If the noble and learned Lord is not able to accept the Amendment, perhaps he will, at least, be willing to say that he will take account of what has been said in his reconsideration of the waiver submission argument, which we have already had.

The LORD CHANCELLOR

Of course, I am willing to consider that. In the face of such a barrage of legal authority, who am I to refuse even to consider what is suggested? Of course, I will willingly consider it; and, indeed, it might have been very helpful if I had had a conference with noble and learned Lords, before I embarked upon these Amendments.

Baroness ELLES

Here, again, I think that it would be advisable for me to withdraw my Amendment, in order for the noble and learned Lord the Lord Chancellor to consult with his colleagues inside or outside of the Supreme Court of the House of Lords, and perhaps we can come to a conclusion on this matter at the next stage. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

[Amendment No. 6 not moved.]

4.17 p.m.

Lord WILBERFORCE moved Amendment No. 7: Page 2, line 16, leave out subsection (5).

The noble and learned Lord said: This is really a probing Amendment, simply because, no doubt through some frailty, I do not understand subsection (5). It relates back to subsection (3)(b), which deals with intervening or taking steps in the proceedings, which is normally treated as a submission. It then states that that does not apply if the State is in ignorance of facts entitling it to immunity. I do not understand how a State can be in ignorance of the facts. A State is entitled to immunity, in principle, under Clause 1, and then there are certain exceptions. Though, of course, one does not want anybody to be prejudiced by something of which he is reasonably not aware, I do not see how a State, an organ of a State or a Department of State can fall within this subsection. It may be that it is based upon some case of which I am unaware, or some doctrine of which I am ignorant, and I should be very grateful for enlightenment. I beg to move.

The LORD CHANCELLOR

Subsection (5) of Clause 2 provides that a State shall not be deemed to have submitted if it has taken any step in the proceedings in ignorance of facts entitling it to immunity if those facts could not reasonably have been ascertained and immunity is claimed as soon as reasonably practicable. I am advised that it is based on the second sentence in Article 3, paragraph 1, of the European Convention, which reads as follows: However, if the State satisfies the court that it could not have acquired knowledge of facts on which a claim to immunity can be based until after it has taken such a step, it can claim immunity based on these facts if it does so at the earliest possible moment. As State immunity will be considerably curtailed by the new clause which is found in Amendment No. 9, the incidence of cases where this subsection is invoked will be very rare. Therefore, its importance is marginal. On the other hand, the immunity which will be at stake will almost certainly be that in respect of acts done in the exercise of sovereign authority.

Whether it is necessary to provide for this expressly in the clause is a matter which I should be very willing to consider—and, of course, to consider the Amendment that has been moved. In the absence of subsection (5), the common law would probably continue to apply and to determine what constitutes an effective submission. It may be that the existing common law is sufficient for most cases. At common law, for instance, an authorised appearance entered by an agent is not sufficient. That was the decision in the case of The Jassy. In the case of the Republic of Bolivia Exploration Syndicate Limited and Baccus—a most attractive title for litigation—v. Servicio Nacional Del Trigo, immunity was successfully claimed after an unconditional appearance. In the Baccus case, it was held that the entry of an unconditional appearance did not necessarily imply a waiver, except with the full authority of the sovereign, and in this case the entry was made by a subordinate officer who wrongly believed that he had authority to do so without consulting his superiors. The case is not conclusive, as it could be argued to be concerned with ignorance of legal rights rather than ignorance of material facts, but I am advised that it is thought to point strongly to the existence of a doctrine in our law that reasonably justifiable ignorance of relevant factors vitiates a submission.

These are interesting matters and there are a number of cases. However, time is short and Spring is nearly here. I shall certainly be willing to consider the Amendment again.

Lord DENNING

May I say that I thought and have said that the Baccus case was wrongly decided. Therefore I should like to support the Amendment by saying that it is much better to leave it to the common law than to read in these matters.

Lord WILBERFORCE

My Lords, I am very grateful to the noble and learned Lord for his reply, which has been extremely full. I had not appreciated that it came from Article 3 of the Strasbourg Convention. I yield to nobody in my desire to fall in with international agreements and to be full of an international spirit. If the noble and learned Lord believes that our relations with other European States would be improved by keeping it in, even though to me it is incomprehensible and unnecsesary, I am quite willing to leave the matter there and not to press the Amendment. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

4.23 p.m.

Baroness ELLES moved Amendment No. 8: Page 2, line 21, leave out from ("appeal") to end of line 22 and insert ("and to any counter-claim—

1. (a) which may arise where if the proceedings had been instituted against a State as a principal claim that State would not have been immune in accordance with the provisions of this Act; or
2. (b) which arises out of the transaction or occurrence which s the subject matter of the claim of the State").

The noble Baroness said: This Amendment seeks to widen the grounds upon which a counterclaim may be made by a defendant. The subsection is considerably narrower than the Convention which we are seeking to be able to ratify If I may quote from page 3, under Article 1(2)(b) the Convention allows a counterclaim to be made, if, according to the provisions of this Convention, it would not have been entitled to invoke immunity in respect of that counterclaim had separate proceedings been brought against it in those courts. The first part of the Amendment seeks to paraphrase that provision. I accept that it may need to be redrafted or reworded, but I should like the noble and learned Lord at least to consider the spirit in which the Amendment is put forward.

As the Bill now stands, it seems to me that it is not possible for a counterclaim on a separate issue to be made available. That is in line with a decision in a case which took place some years ago and which I submit is no longer relevant. Under the Crown Proceedings Act 1947, a person may, with leave of the court, avail himself under Section 35(1)(g) of a counterclaim in a very wide number of circumstances. There are no grounds for treating a foreign State any better or any worse than our own State in our own courts, in particular when the cause of action arises from an activity which could be carried out by an individual who would not in similar circumstances be prevented from seeking to bring such a counterclaim.

Paragraph (b) seeks to avert the difficulty caused by the term "the same legal relationship" in subsection (6). The words proposed follow closely those, used in paragraph 1607B of the United States Act. I should be grateful if the noble and learned Lord would consider the Amendment in that spirit and give an explanation of what is meant by the term "the same legal relationship" in subsection (6). I accept that there is another condition which is common to counterclaims in this kind of situation; namely that the relief demanded should not exceed the amount of the original claim. If the Amendment is accepted in either an amended or a reworded form, perhaps my last comment could be taken into account. I beg to move.

The LORD CHANCELLOR

The object of the Amendment appears to be to widen the classes of counterclaim to which a State is taken to have submitted by taking certain procedural steps, like instituting proceedings or intervening in them. By so doing, the State, in accordance with Clause 2(6), also submits to any counterclaim but only, as the subsection stands, if it arises out of the same legal relationship or facts as the claim. The Amendment would expose the State to any counterclaim which either (a) relates to a matter in respect of which the State is not immune from jurisdiction or (b) arises out of the transaction or occurrence which is the subject matter of the claim. That is the Amendment which is proposed.

As the noble Baroness has said, the second proposition, (b), seems to be a rephrasing of what is already contained in the subsection. However, it is in a slightly narrower form than that which is contained in the subsection, and this may well be unintended. The noble Baroness seeks not to narrow but rather to widen the subsection. However, the effect of what the noble Baroness has proposed is to narrow it. At present, the subsection covers counterclaims arising out of the same legal relationship—for example, agency or a course of trading—which would not be covered by the Amendment words "transaction or occurrence which is the subject matter of the claim".

As to paragraph (a) of the Amendment, I venture to submit that it is unnecessary. If a counterclaim relates to a matter as regards which the State enjoys no immunity from jurisdiction, then the State is clearly subjected to it, just like any other litigant. Clause 2(6) is concerned with circumstances where, in order to establish jurisdiction against a State, the plaintiff needs to rely upon the State's voluntary submission to the jurisdiction. That, I submit, cannot arise under proposal (a) where the counterclaim relates to matters in respect of which the State would not have been immune, in accordance with the provisions of the Bill. Therefore, I venture to submit, if I may do so without impertinence, that perhaps these Amendments do not quite achieve the purpose which is intended.

Baroness ELLES

I thank the noble and learned Lord for that explanation. I am not sure that the words of which I sought to find the meaning, "the same legal relationship", have been fully explained, but I will study the noble and learned Lord's words carefully. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 2, as amended, agreed to.

4.30 p.m.

The LORD CHANCELLOR moved Amendment No. 9: After Clause 2, insert the following new clause:

Commercial transactions and contracts to be performed in United Kingdom

(".—(1) A State is not immune as respects proceedings relating to—

1. (a) a commercial transaction entered into by the State; or
2. (b) an obligation of the State which by virtue of a contract (whether a commercial transaction or not) falls to be performed wholly or partly in the United Kingdom.

(2) This section does not apply if the parties to the dispute are States or have otherwise agreed in writing; and subsection (1)(b) above does not apply if the contract (not being a commercial transaction) was made in the territory of the State concerned and the obligation in question is governed by its administrative law.

(3) In this section "commercial transaction" means any transaction or activity (whether of a commercial, industrial, financial or other similar character) in which a State engages otherwise than in the exercise of sovereign authority and, in particular, includes—

1. (a) any contract for the supply of goods or services to a State irrespective of the purposes for which the goods or services are required; and
2. (b) any loan raised by a State irrespective of the purposes for which the borrowed money is to be applied;

but neither paragraph of subsection (1) above applies to a contract of employment between a State and an individual.")

The noble and learned Lord said: This is probably the most important Amendment that my noble and learned friend and I will move. Its purpose is to meet the very substantial criticisms that were made by the noble and learned Lords, Lord Denning and Lord Wilberforce, during the Second Reading debate in your Lordships' House on 17th January of this year. It was said that it was important in a commercial context not to give any greater immunity in our courts to foreign States or foreign States' trading agencies than is recognised by international law generally. In the Trendtex case the Court of Appeal found that in international law a State did not enjoy immunity in respect of commercial transactions. In the circumstances, the noble and learned Lords that I have mentioned thought it was a mistake to limit the cases of non-immunity to those where the jurisdictional links set out in the European Convention were satisfied. Such links, although they might be acceptable in a European context, were, it was pointed out, not acceptable on a worldwide basis.

There was some pressure to defer the Bill until your Lordships' House had given a decision in Trendtex, but I ventured then, and I take the same view now, to suggest that it is inadvisable to do so for various reasons. The Bill, for instance, does deal with a number of matters which are not likely to be dealt with in any judgment which noble and learned Lords would give in the Trendtex case; for example, the circumstances in which there should not be immunity even in noncommercial transactions—and these are dealt with in Clauses 5 to 11 of the Bill.

There is also strong pressure for early legislation because the United Kingdom is now—as was pointed out then, and I think it is so—at a distinct disadvantage compared with the United States, which has recently passed the Foreign Sovereign Immunities Act 1976. This is particularly apparent in financial and commodity markets. It has been urged on the Government that bankers and traders who deal with States want to have the assurance that any dispute will be capable of litigation in the courts. They now have that assurance in the United States, but will not have it in the United Kingdom until this Bill is passed. Meanwhile, I am advised that important business could pass from London to New York. Unless the present Bill reaches another place early after the Easter Recess the Bill is not likely to complete its course in another place, and it is difficult to see, frankly, when it could again be reintroduced. The decision in Trendtex is not expected until, at the earliest, the end of May 1978, and in any event it is not impossible—I will not put it higher than that—that the case may be settled and may never come before your Lordships' House at all.

The general effect of the Amendment, which I hope will now give noble and learned Lords, and indeed the Committee generally, more confidence in supporting the Bill, is that it substitutes a new clause for the clause removing immunity from commercial activities conducted through establishments in the United Kingdom (Clause 3) and the clause which removes it from contracts to be performed in the United Kingdom (Clause 4). The range of commercial transactions which are no longer immune is accordingly greatly widened by the removal of the requirement of an establishment in the United Kingdom and the addition of a definition, in subsection (3) of the new clause, which covers all activities not done in the exercise of sovereign authority. State loans are singled out for express inclusion in the definition in subsection (3)(b), and by implication so are supplies for the Armed Forces. Lastly, the exceptions which are presently found in Clause 3(2) and Clause 4(2) for contrary agreements of contracts between States or governed by administrative law are preserved in subsection (2) of the new clause.

So far as the detailed provisions are concerned—and I apologise for taking a little time over this important Amendment—subsection (1)(a), as your Lordships will see, provides that A State is not immune as respects proceedings relating to a commercial transaction entered into by the State. That is stated boldly and clearly. The term "commercial transaction" is defined in the new subsection (3). After consultations with City and other interests, it has been decided that it would be best now to provide by Statute that a State is not immune in respect of any commercial transactions. That is the view apparently of the City. In this respect, at any rate, the new clause does accord with the majority view in the Court of Appeal in Trendtex. No qualifications, no jurisdictional links with the United Kingdom are to be required.

Subsection (1)(b) provides that, A State is not immune as respects proceedings relating to—an obligation of the State which by virtue of a contract (whether a commercial transaction or not) falls to be performed wholly or partly in the United Kingdom". This is the old Clause 4(1), which in turn reflects Article 4, paragraph 1 of the European Convention. It seems appropriate to retain the jurisdictional links here, because the paragraph will be invoked mainly in relation to contracts made in the exercise of sovereign authority, all others being also covered by paragraph (1)(a). It is not so easy to justify internationally the assumption of jurisdiction over contracts which are not to be performed here.

The jurisdiction with regard to contracts which may be exercised on other grounds under Order 11 of the Rules of the Supreme Court is considered in many foreign countries to be excessive. It is not without doubt whether we could justify the assumption of jurisdiction so widely over contracts of a sovereign nature. There will, for instance, be no immunity if the contract is to build a fighter plane or a battleship and the construction takes place in the United Kingdom. But, I submit, there would be no basis in public international law for the assumption of jurisdiction where the construction was to take place elsewhere, unless the foreign State had agreed on jurisdiction by the United Kingdom courts. Contracts not included in the exercise of sovereign authority will in the main be commercial transactions as defined in subsection (3), for which, I submit, no jurisdictional link is necessary.

Subsection (2) provides that the clause does not apply if the parties to the dispute are States or have otherwise agreed in writing. This qualification appeared in the original Clause 3(2) and Clause 4(2). Subsection (3) defines what is meant by "commercial transaction". It means: Any transaction or activity (whether of a commercial, industrial, financial or other similar character) in which a State engages otherwise than in the exercise of sovereign authority". As your Lordships will see, the term includes in particular: (a) any contract for the supply of goods or services to a State irrespective of the purposes for which the goods or services are required; and (b) any loan raised by a State irrespective of the purposes for which the borrowed money is to be applied".

That wide definition of "commercial transaction" will mean that the clause will cover practically all the cases where a State can be said to be acting jure gestionis, that is to say, in the same manner as a private person. Subsection 3(a) and (b) are intended to remove possible doubt from the classes of transactions of common occurrence which can be argued to fall into either class—sovereign or non-sovereign—and about which, indeed, the courts of different countries have come to different conclusions.

The subsection equates all non-sovereign acts of a commercial, industrial, financial or similar character with commercial activities. It is thus the nature of the exercise of the activity which is to determine whether there should be immunity or not. It will be for the courts to decide in any particular circumstances, having regard to criteria laid down in the Bill, whether a particular transaction is "commercial" or not and thus its immunity from the jurisdiction or otherwise. That, I am advised, is similar to the approach adopted in the United States' Sovereign Immunities Act 1976, which provides that the commercial character of an activity is to be determined by its nature rather than by its purpose.

Subsection (3) also provides that neither paragraph of subsection (1) applies to a contract of employment between a State and an individual. A similar exception was found in Clause 4(1), but it is now confined to employment of individuals. Contracts of employment between a State and an individual are dealt with in Clause 5 of the Bill, and are intended to be excluded from the new clause.

I apologise for the length of that explanation, but I greatly hope that we have now, by this endeavour, met at any rate the major criticisms that were so effectively addressed to me on Second Reading. I beg to move.

4.43 p.m.

Lord DENNING

I should like to thank the noble and learned Lord the Lord Chancellor very much for this Amendment. We had many misgivings about the Bill when it was first introduced to the House. Indeed, it seemed to be on a retrograde line because 100 years ago, and right up until recently, a State could claim immunity for not only sovereign acts but also commercial acts, and in these days, when so many States engage in commercial transactions, it is very important that they should not be immune from the jurisdiction of the courts. For the past 20 or 30 years judges have been gradually working that way, not only in this country but in many others.

The clause, as it now stands, seems to me to bring our international law on this subject very much in line with the international law of so many other great countries of the world. It clears up many outstanding points, such as, what kind of contracts may be of sovereign authority— for example, the supply of boots for the Forces and so forth. All such matters have been cleared up. I very much support the Amendment and I thank the noble and learned Lord the Lord Chancellor for introducing it.

Lord WILBERFORCE

I entirely endorse what my noble and learned friend Lord Denning has said, We are very grateful to the noble and learned Lord the Lord Chancellor, and to those who help him in his Department, for the trouble they have taken to get this clause in order. I welcome it without any reservation except one which the noble and learned Lord will see reflected in my proposed Amendment No. 10. I shall discuss the matter now very briefly, because the noble and learned Lord has dealt with it by anticipation.

I still think that subsection 1(b) of the new clause is too narrowly expressed and is based upon the jurisdictional confusion to which I have already referred, because performed wholly or partly in the United Kingdom is a jurisdictional concept and not an immunity concept. I fear that the clause may leave out a certain number of obligations which fall neither within (a) nor within (b). However, the noble and learned Lord has come so very far to meet the representations we made on Second Reading that I would propose—unless other noble Lords wish to take up my Amendment—to rest satisfied with the new Clause 9 as it is, and not to gild the lily too much by pressing my Amendment No. 10 which, however unrepentantly, I think would be an improvement to the noble and learned Lord's subsection (1)(b).

4.46 p.m.

Lord O'BRIEN of LOTHBURY

I confess that I rise with some trepidation believing myself to be the only Member of this Committee totally unlearned in the law who has so far ventured to intervene in this debate or, indeed, in the debate on Second Reading. I was by chance present during the Second Reading debate and I was elevated, as no doubt everyone else was, by the erudite contributions by all the noble and learned Lords who took part in that debate. However, at the end I felt that it was pity that there was no one who had some connection with the people mainly affected by the proposed Bill who could say how they would feel about it.

After the Second Reading debate I consulted some of my friends in the City. They did not feel very happy about the Bill as then drafted, although they were very much in favour of the proposal to have an Act in due course on this subject. I understand that since that time they have been received with great courtesy by the noble and learned Lord the Lord Chancellor, and by his officers, who have listened to their representations with great sympathy and understanding. I believe that as a result of those consultations and many others, and what has been said in your Lordships' House, we now have the revised clause to the Bill.

As the noble and learned Lord the Lord Chancellor has said, I am sure that this is the most important Amendment of the draft which first appeared before us. I am glad to know that it is welcomed by noble and learned Lords because I certainly welcome it very much indeed. I should like to take up a moment of your Lordships' time by pointing out how it affects the banking institutions, in particular in the City of London.

The development of the international capital markets over the past 15 years has probably been the most striking development in the financial world in my more than 50 years in the City. Although it has produced problems for national authorities and for others, its beneficent effect, generally speaking, is every great indeed. In those markets very large sums have been raised for many borrowers of all kinds and in particular for States, for parastatal organisations and for organisations that States are prepared to guarantee. Most of the obligations are denominated in US dollars, to some substantial extent in other currencies, but only very little in sterling. So, it is business which is, in effect, carried on outside the United Kingdom, although despite the economic troubles through which this country has passed during the past 15 years, the City of London has, to a very large extent, monopolised the business. Its expertise has been quite outstanding and the banking community has been enormously enlarged by important banks coming to London to participate in the work which is done here. The only other rival is New York. One cannot say which is the greater, but it does not matter because they are two great centres.

As the noble and learned Lord the Lord Chancellor has said, these contracts which, are very large must be governed by law. I think that most of those who take part in them would prefer them to be governed by English law, which is fair, sophisticated, and administered impartially, and the practititioners of the law have great expertise. But, with the passing of the United States Sovereign Immunities Act 1976, we have undoubtedly been placed at a great disadvantage, because, whereas the position of State immunity in this country and under British law is at best a matter of great uncertainty, it is now certain in America and the American legal profession has not hesitated to point out to people wanting to enter into these very large contracts that they can secure their position with greater certainty if they make American law the law which governs them.

American banks, which play a large part in this business and which perhaps have more reason to fear their stockholders than British banks, have endorsed these feelings. So the business is already passing. Once it has passed, it is very difficult to get back. Therefore, the passage of this Bill is extremely important to the City of London. One must remember that in the future we shall have to rely more, not less, on the invisible earnings of the City of London—which, despite our other troubles, are growing—especially at a time when the difficulty of making our manufacturing products competitive in the outside world is growing because of the competition of cheaper and more productive labour in many other countries, some of them under-developed.

Therefore, I believe that this Bill is a very important Bill for the practitioners in the City of London who bring great benefits to this country. I strongly endorse what the noble and learned Lord the Lord Chancellor has said: the passing of the Bill is not only important, but its early passing is very important indeed, otherwise a great deal of business will be lost, not to return. I very much welcome the response so far in favour of the Amendments made to the Bill and thank the noble and learned Lord the Lord Chancellor again for this particular Amendment which is so important, particularly to the City. I hope that the Bill will have an easy and swift passage.

Although it is perhaps not germane to this particular Amendment, I should like to make one final point. Later on, there is a provision that the Bill should be made retrospective. I wonder whether that is wise, given the repugnance which one normally feels for the use of retrospection, and the fact that respect for British law might be harmed if this provision were included.

Lord DENNING

I should like to add a few words because my noble and learned friend Lord Wilberforce mentioned Amendment No. 10. In view of what my noble friend Lord O'Brien has just said, it would be very useful to have Amendment No. 10 which states: which is governed by the law of the United Kingdom". As we have just heard, many of these transactions are, in fact, governed by the law of the United Kingdom; in their terms they often strike out governed by the law of the United States and insert governed by the law of the United Kingdom". I did not know whether this would be mentioned again, but I should like to support what my noble and learned friend Lord Wilberforce said about it.

Baroness ELLES

May I join with the noble and learned Lords who have spoken in thanking the noble and learned Lord the Lord Chancellor, and particularly the members of his Office who have been extremely helpful in drafting and redrafting the Amendments to the Bill. I certainly support Amendment No. 9 as it is at present drafted.

There is only one minor point that I should like to raise and I hope that the noble and learned Lord will not consider it churlish if I mention it, considering how we have received this new Amendment. It is a point that has been mentioned to me by our friends in the City and relates to subsection (3), line 3, where there are the words: in which a State engages". It has been brought to my notice that a State may intend to engage in a commercial activity, and may thereby undertake certain contractual obligations in the City—such as employing legal services, documentation and suchlike, which involve expenses—and then may possibly withdraw from the actual commercial activity because for some reason or other it decides that it is not practicable. Nevertheless, obligations of a contractual and financial kind have been involved, although the commercial activity within the definition of subsection (3) would not, I think, cover this particular situation. I am not asking the noble and learned Lord to reply immediately, but I should be most grateful if he would be good enough to write to me on this point so that I can take it up again on the next stage of the Bill.

The LORD CHANCELLOR

I am most grateful to noble Lords who have expressed gratitude to the members of my staff who, if I may say so, will feel compensated for all the arduous work that they have done at rather short notice by the observations that have fallen from the noble Lord, Lord O'Brien. I am grateful for the importance which the noble Lord, with his great expertise and wide experience not only of the City but of the rest of the world, attaches not only to this Bill becoming law, but to it becoming law as timelessly as the procedures of Parliament will permit. I hope that when the matter comes before the House on Report there will not be too many complaints if that Report stage takes place before the Easter Recess. However, that is really the motivation behind it, and I thought it right to include that little bit of prejudice in favour of speaking at this point in time.

I am most grateful for and gratified by the encouragement that the noble Lord, Lord O'Brien, has given. I certainly share the gratitude that has been expressed to those advising me. I shall certainly look carefully at the point which the noble Lord made about the later provision in the Bill which has a retrospective element, because what might be gained on the swings might well be lost on the roundabouts of lack of respect or confidence in us. I shall certainly approach that with an open mind when we come to it.

I shall look at the word "engages" once again in case it may be possible to find a more engaging word for the purposes of the situation to which the noble Baroness, Lady Elles, referred. As to Amendment No. 10, which the noble and learned Lord, Lord Wilberforce, did not seek to press, I shall certainly look at that again, particularly as it was supported by the noble and learned Lord, the Master of the Rolls.

Lord WILBERFORCE

with the noble and learned Lord's permission, may I say that he cited an example about building battleships which I thought very picturesque as I did not know that any were being built nowadays. I have some examples here about other recondite types of contract in which I am sure the noble Lord, Lord O'Brien will be interested. I do not think it right to inflict them on the House at this stage, but perhaps I may send them to the noble and learned Lord to compare with his battleships and we might see whether or not my Amendment is necessary.

On Question, Amendment agreed to.

[Amendment No. 10 not moved.]

Clause 3 [Commercial, industrial and financial activities]:

On Question, Clause 3 disagreed to.

Clause 4 [Contracts to be performed in United Kingdom]: On Question, Clause 4 disagreed to.

Clause 5 [Contracts of employment]:

5 p.m.

Baroness ELLES moved Amendment No. 11: Page 3, line 7, at end insert ("or where the employee was recruited in the United Kingdom and was ordinarily resident there when recruited or where the contract of employment was made in the United Kingdom.").

The noble Baroness said: As it is now worded the clause only covers contracts of employment which are wholly, or partly, performed in the United Kingdom. But there is an increasing number of cases of contracts of employment, generally made in the United Kingdom and involving British citizens, where British citizens are being recruited by reason of their special scientific or technological knowledge or administrative capability, or for any other specific reason, and are invited to undertake employment abroad and to perform their duties in another country outside the United Kingdom, and particularly, I should add, in less developed countries.

If the United Kingdom is being asked to contribute to the development of these areas of the world, and I think it is right that it should be, it is not for the United Kingdom to consider that its citizens are expendable and not be prepared to give them adequate protection when they undertake this kind of work. Diplomatic protection in these cases is not an adequate safeguard in the circumstances we are now considering.

I wonder, with the permission of your Lordships' Committee, whether I could quote briefly the kind of case I have in mind, where somebody is employed, for instance, in one of the Services and is pressed by the head of, say, Ruritania, to undertake a job at £20,000 a year, and a house to be provided with a car and all the "perks" which go with this kind of job. The officer concerned has doubts because he has to give up the chance of getting a redundancy payment and even has to lose part of his pension, but he is persuaded that the job is pressing and that the job is waiting for him. He therefore leaves the Forces, loses his right to part of a pension, and certainly his right to redundancy pay, and goes abroad to the State concerned, in this case Ruritania.

When he gets there there is no house, and he has to stay in an hotel. The Head of State refuses to see him and puts it off for about three months. At the end of the three months, during which time the officer has run up a very large bill in this, or another hotel, the officer is then told that there is no job after all because the State cannot afford that salary. The officer, therefore, obviously has no right of redress in that State because that State would not entertain such an action. But is it right that the United Kingdom should allow anybody, whether he is an officer of the Forces or whoever he may be, who is ordinarily resident in this country and recruited in this country, not to have any right of redress against that State?

This is a case where the United Kingdom should insist that a State must waive its immunity and come before United Kingdom courts to honour that particular contract, or to give adequate damages in compensation. I have quoted a particular case but, as noble Lords will know from their own experience, there are many similar cases which have arisen. We will have known personally many people who have gone out to less developed parts of the world, believing that they are contributing to the betterment of mankind and their economic development, and who find themselves in similar situations; but the only link with the United Kingdom is the fact that they have been recruited here. I beg to move this Amendment, and earnestly ask the noble and learned Lord the Lord Chancellor to consider it.

The SOLICITOR-GENERAL for SCOTLAND (Lord McCluskey)

May I answer the noble Baroness. First, I am grateful for the explanation she has given. In the course of it she has shattered one of my illusions. I always thought that Ruritania was an attractive place, and I shall have to rethink that.

At the present time, if the defendant is not in the United Kingdom, as a foreign State never could be, I am advised that English courts will assume jurisdiction over a contract if it is made in the jurisdiction, broken within the jurisdiction, or by its terms or implication governed by English law (Rules of the Supreme Court, Order 11, Rule 1(1)(f) and (g)). Scottish law is similar though not the same. The first part of the Amendment therefore covers a case where the English and Scottish courts have no jurisdiction. The fact that in a contract of employment the employee was recruited in the United Kingdom at a time when resident there does not give our courts jurisdiction over the case. It therefore seems pointless to enact that in such circumstances there is to be immunity from jurisdiction. If the noble Baroness, Lady Elles, intends that our courts should actually assume jurisdiction in such circumstances, that would appear to require a change of our general law which it would not be possible to justify. Therefore, we are not disposed to accept the Amendment in relation to that aspect of it.

As regards the second part, where the contract of employment was made in the United Kingdom, the fact that a contract (whether of employment or otherwise) was made in the United Kingdom is a ground on which United Kingdom courts will assume jurisdiction over that contract. It is not, however, a ground which is internationally recognised. The courts of most countries, at any rate outside the common law area, do not assume jurisdiction on this ground. United Kingdom judgments based on such an assumption of jurisdiction are generally not recognised abroad. Under the EEC Jurisdiction and Judgments Convention we will have to give up this basis of jurisdiction in relation to the rest of the EEC. That is not, however, a compelling reason for preserving the immunity of foreign States in relation to such proceedings. They do he against private individuals and it can be argued that foreign States should be in no better position in this respect than private individuals. Accordingly, in relation to that, I am able to say that we shall be happy to consider that aspect of the Amendment.

Baroness ELLES

I thank the noble and learned Lord for that reply, and for agreeing to consider the second aspect of my Amendment. As he will have realised, I feel very much more strongly about the first part of the Amendment. I shall study his reply carefully and see whether I can raise it again at the next stage of the Bill.

Amendment, by leave, withdrawn.

The LORD CHANCELLOR moved Amendment No. 12: Page 3, line 17, leave out from ("for") to ("subsection") in line 18 and insert ("an office, agency or establishment maintained by the State in the United Kingdom for commercial purposes")

The noble and learned Lord said: Amendment No. 12 is consequential on the deletion of Clause 3 from the Bill. I beg to move.

On Question, Amendment agreed to.

Clause 5, as amended, agreed to.

Clause 6 [Personal injuries and damage to property]:

5.8 p.m.

Lord WILBERFORCE moved Amendment No. 13: Page 3, line 39, after ("to") insert ("or loss of")

The noble and learned Lord said: This is a very modest Amendment which almost speaks for itself. Clause 6, which I think is based on the European Convention, is in any case an unscientific section because it talks about an act or omission in the United Kingdom, whereas a great many acts or omissions are composite and sometimes occur partly inside and partly outside. I have not sought to clarify or clear that because it would involve too radical a reconstruction. I did, however, venture to suggest that one should not limit this to damage to tangible property but should extend it to loss. It is either right or wrong, but it does not need a speech in support of it. I beg to move.

The LORD CHANCELLOR

I think that this is a helpful improvement, and I am happy to accept the Amendment.

On Question, Amendment agreed to.

Clause 6, as amended, agreed to.

Clause 7 [Ownership, possession and use of property]:

5.10 p.m.

The LORD CHANCELLOR moved Amendment No. 14: Page 4, line 15, leave out ("except in a case where the State is trustee"). The noble and learned Lord said: Clause 7(3) provides that a court is not to be prevented from exercising any jurisdiction in relation to the estates of deceased persons or persons of unsound mind or to insolvency, the winding up of companies or, except in a case where the State is trustee, the administration of trusts by the fact that the State has a claim to some interest in the property concerned. The subsection enacts the existing law in the United Kingdom. The immunity enjoyed by States is not allowed to stand in the way of the exercise of any such jurisdiction, since the court would otherwise be prevented from dealing with a property altogether and determining the rights and duties not only of the State concerned but of all other persons who have an interest in it. But there is authority to the effect that where the State itself is the trustee, proceedings cannot be brought against it in that capacity.

Article 14 of the European Convention similarly preserves the ability of courts of Contracting States to administer property of this kind, but does not contain an express exception where the foreign State is trustee. Although such cases will be rare, representations received from City solicitors indicate that there are instances where property in the United Kingdom is held by foreign States as trustees, or where the trust is expressly governed by English law. There is no sufficient reason for preserving the immunity of a foreign State in such a case and the deletion of the exception of the case where the State is trustee has the further advantage of bringing the text more completely into line with Article 14 of the Convention.

On Question, Amendment agreed to.

On Question, Whether Clause 7, as amended, shall stand part of the Bill?

Lord WILBERFORCE

Just before we dispose of this clause I cannot forbear from registering a little regret that subsection (4) is in the clause. It aims at preserving in effect the decision of this House in Dolfus Mieg v. the Bank of England, a case in which I had a certain interest at one time. I know there have been discussions about this and that representations have been made to the effect that the rule should be changed, but that the noble and learned Lord has hardened his heart against it. I simply wish to register regret that this provision is included, but I suppose it is a waste of all our time to try to bring about a change at this point.

Clause 7, as amended, agreed to.

Clauses 8 and 9 agreed to.

Clause 10 [Arbitrations]:

The LORD CHANCELLOR moved Amendment No. 15: Page 5, line 13, leave out subsection (2).

The noble and learned Lord said: This Amendment is intended to remove the immunity currently enjoyed by States from proceedings to enforce arbitration awards given against them. Clause 10(1) removes immunity from proceedings relating to arbitration where the State had submitted to the arbitration in the United Kingdom, or according to United Kingdom law, but by subsection (2) enforcement proceedings are excepted; that exception is now to be removed. If the Government Amendments to Clause 14 are accepted, the property of a State which is for the time being in use or intended for commercial purposes will become amenable to execution to satisfy an arbitration award. However, it would not be possible to proceed to such execution without first bringing enforcement proceedings to turn the award into an order of the court on which the execution could be levied, and unless the State had waived its immunity to enforcement, Clause 10(2) would prevent the necessary steps being taken. This Amendment will delete the subsection.

On Question, Amendment agreed to.

Clause 10, as amended, agreed to.

Clause 11 [Ships used for commercial purposes]:

5.15 p.m.

Lord MCCLUSKEY moved Amendments Nos. 16 to 20:

Page 5, line 22, leave out from ("respects") to ("was") in line 24 and insert— ("(a) an action in rem against a ship belonging to that State; (b) an action in personam for enforcing a claim in connection with such a ship, if, at the time when the cause of action arose, the ship")

Page 5, line 26, leave out from ("ship") to ("both") in line 29 and insert ("belonging to a State for enforcing a claim in connection with another ship belonging to that State, subsection (2)(a) above does not apply as respects the first-mentioned ship unless, at the time when the cause of action relating to the other ship arose")

Page 5, line 31, leave out from ("respects") to ("both") in line 33 and insert— ("(a) an action in rem against a cargo belonging to that State if")

Page 5, line 35, leave out from ("purposes") to end of line 38 and insert— ("(b) an action in personam for enforcing a claim in connection with such a cargo if the ship carrying it was then in use or intended for use as aforesaid.")

Page 5, line 39, leave out ("Subject") and insert ("In the foregoing provisions references to a ship or cargo belonging to a State include references to a ship or cargo in its possession or control or in which it claims an interest; and, subject.").

The noble and learned Lord said: The drafting of Clause 11 has been particularly difficult because of the desire to achieve a number of different objectives, which objectives are not always easy to reconcile, and I will list them. First, that ships used for commercial purposes should not be immune; secondly that the provisions should be such as would enable the United Kingdom to ratify the Brussels Convention for the unification of certain rules concerning the immunity of State-owned ships, a Convention which is of unusual complexity and involved language; thirdly, that immunity should not be accorded even to State-owned ships used for non-commercial purposes where immunity could be denied in accordance with both the Brussels Convention and the European Convention; fourthly, to ensure that the working is wide enough to cover not only ships owned by States but also any interests which States might have in ships; and, fifthly, to apply these principles to actions in rem and actions in personam alike, and to apply them to cargoes in the complex circumstances stipulated in the Brussels Convention.

The drafting in Clause 11 was adopted in an attempt to satisfy thse objectives, but it is open to a number of criticisms. The Amendments do not make any changes of substance to the provision but are intended to achieve greater precision and clearer effects, and I will list these as briefly as I can: exemptions from immunity in Clause 11 should be as respects proceedings in connection with a ship or cargo and not as respects the ship or cargo itself; the consequences which flow from writs and judgments in actions in rem and in personam respectively are so different that separate treatment is needed to produce precision; subsection (2) could be interpreted to be wide enough to cover proceedings against a sister ship, in which event it overlaps with subsection (3); and there is an inelegance in Clause 11(4) where lines 31 to 32 and 36 to 37 read consecutively produce a contradiction. The Amendments, it is thought, will improve the clause in all these respects and should provide a clearer text, while still meeting the complex objectives we seek to achieve.

Baroness ELLES

I wish at the outset to raise a minor point which seems to have escaped the draftsman, though I may be wrong about it. Under Amendment No. 19 the word "or" would be left out so that provisions (a) and (b) would appear with no "or" between them. Perhaps the noble and learned Lord would look at what is obviously a minor drafting point.

The LORD CHANCELLOR

I thank the noble Baroness for raising that matter.

Baroness ELLES

The next point I wish to raise concerns the words "intended for use for commercial purposes" in subsection (3): ships were in use or intended for use for commercial purposes". My argument here applies wherever those words are used. The noble and learned Lord said it had been extremely difficult to draft this clause to meet the obligations under the Brussels Convention. There seems to be a lacuna in this drafting because it appears possible for a ship to have been intended to be used as a passenger ship but it is in fact being used as a troop ship. Under the Brussels Convention if it is a troop ship it would be immune from suit, and that surely is not the intention of the Bill—to achieve the objective which it has in fact achieved. Can the noble and learned Lord look at this point, and see whether it needs redrafting, or whether there is something which I have missed, so that it means in fact what it is intended to mean.

Lord McCLUSKEY

I am grateful to the noble Baroness for her assistance in this matter. We shall certainly look at both points.

On Question, Amendments agreed to.

Clause 11, as amended, agreed to.

Clause 12 agreed to.

Clause 13 [Service of process and judgments in default of appearance]:

5.20 p.m.

The LORD CHANCELLOR moved Amendment No. 21:

Page 6, line 32, at end insert— ("( ) 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.").

The noble and learned Lord said: Clause 13 provides a special method for serving process on foreign States. The Amendment adds as an alternative to the method of service there set out, any other manner of service to which the State has agreed. I beg to move.

Lord WILBERFORCE

This is a very beneficial Amendment. It is undoubtedly greatly desired by those who work in this field, by solicitors, and by the City. In fact, they provide always for their own method of service, and that gets rid of all the complicated rules which apply only if they have not agreed. I very much welcome the Amendment and thank the Lord Chancellor for introducing it.

On Question, Amendment agreed to.

Clause 13, as amended, agreed to.

Clause 14 [Other procedural privileges]:

The LORD CHANCELLOR moved Amendment No. 22: Page 6, line 38, leave out subsection (1).

The noble and learned Lord said: Subsection (14)(1), as it now stands, provides that a State shall not be required to give security for costs. That was thought to be in accordance with the requirements of Article 17 of the Convention. Under the common law a foreign State may be required to furnish security for costs. In the Second Reading debate, the noble Baroness said, as reported at column 62 of the Official Report of 17th January, in relation to security of costs: In the European Convention, the Article dealing with this particular matter leaves the question open, and I think that the Bill should take a more robust line on this particular aspect. I am always open to take advice on robustness from the noble Baroness, and we have therefore gone to the extremity of robustness in this Amendment by leaving the subsection out altogether. I beg to move.

Baroness ELLES

I wish to express my gratitude to the noble and learned Lord for being robust, and for the Amendment which he has proposed.

On Question, Amendment agreed to.

The LORD CHANCELLOR moved Amendment No. 23:

Page 7, line 1, leave out subsections (3) to (5) and insert— ("(3) Subject to subsections (4) and (5) below—

1. (a) relief shall not be given against a State by way of injunction or order for specific performance or for the recovery of land or other property; and
2. (b) the property of a State shall not be subject to any process for the enforcement of a judgment or arbitration award or, in an action in rem, for its arrest, detention or sale;

and for the purposes of paragraph (b) above funds belonging to a State's central bank or other monetary authority shall be regarded as property of the State. (4) Subsection (3) above does not prevent the giving of any relief or the issue of any process with the written consent of the State concerned; and any such consent (which may be contained in a prior agreement) may be expressed so as to apply to a limited extent or generally; but a provision merely submitting to the jurisdiction of the courts is not to be regarded as a consent for the purposes of this subsection. (5) Subsection (3)(b) above does not prevent the issue of any process in respect of property (not being funds belcnging to a central bank or monetary authority) which is for the time being in use or intended for use for commercial purposes; but, in a case not falling within section 11 above, this subsection applies to property of a State party to the European Convention on State Immunity only if the State has made a declaration under Article 24 of the Convention and the process is for enforcing a judgment which is final within the meaning of section 19(1)(b) below.").

The noble and learned Lord said: This another important Amendment on execution. Subsections (3) to (5) of Clause 14 prevent the issue of injunctions, orders for specific performance, orders for the recovery of property, and of any process of execution, except in proceedings relating to ships or cargoes. In all other cases, therefore, as it stands, States will remain immune from execution being levied against their property. These provisions were very strongly criticised from almost all quarters in the Second Reading debate, and so this Amendment is now moved.

In one respect the critics have suggested that the Bill goes too far. There should be a provision in the Bill that funds belonging to a State central bank, or other monetary authority, should be immune from execution, except with the State's consent. The United States Foreign Sovereign Immunities Act exempts such property from execution. The Amendment is intended to meet the criticisms made on Second Reading.

The new subsection (3) restates the general rule that injunctions and similar orders, and processes of execution, do not lie against States, and spells out especially that the funds of central State banks are to be regarded as State property, against which execution may not be levied. But this general rule of immunity is made subject to the important exceptions in subsections (4) and (5). It will be noted that subsection (3)(a) is similar to the present subsection (3), but the rest of the subsection is new. Whereas the present subsection (4) provides that no persons shall be issued for enforcing a judgment against the State, subsection (3)(b) provides that the property of a State shall not be subject to any such process. This formulation is chosen to fit all kinds of judgments, those given against the State (in actions in personam) and those given against property (like actions in rem against ships). Arbitration awards are also now expressly provided for.

Subsection (4) concerns what may nevertheless be done with the State's consent. It resembles the present Clause 14(4)(a), but goes much further, to provide that the general rule against injunctions, execution, and other process against States in subsection (3) is not to prevent the giving of any relief, or the issue of any process, with the written consent of the State concerned, and any such consent (which may be contained in the prior agreement) may be expressed so as to apply to a limited extent or generally.

Subsection (4) enables the relief or process to be given or issued with the written consent of the State concerned. It emphasises that the consent may be contained in a prior agreement. In this connection I draw attention to Amendment No. 34, to Clause 18, which provides that a reference to an agreement includes reference to an international agreement to which the State concerned is a party. It is also intended to ensure that agreements containing general waiver clauses covering consent to execution or other relief can be invoked against any claim to immunity under subsection (3).

Subsection (5) presents an important and major change in our law. It in effect permits execution against property of a State which is used, or intended for use, for commercial purposes. That was the matter which was most strongly pressed for in the earlier debate. The new subsection states that subsection (3)(b) is not to prevent … the issue of any process in respect of property (not being funds belonging to a central bank or monetary authority) which is for the time being in use or intended for use for commercial purposes …". It then goes on to make special provision for the property of States which are parties to the European Convention.

The power to enforce judgments and arbitral awards against the property of a State will be very wide, wider even than that under the United States Act. I hope accordingly that this considerable change, which has again been introduced to meet the criticisms raised on an earlier occasion, will be welcome to your Lordships. I beg to move.

The DEPUTY CHAIRMAN of COMMITTEES (Earl Cathcart)

The question is that this Amendment be agreed to?—

Lord WILBERFORCE

I wonder whether the noble Earl is to call my Amendments Nos. 24 and 25 at this point, or later.

Lord HAILSHAM of SAINT MARYLEBONE

I think that the correct procedure may be if the noble Earl in the Chair were now to call Amendment No. 24, because that involves omitting words from Amendment No. 23, and if Amendment No. 23 were now passed the other Amendment would fall.

The DEPUTY CHAIRMAN of COMMITTEES

I now call Amendment No. 24.

Lord WILBERFORCE moved, as an Amendment to the Amendment, Amendment No. 24:

Line 13, leave out from ("process") to end of subsection (4) and insert ("where the State concerned has waived immunity in accordance with section 2(2)(b) except in accordance with the terms of the waiver.").

The noble and learned Lord said: Fortunately, I shall not have to detain the Committee for long on this matter. This relates to subsection (4) of the amended clause, and it would have the effect that that would read: Subsection (3) … does not prevent the giving of … relief or the issue of any process …"; and then we go to my Amendment— where the State concerned has waived immunity in accordance with section 2(2)(b) except in accordance with the terms of the waiver. That, of course, was drafted on the assumption that the noble Baroness's Amendment to Clause 2 would be carried. But it has not been carried; the noble and learned Lord has agreed to reconsider this question of "waiver" versus "submission".

Therefore, I would be quite prepared to have this Amendment dealt with in the same way, although the noble and learned Lord might be able to persuade me that the existing draft of his subsection (4) is sufficient, because it does say "with the written consent of the State concerned" and that any such consent "may be contained in a prior agreement". So we may be reaching for the same objective by the use of different words; but the substance of what I am trying to do in my Amendment is to enable process to be issued in a case in which a State has waived immunity unless at the time of waiving immunity it has declared that it does not waive immunity to execution, and that is part of the general philosophy concerning waiver about which I have already spoken. I certainly attach importance to the principle of it, but I am rather in the hands of the noble and learned Lord the Lord Chancellor as to how to deal with it at this time. I beg to move.

The LORD CHANCELLOR

This Amendment attributes effects to a waiver of immunity from jurisdiction which would often go far beyond what the State intended. I question whether it is right that waiver of immunity from execution should be implied, especially since, as the new clause is drafted, it could apply only to property held for sovereign purposes. Under the new subsection (5), execution will lie against property which is for the time being in use or intended for use for commercial purposes, at least so far as States which are not parties to the European Convention are concerned.

I am advised that the effect of this Amendment would mean that execution could also take place against State property which is not in use or intended for use for commercial purposes if the State had agreed to submit to the jurisdiction of the court and had not made any express reservation with regard to execution. I think the better course for me to follow is to say that I will look at the Amendment again—I think we are after the same objective—and, if the noble and learned Lord is content that I should do that, then I shall be glad to do so; but I have certainly had no encouragement from those advising me that I should accept the Amendment.

Baroness ELLES

I should like to express my gratitude to the noble and learned Lord for the Amendment, which has gone a very long way to meet the objections to what is contained in the Bill; and, once again, I should like to express my gratitude to those in the noble and learned Lord's Department who have been so helpful in this matter. There are just two points which I should like to raise. There may be a satisfactory answer to them, but I would be glad if the noble and learned Lord would consider them. In the first place, after referring to "the property of a State" in subsection (3)(b), it goes on: … for the purposes of paragraph (b) above funds belonging to a State's central bank or other monetary authority shall be regarded as property of the State. There is no mention of funds which are retained by a foreign State for diplomatic purposes; that is, for the maintenance of an embassy or for their diplomatic staff. There was, I understand, a recent case in Germany where there was some considerable difficulty over identifying funds held in a bank in the name of a State. Obviously, those funds which are held for diplomatic purposes would, by normal standards, be immune. I wondered whether the noble and learned Lord would consider whether there should be express mention in this clause, or whether it is covered later on in the Bill.

The second point I should like to raise concerns the fourth line of subsection (5) of the Amendment, where reference is made to in use or intended for use for commercial purposes". There are, as the noble and learned Lord will know, and doubtless your Lordships will know, many foreign Heads of State who in fact have houses in this country for purely social purposes. They undoubtedly should be considered as being available for attachment or execution in any case which is brought against these particular individuals in a matter where immunity has been waived and where they come within the jurisdiction of the United Kingdom courts. There may be a way round this, and any Amendment need not be necessary, but I would be grateful if the noble and learned Lord would give some answer to this, either in writing or at the next stage of the Bill.

The LORD CHANCELLOR

On the question of funds held for diplomatic purposes, these are immune under the provisions of Clause 17(1) of the Bill, but I will certainly look at the other point. As I have said in relation to Amendment No. 24, which we are immediately discussing, I will certainly look at it again, and perhaps we can return to it at a later stage. I am grateful for the welcome which has been given to Amendment No. 23.

Lord WILBERFORCE

I am very grateful to the noble and learned Lord. On that understanding, I am happy to withdraw Amendment No. 24. I hope that the noble Earl in the Chair will not forget that I have Amendment No. 25 before we pass from this clause.

Amendment to the Amendment, by leave, withdrawn.

5.36 p.m.

Lord WILBERFORCE moved, as an Amendment to the Amendment, Amendment No. 25: Line 19, after ("(3)") insert ("(a)or").

The noble and learned Lord said: This Amendment looks innocuous, but it is in fact not so at all. It perhaps raises a point of some importance. It relates to the top line on page 5 of the Marshalled List of Amendments, which at the moment reads: Subsection (3)(b) above does not prevent the issue of any process in respect of property held for commercial purposes. My Amendment proposes to insert "(a)or", so that it would read: Subsection (3)(a) or (b) above does not prevent the issue of any process …". That throws one back to subsection (3)(a), which says that relief shall not be given against a State by way of injunction, and goes on, or order for specific performance …". The essential object of my Amendment is to enable injunctions to be given against State property used for commercial purposes and not, of course, being funds belonging to a central bank or monetary authority.

My noble and learned friend Lord Denning is a much greater authority on injunctions than I am, but it clearly is a very important part of the armoury of British courts that they should be able to issue injunctions, holding in this country property of a State or of a State agency which is in use or intended for use for commercial purposes, of course in a case where jurisdiction exists and not just in a case in order to create jurisdiction. I know that there are these frightening injunctions called Mareva injunctions, which the noble and learned Lord the Master of the Rolls has been using with great skill recently, and I know that they create apprehension in some circles. But apart from that particular kind of injunction, I would suggest that it is important, if English courts are to have jurisdiction over assets used for commercial purposes and are to be able ultimately to lay hands on them at the suit of a British company, that in a suitable case, and of course subject to reservations, jurisdiction should exist to grant injunctions. That is excluded by the new subsection (5) as drafted, and the object of my Amendment is to give to the courts the power in a suitable case, which may not be very common but which may be quite important when it arises, to grant an injunction. I beg to move.

Lord DENNING

I should like to support this. As my noble and learned friend has said, we grant injunctions, and if we have jurisdiction over a State and can grant injunctions we ought to be able to enforce them. Otherwise, our order is a useless order.

Lord WILBERFORCE

Interlocutory ones, too.

Lord DENNING

Interlocutory ones we quite often grant, and usually they are obeyed, or we hope they are. But if they are not, we ought to have this power to our elbow, given us by way of execution. Therefore, I certainly support what my noble and learned friend has said. Let us have paragraph (a) in as well as paragraph (b).

Lord McCLUSKEY

If I may answer on this particular matter, I think it will be well understood by noble and learned Lords, and indeed others, that remedies of a personal nature like injunctions or orders for specific performance are not appropriate against States. The ultimate sanction for such orders lies in contempt. Clearly the processes for punishing contempt cannot be used against a foreign State. As we know, such remedies are not available in proceedings against the Crown and are no more appropriate against a foreign State. However, having regard to what has been said about Mareva injunctions, I think the appropriate course here is to reconsider this particular matter and I would ask the noble and learned Lord, Lord Wilberforce, not to press the matter at this time and to withdraw his Amendment so that it may be reconsidered in the light of what he has said.

Lord WILBERFORCE

I am grateful to the noble and learned Lord for what he has said. I would venture to point out that subsection (5) is drafted in a very circumspect way: the issue of any process in respect of property"; and that what very often would be possible would be to grant an injunction against someone holding an asset without an order directly against a sovereign State. As well as sovereign States, there is also the case of State agencies or State trading bodies which, although they have immunity under this Convention and under general law, are not themselves States and therefore one has not got the prospect of dragging an ambassador from his coach or arresting a crowned head. This is a most important matter and I should be grateful if the noble and learned Lord were to reconsider it. I beg leave to withdraw the Amendment at this stage, on that understanding.

Amendment to the Amendment, by leave, withdrawn.

On Question, Amendment agreed to.

5.43 p.m.

The LORD CHANCELLOR moved Amendment No. 26: Page 7, line 20, leave out from ("that") to ("purposes") in line 21 and insert ("any property is not in use or intended for use by or on behalf of the State for commercial").

The noble and learned Lord said: This Amendment is consequential upon the provision in the new subsection (5) that execution is to be permitted against the property of a State used, or intended for use, for commercial purposes. I beg to move.

On Question, Amendment agreed to.

Lord McCLUSKEY moved Amendment No. 27:

Page 7, line 24, leave out subsection (7) and insert— ("( ) In the application of this section to Scotland—

1. (a) the reference to "injunction" shall be construed as a reference to "interdict";
2. (b) for paragraph (b) of subsection (3) above there shall be substituted the following paragraph— "(b) the property of a State shall not be subject to any diligence for enforcing a judgment or order of a court or a decree arbitral or, in an action in rem, to arrestment or sale."; and
3. (c) any reference to "process" shall be construed as a reference to "diligence" and any reference to "the issue of any process" as a reference to "the doing of diligence".").

The noble and learned Lord said: The purpose of this Amendment is to adapt certain expressions used in Clause 14 into terms appropriate for Scotland. It replaces the existing provision in Clause 14(7) which has been rendered inappropriate in view of the other Amendments made to Clause 14. I will not at this late hour venture into the mysteries of multiplepoinding or other such terms. I beg to move.

On Question, Amendment agreed to.

Clause 14, as amended, agreed to.

Clause 15 [States entitled to immunities and privileges]:

The LORD CHANCELLOR moved Amendment No. 28: Page 7, line 39, leave out ("under the law of that State").

The noble and learned Lord said: It may be convenient to consider with this Amendment, Amendment No 29; and I am delighted to find that I am in harness with the noble Baroness in proposing these two Amendments. Obviously, I am in robust company. Clause 15(1) provides inter alia that references to a State are not to include references to any entity which under the law of that State is distinct from the State and capable of suing or being sued".

Consequently, the immunity which States will continue to enjoy as a result of Clause 1 will not be enjoyed by such entities (which are called "separate entities").

The definition is important because many trading, industrial or financial activities carried out on behalf of States are done by entities of this kind, so that the wider the definition, the less scope remains for States invoking immunity. The present wording has been rightly criticised as leaving too much scope for State agencies being identified with the State and not treated as separate entities. The Amendments do, and are intended to, widen the definition. I beg to move.

Lord DENNING

I should like to say how much I welcome this Amendment. We have had in many cases the lawyers of a foreign State or the ambassador or someone else saying: "This is not a separate organ of the State; it is part of the State itself", and so forth. There is more than one case in which the lawyers or the ambassadors or others have endeavoured to get immunity on that ground. I very much welcome this Amendment; it is a great improvement to the law.

On Question, Amendment agreed to.

The LORD CHANCELLOR moved Amendment No. 29: Page 7, line 39, after ("from") insert ("the executive organs of the government of").

On Question, Amendment agreed to.

Clause 15, as amended, agreed to.

Clause 16 [Restriction and extension of immunities and privileges]:

Baroness ELLES moved Amendment No. 30: Page 8, line 26, after ("appropriate") insert— ("(2) No recommendation shall be made to Her Majesty in Council to make an order under this section unless a draft thereof has been laid before Parliament and approved by resolutions of each House of Parliament.").

The noble Baroness said: The purpose of this Amendment is clear. It is intended that any change in the law with regard to the scope of a restriction or extension of immunity should be by affirmative Resolution of both Houses of Parliament. It is clear that the lengthy discussions in this House now and those that undoubtedly will take place in another place, and the decisions in the courts as to the immunity from suit, would be overridden by the Executive if this Amendment were not accepted—and without any check or control or even debate.

It has been suggested already by the noble Lord, Lord O'Brien, that any changes in the law should not be retrospective so as to affect existing agreements and arrangements. If there is any change in the law by an Order in Council, this House and another place should have the possibility of debating such changes, thereby ensuring that if that is the will of Parliament these changes should not be made retrospective. I beg to move.

The LORD CHANCELLOR

The Amendment proposes that an Affirmiative Resolution should be required if it was sought to restrict or extend immunities and privileges. The difficulty really is that Parliamentary procedures, especially Affirmative Resolution procedures, do impose delays; and there could be circumstances of urgency and speed could be important; for example, where, under Clause 16(a), it is intended to withdraw immunity in retaliation for a denial of immunity to the United Kingdom by the State in question, and proceedings against that State in a United Kingdom court are imminent.

The Affirmative Resolution procedure is one which takes a great deal of time. Perhaps, if noble Lords think that the Order in Council procedure would not suffice, we might compromise by providing for Negative Resolution or annulment procedure which reduces the pressure on Parliamentary time and might provide that saving consideration of any matter of importance by Parliament itself.

Baroness ELLES

I thank the noble and learned Lord for his remarks. I should be happy to accept the Negative Resolution so long as there is some form of Resolution which comes before Parliament. In the light of what has been said, and the considerations of time which may indeed be of the essence, I should be happy to accept the Negative Resolution procedure.

The LORD CHANCELLOR

May I give further consideration to that, if the noble Baroness will withdraw it at this stage?

Baroness ELLES

I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 16 agreed to.

Clause 17 [Excluded matters]:

5.52 p.m.

Lord McCLUSKEY moved Amendment No. 31: Page 8, line 38, leave out from ("mission") to end of line 39.

The noble and learned Lord said: This Amendment is purely consequential upon the deletion of subsection (3) of Clause 21 which is proposed by Amendment No. 40. I will in due course come to that. I have to speak to it at some time and it might be appropriate to deal with it in connection with the present Amendment.

The deletion of subsection (3) removes an unnecessary express provision on the treatment to be accorded to the principal residence in the United Kingdom of a Head of State and to certain other real property he may own here. The present subsection (3) is intended to accord to a foreign Head of State the same protection in respect of his principal residence in the United Kingdom as is enjoyed by an ambassador. It does so by adapting relevant provisions of the Schedule to the Diplomatic Privileges Act 1964 and applying them to a residence of a foreign Head of State in the United Kingdom and other real property owned by him in the United Kingdom as if they were premises of diplomatic missions or used for official State purposes.

On further reflection, it appears unnecessary to make such specific provision. The general provision in the amended Clause 21(1) applying to Heads of State immunities and privileges enjoyed by ambassadors seems adequate for the purpose. The "principal residence" of a head of State will only ever be temporarily in the United Kingdom and always in such cases he will be here officially. In these cases the Head of State will have the immunities and privileges conferred by Part I of the Act by virtue of subsection (1)(a) of Clause 15.

Any other residence in which he is actually living when visiting the United Kingdom privately will be entitled to inviolability under Article 30 of the Vienna Convention. As regards immunity from suit, he will be immune in regard to embassy premises, should these be held by him privately (which seems very unlikely), and his private holdings would be governed by the provisions of Article 31(1), which seems to produce a satisfactory result. He will not enjoy any immunity from jurisdiction in real actions relating to private premises.

We may come back to these matters on Amendment No. 40, but I thought it right, in dealing with the consequential provision, to explain that part of Amendment No. 40 at this stage. I beg to move.

On Question, Amendment agreed to.

Lord McCLUSKEY moved Amendment No. 32: Line 41, leave out ("the armed forces of a State") and insert ("anything done by or in relation to the armed forces of a State while present in the United Kingdom").

The noble and learned Lord said: Clause 17(2) provides that the Bill is not to apply to proceedings relating to the armed forces of a State. It is intended to relate to the activities of forces stationed in the United Kingdom and their supplies, but it could be read to cover also any purchases made here for a foreign State's forces elsewhere. That is not what is intended or is required by the relevant Article of the European Convention (Article 31).

The Amendments will remove only things done by or in relation to Armed Forces in the United Kingdom from the operation of the Bill, so that purchases made by a State for the use of its armed forces elsewhere (whether of supplies or military equipment) will fall under Part I and enjoy no immunity. For instance, subsection 3(a) of the new clause inserted after Clause 2 will apply to such transactions. I beg to move.

On Question, Amendment agreed to.

Clause 17, as amended, agreed to.

Clause 18 [Interpretation of Part I]:

The LORD CHANCELLOR moved Amendment No. 33: Page 9, line 10, at end insert— (""commercial purposes" means purposes of such transactions or activities as are mentioned in section (Commercial transactions and contracts to be performed in the United Kingdom)(3) above;").

The noble and learned Lord said: This is a new provision which is in part consequential on the adoption of the new clause after Clause 2 and links the term "commercial purposes" with the definition of "commercial transaction" in the new clause. I beg to move.

On Question, Amendment agreed to.

The LORD CHANCELLOR moved Amendment No. 34:

Page 9, line 11, at end insert— ("( ) In sections 2(2) and 14(4) above references to an agreement include references to an international agreement to which the State concerned is a party.").

The noble and learned Lord said: This Amendment was dealt with in part in relation with Amendment No. 24. I then explained why the words "or by an international agreement" were omitted from Clause 2, page 2, line 3, and the desirability of having a separate clause providing that references to an agreement include references to an international agreement.

Under the proposed new Clause 14(4), relief by way of injunction or order for specific performance or for the recovery of land or other property and the issue of process for the enforcement of a judgment or arbitration award may be given with the written consent of the State concerned and any such consent (which may be contained in a prior agreement) may be expressed so as to apply to a limited extent or generally. It is thought that such a prior agreement should include an international agreement which a State has entered into with another State or international organisation. This explains the reference to Clause 14(4) in the proposed new clause.

I am advised that, if a definition of an international agreement is sought, an international agreement is an agreement between two or more subjects of public international law which is governed by public international law and which creates rights and obligations under public international law. As a matter of general acceptance in international relations, an international agreement is one made between parties which are the subjects of public international law. I have no doubt that the noble and learned Lord could devise a more satisfactory definition than that, but I hope that that may explain what we have in mind. I beg to move.

Lord WILBERFORCE

I am grateful to the noble and learned Lord who has honoured his promise give on the earlier clause to give an explanation of this rather mysterious expression "international agreement". I understood the words to mean an agreement between two subjects of international law, which means either States or some body having its existence under international law. Therefore it would not, as I understand it, include agreements between a State and, say, a British company or individual. If that is so, I begin to have some doubts about it, particularly as it applies in either Clause 2(2) or in Clause 14, I think that this probably requires some thinking out. I shall have to reserve my position on this. It may be too narrow in its scope if it is confined to agreements between subjects of international law, which in effect means States.

The LORD CHANCELLOR

As I am advised, as a result of more recent developments of international law, international organisations set up by States could also have the capacity to enter into international treaties and could therefore be included in the conception of being parties to an international agreement. I do not know whether that helps matters; but, if the noble and learned Lord is not happy about this, I am willing to revert to it again at Report stage.

Lord WILBERFORCE

I am very grateful to the noble and learned Lord.

Baroness ELLES

I wonder whether the noble and learned Lord will allow me to complicate matters a little further. May I ask whether these international agreements are only those which are registrable under Article 102 of the UN Charter? Would it in fact cover other international agreements? As this would also be relevant, will the noble and learned Lord, when he is giving a further explanation on this, include consideration of that in his answer?

The LORD CHANCELLOR

In the circumstances, I beg leave to withdraw this Amendment so that we can return to the point at a later stage.

Amendment by leave, withdrawn.

The LORD CHANCELLOR moved Amendment No. 35: Line 12, leave out ("3") and insert ("(Commercial transactions and contracts to be performed in the United Kingdom)").

The noble and learned Lord said: This is consequential upon the introduction of the new clause after Clause 2 and the deletion of Clause 3. I beg to move.

On Question, Amendment agreed to.

The LORD CHANCELLOR moved Amendment No. 36: Line 16, leave out ("4(1), 5(1) and 6") and insert ("(Commercial transactions and contracts to be performed in the United Kingdom)(1), 5(1), 6 and 17(2)").

The noble and learned Lord said: This again is consequential on the insertion of the new clause after Clause 2. I beg to move.

On Question, Amendment agreed to.

Lord McCLUSKEY moved Amendment No. 37:

Line 19, at end insert— ("(4) In relation to Scotland in this Part of this Act "action in rem" means such an action only in relation to Admiralty proceedings.").

The noble and learned Lord said: This is a drafting Amendment to clarify the meaning of the words "action in rem" as regards Scotland. In Scotland, the term is used to designate Admiralty actions, but it is also used to designate certain actions related to ownership of other property, and in particular the action of multiplepoinding—which I hope the Hansard reporter can spell—to determine between competing claims to movable property. In the context of Part 1 of this Bill, the term "action in rem" always means an Admiralty action in rem, and the Amendment makes this meaning clear so far as Scotland is concerned. I beg to move.

On Question, Amendment agreed to.

Clause 18, as amended, agreed to.

Clauses 19 and 20 agreed to.

Clause 21 [Visiting heads of State].

6.4 p.m.

Lord McCLUSKEY moved Amendment No. 38: Page 11, line 16, leave out from ("State") to end of line 18.

The noble and learned Lord said: I should like to speak to Amendments Nos. 38 and 39 together. Clause 21 is intended to lay down in statutory form the immunities and privileges enjoyed by foreign heads of State in their private capacities, their families and their households. The position of such heads is governed by customary international law which is not yet embodied in any international convention. The law lacks the precision which is now given to the law concerning practically all other persons who enjoy international immunities and privileges, namely diplomats, consular officers and persons on diplomatic missions, by international Conventions and United Kingdom legislation giving effect to them.

This clause takes the immunities and privileges of heads of State on the analogy of the immunities and privileges of heads of diplomatic missions, which are already covered by legislation in the Diplomatic Privileges Act 1964, and so can readily be attracted. Problems about the position of heads of State rarely arise except when they visit the United Kingdom, and the analogy of the head of a diplomatic mission in the United Kingdom fits naturally for a visiting head of State. The clause has therefore been drafted for such visitors only. However, this method of legislating leaves an unsatisfactory doubt about the position of heads of State who are not in the United Kingdom, which cannot be left unresolved. It could be argued that, with visitors covered, others have no immunity at all. In any event, the uncertainties of the customary international law would remain in respect of property owned here by foreign heads of State or services supplied to them or their families while the head of State is not in the United Kingdom.

These Amendments therefore will ensure that heads of State and members of their families forming part of their households will, irrespective of presence in or absence from the United Kingdom, be treated as regards immunities and privileges like the heads of diplomatic missions and members of their families. I. beg to move.

On Question, Amendment agreed to.

Lord McCLUSKEY moved Amendment No. 39: Line 20, leave out from beginning to (" and")

The noble and learned Lord said: I beg to move.

On Question, Amendment agreed to.

Lord McCLUSKEY moved Amendment No. 40:

Page 11, line 29, leave out subsection (3) and insert— (" ( ) Subject to any direction to the contrary by the Secretary of State, a person on whom immunities and privileges are conferred by virtue of subsection (1) above shall be entitled to the exemption conferred by section 8(3) of the Immigration Act 1971. ( ) Except as respects value added tax and duties of customs or excise, this section does not affect any question whether a person is exempt from, or immune as respects proceedings relating to, taxation.")

The noble and learned Lord said: Your Lordships will recall that I spoke to the reasons lying behind this Amendment just a moment ago. I therefore beg to move this Amendment formally.

On Question, Amendment agreed to.

Clause 21, as amended, agreed to.

Clause 22 [Evidence by certificate]:

The LORD CHANCELLOR moved Amendment No. 41: Page 12, line 16, after ("Immunity") insert (", whether it has made a declaration under Article 24 of that Convention").

The noble and learned Lord said: This is a new provision consequential on the introduction of new clause 14(5), providing for the exclusion of property in use or intended for use for commercial purposes, belonging to a State which is a party to the European Convention only if that State has made a declaration under Article 24 of the Convention. The Secretary of State will be able to give a certificate, which will provide conclusive evidence that such a declaration has been made by a specified foreign State. I beg to move.

On Question, Amendment agreed to.

The LORD CHANCELLOR moved Amendment No. 42: Line 20, after (" 13 ") insert (" (1) or (5) ").

The noble and learned Lord said: Amendment No. 42 is consequential on the Amendment to Clause 13, page 6, line 32. The Secretary of State can issue conclusive certificates to determine whether and, if so, when a document has been served or received where it has been transmitted through the Foreign and Commonwealth Office to the foreign Ministry of Foreign Affairs. He cannot issue such a certificate in respect of service effected under the agreed method of service which has now been added as an alternative method by the new subsection of Clause 13. I beg to move.

On Question, Amendment agreed to.

Clause 22, as amended, agreed to.

Clause 23 agreed to.

Clause 24 [Short title, repeals, commencement and extent]:

Baroness ELLES moved Amendment No. 43: Page 13, line 10, leave out (" 16th May 1972 ") and insert (" the coming into force of this Act; ").

The noble Baroness said: As has already been stated by the noble Lord, Lord O'Brien, there is considerable anxiety in the City, and particularly among financial and commercial institutions dealing with foreign States and the State trading companies of foreign States. The relationship is based very largely on trust and in the belief that in the United Kingdom we have a fair legal system. A change in the law of the United Kingdom, such as will obviously be the outcome of this Bill, may modify or even extinguish existing contractual obligations. It will certainly affect them in a major way and it would seem quite unprincipled that the United Kingdom should be seen to be acting in such a way as to bring in retrospective legislation which would alter the terms and conditions of existing agreements.

In the Convention itself, in Article 35(3), the date of 16th May 1972 is the earliest date at which the Bill could take effect, but there is nothing in the Convention that I can find which makes that an obligatory date. Therefore, I should like to suggest that the noble and learned Lord should consider my Amendment so that the Bill would not apply not only to proceedings instituted before the coming into force of the Convention but also to proceedings in respect of matters that occurred before the coming into force of this Act. I beg to move.

The LORD CHANCELLOR

In view of the anxiety expressed by the noble Lord, Lord O'Brien—and the matter has now been underlined by the noble Baroness—I am certainly very willing to give further consideration to this matter if the noble Baroness will withdraw the Amendment.

Baroness ELLES

On the undertaking from the noble and learned Lord, I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn. Clause 24 agreed to.

The LORD CHANCELLOR moved Amendment No. 44: In the Title, line 7, leave out (" visiting ").

The noble and learned Lord said: This Amendment is consequential on Government Amendments to Clause 21. That Clause, as amended, now makes provision for immunity of heads of State irrespective of whether or not they are visiting the United Kingdom. Therefore, the adjective "visiting" has to be deleted before "heads of State". I beg to move.

On Question, Amendment agreed to.

House resumed: Bill reported with the Amendments.