Commercial Disputes Weekly – Issue 23525 February 2025

Enforcement
The UK Supreme Court has decided in favour of a bank that was trying to enforce an Abu Dhabi judgment for approx. £20m against the appellants’ father, Mr El-Husseini. The bank alleged that Mr El-Husseini had transferred several assets (including houses in central London) to other people, including the appellants, to put them beyond the reach of the bank or reduce the value of the companies that owned them. It asked the court for relief under section 423 of the Insolvency Act 1986, which relates to transactions defrauding creditors. The issue was whether section 423 applied where the debtor had not directly owned the asset but had instead procured that the company owned or controlled by the debtor, which did own the asset, transferred ownership to someone else (in this case the debtor’s son) for no consideration. The court held that a ‘transaction’ for the purposes of section 423 was not limited only to assets owned directly by the debtor but could extend to the situation here. If the transaction satisfied the other requirements of section 423, the court can make orders to restore the position, including setting aside the transaction. Note however that separate High Court proceedings have concluded that the transfer was not made with the intention of hindering the bank’s enforcement of the judgment.
El-Husseiny v Invest Bank PSC [2025] UKSC 4, 19 February 2025

Court Procedure
The doctrine of merger under English law provides that where a judgment determines a cause of action, it extinguishes that cause of action. This prevents duplicate proceedings and ensures finality of litigation. The Supreme Court was asked to decide whether the doctrine applied where the judgment was a declaration as to a state of affairs under a contract, rather than ordering the payment of money. The lower court had granted declarations that the shares in Zavarco held by Mr Nasir were unpaid and that Zavarco was entitled to forfeit the shares. Zavarco forfeited the shares and commenced further proceedings to recover the value of the shares. The Supreme Court held that the doctrine did not apply to declaratory judgments. It was only relevant where the first judgment ordered the payment of money or enforced a right of property, rather than simply confirming obligations that already existed. For the doctrine to apply, the judgment should replace the cause of action (the right to claim a remedy arising from factual circumstances) with an obligation of a higher nature, namely the judgment.
Nasir v Zavarco Plc [2025] UKSC 5, 19 February 2025

State Immunity
The Court of Appeal has confirmed that Libya was not protected by state immunity against the enforcement of an arbitration award. The parties had entered into a contract for the supply of a communications and information system. That contract contained an agreement to refer disputes to arbitration and it was common ground that this was sufficient submission by Libya within the meaning of section 9 of the State Immunity Act 1978 such that Libya was not immune from the adjudicative jurisdiction of the English courts in relation to that arbitration. General Dynamics had obtained a charging order over a London property owned by Libya. Libya’s appeal against that decision was dismissed. The agreement by Libya to submit disputes to arbitration also functioned as consent to execution of the arbitration award.
General Dynamics United Kingdom Ltd v The State of Libya [2025] EWCA Civ 134, 19 February 2025

Finance
The defendant bank issued a standby letter of credit to the claimant, Litasco, as security in financing arrangements for an LPG distribution network construction project. The defendant did not make payment when it was due. Litasco was awarded summary judgment on its claim for non-payment. The bank had several defences to the claim, the primary one being that the enforceability of a contract governed by English law can be determined by reference to the law of another country where the contractual performance required in that other country would be unlawful. The bank submitted that it was required to make payment in Mauritania where orders of the Mauritanian courts would make the relevant acts unlawful and under the Ralli Bros principle, this was a defence to Litasco’s claim. The court held that the Ralli Bros principle only applied where the unlawfulness resulted from legislation or regulations, rather than court orders and that it would not extend the principle in this way.
Litasco SA v Banque El Amana SA [2025] EWHC 312 (Comm), 14 February 2025

Should you wish to discuss any of these cases in further detail, please speak with a member of our London dispute resolution team below, or your regular contact at Watson Farley & Williams: