The Philippines v Maler Foundation [Russian Federation, Supreme Court.]

JurisdictionRusia
CourtSupreme Court (Russia)
JudgeChan CJ,Phang JA
Docket Number(Civil Appeal No 7 of 2007)

(Chan CJ; Phang JA)

(Civil Appeal No 7 of 2007)

Singapore, Court of Appeal

Republic of the Philippines
and
Maler Foundation and Others1

State immunity Jurisdictional immunity Interpleader Interest in property Funds in escrow State claiming title to proceeds of bank account Whether State able to invoke State immunity to prevent proceedings going ahead Control and possession of property through an agent or trustee Stay of proceedings Waiver of immunity Whether a foreign State entitled to immunity after submitting to the jurisdiction of the courts of the forum State Whether actions of third party capable of amounting to waiver Whether third party acting as agent of the State The law of Singapore

Summary:2The facts:The Republic of the Philippines (the appellant) applied to stay interpleader proceedings in respect of certain sums of money held in a bank account of the Philippine National Bank (PNB) in Singapore. The funds in the account, which were part of a larger sum of assets, were said to have been illegally accumulated by the late Ferdinand E. Marcos, his family and associates, during the period of his presidency of the Philippines. The assets were originally held in Swiss bank accounts of the first to fifth respondents. At the request of the appellant, the Swiss courts froze the assets between April 1986 and January 1990, pending legal proceedings in the Philippines to determine the ownership of the assets. The freezing orders were changed by the Federal Supreme Court of Switzerland on 10 December 1997, and the funds were released to the appellant subject to a requirement that they be held on escrow pending a final and binding decision as to their ownership by a competent Philippine court. PNB was appointed the escrow agent for this purpose, and the funds were held in escrow in PNB's account with WestLB AG, Singapore (WLB).

On 16 July 2003, the Supreme Court of the Philippines ordered that the funds be forfeited to the appellant. The majority of the funds deposited with WLB were released to the appellant on 25 August 2003, following the ruling of the Supreme Court. However, before WLB could release the remaining funds, several other claimants notified WLB of their competing claims to the funds on various grounds. WLB then commenced interpleader proceedings in the High Court of Singapore, and the High Court ordered that the remaining funds be transferred to an escrow account held by PNB's solicitors, pending the outcome of the proceedings.

On 18 August 2005, PNB made an interlocutory application to stay the interpleader proceedings on the ground of forum non conveniens. The application was dismissed and PNB did not appeal against the dismissal order. The appellant was added as a defendant to the interpleader summons for the purpose of asserting its interest in, and State immunity in respect of, the funds. On 22 August 2006, the appellant filed an application for the interpleader proceedings to be stayed (the Stay Application) pursuant to Section 3 of the State Immunity Act, and for the funds to be released to it. The appellant argued that it owned the funds as a result of the forfeiture order given by the Supreme Court of the Philippines, and that it had possession and control of the funds through PNB. Moreover, the appellant contended that, as a sovereign State, it was entitled to assert State immunity in respect of those funds.

The High Court dismissed the Stay Application. Applying the test laid down by the Privy Council in Juan Ysmael & Company Inc. v. Government of the Republic of Indonesia (21 ILR 95), the High Court found that the appellant had established sufficient standing to stay the interpleader proceedings on the basis of State immunity, since its claims to the funds were not merely illusory, nor founded on a title manifestly defective. However, the High Court held that the appellant had, by its agent PNB and by its own conduct, already submitted to the jurisdiction of the court so that, by virtue of Section 4(1) of the State Immunity Act, it could no longer claim immunity. The appellant appealed.

Held:The appeal was dismissed.

(1) The basic principle of State immunity, enshrined in Section 3 of the State Immunity Act, was that a foreign sovereign State was immune from the jurisdiction of the Singapore courts and could not be impleaded, directly or indirectly, in any action before those courts without its consent. The common law continued, however, to be relevant in the determination of whether a court could grant sovereign immunity in any particular case (para. 33).

(2) The doctrine of State immunity did not apply in cases where claims to debts or choses in action were not in the possession of the sovereign State, whether directly or indirectly, but were instead in the hands of a third party which was neither an agent nor a trustee of the State, and especially where, as in the present case, the assets were being held in escrow by the third party (paras. 347 and 4655).

(3) The test laid down by the Privy Council in Juan Ysmael was inapplicable in the present case. The question of whether the conditions of the escrow were fulfilled was a threshold issue and not one to be left to the interpleader proceedings. Applying the test enunciated in Juan Ysmael would have left the appellant's claim to the funds undetermined so long as the appellant did not submit to the jurisdiction of the Singapore courts to prove its claim (paras. 3845).

(4) In the present case, PNB did not act as the appellant's agent in the interpleader proceedings, and accordingly, the appellant had not submitted to the jurisdiction of the courts of Singapore through the acts of PNB (paras. 615).

(5) Where a foreign State had submitted to the jurisdiction of the Singapore courts by taking steps or making requests that invoked the jurisdiction of the Singapore courts, it could no longer claim State immunity. In the present case, the appellant had intended to invoke the jurisdiction of the Singapore courts by incorporating a request for the release of the funds in its Stay Application. The appellant had therefore taken a step in the proceedings for the purpose of Section 4(3)(b) of the State Immunity Act, and was deemed to have submitted to the jurisdiction of the Singapore courts (paras. 7981).

The following is the text of the judgment of the Court, delivered by Chan CJ:

INTRODUCTION

1. The Republic of the Philippines (the Appellant) has appealed against the decision of Kan Ting Chiu J (the Judge) dismissing its application in Summons No 3874 of 2006 (the Stay Application) to stay the interpleader proceedings in Originating Summons No 134 of 2004 (the Interpleader Summons) on the basis of state immunity (see WestLB AG v. Philippine National Bank[2007] 1 SLR(R) 967 (the Judgment)).

FACTUAL BACKGROUND

2. The interpleader proceedings concern competing claims to certain moneys (the Funds) which are held in an escrow account in the name of Harry Elias Partnership (HE&P), the solicitors for Philippine National Bank (PNB), for the credit of the said proceedings. The Funds were originally held in escrow in PNB's account with WestLB AG, Singapore (WLB) pending the determination of the ownership of or the title to the Funds by the courts of the Philippines, upon which event the escrow would automatically terminate. On 15 July 2003, the Supreme Court of the Philippines ordered that the Funds be forfeited to the Appellant on the ground that they were the ill-gotten gains of the former President of the Philippines, the late Ferdinand E. Marcos, and Mrs Imelda R. Marcos.

3. However, before WLB could release the Funds to PNB as the account holder, eight other claimants notified WLB of their claims to the Funds on various grounds. As a result, WLB took out the Interpleader Summons to interplead the conflicting claims of the nine claimants. PNB was named as the first defendant in the Interpleader Summons. Five foundations, viz, the Maler Foundation, the Avertina Foundation, the Palmy Foundation, the Vibur Foundation and the Aguamina Corporation (collectively referred to as the Foundations), which are the first to fifth respondents in this appeal, were named as the second to sixth defendants. The seventh defendant in the Interpleader Summons (the sixth respondent in this appeal) is collectively the plaintiffs in the Estate of Ferdinand E. Marcos Human Rights Litigation in Case No MDL840-R in the United States District of Hawaii (the HR Claimants), who had obtained damages from the Hawaiian district court on 3 February 1995. The eighth and the ninth defendants have withdrawn from the interpleader proceedings and are not parties to this appeal. Hereafter in this judgment, the Foundations and the HR Claimants will be referred to collectively as the Respondents.

How and Why the Funds came to be Deposited in Singapore

4. The Funds (which at this time amounted to about US $25m inclusive of interest) were originally part of a larger pool of assets (the Marcos assets) held in the Swiss bank accounts of the Foundations. They came under the jurisdiction of the Singapore courts in rather unusual circumstances. The journey began on 28 February 1986, two days after former President Ferdinand E. Marcos and his family fled the Philippines, when the Appellant set up a commission called the Presidential Commission on Good Government (PCGG) to recover [all the] ill-gotten wealth accumulated by former President Ferdinand E. Marcos, his immediate family, relatives, subordinates and close associates, whether located in the Philippines or abroad during his presidency. Some of the assets in question were the Marcos assets, which, as at 31 January 2002, amounted to more than US $658m with accrued interest.

5. The PCGG sought the assistance of the Swiss authorities to recover the Marcos assets from the Foundations. On 24 March 1986, the Swiss Federal Council issued an interim order freezing the Marcos assets pursuant to a Swiss federal law, viz, the International Mutual Assistance...

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