High Court finds lender's claim not barred due to sovereign immunity

The High Court has found in favour of a lender in its claim against a sovereign state and a central bank for unpaid sums due under multiple facility agreements and guarantees, finding that it was not barred on sovereign immunity grounds: African Export-Import Bank v National Government of the Republic of South Sudan & Anor [2025] EWHC 1079 (Comm).

The decision will be of interest to financial institutions as it illustrates the enforceability of loan agreements and guarantees against sovereign states and central banks, particularly when they fail to engage in proceedings. It is a reminder that, under the State Immunity Act 1978 (SIA 1978), foreign states generally enjoy immunity from the jurisdiction of the English courts (as can a state’s central bank or monetary authority, even if a separate entity). However, exceptions exist, particularly for commercial transactions or when the state or central bank has expressly submitted to the jurisdiction of the English courts.

The decision highlights the importance of including express jurisdiction and waiver of immunity clauses in financial contracts with sovereign states and their central banks. While the nature of a transaction may inherently be commercial and fall under the "commercial transaction" exception in the SIA 1978, these clauses provide extra protection. They ensure transactions also meet the "submission to jurisdiction" exception in the SIA 1978, minimising the risk of claims being barred on sovereign immunity grounds and reducing the likelihood of a successful sovereign immunity defence.

We consider the decision in more detail below.

Background

Between 2019 and 2020, the claimant lender entered into three facility agreements with the first defendant, a sovereign state. The borrower's obligations under two of the agreements were guaranteed by the second defendant, a central bank. By 2023, the borrower defaulted on all the agreements. The lender accelerated the loans, making all the amounts immediately due and payable, and sent demand letters to both the borrower and the guarantor. The borrower acknowledged the debt in pre-action correspondence. However, the borrower and guarantor failed to repay any of the sums due.

The lender commenced proceedings against the borrower and guarantor, who failed to engage or to file any acknowledgement of service or defence. Although entitled to default judgment, the lender sought a reasoned judgment from the court to aid its efforts to enforce any judgment abroad. It applied under CPR 24.4(1) for permission to apply for summary judgment, and if permission was granted, for summary judgment. The borrower and guarantor were given notice of the summary judgment application hearing but did not appear. The lender requested that the court determine the summary judgment application in their absence, which the court agreed to for compelling reasons.

The court considered the potential sovereign immunity defence the borrower and guarantor might have raised if they had appeared. It noted that, under s 1(2) SIA 1978, it was required to satisfy itself that the borrower and guarantor could not claim sovereign immunity, even in their absence.

Decision

The High Court found in favour of the lender, finding it was entitled to apply for and to enter summary judgment against the borrower and guarantor.

The key issues which will be of interest to financial institutions are examined below.

Permission to apply for summary judgment

The court referred to established principles from European Union v Syria [2018] EWHC 1712 (Comm) and DVB Bank SE v Vega Marine Ltd [2020] EWHC 1494 on the purpose of CPR 24.4(1) and on the conditions to be met before the court will grant permission to apply for summary judgment against a defendant prior to the filing of an acknowledgement of service. In particular, the court noted that: (i) permission should be granted only where the court is satisfied that the claim has been validly served and that the court has jurisdiction to hear it; and (ii) the fact that a summary judgment may be more readily enforced in other jurisdictions than a default judgment is a proper reason for seeking permission to apply for summary judgment and it is enough that the claimant reasonably believes that a summary judgment may be more readily enforced in other jurisdictions.

Applying these principles to the present case, the court found that the necessary pre-conditions were met. It was satisfied that the proceedings, application and supporting evidence were all served on the borrower and guarantor at their nominated process agent's registered offices, which was valid (as per Trafigura v Republic of South Sudan [2020] EWHC 2044 (Comm)).

Further, in accordance with CPR 6.11 and CPR 6.33, the court underlined that its jurisdiction was clearly established in the present case. The court had jurisdiction as of right by service on the borrower and guarantor's appointed process agent in the jurisdiction. Each of the contracts contained an exclusive jurisdiction clause in favour of the courts of England and Wales. Additionally, the court was satisfied that there were no further grounds for suggesting that any other jurisdiction would be the forum conveniens for bringing this claim. In any event, even if a properly arguable jurisdiction challenge could have been mounted, the time for doing so had long since expired.

Finally, the lender's belief that a reasoned judgment from the court on the merits may assist with enforcement was consistent with Trafigura, a similar case involving the defendants.

Summary judgment

Applying the established principles from Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) on summary judgment applications, the court said it was satisfied that the borrower and guarantor had no real prospect of successfully defending the claims. Nor was there any other compelling reason for a trial.

The court noted that the claims were all based squarely on the express terms of the agreement and guarantees. These were unambiguous and clear. There were no facts in dispute and accordingly there was no basis to conclude that disclosure or witness evidence would shed any further light on the claims or give rise to any potential ground of defence. The borrower expressly acknowledged the debt in pre-action correspondence, and the guarantor failed to participate at all.

The court said it was satisfied that neither defendant would have been able to successfully assert a claim for sovereign immunity.

The court noted that under s.14(1)-(2) SIA 1978, the general rule is that a foreign state is immune from the jurisdiction of the English courts. Further, under s.14(3)-(4) SIA 1978, a state’s central bank or monetary authority may also enjoy certain privileges, even if it is a separate entity from the state.

However, the court underlined that there were a number of exceptions to state immunity, two of which were applicable in the present case:

1. The borrower and guarantor each had submitted to the jurisdiction of the English courts by a "prior written agreement" under s.2 SIA 1978. The agreements and guarantees each contained express exclusive jurisdiction clauses in favour of the English courts, and also included express waiver of immunity clauses. These were each sufficient to satisfy the requirement for a "prior written agreement" pursuant to s.2 SIA 1978.
2. The proceedings related to a "commercial transaction" entered into by a state under s.3(1)(a) SIA 1978, which provides that there is no immunity for such proceedings. Under s.3(3)(b) SIA 1978, a commercial transaction includes "any loan or other transaction for the provision of finance and any guarantee or indemnity in respect of any such transaction or of any other financial obligation". The agreements at issue in the present case were each "loans" or "transaction[s] for the provision of finance", whilst the guarantees were "guarantee[s]" or [indemnities] in respect of any such transaction".

Accordingly, the court found in favour of the lender, finding it was entitled to apply for and to enter summary judgment against the borrower and guarantor.