Commercial Court rules on application to set aside default judgment against Pakistan

12/05/14

On Friday Burton J handed down his decision in Mid-East Sales Limited v The Islamic Republic of Pakistan [2014] EWHC 1457 (Comm), a case concerning an application by Pakistan to set aside a default judgment entered against it in January 2011.

The underlying claim related to the supply by the Claimant, Mid-East Sales Limited, of power turbines to Khan Research Laboratories (“KRL”), the organisation responsible for the development of Pakistan’s nuclear weapons capability. The Claimant contended that KRL, an organisation controlled by Pakistan’s Strategic Plans Division, which is responsible for all aspects of Pakistan’s nuclear security and atomic energy, was an organ of the Pakistan state, and thus that Pakistan was liable for the debts of KRL pursuant to the Privy Council’s decision in La Générale des Carrières et des Mines v F.G. Hemisphere Associates LLC [2012] UKPC 27.

The claim was issued in June 2007, default judgment was entered in January 2011, and an interim Third Party Debt Order was obtained in December 2012. Pakistan did not apply to set aside the default judgment until April 2013, when it also applied for a declaration that the Court had no jurisdiction to hear the dispute under CPR Part 11.

Burton J held that an application to set aside a default judgment should be determined in accordance with the new stricter approach to rules compliance mandated by the Court of Appeal in Mitchell following the Jackson reforms. He also held that Pakistan had adopted a deliberate strategy of avoiding participation in the English proceedings despite knowing about their existence, and, even taking into account the grace period given to States under s. 12(5) of the State Immunity Act 1978, had only been spurred into action by the Claimant’s attempts to enforce the default judgment. He therefore dismissed Pakistan’s Part 11 application. However he also held that Pakistan’s assertion of State immunity from jurisdiction had to be determined on the balance of probabilities (which was not possible on the evidence before him), and that as a result it was necessary to set aside the default judgment, subject to conditions.

The judgment is here.