High Court · Decided 10 August 2012

WestLB AG v Philippine National Bank and others

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[2012] SGHC 162Case no. Originating Summons No 134 of 2004

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Andrew Ang J:
Introduction
[1] The present case arises from interpleader relief sought by the plaintiff, the Singapore branch of the German bank, West Landesbank (“WestLB”). The subject of dispute are certain sums of money totalling US$16.8m and £4.2m (“the Funds”) which are presently held by Harry Elias Partnership LLP (“HEP”), the current solicitors for the first and tenth defendants, viz, Philippine National Bank (“PNB”) and the Republic of the Philippines (“the Republic”), in an escrow account with WestLB.
[2] The Funds were originally part of a pool of assets held in various Swiss bank accounts (“the Swiss Deposits”) by the family and close aides of Ferdinand E Marcos (“the Marcoses”). Ferdinand E Marcos was the President of the Republic of the Philippines from 1965 until 1986 when he was overthrown in a bloodless revolution and exiled from the country. It is common knowledge that during his tenure the Marcoses illicitly looted from public coffers to amass a huge personal fortune. These looted assets, valued at approximately US$567m, were parked in various Swiss bank accounts.
[3] In 1998, following a chain of events involving the Swiss and Philippines authorities (see [13]–[19] below), the Swiss Deposits were released by the Swiss authorities to PNB, to hold as escrow agent. PNB then deposited the Swiss Deposits in various banks in Singapore. These included the Funds which were deposited with WestLB.
[4] Pursuant to an order of court dated 24 March 2004, made after the commencement of the interpleader proceedings, WestLB was ordered to pay the Funds into an escrow account established by PNB’s then solicitors, Drew & Napier LLC (“D&N”), for the credit of these proceedings. Following a further order of court dated 22 February 2006, the Funds were transferred to an escrow account held in the name of HEP for the credit of these proceedings. This remains the current state of affairs, pending the court’s determination of the question of entitlement to the Funds.
The parties claiming entitlement to the Funds
[5] PNB is a bank incorporated in the Republic of the Philippines with its principal office in Manila and branches in various cities including Los Angeles, New York, Honolulu and Singapore. It is jointly represented together with the Republic, which was joined as a defendant in May 2006. The claims by the Republic and PNB rest upon proceedings involving the Swiss authorities, the Republic and PNB concerning the release of the Funds from the Swiss bank accounts (see [24]–[28] below). The Republic and PNB refer to this chain of events as “the Green Line”, which will be described in greater detail at [13]–[19] below.
[6] The seventh defendants (Plaintiffs in the Estate of Ferdinand E Marcos Human Rights Litigation in Case No MDL840-R in the United States District Court for the District of Hawaii) were the plaintiffs in a class action human rights litigation which was adjudicated in the United States in In re The Estate of Ferdinand E Marcos Human Rights Litigation, MDL No 840 (D Hawaii) (“the US Human Rights Litigation”). These human rights victims (“the HRVs”) comprise 9,539 civilian citizens of the Republic, their heirs and beneficiaries, who had, between September 1972 and February 1986, suffered human rights abuses, including torture and summary executions, during the rule of Ferdinand E Marcos. The HRVs’ claim to the Funds arises out of enforcement proceedings in the US in relation to the US Human Rights Litigation (see [9]–[12] and [29] below).
[7] The second to sixth defendants, viz, Maler Foundation, Avertina Foundation, Palmy Foundation, Vibur Foundation and Aguamina Corporation (collectively “the Foundations”), are the named holders of the Swiss bank accounts which originally held the Swiss Deposits before they were released by the Swiss authorities. The second to fifth defendants were foundations established in Vaduz, Liechtenstein, while the sixth defendant was a corporation incorporated in Panama. The Foundations’ claim to the Funds is premised on their status as the original legal owners of the same; they seek to impeach the other parties’ claims and argue that, in the event, the Funds must revert back to them as original owners (see [31]–[35] below).
[8] There were originally two other defendants to these proceedings – the eighth defendant, the Estate of Roger Roxas; and the ninth defendant, The Golden Budha Corporation. However, they discontinued their claims in March 2006 and are no longer relevant to these proceedings.
Background facts
The US proceedings
[9] Following the impeachment of Ferdinand E Marcos, the US Human Rights Litigation was initiated against Ferdinand E Marcos in April 1986 by one Robert A Swift for and on behalf of the HRVs. After Ferdinand E Marcos’ death in September 1989, the Marcos Estate was substituted as the defendant, with Ferdinand E Marcos’ widow and son, ie, Imelda Marcos Ferdinand R Marcos (“Marcos Junior”), as its legal representatives.
[10] In early 1995, the US District Court of Hawaii ruled in favour of the HRVs and entered judgment for in excess of US$1.9b against the Marcos Estate (“the US Final Judgment”) (Celsa Hilao et al v Estate of Ferdinand E Marcos, 910 F Supp 1460 (D Haw 1995) (No 86-0390). These sums were to be paid out of the Foundations’ respective Swiss bank accounts, which the court found to be the property of the Marcos Estate. The court further imposed a preliminary injunction on the Swiss Deposits to prevent the Marcos Estate and its agents from transferring or secreting these away. The US Final Judgment was affirmed in its entirety by the US Court of Appeal in Maximo Hilao v Estate of Ferdinand Marcos, 103 F 3d 767 (9th Cir 1996).
[11] Contempt proceedings were subsequently initiated against Imelda Marcos and Marcos Junior for violating the above-mentioned injunction. By an Order Granting Additional Relief for Contempt dated 13 July 1995 (“the US Contempt Order”), the US District Court of Hawaii ordered the assignment, for the benefit of the HRVs, of all rights, title and interest in the Swiss bank accounts maintained in the names of various members of the Marcos family and their instrumentalities, which included the Foundations. It directed Imelda Marcos and Marcos Junior to, inter alia, execute an assignment of the relevant Swiss Bank accounts to Robert A Swift for the HRVs’ benefit, failing which the Clerk of the US Court would be directed to execute the same on behalf of Imelda Marcos and Marcos Junior. Judge Manuel L Real ordered that:
[12] The assignment was not executed by the legal representatives of the Marcos Estate. Consequently, on 14 July 1995, a deed of assignment of “all right, title and interest in and to bank accounts maintained in Switzerland in the names of”, inter alia, the Foundations, was executed by the Clerk of the United States District Court for the District of Hawaii (“Hawaii District Court”), Walter A Y Chinn, on behalf of the Marcos Estate (“the Chinn Assignment”). The Chinn Assignment read as follows:
This Chinn Assignment forms the chief basis of the HRVs’ claimed entitlement to the Funds (see [29]–[30] below).
The Swiss proceedings
The first request for international mutual assistance
[13] After Ferdinand E Marcos’ impeachment, the Republic had slowly begun its efforts to recover the Swiss Deposits. On 7 April 1986, it lodged a formal request for assistance from the Swiss authorities to locate and identify the ill-gotten assets of the Marcoses which had been deposited in Switzerland. The request was made pursuant to the Swiss Federal Act on International Mutual Assistance in Criminal Matters (20 March 1981) (“IMAC”) which empowers the Swiss authorities to seize and forfeit the proceeds of criminal acts which are within Switzerland.
[14] Pursuant to the procedures under IMAC, the Republic’s request was processed by the Swiss Federal Office for Police Matters and forwarded to the competent cantonal judicial authorities for execution. After investigations, the magistrates of the Swiss cantons issued freezing orders against the Swiss Deposits (“the Swiss freeze orders”). By a decision dated 21 December 1990, Swiss Federal Court Decision, IA 77, 79-84, 1990, the Swiss Federal Supreme Court upheld these freezing orders and gave directions for the in-principle transmission of the Swiss Deposits to the Republic. The Swiss Federal Supreme Court held that the actual transfer would be deferred until presentation of a decision by a Philippine court legally competent in criminal matters:
[15] Subsequently, on 17 December 1991, the Republic filed a Petition for Forfeiture before the Sandiganbayan, a special court in the Philippines having jurisdiction over both criminal and civil cases involving graft, corrupt practices and other offences committed by public officers in relation to their office. The Petition was made pursuant to Republic Act 1379 (“RA 1379”), a statute declaring forfeiture in favour of the Republic any property found to have been unlawfully acquired by a public officer and in conjunction with Executive Order Nos 1, 2, 14 and 14A. The defendants to the writ of petition were Ferdinand E Marcos, represented by his estate (“the Marcos Estate”) and Imelda Marcos. For convenience, these proceedings will be referred to as “the forfeiture proceedings”.
The second request for international mutual assistance
[16] In August 1995, the Republic filed a second request with the Zurich District Attorney for the early transfer of the Swiss Deposits into an escrow account with PNB in advance of a final and binding decision of the Philippine Courts in relation to the entitlement to the Swiss Deposits. On 21 August 1995, the Zurich District Attorney granted the request for the transfer of the Swiss Deposits to PNB as the Republic’s escrow agent, subject to the terms of certain escrow agreements (“the Escrow Agreements”) which were signed on 10 August 1995 between the PNB and the President Commission of Good Government (“PCGG”), which was established to assist in the recovery of the allegedly looted public funds. Under the Escrow Agreements, PNB undertook not to dispose of the Swiss Deposits other than in accordance with the following:
(a) a final and enforceable judgment of the Sandiganbayan or any other competent court in the Philippines;
(b) written and identical instructions from both the relevant Foundation and the PCGG; or
(c) instructions received from the PCGG as approved in principle by the Marcos Estate’s representatives.
[17] The orders of the Zurich District Attorney were affirmed by the Swiss Federal Supreme Court on 10 December 1997, subject to two additional requirements, Swiss Federal Court Decision, 123 II 595, 1997. First, the Republic had to undertake to brief the Swiss authorities regularly on the judicial confiscation and repayment proceedings as well as on the precautions and procedure pertaining to the compensation for the HRVs. Second, and more significantly, the Republic had to provide an assurance that the confiscation or repayment of the assets in question would be handled through judicial proceedings that complied with the principles established in Art 14 of the International Civil and Political Rights Pact (“Art 14”), which provides that:
In this connection, the Swiss Federal Supreme Court held (at [5(bb)]) that:
[18] Between April and July 1998, the Republic supplied the guarantees required and the Swiss authorities released the Swiss Deposits to PNB to hold as escrow agent. The Escrow Agreements empowered PNB to invest the Swiss Deposits in the money market or in securities, provided the relevant debtor or company had a Standard & Poor’s rating of at least “AA”. The Swiss Deposits were accordingly deposited in various banks, including the Funds, which came to be deposited in WestLB.
The Philippine proceedings
[19] The forfeiture proceedings culminated in a judgment dated 15 July 2003 (“the Forfeiture Judgment”) by which the Philippines Supreme Court ordered the Swiss Deposits held in escrow by PNB to be forfeited in favour of the PCGG, Republic of the Philippines v Sandiganbayan (GR No 152154) (July 15, 2003). The Philippines Supreme Court held that it did not matter that the Foundations were not made parties to the forfeiture proceedings:
[20] The release of the Forfeiture Judgment was followed by a press release by the Swiss Federal Office of Justice, issued on 5 August 2003, announcing, inter alia, that:
(a) the guarantees given by the Republic were satisfactory;
(b) the Forfeiture Judgment confirmed the view of the Swiss Federal Supreme Court with regard to the criminal origin of the moneys seized;
(c) the Philippines government could dispose of the Swiss Deposits; and
(d) no further decisions on this issue were due on the part of the Swiss authorities.
[21] Motions were subsequently made to the Philippines Supreme Court by the Marcos Estate, Imelda Marcos and Marcos Junior seeking reconsideration of the Forfeiture Judgment. The Forfeiture Judgment was reconsidered and affirmed by the Philippines Supreme Court in its Resolution of 18 November 2003 (“the Forfeiture Resolution”) (GR No 152154 (18 November 2003)). In rejecting the applicants’ argument that the summary nature of the forfeiture proceedings, which they argued was penal in nature, violated their due process rights as accused persons under RA 1379, Renato C Corona J held as follows (at pp 10–11):
Corona J went on to hold in the Forfeiture Resolution as follows (at pp 18–19):
Demands made on the Funds
[22] Pursuant to the Forfeiture Judgment, PNB procured the repayment of parts of the Swiss deposits from the various banks in Singapore with whom it had deposited the same. In this connection, PNB instructed WestLB to repay the Funds to PNB as and when the deposits matured. WestLB, however, would not release the Funds, in light of the HRV’s competing claim made known to WestLB on 8 September 2003. The Foundations also subsequently lodged their competing claims against the Funds.
[23] As mentioned at [4] above, the Funds were subsequently held in an escrow account by D&N for the credit of these proceedings before being transferred into an escrow account held in the name of HEP for the same purpose. This remains the current state of affairs, pending the court’s determination of the question of entitlement to the Funds.
Overview of the competing claims
The Republic’s case
[24] Counsel for the Republic and PNB, Mr Harry Elias SC (“Mr Elias”), argues that the Green Line, as described at [13]–[19] above, encapsulates the completed procedure adopted by the Swiss and Philippines authorities pursuant to the IMAC for the recovery of the ill-gotten gains of the Marcoses and subsequent determination of the entitlement to the Funds, ie, as long as this court finds that the Forfeiture Judgment complied with the terms of the Swiss orders and conditions set out in the Escrow Agreements, it must also conclude that the Republic is entitled to the Funds.
[25] According to Mr Elias, any other order would defeat the acts of the Swiss and Philippines authorities in the recovery of the ill-gotten gains of the Marcoses. He seeks to invoke the act of state doctrine by pointing out that the Funds were deposited in WestLB pursuant to the Swiss orders, which pertained to the mutual assistance measures adopted by two sovereigns for the determination of the entitlement to the Funds by the Philippines Supreme Court, which determination has been accepted by the Swiss authorities. As such, Mr Elias argues that a finding by this court on the title to the Funds must necessarily involve a finding on whether the IMAC process had been complied with, so as to render the doctrine applicable.
[26] In response, the Foundations and the HRVs seek to circumvent this “Green Line argument” by characterising the Republic’s claim as, in essence, an attempt to enforce the Forfeiture Judgment in the Singapore courts. In this connection, they argue that (a) the Forfeiture Judgment is a judgment in personam, and is therefore not capable of binding them; and (b) the Forfeiture Judgment is penal in nature and therefore cannot be enforced in Singapore.
[27] Mr Elias disagrees that the Forfeiture Judgment should be viewed in isolation from the Green Line. In any event, he submits that (a) the Forfeiture Judgment is a judgment in rem; and (b) the Forfeiture Judgment is not penal in nature as it merely restores ownership of the Swiss Deposits to the rightful owner, ie, the Republic. Mr Elias also emphasises that the question of the penal nature of the Forfeiture Judgment does not arise as the Republic is not seeking to enforce a claim against the Funds as judgment creditor but is merely requiring this court to recognise the Forfeiture Judgment.
PNB’s case
[28] On behalf of PNB, Mr Elias argues that even if the Green Line fails to establish the Republic’s entitlement to the Funds, PNB would retain the same as escrow agent. Mr Elias argues that as escrow agent PNB had legal title to the Funds and still retains it through HEP. It is thus entitled to immediate repayment of them as and when the deposits mature.
The HRVs’ case
[29] The HRVs rely on the Chinn Assignment to establish their purported beneficial entitlement to the Funds arguing, through their counsel, Mr Kenneth Tan SC (“Mr Tan”), that the Chinn Assignment was effective under US law to transfer to the HRVs all rights, title and interest in the Funds held by the Foundations. In this connection, Mr Tan argues that the US court was legitimately exercising in personam jurisdiction over the Marcos Estate by making the directions under the US Contempt Order and the Chinn Assignment. He points out that the US court found that the Foundations were the instrumentalities of the Marcoses, arguing that the Foundations were therefore before the US court, ie, the Assignment thus bound the Foundations and the HRVs. Mr Tan argues that the HRVs’ title to the Funds as conferred by the Chinn Assignment cannot be defeated by the Republic’s claim based on the subsequent Forfeiture Judgment, which Mr Tan argues is in personam in nature.
[30] Further, Mr Tan argues that the expiration of the US Final Judgment as of February 2005, which is undisputed, has no bearing upon the HRVs’ claim. First, he argues that the Chinn Assignment transferred the Foundations’ rights, title and interest in the Funds to the HRVs at the time of its execution. The HRVs’ interest in the Funds is thus unaffected by the subsequent expiration of the US Final Judgment. Second, the US Final Judgment had (following its lapse in Hawaii) been registered in, inter alia, California, New York, Illinois and Texas. Mr Tan argues that each registration of the US Final Judgment in another state created a new judgment capable of being executed upon beyond February 2005. Mr Elias and the Foundations’ counsel, Mr Rethnam Chandra Mohan (“Mr Mohan”), disagree. Relying on the evidence of the US law experts, Margery Bronster (“Ms Bronster”) for the Republic and PNB, and Professor Richard M Buxbaum (“Prof Buxbaum”) for the Foundations, Mr Elias and Mr Mohan argue that the Chinn Assignment, which was a mode of enforcement of the US Final Judgment, became unenforceable when the US Final Judgment expired in February 2005. For ease of reference, I shall refer to this as “the Re-registration issue”.
The Foundations’ case
[31] The basis for the Foundations’ claim to the Funds is fairly straightforward. Mr Mohan argues that since it is undisputed that the Funds originally belonged to the Foundations, as long as the Foundations can demolish the claims by PNB, the Republic and the HRVs, the Funds must necessarily revert to the Foundations as the original owners of the Funds.
[32] Mr Mohan argues that PNB, as escrow agent, was a mere custodian of the Funds until a competent court decides on the ownership, and had lost any title to the Funds when the Funds were interpleaded. He emphasised that PNB was merely a conduit to channel the Funds to the rightful party and that its role became superfluous when the Funds came to be held in escrow by HEP. Contrary to PNB’s position, Mr Mohan argues that HEP does not hold the Funds on behalf of PNB, but only holds the Funds for the credit of these interpleader proceedings as an administrative measure.
[33] Mr Mohan also argues that the Republic has no claim to the Funds. As mentioned at [26] above, it is the Foundations’ case that they cannot be bound by the Forfeiture Judgment since it was a judgment in personam arising from the forfeiture proceedings to which the Foundations were not parties. Mr Mohan also emphasises that the Republic failed to execute the guarantee it supplied to the Swiss authorities that it would involve the Foundations in the Forfeiture Proceedings and so cannot now purport to bind them by finding that they were the alter egos of the Marcoses. Further, Mr Mohan argues that the Forfeiture Judgment cannot, in any event, be recognised or enforced in Singapore as it is penal in nature.
[34] Mr Mohan argues that the HRVs’ claim also fails. First, he argues that the US Final Judgment binds the HRVs and the Marcos Estate but cannot bind the Foundations, which were not party to the US Human Rights Litigation. Second, the Chinn Assignment was an invalid mode of enforcing a judgment under Hawaiian Law and so failed to pass title to the HRVs. Third, even if the Chinn Assignment was valid under Hawaiian law, it was extinguished when the US Final Judgment expired as of 3 February 2005. Fourth, the Chinn Assignment also failed to pass title to the HRVs under Swiss law, since the Funds were at the material times subject to the Swiss freeze orders barring the Foundations from dealing with them.
[35] In light of the foregoing, Mr Mohan argues that title to the Funds must revert to the Foundations, which were the original account holders of the Swiss Deposits.
The issues
[36] The competing claims raise interesting and complex questions of private international law and may be distilled as follows:
(a) In relation to the Republic’s claim, which rests chiefly upon the Green Line culminating in the Forfeiture Judgment:
(i) Whether the act of state doctrine applies in support of the Republic’s Green Line argument (see [37]–[44] below);
(ii) Whether the Forfeiture Judgment is an in rem judgment and, if so, whether the Philippines court had jurisdiction to issue such a judgment (see [45]–[65] below); and
(iii) Whether enforcement of the Forfeiture Judgment would amount to indirect enforcement in Singapore of a penal and/or public law (see [66]–[74] below).
(b) In relation to the HRVs’ claim, which rests upon the Chinn Assignment: under the applicable law, whether the Chinn Assignment was effective in transferring to the HRVs the title to the Funds (see [75]–[109] below).
(c) What is PNB’s interest in the Funds (if at all) given its capacity as escrow agent appointed by the Republic and the Swiss authorities (see [110]–[116] below).
Analysis of the Republic’s claim
(1) Whether the act of state doctrine applies in support of the Republic’s Green Line argument
[37] As mentioned (at [24]–[25] above), Mr Elias relies on the act of state doctrine to assert the propriety and purported unassailability of the events constituting the Green Line. He submits that the Swiss freeze orders, the in-principle grant of the transmission of the Swiss Deposits to the Republic, the delegation of the determination of title to the Philippines courts, the subsequent transfer of the Swiss Deposits to Singapore and the Forfeiture Judgment forfeiting the Funds to the Republic were all acts of state falling squarely within the act of state doctrine. The upshot is that these listed acts must be deemed valid and unassailable by this court, ie, the Green Line remains intact and had validly vested the Republic with the title to the Funds.
[38] Despite the appealing simplicity of the Green Line argument, however, it is fundamentally flawed in its assumption that the act of state doctrine applies in aid of the Republic’s claim. The act of state doctrine immunises from judicial review the sovereign acts of a foreign state, which are automatically non-justiciable by reason of their sovereign nature. Where the doctrine applies, the forum court will refrain from adjudicating upon the propriety of the legislative or executive acts of a recognised foreign state within the limits of its own territory (Richard Fentiman, International Commercial Litigation (Oxford University Press, 2010) at paras 10.06 and 10.09; and Dicey, Morris & Collins, The Conflict of Laws, vol 1 (Sweet & Maxwell, 14th Ed, 2006) (“Dicey, Morris & Collins,vol 1”) at paras 5–041 and 5–043). In what was probably the earliest formulation of the modern act of state doctrine, Chief Justice Fuller of the US Supreme Court held in Underhill v Hernandez 168 US 250 (1897) that:
[39] The doctrine limits, for prudential rather than jurisdictional, reasons, the forum court from inquiring into the validity of a recognised foreign sovereign’s public acts committed within the latter’s own territory (Honduras Aircraft Registry Ltd v Government of Honduras 131 F.3d 157 (11th Cir, 1997)). As such, it is separate and distinct from the doctrine of sovereign immunity (David Epstein & Charles S Baldwin, IV, International Litigation: A Guide to Jurisdiction, Practice and Strategy (Martinus Nijhoff Publishers, 4th Rev Ed, 2010) (“Epstein & Baldwin”) at p 292).
[40] Such restraint stemmed from the judicial recognition that certain disputes involving foreign sovereigns are not appropriately considered by the courts (Epstein & Baldwin at pp 278, 281–282). As was observed in Banco Nacional de Cuba v Peter L F Sabbatino 376 US 398 (1964) at 423:
[41] In Underhill v Hernandez, the defendant was a general in command of a revolutionary army in Venezuela which had seized the city Bolivar where the plaintiff, an American citizen, was resident. The plaintiff had constructed a waterworks system for Bolivar under a contract with the defeated government and also ran a machinery repair business. When he applied for a passport to leave the city, this was refused by the defendant who wished that the former would operate his waterworks and repair works for the benefit of the community and revolutionary forces. When the plaintiff was finally allowed to return to the US, he commenced proceedings in the Circuit Courts to recover damages caused by, inter alia, the defendant’s refusal to grant him a passport, his alleged confinement in his own house and for alleged assaults and affronts by the defendant’s subordinates. On appeal, Chief Justice Fuller declined a decision on the merits. The revolutionary government under which the defendant was acting had since been recognised by the US as the legitimate government of Venezuela. The defendant’s acts were thus the acts of the government of Venezuela and, as such, were not properly the subject of adjudication in the courts of another country (Underhill v Hernandez at 254).
[42] For the act of state doctrine to apply, the “act” in question must be a public governmental act and the subject-matter of the act must be located within the foreign sovereign’s territory at the material time (Epstein & Baldwin at pp 279, 289). Further, there must exist a “factual predicate” for the doctrine to apply, ie, act of state issues only arise when the outcome of the case turns upon the effect of official action by a foreign sovereign (W S Kirkpatrick & Co, Inc, et al v Environmental Tectonics Corporation, International 439 US 400 (1990) at 406).
[43] Turning to the present facts, the Green Line argument based on the act of state doctrine appears to be a red herring. First, the challenge mounted by the HRVs and the Foundations against the Republic’s case is that the Forfeiture Judgment did not validly vest in the Republic an entitlement to the Funds. The Forfeiture Judgment, which was rendered by the Philippines Supreme Court, was not a legislative or executive act to which the act of state doctrine applies. Second, and more importantly, there is no issue arising for determination by this court as to the propriety of any foreign sovereign act. A close examination of the claims by the HRVs and the Foundations shows that neither contains a challenge as to the legitimacy of the Swiss freeze orders, the in-principle grant of the transmission of the Swiss Deposits to the Republic, the delegation of the determination of title to the Philippines courts and the subsequent transfer of the Swiss Deposits to Singapore. The act of state doctrine would have been relevant and of aid to the Republic had the challenge against its case been in relation to these listed acts. As this is not the case, the Republic’s reliance on the act of state doctrine appears somewhat misplaced.
[44] As stated, the crux of the dispute in relation to the Republic’s entitlement to the Funds centred on the legal effect of the Forfeiture Judgment, viz, whether it passed beneficial title to the Republic, which would in turn depend upon whether the Forfeiture Judgment is in personam and penal in nature, as the HRVs and the Foundations assert. Given the foregoing, the act of state doctrine does not apply in this case.
(2) Whether the Forfeiture Judgment is an in rem judgment and, if so, whether the Philippines court had jurisdiction to issue such a judgment
[45] It is the HRVs’ and the Foundations’ case that the Forfeiture Judgment is a judgment in personam which only binds parties to the forfeiture proceedings, ie, the Republic and the Marcoses. In response, Mr Elias argues that the Forfeiture Judgment is a judgment in rem, drawing support from the Philippines Supreme Court’s statement in its Forfeiture Resolution that RA 1379 proceedings were in rem (see [21] above). After a close examination of the relevant authorities and the facts before me, I am of the view that the Forfeiture Judgment is by nature in rem. However, for reasons stated at [63]–[65] below, this court nevertheless is unable to grant recognition to the Forfeiture Judgment.
Whether the Forfeiture Judgment is an in rem judgment
The law
[46] A judgment in rem determines the status of a thing or person and is binding on the world. By contrast, a judgment in personam binds only parties to the proceedings (Adrian Briggs & Peter Rees, QC, Civil Jurisdiction and Judgments (Informa, 5th Ed, 2009) (“Briggs & Rees”) at paras 7.44 and 7.57 and Pattni v Ali and anor [2007] 2 AC 85 (“Pattni”) at [21]). For example, while a divorce decree may be a judgment in rem in so far as it determines the status of the parties, an ancillary order declaring the interests of those parties to the matrimonial assets binds only the parties personally and is a judgment in personam (Murakami Takako (executrix of the estate of Takashi Murakami Suroso, deceased) v Wiryadi Louise Maria [2007] 4 SLR(R) 565 (“Murakami Takako”) at [33]).
[47] In determining whether a foreign judgment is in rem or in personam, it is not relevant whether the foreign court recognises these concepts. The forum court will have to undertake this inquiry independently, considering the nature of the proceedings culminating in the foreign judgment, the substance of the judgment and the intended effect of the order on the parties to the proceedings (Murakami Takako at [30]). In Pattni, for example, the English court held that a Kenyan judgment ordering the respondents to transfer certain shares to the appellant “as per the said sale and purchase agreement” was a classic order in personam for specific performance, following an examination of the aim and intended effect of the Kenyan judgment. Lord Mance held (Pattni at [28]–[35]):
Lord Mance emphasised that a judgment in rem must relate to the status or disposition of property which is to be valid as against the whole world; the mere fact that a judicial determination relates to the existence of property rights between parties does not in itself mean that it is in rem (Pattni at [23]).
[48] In another English decision, Louis Castrique v William Imrie and anor (1869–1870) LR 4 HL 414 (“Castrique”), the House of Lords examined the nature and effect of certain French proceedings before concluding that they were in rem. In that case, the original owner of the ship, one Claus, executed a mortgage of the ship in favour of one Harrison in November 1854. The mortgage was transferred to one Emley, who registered himself as the ship owner, and subsequently to one Castrique in April 1855. As Castrique only registered himself as owner in April 1857, Emley remained the owner under English law as of April 1855. In the interim, the ship embarked upon a voyage during which it stopped by in Melbourne to be repaired and furnished with necessities. The captain Benson drew a bill on Claus for the amount due (“the Melbourne Bill”).
[49] The ship entered a French port on 4 May 1855. While it was there, Claus became bankrupt and, in the meantime, the Melbourne Bill was indorsed to French subjects, who commenced a suit in the Tribunal de Commerce in France against Benson on the bill. Benson appeared but did not defend the suit. On 15 May 1855, judgment was entered against Benson (“the French judgment”) declaring the debt “privileged on the ship”, ie, having priority over others. The French authorities seized the ship pursuant to the French judgment. However, before it could be sold, the Tribunal de Commerce’s judgment had to be ratified by the French Civil Tribunal which would first hear the ship owners. Although Claus and Benson received notices to appear before the French Civil Tribunal, they did not appear, and the judgment was confirmed and the ship’s sale ordered. When Castrique subsequently became aware of those proceedings, he commenced a suit in the French Civil Tribunal to replevy the ship, but was unsuccessful. When the ship finally arrived in England, he demanded possession of it and brought a suit in an English court to recover it on the ground that the sale in France was illegal and void as against his earlier title.
[50] The decision in Castrique turned upon the nature of the French judgment; if the French judgment was in rem, Castrique would fail in his claim since the ship was in France at the time of the French proceedings, ie, the French in rem judgment would bind the world, including Castrique. On the other hand, the French judgment would not bind Castrique if it was in personam, given that Castrique was absent from the French proceedings.
[51] The distinction between judgments in rem and in personam was explained in some detail by Blackburn J. If the court ordered a litigant’s property to be sold in execution of a judgment against that litigant, there was nothing to prevent any third party from setting up his claim to that property because the tribunal neither had jurisdiction to determine, nor did it determine, anything more than that the litigant’s property should be sold, and did not do more than to sell the litigant’s interest, if any, in the thing (Castrique at 427–428). The case was, however, different when the tribunal had jurisdiction to determine not merely the rights of the parties but also the disposition of the thing, and did in the exercise of that jurisdiction direct that the thing, and not merely the interest of any particular party in it, be sold or transferred (Castrique at 428). Blackburn J held (Castrique at 428–430):
[52] In concluding that the French judgment was in rem in nature, Blackburn J held (Castrique at 432):
Lord Hatherley also concluded that the French judgment was a judgment in rem (Castrique at 443–445):
[53] Castrique was applied in Minna Craig Steamship Company and James Laing v Chartered Mercantile Bank of India London and China [1897] 1 QB 55 (“Minna Craig”). In that case, while a ship owned by the English plaintiff company was loading in Bombay for a voyage to Hamburg, the master was fraudulently induced to sign bills of lading for goods which were never loaded onto the ship. The bills of lading were indorsed to the English defendants. Under German law, non-delivery of goods specified in a bill of lading entitles the bill holder to a lien upon the vessel. Upon the ship’s arrival in Germany, a winding-up order was made against the plaintiff. The defendants, who had in the meantime discovered the fraud, arrested the ship and commenced proceedings against her in a German court to enforce their lien. The German court ordered the ship to be sold, and ordered that lien to be satisfied out of the sale proceeds. Although the plaintiff had notice of these proceedings, it did not appear. Subsequently, liquidators of the plaintiff sued the defendants in England to recover the fruits of the foreign judgment. The defendants argued that the German proceedings were in rem and binding on the plaintiff. Collins J agreed with the defendants (Minna Craig at 61):
[54] It is essential to the recognition of a foreign judgment in rem that the res should have been situated in the foreign country concerned at the time of the proceedings (Dicey, Morris & Collins, vol 1 ([38] supra), at para 14–104; and Briggs & Rees ([46] supra) at para 7.57). If the res were so situated, jurisdiction would exist even if the owner did not consent to its being there, eg, where a yacht is stolen and abandoned in a foreign port (Dicey, Morris & Collins, vol 1, at para 14–104). On the other hand, if the res were situated elsewhere, the foreign court would have had no such jurisdiction (Dicey, Morris & Collins, vol 1, at para 14–101).
[55] A case in point is Calyon v Irene Michailaidis and others [2009] UKPC 34 (“Calyon”), which concerned an ownership dispute in relation to a collection of Eileen Gray furniture (“the Collection”). From about the 1970s until his death, Christo, who was part of a wealthy Greek shipping family, lived with one Robin in a house in Kensington. When Christo died in 1999, he was domiciled in Greece and, under Greek law, his mother (“Irene”) and sister (“Despina”) were his heirs. In 2000, Robin sold the Collection through a Paris dealer for $15m. The Collection was flown to Switzerland for delivery to the buyer and the sale proceeds were dissipated by Robin for various purposes. The Collection ended up with the Gibraltar branch of a French bank (“Calyon”).
[56] Christo’s family disputed Robin’s right to sell the Collection, claiming that the Collection belonged to Christo and had therefore passed to his heirs upon his death. On 23 February 2001, they started proceedings against Robin and Robin’s company (“RSL”) which had benefitted from the sale proceeds. On the same day, Robin and RSL issued proceedings in Athens seeking a declaration that Robin was the owner of the Collection and joined Irene, Despina and the administrators as defendants. In June 2004, the Greek court delivered judgment in favour of Irene and Despina. Armed with the Greek judgment, Irene and the administrators proceeded to the courts of Gibraltar, asserting that Calyon had dishonestly assisted Robin in a breach of trust.
[57] Lord Rodger held that, if it were treated as a judgment in rem, it could not be granted recognition since the Collection was never within the jurisdiction of the Greek court (Calyon at [20]):
[58] As a judgment in personam, the Greek judgment could not bind Calyon. This was because Calyon had not been made a party to the Greek proceedings (Calyon at [21]):
The present facts
[59] As earlier stated at [45] above, I am of the view that the Forfeiture Judgment is a judgment in rem. The Philippines Supreme Court had explicitly stated in the Forfeiture Resolution that “a forfeiture proceeding is an action in rem, against the thing itself instead of against the person”. It had also clearly indicated its intention to finally determine the ownership of the Funds, stating, in the Forfeiture Judgment, that:
[60] The in rem nature of the forfeiture proceedings may also be discerned from the wording of RA 1379 pursuant to which the proceedings were instituted. In particular, ss 2 and 6 of RA 1379 provide:
It is clear, from the wording of these provisions, that the proceedings under RA 1379 were directed against the res in question – as long as the presumption of unlawful acquisition is not adequately rebutted, the res would become vested in the State. That the forfeiture proceedings were directed against the res, ie, the Funds in the present case, is also demonstrated by the fact that the Funds were in the meantime parked in escrow accounts pending final determination of their disposition (see [16] above). Further, the forfeiture proceedings were brought in relation to Executive Order No 2 (12 March 1986), which, inter alia, required full disclosure from all persons and entities who had knowledge of possession of such ill-gotten assets, and prohibited them from concealing, transferring or dissipating them and from otherwise frustrating or obstructing the recovery efforts of the government.
Whether the Philippines court had jurisdiction to issue an in rem judgment
Non-participation of the Foundations in the forfeiture proceedings
[61] Having found that the Forfeiture Judgment is in rem in nature, what effect does it have in the present proceedings? Mr Mohan argues that the Philippines Supreme Court did not, in any event, have jurisdiction to bind the Foundations, since, contrary to the guarantees provided by the Philippines authorities to the Swiss authorities (see [17]–[18] above), the Foundations were not made parties to the forfeiture proceedings. I disagree.
[62] As Mr Elias rightly points out, while the Philippines government guaranteed that the Foundations would be entitled to be heard in the forfeiture proceedings, it did not undertake a duty to implead the Foundations. Significantly, after the Forfeiture Judgment was released in July 2003, the Swiss Federal Office of Justice issued a press release announcing, inter alia, that the guarantees provided by the Republic were satisfactory and that the Philippines government could dispose of the Swiss Deposits (see [20] above). In the circumstances, there is no basis for this court to find that the Philippines authorities had breached the conditions set out by the Swiss Federal Supreme Court. As evidenced by Powers of Attorney executed by Imelda Marcos in favour of the Foundations’ Mr Patrick Foetisch, the Foundations were aware of the forfeiture proceedings and their right to participate in the same. They chose not to participate in the forfeiture proceedings despite having notice of the same and cannot now rely on their non-participation as a basis for arguing that the Forfeiture Judgment did not bind them (see, for example, Minna Craig) ([53] supra).
Situs of the Funds at the material time
[63] In spite of the foregoing, there is an impediment to the recognition of the Forfeiture Judgment in that the Funds were not in the Philippines but in Singapore at the time of the Forfeiture Judgment. As discussed (see [54]–[57] above), it is essential to the recognition of a foreign judgment in rem that the res should have been situated in the foreign country concerned at the time of the proceedings.
[64] To circumvent this difficulty, Mr Elias argues that the Philippines Supreme Court had jurisdiction to bind the world as the authorities of Switzerland, where the Funds were originally situated, had delegated jurisdiction to it pursuant to the IMAC proceedings, thus giving it constructive custody of the Funds. In other words, as the Funds were deposited in Singapore pursuant to and in accordance with the Swiss orders, the situs of the Funds in Singapore was immaterial to the force of the Forfeiture Judgment which was rendered in compliance with the IMAC process.
[65] Unfortunately, no authority has been cited in support of such an extension of the principle of recognition of judgments in rem. While the references to “actual or constructive possession of the subject matter” and “situated within the lawful control of the state” in, for example, Castrique and Calyon ([55] supra), may suggest that the principle may accommodate situations where the foreign state only has constructive custody of the res, in the absence of full and proper argument on this specific point, this court would be slow to adopt such a position. In any event, even if, as the Republic suggests, the jurisdictional requirements were fulfilled on the basis of constructive custody, this court would still be unable to grant recognition to the Forfeiture Judgment due to its penal nature, as explained below.
(3) Whether the Republic’s claim depends upon the indirect enforcement in Singapore of a foreign penal law
[66] The HRVs and the Foundations argue that enforcement of the Forfeiture Judgment in Singapore would amount to indirect enforcement of RA 1379, which, they aver, is a penal law. Accordingly, they argue that the Republic’s claim, premised on the Forfeiture Judgment, must fail.
The law
[67] It is trite that a forum court will not enforce a foreign judgment if to do so would amount to a direct or indirect enforcement of a penal law, revenue law or other public law of the foreign state (Dicey, Morris & Collins, vol 1, at para 5–020 and Relfo Ltd (in liquidation) v Bhimji Velji Jadva Varsani [2008] 4 SLR(R) 657 at [53]). As Lord Denning MR held in Attorney-General of New Zealand v Ortiz [1984] 1 AC 1 (“Ortiz”) at 20:
[68] This rule stems from the foreign state’s lack of international jurisdiction to enforce its laws outside its own territory and the forum court’s unwillingness to exercise its own jurisdiction in aid of an attempt by the foreign state to act in excess of its own jurisdiction (Government of the Islamic Republic of Iran v The Barakat Galleries Ltd [2008] 3 WLR 486 (“Barakat Galleries”) at [97]). The rule was explained by Lord Denning MR in similar terms (Ortiz at 21):
[69] In Banco de Vizcaya v Don Alfonso de Borbon y Austria [1935] 1 KB 140 (“Banco de Vizcaya”), the Spanish Republic declared the ex-King of Spain (“Alfonso”) to be a traitor, decreed that all his property be seized for the benefit of the State and ordered all bankers in Spain having in deposit any such property to deliver the same to the Spanish Treasury. Certain securities belonging to Alfonso had been deposited in an English bank (“WBank”) to the order of the Spanish bank (“BV”), which was Alfonso’s agent. Both Alfonso and BV claimed the delivery up of these securities. WBank took out an interpleader summons. Lawrence J held that BV was not in reality asserting its own contractual rights as they originally existed but the rights of the Spanish Republic. Consequently, BV’s claim failed, since to countenance it would amount to an enforcement of an admittedly penal law of the Spanish Republic (Banco de Vizcaya at 143–145):
[70] It is important to note that whether a foreign law is penal is to be determined by the forum court (Barakat Galleries at [106]). “Penal law” was defined by the Privy Council in Huntington v Attrill [1893] AC 150 (“Huntington v Attrill”) at 156–157 as follows:
In light of this nuanced definition, care should be taken not to conflate the concepts of “criminal” with “penal”; the forum court may conclude that the foreign law is penal even if it does not form part of the criminal code of a foreign country (Barakat Galleries at [108]). As observed in Dicey, Morris & Collins, vol 1 ([38] supra), at para 5–027, for the present purposes, a penal law could be one which punishes or prevents an offence.
The present facts
[71] In arguing that the Forfeiture Judgment was not penal in nature, Mr Elias emphasised that the Forfeiture Judgment and the Forfeiture Resolution had stated in no uncertain terms that forfeiture proceedings under RA 1379 are civil in nature and do not terminate in the imposition of a penalty (see [21] above). This, however, does not foreclose the issue since, as mentioned at [70] above, whether a foreign law is penal is to be decided by this court. That the proceedings under RA 1379 were not criminal in nature also does not determine the issue whether such law is of a penal nature.
[72] In United States of America v Inkley [1989] 1 QB 255 (“Inkley”), the US government brought an action against the defendant for the enforcement of a judgment for the amount of an appearance bond obtained in a Florida federal court sitting as a civil court. The defendant, who had been arrested in the US and charged with criminal offences, had been released on bail but had subsequently failed to appear to answer criminal charges. In refusing to enforce the Florida judgment, the English Court of Appeal held that since the purpose of the action was part of a public law process aimed to ensure attendance of persons accused of crime before the criminal courts, the general context was criminal and penal, and was unaffected by the fact that it was dressed up in civil form (Inkley at 265–266):
[73] I find that the HRVs and the Foundations are correct in contending that the success of the Republic’s case is dependent upon the indirect enforcement of a foreign penal law. RA 1379, which provides for the forfeiture of property in favour of the state whenever any property is found to have been unlawfully acquired by a public officer, is clearly of a penal nature since it summarily forfeits property in the hands of public officials in consequence of a wrong committed by the individual. Significantly, during Mr Tan’s cross-examination of the Republic and PNB’s Philippines law expert Mr Ed Vincent S Albano (“Mr Albano”), Mr Albano confirmed that the forfeiture proceedings under RA 1379 did not apply to revest originally state-owned property in the State but vested property in the State by virtue of the forfeiture:
[74] Indeed, the intrinsically penal nature of the forfeiture proceedings under RA 1379 was borne out during Mr Tan’s cross-examination of Mr Albano:
That RA 1379 was penal in character was also conceded by Mr Albano during his cross-examination by Mr Mohan:
In the premises, I find that the Forfeiture Judgment was penal in nature, and consequently dismiss the Republic’s claim.
Analysis of the HRVs’ claim
[75] The HRVs’ primary case is that the Chinn Assignment validly transferred all right, title and interest in the Funds from the Foundations to the HRVs. Their argument is based on the assumption that the issue is the validity of the Chinn Assignment vis-a-vis the assignor and assignee, and that such issue is to be determined by US law. They rely on the evidence of their US law expert, Professor David I Levine (“Prof Levine”), to support their claimed entitlement to the Funds pursuant to the Chinn Assignment under US law.
[76] The Republic and PNB disagree, arguing that it is Swiss law which governs the question of validity of the Chinn Assignment. In any event, they argue that the Chinn Assignment is invalid under both Swiss law and US law. For this, they rely on the evidence of their Swiss law expert, Dr Andres Lanzlinger (“Dr Lanzlinger”), and the evidence of Ms Bronster. The Foundations did not, in their closing submissions, address the question of the appropriate law governing the issue. However, like the Republic and PNB, their position is that the Chinn Assignment was ineffective in passing title to the HRVs under both Swiss law and US law. They rely on the evidence of Prof Buxbaum, who testified on the content of US law, and the evidence of Dr Lanzlinger on the content of Swiss law.
[77] Two questions arise. First, is there a true conflict between US law and Swiss law on the relevant issues to be decided? As mentioned, although only the Republic and PNB have tendered expert evidence on Swiss law, parties have all produced evidence in relation to US law and, perhaps unsurprisingly, the US law experts have provided varying opinions on the validity and effect of the Chinn Assignment. The possibility of a false conflict thus presents itself since the Chinn Assignment could very well be ineffective to pass title under both US law and Swiss law. Second, if US law and Swiss law differ in their treatment of the Chinn Assignment, which system of law applies? As will be seen (at [109] below), these questions will in turn determine the Re-registration issue.
[78] A court seeking to discover the lex causae (ie, governing law) typically embarks on a three-stage process involving, viz:
(a) the characterisation of the relevant issue;
(b) the selection of the choice of law rule which lays down a “connecting factor” for that particular issue; and
(c) the identification of the system of law which is tied by that connecting factor to the relevant issue (Macmillan Inc v Bishopsgate Investment Trust plc (No 3) [1966] 1 WLR 387 (“Macmillan No 3”) at 391–392; Raiffeisen Zentralbank Osterreich AG v Five Star Trading LLC [2001] QB 825 (“Raiffeisen”) at [26]).
[79] Although, generally, the three-step “search” for the lex causae is undertaken after a determination of the presence of a true conflict situation (Janeen M Carruthers, The Transfer of Property in the Conflict of Laws (Oxford University Press, 2005) (“Carruthers”) at para 4.10), there is, in the present case, value in first setting out the appropriate characterisation of the issue and the relevant connecting factor because (as will be seen from the analysis) much of the disagreement on the effect of the Chinn Assignment may be attributed to a mischaracterisation of the relevant issue, feeding into the failure to pinpoint the appropriate connecting factor and, hence, the appropriate governing law. In undertaking the three-step inquiry, the following observations by Mance LJ in Raiffeisen at [26]–[29] are borne in mind:
Stage 1: Issue characterisation
[80] Mr Tan frames the issue as one concerning the validity of the assignment as between the assignor and assignee, ie, the Foundations and the HRVs. I find this to be too narrow a construction of the dispute at hand, bearing in mind its context as an interpleader action. By focusing purely on the assignor-assignee relationship, Mr Tan has essentially characterised the issue as a contractual one. This, however, is problematic. First, framing the issue in contractual terms is artificial when one considers the involuntary nature of the Chinn Assignment. Second, and more importantly, a “contractualisation” of the issue ignores the fact that the Chinn Assignment had expressly directed “all persons acting in the capacity or title of custodians, officers, directors or trustees of entities having authority over the bank accounts” to effect the transfer of the Funds as directed. This putative third party reach of the Chinn Assignment cannot be ignored.
[81] As Mr Elias rightly points out, the court is ultimately concerned with determining who has proprietary entitlement to the Funds. In the face of the competing claims, the issue is more appropriately framed in property terms, viz, whether the Chinn Assignment effectively vests in the HRVs proprietary rights to the Funds which are good against the whole world.
Stage 2: The choice of law rule
[82] Parties have suggested various connecting factors that might apply on the present facts. Given the manner in which Mr Tan has framed the issue (see [80] above), he argues that US law applies as the lex loci actus, and that, pursuant to US law, the Foundations’ rights, title and interests in the Funds were validly assigned to the HRVs under the Chinn Assignment. Alternatively, he argues that the appropriate governing law should be the law governing the assignor and the assignee (ie, the proper law of the assignment), and that since both were subject to the jurisdiction of the US court at the relevant time, the lex causae is US law. Mr Elias, on the other hand, argues that the validity of the Chinn Assignment, which was an involuntary assignment akin to an attachment or garnishment of debt, should be determined based on the lex situs of the debt, that being Swiss law. As mentioned, Mr Mohan takes the view that it is immaterial which law applies as the HRVs would have no claim in any event.
[83] However, the lex loci actus, the lex situs and the proper law of the assignment appear to be inappropriate in cases of involuntary assignments of intangible movable property, such as the present. After reviewing the authorities, I am of the view that the law governing the question whether the HRVs had obtained a proprietary right to the Funds under the Chinn Assignment is the proper law of the debt, which is in this case Swiss law. This is distinct from the proper law of the assignment. I will examine each connecting factor raised by the parties before explaining why the proper law of the debt is the most appropriate law to govern the issue.
(i) US law as the lex loci actus
[84] The HRVs rely on the leading case of Republica de Guatemala v Nunez [1927] 1 KB 669 (“Nunez”) in support of their position that US law applies as the lex loci actus. Nunez concerned moneys which were deposited with London bankers by a former president of the Republic of Guatemala (“ROG”), Cabrera, who was domiciled in Guatemala. The moneys had allegedly been wrongfully misappropriated by Cabrera from the ROG. Cabrera subsequently assigned the moneys, by way of gift, to his son, Nunez, who was also domiciled in Guatemala. An interpleader action was brought by the London bankers to determine the title issue between the ROG and Nunez. To do so, the English court had to determine the validity of the purported assignment based on either English law as the lex situs, under which the assignment was valid, or Guatemalan law, under which the assignment was void. The English court opted for the latter position. Unfortunately, due to the lack of unanimity in the judges’ reasoning, it is unclear whether Guatemala law applied as the lex domicilli or the lex loci actus, since those two connecting factors coincided on the facts (Mark Moshinsky in The Assignment of Debts in the Conflict of Laws (1992) 108 LQR 591 (“Moshinsky”) at pp 598–599, 601). However, regardless of whether Guatamala law applied as the lex domicilli or lex loci actus, Nunez does not really advance the HRVs’ case as it dealt with a voluntary assignment, as distinct from the Chinn Assignment.
[85] I also note that the emphasis on the loci actus as a connecting factor appears now to have become outmoded even in the context of voluntary assignments, since modern conditions may render the place of the transaction to be purely fortuitous (JHC Morris, The Conflict of Laws (Sweet & Maxwell, 7th Ed, 2009) (“Morris”) at para 15–027, Moshinsky at p 601 and Macmillan No 3 at 402). A fortiori in the context of involuntary assignments.
(ii) US law as the proper law of the assignment
[86] The HRVs also suggest that US law may apply as the proper law of the assignment. There are, however, at least two reasons for rejecting this suggestion. First, it would not be sensible for the proper law of the assignment to be pivotal in cases of involuntary assignments. As I have explained, the contract metaphor in cases of involuntary assignments is not well-founded, and consequently, focusing on the act constituting the assignment, may not be the most appropriate option. Second, it is important to note that there are two tiers of relationships involved in assignment of debts, viz:
(a) the relationship between the assignor (ie, the Foundations) and assignee (ie, the HRVs); and
(b) the relationship between the third party debtor (ie, the Swiss Banks) and the assignor or assignee.
As we are concerned with the proprietary effect of the Chinn Assignment, it would not be appropriate to focus purely on the relationship in the first tier. As was observed in Moshinsky at pp 594–595:
(iii) The lex situs and proper law of the debt
[87] As Mr Elias argues, despite the labelling of the Chinn Assignment as an “assignment”, its putative effect is essentially to effect a garnishment of the Swiss accounts in which the Funds were deposited. Questions relating to the effect of garnishment of debts may be broadly divided into two categories. First, whether the Singapore court should garnish a debt; and second, whether the Singapore court should recognise a foreign court’s garnishee order or its equivalent as having discharged a debt (P J Rogerson, The Situs of Debts in the Conflict of Laws – Illogical, Unnecessary and Misleading (1990) 49(3) CLJ 441 (“Rogerson”) at p 447).
[88] These two categories of cases may be further sub-divided. Under the first category, the Singapore court may be asked to decide whether to make a garnishee order over a debt situated:
(a) in Singapore; or
(b) in another country.
(a) Under the second category of cases, which raises more difficult questions, the Singapore court may have to determine the validity of a garnishee order made in a foreign country over:
(c) a debt situated in Singapore; or
(d) a debt situated in yet another foreign country.
(b) This court’s assessment of the Chinn Assignment falls within situation (d), which raises the most complex questions. There is, unfortunately, a dearth of cases dealing with situation (d). It thus becomes necessary to consider cases within situations (a) to (c) in order to draw out the relevant and underpinning principles.
Situation (a) and (b) cases
[89] When determining whether to garnish a debt, courts have concentrated on the situs of the debt as an important factor in coming to a decision. As observed in Rogerson at p 450:
The emphasis on the situs of the debt stems from the concern that the potential garnishee may otherwise be faced with the “double jeopardy” problem of multiple claims if the English court makes a garnishee order which does not discharge the debt of the potential garnishee to the judgment debtor according to the law governing the debt (Morris at paras 15–042 and 15–043; and Carruthers at para 6.65); Philip R Wood, Conflict of Laws and International Finance (Sweet & Maxwell, 2007) explains at para 10–018:
[90] In Societe Eram Shipping Co Ltd v Cie Internationale de Navigation [2004] 1 AC 260 (“Societe Eram”), a Romanian shipping company sought to enforce a judgment against judgment debtors residing in Hong Kong. Execution was sought against moneys standing to the judgment debtors’ credit in a Hong Kong bank account. In third party proceedings, the Romanian company obtained an English garnishee order nisi against the bank but, on application for the order to be made absolute, the undisputed evidence was that Hong Kong law did not recognise such an order made in England in relation to a debt sited in Hong Kong. The House of Lords upheld the trial judge’s decision to discharge the order nisi. Lord Bingham of Cornhill held (Societe Eram at [16]):
[91] Societe Eram was affirmed in Kuwait Oil Tanker Co SAK and another v Qabazard [2004] 1 AC 300 (“Qabazard”). Having obtained judgment in an English court, the judgment creditor sought execution against moneys standing to the judgment debtor’s credit in a Swiss bank account. The English court refused to make a garnishee order. Lord Hoffmann held that (Qabazard at [16]–[17]:
[92] Societe Eram and Qabazard may be contrasted against Swiss Bank Corporation v Boemische Industrial Bank [1923] 1 KB 673 (“Boehmische”) where a garnishee order was made absolute by the English court. The plaintiff (“SBC”) obtained judgment against a Czech bank (“BIB”) carrying on business in Prague. SBC then obtained a garnishee order nisi in an English court attaching a debt owed by an English bank to BIB. The garnishee order was made absolute by the English Court of Appeal which held that there was no significant risk that the English bank would be compelled to pay twice. Banks LJ placed much emphasis on the situs of the debt, holding (Boehmische at 678–680):
It is clear, from this extract, that the underlying concern is, as discussed, the risk of exposing the third party debtor to multiple claims. Atkin LJ also placed much emphasis on the situs on the debt, holding (Boehmische at 684–685):
Situation (c) and (d) cases
[93] Situation (c) and (d) cases involve the forum court having to determine the validity of a foreign garnishee order. According to Morris ([85] supra) at para 15–044, whether an English court gives effect to a foreign garnishee order depends on whether the debt is situated, ie, properly recoverable, in the foreign country where the garnishee order was made. The significance of the lex situs in these situations is also recognised in Halsbury’s Laws of Singapore, vol 6(2) (LexisNexis, 2009) at para 75.326:
There are, unfortunately, few cases on this point, though two cases, viz, Rossano v Manufacturers’ Life Insurance Co Ltd [1963] 2 QB 352 (“Rossano”) and Power Curber International Ltd v National Bank of Kuwait SAK [1981] 1 WLR 1233 (“Power Curber”) are consistent with this formulation.
[94] In Rossano, the plaintiff Egyptian national (“Rassano”) bought certain insurance policies from the defendant company (“MLI”) which was incorporated according to Canadian law with branches in many countries, including Egypt. When the policies matured, Rassano brought an action in England claiming the money due under them. In defence, MLI argued, inter alia, that it was not liable to pay Rossano such sums as there were garnishee orders served upon MLI’s Egyptian branch by the Egyptian tax department in respect of tax alleged to be due by Rassano and that payment to Rossano would expose MLI to the risk of having to pay the money twice. Significantly, the policies prescribed the mode of payment as “in banker’s demand draft on London” or “on New York”, ie, the situs of the debt was not Egypt (Rosanno at 379). Following the position taken in Morris (see [93] above), one might surmise that the Egyptian garnishee orders should not be recognised since the debt was not situated in Egypt. However, McNair J relied upon a different ground to refuse recognition of the validity of the garnishment orders, viz, that recognition of those orders would offend against the well-settled principle that an English court would not enforce a foreign revenue law. It was thus strictly unnecessary for McNair J to address the parties following arguments on the choice of law question outlined by the learned judge (Rossano at 376):
McNair J observed obiter (Rossano at 381–382) as follows:
[95] Power Curber, on the other hand, involved a Kuwaiti garnishment of sums payable in North Carolina under a letter of credit. The facts may be stated briefly. An American corporation (“PC”) supplied goods to a Kuwaiti firm, Hammoudeh. In return, Hammoudeh asked its bank in Kuwait to issue a letter of credit to banks in the US. Subsequently, there was a Kuwaiti court order for provisional attachment of the sums payable by the Kuwaiti bank under the letter of credit to PC, which purported to prevent the Kuwaiti bank from making any further payments under the letter of credit. An action was brought by PC against the Kuwaiti bank in England for summary judgment vis-a-vis the sums due to PC under the letter of credit. In holding that the Kuwaiti order did not provide the bank with a defence against a claim for payment under the letter of credit, Griffiths J observed (Power Curber at 1242–1243) as follows:
In short, the court refused to recognise the Kuwaiti order which was ineffective to discharge the debt under North Carolina law. It is unclear whether North Carolina law was applied as the lex situs or proper law of the letter of credit since those connecting factors coincided on the facts. What was clear was the obvious concern that the banks could otherwise be exposed to multiple claims.
The lex situs or the proper law of the debt?
[96] The cases discussed thus far indicate that the lex situs assumes a large measure of significance in issues to do with garnishee orders involving foreign elements. This position has however been criticised. The most obvious criticism arises from the artificiality of treating debts as capable of having a situs (Rogerson ([87] supra) at pp 454–455):
[97] Flowing from this is the more fundamental objection that using the situs as a connecting factor adds an extra unnecessary layer to the choice of law analysis, which obfuscates rather than clarifies the actual connecting factor relied on by the courts. This objection has been stated in the following terms (Rogerson at p 453):
In other words, as a debt does not in reality have a situs, deferring to the lex situs requires the court to attempt to locate the situs by asking further questions, eg, where the debtor is resident, where the debt is enforceable, etc. This obscures the true basis for the court’s conclusion on the choice of law and results in the situs being an unstable connecting factor. Such a situation is not desirable because a choice of law rule requires a connecting factor that, ideally, points to a single system of law. The situs of the debt fails to achieve this as (Rogerson at 455):
Indeed, it must not be assumed that, where a debt is situated in England, there will never be a risk of double jeopardy and that jurisdiction will always be assumed (Cheshire, North & Fawcett, Private International Law (Oxford University Press, 14th, 2008) at p 1239; Dicey, Morris & Collins, The Conflict of Laws, vol 2 (Sweet & Maxwell, 14th Ed, 2006) (“Dicey, Morris & Collins, vol 2”) at para 24–082).
[98] In Deutsche Schachtbau-und Tiefbohrgesellschaft mbH v Shell International Petroleum Co Ltd (trading as Shell International Trading Co) [1990] 1 AC 295, a German company (“DST”) was awarded, pursuant to arbitration, a sum of money from a company incorporated in R’As al-Khaimah (“Rakoil”). The arbitration award was recognised under English law but not under the law in R’As al-Khaimah. Before the English court, DST sought to garnish a debt owed to Rakoil by Shell International Petroleum (“Shell”) which was the English subsidiary of an Anglo-Dutch group of companies. Shell was subject to the jurisdiction of the English court and the debt was situated in England. It was, however, clear that the garnishee order would not be recognised in R’As al-Khaimah. Payment to DST under an English garnishee order would therefore not discharge Shell from its obligations under R’As al-Khaimah law. It also appeared that the courts of R’As al-Khaimah were in a position to force Shell to pay. As it would have been unfair to make Shell pay twice, the House of Lords held that the garnishee order should not have been made.

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WestLB AG v Philippine National Bank and others

Grounds of decision

Introduction

The parties claiming entitlement to the Funds

Background facts

The US proceedings

The Swiss proceedings

The first request for international mutual assistance

The second request for international mutual assistance

The Philippine proceedings

Demands made on the Funds

Overview of the competing claims

The Republic’s case

PNB’s case

The HRVs’ case

The Foundations’ case

The issues

Analysis of the Republic’s claim

(1) Whether the act of state doctrine applies in support of the Republic’s Green Line argument

Whether the Forfeiture Judgment is an in rem judgment

The law

The present facts

Whether the Philippines court had jurisdiction to issue an in rem judgment

Non-participation of the Foundations in the forfeiture proceedings

Situs of the Funds at the material time

(3) Whether the Republic’s claim depends upon the indirect enforcement in Singapore of a foreign penal law

The law

The present facts

Analysis of the HRVs’ claim

Stage 1: Issue characterisation

Stage 2: The choice of law rule

(i) US law as the lex loci actus

(ii) US law as the proper law of the assignment

(iii) The lex situs and proper law of the debt

Situation (a) and (b) cases

Situation (c) and (d) cases

The lex situs or the proper law of the debt?