Whether property was “for the time being in use or intended for use for commercial purposes” within the meaning of section 13(4) of the State Immunity Act 1978 did not depend on the property’s origin but on the use to which the state had chosen to put it.

The Supreme Court so held in dismissing an appeal by the claimant, SerVaas Inc, a judgment creditor of the Republic of Iraq, against the decision of the Court of Appeal (Stanley Burnton and Hooper LJJ, Rix LJ dissenting) [2011] EWCA Civ 1256 dismissing its appeal against the decision of Arnold J [2010] EWHC 3287 (Ch) that its claims against moneys due to the Republic of Iraq under a scheme of arrangement relating to the London branch of the Rafidain Bank, involving debts previously owed by Rafidain to their commercial creditors, were immune from execution by reason of section 13(2)(b) and (4) of the 1978 Act because the moneys were not property which was for the time being in use or intended for use for commercial purposes.

The 1978 Act provides by section 13: “(2) Subject to subsection … (4) below … (b) the property of a state shall not be subject to any process for the enforcement of a judgment … (4) Subsection (2)(b) above does not prevent the issue of any process in respect of property which is for the time being in use or intended for use for commercial purposes …”

LORD CLARKE JSC said that the appeal was concerned with the scope of a state’s immunity from execution of a judgment given against it, which was governed by section 13(2)(b) and (4) of the 1978 Act. The central question was whether the nature of the origin of the debts was relevant to the question whether the property in question was in use for commercial purposes. It was not. That conclusion was based upon the language of section 13(4). It was also informed by the decision of the House of Lords in Alcom Ltd v Republic of Columbia [1984] AC 580. The expression “in use for commercial purposes” should be given its ordinary and natural meaning having regard to its context. It would not be an ordinary use of language to say that a debt arising from a transaction was “in use” for that transaction. Parliament did not intend a retrospective analysis of all the circumstances which gave rise to property, but an assessment of the use to which the state had chosen to put the property. On the facts, the claimant could not show that the debts were or had been earmarked (or in use) for being drawn down upon in order to satisfy commercial liabilities.

LORD PHILLIPS PSC, BARONESS HALE, LORD SUMPTION AND LORD REED JJSC agreed.