‘Law Debenture Trust Corp Plc v. Ukraine UKSC 11 – Can a threat by one foreign state [‘S.1’] to use physical violence against civilians of another foreign state [‘S.2’] and a threat to damage property in S.2 constitute duress under English Law?’
‘Where a contract is governed by English law, the English courts can entertain the defence of duress raised by a sovereign state [S.1] based on threats by another state [S.2] to use physical violence towards the armed forces and civilians of the threatened state and threats to damage or destroy property in the threatened state. Such threats can constitute duress under English law.’ (‘Duress, Undue Influence and Unconscionable Dealing’ by Nelson Enonchong (2023) Fourth Edition, Sweet & Maxwell, p.15).
At 147, their Lordships stated:
‘In argument, counsel for Ukraine maintained that Ukraine’s case on duress was based on the fact of the threats, that is to say on the nature of the acts which were threatened, rather than on their treatment under international law. On that basis, counsel characterised Ukraine’s case in relation to the threatened use of force as being based on duress of the person and of goods. Although counsel for the Trustee understandably emphasised that Ukraine’s case had not been pleaded in that way, the characterisation of this aspect of its case as one of duress of the person and of goods can be regarded as a change in the legal analysis of the facts pleaded rather than a different case on the facts. Defective pleadings which can be cured by amendment are not necessarily struck out without affording the pleader the opportunity to cure the deficiency, and the court has a wide ambit of discretion in this regard. The same principle also applies in the context of an application for summary judgment. In the present case, any trial of the action remains some considerable way off. We are also mindful that the law of duress has been the subject of significant clarification during the course of these proceedings. With all these factors in mind, we are prepared to consider Ukraine’s case based on alleged duress of the person and of goods. Any prejudice to the Trustee arising from Ukraine’s change of tack, and its failure to argue its case on the same basis in the courts below, is capable of being addressed in costs.’
Since equitable compensation ‘is a remedy by which the court of equity award substantial compensation for loss which the complainant has suffered as a result of the defendant’s equitable wrong … [it] is available even in a transaction where no property was transferred or none is required to be returned through rescission … Equitable compensation is a remedy which may be available in its own right in the absence of rescission … Equitable compensation seeks to restore the parties financially to the status quo ante.’ (Enonchong, para 28-064).
The Law Debenture Trust Corporation plc (Appellant) v Ukraine (Represented by the Minister of Finance of Ukraine acting upon the instructions of the Cabinet of Ministers of Ukraine) (Respondent) – The Supreme Court