This blog post is by Max Archer of 12 King’s Bench Walk.
In Iranian Offshore Engineering and Construction Co v Dean Investment Holdings SA & Ors  EWHC 2759 (Comm), Baker J held that where a claim was governed by foreign law but the claimant had not pleaded or proved the content of that law, the court would apply English Law as per rule 25(2) of Dicey, Morris & Collins on the Conflict of Laws. Where a claimant has pleaded a viable cause of action and the defendants had not argued that it would be inappropriate to apply English law, it must apply as per rule 25(2).
The claimant’s claims arose out of an alleged fraud following acts committed in Iran and the UAE.
The claims did not plead Iranian Law, albeit the claimant accepted that in principle the claims were governed by Iranian law. Two of the defendants pleaded that the claims against them were governed by Iranian law but they did not plead any specific case as to its content. None of the parties sought expert evidence as to Iranian law.
The matter was listed for a three-week trial in the Commercial Court. At the pre-trial review the defendants raised the issue as to whether it would be appropriate for them to contend at trial that the claimant’s failure to plead and prove the principles of Iranian law meant that their claims should fail as it would be inappropriate to apply English law in default under rule 25(2). The claimant sought an order that rule 25(2) would apply at trial.
The issue arose out of the application of the evidential assumption of English Law set out in Dicey, Morris & Collins on the Conflict of Laws. Rule 25(1) of Dicey stated that where foreign law applied, it had to be pleaded and proved by expert evidence. Rule 25(2) stated that, absent satisfactory evidence of foreign law, the court would apply English law. Dicey stated that there could be cases where applying English law would be too artificial to be appropriate and suggested that where a party had pleaded foreign law but failed to prove it, the court could regard it as having failed to establish its case.
It was this latter suggestion that the defendants wished to argue at trial.
The judge found in favour of the claimant, an order was made confirming that rule 25(2) applied and that the defendants could not raise the issue.
The judge’s analysis of rule 25(2) was set out as follows:
“i) It is not necessary for a claimant to plead the existence of, or an intention to rely at trial upon, Rule 25(2). It goes without saying that it will apply — otherwise it would not be the default rule that it is — unless reason not to apply it be demonstrated.
ii) It follows that even a plea as to applicable law, let alone a plea as to the content of some possibly applicable foreign law, is not a material averment a claimant is required to make if the matters, as pleaded, that it says create liability do not involve or imply the advancing by it of any case as to the content of some foreign law.
iii) A claimant might of necessity plead some matter of foreign law, but for which it would fail to disclose any cause of action (imagine, for example, a negligence claim for bad advice about possible US tax liabilities); or a claimant might choose, whether or not it would have a claim by reference to English law, to base its claim upon a system of foreign law it said was applicable. In either type of case, different considerations would arise.
iv) Where, however, as in this case, a claimant neither needs nor chooses to plead foreign law, in order to plead what would be a complete and viable cause of action if the claim be determined under English law, as by default it will be, a contention that it is inappropriate to determine the claim by reference to English law, so that it should fail come what may, is a reasoned denial of liability. Since determination of the claim under English law is the default rule in English proceedings, even where (in principle) the law governing a claim is or might be a foreign law, any contention that it is inappropriate to apply that rule must necessarily be founded upon matters particular to the claim in question.
v) In principle, therefore, and in line with CPR 16.5(2)(a) , it is for a defendant, if it wishes to raise any such contention at trial, to plead it as a reasoned denial of liability, setting out the matters particular to the claim said to render it inappropriate to judge it by reference to English law. If it does not do so, then no such contention will be open to it at trial, subject to (vi) below. The particular matters said to render the default application of English law inappropriate might well include, and perhaps often will include, relevant propositions of foreign law, but not necessarily.
vi) There is no absolute rule precluding the possibility of relying at trial on a contention that ought to have been pleaded, whether in support of or in defence of a claim. There could be a late amendment, or the grant of indulgence at trial to rely on an unpleaded case, or perhaps even the raising of the point of the court’s own motion at trial. Of course, it will be a rare case where it will be fair for that to occur only at (or on the eve of) trial, assuming proper pre-trial case management. But the existence of those procedural possibilities means, as I say, that there is no absolute rule of preclusion.”
The judge’s analysis followed the (obiter) judgments of Arden LJ in OPO v MLA  EWCA Civ 1277 and Brownlie v Four Seasons Holdings Inc  EWCA Civ 665,  1 WLR 1814.
He distinguished Belhaj et al. v Straw et al.  EWHC 4111 (QB),  EWCA Civ 1394,  2 WLR 1105. In Belhaj the claimant and his wife asserted causes of actions against a former Foreign Secretary and others in respect of the defendants’ participation in what they said had been their unlawful rendition. The claimants had raised the appropriateness of judging their claims by reference to English law by pleading in their reply that reliance on foreign law was “inappropriate and otiose” because it was to be presumed that the law of all relevant countries will provide a remedy to victims of serious human rights violations, alternatively because it was substantially more appropriate to apply English law to the determination of their claims. The court found that the claimant’s claims by their very nature raised the question whether their detentions had been unlawful under local law rendering the idea of determining the claims at trial by reference to English law (by default) “wholly artificial and unrealistic” (Court of Appeal at ).
The judge in Iranian Offshore was not of the view that Belhaj laid down
“a rule of general application that where a claim is governed by foreign law, the claimant must plead a case as to the content of that foreign law. If I am wrong in that, and the Court of Appeal did intend to state such a general rule, then: it was not necessary to the decision in Belhaj ; it is inconsistent with Arden LJ’s analysis in OPO v MLA and Brownlie that I have said I find compelling; I would therefore decline to follow it.”
The judge found that none of the matters pleaded by the claimant involved advancing a positive case as to the content of Iranian law: there was not a positive plea as to its content. The defendants had conceded that foreign law was applicable, however, they had not themselves advanced a positive case on the point. Neither had it pleaded any case as to the appropriateness of applying rule 25(2): conceding that foreign law was applicable did not amount to a denial of the application of the rule. There had been various case management conferences and the claimant had made it clear it was relying on the rule. No objection was made at any point by the defendants. The mere fact that foreign law was contended for by both parties in their pleadings did not mean that it was artificial to apply English law at trial under rule 25(2). With the defendants having made no objection as to the appropriateness of applying English law, nor advanced any positive case as to foreign law, rule 25(2) had to apply.