The UK Supreme Court in Maduro Board of the Central Bank of Venezuela v Guaidó Board of the Central Bank of Venezuela [2021] UKSC 57 unanimously allowed the Guaidó Board’s appeal in part, holding that the UK Government has recognised Mr Guaidó as interim President of Venezuela and that the act of state doctrine prevents the English courts from adjudicating the legality, under Venezuelan law, of Mr Guaidó’s appointments to the Central Bank of Venezuela. However, the Supreme Court also held that the Maduro Board may rely on judgments of the Venezuelan Supreme Tribunal of Justice (“Venezuelan STJ”) striking down Mr Guaidó’s appointments, if those judgments meet the requirements for recognition by the English courts (whether or not they do was remitted to the Commercial Court). The judgment represents an important development of the act of state doctrine, which will help UK-recognised foreign governments to take control of assets in England and, in the right circumstances, should provide more legal certainty to financial institutions that have commercial dealings with sovereigns and sovereign owned entities.

The appeal relates to two different legal proceedings in which the same issue has arisen: does the Guaidó Board or the Maduro Board have authority to deal with assets of the Central Bank of Venezuela in England? We have summarised the key facts and issues of this case in our previous article (Venezuelan gold continues to be held at the Bank of England) in relation to the Court of Appeal’s decision.

The Supreme Court overturned the Court of Appeal's decision on the UK’s recognition of Mr Guaidó’s government. The Court of Appeal had found that the UK Government recognised Mr Guaidó as at least the de jure head of state (meaning the individual who the UK considered should govern Venezuela), but the Court of Appeal interpreted the UK Government’s public statements and letters to the court as leaving open the possibility that the UK impliedly recognised Mr Maduro as the de facto head of state (meaning that the UK may recognise that Mr Maduro exercises at least some of the relevant powers in practice). The Supreme Court acknowledged that recognition of a foreign head of state is constitutionally "entrusted to the executive" [64], and that any recognition by the UK Government of the head of state of another country must be accepted as conclusive by the UK judiciary (since the branches of government in the UK must speak with “one voice” on such matters). It held that the UK Government had put forward a "clear and unequivocal recognition of Mr Guaidó as President of Venezuela" which "necessarily entailed that Mr Maduro was not recognised as President" [92] and that the Court of Appeal had erred in interpreting any such statement by reference to extrinsic evidence [93]. 

The Supreme Court confirmed the High Court’s extension of the act of state doctrine to include sovereign appointments regardless of their legality under applicable law. One aspect of the act of state doctrine provides that acts of a foreign executive cannot be questioned in English courts. This rule has traditionally been applied to expropriations of property by foreign states and Supreme Court judges had previously suggested that the rule could be limited to property rights (Belhaj v Straw [2017] UKSC 3, at [74] and [169]). However, the Supreme Court has now confirmed that the rule applies to executive appointments [139]-[146] and, furthermore, that the English courts cannot consider the lawfulness of those appointments even under the relevant foreign law [135]. As such, the Supreme Court held that (subject to the point below) the English courts could not adjudicate on the lawfulness under Venezuelan law of Mr Guaidó’s appointments to the Board of the Central Bank of Venezuela.

The Supreme Court created an exception which allows English courts to recognise a foreign court’s judgment quashing a foreign act of state and remitted the question of whether the judgments of Venezuelan Supreme Tribunal of Justice should be recognised and given effect. A further issue was the conflict between the acts of the Venezuelan executive and the acts of its judiciary because the Venezuelan STJ has ruled that the appointments to the Guaidó Board were unlawful. The Supreme Court found that the act of state doctrine does not prevent the English courts from giving effect to judgments of foreign courts (such as the Venezuelan STJ) which nullify the act of state [169]. The question of whether the Venezuelan STJ’s judgments should be recognised is to be determined in accordance with the normal rules for foreign judgments and was remitted to the Commercial Court for further consideration. However, the Supreme Court was clear that courts in England and Wales must not recognise the Venezuelan STJ’s judgments if they conflict with the “one voice” doctrine by relying on the view that Mr Guaidó was not the President of Venezuela.

What does this decision mean for financial institutions that have commercial dealings with sovereigns? The central question arising on the appeal was whether the Guaidó Board or the Maduro Board had authority to deal with assets of the Central Bank of Venezuela in England (including gold reserves worth USD1.95bn held in the Bank of England). The Supreme Court’s decision provides welcome clarity on the unwillingness of UK courts to look behind the UK Government’s statements recognising foreign governments. If the UK Government has expressly recognised a relevant foreign government, that clarity and the extension of the act of state doctrine will, in the right circumstances, give greater legal certainty to financial institutions dealing with UK recognised sovereigns and their sovereign owned entities. 

However, in this case, the Supreme Court described the UK Government’s decision to recognise a foreign government as “exceptional” ([91] and [99]). Much uncertainty is likely to remain in cases where the UK Government has not made that exceptional decision to recognise a relevant foreign government. In those circumstances, the Supreme Court has emphasised [98] that the English courts will need to conduct their own enquiries to identify the foreign government under the principles set out in Somalia v Woodhouse [1993] Q.B. 54. 

Michael Munk, Managing Associate, Ben Ball, Managing Associate (Knowledge) and Elena Cucuz, Trainee Solicitor in London

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