The Supreme Court has today handed down its judgment in Pakistan International Airline Corp v Times Travel (UK) Ltd concerning lawful act duress. Bankim Thanki QC and Simon Atrill (with Ben Jaffey QC) acted for Ukraine, intervening in the appeal (instructed by Alex Gerbi of Quinn Emanuel Urquhart & Sullivan UK LLP).
The Supreme Court unanimously affirmed that “lawful act” duress exists in English law and declined to follow suggestions from other common law jurisdictions and academics that only acts that are unlawful could constitute duress. However, there were two judgments: Lord Hodge (with whom Lord Reed, Lord Lloyd-Jones and Lord Kitchin agreed) and a minority judgment of Lord Burrows. The judgments can be accessed here and the press release here.
Lord Hodge concluded that lawful act duress existed in at least two categories of case: (1) where a defendant uses his knowledge of criminal activity by the claimant or a member of the claimant’s close family to obtain a personal benefit from the claimant by the express or implicit threat to report the crime or initiate a prosecution and (2) where the defendant, having exposed himself to a civil claim by the claimant, for example, for damages for breach of contract, deliberately manoeuvres the claimant into a position of vulnerability by means which the law regards as illegitimate and exploits that vulnerability. Lord Hodge also held that the boundaries of the doctrine of lawful act duress are not fixed, but any extension should be approached incrementally and with caution, particularly in the context of contractual negotiations between commercial entities.
Lord Burrows would have developed the law differently: in his view, it was necessary in “lawful act” duress cases for the relevant demand to have been made in bad faith, i.e. without a genuine belief that the party was entitled to make the demand. This was neither necessary nor sufficient under the analysis of the majority Justices, although they agreed that bad faith was a relevant matter to take into account in determining whether a demand was illegitimate.
The Supreme Court’s decision in Law Debenture v Ukraine is awaited (which raises issues in relation to duress arising from allegations that Russia applied illegitimate pressure to Ukraine, including threats to its territorial integrity, to procure the issue of very substantial Eurobonds).