Banque Centrale de Turquie v Weston

CourtFederal Tribunal (Switzerland)
Switzerland, Federal Tribunal.
Banque Centrale de la Rpublique de Turquie
Weston Compagnie de Finance et d'Investissement SA and Another

Sovereign immunity Foreign States and agencies Central bank of foreign State Action for repayment under loan agreement between commercial banks Requirement of repayment through central bank pursuant to foreign exchange legislation Attachment of bank deposits of central bank Whether central bank entitled to immunity from jurisdiction and enforcement Whether fact that central bank endowed with independent legal personality decisive European Convention on State Immunity 1972, Article 4 and 27 Whether declaratory of existing international law Acts iure imperii and iure gestionis Whether original nature of relationship decisive The law of Switzerland

Summary: The facts:In 1977 Lloyds Bank International granted a time deposit (a form of loan) to a Turkish bank. It was agreed, in conformity with Turkish foreign exchange legislation, that repayment would be made through the intermediary of the Central Bank of Turkey. Repayment was not made when it became due and Lloyds Bank assigned its rights to Weston Cie which, in pursuance of its claim, obtained two attachment orders against bank deposits of the Central Bank held in Switzerland. Enforcement orders were subsequently obtained for the attachments. The Central Bank lodged public law appeals against the orders before the Federal Tribunal, on the grounds that they infringed its immunity.

Held:The appeals were dismissed and the attachments were upheld.

(1) The European Convention on State Immunity of 16 May 1972 did not apply in this case because Switzerland had signed but not ratified it and Turkey was not a signatory. Nevertheless the principles embodied in the Convention could be regarded as an expression of the direction in which contemporary international law was developing and in this sense could be taken into consideration (ground 2a).

(2) It was open to question whether the proposition contained in old Swiss case law to the effect that entities with their own legal personality according to the law of their seat were not entitled to invoke sovereign immunity could still be applied, bearing in mind the modern tendency to discard legal form (lifting the veil) and to take account of economic realities (particularly in matters of tax law). Article 27 of the European Convention on State Immunity contradicted the proposition that such entities, when they were closely associated with the State (in the performance of public law functions), could not rely on immunity (ground 3).

(3) An agreement for the provision of a time deposit between two commercial banks, to which a State was not a party and which had been concluded according to prevailing international banking practice, was to be classified according to its nature as a contract under private law (iure gestionis) over which the Swiss courts had jurisdiction (provided there was a sufficient connection between the transaction and Switzerland). The fact that Turkish foreign exchange regulations required repayment to be made through the intermediary of the Turkish Central Bank following procedures operated according to directives issued by the Ministry of Finance did not alter the position since the legal nature of the original relationship was decisive. The lending bank or its assignees had the right to take proceedings directly against the borrowing bank to obtain repayment and this demonstrated the ordinary private law nature of the transaction (grounds 4a and b).

The following is the text of the judgment of the Court:

In 1977 Lloyds Bank International Ltd (Lloyds Bank) in Zurich, granted a time deposit in the amount of one million Swiss francs to the Turkiye Garanti Bankasi AS in Istanbul. Repayment was due on 3 May 1978 and in conformity with Turkish foreign exchange law was to be effected through the intermediary of the Banque Centrale de la Rpublique de Turquie, the Turkish State Bank. Repayment was not made within the time limit and Lloyds Bank subsequently assigned its claim to the Weston Compagnie de Finance et d'Investissement, SA (Weston Cie).

At the request of Weston Cie, the competent sole judge of the District Court (Bezirksgericht) of Zurich made, on 30 June 1978, a first attachment order against the Banque Centrale de la Rpublique de Turquie in the amount of one million francs plus interest and costs. The basis of the claim was specified as Time Deposit No, 100034/086 in conformity with Communiqu No. 176 of the Turkish law. Attachment was levied upon accounts of the attachment debtor held at three major Swiss banks in Zurich and the attachment was confirmed on 7 July 1978. Weston Cie followed up the attachment by obtaining a notice to pay issued on 28 July 1978. A second attachment order in respect, of the claim was obtained on 25 July 1978and was directed against the total value of the assets of the attachment debtor held at the offices of its representative in Zurich. Attachment was levied on 26 July 1978 and the attachment order was confirmed on 31 July 1978. The Banque Centrale de la Rpublique de Turquie then lodged public law appeals by means of which it asked for the vacation of the two attachment orders together with the...

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