Korek Telecom Co LLC v Iraq Telecom Ltd (DIFCA 162024, 16 June 2025)

In Korek Telecom Co LLC v Iraq Telecom Ltd (DIFCA 16/2024, 16 June 2025), the DIFC Court of Appeal has recognised the existence of the Foreign Act of State doctrine in DIFC law, but found on the facts that it did not apply so as to justify the setting aside of an ICC arbitration award. The Court also held that new Article 8A of the amended Applications Law (which came into effect on 21 November 2024) does not apply retrospectively. Zoe O'Sullivan KC acted for Korek (instructed by Boies Schiller).

Zoe's full case note has been included below: 

The DIFC Court of Appeal recognises the existence of the Foreign Act of State doctrine in DIFC law

1. In Korek Telecom Company LLC v Iraq Telecom Ltd (DIFCA 16/2024, 16 June 2025) the DIFC Court of Appeal has rejected Korek’s argument that a claim that an administrative decision of the Iraq state was procured by the bribery of Iraqi officials was not arbitrable because of the doctrine of “foreign act of state”. It accordingly dismissed Korek’s application to set aside an arbitration award made in favour of the respondents by an ICC tribunal.
    
2. The act of state doctrine is notoriously difficult to define. In broad terms, it is a principle derived ultimately from US law that “every sovereign state is bound to respect the independence of every other sovereign state and the courts of one country will not sit in judgment on the acts of the government of another done within its own territory” (Underhill v Fernandez 168 US 250 (1897)). However, explanations of the juridical basis for the doctrine have changed over time, to the extent that the distinguished legal scholar FA Mann said that it rested “on so slippery a basis that its application becomes a matter of speculation”. There is clearly a close relationship between the act of state doctrine and the doctrine of state immunity.
    
3.  In recent years, the limits of the doctrine have been subject to intense scrutiny by national courts considering claims brought against the state for facilitating the torture and unlawful rendition of the claimant by agents of a foreign government. In such cases, unsurprisingly both the UK and Australian courts have taken the view that the act of state doctrine is not available as a defence to the defendant government because of the existence of a public policy exception: see Belhaj v Straw [2017] AC 964 and Habib v Commonwealth of Australia [2010] FCAFC 12. The doctrine was also ruled not to be available in the claim brought by Kuwait Airways for the theft of its airline fleet following the Iraqi invasion in 1990 because the seizure of the aircraft was a gross breach of international law : see Kuwait Airways Corporation v Iraqi Airways (Nos 4 and 5) [2002] AC 883. The Canadian Supreme Court has gone as far as declining to recognise the existence of the doctrine in Canadian law: Nevsun Resources Ltd v Araya [2020] 1 SCR 166.
    
4. The courts have also developed a number of other exceptions to the application of the doctrine, in particular the “commercial” exception where the state is engaged in commercial activities and the so-called “Kirkpatrick” exception which applies where the claimant is not asking the court to rule on the validity or legal effectiveness of the acts of a foreign state: see WS Kirkpatrick & Co Inc v Environmental Tectonics Corporation International 493 US 400 (1990). In that case, the claimant alleged that a contract had been procured by the bribery of foreign government officials, and the Supreme Court held that act of state was not available as a defence because the outcome of the case did not turn on the legality of the actions of the foreign state. The Kirkpatrick exception has been recognised (with some differences of emphasis) in English law: see Yukos Capital SO v OJSC Rosneft Oil Company (No 2) [2014] QB 458.
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5. The cases mainly address the justiciability of claims brought in court, but the Court of Appeal approached the issue on the basis that a matter which goes to justiciability in the courts may equally go to the question of arbitrability before arbitration tribunals.
    
6. Despite the uncertainties created by the evolution of the doctrine in multiple common law jurisdictions, the doctrine is regularly invoked in the common law courts. This case presented an opportunity to the DIFC Court to decide whether the doctrine has any place in DIFC law and if so what limits on the doctrine DIFC law might choose to recognise. The Court held that the English law authorities were relevant, and observed that in future DIFC law might also draw on other common law decisions, following the implementation of the new Applications Law.
    
7. The judgment contains an elegant and scholarly discussion of the evolution of the doctrine in multiple jurisdictions. But the Court declined to provide any definition of the act of state doctrine in DIFC law. It applied the “Kirkpatrick” exception, holding that an allegation that bribery of state officials by the respondent has inflicted economic loss on the claimant does not involve any investigation of the validity of a decision of the foreign state. The court also had regard to UAE public policy, which it said “stands firmly against conduct involving the bribery of foreign officials”. It said at [317]:

   “The DIFC Courts serve as part of an international community of commercial courts and in that way contribute to the rule of law in transnational trade and commerce. The public policy which gave rise to their creation will not allow the use of the foreign act of state doctrine to blindfold the Courts or DIFC-seated arbitrators in cases where the disputes before them have arisen out of the corrupt conduct of one of the parties.”

   Beyond that, the Court had little to say about the juridical basis of the doctrine or the extent or justification for its exceptions.
    

8. The Court also held (obiter) that new Article 8A of the amended Applications Law, which came into force on 21 November 2024, does not apply retrospectively. Therefore in cases such as this, where the old law was still in force at the time when the arbitral tribunal decided the matter, the Court was constrained to looking at whether the English doctrine had been recognised in DIFC Law