The recent House of Lords decision in the Primero Cortgreso del Partido [1981] 3 W.L.R. 328, is of considerable interest to the modern development of State immunity in commercial transactions. Before analysing the effect of the case the following background should be borne in mind (which I shall state in the form of propositions, firstly because the history is outside the immediate scope of this article, and secondly because to be discursive would create problems of space).

(1) Until the case of the Philippine Admiral in the Privy Council [1977] A.C. 373, English law was embracing the absolute theory of sovereign immunity, viz., that a foreign State could not be impleaded in our courts even in respect of the breach of a purely commercial obligation arising from a trading transaction freely entered into by that State—and this despite the fact that (a) that great international lawyer, Sir Robert Phillimore, had been an adherent of the restrictive doctrine (by which immunity would be denied to a State in respect of trading transactions) as early as the latter part of the 19th century; (b) virtually all the civilised nations had adopted the restrictive theory by the 1950s, some, e.g. Belgium and Italy as early as the last century, some lately, e.g. France and the United States in the fifties; and (c) Lord Denning, M.R., ever the outrider for progress, had in 1958 cogently advocated the restrictive doctrine in a dissenting judgment in the House of Lords (where he sat unhappily for a while).

(2) In November, 1975, the Privy Council accepted the restrictive theory as applying to actions in rem. This was the important case of the Philippine Admiral (supra). This created the anomaly that the availability of State immunity depended on the purely procedural point of whether the plaintiff proceeded in personam or by the arrest of a ship.

(3) Lord Denning, in the Court of Appeal in January, 1977, firmly maintained in the Trendtex case ([1977] Q.B. 529) that international law had adopted the restrictive view and that the common law had quietly changed with it. He said that the restrictive view applied to all trading transactions, not merely actions in rem (i.e. actions that proceeded by the arrest of a ship or aircraft), and not merely marine carriage. One of his colleagues supported him, and an appeal was eagerly awaited not only by lawyers and commercial men but by at least one of the Law Lords (Lord Wilberforce has said