The English court will not, in general, adjudicate on acts done abroad by virtue of sovereign authority.

In Buttes Gas & Oil v Hammer [1982] AC 888, Lord Wilberforce drew from various English and American authorities two principles:

In AK Investment CJSC v Kyrgyz Mobil Tel Ltd [2011] UKPC 7, relying on the act of state doctrine, the claimant submitted that the court should not sit in judgment on the independence of a foreign judicial system. However, the Privy Council found that the act of state doctrine did not apply where there was a risk that justice could not be obtained in a foreign legal system in general, although the court had to be extremely cautious before drawing such a conclusion, for which cogent evidence was required.

The requirements for the application of a foreign issue estoppel are set out in The Sennar (No. 2) [1985] 1 WLR 490, 499 A-B, where the court held:

The court has a discretion to refuse to give effect to a foreign judgment if there are special circumstances making it unjust to recognise the decision (Henderson v Henderson (1843) 3 Hare 100 at 114 - 1115).

Relying on the act of state doctrine and the associated doctrine of non-justiciability, Rosneft argued that Yukos' case that the Russian court's decision was partial and dependant, raised issues about the executive or administrative acts of a foreign sovereign within its own territory. The English courts could not adjudicate on that. It argued that AK Investments allowed consideration of acts of state where a future risk of injustice has to be assessed but not past acts.

Yukos relied on AK Investments to undermine Rosneft's case on act of state doctrine. It argued that the act of state doctrine may only be invoked where the validity of an act of state is in dispute or where a judicial remedy is sought in respect of such acts. It also sought to rely on the Kilpatrick exception, claiming that here there was no "sitting in judgment on" the acts of state, but only a question as to whether certain facts had occurred. Further, it claimed that the act of state doctrine only applied where the English court is required to adjudicate on the actions of the foreign sovereign by determining that they are invalid or by granting a remedy in respect of those actions (the challenge to validity limitation).

Rosneft argued that the issue to be decided by the English court was not the same as that decided by the Dutch court, because the Dutch decision was a decision to allow enforcement of the awards and refuse recognition of the annulment, whereas the decision sought from the English courts was that the Russian courts were partial and dependant and that their decision should not be recognised as a matter of English public policy. Therefore, discretion should be exercised in Rosneft's favour because it would be unjust to permit enforcement in England when the Dutch court had never considered Rosneft's act of state defence. Furthermore, an attack on the integrity of a foreign country's judicial system was very serious and should be the subject of a decision of the courts in the country where enforcement was sought.

Yukos argued that the issue before the English and Dutch courts was exactly the same. In the Dutch court, the issue was whether the Russian annulment decisions were "partial and dependant". If they were, the Dutch court would not recognise them. Similarly, if the English court found the decisions were partial and dependant, it would not recognise them. The public policy considerations in deciding the issue was the same in each country.

Agreeing with Hamblen J's finding that there was no rule against passing judgment on the judiciary of a foreign country, Rix LJ considered the jurisprudence in this area and concluded that judicial acts are generally not regarded as acts of state for the purposes of acts of state doctrine (other than in human rights law).

Having examined the relevant authorities, most notably AK Investment, he found that the act of state doctrine does not prevent an investigation of, or adjudication on the conduct of the judiciary of a foreign state, whether that conduct was in the past or future and whether or not such conduct in the past is relied on as the foundation for an assessment of risk as to its conduct in the future (paragraph 86, judgment).

Further, whereas in a proper case comity seems to require that the validity of executive or legislative acts of a foreign friendly state acting within its territory should not be adjudicated upon in the English courts, comity only cautions that judicial acts of a foreign state should not be challenged without cogent evidence. Rix LJ disagreed with the US decision in Philippine National Bank v United States District Court for the District of Hawaii 397 F.3d 768, and he concluded he did not agree "that the doctrine applies to prevent adjudication on an otherwise appropriate challenge to a foreign court decision" (paragraph 89, judgment).

However, Yukos could not rely on the Kilpatrick exception because Yukos was not only seeking to show certain events occurred but that such events were invalid. As to the challenge to validity limitation, although challenges to foreign acts of state must lie at the heart of the case, in order to invoke the act of state doctrine, the doctrine should not be reduced to a single formula, such as distinguishing validity or invalidity from other forms of lawful or wrongful conduct.

Accordingly, the court concluded that the act of state doctrine does not prevent examination of "substantial justice" in a foreign court, whether in a particular case, or on a systematic basis. The right to examine substantial justice of a foreign court must arise when a party is asking the English court to recognise a decision of a foreign court, although the English court will require cogent grounds for any allegation that a foreign court's decision should not be recognised because of a failure of substantial justice.

Rix LJ concluded that the issue to be decided in the English court was not the same as that in the Dutch court and, therefore, the appeal on this aspect of the case was allowed.

He noted that public policy is invariably different in each country. Therefore, the standards used to determine whether the Russian courts were partial and dependant may vary considerably from country to country. Recognition is usually given to judgments of states where the interests of that very state are at stake, and if it is to be refused, evidence of partiality will be required. English public policy requires specific examples of partiality before a decision not to recognise the judgment of a foreign state can be made. Therefore, the court concluded that Rosneft was not issue estopped from claiming in the English courts that the Russian court decisions were impartial.