In General Dynamics UK Ltd v Libya Queen's Bench Division  EWHC 64 (Comm), the English Commercial Court held that an arbitral award against a State cannot be enforced in the United Kingdom without service on that State of court documents in accordance with s.12 of the State Immunity Act 1978 (the “SIA”).
The ruling was made in the context of a dispute between a subsidiary of General Dynamics Group, a global military defence conglomerate, and the State of Libya, which arose from a contract for the supply of communications systems.
The claimant obtained an award in a Geneva-seated arbitration and was granted permission to enforce it in the UK by an order made pursuant to s.101 of the Arbitration Act 1996.
At the claimant’s request, Mr Justice Tear had dispensed with service of that order and other court documents and instead required these documents to be couriered to the Ministry of Foreign Affairs in Tripoli (amongst others). Libya applied for the order to be partially set aside for being incompatible with s.12 of the SIA, requiring “[a]ny writ or other document required to be served for instituting proceedings against a State [to] be served by being transmitted through the Foreign and Commonwealth Office to the Ministry of Foreign Affairs of the State”. It also applied to vary the order such that the two-month period to challenge the court’s permission to enforce would run from the date of service, not the date of the order.
Lord Justice Males granted the application.
Three separate questions were considered. The first was whether the enforcement order should be regarded as the document which instituted the proceedings for the purposes of s.12 of the SIA or whether the document which started the proceedings was the application for leave to enforce. This was relevant because, under rule 62.18 of the Civil Procedural Rules (Arbitration Claims – enforcement of awards), the enforcement application (made by way of an arbitration claim form) is not a document required to be served on the defendant.
The court held there will always be some document required to be served for instituting proceedings against the State, and this can be either the arbitration claim form or the enforcement order itself. As there was no order requiring the arbitration claim form to be served in this case, the order had to be regarded as the instituting document. In reaching this conclusion, the court considered not only the plain wording of s.12 of the SIA but the policy objectives underpinning that legislation, including the need to ensure “appropriately respectful dealings between sovereign states”.
Having established that s.12 should apply, the second question was whether the court had the power to dispense with service of the order under that provision. Males LJ concluded the courts have no such power, despite recent decisions holding otherwise. This was on the basis inter alia that service through the Foreign & Commonwealth Office is an important safeguard for the conduct of international relations which would be illusory if s.12 could be bypassed.
The third question, which was academic given the court’s answer to the two prior questions, was whether it would have been appropriate to dispense with service in this case. Males LJ considered that the unstable political situation and regular outbreaks of violence in Libya in 2018 were sufficiently exceptional to dispense with service had the court had power to do so.
This decision is significant because it departs from the position recently taken by other Commercial Court judges on the same issue.
As the court itself acknowledged, this may be regarded as an unsatisfactory outcome by the award creditor. The process of serving court documents through the Foreign & Commonwealth Office can be a lengthy and difficult process. In this case, given the current political situation in Libya, this would necessarily lead to considerable delay in the enforcement of the award.
The outcome may also appear to some to be illogical, as Libya was already aware of the award through its involvement in the arbitration. However, as the court explained in its judgment, whilst the most important purpose of service of proceedings is to ensure the content of the document served is communicated to the defendant, another important purpose of service on a State is to ensure the jurisdiction of the court is invoked in a proper manner, which is a matter for the Foreign & Commonwealth Office, i.e. the executive, not the courts.