In a much-anticipated decision, the Supreme Court has handed down judgment in General Dynamics v Libya, a case concerning the service of proceedings to enforce an arbitral award against a State.
General Dynamics (“GD”), the UK arm of a global military defence conglomerate, sold communications systems to the Gadaffi regime. Following the collapse of the regime, in 2016 GD obtained an award for US$16 million against Libya in an ICC arbitration in Geneva. The company commenced proceedings against Libya in the USA to enforce the award and then, having abandoned attempts at enforcement there, in June 2018 it sought to commence enforcement proceedings in England.
Under s.12(1) of the State Immunity Act 1978 (“SIA”):
“Any writ or other document required to be served for instituting proceedings against a state shall be served by being transmitted through the Foreign and Commonwealth Office to the Ministry of Foreign Affairs of the state...”
In July 2018, the Commercial Court granted GD permission on a without notice application to enforce the arbitral award in the same manner as a judgment or court order pursuant to s.101 of the Arbitration Act 1996 (the “Enforcement Order”). In the light of evidence about the uncertain political situation in Libya, the Court also granted GD permission to dispense with service on Libya of the arbitration claim form and the Enforcement Order via diplomatic channels as envisaged by s.12 SIA. It did so in purported exercise of a discretion under CPR rr. 6.16 and/or 6.28. The government of Libya successfully challenged the decision to dispense with service in accordance with s.12 SIA, but on appeal by GD, the Court of Appeal restored the Enforcement Order and dispensation with service, having regard (inter alia) to evidence about the dangerous and unpredictable security situation in Libya at the time.
The Supreme Court granted Libya permission to appeal. On appeal, it held (by a 3-2 majority) that s.12 SIA established a mandatory and exclusive method of service of process against a State, subject only to s.12(6), which provides that service by alternative means is permitted if the State so agrees. The majority (Lord Lloyd-Jones, Lady Arden and Lord Burrows) held that this interpretation of the section accorded with its clear language and legislative purpose, and that it was strongly supported by international law and comity. It was essential that States be given proper notice of proceedings commenced against them and a fair opportunity to respond, and s.12(1) provided a workable means of effecting service on States in circumstances of considerable international sensitivity. The majority further held that there was nothing in s.12(1) SIA which indicated that it was to be read by reference to rules of court, and in any event rules of court could not oust the requirements of primary legislation and CPR6.1(a) expressly provides that the rules as to service do not apply where any other enactment makes different provision. The Court therefore had no discretion to dispense with the statutory requirement as to service on a State.
The majority also rejected GD’s alternative argument that an interpretation of s.12(1) SIA which imposed such a mandatory rule for service on States would infringe a claimant’s right of access to the court under Art 6 ECHR or the common law principle of legality.
In relation to proceedings to enforce arbitration awards against States, the majority held that the document required to be served under s.12 SIA was the arbitration claim form where service of that form was required by the Court under s.101 of the 1996 Act, and the order granting permission to enforce the award where service of the claim form was not so required.
This case examines important principles of international law and state immunity, and it clarifies an area of procedural law, on which there have been a number of decisions in recent years. It is fundamental to all claims against States, including the growing area of proceedings to enforce arbitral awards against States under the New York Convention.
The judgments are here.
Harry Matovu QC represented the State of Libya in the Supreme Court, having not appeared below. He was instructed by Curtis Mallet-Prevost, Colt & Mosle LLP.