Service of Enforcement Proceedings of an Arbitration Award on a State

Feb 12, 2019

Introduction

Litigation against a Sovereign state can be a prolonged affair. In large part, this is because states enjoy certain rights and protections granted by statute over and above those which other litigants enjoy. These additional rights are in place for the practical reason that a sovereign state, unlike most litigants, has a large bureaucracy and so a new claim served on a state can take some time to find its way to the correct person for proper consideration.

One such right relates to the service of court proceedings. Under s.12 State Immunity Act 1978, "any writ or other document required to be served for instituting proceedings against the State" shall be served through the UK’s Foreign & Commonwealth Office (“FCO”) to the Ministry of Foreign Affairs of that state. The state then has two months to enter an appearance in respect of these new proceedings. In the recent case of General Dynamics United Kingdom Ltd v State of Libya [2019] EWHC 64 (Comm), the Commercial Court considered whether an arbitration award against a state could be enforced by court proceedings in this country without service on that state of any formal court document.

Background Facts

The Claimant, General Dynamics United Kingdom Ltd (“General Dynamics”) is a UK company that is part of a large military defence conglomerate. On 5 January 2016, General Dynamics was awarded £16,114,120.62 in damages plus interest and costs following an arbitration under ICC rules in Geneva. The defendant, the state of Libya, has not paid the sums awarded. Efforts were made to enforce the award in the USA but no assets belonging to the Libyan state were identified. General Dynamics therefore decided to try enforcement in the UK.

General Dynamics’ Application

As a first step, General Dynamics applied without notice under s.101 Arbitration Act 1996 for its arbitration award to be recognised and enforced in the same manner as a judgment pursuant to the procedure in CPR 62.18. This application was granted by Mr Justice Teare on 20 July 2018 (the “Teare Order”). The Teare Order provided that service of the arbitration claim form, the Teare Order itself and all associated documents be dispensed with, pursuant to CPR 6.16 and 6.28. Instead, all of those documents were to be sent by courier to:

Thereafter, Libya had two months from the date of the Teare Order to apply to set it aside.

Libya’s Application

Libya applied to set aside the parts of the Teare Order that dispensed with service within the two month timeframe. The primary issue for the English Court to decide was whether service could be dispensed with or whether the provisions of s.12 State Immunity Act 1978 were mandatory.

The Court decided in favour of Libya.

Pursuant to CPR 6.16 service of a Claim Form can be dispensed with “in exceptional circumstances”. The Court held that, in this case, the circumstances really were exceptional, not least because Libya was a very unstable country and, indeed had two competing governments (one in Tripoli and one in Tobruk). As such service of the claim form could be dispensed with. General Dynamics had argued that, since the arbitration claim form was the document that instituted proceedings for the purposes of s.12 State Immunity Act 1978, if service of the claim form was dispensed with, s.12 did not apply. However, the Court disagreed. An application for permission to enforce an arbitration award is made on an arbitration claim form and is normally made without notice. This means that the Defendant will not be served with the documents before the Court determines the application. The Court decided that, in those circumstances, the order granting permission will be the document that was “instituting proceedings”. So, in the General Dynamics case, service of the Teare Order could not be dispensed with; it had to be served in accordance with the provisions in s.12 State Immunity Act 1978.

Comment

In some ways this is a strange decision because it runs contrary to the Court’s stated aim of making arbitration awards quicker and easier to enforce. Following this decision, General Dynamics will now have to now serve the order granting permission via the FCO, which will take several months and delay enforcement. Unfortunately, this is one of the perils of litigating against sovereign states.

General Dynamics has been granted permission to appeal and it will be interesting to see if the decision is upheld.

Adam.Knee@byrneandpartners.com

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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About Adam

Adam works in the firm’s commercial litigation department handling a range of High Court litigation and international arbitration cases. He has a particular specialism in jurisdictional issues and conflict of laws