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General Dynamics United Kingdom Limited v. The State of Libya [2019] EWCA Civ 1110

In a recent decision, the Court of Appeal has held that the Courts may order that the formal rules of service can, where appropriate, be dispensed with when a party is seeking to enforce an arbitration award against a State.  The decision also comes as a warning to States that they will not necessarily enjoy some of the protections to enforcement proceedings that they may once have had if they have already participated in, or indeed have refused to participate in, the initial proceedings or if there are special circumstances at play: the decision shows the English Court’s willingness to bypass at least some of the usually required formalities of service where effecting proper service would be in a real way overly problematic, risky or lengthy

Background

In 2016 the Claimant obtained an ICC arbitration award against Libya in the amount of £16 million.  Following Libya’s failure to pay and following an unsuccessful attempt to enforce the award in the USA, the Claimant sought instead to seek enforcement in England.

In 2018, the Claimant obtained an Order from the Commercial Court permitting it to enforce the Award in England and, due to the serious internal conflict in Libya and issues relating to its proper and rightful government, permitting it to dispense with formal service.  Instead, the Order was required to be brought to the attention of Libya by the sending of it to three specific addresses – which it was.

Within time, Libya applied to set aside the parts of the order that dispensed with service, arguing that service of court proceedings is governed by S.12(1) of the State Immunity Act 1978 (the “SIA”), which provides that "Any writ or other document required to be served for instituting proceedings against a State shall be served by being transmitted through the Foreign & Commonwealth Office to the Ministry of Foreign Affairs of the State".

Males LJ agreed with Libya and concluded that the court has no power to dispense with service in a case such as this and that arbitration enforcement proceedings (and all other documents relating to instituting proceedings against a state) must be served in the manner provided for in s.12(1) SIA (i.e. through the Foreign and Commonwealth Office (the “FCO”)).

The Claimant appealed the decision to the Court of Appeal, arguing that neither the Order nor the Claim Form initiating the enforcement proceedings were documents to which s.12(1) SIA applied.

The Decision

The Court of Appeal allowed the appeal in part, restoring the earlier Order of the Commercial Court and holding that, despite the earlier decision of Males LJ, the Claimant could dispense with formal service against Libya.

In making its decision, the Court of Appeal considered that when a State is first sued, it is natural that the document “instituting proceedings” should be served through the FCO, as required by s.12 SIA. However, if the State then fully participates in the subsequent arbitration or litigation (as Libya did in this case), or even if it deliberately refuses to participate, it no longer requires the protection of enforcement proceedings being transmitted through the FCO.  In the Court’s view, neither the Order nor the Claim Form initiating enforcement proceedings was analogous to a document “instituting proceedings.”

The Court of Appeal went on to find that while an order permitting enforcement of an arbitral award must still be served on a State, service does not need to follow s.12 SIA and thus, in appropriate cases, an English court may dispense with the normal rules of service.  For example, when the order permitting enforcement of an award is to be the first time that the State receives notice of an attempt to enforce, an English court can dispense with formal service where there are “exceptional circumstances” (under Civil Procedure Rule 6.16).  Given the internal conflict and danger within Libya, and the considerable length of time any such formal service might take, the Court of Appeal held that exactly such exceptional circumstances existed in this case.

However, protection remains in place for States even where formal service may be ordered to be dispensed with:  the Court of Appeal concluded that even where the court permits a relaxation of the rules of service, as it did in this case, States will still be given a period of time (usually two months) in which to challenge an order permitting enforcement of an arbitral award, with no risk of execution against its assets in the meantime.