On 5 February 2015 the Court of Appeal held that ss 4(2) (which disapplies the exception to immunity created by s. 4(1) where an individual is not habitually resident in the UK at the time the employment contract is made) and 16(1)(a) (immunity in cases concerning embassy or consular employment disputes) of the State Immunity Act 1978 were incompatible with Article 6 ECHR and Article 47 of the EU Charter (right to a fair trial).
The case concerned two Moroccan nationals employed at the Sudanese and Libyan embassies respectively. They brought claims for unfair dismissal, non-payment of the minimum wage, unpaid wages, breach of the Working Time Regulations 1998, racial discrimination and harassment. The question was whether such claims were barred by state immunity.
The Court of Appeal held that:
There was conflicting authority on when Article 6 ECHR was engaged. In Holland v. Lampen Wolfe  1 WLR 1573 the House of Lords held that where the extent of the jurisdiction of a state party to the ECHR was in question it had to be determined first. Therefore, Article 6 was not engaged where the national court did not have adjudicative jurisdiction due to the international rules of state immunity. This view was supported by the House of Lords in Jones v. Saudi Arabia  1 AC 270. By contrast, in Al-Adsani v. United Kingdom (2002) 34 EHRR 11 (and subsequent cases) the ECtHR proceeded on the basis that Article 6 was engaged and then evaluated the claim to immunity by reference to the concepts of legitimate aim and proportionality.
In the present case, Holland v. Lampen Wolfe was to be followed. "It is difficult to see how Article 6 can be engaged if international law denies to the Contracting State jurisdiction over a dispute. There can be no denial of justice for which the State is responsible if there is, as a matter of international law, no court capable of exercising jurisdiction. Moreover, Article 6 cannot have been intended to confer on Contracting States a jurisdiction which they would not otherwise possess, nor could it have conferred a jurisdiction denied by general international law in such a way as to be binding on non-Contracting States. It is unfortunate that in none of its many decisions in which the point has arisen has the Strasbourg court grappled with these considerations".
However, in the present case the court did not have to choose between these competing approaches. According to the ECtHR a state would not be in breach of Article 6 simply because it gave effect to an international law rule requiring the grant of immunity. The grant of immunity would be held to be a proportionate means of achieving a legitimate aim (i.e. compliance with international law).
It was necessary to consider whether the immunity of the respondents (under ss 4 and 16(1)(a) SIA) was required by international law or lay within the margin of appreciation accorded to states to determine the extent of their obligations under international law. The answer was in the negative. S. 16(1) granted immunity beyond what was required by international law. S. 4(2)(b) was not required by international law.
As regards s. 16(1), there was no rule of international law requiring the grant of immunity in respect of employment claims by members of the service staff of a mission in the absence of some special feature, e.g. where the claim was for the recruitment, renewal of employment or reinstatement of an individual, or where the proceedings would interfere with the security interests of the state. No such considerations arose in the present case. The effect of s. 16(1) was a blanket immunity in all cases concerning embassy or consular employment disputes.
As regards s. 4(2)(b), this limited the exception to immunity in respect of employment contracts, so that immunity was only disapplied where the individual was habitually resident in the UK at the time the employment contract was made. There was no international legal obligation requiring the UK to have such a provision in its national law. Moreover, there were no legitimate objectives which might possibly be achieved by such a limitation on the exception to immunity. The purpose of such an exception seemed to be a need to identify the cases where the UK had a sufficient jurisdictional interest in the claim, based on its interest in adjudicating on the employment law rights of its local work force. Limiting access to justice in this way could not be justified.
Furthermore, both ss 4(2)(b) and 16(1) infringed Article 47 of the EU Charter (right to effective remedy and fair trial), which had been incorporated into English law following the Lisbon Treaty. In so far as relevant to the present case, the content of Article 47 was identical to that of Article 6 ECHR, so Article 47 was also violated.
Article 52(5) of the EU Charter stated that the Charter only applied to Member State national courts, and EU institutions and like bodies when they were implementing Union law. However, the present claims fell within the scope of EU law as they were derived from EU law measures (e.g. the Working Time Regulations, discrimination and harrassment).
An EU Charter right could be relied on "horizontally" in certain circumstances (i.e. despite the fact that Libya was not a Member State of the EU). The right to an effective remedy guaranteed by Article 47 was a general principle of EU law, so that Article 47 had horizontal direct effect.
In conclusion, based on the breach of Article 6 ECHR the court proposed to make a declaration of incompatibility pursuant to s. 4(2) of the Human Rights Act 1998 as regards ss 4(2)(b) and 16(1)(a) SIA.
As regards the breach of Article 47 of the EU Charter, the court was bound to disapply ss 4(2)(b) and 16(1)(a) SIA. The applicants would then be able to bring their EU law claims in the English courts.