Sovereign States have, for a long time, enjoyed a degree of protection from the English courts under the State Immunity Act 1978. For example, absent a pre-agreed method of service such as on a service agent in England, proceedings against a State have to be served through the Foreign and Commonwealth Office, which is time-consuming. In a helpful judgment on 3 July 2019, which will be welcomed by those pursuing claims in England against States, the English Court of Appeal decided that litigants will not always have to follow the formal rules of service in seeking to enforce judgments against States.
In General Dynamics United Kingdom Limited v The State of Libya,1 the claimant, a UK company, obtained an award from an ICC arbitral tribunal against the State of Libya for around GBP 16 million. The claimant sought to enforce the award through the English courts as it believed that Libya had or may have had assets in England and Wales.
The claimant made an application to enforce the award through an arbitration claim form (the Arbitration Claim Form). Teare J granted the claimant permission to enforce the award in England and Wales and, given the serious internal conflict in Libya, permitted the claimant to dispense with formal service of the Arbitration Claim Form, along with any orders made by the English court and associated documents (the Order). Notice of the documents still had to be given to Libya by sending them to three addresses, one of which was to the Libyan Ministry of Foreign Affairs, and Libya was given two months within which to apply to set the Order aside.
The Order did come to the attention of Libya which applied, amongst other things, to have the Order set aside insofar as it sought to dispense with the ordinary rules on service. The judge hearing Libya’s application found that the English court had no jurisdiction to dispense with service against a State. His view was that service of the Order had to be made through the Foreign and Commonwealth Office (the FCO) in accordance with section 12 of the State Immunity Act 1978 (the SIA), as it was a “document required to be served for instituting proceedings against a State.”
The claimant then appealed that decision to the Court of Appeal, arguing, amongst other things, that neither the Order nor the Arbitration Claim Form were documents to which section 12 of the SIA applied.
The Decision of the Court Of Appeal
The Court of Appeal allowed the appeal in part, holding that the claimant could dispense with formal service against Libya.
When a State is first sued, it is natural that the document “instituting proceedings” should be served through the FCO, as required by section 12 of the SIA. However, if the State then fully participates in (or even deliberately declines to participate in) the subsequent litigation (or arbitration), it no longer requires the protection of enforcement proceedings being transmitted through the FCO. Neither the Order nor the Arbitration Claim Form was akin to a document “instituting proceedings.”
Whilst an order permitting enforcement of an arbitral award still has to be served on a State, an English court can dispense with the formal rules of service in appropriate cases. 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 service where there are “exceptional circumstances” (under Civil Procedure Rule 6.16). Given the internal conflict and danger within Libya, the Court of Appeal held that there were such exceptional circumstances in this case. The Court of Appeal rejected Libya’s arguments that service had to be impossible in order to qualify for the “exceptional circumstances” exemption.
Even where the court permits a relaxation of the rules of service, as it did in this case, States will 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.
Takeaways for Prospective Litigants
The decision of, and comments from, the Court of Appeal are welcome news for litigants who are looking to enforce judgments or awards in England against a State. States cannot enjoy the protection of having enforcement proceedings served through the FCO where they have already participated in, or refused to participate in, the initial litigation or arbitration.
In such cases, the English court has and will exercise its discretion to dispense with the rules for formal service where factors exist which make effecting service difficult and time-consuming. The serious internal conflict within Libya was a good example. The English court’s willingness to dispense with service in appropriate circumstances will provide a significant and helpful saving in time for litigants.