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Supreme Court hands down judgments in General Dynamics v Libya

On 25 June 2021, the Supreme Court handed down its much anticipated decision in General Dynamics United Kingdom Ltd v State of Libya [2021] UKSC 22. The Court divided 3:2 on the issue of whether diplomatic service of proceedings under section 12(1) of the State Immunity Act 1978 (the “SIA”) was required in proceedings to enforce arbitral awards, even where such service would be impossible or unduly difficult.

The majority (Lord Lloyd-Jones, Lord Burrows and Lady Arden) allowed the appeal, overturning the unanimous decision of the Court of Appeal (Sir Terence Etherton MR, Longmore and Flaux LJJ), with Lord Stephens and Lord Briggs dissenting.

General Dynamics had successfully obtained an arbitral award against Libya which it sought to enforce in England. However, the evidence established that diplomatic service by the Foreign, Commonwealth and Development Office (the “FCDO”) under section 12(1) was “not at all straightforward, too dangerous and (assuming it to be possible at all) likely to take over a year”. As a result, General Dynamics sought and obtained from Teare J in July 2018 an order dispensing with formal service, on the condition that the documents be couriered to Libya. Males LJ set aside that order at an inter partes hearing in January 2019, but the order was restored by the Court of Appeal in July 2019.

There were three issues for the Supreme Court:

  1. Was an order permitting enforcement of an arbitral award a document “required to be served for instituting proceedings” under section 12 (1) of the SIA?
  2. If so, would such document cease to be one “required to be served” if, in exceptional circumstances, the Court decided to dispense with service under CPR r6.16 or r.6.28?
  3. Must section 12(1) of the SIA be interpreted as allowing the court to make alternative directions as to service in exceptional circumstances where the claimant’s right of access to the Court would otherwise be infringed, in accordance with section 3 of the Human Rights Act 1998?

The majority concluded that section 12(1) needed to be given a broad reading because issues of international law and comity were “in play” (at [43] and [58]). As a result: (1) section 12(1) should be interpreted as applying in all cases in which a foreign state is impleaded in the English courts, and as extending to an arbitration claim form or an enforcement order (at [76]); (2) this interpretation did not allow for any exceptions, even if such service was impossible (at [81]); and (3) the approach adopted was a proportionate means of pursuing the legitimate objective of providing for a means of service which conformed with principles of comity (at [84]).

The minority would have decided all three issues in favour of General Dynamics. In particular, Lord Stephens (with whom Lord Briggs agreed) held that the restrictive doctrine of state immunity required that foreign states should not be able to escape the “rules of the marketplace” by frustrating attempts to serve them with legal proceedings (at [143]).

As a result, the minority concluded that: (1) Parliament intended that the applicability of section 12(1) depended on whether, under the Court rules, there was a document which both instituted proceedings and was required to be served (and neither the arbitration claim form nor the enforcement order met both of those requirements) (at [200]); (2) if the court dispensed with service, then the document would cease to be one which was “required to be served” within the terms of section 12(1) (at [238]); and (3) denying a claimant access to the Court where diplomatic service was impossible or unduly difficult would not be a proportionate infringement of the right of access to the Court, and an interpretation which permitted alternative directions as to service should be adopted (at [243]).

Additionally, there were two important points on which the Court was unanimous:

  1. First, contrary to the position of Libya, there is no rule of customary international law which requires diplomatic service of proceedings on foreign states (at [165]). The Court concluded that there was a variety of state practice, and that article 22 of the United Nations Convention on Jurisdictional Immunities of States and Their Property was not declaratory of customary international law (at [52] and [164]).
  2. Secondly, the FCDO did not have a discretion as to whether to effect service under section 12(1) of the SIA (disagreeing with contrary statements of Males LJ at first instance) (at [33] and [215]). As Lord Lloyd-Jones put it (with whom Lord Burrows and Lady Arden agreed), the FCDO is obliged to use its “best endeavours to effect service in accordance with section 12” (at [33]).

Daniel Toledano QC and James Ruddell acted for General Dynamics in the proceedings before Males LJ, the Court of Appeal and the Supreme Court, instructed by Reed Smith LLP.  You can view the full Judgment here