Can a foreign state become subject to the enforcement jurisdiction of the English court without ever having been validly served a document required to be served for instituting proceedings? The answer, perhaps unsurprisingly, is no. Perhaps more surprisingly, that is only the case due to a 3–2 split decision of the Supreme Court handed down on 25 June 2021 in General Dynamics United Kingdom Ltd v Libya[1] (“General Dynamics”). Indeed, the Court of Appeal had unanimously held otherwise. The Supreme Court’s decision reverses that of the Court of Appeal, which had reversed the first instance decision of Males LJ, which itself had set aside those parts of Teare J’s order made on a without notice application granting the claimant permission to dispense with service.

Background

By s 1 of the State Immunity Act 1978 (the “SIA”), sovereign states are immune from the jurisdiction of the courts of the United Kingdom except as otherwise provided in the SIA. By s 12 of the SIA, any document “required to be served for instituting proceedings” against a state must be served by being transmitted through the Foreign, Commonwealth and Development Office (the “FCDO”) to the Ministry of Foreign Affairs of the State.

The relevant facts of General Dynamics can be summarised in outline as follows:

• The claimant in an arbitration obtains an award in its favour, whose terms provide for an award of damages to be paid by the defendant (a sovereign state, in this case, Libya). The award is enforceable under the New York Convention. The defendant fails to comply with the award.
• The claimant seeks to enforce in England and Wales, pursuant to s 101 of the Arbitration Act 1996 (“AA 1996”) and CPR r 62.18. The claimant issues an arbitration claim form and makes an application under CPR r 62.18 without notice (r 62.18(1)). Importantly, the arbitration claim form need not be served on any party unless the court so orders (r 62.18(2)). The claimant’s enquiries as to the possibility of effecting service on the defendant in accordance with s 12(1) indicate that, due to current political circumstances within the defendant’s territory, service will take over a year, if it is possible at all.
• On the hearing of the application, the court makes an order: (1) granting the claimant permission to enforce the award in the same manner as a judgment or order of the court; (2) entering judgment against the defendant; and (3) due to the difficulties in serving via the usual FCDO channels, granting permission to dispense with service of the arbitration claim form, any order made by the court and any other associated documents. Instead, all of those documents should be brought to the attention of the defendant by being couriered to government officials in the defendant’s capital city and its lawyers in another jurisdiction.

The question which arises is whether the court has power to dispense with service of the order permitting enforcement, given that it has not required the arbitration claim form to be served. In General Dynamics, Libya made an application to set aside those parts of the order made on the claimant’s application which dispensed with service.

Decisions at first instance and in the Court of Appeal

I wrote about the previous decisions in this case of Males LJ, at first instance[2], and the Court of Appeal[3] for the Practical Law Arbitration Blog. Those articles are available here: first instance, Court of Appeal. In summary:

• At first instance, Males LJ held that:
  • On a proper construction of s 12 of the SIA, in any, and all, proceedings brought against a state in the English courts, a document must always be served on that state to institute proceedings (paras 24–36).
  • If, in a claim to enforce an arbitral award, no order has been made requiring the arbitration claim form itself to be served, then the order granting permission to enforce the award must be regarded as the document instituting proceedings for the purposes of the SIA (paras 37–44, 78). This is so notwithstanding that the arbitration claim form is, as a matter of English procedural law, the document instituting proceedings and need not be served on the defendant unless the court so orders.
• The Court of Appeal (Etherton MR and Longmore and Flaux LJJ) held that:
  • The SIA must be read in accordance with English procedural law as it is from time to time – it is an ambulatory statute. Moreover, there is no other procedural law from the perspective of which s 12 can be viewed. In any event, the rules in force when the SIA was passed were not materially different from the current position under the CPR. Parliament must be taken to have known in 1978 that there was a procedure for instituting registration of both foreign judgments and foreign awards without requiring service of the initiating document (paras 30, 40 and 41).
  • For the above and other reasons, it was not mandatory to serve the arbitration claim form on the respondent. Nor was it mandatory to serve the order permitting enforcement. Pursuant to CPR r 62.18(8)(b) and CPR r 6.44, the order permitting enforcement did have to be served, but such service could be dispensed with under CPR rr 6.16 and 6.28. If such service is to be dispensed with, it will always be appropriate to ensure that the order comes to the attention of the respondent by some other means, as had been done in this case by the original order of Teare J[4], which required the order to be couriered to Libyan government officials in Tripoli and Libya’s lawyers in Paris (para 60).

The Supreme Court’s judgment(s)

The issues for the Supreme Court, as stated in the parties’ agreed statement of facts and issues, were:

• whether, in proceedings to enforce an arbitral award against a foreign state pursuant to the AA 1996, s 12(1) of the SIA required service of a document on the foreign state by transmittal through the FCDO to the Ministry of Foreign Affairs of the state;
• whether the arbitration claim form or the enforcement order were a “writ or other document required to be served for instituting proceedings” within the meaning of s 12(1); and
• whether, in exceptional circumstances, the court was able, pursuant to CPR r 6.16 and/or r 6.28, to dispense with service of the enforcement order.

Three of the five Justices of the Supreme Court who heard the case gave judgments:

• Lord Lloyd-Jones, with whom Lord Burrows agreed;
• Lady Arden, who also agreed with Lord Lloyd-Jones; and
• Lord Stephens, with whom Lord Briggs agreed, dissenting from the majority.

In essence, the reasoning of the majority, allowing the appeal, sided with Males LJ, while that of the minority sided with the Court of Appeal.

The majority

Lord Lloyd-Jones derived particular assistance from a case of the Singapore High Court (Kannan Ramesh J), Van Zyl & Ors v Kingdom of Lesotho[5]. That case had dealt with essentially the same issue: “Must an order granting leave to enforce an arbitral award (a “leave order”) be served in accordance with s 14 of the State Immunity Act (Cap 313, 2014 Rev Ed) […]?” (para 1 of Van Zyl). Lord Lloyd-Jones noted that “the Singapore State Immunity Act (Chapter 313, (2014) revised ed) […] was closely modelled on the UK SIA and rules of court which [Ramesh J] noted were not different in any meaningful manner from those in the United Kingdom” (para 72).

Per Lord Lloyd-Jones (para 76):

• Section 12 SIA establishes special procedures and procedural privileges in cases where the defendant is a state. These apply whether the proceedings invoke the adjudicative or enforcement jurisdiction.
• In cases to which s 12(1) applies, the procedure which it establishes for service on a defendant state through the FCDO is mandatory and exclusive, subject only to the possibility of service in accordance with s 12(6) in a manner agreed by the defendant state.
• A particular purpose of section 12 is to provide a means by which a state can be given notice of proceedings against it and a fair opportunity to respond. This rationale applies fully to the service of an order giving permission to enforce an arbitral award. As Ramesh J pointed out in Van Zyl, although the order is not in itself an originating process, it will often be the first notice to the defendant state of an attempt to enforce the arbitral award in the forum in question.
• Although there is no rule of customary international law requiring that the service of a document instituting proceedings against a defendant state be served through the diplomatic channel, considerations of international law and comity strongly support a reading of s 12(1) which makes its procedure available and mandatory, subject to s 12(6), in all cases where documents instituting proceedings are to be served on a foreign state.
• Section 12(1) is intended to establish a procedure for service of general application. If s 12(1) has no application to enforcement proceedings, there would be no procedure under the SIA by which notice of enforcement proceedings could be given to a defendant state.
• Where proceedings are instituted to enforce an arbitration award against a defendant state, and where no order has been made for the service of the application for permission to enforce the award, the order for enforcement is a “document required to be served for instituting proceedings against a State” and s 12(1) SIA therefore requires, subject only to s 12(6), that service be effected through the FCDO to the Ministry of Foreign Affairs of the defendant state.

Lady Arden’s “vote” was key. Her view that s 12(1) SIA could not be treated as “ambulatory” or “always speaking” led her to side with Lords Lloyd-Jones and Burrows:

“In my judgment, neither the concept of open-textured expressions nor the concept of functional equivalence is relevant here. The issue is whether procedural rules can authorise substituted service or even dispense with service. If that was the purpose of the provision, Parliament would have used language to enable this to happen. Section 12(1) could have begun with some such words as “Subject as provided in rules of court”. But those words were not there, and in my judgment, a court cannot interpolate them.” (Paragraph 96)

The minority

Lord Stephens considered that:

• “it is a complete subversion of the purpose of section 12(1) SIA 1978 to treat the requirement for diplomatic service as enabling a state which is not (or arguably not) immune nonetheless to obtain it de facto by being obstructive about service, or by putting diplomatic pressure on the United Kingdom’s FCDO not to serve or to delay the service of the proceedings” (para 109); and
• “a purposive construction should promote international comity which requires that states entering into commercial transactions should abide by the rules of the marketplace. A fundamental aspect of the rules of the market place is that liabilities as determined by judgments or arbitral awards should be honoured” (para 133).

Lords Stephens’ (and Briggs’) view was that, when enacting the SIA, Parliament must have contemplated that the court’s procedural rules would be subject to change and s 12 must therefore be given an “always speaking” interpretation (para 136). Whether proceedings have been instituted (and by what document) and whether service is required are issues which are inherently procedural and can only be determined by reference to the procedural rules of the forum state (para 199). Consequently, since the CPR did not require the arbitration claim form to be served and the enforcement order did not itself institute proceedings, as a matter of English procedural law, there was no document that was required to be served to institute proceedings against Libya, and s 12(1) did not apply.

Conclusion and takeaways for practitioners

Somewhat ironically, a postscript to Lord Lloyd-Jones’s judgment at para 87 of his judgment records that service on Libya of various documents, including the arbitration claim form and application for permission to enforce the award, was achieved via the FCDO, in accordance with s 12(1), on 15 June 2021, shortly before the draft judgments were circulated to the parties. In hindsight, General Dynamics presumably wishes it had never attempted to shortcut its way around s 12(1) – though the taking of that decision at the time is entirely understandable, since the evidence was that service via the FCDO was “not at all straightforward, too dangerous, and (assuming it to be possible at all) likely to take over a year” (para 87 of Males LJ’s judgment).

In any event, the takeaway for practitioners and claimants who have obtained an award against a state is clear: any order made by the English court permitting enforcement of the award must be served via the FCDO in accordance with the SIA. As Lord Stephens pointed out, this potentially means a state could make itself de facto immune from enforcement by ordering its diplomats to refuse to accept service: see Westminster City Council v Iran[6] for a previous example. In other cases, service may be difficult, dangerous, or impossible, even absent an outright refusal. As always, a clear plan for enforcement should be established at the outset of any claim and kept in mind throughout its progress. Practitioners should advise their clients of the potential obstacles created where service on a defendant state via the FCDO may prove difficult or time-consuming.

[1] [2021] UKSC 22; [2021] 3 WLR 231.

[2] [2019] EWHC 64 (Comm); [2019] 1 WLR 2913.

[3] [2019] EWCA Civ 1110; [2019] 1 WLR 6137.

[4] The text of Teare J’s order is quoted at para 7 of [2019] EWHC 64 (Comm); [2019] 1 WLR 2913. Teare J’s brief judgment is at [2018] EWHC 1912 (Comm).

[5] [2017] SGHC 104.

[6] [1986] 1 WLR 979.