Court of Appeal rejects Libya’s claim for immunity from enforcement

The English Court of Appeal has rejected an appeal from the State of Libya (Libya) on the question of whether the phrase “final, binding and wholly enforceable” in a contract with General Dynamics United Kingdom Limited (GDUK) amounted to written consent waiving Libya’s immunity from enforcement under section 13(3) of the State Immunity Act 1978 (SIA), as well as a waiver of its adjudicative immunity. 

The Court was unanimous in its decision that the phrase did constitute consent to the English courts’ enforcement jurisdiction, with all members agreeing that there was no scope for reading in additional requirements to section 13(3) as Libya contended. Two of the Lord Justices (Lewison LJ and Zacaroli LJ) found that the straightforward meaning of the phrase “final, binding and enforceable” itself was sufficient to waive Libya’s immunity from enforcement. Phillips LJ considered that the phrase on it own was insufficient but that  the International Chamber of Commerce (ICC) Rules were referred to in the same clause, which incorporated a further agreement by the parties to “carry out” any arbitral award without delay.

Background to the claims

GDUK and Libya entered into a contract for the provision of communications systems in 2008 (the Contract). The Contract was governed by Swiss law and provided, at Clause 32, for the arbitration of any dispute under ICC Rules with the decision of the arbitration panel being “final and binding” on the parties, with the further phrase that “Both parties agree that the decision of the arbitral panel shall be final, binding and wholly enforceable”. A dispute developed, which was referred to arbitration, and GDUK obtained an arbitral award for £16,114,120.62 plus interest in 2016.

Proceedings in the United Kingdom commenced in 2018; the award was recognised in the United Kingdom under section 101 of the Arbitration Act 1996, and GDUK obtained permission from the Court to enforce it as if it was a judgment of the court. GDUK then sought a charging order over a property owned by Libya in London. An interim charging order was granted in February 2023 and made final on 22 March 2024. 

Libya argued against the final charging order on the basis that (among other things) it was entitled to immunity from enforcement under section 13(2) of the SIA and that, although Clause 32 of the Contract amounted to a waiver of adjudicative immunity, it did not constitute a waiver of immunity against enforcement. It submitted that the phrase “final, binding and wholly enforceable” meant that any arbitral award would be wholly enforceable to the extent permitted by the law of the relevant jurisdiction, which in the United Kingdom meant that it was subject to the enforcement immunity granted by the SIA.

However, in making the final charging order, Pelling J accepted GDUK’s submissions that Clause 32 did amount to a waiver of enforcement immunity as well as adjudicative immunity. Pelling J noted that no special or particular words are required under section 13(3) of the SIA for a state to indicate its written consent, that Swiss law required him to interpret the words used in light of the way that the parties would have construed them in good faith in light of all of the circumstances, and that this meant asking what the phrase would mean to a reasonable person with knowledge of the circumstances would have concluded. He concluded that the phrase used must have been intended to waive enforcement rights. He noted that the meaning Libya contended for would have meant that the phrase “final, binding and wholly enforceable” was redundant and did not add anything to the initial description in Clause 32 of the award as “final and binding”.

Pelling J granted Libya permission to appeal, and the appeal was heard in November 2024.

What was the basis for Libya’s appeal?

Libya appealed on two grounds. First, it argued that Pelling J erred in holding that “clear words” are not required for a state to consent to execution against its property within the meaning of section 13(3) of the SIA (Ground One) (although the Court of Appeal noted in its judgment that Libya did not actually make this argument before Pelling J, but that it would deal with it anyway), and second, that Pelling J erred in holding that Libya had provided written consent in Clause 32 for the purposes of section 13(3) of the SIA (Ground Two).

For Ground One, Libya contended that there were two relevant points to consider. These were: (i) the purpose and context of the SIA support a requirement that only “express” words would be sufficient to waive immunity against execution pursuant to section 13(3); and (ii) the SIA should be taken to incorporate the pre-existing common law principle that the more valuable a right which is said to be waived, the more emphatic the language of the waiver must be to effect it.

For Ground Two, Libya argued that agreement that an award is “wholly enforceable” is insufficient by itself to amount to a state’s consent to execution against its property. Libya highlighted the difference between adjudicative immunity and immunity against execution and contended that the phrase “wholly enforceable” referred to a waiver of adjudicative immunity, but did not constitute a waiver of immunity against execution for the purposes of section 13(3).

What did the Court decide?

The Court of Appeal dismissed the appeal unanimously and upheld Pelling J’s decision. 

Phillips LJ gave the leading judgment. As regards Ground One, he concluded that there is no justification for putting any gloss on the words of section 13(3). He noted that section 13(3) requires “the written consent of the State concerned, such consent being “expressed so as to apply to a limited extent or generally” by the words used”” and found that there was no scope for any additional requirement for clear words, explaining that:

 “[a]s it is common ground that there is no need to use the word “consent” or any other specific wording, it is unclear what would be required, beyond that the words used express consent, for that consent to be regarded as “express”. Further, given that words will not be construed as giving consent if they express an intention which is unclear or equivocal, there appears to be no scope for an additional requirement for “clear words”. 

Phillips LJ referred to the judgment he had given in the recent case of Infrastructure Services Luxembourg S.A.R.L and another v Spain and Border Timbers and another v Zimbabwe [2024] EWCA Civ 1257, explaining that he had concluded in that case that the word “express” used in some of the foreign judgments on this issue could simply mean express as opposed to implied consent, and that the same analysis applied in this case. 

As regards Ground 2, the Court of Appeal found that Clause 32 of the Contract amounted to written consent for the purposes of section 13(3), although the panel arrived at this conclusion via different routes.

Zacaroli LJ and Lewison LJ found that a straightforward reading of Clause 32, by itself, amounted to express written consent by Libya for the purposes of section 13(3), and therefore that the phrase “final, binding and wholly enforceable” was a waiver of both adjudicative and enforcement immunity. 

Phillips LJ, while agreeing that Clause 32 constituted written consent for the purposes of section 13(3), considered that the phrase “final, binding and wholly enforceable” was insufficient by itself to constitute consent to enforcement. He took the view that the earlier reference in Clause 32 to awards being “final and binding” did not waive adjudicative or enforcement immunity as Pelling J had concluded, and that therefore the further reference to the award being “final, binding and wholly enforceable” could be read as applying to adjudicative immunity only. However, it was important in his view that Clause 32 also provided that disputes would be settled under the ICC Rules, which include a specific rule by which the parties agree to carry out any award without delay. He noted that for this reason the ICC Rules have been interpreted in at least two major jurisdictions as amounting to a waiver of execution immunity, and concluded that therefore Libya’s agreement to Clause 32 can “readily be seen to encompass any and all waivers necessary for the Award to be carried out, that is to say, not only enforced but also executed.”

About

Freshfields partner Sarah Parkes, counsel Anthea Bowater and associate Andrew Layland acted for GDUK, instructing Joe Smouha KC of Essex Court and James Ruddell of One Essex Court.