General Dynamics United Kingdom Ltd a UK subsidiary of General Dynamics – an American defence and security corporation, entered into a contract with the State of Libya in which they supplied the state with a communications system. In January 2016, a International Chamber of Commerce in Geneva tribunal made an award of £16,114,120.62 plus interest and costs) to General Dynamics. To this day, Libya has not made any attempt to pay the award.
In July 2018, due to political unrest in Libya, the High Court made an order which allowed General Dynamics to dispense with service of the arbitration form – meaning that they would not be obliged to send the claim form or documentation of the award to the Libyan state in the formal manner. However, General Dynamics was still directed to send the necessary documentation to an address in Paris and two addresses in Tripoli associated with the Government of National Accord, the recognised government of Libya.
Libya applied to vary the enforcement order in order to reintroduce General Dynamics’ obligation to serve a claim form to its ministry of foreign affairs through the UK’s Foreign Commonwealth Development Office. Its application was successful at first instance, but, on General Dynamics’ appeal, the Court of Appeal decided that formal service through the FCDO was not required and that the service dispensation should therefore be restored. Libya then appealed to the Supreme Court.
The High Court’s order was supported by the Civil Procedure Rules – a set of rules which were originally established to make legal proceedings cheaper, quicker, and easier to understand. The order was given in reference to rules 6.16 and 6.28, which allowed the company to both enforce the judgement and dispense with service of any relevant documents.
Libya’s then applied to vary the order so that General Dynamics would have to provide service in the formal manner laid out in section 12(1) of the State Immunity Act 1978. Section 12(1) presides itself with the process for undergoing court proceedings against a foreign state. It states that ‘any writ or other document required to be served for instituting proceedings against a State’ shall be transmitted through the FCDO. Libya claim that the claim form constitutes as an ‘other document’.
At first instance in the Commercial Court, Libya’s application was successful and the permission to dispense with service was revoked. In his judgement, Males LJ, the sitting judge, stated that it was mandatory for the relevant document to be served to the foreign state in accordance with section 12(1) of the SIA, thus the court could not dispense with service under CPR rules 6.16 and 6.28. However, the judge stated obiter (in passing) that, if he was able, he would have found the circumstances exceptional enough to dispense with service.
General Dynamics then appealed this decision, arguing that section 12(1) of the SIA was not mandatory. The Court of Appeal shared this view in a hearing in June 2019, citing the fact that since section 12(1) was not mandatory, the Court could not differ from Males LJ’s obiter conclusion that the circumstances were exceptional enough for service to be dispensed with.
In February 2020, Libya were granted – at the second time of asking – permission to appeal to the UK Supreme Court.
By a majority of 3:2, the Supreme Court allowed Libya’s appeal. The court was concerned with three particular issues.
Issue 1: When attempting to enforce an arbitration award against a foreign state, does section 12 of the SIA require the claim form or the enforcement order to be served through the FCDO to the State’s Ministry of Foreign Affairs?
The majority of the Court (Lord Lloyd-Jones, Lady Arden and Lord Burrows) agreed that this was the case, concluding that section 12(1) of the SIA had to be followed in all cases in which documents that launched legal proceedings against a defendant state. They stated that, in order to comply with principles of international law and comity (practices among different political entities), section 12 of the SIA had to be interpreted broadly. They believed that a broad interpretation of the phrase “other document required to be served for instituting proceedings against a State” implied that documents required to enforce an arbitral reward fell into this bracket. Therefore, as section 12(1) of the SIA is the ‘mandatory’ and ‘exclusive’ procedure when dealing with a foreign state, General Dynamics would have to provide service through the FCDO in the formal manner. This would only not be mandatory if, in line with section 12(6) of the SIA, the defendant state agreed to a different manner of service, which was not the case.
On the other hand, the minority (Lord Stephens and Lord Briggs), would not have allowed Libya’s appeal on this issue, believing that section 12(1) SIA should be interpreted more narrowly, with the implications of the phrase “required to be served for instituting proceedings against a state” needing reference to procedural rules laid out in the Civil Procedure Rules. If those rules did not require service of the document in question, then section 12(1) of the SIA would not apply. As a result, since the CPR did not did not require the claim form to be served, and the High Court’s enforcement order was not a document that instituted proceedings, both documents were not required to be served through the FCDO.
Issue 2: In exceptional circumstances, can the court remove the obligation to provide service of the enforcement order according to CPR rules 6.16 and/or 6.28, regardless of whether section 12(1) of the SIA applies?
The majority’s answer was “no”. Firstly, Lord Lloyd-Jones stated that section 12(1) of the SIA, being a statutory requirement (it has been enacted by Parliament), does not require the court to refer to the CPR to determine whether a document requires service. Secondly, the majority agreed that Rule 6.1(a) of the CPR also makes clear that in this case the CPR does not have the ability to set aside the requirements of section 12(1) of the SIA. This rule states that CPR part 6 applies to the service of documents “except where … another Part, any other enactment or a practice direction makes different provision”, meaning that the SIA’s requirement overrides the procedure rules. Therefore, the CPR does not allow the court to dispense with service in any case.
The minority’s answer was “yes”. Lord Stephens considered that, if discretion is used in order to dispense with service, then the document would no longer be required to be served under section 12(1) of the SIA. This would not alter section 12, instead putting domestic procedure rules into effect that were created after the SIA. Lord Stephens also stated that this interpretation would give effect to the ‘doctrine of state immunity’, which ensures access to justice in circumstances where no harm or prejudice is being caused to the defendant, but the defendant is simply attempting to evade their legal obligations (in this case, paying the £16 million).
Issue 3: Can section 12(1) be interpreted as allowing the court to accept different methods of service where the claimants right of access to the court would otherwise be infringed?
General Dynamics argues that the service requirements in section 12(1) could prevent a claimant from pursuing its claim, which would infringe article 6 of the European Convention on Human Rights as well as the constitutional right of access to the court. It therefore contends that section 12(1) should be interpreted, according to section 3 of the Human Rights Act 1998 and common law principles, as allowing the court to make alternative methods of service in exceptional circumstances.
The majority of the court did not agree. They held that the formal procedure of service helped achieve the objective of conforming with requirements of international law and comity in circumstances of international sensitivity. Therefore, the procedure cannot be said to infringe article 6 of the ECHR or any constitutional right of access to the court. Lady Arden also added that section 3 of the HRA does not, in any case, permit the court to adopt an interpretation which is inconsistent with a fundamental feature of the legislation. Thus the court could not interpret section 12 of the SIA as permitting alternative forms of service.
The minority interpreted section 12(1) of the SIA as allowing the court to allow for alternative methods of service in exceptional circumstances. They considered that denying access to a court when diplomatic service is impossible or excessively difficult would not achieve the objective of conforming with requirements of international law and comity in order to promote good relations between the states.
This case provides a warning to other firms that are engaged with countries that have a reputation for civil unrest, as Libya does. In this case, though Libya prior to the revolution of 2011 looked to be emerging as a stable nation, the civil unrest post-2011 has caused the following of statutory procedure to be hazardous, therefore leaving General Dynamics vulnerable of losing the money that they were promised. This leaves some companies in a dangerous position: faced with losing the contract or accepting the risk of losing the money as a result of section 12(1) of the SIA.