Case law

UK Supreme Court Rules on Dispensing service in exceptional circumstances under the State Immunity Act

On 25 June 2021, the Supreme Court of the United Kingdom issued a ruling in General Dynamics United Kingdom Ltd (Respondent) v State of Libya (Appellant) [2021] UKSC 22 on the right of the claimant to dispense service to a foreign State, by invoking exceptional circumstances. The court ruled that in proceedings to enforce an arbitration award against a foreign State under the 1996 Arbitration Act, the State Immunity Act (SIA) requires the arbitration claim form or the enforcement order to be served through the Foreign, Commonwealth (and Development) Office (“FCO”) to the State’s Ministry of Foreign Affairs, thus excluding the application of pertinent CPR rules.

Background

General Dynamics United Kingdom Ltd (“GD”) is part of the General Dynamics group, a global defense conglomerate. Libya is a sovereign state which, at the time of these proceedings, had two competing governments. A dispute arose between the parties over a contract for the supply of communications systems. In January 2016, an arbitral tribunal in Geneva made an award of approximately £16 million (plus interest and costs) in favor of GD. The Award remains unsatisfied, but GD wishes, and has attempted, to enforce it in England and Wales. In July 2018, the High Court made an order which, amongst other things, allowed GD to enforce the Award, dispense with the requirement on it to serve a claim form or any associated documents on Libya and provided for Libya to be notified of the order (as the initial hearing had been held without notice).

Subsequently, Libya applied to the High Court to set aside those parts of the initial order dispensing with service. It referred to section 12(1) of the SIA, which requires service of ‘any writ or other document required to be served for instituting proceedings against a State’ to be transmitted to that state’s Ministry of Foreign Affairs by the FCO. It asserted that, as no service in this manner either of the arbitration claim form or of the High Court’s order giving permission to enforce the Award had occurred, the order had to be set aside and the Award could not be enforced. Accordingly, it argued, any assets of Libya in the jurisdiction could not be used to satisfy the Award. The High Court’s initial order was therefore overturned. However, the Court of Appeal restored the High Court’s initial order finding that it was not mandatory for the arbitration claim form or order permitting enforcement to be served through the FCO ([2019] EWCA Civ 1110). The State of Libya appealed.

Ruling

The Supreme Court was called to address the following issues:

Issue 1: In proceedings to enforce an arbitration award against a foreign State under section 101 of the 1996 Act, does section 12(1) of the SIA require the arbitration claim form or the enforcement order to be served through the FCDO to the State’s Ministry of Foreign Affairs?

Issue 2: Even if section 12(1) applies, in exceptional circumstances, can the court dispense with service of the enforcement order under rules 6.16 and/or 6.28 of the CPR?

Issue 3: Must section 12(1) be construed 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?

The court summarised the judgment as follows.

Issue 1

The majority of the Court allowed Libya’s appeal on the first issue. They considered that a broad reading of section 12(1) of the SIA is appropriate, on account of the considerations of international law and comity which are in play. The words “other document required to be served for instituting proceedings against a State” in section 12(1) are wide enough to apply to all documents by which notice of proceedings in this jurisdiction is given to a defendant State. In the particular context of enforcement of arbitration awards against a State, the relevant document will be the arbitration claim form where the court requires one to be served, or otherwise will be the order granting permission to enforce the award. In cases to which section 12(1) applies, the procedure which it establishes for service on a defendant State through the FCO is mandatory and exclusive, subject only to the possibility of service in accordance with section 12(6) in a manner agreed by the defendant State.

The minority would have dismissed Libya’s appeal on the first issue. They considered that that Parliament intended the applicability of section 12(1) of the SIA to depend on what was required by the relevant court rules. If, as in this case, the operation of the relevant rules does not require service of the document instituting proceedings, then that document will fall outside section 12(1) of the SIA. Documents which do not institute proceedings, such as the enforcement order, fall outside the scope of section 12(1) of the SIA entirely. Where section 12(1) of the SIA does not apply, the status quo of State immunity provided for in section 1 of the SIA must prevail.

Issue 2

The majority’s answer to this question is “No”. Lord Lloyd-Jones explained that section 12(1) of the SIA does not require the court to refer to the CPR to determine whether a document is one which is required to be served. Rule 6.1(a) of the CPR also makes clear that in this instance the CPR do not purport to oust the requirements of section 12(1) of the SIA. The CPR cannot give the court a discretion to dispense with a statutory requirement in any event.

The minority’s answer to this question is “Yes”. Lord Stephens considered that, if the court exercises a discretion to dispense with service in exceptional circumstances, then the relevant document is no longer a document that is “required to be served” for the purposes of section 12(1) of the SIA. In his view, this interpretation gives effect to the underlying purpose of the legislation because it facilitates the restrictive doctrine of State immunity.

Issue 3

General Dynamics argued that the service requirements in section 12(1) of the SIA may prevent a claimant from pursuing its claim, which would infringe article 6 of the European Convention on Human Rights (“ECHR”) as well as the constitutional right of access to the court. It therefore contended that section 12(1) should be construed, pursuant to section 3 of the Human Rights Act 1998 (“HRA”) and/or common law principles, as allowing the court to make alternative directions as to service in exceptional circumstances.

The majority of the Court rejected this argument. They held that the procedure prescribed by section 12(1) of the SIA is a proportionate means of pursuing the legitimate objective of providing a workable means of service which conforms with the requirements of international law and comity, in circumstances of considerable international sensitivity. The procedure cannot therefore be considered to infringe article 6 of the ECHR, or to engage the common law principle of legality. The court cannot therefore interpret section 12 of the SIA as (for example) permitting substituted service, given that a fundamental feature of the provisions is their mandatory and exclusive nature.

The minority would interpret section 12(1) of the SIA as allowing the court to make alternative directions as to service if the claimant’s right of access to the court would otherwise be infringed. They considered that denying access to a court in circumstances where diplomatic service is impossible or unduly difficult would not be proportionate to the legitimate aim of complying with international law to promote comity and good relations between States.

Assessment

The case concerns the application of internal rules of the UK. We will therefore refrain from any comment on the domestic landscape, and approach the issue from a broader perspective.

Some clarifications first:

  1. The case falls outside the scope of the EU Service Regulation: Service of process was supposed to take place outside the boundaries of the European Union.
  2. The case falls outside the scope of the 1965 Hague Service Convention: The State of Libya is not a signatory of the convention aforementioned.
  3. There is no bilateral convention between the UK and the State of Libya in the field of judicial cooperation in civil matters.
Efforts to notify the defendant

As evidenced from the text of the Court of Appeal judgment, the Claimant had permission to dispense with service of the Arbitration Claim Form dated 21 June 2018, any Order made by the Court and other associated documents, pursuant to Civil Procedure Rules 6.16 and 6.28. The Claimant was allowed to courier the Arbitration Claim Form, the Order and the associated documents to the following addresses:

  1. Interim General Committee for Defence, Ghaser Bin Gashour, Tripoli, Libya;
  2. The Ministry of Foreign Affairs, Ash Shatt St, Tripoli, Libya; and
  3. Sefrioui Law Firm, 72 Boulevard de Courcelles, 75017 Paris, France.

All three addresses were associated with the Government of National Accord, the recognised government of Libya. The Defendant could, within two months of the date of this order, apply to set aside this Order and the Award could not be enforced until after the expiration of that period, or, if the Defendant applied to set aside this order within two months of the date of this Order, until after the application has been finally disposed of.

The proceedings did come to the attention of Libya which has applied (within the specified two-month period) to set aside paragraphs 4 and 5 of the order and to vary paragraphs 6 and 7 so that the period for any application to set aside paragraphs 1 to 3 will run from the date of service of the order pursuant to section 12 of the State Immunity Act.

Hence, the question was not whether the State of Libya was aware of the proceedings; it was rather whether the notification met with the requirements of UK law, i.e. with section 12 of the State Immunity Act.

European and global good practices

In the EU context, we could refer to Article 19(1)b of the Service Regulation, which reads as follows:

  1. Where a writ of summons or an equivalent document has had to be transmitted to another Member State for the purpose of service under the provisions of this Regulation and the defendant has not appeared, judgment shall not be given until it is established that:

 b the document was actually delivered to the defendant or to his residence by another method provided for by this Regulation;

and that in either of these cases the service or the delivery was effected in sufficient time to enable the defendant to defend.

The same rule applies in the field of the 1965 Hague Service Convention. Article 15(1)b states that,

Where a writ of summons or an equivalent document had to be transmitted abroad for the purpose of service, under the provisions of the present Convention, and the defendant has not appeared, judgment shall not be given until it is established that –

  1. b)  the document was actually delivered to the defendant or to his residence by another method provided for by this Convention,

and that in either of these cases the service or the delivery was effected in sufficient time to enable the defendant to defend.

Violation of the defendant’s procedural rights?

In light of the factual situation, it is substantially improbable that the procedural breach has caused an essential injury to the appellant’s defense rights. The State of Libya filed timely an application to set aside the arbitral award, apparently because it received the courier in one of the addresses aforementioned.

Formal service prevails over actual knowledge of the proceedings?

As a conclusion, we wish to underline that the State of Libya was not deprived of its rights to challenge the award. Admittedly, GD could have attempted to serve the documents pursuant to the SIA, before opting for notification by courier. It did so, because it was given the right by the High Court order. In addition, GD attempted subsequently to serve the documents, by following the requirements of section 12 of the SIA, however to no avail.

And now what?

GD is obliged to follow the conditions stipulated in Section 12 SIA. According to the most favorable estimates, evidenced in the judgment of the Court of Appeal, service will be effected no sooner than a year following transmission. Of course, it may not be excluded that service will not take place at all. This will be the moment when article 6 of the European Convention on Human Rights comes into play.

 

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