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No scope for additional requirement for “clear words” - Court of Appeal concludes foreign state waived immunity from execution against its assets
General Dynamics United Kingdom Ltd -v- The State of Libya [2025] EWCA Civ 134
The Court of Appeal has held that the State of Libya had agreed in writing not only to submit disputes under a commercial contract to ICC arbitration but had also consented to the execution against its property of any arbitration award made against it that dealt with disputes under that contract.
The decision reflects the English courts’ reluctance to allow foreign states to rely on state immunity where they are entering into general commercial transactions.
The background facts
Pursuant to a contract dated 5 May 2008, General Dynamics UK Ltd (GDUK) agreed to supply a communications and information system to the State of Libya (Libya) at a price of £84m. The contract was governed by Swiss law. Clause 32 of the contract provided for ICC arbitration in Geneva, with the decision of the arbitral tribunal to be “final, binding and wholly enforceable”.
It was not disputed that clause 32 amounted to a written agreement by Libya to submit disputes under the contract to arbitration, within the meaning of s.9 State Immunity Act 1978 (SIA) so that Libya was not immune from the adjudicative jurisdiction of the UK courts in relation to that arbitration. The issue on appeal was whether Libya also thereby consented, within the meaning of s.13(3) SIA, to the execution against its property of any ICC arbitration award made against it.
S.13 SIA provides, so far as relevant, as follows:
"(2) Subject to subsections (3) and (4) below—
…
(b) the property of a State shall not be subject to any process for the enforcement of a judgment or arbitration award or, in an action in rem, for its arrest, detention or sale.
(3) Subsections (2) and 2(A) above do not prevent the giving of any relief or the issue of any process with the written consent of the State concerned; and any such consent (which may be contained in a prior agreement) may be expressed so as to apply to a limited extent or generally; but a provision merely submitting to the jurisdiction of the courts is not to be regarded as a consent for the purposes of this subsection."
The Commercial Court decision
The Commercial Court held that the wording of clause 32 did amount to consent within the meaning of s.13(3) SIA, so that Libya could not rely on state immunity to resist execution against its property of an ICC award for over £16 million arising from a dispute under the contract. The award had already been recognised in the UK under s.101 Arbitration Act 1996, with leave to enforce the award as though it was a judgment of the Court. Therefore, the Court made a final charging order in favour of GDUK over London property owned by Libya.
Among other relevant findings, the Commercial Court stated that:
Contractual provisions that are said to fall within the scope of s.13(3) SIA should not be construed restrictively.
In the context of an agreement such as the contract, no special or particular words were required in order to satisfy the requirement of s.13(3) that the state concerned should have provided its written consent.
The use of the word “wholly” emphasised an intention by the parties that “enforceable” should not be regarded as limited in effect, particularly given the inclusion of the words “final” and “binding” that precede it.
The role of Swiss law was to provide the substantive rules by which the meaning of the contract was to be ascertained. Once that exercise was completed, it was a matter of English law whether the contract took effect in England and Wales as a waiver of state immunity in respect of enforcement against its assets.
Applying Swiss law principles to the construction of the contract, the parties’ intention was to enable an award made pursuant to the parties’ arbitration agreement contained in clause 32 of the contract to be enforceable in the same way as such an award could be enforced in any commercial agreement between non-state actors.
Libya appealed.
The Court of Appeal decision
Libya’s first ground of appeal was that the Commercial Court had erred in holding that “clear words” were not required for a state to consent to execution against its property within the meaning of section 13(3) of the SIA.
However, the Court of Appeal thought that there was no justification for putting a gloss on the words used. S.13(3) required 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.
Therefore, the Court had to determine whether and to what extent the state gave or expressed its consent by construing the words used according to the law applicable to that exercise, in the present case, Swiss law. Once the Court had determined that the state’s consent for the giving of the relief in question was expressed by the written words, s.13(3) was satisfied.
As it was common ground that there was no need to use the word “consent” or any other specific wording, it was unclear what would be required, beyond that the words used expressed consent, for that consent to be regarded as “express”. Further, given that words would not be construed as giving consent if they expressed an intention which was unclear or equivocal, there appeared to be no scope for an additional requirement for “clear words”.
Libya’s second ground of appeal was that the Commercial Court had erred in holding that, as a matter of construction of clause 32 of the contract, Libya had provided written consent for the purposes of s.13(3) SIA. Specifically, that an agreement that an award was “wholly enforceable” was insufficient on its own to amount to a state’s consent to execution against its property.
The Court of Appeal indicated that if the case as to consent to execution was based solely on the words “final, binding and wholly enforceable”, it would have been inclined to the view that they were insufficient for that purpose, notwithstanding that the word “wholly” supported the wider reading for which GDUK contended.
However, clause 32 also provided that disputes would be settled under the ICC Rules of Arbitration (ICC Rules), including article 28(2) of the 1998 Rules, which provided that:
"Every award shall be binding on the parties. By submitting the dispute to arbitration under the Rules, the parties undertake to carry out any award without delay and shall be deemed to have waived their right to any form of recourse insofar as such waiver can be validly made."
Libya had agreed to be bound by the ICC Rules by which it undertook “to carry out any award without delay”, which had been interpreted in at least two major jurisdictions as amounting to a waiver of execution immunity.
Construed in that context, Libya’s agreement in clause 32 that an award would be “wholly enforceable” could 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.
The Court of Appeal, therefore, dismissed the appeal.
Comment
In the Court of Appeal’s view, the parties were to be taken to have appreciated the distinction between recognition of an award and its enforcement. Therefore, the fact that they had not separately addressed those two concepts in clause 32 but had instead referred simply to the award being “wholly” enforceable, led to the conclusion that they consented to the whole process of enforcement of the award, including its recognition in any jurisdiction where it was sought to be enforced.
