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Enforcing arbitral awards against foreign states | Feature

How is an arbitral award against a foreign state to be enforced as a matter of English law? In answering this question, the Court of Appeal in General Dynamics United Kingdom Ltd v Libya [2019] EWCA Civ 1110 considered, inter alia, the application of section 12 of the State Immunity Act 1978 (the act) and the relevant procedural rules on service under Civil Procedure Rule 6 and enforcement of arbitral awards under CPR 62.18. 

The act and the rules 

Section 12 of the act provides that service of court proceedings on a foreign state shall be served through the Foreign & Commonwealth Office (FCO) to the Ministry of Foreign Affairs of the state in question. That section refers to ‘any writ or other document required to be served for instituting proceedings against a state’. CPR 62.18 governs the procedure for enforcement of arbitration awards and provides, inter alia, that an order cannot be enforced until the defendant has had an opportunity to apply to set it aside. Where the defendant is out of the jurisdiction, the order may be served in accordance with CPR 6.40-6.46 as if it were an arbitration claim form. CPR 6.44 provides for service on a state through the FCO and CPR 6.16 deals with dispensing with service of a claim form ‘in exceptional circumstances’. Finally, CPR 6.28 concerns dispensing with ‘any document’ which is to be served in the proceedings. 

Brief facts and lower courts 

The claimant sought to enforce an ICC award against the assets of the defendant in England. Mr Justice Teare gave permission to the claimant to enforce the award and, in light of internal conflict in Libya, dispensed with the need for formal service but provided that notice of the order be given to the defendant. The claimant subsequently took steps to bring the order to the attention of the defendant which led to the defendant making an application to set aside those aspects of Teare J’s order dispensing with service and requiring service through the FCO. That application came before Lord Justice Males, who held: (i) there would always be some document ‘required to be served’ and that such service had to be through the diplomatic route in section 12 of the act; and (ii) there was no jurisdiction to dispense with service. 

Court of Appeal

The Court of Appeal (Sir Terence Etherton MR, Longmore and Flaux LLJ) held that section 12 of the act was to be viewed from the perspective of English procedural law. The provisions of the act meant that foreign states were no longer immune to proceedings in respect of commercial transactions, arbitrations, or enforcement, and as such there was no reason why the ordinary procedural law of England should not apply. Although orders permitting the enforcement of an award still had to be served, they were not, according to the court, the ‘document instituting proceedings’ and as such service did not have to take place in accordance with section 12 of the act.

Further, although CPR 62.18 provided for service out of the jurisdiction in accordance with rule 6.44, service by such method could be dispensed with in appropriate cases under CPR 6.16 and/or CPR 6.28. Where the court exercises its jurisdiction to dispense with service under CPR 6, appropriate steps must be taken to notify the state that the order has been made. 

The court went on to stress that such notification ‘does not amount to alternative service and must not be used as a proxy for such service’. The court explained that CPR 6.16 and CPR 6.28 draw a distinction between dispensing with service ‘in exceptional circumstances’ and dispensing with service in other circumstances as to which there is a general discretion. It followed, in the court’s opinion, that ‘it could be said that a judge has a general discretion to dispense with service of the order permitting enforcement of the award’. However, where the state is being notified for the first time of the order to enforce, it was ‘only right and proper that the court should apply the test of exceptional circumstances’.

The decision is significant for the practice of international commercial arbitration. It makes clear that enforcement proceedings and orders against a state that has been a party to a commercial transaction is not subject to service through the FCO. Further, service under the CPR may be dispensed with where the circumstances of the case are exceptional. However, where service is dispensed with, the claimant will be required to take necessary steps to notify the state of the existence of the enforcement order. 

The decision seeks to strike a balance between relevant policy considerations of the sensitivities surrounding impleading a foreign state and the need for parties to honour valid arbitral awards. 

 

Masood Ahmed is an associate professor at the University of Leicester and a member of the Civil Procedure Rule Committee


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