General Dynamics United Kingdom Ltd v The State of Libya

Factual and Procedural Background

By a written agreement dated 5 May 2008, the Respondent ("Company A") agreed to supply a Tactical Communications and Information System to the Appellant ("State A") for £84 million ("the Contract"). The Contract was governed by Swiss law and contained an arbitration clause (clause 32) providing for disputes to be resolved under the International Chamber of Commerce ("ICC") Rules of Arbitration, with the arbitration panel's decision being "final, binding and wholly enforceable".

It was undisputed that clause 32 constituted a written agreement by State A to submit disputes to arbitration within the meaning of section 9 of the State Immunity Act 1978 ("SIA"), removing immunity from adjudicative jurisdiction in UK courts for arbitration-related proceedings. The issue on appeal was whether State A also consented, within section 13(3) of the SIA, to enforcement (execution) against its property of any ICC arbitration award.

His Honour Judge Pelling KC ("the Judge") determined that clause 32 did amount to such consent, allowing Company A to enforce an ICC arbitration award of £16,114,120.62 ("the Award") against State A’s property at a London address. The Award had been recognised under the Arbitration Act 1996 with leave to enforce it as a judgment. The Judge made a final charging order over the property and dismissed State A's application to discharge an interim charging order.

State A appealed the Judge’s decision with permission granted.

Legal Issues Presented

1. Whether clause 32 of the Contract constituted written consent by State A to the enforcement (execution) of an ICC arbitration award against its property within the meaning of section 13(3) of the State Immunity Act 1978.
2. Whether the phrase "final, binding and wholly enforceable" in clause 32 suffices as a waiver of immunity from enforcement.
3. Whether "clear words" or "express consent" are required under section 13(3) SIA to waive immunity from enforcement.
4. The proper construction and application of Swiss law principles to interpret the Contract in relation to waiver of state immunity.

Arguments of the Parties

Appellant's Arguments

• The Judge erred in holding that "clear words" are not required to waive immunity from enforcement under section 13(3) of the SIA, arguing that express and clear wording is necessary due to the valuable nature of the right being waived and international law considerations.
• The phrase "wholly enforceable" in clause 32 is insufficient to amount to consent to enforcement against State A’s property; it only refers to enforceability subject to the law of the enforcing jurisdiction and thus does not waive immunity from execution.
• Waiver of immunity from enforcement requires more explicit language, often including reference to assets or property, which clause 32 lacks.
• The Contract should be interpreted with the presumption that a state with prima facie immunity has not waived it lightly, requiring clear and explicit consent.
• Swiss substantive law requiring waivers to be "express" and "clear" supports the need for explicit wording.

Respondent's Arguments

• Clause 32, read as a whole and applying Swiss law principles of interpretation, evidences an intention that the arbitration award be "final, binding and wholly enforceable", which includes consent to enforcement against property.
• The distinction between adjudicative immunity and enforcement immunity is well recognized, but clause 32’s wording and incorporation of ICC Rules (which require parties to carry out awards without delay) demonstrate consent to enforcement.
• No special or particular words are required to satisfy section 13(3) SIA; consent must be expressed by the written words, which clause 32 satisfies.
• International law and relevant case law support the interpretation that submission to ICC arbitration rules, including Article 28(6), amounts to waiver of immunity from enforcement.
• The English law presumption requiring clear words to waive valuable rights does not apply strictly here due to Swiss law governing interpretation and the commercial context.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by reaffirming the statutory framework under the State Immunity Act 1978, emphasizing the clear distinction between adjudicative immunity (immunity from being sued or having a dispute adjudicated) and enforcement immunity (immunity from execution against property). Submission to arbitration under section 9 removes adjudicative immunity but not necessarily enforcement immunity under section 13.

The court applied Swiss law principles to interpret the Contract, noting that interpretation must consider the language used, the contract’s commercial context, and the principle of good faith. There was no evidence of subjective intention, so an objective interpretation was required.

The court held that the phrase "final, binding and wholly enforceable" in clause 32 was not merely a restatement of adjudicative submission but, when read in context and in light of the ICC Rules incorporated, constituted written consent to enforcement against property. The use of "wholly" indicated an intention to waive enforcement immunity, not just adjudicative immunity.

The court rejected the Appellant's argument that "clear words" or "special words" were required to waive enforcement immunity, holding that the statutory requirement of "written consent" under section 13(3) means consent must be expressed in the written words, but no higher standard applies. The court noted that consent can be implied from clear language and context, consistent with international law principles.

The court also distinguished the contractual language from standard boilerplate waivers, finding that the Contract's wording and incorporation of ICC Rules (which require parties to carry out awards without delay and waive recourse) supported an inference of waiver of enforcement immunity.

While one Lord Justice expressed some reservations about the sufficiency of the phrase "wholly enforceable" standing alone, he agreed that the incorporation of the ICC Rules and the commercial context justified the conclusion that enforcement immunity was waived.

Holding and Implications

DISMISSED

The court held that clause 32 of the Contract, when properly construed under Swiss law and in the commercial context, constituted written consent by State A to the enforcement (execution) of the ICC arbitration award against its property within the meaning of section 13(3) of the State Immunity Act 1978. The appeal was dismissed, affirming the Judge’s order for a final charging order over State A’s property.

The decision confirms that contractual language agreeing that an arbitration award is "final, binding and wholly enforceable", especially when combined with incorporation of ICC Rules requiring prompt compliance, can amount to written consent to enforcement, waiving state immunity from execution. No new precedent was set beyond the application and clarification of existing principles relating to state immunity and waiver under the SIA.