UK Supreme Court emphasises, in the context of enforcement of a foreign award, the exclusive nature of s.12 SIA 1978

In General Dynamics v Libya [2021] UKSC 22 the UK Supreme Court held that the regime for service of English court proceedings on a foreign state contained in s.12 State Immunity Act 1978 (“SIA”) was mandatory when seeking to enforce an arbitration award against it. 

Background

The appeal concerned the enforcement, in England, of a foreign (ICC with Geneva seat) arbitral award against Libya in favour of General Dynamics (“GD”) (a global military defence conglomerate).

Under the English procedure for enforcement of commercial arbitration awards (CPR 62.18) the court can decide whether to order service of the document by which the enforcement application is made (an arbitration claim form) or, instead, make an order giving permission to enforce the award which is then served on the defendant. In this case, GD successfully obtained the latter order.

At the time, however, the situation in Libya was extremely unstable. So there were potential problems with service in accordance with s.12 SIA (it, from time to time, being too dangerous). S.12, in summary, provides for “any writ or other document required to be served for instituting proceedings against a State" to be served through the Foreign Commonwealth and Development Office (“FCDO”)  to that state’s foreign ministry (there are exceptions where the state has entered an appearance, or has agreed to another method of service; neither of these were engaged in this case).

Accordingly, GD was given permission to dispense with service of the enforcement order because of the exceptional circumstances in Libya.

That permission was subsequently set aside by the High Court on the basis that it was contrary to the mandatory nature of s.12. For further details; see our earlier post here.

However, the Court of Appeal disagreed, concluding that, under the domestic procedure being followed, there was no “document instituting proceedings” to be served in this case. So, s.12 didn’t apply and it was free to dispense with service in exceptional circumstances.  

Decision

The main issue before the Supreme Court was whether service of the order giving permission to  enforce the arbitration award fell within the scope of s.12. 

Consistent with the Court of Appeal, GD argued that s.12 was not applicable because that order, which did ordinarily need to be served, was not the document which instituted the proceedings (that being the arbitration claim form in respect of which, under the procedure being followed, there was no requirement to serve).

A majority of the UKSC rejected that argument; it would improperly delegate the content of s.12 to the Civil Procedure Rules Committee. Instead, s.12 needed to be understood as encompassing the document by which notice must be given to the foreign state of the court process against it (which might not necessarily be the specific document which technically institutes proceedings). Therefore, in this case, the document giving such notice was the aforesaid order; to which s.12 thus applied. In interpreting it in this way, the majority had regard to s.12’s policy objective, being to provide the appropriate means by which a state can be given notice of proceedings and a fair opportunity to respond.

The majority further concluded that, in light of the policy objectives underlying s.12 and its mandatory and exclusive nature, the English courts are not able, even in exceptional circumstances, to dispense with service in cases to which it applies. That being the case, the order needed, in this case, to be served through the FCDO.

The appeal also raised an issue as to whether such a construction of s.12 had the effect of preventing access to the court under article 6 of the ECHR. The majority rejected that argument, holding that service via diplomatic channels pursues a “legitimate objective by proportionate means”.   

Conclusion

Although s.12 generally has been understood to be mandatory, the judgment clarifies an important aspect of its scope; namely that it covers any document by which a party must give a foreign state notice of English court proceedings. So, where there is such a document, s.12 can’t be avoided by saying that there was some other document which, technically, instituted proceedings but did not need to be served. Furthermore, it provides clear emphasis that the mandatory nature of s.12 means mandatory – even in an exceptional case.

For enforcement of a foreign arbitration award in England against a foreign state, its practical implications are therefore significant and illustrate additional hurdles in this area. Service of either the arbitration claim form, or the permission order, will almost certainly have to follow the s.12(1) SIA route through the FCDO (in this context, in the usual course of events, the chances of a voluntary appearance by the state, or the existence of relevant contractual provisions - as it may not be feasible to predict all third states in which enforcement of an award might need to be attempted, might seem unlikely). Although, the judgment makes clear that the FCDO must use its best endeavours to effect such service and, in a post script, that it was successfully achieved shortly before the UKSC gave judgment.