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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> General Dynamics United Kingdom Ltd v The State of Libya [2025] EWCA Civ 134 (19 February 2025) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2025/134.html Cite as: [2025] EWCA Civ 134, [2025] 4 WLR 34, [2025] WLR(D) 122 |
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CIVIL
DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (KING'S BENCH DIVISION)
His Honour Judge Pelling KC (Sitting as a Judge of The High Court)
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE PHILLIPS
and
LORD JUSTICE ZACAROLI
____________________
GENERAL DYNAMICS UNITED KINGDOM LIMITED |
Claimant/ Respondent |
|
- and - |
||
THE STATE OF LIBYA |
Defendant/ Appellant |
____________________
Richard Lissack KC and Jacob Turner (instructed by Squire Patton Boggs (UK) LLP)
for the Defendant/Appellant
Hearing date: 13 November 2024
____________________
Crown Copyright ©
Lord Justice Phillips:
The key provisions
"Disputes/Arbitration
The Parties will attempt to resolve any differences or disagreements by mutual agreement. All disputes in which mutual agreement cannot be reached arising out of or in connection with the present Contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one (1) or three (3) arbitrators. The award will be final and binding upon the Parties. The seat or legal place of arbitration shall be Geneva, Switzerland. The language to be used in the arbitral proceedings shall be English. The arbitrators shall have no authority to award aggravated or punitive damages and shall be bound by any limits on the PURCHASER's and SELLER's liability as set out in this Contract. The Parties undertake to keep confidential all awards and orders as well as all materials submitted by another party in the framework of the arbitral proceedings not otherwise in the public domain, save and to the extent that a disclosure may be required of a party by a legal duty, to protect or pursue a legal right. Both parties agree that the decision of the arbitration panel shall be final, binding and wholly enforceable."
"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."
"In all matters not expressly provided for in these Rules, the [ICC] Court and the Arbitral Tribunal shall act in the spirit of these Rules and shall make every effort to make sure that the Award is enforceable at law".
"(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 judgment
"The SIA is a complete code and now the sole source of the English law of state immunity. The scheme of the SIA is to create a general immunity conferred by SIA, s.1(1) for the governmental acts of states, subject to the express exceptions set out in later sections of the SIA – see Benkharbouche v Embassy of the Republic of Sudan [2019] AC 777, per Lord Sumption at paragraph 39. The SIA draws a clear distinction between a court's adjudicative jurisdiction (which is the subject of SIA, ss.2-11) and its enforcement jurisdiction (which is the subject of SIA, ss.13(2)-(6) and 14(3)-(4)) – see Alcom Ltd. V. Republic of Colombia [1984] AC 580 per Lord Diplock at 600F-H, where the point is also made that voluntary submission to the court's adjudicative jurisdiction does not of itself imply any submission to its enforcement jurisdiction; and General Dynamics United Kingdom Ltd v State of Libya [2021] UKSC 22; [2022] AC 318 per Lord Lloyd-Jones at paragraph 30. This distinction means, in relation to arbitral awards, that SIA s.9 applies to applications under [Arbitration Act 1996] s.101(2) because " … leave to enforce an award as a judgment is, as subsection (1) recognises, one aspect of its recognition and as such is the final stage in rendering the arbitral procedure effective. Enforcement by execution on property belonging to the state is another matter, as section 13 makes clear" – see Svenska Petroleum Exploration v Lithuania [2007] QB 886 per Moore-Bick LJ at [117]."
"The present case is concerned with an ordinary commercial transaction and I can see no good reason why the clause in question should not be construed in like manner to the rest of the contract in accordance with the ordinary principles of construction for commercial contracts, by looking at the bargain as a whole in its context and giving the words used, if capable of bearing them, a construction which accords with commercial common sense."
"at any rate in the context of an agreement such as the Contract, no special or particular words are required in order to satisfy the requirement of SIA, s.13(3) that the state concerned should have provided its written consent."
"(a) As a starting point, the interpretation must first be based on the wording of the language that is in question. Swiss law will apply the general and ordinary usage of the words as a matter of language.
(b) In addition to the wording, the entire circumstances of the particular language must be taken into account, this includes: (i) pre-contract negotiations of the parties; (ii) the surrounding circumstances at the time of the conclusion of the contract; (iii) the purpose of the contract; and (iv) the conduct of the parties after conclusion of the contract.
(c) In light of the above, a Swiss Court will perform a subjective interpretation, based on the evidence, as to what the true and common intention of the parties was. If that is conclusive, that interpretation will be binding.
(d) If that subjective interpretation is not conclusive, the principle of good faith will be invoked, and the Swiss Court will then perform an objective interpretation as to what meaning the parties could and should have given, in good faith, to their mutual expressions of intent in light of all the circumstances.
In addition, there is no principle of Swiss law that requires commercial contracts with a state to be construed differently from any other commercial agreement."
"a reasonable person with all the relevant knowledge of the parties and applying the good faith principle would conclude that the intention of the parties was that each should be able to enforce its obligations against the other in accordance with the terms of their agreement and that included obligations resulting from an award by arbitrators appointed to resolve any differences between the parties under the arbitration agreement contained in clause 32 of the Contract."
"In my judgment the use of the word "wholly" emphasises an intention on the part of the parties that the word "enforceable" was not to be regarded as limited in effect, particularly given the inclusion of the words final and binding that precede it, which in my judgment were included as words of emphasis rather than merely to repeat needlessly what had gone before. Using the word "wholly" is obviously inapposite if the intention was to confine the meaning of enforceable in the way contended for by [Libya]. Indeed, in my view to attempt to construe the clause in the manner adopted by [Libya] is likely to defeat what is required by a good faith approach to the true meaning and effect of the agreement when the alternative – that the sentence is concerned with waiving adjudicative immunity alone – makes little sense given (a) what the third sentence of clause 32 appears to achieve and (b) that in any event an Award made by a tribunal sitting in Switzerland applying Swiss law would be and it is reasonably to be inferred would be known to the parties and their advisors to be adjudicatively enforceable in most states by reference to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention")."
"…the parties' intention was to enable an award made pursuant to the parties' arbitration agreement contained in the Contract to be enforceable in the same way as such an award could be enforced in any commercial agreement between non-state actors. No other meaning has been identified for the final sentence of clause 32 other than that it applies only to adjudicative immunity. However that is a meaning to be rejected for the reasons set out earlier."
The grounds of appeal
(i) The proper interpretation of section 13(3) of the SIA
"58….[C]onsiderations of international law and comity are in play here and they support the wider reading of section 12(1) SIA. The SIA is primarily concerned with relations between sovereign states and, as a result, its provisions fall to be considered against the background of established principles of international law (Alcom Ltd v Republic of Colombia [1984] AC 580, p 597G-H per Lord Diplock).
59. The sovereign equality of States is a fundamental principle of the international legal order. This is reflected in the rules of international law governing State immunity from the jurisdiction of the courts of other States. Although the immunity of States is not absolute this is nevertheless an area of considerable sensitivity. In Jurisdictional Immunities of the State (Germany v Italy; Greece intervening) the International Court of Justice observed:
"The court considers that the rule of state immunity occupies an important place in international law and international relations. It derives from the principle of sovereign equality of States, which, as article 2, paragraph 1, of the Charter of the United Nations makes clear, is one of the fundamental principles of the international legal order. This principle has to be viewed together with the principle that each State possesses sovereignty over its own territory and that there flows from that sovereignty the jurisdiction of the State over events and persons within that territory. Exceptions to the immunity of the State represent a departure from the principle of sovereign equality. Immunity may represent a departure from the principle of territorial sovereignty and the jurisdiction which flows from it." (at para 57)
These observations apply to both immunity from a State's adjudicative jurisdiction and immunity from a State's enforcement jurisdiction. Indeed, the latter may give rise to even greater sensitivities in view of the fact that the power of the forum state may be enlisted to seize assets of the defendant state."
"No measure of execution or preventive measures against the property of a Contracting State may be taken in the territory of another Contracting State except where and to the extent that the State has expressly consented thereto in writing in any particular case."
"23. There is some ambiguity about what these numerous statements mean by their insistence that a waiver of immunity in a treaty be "express". Part of the difficulty is a lack of clarity in legal discourse generally about what is meant by "express" meaning. Properly understood, express meaning can include implications, which constitute the unexpressed content of a statement or term and which are identified by inference.
24. An express term of an agreement involves words that are "openly uttered" either orally or in writing. The meaning of an express term is derived primarily from the content of the words expressed. It contrasts with an implied term, the meaning of which is derived primarily by inference from the conduct of the parties to the agreement and the circumstances in light of the express terms. There can sometimes be difficulty in distinguishing between the two types of terms, because often the imprecision of language means that inferences are required to understand an express term. Even the words of the most carefully drafted international instrument are built upon a foundation of presuppositions and necessary implicatures and explicatures. The international authorities that insist upon express waiver of immunity in a treaty should not be understood as denying the ordinary and natural role of implications in elucidating the meaning of the express words of the treaty.
25. The insistence that the waiver be "express" should be understood as requiring only that the expression of waiver be derived from the express words of the international agreement, whether as an express term or as a term implied for reasons including necessity. For instance, Lord Goff's statement in Pinochet [No 3] that consent must be "express" was based on his acceptance of the submissions of Dr Collins, including that "[a] term can only be [recognised as] implied [in] a treaty for necessity, not to give the treaty maximum effect"…
26. In this sense, the insistence by international authority that a waiver of immunity in an international agreement must be "express" is an insistence that any inference of a waiver of immunity must be drawn with great care when interpreting the express words of that agreement in context. It does not deny that implications are almost invariably contained in any (expressed) words of a treaty. As senior counsel for Spain rightly put the point in oral submissions: "[T]here must be implications that surround every textual passage. The question is: what are those implications, and what level of clarity about the implication is required?" Accordingly, if an international agreement does not expressly use the word "waiver", the inference that an express term involves a waiver of immunity will only be drawn if the implication is clear from the words used and the context. In words quoted by Lord Goff in Pinochet [No 3] from the International Law Commission's commentary upon (what were then) the draft articles on jurisdictional immunities of States and their property, there is "no room" to recognise an implication of "consent of an unwilling state which has not expressed its consent in a clear and recognisable manner". And as Rehnquist CJ said, delivering the opinion of the Supreme Court of the United States in Argentine Republic v Amerada Hess Shipping Corp, a foreign State will not waive its immunity merely "by signing an international agreement that contains no mention of a waiver of immunity to suit in United States courts or even the availability of a cause of action in the United States". This reflects the "political principle that those who are independent and autonomous cannot, except by consent, exercise authority over, or establish an external source of authority over, others of independent and autonomous status"."
"If the express words used amount, on their proper construction, to an unequivocal agreement by the state to submit to the jurisdiction, that is sufficient to satisfy section 2(2) of the SIA, even if the words "submit" and "waiver" are not used."
(ii) The proper construction of clause 32 of the Contract
"The [SIA] itself draws a distinction between proceedings which relate to the arbitration (section 9) and process in respect of property for the enforcement of an award (section 13). In our view an application under section 101(2) of the Arbitration Act 1996 for leave to enforce an award as a judgment is, as subsection (1) recognises, one aspect of its recognition and as such is the final state in rendering the arbitral procedure effective. Enforcement by execution on property belonging to the state is another matter."
"Immunity from jurisdiction therefore only refers to the adjudicative process. If it had been intended in Clause 8 of the facility letter to stipulate for a waiver in respect of both immunity from suit and immunity from execution, one would expect more explicit wording than a mere submission to jurisdiction. This is why one commonly finds in international loan agreements to which a State is party express waivers of both immunity from suit and immunity from execution."
i) The phrase "final and binding" is commonplace wording to indicate that an award is not merely advisory, interim or provisional, but conclusively determines the issues between the parties (subject to challenge, review or appeal under the relevant rules). It does not indicate waiver of adjudicative immunity, and I did not understand GDUK to suggest that it did.
ii) Many states (and all Contracting States who are parties to the New York Convention) regard submission to arbitration as submission to the adjudicative jurisdiction in respect of that arbitration, as enacted in the UK by section 9 of the SIA. But that does not render otiose a contractual submission to the adjudicative jurisdiction, not least in relation to states which do not have an equivalent of section 9, and it does not justify reading such a waiver of adjudicative immunity as being, instead, a waiver of execution immunity.
"In addition, the ROC agreed to abide by the Rules of the ICC which precludes the ROC from asserting a sovereign immunity defense. Rule 28(6) states … [he then recites it]. Therefore we hold that the ROC explicitly waived its sovereign immunity. Accordingly we need not address a potential implicit waiver."
Conclusion
Lord Justice Zacaroli
Lord Justice Lewison
"(2) Subject to subsections (3) and (4) below—
(a) relief shall not be given against a State by way of injunction or order for specific performance or for the recovery of land or other property; and
(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 (2A) 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."
"…All disputes in which mutual agreement cannot be reached arising out of or in connection with the present Contract shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by one (1) or three (3) arbitrators. The award will be final and binding upon the parties. The seat or legal place of arbitration shall be Geneva, Switzerland. The language to be used in the arbitral proceedings shall be English. The arbitrators shall have no authority to award aggravated or punitive damages and shall be bound by any limits on the purchaser's and seller's liability as set out in this Contract. …Both parties agree that the decision of the arbitration panel shall be final, binding and wholly enforceable."
"The State Immunity Act 1978, whose long title states as its first purpose to make new provision with respect to proceedings in the United Kingdom by or against other states, purports in Part I to deal comprehensively with the jurisdiction of courts of law in the United Kingdom both (1) to adjudicate upon claims against foreign states ("adjudicative jurisdiction"); and (2) to enforce by legal process ("enforcement jurisdiction") judgments pronounced and orders made in the exercise of their adjudicative jurisdiction. But, although comprehensive, the Act in its approach to these two aspects of the jurisdiction exercised by courts of law does not adopt the straightforward dichotomy between acta jure imperii and acta jure gestionis that had become familiar doctrine in public international law, except that it comes close to doing so in section 14(2) in relation to the immunity conferred upon "separate entities that are emanations of the state". Instead, as respects foreign states themselves the Act starts by restating in statutory form in section 1(1) the general principle of absolute sovereign immunity, but makes the principle subject to wide-ranging exceptions for which the subsequent sections in Part I of the Act (sections 2 to 17) provide."
"The long title of the SIA states that it makes new provision with respect to proceedings in the United Kingdom by or against other states. Part I is entitled "Proceedings in United Kingdom by or against other states". Section 1(1) confers on a state a general immunity from the jurisdiction of the courts of the United Kingdom except as provided in the following provisions of Part I. That immunity extends to both the adjudicative and enforcement jurisdiction of the courts. Sections 2 to 11 set out exceptions to the immunity from adjudicative jurisdiction, including in section 9 an exception in the case of certain proceedings which relate to arbitrations. Sections 13(2) to (6) and 14(3) and (4) address and establish exceptions to the immunity from enforcement jurisdiction."
"Where a State has agreed in writing to submit a dispute which has arisen, or may arise, to arbitration, the State is not immune as respects proceedings in the courts of the United Kingdom which relate to the arbitration."
"Both parties agree that the decision of the arbitration panel shall be final, binding and wholly enforceable."
Note 2 The 1965 Convention on the Settlement of Investment Disputes between States and Nationals of Other States. [Back] Note 3 Moscow Centre for Automated Air Traffic Control v Court for Debt Enforcement and General Insolvency (reference 7B.2/2007) [Back]