General Dynamics United Kingdom Ltd v The State of Libya
| Jurisdiction | England & Wales |
| Judge | Pelling |
| Judgment Date | 22 March 2024 |
| Neutral Citation | [2024] EWHC 472 (Comm) |
| Court | King's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2018-000422 |
[2024] EWHC 472 (Comm)
HIS HONOUR JUDGE Pelling KC
SITTING AS A JUDGE OF THE HIGH COURT
Case No: CL-2018-000422
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (KBD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Daniel Toledano KC and James Ruddell (instructed by Alston & Bird (City) LLP) for the Claimant
Lucas Bastin KC and Freddie Popplewell (instructed by Curtis, Mallet-Prevost, Colt & Mosle LLP) for the Defendant
Hearing dates: 21 February 2024
Approved Judgment
This judgment was handed down remotely at 10.30am on 22/03/2024 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
HIS HONOUR JUDGE Pelling KC SITTING AS A JUDGE OF THE HIGH COURT
HH Judge Pelling KC:
Introduction
This is the hearing of an application by the claimant (“GDUK”) for a final charging order over a property owned by the defendant (“SoL”) located at 7 Winnington Close, London, N2 0UA (“Property”), following the making of an interim charging order on 24 February 2023 (“ICO”). SoL applies for an order discharging the ICO on the basis that the Property is immune from execution by operation of s.13(2)(b) of the State Immunity Act 1978 (“SIA”). GDUK maintains that this is wrong because SoL has provided written consent waiving its right to assert such an immunity within the meaning of SIA, s.13(3).
Factual Background and Parties' Contractual Relationship
By an agreement in writing made on 5 May 2008, the parties entered into an agreement for the supply by GDUK to SoL of a Tactical Communication and Information System at a price in excess of £84m (“Contract”). The parties agreed that the Contract would be “… exclusively governed and construed in all aspects in accordance with the Laws of Switzerland…” – see clause 33.1 – and by clause 32 that:
“ 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.” [Emphasis supplied]
A dispute developed between the parties, the detail of which does not matter for present purposes, which was referred to arbitration under the ICC Rules in accordance with the arbitration agreement between the parties contained in clause 32 of the Contract. By an Award published on 5 January 2016, GDUK was awarded £16,114,120.62. On 18 July 2018, Teare J gave GDUK permission under s.101 of the Arbitration Act 1996 (“AA”) to enforce the Award as if it was a judgment. Following difficulties with service, there was a challenge to the s.101 order that was dismissed on 11 March 2022 and GDUK became entitled to enforce the Award as if it was a judgment of the High Court unconditionally from 2 April 2022.
On 22 April 2022, GDUK applied for the ICO, contending that either (a) SoL had given written consent by clause 32 of the Contract to enforcement against its property including the Property under SIA, s.13(3) or (b) the Property was in use or intended for use for commercial purposes within the meaning of SIA, s.13(4). This last mentioned argument was abandoned on 16 December 2022 and on 24 February 2023 I made the ICO following a without notice hearing in accordance with CPR r.73.10A(3), on the basis that GDUK had established a realistically arguable case that SoL had given its consent to enforcement against its assets of any award made in a reference to arbitration pursuant to the arbitration agreement contained in clause 32 of the Contract. On 4 December 2023, SoL issued its discharge application, which it now advances exclusively on the basis of the immunity against execution conferred by of SIA, s.13(2)(b).
Applicable English Law Principles
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 AA 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].
Turning to SIA, s.13, subsections (2) and (3) respectively provide (in so far as is material for present purposes):
“(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) Subsection (2) above does 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.”
GDUK submits that the final sentence within clause 32 of the Contract – “… (b) oth parties agree that the decision of the arbitration panel shall be final, binding and wholly enforceable” – and in particular the words “… and wholly enforceable…” constitutes the “… written consent of …” SoL to the enforcement of a judgment or Award against its property, which is “… contained in a prior agreement…”, being the Contract.
GDUK places significant reliance on comments within various authorities to the broad effect that no particular form of words is required to satisfy SIA, s.13(3) and that the construction of contractual provisions that are said to fall within the scope of SIA, s.13(3) should not be construed restrictively but “… 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…” – see A Co. Ltd. v. Republic of X [1990] 2 Lloyds Rep 520 per Saville J as he then was at 523 (RHC).
Two points need to be made about formulations such as this. Firstly, the statement was made in the context of a contract governed by English law, whereas this one is governed by Swiss law. Secondly, the clause in issue in A Co. Ltd. v. Republic of X (ibid.) was more explicit than the final sentence of clause 32 of the Contract. It provided that the “… Ministry of Finance hereby waives whatever defence it may have of sovereign immunity for itself or its property (present or subsequently acquired)…”. Given the language used, it was reasonably straightforward for Saville J to arrive at the conclusion Saville J reached namely that as a matter of English law “… read in the context of what was undoubtedly a commercial bargain between the parties, the intent and purpose of the clause is quite clear, namely, to put the State on the same footing as a private individual so that neither in respect of the State nor its property would any question of sovereign immunity arise in connection with the State's obligations to the plaintiffs under the agreement…”. That said, I accept that 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.
I do not accept that Pearl Petroleum Co Ltd v Kurdistan Regional Government of Iraq [2016] 4 WLR 2 is authority for any narrower proposition. That case was not concerned with an application to enforce an Award – see paragraph 40 – nor with the immunity against execution – see paragraph 42. The comment at paragraph 42 that a waiver must be construed “ strictly and...
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