REUTERS | Esam Omran Al-Fetori

Foreign Office travel advisory update: in exceptional circumstances, service of an enforcement order on a sovereign state need not be effected through the FCO

In General Dynamics United Kingdom Ltd v The State of Libya, the English Court of Appeal, comprised of Etherton MR and Longmore and Flaux LJJ recently gave judgment reversing, in part, a decision of Males LJ in the English Commercial Court. Males LJ had held that service of an order permitting the claimant to enforce an arbitral award against a sovereign state must be effected through the Foreign and Commonwealth Office (FCO) (see my earlier blog).

Section 12 of the State Immunity Act 1978

By section 12 of the State Immunity Act 1978 (SIA), any document “required to be served for instituting proceedings” against a state must be served by being transmitted through the FCO to the Ministry of Foreign Affairs of the State. The first issue before the Court of Appeal was whether the construction of section 12 of the SIA in the lower court was correct.

Enforcement of arbitration awards under the CPR

CPR 62.18 is the rule of court dealing with the procedure for enforcement of arbitration awards. Under that rule, per paragraph 18 of the Court of Appeal judgment:

“The claimant may issue an arbitration claim form but need not serve this on the defendant unless the court so orders. The application may be and usually is determined without giving notice to the defendant, but the order provides that the award must not be enforced until the defendant has had an opportunity to apply to set it aside. The order must be served and, when the defendant is out of the jurisdiction, may be served in accordance with CPR 6.40 to 6.46 as if it were an arbitration claim form.”

The lower court’s decision

Males LJ had acknowledged that “[t]here is no doubt that as a matter of English procedural law the proceedings were started on issue of the arbitration claim form”. Therefore, “[v]iewed solely as a matter of English procedural law”, he would have accepted General Dynamics’ submission that proceedings had been instituted by the arbitration claim form and the order permitting the claimant to enforce its arbitral award was not a document that was required to be served on the respondent (paragraph 37 of the High Court judgment).

But he held that:

  • On a proper construction of section 12 of the SIA, in any and all proceedings brought against a state in the English courts, a document must always be served on that state to institute proceedings (paragraphs 24 to 36 of the High Court judgment).
  • If, in a claim to enforce an arbitral award, no order has been made requiring the arbitration claim form itself to be served, then the order granting permission to enforce the award must be regarded as the document instituting proceedings for the purposes of the SIA (paragraphs 37 to 44, and 78).

The Court of Appeal’s decision

The Court of Appeal disagreed with Males LJ:

  • The SIA must be read in accordance with English procedural law as it is from time to time; it is an ambulatory statute. Moreover, there is no other procedural law from the perspective of which section 12 can be viewed. In any event, the rules in force when the SIA was passed were not materially different from the current position under the CPR. Parliament must be taken to have known in 1978 that there was a procedure for instituting registration of both foreign judgments and foreign awards without requiring service of the initiating document (paragraphs 30, 40 and 41 of the Court of Appeal judgment).
  • If a foreign state has fully participated in (or deliberately declined to participate in) proceedings in litigation or arbitration, it does not obviously need the protection of enforcement proceedings being transmitted through the FCO (paragraph 42).
  • The lower court’s reference to the European Convention on State Immunity 1972 was misplaced. Section 12 did not require service of the arbitration claim form on the sovereign state (paragraph 56).
  • The policy considerations pulled in opposite directions: obstacles to enforcement should be few and far between, but there were still sensitivities about impleading a foreign state. In these circumstances, the correct course for a court is to go by the deliberately chosen wording of the statute rather than adopt a meaning different from the natural reading of the words (paragraphs 57–59).

It was therefore not mandatory to serve the arbitration claim form on the respondent. Nor was it mandatory to serve the order permitting enforcement. Pursuant to CPR 62.18(8)(b) and CPR 6.44, the order permitting enforcement did have to be served, but such service could be dispensed with under CPR 6.16 and CPR 6.28. If such service is to be dispensed with, it will always be appropriate to ensure that the order comes to the attention of the respondent by some other means, as had been done in this case by the original order of Teare J, which required the order to be couriered to Libyan government officials in Tripoli and Libya’s lawyers in Paris (paragraph 60).

Finally, as the order is not a claim form, it could be said that CPR 6.28 permits the judge a general discretion to dispense with service. However, when the order permitting enforcement is to be the first time that the foreign state receives notice of a claimant’s attempt to enforce an award, it is only right and proper that the court should apply the test of exceptional circumstances as required under CPR 6.16 (paragraph 61).

Dispensation of service

The second issue before the Court of Appeal was whether, as Males LJ had held that, if the order permitting enforcement must be treated as the document instituting proceedings, the court had no power to dispense with service, notwithstanding CPR 6.16 and CPR 6.28.

The Court of Appeal agreed with the lower court’s decision on this point (paragraph 63 of the Court of Appeal judgment):

“The argument is that, if the judge dispenses with service in an appropriately exceptional case, there is then no document required to be served within section 12. That is an impossible construction. If right, it would give the judge a discretion to dispense with a statutory requirement and that cannot be the law.”

The distinction between dispensing with service of a claim form and the order permitting enforcement is quite subtle:

  • The CPR require a claim form to be served to institute proceedings. Section 12 provides that any document required to be served for instituting proceedings must be served through the FCO. Since that is a statutory requirement, it cannot be overridden by rules of court. Therefore, the power in CPR 6.16 to dispense with service is not operative in such circumstances, as that would give the judge a discretion to dispense with the statute. The Court of Appeal expressly stated at paragraph 63 that the obiter holding to the contrary in Certain Underwriters at Lloyd’s of London v Syrian Arab Republic cannot be considered good law.
  • The CPR also require an order permitting enforcement of an arbitral award to be served on the respondent. But since that is not a document instituting proceedings, section 12 does not bite and the court retains the power to dispense with service.

Therefore, whilst, in exceptional circumstances, arbitral awards may be enforced without service of any document on the respondent sovereign state through the FCO, this is not the case for claims or other proceedings where service of a document is required to institute proceedings.

Conclusion

The Court of Appeal’s judgment means that claimants seeking to enforce an arbitral award against a sovereign state may obtain an order permitting enforcement in the usual way under CPR 62.18 and, in exceptional circumstances, be permitted by the court to dispense with service of that order on the respondent. This removes the potential obstacle created by Males LJ’s judgment where service of the order through the FCO is impracticable or impossible.

However, the court also agreed with Males LJ that service of a document required to institute proceedings could not be dispensed with; in such cases, claimants will still need to effect service through the FCO. Fortunately for claimants seeking to enforce an award, service of the arbitration claim form on the respondent is not required to institute proceedings.

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