English Commercial High Court (QBD): Can an Arbitral Award Against a State Be Enforced By Court Proceedings In the UK Without Service On That State of Any Formal Court Document?

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In General Dynamics United Kingdom Ltd v State of Libya [2019] EWHC 64 (Comm), the English Commercial High Court inter-alia held that under the English procedural law, the order granting permission to enforce an award against a foreign sovereign state is the document which required to be served for instituting proceedings within the terms of section 12 of the State Immunity Act, 1978. The Court further held that the court has no power to dispense with service of this document as this would be contrary to the mandatory terms of section 12 except in “exceptional circumstances”. In the present case, since the award was against the State of Libya which was going through civil unrest and instability, the Court held that this amounts to the exceptional circumstances in which the service of document can be dispensed with. Detailed case analysis given below:

Factual Matrix

General Dynamics, a UK company, entered into a contract with the State of Libya for supply of communication systems. Dispute broke out amongst the parties and General Dynamics invoked ICC arbitration. The award was granted in favour of General Dynamics of which it sought enforcement in the UK under Section 101 of the English Arbitration Act, 1996 in the present case.

The General Dynamics filed the application for enforcement of award in the same manner as a judgment or order of the Court and to the same effect. Mr Justice Teare allowed the application and dispensed the requirement of service of the Arbitration Form to the State of Libya.

Note: Under Rule 62.18 of the English Civil Procedural Rules (Arbitration Claims – enforcement of awards), the enforcement application (made by way of an arbitration claim form) is not a document required to be served on the defendant unless the court so orders.

Justice Teare further contemplated that there would be no service of any kind on the State of Libya, but ensured that State of Libya would be made aware of the proceedings and of the order by the couriering of documents to the General Committee for Defence Tripoli, Libya, the Ministry of Foreign Affairs, Tripoli, Libya, and the Attorney’s of the State of Libya. Vide this Order, the State of Libya was provided an opportunity to assail the award within 2 months by making an application to that effect.

The upshot of this order was that in the absence of any such application within the specified period, General Dynamics will be entitled to enforce the judgment thus entered against any property of the State of Libya in the UK.

The State of Libya filed an application to partially set aside the arbitral award in the present proceedings.

Applicable Legal Principles

Section 12(1) of the State Immunity Act, 1978

12 Service of process and judgments in default of appearance.

(1) Any writ or other document required to be served for instituting proceedings against a State shall be served by being transmitted through the Foreign and Commonwealth Office to the Ministry of Foreign Affairs of the State and service shall be deemed to have been effected when the writ or document is received at the Ministry.

Section 101 of the English Arbitration Act, 1996

101 Recognition and enforcement of awards.

(1) A New York Convention award shall be recognised as binding on the persons as between whom it was made, and may accordingly be relied on by those persons by way of defence, set-off or otherwise in any legal proceedings in England and Wales or Northern Ireland.

(2) A New York Convention award may, by leave of the court, be enforced in the same manner as a judgment or order of the court to the same effect.

As to the meaning of “the court” see section 105.

(3) Where leave is so given, judgment may be entered in terms of the award.

Rule 62.18 of the Civil Procedural Rules

The rule of court dealing with the procedure for enforcement of arbitration awards, including New York Convention awards as in this case, is CPR 62.18. This provides:

(1) An application for permission under … section 101 of the 1996 Act … to enforce an award in the same manner as a judgment or order may be made without notice in an arbitration claim form.

(2) The court may specify parties to the arbitration on whom the arbitration claim form must be served.

(7) An order giving permission must –

(a) be served on the defendant by –

(i) delivering a copy to him personally; or

(ii) sending a copy to him at his usual or last known place of residence or business;

(8) An order giving permission may be served out of the jurisdiction

(a) without permission; and

(b) in accordance with rules 6.40 to 6.46 as if the order were an arbitration claim form.

(9) Within 14 days after service of the order or, if the order is to be served out of the jurisdiction, within such other period as the court may set –

(a) the defendant may apply to set aside the order; and

(b) the award must not be enforced until after –

(i) the end of that period; or

(ii) any application made by the defendant within that period has been finally disposed of. …

Rule 6.16 of CPR

(1) The court may dispense with service of a claim form in exceptional circumstances.

Rule 6.28 of CPR

(1) The court may dispense with service of any document which is to be served in the proceedings.

Parties’ Contentions

The State of Libya contended:

  • that the order giving permission to enforce the award should be regarded as the document which instituted the proceedings;
  • that such order was the document within the terms of Section 12(1) of the State Immunity Act, 1978 which was required to be served;
  • although the court had power to dispense with service of the order despite the terms of Section 12 of the 1978 Act, that power should only be exercised in exceptional circumstances as the order was equivalent to a claim form;
  • there were no exceptional circumstances in this case, in particular because General Dynamics had not even attempted to serve the order through the Foreign & Commonwealth Office and (if it had done so) there was no reason why the order could not have been served.

General Dynamics countered as under:

  • the proceedings were instituted by the issue of an arbitration claim form which was not required to be served on the State of Libya, while the order which was required to be served was not a document instituting the proceedings. Accordingly, Section 12 did not apply;
  • Service of the order was governed by CPR 62.18(8) and CPR 6.44 but these provisions did not turn the order into a claim form; they merely provided that it could be served as if it were one;
  • Accordingly, the court had power to dispense with service and (because the order was not a claim form) the applicable dispensing Rule was CPR 6.28 where the court’s discretion is unfettered and there is no requirement to show exceptional circumstances, not CPR 6.16;
  • In any event the circumstances in Libya were exceptional.

Judgement

The English High Court held:

Was there a document required to be served for instituting proceedings?

  • in the case of proceedings to enforce an arbitration award under Section 101 of the Arbitration Act 1996, a document is required for instituting proceedings against a State. That document is the arbitration claim form in a case where the court requires the claim form to be served, but if (as is commonly the case and was the case here) it does not so require, it is the order granting permission to enforce the award. In either case, the document must be served in accordance with section 12 of the State Immunity Act 1978. As there was no order in this case requiring the arbitration claim form to be served, the order must be regarded as the instituting document.

Whether the court has power to dispense with service against a State?

  • the court has no power to dispense with service in such a case as this would be contrary to the mandatory terms of section 12.

If the court has the power to dispense with service against the State then whether that power should be exercised

  • the court has power to dispense with service in exceptional circumstances and there were exceptional circumstances in State of Libya (civil unrest and instability) in which case it is necessary to dispense with the service against it.

Position in Singapore

The English High Court referred the Singapore case of Van Zyl v Kingdom of Lesotho [2017] SGHC 104, [2017] 4 SLR 849 which was also concerned with enforcement of a New York Convention award against a state. The Court noticed that Section 14 of the Singapore State Immunity Act was modelled on Section 12 of the United Kingdom Act and, as in the UK, the relevant Singapore procedural rules required service of the order granting permission to enforce an award but not necessarily of the originating summons which commenced the proceedings.

In Van Zyl, the Court analysed the English authority in Norsk Hydro ASA v State Property Fund of Ukraine [2002] EWHC 2120 (Comm) and concluded that although Gross J had not examined the specific wording of section 12(1), it was implicit in his decision that an order granting permission to enforce an award was a “writ or other document required to be served for instituting proceedings against a State”.

The Singapore High Court also relied on L v Y Regional Government of X and held that in the case of proceedings to enforce an award, it was the order granting permission to enforce which constituted a “document required to be served for instituting proceedings against a State”.

These conclusions were developed referring to the importance of the two-month period for the state to respond, the observation in Fox & Webb, The Law of State Immunity (3rd edition) “that service of process is a first stage in the institution of proceedings” by which “the defendant is made aware of the claim, of the proposed court to adjudicate it, and of his required presence to answer the claim”, and the absence of any “clear ground rules for effecting service of leave orders on a sovereign”.

Thus, as per the Singapore High Court, it is the order granting permission to enforce an award which constitutes a document within the Singapore equivalent of Section 12.

Position in India

Section 49 of the Indian Arbitration Act is equivalent to Section 101 of the English Arbitration Act which states as under:

Section 49 – Enforcement of foreign awards

Where the Court is satisfied that the foreign award is enforceable under this Chapter, the award shall be deemed to be a decree of that Court.

Under Indian law, the application of enforcement of a foreign award does not fall back to the Indian Code of Civil Procedure, 1908 since as per the settled position of law in India where the court is satisfied that the foreign award is enforceable, the award itself would be deemed to be a decree of the Court. It thus, omits the procedural formality for the court to pronounce judgment and a decree to follow on that basis.

It is noteworthy to quote the observation of Supreme Court of India in M/s. Fuerst Day Lawson Ltd v. Jindal Exports Ltd 2001 (6) SCC 356 wherein the Court dealt with this issue and observed:

…a party holding foreign award can apply for enforcement of it but the court before taking further effective steps for the execution of the award has to proceed in accordance with Sections 47 to 49. In one proceeding there may be different stages. In the first stage the Court may have to decide about the enforceability of the award having regard to the requirement of the said provisions. Once the court decides that foreign award is enforceable, it can proceed to take further effective steps for execution of the same. There arises no question of making foreign award as a rule of court/decree again. If the object and purpose can be served in the same proceedings, in our view, there is no need to take  two separate proceedings resulting in multiplicity of litigation. It is also clear from objectives contained in para 4 of the Statement of Objects and Reasons, Sections 47 to 49 and Scheme of the Act that every final arbitral award is to be enforced as if it were a decree of the court.”

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