February, 2025 - Court of Appeal considers State Immunity and the importance of the words "wholly enforceable"

The decision in General Dynamics United Kingdom Limited (“GDUK”) v The State of Libya [2025] EWCA Civ 134 raises an interesting issue concerning state immunity and in particular whether a state company can rely upon section 13(2)(b) of the State Immunity Act (“SIA”) to resist enforcement of an award or judgment. In short and most importantly the Court of Appeal held unanimously that the appellant (“Libya”), was not entitled to rely upon section 13(2)(b) of the SIA on the basis that within a contract it had consented to the enforcement of an award against its assets on the basis that it had agreed that any award would be “fully enforceable.”

It is unnecessary to look in detail at the reasoning of Phillips LJ, who gave the leading judgment, because all three judges in common were prepared to rest the court’s conclusion that Libya had given its written consent to the enforcement of an award against its assets as the arbitration clause had included the words “wholly enforceable”. 

In a shipping context it is common for arbitration clauses (for example in shipbuilding contracts) to provide that any arbitration award will be “final and binding”. Such words do not generally exclude a right to appeal but it is much less common for the arbitration clause to provide that the award will be “wholly enforceable”.

Given that in the shipping context contracts are regularly entered into by private (or at least non state companies) with state or state controlled companies, in light of this decision it might well be helpful to include the words “wholly enforceable” to potentially assist in enforcement steps. 

Summary facts

By a written agreement dated 5th May, 2008 GDUK agreed to supply a Tactical Communications and Information System to Libya for the price of £84 million ("the Contract"). The Contract was governed by the law of Switzerland. Clause 32 provided for arbitration of any dispute under the Rules of Arbitration of the International Chamber of Commerce ("the ICC"), further providing that the decision of the arbitration panel "shall be final, binding and wholly enforceable".

It was common ground that clause 32 constituted a written agreement by Libya to submit disputes under the Contract to arbitration within the meaning of section 9 of the SIA, so that Libya was not immune as to the adjudicative jurisdiction of the courts of the United Kingdom in relation to that arbitration. The issue on the appeal was whether Libya thereby also consented, within the meaning of section 13(3) of the SIA, to the execution against its property of any ICC arbitration award made against it.

Section 13 of the SIA provides, so far as relevant, as follows:

"(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 only alternative meaning suggested for those words was that Libya consented to the whole of the award being recognised. Where, as that argument implies, the parties must be taken to appreciate the distinction between recognition of an award and its enforcement, the fact that they have not separately addressed those two concepts, but have instead referred simply to the award being "wholly" enforceable, suggests clearly that they consented to the whole process of enforcement of the award, including its recognition in any jurisdiction where it is sought to be enforced.

If Members have any questions in relation to the above issues they are invited to contact the Club for further information.