London Calling: Immunity no go

The Commercial Court recently considered whether the State of Libya (the "Defendant") had waived its right to assert state immunity*.

Background

As part of seeking to enforce an ICC arbitral award, General Dynamics United Kingdom Limited (the "Claimant") had applied for a final charging order over a London-based property owned by the Defendant. The Defendant primarily argued that the property was immune from enforcement pursuant to s.13(2)(b) of the State Immunity Act 1978 (the "SIA").

The Claimant argued that the Defendant had given written consent to enforcement pursuant to s.13(3) of the SIA. It was argued that such consent derived from the underlying commercial contract, which was governed by Swiss law. The final sentence of clause 32 of the contract stated that: "Both parties agree that the decision of the arbitration panel shall be final, binding and wholly enforceable" (emphasis added).

Decision

Butcher J held that "whether the words used have the effect of removing a state's immunity from enforcement depends not simply on the words used when read in isolation but what effect the words used have when read in their correct legal and factual context and in this case when applying Swiss principles of construction". In the circumstances, it was held that the parties' intention was to enable a valid arbitral award to be enforceable in the same way as it could be in any commercial agreement between non-state parties.

Comments

The effect of clause 32, in particular the words "wholly enforceable" in the final sentence, was to waive the Defendant's immunity from enforcement against its assets. The case reminds us that it is important to consider the precise wording used in dispute resolution clauses.

?* General Dynamics United Kingdom Limited v The State of Libya [2024] EWHC 472 (Comm)

Brian and Colin