On 5 June 2025, the Supreme Court refused permission to appeal in the final instalment of the long-running litigation between General Dynamics United Kingdom Ltd and the State of Libya, so affirming the Court of Appeal’s decision in General Dynamics United Kingdom Ltd v The State of Libya [2025] EWCA Civ 134.
The Court of Appeal’s decision therefore remains the leading authority on the proper approach to the statutory interpretation of s.13(3) of the State Immunity Act 1978 (“SIA”), and in particular the fundamentally important role played by immunity from execution.
In its decision, the Court of Appeal held that Libya had waived its right to sovereign immunity from execution under s.13(2)(b) of the SIA, on the basis that wording contained in the contract between the parties constituted Libya’s consent to enforcement against its property.
Background
In 2008, the Claimant, General Dynamics, entered into an £84 million contract to supply a “tactical communications and information system” to Libya. The contract was governed by Swiss law and contained an ICC arbitration clause which stated that: “Both parties agree that the decision of the arbitration panel shall be final, binding and wholly enforceable”.
The arbitration clause also referred to the 1998 ICC arbitration Rules, Article 28(6) of which provides: “Every award shall be binding on the parties. By submitting the dispute to arbitration under the Rules, the parties undertake to carry out any award without delay”.
A dispute arose, leading to General Dynamics obtaining a £16m ICC arbitration award against Libya in 2016.
General Dynamics sought to enforce the award in the UK in 2018. After a series of appeals on the issue of service (eventually resolved by the Supreme Court in 2021), General Dynamics was given permission to enforce the award in March 2022 and then obtained a charging order over a Libya-owned, seven-bedroom property in London.
Libya applied to discharge the charging order on grounds that it was immune from execution, relying on section 13(2)(b) of the SIA, which provides that a State’s property is immune from enforcement measures unless the State has consented to such measures in writing.
At first instance, His Honour Judge Pelling KC dismissed Libya’s application and made a final charging order over the property, holding that the use of the words “wholly enforceable” in the arbitration clause amounted to consent for the purposes of s.13(3) SIA, such that Libya could not rely on state immunity for the purpose of resisting enforcement against its property.
Decision
Libya appealed on two grounds, namely that the judge had erred in: (i) the proper interpretation of section 13(3) of the SIA; and (ii) the proper construction of the arbitration clause.
The proper interpretation of section 13(3) of the SIA
On the first ground, Libya argued that the Judge had erred in holding that “clear words” were not required for a State to consent to execution against its property under section 13(3) of the SIA.
However, the Court of Appeal held that there was simply no justification for putting a “gloss” on the words of section 13(3). The Court’s task was to determine whether the state had expressed its consent by construing the words used in the contract according to the law applicable to that exercise (in this case, Swiss law). Once it had been determined that the words used expressed consent, section 13(3) was satisfied. There was no need to use the word “consent” or any other specific or “clear” wording.
The proper construction of the arbitration agreement
As to the second ground, Libya argued that the Judge erred in holding that, on their proper construction, the words “wholly enforceable” constituted Libya’s consent to enforcement.
Phillips LJ gave the leading judgment and held that, without more, the words “final, binding and wholly enforceable” were insufficient to constitute consent to execution. However, in this case, the parties had also agreed to arbitration under the ICC Rules and, by article 28(2) of those rules, Libya had undertaken to “carry out any award without delay”. Phillips LJ noted that at least two other major jurisdictions (France and the US) had interpreted those words as constituting a waiver of immunity and held that, construed in that context, the words “wholly enforceable” were wide enough to encompass a waiver for the purposes of enforcement.
Zacaroli LJ and Lewison LJ agreed with Phillips LJ, save that they thought that the words “wholly enforceable” suggested that Libya had properly consented to enforcement, with the reference to the ICC rules, in Zacaroli LJ’s case, only reinforcing that conclusion.
Comment
This is a significant judgment on the proper interpretation of s.13(3) of the SIA. The judgment confirms that the Court’s task is to determine whether the words used express consent, and that no specific or “clear” wording is otherwise required. It also shows the English Court’s robust approach to the enforcement of arbitration awards, particularly in relation to contracts entered into by States for purely commercial purposes.
However, the differing views expressed by the Lord Justices as to the construction of the arbitration clause demonstrate the need to ensure that the contract contains clear wording, if a waiver is intended, so as to minimise potential disputes over Sovereign immunity.
In reaching its conclusion, the Court of Appeal also referred to case law in other jurisdictions. While foreign decisions can provide useful guidance, a degree of caution is required, since State immunity remains a matter of domestic law, and material differences between the SIA and the laws of other jurisdictions can therefore result in different conclusions being reached on the same set of facts.
The decision therefore serves as a useful reminder of the importance of obtaining legal advice at an early stage in relation to questions of waiver and immunity.