In General Dynamics United Kingdom Ltd v State of Libya  EWHC 501 (Comm) Mr Justice Butcher in the Commercial Court refused to set aside an arbitration enforcement order against the State of Libya which was challenged on the grounds that the applicant had failed to disclose all materially relevant facts in support of its ex parte application, including in particular that under section 1(1) of the State Immunity Act 1978 (SIA 1978) a state is immune from the jurisdiction of the courts of the UK except as provided in the following provisions of SIA 1978, Pt I. The court found that the nature and effect of the non-disclosures did not justify setting aside the underlying order in circumstances where non-disclosure did not provide an advantage to the applicant or prejudice the opposing party. Nonetheless, in order to uphold the principle of full and frank disclosure, the court ordered the applicant to bear their own costs for the application.
- What are the practical implications of this case?
This decision highlights the well-established duty for applicants to provide ‘full and frank’ disclosure of all facts which are necessary for the judge to consider an application in the absence of representations from the opposing party (the ‘Duty’). In order to comply with the Duty, this case suggests that an applicant may be expected to raise defences on behalf of the opposing party even where these are unlikely to succeed, if only to clarify why they should not apply. On the other hand, the court found that the applicant was not required to raise issues prematurely if they would only be relevant to a later stage of the procedure.
The key implication of this case is that an ex parte order is unlikely to be set aside where an applicant’s failure to disclose information does not influence the outcome of the application. Rather, in order to determine the appropriate sanction for a breach of the Duty, the court will weigh factors such as the culpability, importance and impact of the non-disclosure against the potential prejudice which setting aside the order would cause the applicant. Nonetheless, even in such circumstances, the court may deprive an applicant of its costs, to mark the importance that it attaches to any non-disclosure.
While the decision therefore provides comfort that challenges based on minor breaches of the Duty cannot be used to undermine applications which are otherwise meritorious, practitioners should remain mindful of the Duty, even where they consider that the information in question is not relevant to the issue being determined.
This decision will also be relevant to arbitration and public international law practitioners by confirming once more the established principle that, under SIA 1978, s 9, a foreign state which has agreed to submit a dispute to arbitration not only waives its adjudicative immunity for the purposes of the arbitration proceedings, but also for court proceedings in England for permission to enforce an award under section 101 of the Arbitration Act 1996 (AA 1996).
- What was the background?
A dispute arose between General Dynamics Ltd (General Dynamics) and the State of Libya (Libya) over a contract for the supply of communications systems. The dispute was resolved by way of International Chamber of Commerce arbitration seated in Geneva, with an award of approximately £16m plus interest and costs given in favour of General Dynamics (the Award). General Dynamics sought to enforce the Award in England and Wales under AA 1996, s 101 by way of an ex parte or without notice application (the Application). The High Court gave permission to enforce the Award (the Enforcement Order).
The High Court had also granted permission under the Civil Procedure Rules to dispense with service of the arbitration claim form and the Enforcement Order citing exceptional circumstances in Libya. This part of the Order was subsequently set aside by the Supreme Court in its decision regarding the mandatory nature of service of court documents on a foreign state pursuant to SIA 1978, s 12(1). For our coverage of this decision, see News Analysis: Supreme Court decides process for service on a state (General Dynamics v Libya).
The present decision arose from Libya’s application that the remainder of the Enforcement Order be set aside without renewal on the basis that General Dynamics had failed to uphold the Duty when bringing the Application.
- What did the court decide?
The court considered Libya’s arguments that the Enforcement Order should be set aside based on General Dynamics’ alleged failure to disclose:
- that Libya benefitted from adjudicative and enforcement immunity under the SIA, subject to relevant exceptions (Issue 1), and
- that there was only one recognised government in Libya for the purpose of effecting diplomatic service (Issue 2)
Libya submitted that General Dynamics failed to make reference to Libya’s immunity when applying for the Enforcement Order. The court distinguished the two types of immunity granted by the SIA 1978, namely adjudicative immunity from the jurisdiction of the United Kingdom courts (SIA 1978, s 1(1)) and immunity in respect of enforcement (SIA 1978, s 13).
The court noted that it would have been ‘preferable’ for General Dynamics to have raised the issue of adjudicative immunity when making the Application. However, it was not in dispute that by having agreed to submit the dispute to arbitration, Libya could not claim adjudicative immunity in the subsequent enforcement proceedings and had not attempted to do so. Indeed, SIA 1978, s 9(1) provides:
‘Where a State has agreed in writing to submit a dispute which has arisen, or may arise, to arbitration, the State is not immune as respects proceedings in the courts of the United Kingdom which relate to the arbitration.’
As a result, and in circumstances where General Dynamics’ omission was not deliberate, this did not affect the outcome of the Application and no prejudice to Libya was caused. Nonetheless, in order to mark the importance of compliance with the Duty, the court sanctioned the non-disclosure by ordering General Dynamics to pay its own costs in relation to the Application.
Immunity from enforcement
The court found this to be a different issue from that of obtaining an order under AA 1996, s 101, and which only needed to be considered after the Order was granted and once General Dynamics sought specific enforcement measures. The court rejected Libya’s claim that General Dynamics would have been able to execute the Order directly against Libyan assets without the issue being considered by the court. Not only was this contrary to established court procedure, the court agreed that General Dynamics and its counsel would in any event have had a professional obligation to raise the issue when seeking execution. As a result, there was no obligation on General Dynamics to disclose the issue of immunity from enforcement at the time of making the Application.
General Dynamics had relied on the alleged existence of two competing Libyan governments in support of its application to dispense with service of the Enforcement Order. In fact, General Dynamics had failed to disclose that the UK government only recognises a single legitimate Libyan government. Nonetheless, the court found this omission to be minor and in any event only concerned the part of the Order which had since been set aside by the Supreme Court.
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This analysis was first published in very similar form by Lexis®PSL on 22 March 2022 and can be found here (subscription required).
The author would like to thank Louis Austin for his assistance in preparing this blog post.