Clarification on the juncture between service, enforcing arbitration awards, and the State Immunity Act 1978: since our first comment on these proceedings, the Court of Appeal reverses the Court below and restores the Order of the first-instance Judge.
In 2016, an arbitral tribunal made an award against the Defendant State of Libya in favour of the Claimant, a UK company. In accordance with CPR r 62.18, the Claimant made a without notice application with an arbitration claim form to enforce the award.
In the Courts below, the key question was whether, in order to bring proceedings against a sovereign state, s 12 of the State Immunity Act 1978 (‘SIA 1978) required the Claimant to serve ’any writ or other document required to institute proceedings’ through the Foreign and Commonwealth Office (‘FCO’).
Teare J held that such service of the arbitration claim form was not required. He therefore gave permission to so dispense with service and entered judgment in the terms of the award with a two-month stay on execution. The Claimant was, nevertheless, ordered to courier the Arbitration Claim Form, the Order permitting enforcement, and other associated documents to the Defendant at three addresses associated with the Libyan government.
On appeal, Males LJ disagreed. As a matter of purely English procedural law, an arbitration claim form is not required to be served. However, this was held to be the wrong perspective from which to view proceedings involving a sovereign state. Males LJ instead concluded that s12 of the SIA 1978, which pre-dates both the Arbitration Act 1996 and the CPR, contemplates that there will always be some document required to be served for instituting proceedings against a state. The nature of the document would be determined by the procedural rules such as exist from time to time, but this did not mean proceedings can be instituted against a sovereign state without service of any document whatever.
Males LJ further held that the court had no power to dispense with service. However, had he been wrong on this and there were a discretion to dispense with service, he considered that the circumstances were sufficiently exceptional to justify such dispensation.
The First Appeal: the Meaning of s 12 of the SIA 1987
The Court of Appeal (in a single judgment) agreed that the SIA 1978 had to be read in accordance with English procedural law as it exists from time to time but disagreed that this was the wrong perspective through which to view s 12 of that Act. There is, after all, no other procedural law through which s 12 can be considered. Although it was correct that the current CPR post-dates the SIA 1978, a review of the procedural background against which the SIA 1987 had been enacted disclosed no material difference with the current procedural position.
Furthermore, owing to the fact that the SIA 1978 had been sponsored as a Bill in the House of Lords by the Chairman of the Rules Committee as it enacted the relevant provisions in the RSC, Parliament, as a whole, must be taken as being aware that there was a procedure for instituting registration of both foreign judgments and foreign awards without requiring service of the initiating document.
This construction of the 1978 Act in accordance with its terms was, moreover, considered to be “eminently understandable.” When a sovereign state is first sued, it is natural enough that such action should be transmitted through the FCO. But where a state has fully participated in (or deliberately declined to participate in) legal proceedings, it does not obviously need the protection of enforcement proceedings being transmitted through the FCO.
The Court of Appeal therefore concluded it was not mandatory in this case that either the arbitration claim form or the Order permitting the enforcement of the award as a judgment had to be served through the FCO.
The Second Appeal: Dispensing with Service
Although, given the conclusion on the first issue, the second issue on appeal did not arise, the Court of Appeal clarified that, if Males LJ had been correct that s12 of the SIA 1978 requires an order permitting enforcement of an arbitral award to be treated as a document required to be served through the FCO to institute proceedings, Males LJ was correct to say that that service of such order could not be dispensed with.
The Court of Appeal agreed with the reasoning that if service is dispensed with in an appropriately exceptional case, there is then no document required to be served within s,12. This would be an impossible construction, giving the judge a discretion to dispense with a statutory requirement. This could not be the law.
The Third Appeal: Exceptional Circumstances
The Court of Appeal rejected the submissions that Males LJ (i) should only have upheld the order dispensing with service if service was impossible; and (ii) was wrong to take into account subsequent developments in Libya since the Order under appeal was made. Impossibility was found not to be condition of exceptional circumstances; nor was reference to subsequent events inappropriate as they had been used only to demonstrate that the concerns of Teare J were well-founded.
Conclusion and Commentary.
The Court of Appeal therefore allowed the first ground of appeal and restored the Order of Teare J.
This helpfully clarifies what, exactly, needs to be served and how in circumstances where the parties are seeking to enforce an arbitral award against a sovereign state as a judgment:
- An arbitration claim form applying for the enforcement of an award does not need to be served via the FCO;
- An Order permitting the enforcement of an award as a judgment must be served pursuant to CPR 62.18(8)(b) and CPR 6.44 (which deals with service of documents on a foreign state); but, because this is not a document instituting proceedings, it need not be served through the FCO;
- The court has jurisdiction in an appropriate case to dispense with service of the Order permitting enforcement in accordance with CPR 6.16 and/or 6.28;
- If the court considers it an appropriate case in which to so dispense with service of the Order permitting enforcement, it will be also appropriate to notify the state that the Order has been made and to make to notify the state in such a way so as to bring it to the attention of those organs of the state responsible for honouring the award.
The appeal also confirms that English procedural law, too, adheres to the principle of Parliamentary Sovereignty. As the Court held in the present case: if Parliament decides that foreign states are not immune to proceedings in respect of commercial transactions and/or arbitrations, and no immunity is granted in respect of enforcement, neither is an exception necessary to the ordinary application of English procedural law.
This, however, does not mean sovereign states are without protections: such Orders should, as a matter of course, give the state two months to set it aside aside with no risk of execution in the interim as envisaged by CPR 62.18(9).
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