The case concerns the enforcement of an arbitral award against a property owned by the State of Libya in London. The key issue was whether Libya had waived its state immunity from enforcement through a clause in the original contract. The English High Court ruled in favour of General Dynamics, finding that the contract’s wording constituted written consent to waive immunity from enforcement under the State Immunity Act 1978.

Background:

In 2008, General Dynamics UK Ltd (“GDUK”) and the State of Libya (“Libya”) entered a contract for the supply of a Tactical Communication and Information System. The contract included an arbitration clause (“Clause 32”) stating that any arbitration decision would be “final, binding and wholly enforceable”. A dispute arose, leading to an arbitration award of £16,114,120.62 in favor of GDUK on January 5, 2016. GDUK sought to enforce the award against a property owned by Libya in London. On July 20, 2018, the High Court granted permission to enforce the award as a judgment. After resolving service issues and dismissing a challenge, GDUK became entitled to enforce the award unconditionally from April 2, 2022. The central issue before the High Court was whether the arbitration clause in the original contract constituted Libya’s written consent to waive its immunity from enforcement under Section 13(3) of the State Immunity Act 1978.

GDUK argued that the phrase “wholly enforceable” in the arbitration clause of the contract constituted Libya’s written consent to waive its immunity from enforcement. They contended that this wording, particularly the term “wholly”, demonstrated an intention that enforceability was not limited to adjudication immunity but extended to enforcement by execution against assets. GDUK also relied on previous case law suggesting that no particular form of words is required to satisfy Section 13(3) of the State Immunity Act 1978 (“SIA”), and that such provisions should be construed in accordance with ordinary principles of construction for commercial contracts. Libya, on the other hand, sought to discharge the interim charging order on the grounds that its property was immune from execution under Section 13(2)(b) of the SIA. They argued that the contract’s wording did not clearly express a waiver of state immunity and that such waivers should be construed strictly.

Court’s Decision:

Judge Pelling KC, sitting as a High Court judge, granted GDUK’s application for a final charging order, effectively allowing enforcement against Libya’s property. Two key observations were made:

1. In terms of interpretation of the contract, the Court noted that “no special or particular words are required” and therefore dismissed the need for specific wording to waive enforcement jurisdiction. Instead, the task was to interpret the language used by the parties in line with Swiss law, which governed the contract. Once this interpretation was completed, the issue became one of English law – specifically, whether the parties’ agreement constituted a waiver of immunity under section 13(3) of the SIA in England and Wales. The Court examined relevant principles of Swiss law, including the language and broader context of the Contract. It found no evidence of the parties’ subjective intentions and concluded that the Contract must be interpreted objectively in line with the principle of good faith. Further, although “good faith” is not typically used by English lawyers in contract interpretation, the Court, albeit with some hesitation, understood this principle as referring to what a “reasonable person with knowledge of the parties” would infer the language to mean in the given circumstances. Applying this principle, the Court determined that a reasonable person would conclude that the parties intended to be able to enforce their obligations under the Contract, including obligations arising from an arbitral award made in accordance with their arbitration agreement.

2. The Court then reviewed Clause 32, noting that Libya’s interpretation, which limited it to adjudicative jurisdiction, would make it redundant in England due to section 9 of the SIA and also because of the phrase “final and binding.” Therefore, “wholly enforceable” must refer to something else. The Court also dismissed the need for a specific SIA reference, arguing that commercial contracts typically use general terms to allow enforcement across jurisdictions.