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Turmoil in War-Torn Libya Triggers State Immunity Test Case

Sovereign powers are not like ordinary commercial partners and dealings with them are complicated by considerations of diplomacy and state immunity. A landmark Court of Appeal ruling will, however, make it much easier to enforce judgments against them.

A defence contractor had obtained an award of over £16 million against the state of Libya following an arbitration process in which the latter fully participated. A judge later granted an order in conventional form, enabling the contractor to enforce the award as a judgment. Although it was required to notify Libya that the order had been made, the contractor was permitted to dispense with formal service.

Libya, however, subsequently succeeded in having the latter part of the judge’s order set aside. That was on the basis that he had no jurisdiction to dispense with the requirement of the State Immunity Act 1978 that any writ or other document required to be served for instituting proceedings against a sovereign state can only be validly served via the Foreign and Commonwealth Office (FCO).

In ruling on the contractor’s challenge to that decision, the Court noted that the matter was complicated by the state of turmoil in Libya. With armed militias on the streets and rival governments operating in Tripoli and Tobruk, service of the necessary documents would be dangerous and difficult. The FCO had stated that, even if achievable, the process of service was likely to take over a year.

In upholding the appeal, the Court found that, on a true interpretation of the Act, it was not mandatory for either the arbitration claim form or the order permitting the award’s enforcement as a judgment to be served through the FCO. Service of the latter would ordinarily be required under the Civil Procedure Rules, but there was a general judicial discretion to dispense with such service.

The Court noted that that discretion would normally only be exercised in exceptional circumstances, particularly where no previous attempt at enforcement had been made. It would also always be appropriate to notify the executive organs of the state concerned that an order had been made against it. The Court noted that it had sought to strike the right balance between according diplomatic respect to sovereign states and the public interest in rigorous enforcement of arbitration awards.