English Court of Appeal interprets arbitration agreement to hold Libya waived sovereign immunity from execution

In General Dynamics United Kingdom Ltd v The State of Libya [2025] EWCA Civ 134, the Court of Appeal (the Court) held that Libya waived immunity from execution against its assets pursuant to the State Immunity Act 1978 (SIA). Although the Court's ultimate decision was unanimous, the Justices' reasoning regarding the effect of the phrase "wholly enforceable" in the underlying arbitration agreement differed substantially. The judgment serves to emphasise the need for careful drafting of arbitration agreements and sovereign immunity waiver provisions.

Background

The dispute concerns a contract between General Dynamics Ltd (General Dynamics) and Libya, governed by Swiss law, to supply a tactical communications and information system (Contract). Following an ICC arbitration conducted in Geneva pursuant to the ICC Rules, General Dynamics was awarded approximately £16 million (plus interest and costs) (Award). A series of proceedings in the English courts ensued regarding enforcement of the Award and service on Libya under the SIA, culminating in a judgment of the Supreme Court. We addressed those proceedings in earlier blog posts (see here and here).

The present appeal arose out of a judgment issued by the High Court in April 2024. His Honour Judge Pelling KC held that Libya waived execution immunity by clause 32 of the Contract, which provides, in relevant part: "The award will be final and binding upon the Parties… Both parties agree that the decision of the arbitration panel shall be final, binding and wholly enforceable." See our analysis of the judgment here.

The SIA constitutes a complete code for the English law of State immunity. It creates a general immunity for foreign States, subject to certain exceptions as set out in the Act.

The SIA distinguishes between a court's jurisdiction (i) to adjudicate upon claims (see SIA, s. 2-11) and (ii) to enforce or execute judgments made in the exercise of its adjudicative jurisdiction (see SIA, ss. 13(2)-(6) and 14(3)-(4)). As the Supreme Court observed at an earlier stage of these proceedings, both forms of jurisdiction give rise to "considerable sensitivity". However, execution jurisdiction "may give rise to even greater sensitivities in view of the fact that the power of the forum state may be enlisted to seize assets of the defendant state".

The Court of Appeal's judgment

The Court's judgment concerns immunity from execution jurisdiction under s. 13(3) of the SIA, which permits recourse against State assets "with the written consent of the State concerned". Section 13(3) goes on to clarify, however, that "a provision merely submitting to the jurisdiction of the courts is not to be regarded as a consent for the purposes of this subsection".

Libya raised two grounds of appeal.

Proper interpretation of section 13(3)

Libya's first ground of appeal was that the first instance judge erred in holding that "clear" or "express" words are not required for a State to consent to execution within the meaning of s. 13(3) because:

1. "the purpose and context of the SIA support a requirement that only “express” words would be sufficient to waive immunity". Libya referred to the Supreme Court's earlier observations in these proceedings, quoted above, to the effect that execution immunity raised "even greater sensitivities"; and
2. the "SIA should be taken to incorporate the pre-existing common law principle… that the more valuable a right which is said to be waived, the more emphatic the language of the waiver must be to effect it".

The Court rejected those submissions. Phillips LJ (Zacaroli LJ and Lewison LJ agreeing) found that there was "no justification for putting any gloss on the words of section 13(3)", which simply require written consent. The Court emphasised that "there is no need to use the word "consent" or any other specific wording", and any requirement to use "express words" merely requires that the consent be stated in writing (citing Infrastructure Services Luxembourg S.A.R.L and another v Spain and Border Timbers and another v Zimbabwe [2024] EWCA Civ 1257).

The proper construction of the arbitration agreement

Libya's second ground of appeal was that the High Court erred in holding that clause 32 of the Contract constituted written consent to waive execution immunity. Libya argued that:

1. the phrase "wholly enforceable" refers to a waiver of adjudicative immunity; and
2. clauses waiving adjudicative and execution immunity are typically "far more extensive and deal separately and expressly with each form of immunity".

Phillips LJ agreed that the phrase "wholly enforceable" was not sufficient, on its own, to waive execution immunity. Among other things, Phillips LJ observed that "the phrase "final and binding" is commonplace wording to indicate that an award… conclusively determines the issues between the parties", as opposed to waiving execution immunity. Crucially for Phillips LJ, however, clause 32 also provides that disputes would be settled under the ICC Rules, by which the parties "undertake to carry out any award without delay" (see Art. 35(6) in the 2021 ICC Rules). Phillips LJ noted decisions of the French Cour de Cassation and United States Court of Appeal (5^th Circuit), which held that predecessors to Art. 35(6) of the 2021 ICC Rules led to a waiver of sovereign immunity. While Phillips LJ did not explicitly rely on those decisions, he held that clause 32 of the Contract, when read in conjunction with the undertaking, was sufficient to waive execution immunity.

In contrast, Lewison LJ and Zacaroli LJ adopted a broader construction of "wholly enforceable". A "straightforward reading" of the phrase constituted consent to adjudicative and execution jurisdiction.

Comment

The Court's judgment has significant implications for parties drafting waivers of sovereign immunity, and emphasises the need for great care to be taken in this process to ensure the parties' intentions are completely clear.

Relying on contextual language such as "wholly enforceable" is not advisable. For a party entering into a contract with a State, clear wording waiving both adjudicative and execution immunity should be negotiated where possible. Express waiver language will reduce the risk of disputes like this one. It will also offer that party the best prospects of enforcement in the courts of other jurisdictions. We also discuss the judgment further in this podcast.