Arbitration agreement interpreted to waive sovereign immunity from execution

In General Dynamics United Kingdom Ltd v The State of Libya [2025] EWCA Civ 134, part of a long-running litigation relating to enforcement of an award against the State of Libya, the Court of Appeal held that Libya had waived its immunity from execution against its assets pursuant to the State Immunity Act 1978 (SIA). The underlying arbitration agreement did not contain detailed waiver of sovereign immunity provisions but included the parties’ agreement that any arbitration award shall be final, binding and wholly enforceable which in the circumstances was held to be sufficient to waive immunity from execution by written consent. As a result, the Court of Appeal unanimously upheld the High Court’s decision to grant General Dynamics United Kingdom Ltd (General Dynamics) a charging order against a property owned by Libya.

This decision demonstrates that, where one of the parties to an arbitration agreement is a State or State-owned entity, the agreement should contain detailed sovereign immunity waiver provisions relating to both the adjudication of disputes and the enforcement of judgments to avoid uncertainty and satellite litigation.

Legal background

The SIA governs state immunity under English law and distinguishes between immunity from the adjudication of a dispute (i.e. whether the English courts have jurisdiction to adjudicate a claim involving the State) and immunity from execution (i.e. whether the English courts have jurisdiction to enforce judgments made in an adjudicative process against State property). The SIA provides a general immunity for foreign States, subject to certain exceptions detailed in the Act. In relation to immunity from execution, the SIA provides that the property of the State shall not be subject to any enforcement process unless there is written consent from the State concerned. A provision merely submitting to the jurisdiction of the courts is not sufficient consent for these purposes (s.13(2)(b) and s.13(3), SIA).

Facts

A dispute arose over a Swiss law contract between General Dynamics and Libya for the supply of a communications system. The contract contained an arbitration agreement which included the provision that: “Both parties agree that the decision of the arbitration panel shall be final, binding and wholly enforceable.”

General Dynamics commenced ICC arbitration proceedings and obtained an award for £16 million which it subsequently sought to enforce against Libya. In April 2022, the High Court granted a charging order over real estate in London owned by Libya.

Libya made an application to discharge the order on the grounds that it was immune from execution against its assets under s.13, SIA. The High Court dismissed the application finding that Libya had waived immunity from execution as a result of the provision in the arbitration agreement above.

Court of Appeal decision

Libya accepted that the arbitration agreement constituted a written agreement to submit the dispute to arbitration and that it had therefore waived its right to adjudicative immunity. However, it appealed the High Court’s finding that it had waived its immunity from execution on two grounds:

(1) The correct interpretation of s.13(3): Libya argued that “clear” or “express” words are required for a State to give valid written consent under s.13(3) to execution against its property; and

(2) The construction of the arbitration agreement: the wording of the arbitration agreement and the phrase “wholly enforceable”, was insufficient to waive sovereign immunity from execution and only applied to waive immunity from adjudication.

The Court of Appeal dismissed the appeal on both grounds:

Ground 1: there is no requirement in the SIA for the State to have provided its consent with “clear words”. It is instead the task of the court to consider the extent to which the State has expressed its written consent by the words it has used (construing the words according to the applicable law). As the court would not imply consent without a clear and unequivocal expression of intent, there was no need to impose a requirement for “clear words”. The Court noted there was no requirement for the parties to use the word “consent” or any other specific wording.

Ground 2: Libya had provided written consent to execution, albeit the Lord Justices took different approaches to the construction of the arbitration agreement:

1. Lord Justice Phillips, giving the leading judgment, held that the wording of the arbitration agreement, “final, binding and wholly enforceable”, would be insufficient on its own to constitute consent to execution. However, the arbitration agreement incorporated the ICC Arbitration Rules which provided that the parties agreed to “carry out any award without delay”. The arbitration agreement, read together with this undertaking in the ICC Rules, amounted to a waiver of execution immunity by Libya (an approach Phillips LJ noted was in line with decisions of the courts in France and the USA).
2. Lord Justice Zacaroli found that Libya waived its immunity from both adjudication and execution by agreeing to the wording included in the arbitration agreement alone; the fact that Libya had agreed to the ICC Rules merely reinforced the position.
3. Lord Justice Lewison found that the wording of the agreement must be construed by the law governing the contract. Libya’s argument that “clear words” were necessary to give consent was based on English law principles of contractual interpretation, however, the parties had agreed to arbitrate their proceedings under a Swiss law contract in which those principles had no application. Lord Justice Lewison found that on a “straightforward reading” of the arbitration agreement, the parties had agreed that any award could be enforced and therefore Libya had provided written consent to execution against its assets.

Key takeaways

1. Parties entering into a contract with a State or State-owned entity should use clear and unambiguous language when drafting agreements to arbitrate and address the waiver of sovereign immunity from both adjudication and execution. The different approaches taken by the Lord Justices to whether the words “wholly enforceable” amounted to ‘written consent’ under the SIA reinforces this need for certainty in the drafting rather than relying on more general wording. Clear drafting will avoid dispute and increase the prospects of enforcement.
2. The decision illustrates that London remains a favourable destination to enforce arbitral awards against States. This is particularly true given a number of jurisdictions have taken a different approach to state immunity.

With thanks to Max Sharp for his assistance in preparing this post.