PCL & Ors v The Y Regional Government of X

Section 12 of the State Immunity Act 1978 applies to an arbitration claim form used to commence distinct court proceedings under section 42 of the Arbitration Act 1996, even where those proceedings support an existing arbitration. Service on the foreign State must comply with the statutory diplomatic procedure unless the State has agreed to the manner of service. Filing an acknowledgment of service to challenge jurisdiction does not waive that protection if the jurisdiction application is made within the prescribed time. The Act requires an updated construction to accommodate procedural changes. Serious non-disclosure on a without-notice application may justify setting aside the order, even if the order would otherwise have been made.

The claimants sought to enforce under section 42 of the Arbitration Act 1996 a peremptory payment order made in an LCIA arbitration against the Y Regional Government of X. Phillips J had permitted service of the arbitration claim form at the address of the defendant’s solicitors, and Flaux J had imposed an expedited timetable and abridged the time for acknowledgment of service.

The defendant applied to set aside both orders. It relied on the mandatory service and timing provisions of section 12 of the State Immunity Act 1978, contending that there had been no agreement to alternative service and no waiver. It also alleged failure to make full and frank disclosure on the without-notice applications.

1. Application of section 12(1). The arbitration claim form commenced separate court proceedings. Although ancillary to the existing arbitration, the claim invoked the court’s powers and was the originating process by which the defendant was brought before the court. It therefore had to be served in accordance with section 12(1) of the State Immunity Act 1978. The provision is general and unqualified, and is not confined to proceedings seeking judgment. The reasoning in Norsk Hydro ASA v State Property Fund of Ukraine and Westminster City Council v Government of Iran supported that conclusion.
2. No agreement to alternative service. The defendant’s solicitors’ letter confirmed representation in the arbitration. It did not constitute agreement to service of court proceedings or agreement to the manner of service required by section 12(6). Any earlier authority to accept service had also ceased to be operative when the solicitors declined a specific request to accept service of the arbitration claim form.
3. No waiver by acknowledgment of service. A defendant disputing jurisdiction under the CPR must file an acknowledgment of service. Section 12(3) should therefore be construed in an updated manner. A State appears, for this purpose, when it files an acknowledgment of service but fails to make the required application disputing jurisdiction within the prescribed period. The defendant had challenged jurisdiction in time and had not waived section 12 protection. The approach was consistent with NML Capital Ltd v Argentina and the updating principle discussed in Yemshaw v Hounslow London Borough Council.
4. Full and frank disclosure. The claimants’ failure to disclose the potential application of section 12 on the without-notice applications was seriously culpable. The omitted matters concerned the mandatory method of service and the mandatory period for acknowledgment of service, and were fundamental to the applications. Applying the principles illustrated by Bank Mellat v Nikpour, Brink’s Mat Ltd v Elcombe, Arena Corporation Ltd v Schroeder and Siporex Trade SA v Comdel Commodities Ltd, the orders would in any event have been set aside.
5. The defendant’s application succeeded. The November Order and December Order were set aside.