In <span class="news-text_italic-underline">Docket No I ZB 107/25</span>, the German Federal Court of Justice (“<span class="news-text_medium">BGH</span>”) upheld a declaration of enforceability for a foreign arbitral award against Libya. The applicant, a UK-based company, had contracted in 2008 with the procurement agency of Libya’s Ministry of Defence to supply and install a tactical communication system (“<span class="news-text_medium">LTCIS</span>”).
The Swiss-law contract provided for ICC arbitration seated in Geneva. After the Libyan civil war began in 2011, the company terminated the contract and brought arbitration proceedings against Libya. It received an award of GBP16 million in damages for the wrongful calling of payment guarantees. In April 2024, the Bavarian Higher Regional Court granted its application for a declaration of enforceability. Libya appealed on points of law, but the BGH dismissed the appeal in full.
The BGH held that Libya could not rely on state immunity to defeat the German court’s jurisdiction. Applying the German test that distinguishes public from private acts by their nature, it found that both the LTCIS contract and the calling of the guarantees were private-law transactions: they involved private-law declarations rather than the exercise of sovereign power. The system’s military purpose did not change that classification.
The court also attributed the procurement agency’s conduct to Libya because the agency had acted in an administrative capacity for the state. Any failure to comply with internal Libyan approval requirements did not alter that conclusion. In reaching it, the BGH applied by analogy the principle in article 46(1) of the Vienna Convention on the Law of Treaties.
Libya was also precluded from arguing under article V(1)(a) of the New York Convention that it lacked the capacity to enter into the arbitration agreement. The BGH held that a state which participates in commercial dealings and agrees to arbitrate cannot later invoke its domestic law to challenge that capacity.
The decision confirms that a state cannot use sovereign immunity to resist recognition and a declaration of enforceability of an award arising from its commercial dealings. It does not, however, determine whether enforcement measures can be taken against particular assets: Libya remains able to resist measures directed at assets serving genuinely sovereign purposes.
<span class="news-text_medium">Case:</span> <span class="news-text_italic-underline">Docket No I ZB 107/25</span>, 16 July 2026 (judgment in German).
