by Ioana Maria Bratu[1]
On 19 January 2024 the High Court of Justice of England and Wales (EWHC or the English court) dismissed Zimbabwe’s state immunity argument to set aside the 2015 $125m ICSID arbitration award in Border Timbers Limited & Anor v Republic of Zimbabwe ([2024] EWHC 58 (Comm)). While the Court ultimately sided with the investors, its findings (if applied by higher courts) may have far-reaching repercussions for the future of enforcement in the UK.
Background
The claim arises from Zimbabwe’s expropriation of property belonging to the Claimants within the framework of its Land Reform Programme. The Claimants pursued an ICSID claim under the Zimbabwe–Switzerland BIT to recover legal title and/or obtain appropriate compensation. The arbitral tribunal handed down an award that ordered restitution or compensation, in the alternative. The Respondent contested this decision, appealing to the ICSID annulment committee. Ultimately, the annulment committee upheld the award by a final decision in 2018.
Claimants then applied to the EWHC for the registration and entry of judgement per the Arbitration (International Investment Disputes) Act 1966 (‘the 1966 Act’) implementing the ICSID Convention in English law. The English court made an ex parte enforcement order, which Zimbabwe applied to set aside on the basis of immunity from jurisdiction under the State Immunity Act 1978 (‘the 1978 Act’). In retort, Claimants argued that adjudicative immunity was defeated by submission to ICSID jurisdiction, according to section 2 of the 1978 Act, and, in the alternative, by the carve-out created by section 9 of the 1978 Act, dealing with the arbitration exception.
On section 2 of the 1978 Act, Mrs Justice Dias held that Article 54 of the ICSID Convention does not equate to a sufficiently clear and unequivocal submission to the jurisdiction of the English courts. The judge held that the 1978 Act entitles the State to blanket immunity [66], and that no specific mention differentiates the ICSID system from other matters involving any other type of award [67].
Importantly, the judge distinguished between waiver of immunity (from enforcement jurisdiction) and submission to the jurisdiction, a distinction supported by reference to Svenska Petroleum Exploration AB v Lithuania,[2] an English Court of Appeal decision dealing with an ICC award [69].
As to waiver of immunity, Mrs Justice Dias stated that Article 54(1) of the ICSID Convention amounted to general a waiver of immunity in relation to recognition and enforcement [58], [63], but that even a general waiver of immunity will not necessarily deprive a state of its immunity for the purposes of the 1978 Act unless it can be squarely brought within one of the exceptions of the Act [66].
Therefore, on submission to jurisdiction, she followed with the conclusion that submission to (the English court’s) jurisdiction does not concern the underlying dispute (the arbitration) but the case before the English court (the enforcement), and that Article 54 does not contain an express submission by a Contracting State to the enforcement jurisdiction of another Contracting State [71]. In short, the judge could not find evidence that Zimbabwe submitted to English court’s jurisdiction for enforcement purposes, even though Article 54 of the ICSID Convention was recognised as a general waiver of immunity.
On section 9 of the 1978 Act, Dias J decided that the English court was required to make a determination on whether there was an arbitration agreement between the parties to the dispute, and this requirement did not exclude ICSID awards. Furthermore, Dias J stated that the English court is not bound by the conclusion of the ICSID panel on the existence of an arbitration agreement. Therefore, the gist of Dias J’s approach to Section 9 is that the respective Section at most requires and at least permits the EWHCt to re-examine jurisdiction, as a premise to be satisfied before Section 9 is engaged. Therefore, the English court must be satisfied that the State agreed to arbitration and that the dispute fell within the scope of the arbitration agreement [83-84]. This assessment was substantiated by reference to Mr Justice Butcher’s decision in PAO Tatneft v Ukraine,[3] where Butcher J held that Ukraine was not precluded from raising jurisdictional arguments before the EWHC, regardless of whether the points had already been put before the arbitral tribunal. Differently from the context of Border Timbers, the Tatneft case concerned a non-ICSID UNCITRAL award, where the arguments before the English court had not been considered by the arbitral tribunal.
Analysis
Both of Dias J’s conclusions as regards the 1978 Act go against Fraser J’s judgement in Infrastructure Services Luxembourg Sarl v Spain (analysed on our Blog by Aleksander Kalisz, here).[4] On Section 2, Fraser J stated that Article 54 of the ICSID Convention constituted ‘prior written agreement’ for the purposes of the 1978 Act. In his view, any other interpretation would lead to an absurd result, whereby the 1966 Act could only apply to awards in which the United Kingdom was a party. For Dias J it does not result that the United Kingdom needs to be a party to the arbitration for the 1996 Act to apply, but she interprets the 1978 Act as requiring express submission to enforcement jurisdiction. By separating waiver of immunity from submission to jurisdiction, Dias J concludes that, had Article 54 of the ICSID Convention contained a provision referring to ‘the courts of any other Contracting State called upon to enforce an award against it’, then that would constitute a clear submission to jurisdiction under Section 2 of the 1978 Act [71]. In her opinion, while general immunity was waived by virtue of Article 54 of the ICSID Convention, submission to English court’s jurisdiction could not be sufficiently evidenced.
As to Section 9, Fraser J unambiguously commented that ‘the ICSID Convention – a schedule to the 1966 Act – satisfies the requirements of section 9(1) of the 1978 Act and is an agreement in writing by all the Contracting States to submit disputes with investors from other states to international arbitration.’[5] Generally, as to enforcement under the 1996 Act, and contrary to Dias J’s view, Fraser J held that the court may not re-examine the ICSID tribunal’s jurisdiction.[6] The only occasion in which the arbitration agreement would be opened by the court is where the party opposing enforcement raises ‘additional defences against enforcement, in certain exceptional or extraordinary circumstances’.[7]
Despite Claimants’ unsuccessful points on the merits, the argument to have the award set aside failed on procedural grounds. Dias J explained that the 1966 Act and the CPR do not allow for an argument of immunity from jurisdiction to be raised in applications for registration and entry of judgement. The judge, however, penalised the Claimants in costs for failure to provide full and frank disclosure. Even if the failure to disclose was considered immaterial, as state immunity was, in fact, irrelevant to the Claimants’ application, the judge ruled that the Claimants breached their obligation to mention the State immunity issue in the witness statement supporting their ex parte application. Therefore, one important procedural takeaway is that it is ‘incumbent on anyone making an application which names a state as respondent to address the question in order to allow the court to satisfy itself that immunity is not engaged.’ [115]
Successful registration of the award means that Claimants can execute the award vis-à-vis Zimbabwe’s assets within the territory to satisfy the award. However, following the 19th of January 2024 High Court decision, Zimbabwe obtained permission to appeal to the Court of Appeal.
Outlook and Conclusion
One interesting issue in this decision is how a rigid approach to interpretation might lead to an uncoordinated analysis of different Acts. While the commentary on State immunity and opening up the arbitration agreement has no direct bearing on the final ruling in this case, it does not seem to be consistent with the 1966 Act. Indeed, Dias J finally determined that the 1966 Act does not even allow for a state immunity case to be made because the mere recognition and enforcement of an ICSID award does not involve the exercise of the court’s adjudicative jurisdiction [109]. Nevertheless, the judge herself admitted that there is no authority for that proposition [111]. Furthermore, case law indicating the contrary was cited in the form of Fraser J’s decision in Infrastructure Services [109]. Therefore, if one accepts that the 1966 Act does not allow a state immunity argument because of the specific characteristics of the ICSID regime,[8] it is counterintuitive to maintain that the 1978 Act regarding state immunity leads to the opposite construction, in which ICSID awards are to be treated as any other arbitration award.
Dias J’s novel approach seems to hinge on how the EWHCs power is defined. Dias J held that the English court does not exercise adjudicative jurisdiction when recognising and enforcing an ICSID award, and this is why the question of sovereign immunity cannot arise. In her view, the English court is called to perform a ministerial act and, therefore, does not exercise any discretion [106, 109]. Contrastingly, Fraser J was of the opinion that recognition and enforcement require the English court to have adjudicative jurisdiction, and rejected the state immunity argument based on the interpretation of the 1966 Act and the 1978 Act by reading the 1978 Act in a way that is consistent with the purpose of the ICSID Convention. It is appropriate to mention that the judgement of the Supreme Court in Micula[9] provides that even in the ICSID context ‘there is scope for some additional defences against enforcement, in certain exceptional or extraordinary circumstances’, indicating adjudicative jurisdiction.
The fact that, in the end, the 1978 Act arguments were deemed irrelevant to the 1966 Act’s enforcement purpose may be of temporary consolation for the Claimants, but the issues as to State immunity and looking into the arbitration agreement remain as thorny as ever in the context of the interaction between the 1978 Act and the 1966 Act when it comes to enforcing ICSID awards.
Ioana Bratu, M.CIArb is a study grant recipient and fellow researcher (PhD) in Law and Legal Orders at The Open University, UK. ↑
[2006] EWCA Civ 1529. ↑
[2018] EWHC 1797 (Comm). ↑
[2023] EWHC 1226 (Comm). ↑
[2023] EWHC 1226 (Comm) [102]. ↑
[2023] EWHC 1226 (Comm) [107]. ↑
[2023] EWHC 1226 (Comm) [100]. ↑
Which is almost a truism at this point. See Christoph H Schreuer, The ICSID Convention: A Commentary (CUP 2009, 2nd ed), p 1139, para 81: ‘…the system of review under the Convention is self-contained and does not permit any external review. This principle also extends to the stage of recognition and enforcement of ICSID awards. […] This is in contrast to non-ICSID awards, including Additional Facility awards, which may be reviewed under domestic law and applicable treaties. In particular, the New York Convention gives a detailed list of grounds on which recognition and enforcement may be refused…’ ↑
[2020] UKSC 5, [78]. ↑