By Dimitar Arabov[1]
Registering arbitral awards rendered pursuant to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1965) (the “ICSID Convention” and, respectively, “ICSID Award(s)”) in England & Wales ought to be, at least in principle, a reasonably straightforward matter.
The implementing legislation of the ICSID Convention in the UK, the Arbitration (International Investment Disputes) Act 1966 (the “1966 Act”), alongside Rule 62.21 of the Civil Procedure Rules, provide for a straightforward procedure for registering an ICSID Award in the UK. The application is usually made ex parte, using a CPR Part 8 claim form, supported by (i) written evidence (usually a short witness statement by a solicitor, containing a number of basic details regarding (a) the judgment debtor, (b) the ICSID Award, and (c) the ICSID Award’s status (paid or unpaid)), and (ii) a certified copy of the ICSID Award itself (“Registration Proceedings”). Neither the ICSID Convention, nor the 1966 Act, expressly provide for any substantive defences to registration. In Border Timbers Ltd v Republic of Zimbabwe [2024] EWHC 58 (Comm) (the “Border Timbers Judgment”), one of the first instance judgments appealed in the Court of Appeal judgment discussed below, Mrs Justice Dias even went as far as describing the registration process for ICSID Awards in the UK as “an essentially ministerial act”, which does not even formally engage the jurisdiction of the English courts (though, as noted below, the UK Court of Appeal disagreed with that assessment).
Armed with an ICSID Award in their favour and seeking to register it in the UK, investors, however, often find themselves stumbling into a completely different obstacle – the state’s assertion of a lack of jurisdiction, relying upon state immunity pursuant to the State Immunity Act 1978 (the “SIA 1978”). Under section 1 of the SIA 1978, sovereign states are granted absolute adjudicative immunity, subject to exceptions set forth in the Act. The SIA 1978 also requires the courts to give effect to such immunity even when the state in question does not appear in the relevant proceedings. Accordingly, the two most relevant potential exceptions, that investors usually seek to rely upon in the context of Registration Proceedings in the UK, are:
- Submission to Jurisdiction (section 2, SIA 1978) – if the state in question has submitted to the English courts’ adjudicative jurisdiction voluntarily, either by a prior written agreement or by appearing in the relevant proceedings (the “Submission Exception”); and
- Arbitration (section 9, SIA 1978) – if the relevant proceedings before the English courts relate to an arbitration, in circumstances where the state in question has previously agreed in writing to submit the dispute to arbitration (the “Arbitration Exception”).
The Court of Appeal considered the relevance of state immunity, and the application of both of those exceptions, in the context of Registration Proceedings in Infrastructure Services Luxembourg SARL v Kingdom of Spain and Border Timbers Ltd v Republic of Zimbabwe [2024] EWCA Civ 1257 (the “CA Judgment”).
Background to the CA Judgment
The CA Judgment arose out of a joined appeal of two recent first instance decisions rendered by the UK High Court: Infrastructure Services Luxembourg SARL v Kingdom of Spain [2023] EWHC 1226 (Comm) (the “Infrastructure Services Judgment”) and the Border Timbers Judgment (referred to above). Interestingly, those judgments (handed down only a few months apart from one another) provided for diametrically opposed interpretations on the applicability to Registration Proceedings in the UK of (i) prima facie state immunity, (ii) the Submission Exception, and (iii) the Arbitration Exception.
In the Infrastructure Services Judgment, Fraser J ruled that state immunity applies prima facie to Registration Proceedings. However, he noted that Art. 54 of the ICSID Convention constitutes a prior written agreement by each Contracting State to submit to the other Contracting States’ national courts’ adjudicative jurisdiction in relation to Registration Proceedings for ICSID Awards. The consequence of that finding was that the Submission Exception applied in relation to Registration Proceedings, and it was not open to sovereign states to argue that they are immune from them. In the alternative, he also found that the claimants would have been able to defeat Spain’s state immunity plea by relying on the Arbitration Exception.
Conversely, in the Border Timbers Judgment, Dias J held that, since the bespoke procedure for Registration Proceedings (set out above) does not require service of any originating process on the respondent state, the doctrine of sovereign immunity is not engaged at all in relation to Registration Proceedings. Before setting that analysis out, however, she also held that the waiver contained in Art. 54 of the ICSID Convention does not constitute a prior written agreement for the purposes of Submission Exception as the language contained therein was too “general” to satisfy the high threshold (requiring clear and unequivocal submission) applicable to the Submission Exception. She also analysed the Arbitration Exception and ruled that, since the Arbitration Exception is dependent on the existence of a valid arbitration agreement between the state and the investor, the English courts are not bound by the decision of the arbitral tribunal on it (i.e., they would have to analyse the jurisdiction arguments pertaining to the ICSID tribunal’s jurisdiction de novo) and she would need to hear full arguments on the tribunal’s jurisdiction in order to determine whether it applies.
CA Judgment
Having found itself in the position to clarify the legal position in the context of such conflicting interpretations by the lower court, the Court of Appeal had to consider three key questions:
- whether state immunity applies, in principle, to the Registration Proceedings;
- if state immunity does apply, whether Contracting States to the ICSID Convention have nonetheless waived that immunity from Registration Proceedings pursuant to the Submission Exception by ratifying the ICSID Convention (and, specifically, Art. 54 therein); and
- if there is no such waiver by prior written agreement, whether a foreign state is estopped or otherwise prevented from asserting the invalidity of the underlying award, with the result that the Arbitration Exception is necessarily satisfied.
In relation to the first question, the Court of Appeal held that state immunity applies to Registration Proceedings on the basis that registering an ICSID award as a judgment of the Court is not merely a ministerial or administrative act as it requires a judge to be satisfied to the requisite standard as to the proof of authenticity and the “other evidential requirements” of the 1966 Act (i.e., the details required to be set out in the supporting witness statement set out above). The CA Judgment expressly clarifies that the fact that the decision to register the ICSID Award may be straightforward (if the evidence provided is deemed to be in order) does not undermine the adjudicative nature of the judicial task of assessing that evidence and, consequently, granting a registration order cannot be “merely a ministerial or administrative act”.
As regards the second question, the Court of Appeal followed the reasoning expressed by Fraser J in the Infrastructure Services Judgment, and relied heavily on the decision of the High Court of Australia, Australia’s apex court, in Kingdom of Spain v Infrastructure Services Luxembourg S.à.r.l. [2023] HCA 11. It concluded that Art. 54 of the ICSID Convention amounts to a sufficiently clear and unequivocal waiver of state immunity to satisfy the high threshold required to establish the Submission Exception. As such, it held that, by ratifying the ICSID Convention, Contracting States have waived their adjudicative immunity and voluntarily submitted to the UK courts’ jurisdiction in relation to any Registration Proceedings brought against them in the UK.
However, the Court of Appeal also expressly affirmed that “Article 55 makes plain that that agreement does not extend to waiving immunity from execution of any such judgment” (emphasis added). In that sense, the CA Judgment drew a line between its adjudicative jurisdiction (i.e., its authority to register ICSID Awards as national judgments against the sovereign state defendants), and its enforcement jurisdiction (i.e., its authority to take execution actions on the registered ICSID Award, such as granting writs of control, charging orders, or third-party debt orders, against property belonging to the sovereign state defendants). Accordingly, it made clear that its findings on the effect of Art. 54 of the ICSID Convention apply only to the Court’s adjudicative jurisdiction; states remain entitled to raise state immunity objections in the context of any proceedings for execution against their property. That approach reflects the structure of the ICSID Convention and, in particular, Arts. 54 and 55 therein.
The Court of Appeal also considered briefly (and obiter) the potential impacts of its findings on Art. 54 of the ICSID Convention with respect to Art. III of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention”): i.e., whether its conclusions meant that Art. III of the New York Convention also amounts to a waiver of immunity. Although providing limited observations, the Court of Appeal did not answer that question, noting that it had not heard full arguments and was not in a position to decide the issues.
In light of its findings on the second question (i.e., that the Submission Exception applied), the Court of Appeal considered that it was unnecessary to consider the third question in detail. Regardless, the Court did observe (obiter) that it would be difficult to interpret the Arbitration Exception and the language in section 9 of the SIA 1978 as anything else other than imposing a duty upon the Court to satisfy itself that the relevant sovereign state had agreed to submit the dispute in question to arbitration (i.e., effectively requiring the Court to hear, and adjudicate upon, all of the jurisdictional objections that the state wishes to put forward).
Comments and Practical Impact
The findings of the Court of Appeal in the CA Judgment, particularly in relation to Art. 54 of the ICSID Convention constituting a waiver of adjudicative immunity for the purposes of the Submission Exception, are significant. The legal consequence is that states should no longer (credibly) be able to argue state immunity as a defence to registration of an ICSID Award in the UK. This finding brings the legal position in the UK in line with decisions of the courts of Australia, New Zealand, France, and Malaysia, and the United States (and, as expressly noted by the Court of Appeal, it is, generally, desirable that international treaties should be interpreted by the courts of all of the relevant Contracting States uniformly). It is unclear, however, whether this would be the last word of the English courts on the matter – the CA Judgment may be appealed to the UK Supreme Court.
The findings of the Court of Appeal are grounded in the interpretative rules codified in the Vienna Convention on the Law of Treaties, including that international treaties ought to be interpreted in light of their object and purpose. In that regard, the Court of Appeal noted that, when it comes to the ICSID Convention, there was recognition of the principles that (a) any disputes as to ICSID Awards’ recognition and enforcement would usually be subject to national legal processes, but also that (b) mutual consent to arbitration through ICSID constitutes a binding agreement which requires that any ICSID Award be complied with. Inherent in such balancing exercise were the ICSID Convention’s objects and purposes of encouraging private international investment, mitigating sovereign risk, and mutual acceptance as to the binding effect of an ICSID Award. Drawing upon the UK Supreme’s Court’s analysis in Micula & Ors v Romania (European Commission intervening) [2020] UKSC 5, the High Court of Australia’s in Kingdom of Spain v Infrastructure Services Luxembourg S.à.r.l. [2023] HCA 11, and the ICSID Convention‘s travaux préparatoires, the Court of Appeal concluded that “throughout the preparatory stages [of the ICSID Convention] the overarching intention was that awards (including awards against states) would be treated in each Contracting State as final judgments and enforced as such.”
The CA Judgment is also a significant positive development, from a practical perspective, for investors seeking to enforce their ICSID Awards against states in the UK. Previously, the most common way for investors to defeat the prima facie adjudicative immunity that states enjoy in the UK was through the Arbitration Exception. However, as noted in the CA Judgment, that can involve a consideration de novo by the UK courts of all of the jurisdictional objections that the state may wish to raise, even if they have been dismissed by the ICSID tribunal. As arbitration practitioners know well, establishing jurisdiction can sometimes be the most challenging, time-consuming and expensive part of an ICSID arbitration. Therefore, avoiding the time and cost implications associated with re-running those arguments is certainly a step forward in promoting the status of the UK as a pro-arbitration and pro-enforcement jurisdiction.
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Dimitar Arabov is an English-qualified lawyer, who practices in the Disputes department of Gibson Dunn’s London office. He has broad experience in international arbitration and award enforcement against sovereign states. He trained at Gibson Dunn before qualifying as an associate at the firm and holds a First-Class Law degree from University College London (UCL).
The views presented in this article are the author’s own and do not necessarily represent the views of any other organisation. ↑