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The English Court of Appeal Confirms Sovereign Immunity is No Defence to ICSID Award Enforcement

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Authors: David Turner and Maroš Hodor

Infrastructure Services Luxembourg S.à.r.l. and Energia Termosolar B.V. v Kingdom of Spain; Border Timbers Limited and Hangani Development Co. (Private) Limited v Republic of Zimbabwe [2024] EWCA Civ 1257, 22 October 2024

Overview

In a significant recent decision in Infrastructure Services v Spain; Border Timbers v Zimbabwe, arising out of two separate English proceedings seeking the recognition and enforcement of ICSID arbitration awards rendered against Spain and Zimbabwe respectively, the England and Wales Court of Appeal (the “EWCA”) has held that States may not oppose the registration of ICSID awards in the United Kingdom on the basis of state immunity.1 While States enjoy general immunity from proceedings in the UK courts, the States’ accession to the 1965 ICSID Convention constitutes an express waiver of sovereign immunity with respect to the registration (though not execution) of ICSID awards.

The decision means that States will henceforth be unable to oppose registration of an adverse ICSID award in the UK courts by challenging the validity of the underlying reference to arbitration – including, significantly, on the basis that the award has been issued in violation of the EU’s prohibition on intra-EU investor-state dispute settlement (as Spain had sought to argue).

The High Court Registration Proceedings

In both the Spain and Zimbabwe proceedings, the investors had sought to register their ICSID awards before the English High Court.2 The first proceeding, heard by Mr Justice Fraser, concerned an award issued against Spain under the Energy Charter Treaty, ordering Spain to pay compensation to the investors in excess of €101 million. The second proceeding, before Mrs Justice Dias, concerned an award against Zimbabwe under the Switzerland–Zimbabwe BIT, ordering Zimbabwe to pay compensation to the investors of US$30 million.

While opposing the validity of the awards on different grounds, both Spain and Zimbabwe argued that the English High Court had no jurisdiction to register the awards because both States enjoyed immunity from the Court’s adjudicative jurisdiction pursuant to section 1(1) of the State Immunity Act 1978 (the “SIA”).

The High Court rejected the States’ claim to immunity in both cases, albeit for different reasons.3 Leave to appeal was granted in both cases. Given the substantial overlap between the two cases, the EWCA heard the two cases as a joint appeal on the following key grounds:

(i) whether States’ general immunity from the jurisdiction of the UK courts under the SIA extends to proceedings for the registration of ICSID awards; and

(ii) if so, whether States’ accession to the ICSID Convention constitutes a submission to the jurisdiction of the UK courts and therefore engages the exception to sovereign immunity under section 2(2) of the SIA.4

States’ Accession to the ICSID Convention Constitutes a Submission to the UK Courts’ Jurisdiction for Award Enforcement

The EWCA held that, as a “complete code” of rules governing sovereign immunity in UK law, the SIA extends to all judicial proceedings involving States, including the registration of ICSID awards.5 The Court rejected Dias J’s reasoning in the High Court that the SIA did not apply because registration of an award is merely an administrative or “ministerial” act.6 The fact that the decision to register may be straightforward”, the EWCA held, “does not undermine the adjudicative nature of the judicial task”.7 Indeed, “there could not be a clearer case of the English court exercising its adjudicative jurisdiction over a foreign state than entering judgment against that state”.8

The Court therefore went on to consider whether the exception to sovereign immunity under section 2(2) of the SIA (where a State has submitted to the jurisdiction of the UK courts) applied by virtue of Article 54 of the ICSID Convention (by which the Contracting States, including the UK, Spain and Zimbabwe, agree to recognise and enforce ICSID arbitration awards as if they were a final judgment of the courts of that State).

The EWCA held that Article 54 implies a mutual agreement between the Contracting States to each enforce ICSID awards, including those adverse to States, in their respective jurisdictions.9 As the Court noted, this is consistent with the way Article 54 has been interpreted by the courts of Australia, New Zealand, the United States, France and Malaysia.10 The EWCA referred in particular to a recent decision of the High Court of Australia (the “HCA”) in Spain v. Infrastructure Services (which concerned enforcement in Australia of the same ICSID award), in which the HCA ruled that Article 54 constituted a clear waiver of sovereign immunity to proceedings for the recognition of ICSID awards.11 This decision, the EWCA held, was “plainly right”.12

With respect to Spain and Zimbabwe’s objection that Article 54 was not an “express” waiver of sovereign immunity under international law,13 the EWCA again looked for guidance to the Australian courts. The HCA had interpreted the requirement that a waiver be “express” as “requiring only that the expression of waiver be derived from the express words of the international agreement, whether as an express term or as a term implied for reasons including necessity”.14 Thus, as the EWCA agreed, a State’s waiver of sovereign immunity need use express words such as “waiver” or “submit”, so long as the words used constitute, on their proper construction, an unequivocal agreement by the State to submit to the courts’ jurisdiction.15

Comment

The EWCA’s decision provides helpful confirmation that sovereign immunity principles under the SIA extend to all proceedings in the UK courts, even largely formalistic proceedings such as the registration of ICSID awards.

Even more importantly, the EWCA’s finding that Article 54 of the ICSID Convention constitutes a waiver of sovereign immunity settles a key question for investors seeking to enforce ICSID awards against States in the UK courts. The result should be to expedite the registration process for ICSID awards, as States can no longer seek to challenge the validity or scope of the underlying arbitration agreement in such proceedings (although, as the EWCA confirmed, there may remain a limited, and as-yet-undefined, class of other “exceptional” defences which a State might raise to oppose registration of an award).16

Notably, the EWCA’s decision means that the UK courts are unable to refuse registration of an ICSID arbitration award on the basis that the arbitration concerned an intra-EU investor-state dispute (i.e., the Achmea/Komstroy objection), as Spain had sought to argue. However, in non-ICSID investor-state proceedings (e.g., under the SCC or UNCITRAL arbitration rules), where the award falls to be enforced pursuant to the New York Convention, the State could still, in principle, raise such an objection under section 9 of the SIA – unless, that is, the courts treat Article III of the New York Convention (by which the Contracting States similarly undertake to recognise and enforce international arbitral awards, although subject to the exceptions set out in Article V) in the same manner as Article 54 of the ICSID Convention. In an obiter observation, the EWCA rejected the States’ argument that to interpret Article 54 of the ICSID Convention as a submission to the UK courts’ jurisdiction would necessarily mean giving the same effect to Article III of the New York Convention.17 It remains to be seen, however, whether the courts will uphold this distinction if the issue is directly before them.


Infrastructure Services Luxembourg S.à.r.l. & Energia Termosolar B.V. v Kingdom of Spain; Border Timbers Limited & Hangani Development Co. (Private) Limited v Republic of Zimbabwe [2024] EWCA Civ 1257, 22 October 2024 (“Infrastructure Services”).

2 In the United Kingdom, the Arbitration (International Investment Disputes) Act 1966 (the “1966 Act”) governs the recognition and enforcement of ICSID awards. The 1966 Act transposed into domestic law the UK’s international obligations under Article 54 of the ICSID Convention, which requires the Contracting States to recognise and enforce ICSID arbitration awards as if they were a final judgment of the courts of that State. Article 54 (and therefore the 1966 Act) does not provide for any grounds on which parties may oppose the recognition or enforcement of ICSID awards (unlike, for example, the 1958 New York Convention).

3  In the Spain case, Fraser J ruled that the ICSID Convention and the 1966 Act precluded States from raising any defences under the SIA, including any sovereign immunity defence. In the Zimbabwe case, in contrast, Dias J held that the SIA applies only to judicial proceedings, whereas the registration of an ICSID award is merely an administrative or “ministerial” act performed by the court without exercising its adjudicative powers. While the EWCA upheld the High Court’s decision in both cases, it rejected both of these lines of reasoning.

Infrastructure Services at [12]. The EWCA was also asked to consider a third ground: whether, if section 2(2) of the SIA did not apply, section 9 of the SIA (which establishes a further exception to sovereign immunity where a State has agreed in writing to settle disputes by arbitration) permits States to contest the validity of the underlying reference to arbitration (in circumstances where the ICSID tribunal had already upheld its own jurisdiction to hear the dispute). Given its finding that Article 54 of the ICSID Convention constituted a submission to the jurisdiction of the UK courts for the purposes of section 2(2) of the SIA, the EWCA ultimately did not need to decide this issue. See ibid at [104]–[106].

Infrastructure Services at [33] (citing Benkharbouche v Embassy of the Republic of Sudan [2017] UKSC 62, [2019] AC 777 at [39], per Lord Sumption JSC).

Notably, even the investors in the Zimbabwe case had not sought to defend Dias J’s decision on this basis. See Infrastructure Services at [36] and fn. 3 above.

Infrastructure Services at [37].

Ibid. at [38].

Ibid at [59]. Notably, section 17(2) of the SIA provides that a written agreement to submit to the jurisdiction of the UK courts for the purposes of section 2 may be found in a treaty, convention or other international agreement.

10 Ibid at [60].

11 Kingdom of Spain v Infrastructure Services Luxembourg S.à.r.l. [2023] HCA 11.

12 Infrastructure Services at [77].

13 See R v Bow Street Metropolitan Stipendiary magistrate; Ex parte Pinochet Ugarte (No 3) [1999] UKHL 17, [2000] 1 AC 147 at [217D].

14 Infrastructure Services at [89] (citing the HCA’s decision at [25]).

15 Ibid at [92]–[93].

16 It bears noting, moreover, that the EWCA’s decision has no effect on a State’s right to assert sovereign immunity when it comes to executing an ICSID award against a State’s assets (which is expressly confirmed by both Article 55 of the ICSID Convention and section 13(2)(b) of the SIA).

17 Infrastructure Services at [102].

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