States cannot rely on immunity to resist registration of ICSID awards in England

29 October 2024

On 22 October 2024, the English Court of Appeal (“CoA”) handed down judgment in Infrastructure Services Luxembourg S.À.R.L. v Kingdom of Spain and Border Timbers Ltd v Republic of Zimbabwe [2024] EWCA Civ 1257, rejecting appeals brought by Spain and Zimbabwe against the registration of two ICSID awards against the States.

Context

The appeals concerned ICSID awards issued in separate investor-State proceedings against Spain and Zimbabwe.

Under the 1965 ICSID Convention (the “Convention”) each contracting State agrees to recognise an award under the Convention and enforce pecuniary obligations under the award within its territories “as if it were a final judgment of a court in that State” (s. 54). The Arbitration (International Investment Disputes) Act 1966 ("1966 Act") implements the UK’s obligations under the Convention and provides for the registration of ICSID awards by the High Court.

In 2021, the award creditors successfully applied (ex parte) for the awards to be registered by the English courts under the 1966 Act. Spain and Zimbabwe applied to set aside the orders arguing immunity from the jurisdiction of the UK courts.

The State Immunity Act 1978 ("SIA") provides a restricted immunity regime. The relevant provisions of the SIA provide:

general immunity of foreign States from the adjudicative jurisdiction of the UK courts, save for in the exceptions set out in the SIA (s.1(1));
several exceptions to immunity including where a foreign Statesubmits to the jurisdiction of the UK courts after a dispute has arisen, or by prior agreement in writing (s.2(2)); and
in respect of proceedings related to arbitration, an exception to immunity where a State has agreed to arbitrate those disputes (s. 9).

Decisions at First Instance

In Infrastructure Services Luxembourg v Kingdom of Spain [2023] EWHC 1226 (Comm), Fraser J dismissed Spain's application to set aside the order:

- Based on Micula & Ors v Romania [2020] UKSC 5, [2020] 1 WLR 1033, Spain was precluded by the 1966 Act from bringing any "defence" under the SIA to the recognition of an ICSID award.

- Alternatively, if the SIA was engaged, Article 54 of the Convention constituted a submission to the jurisdiction for the purpose of section 2 and/or Spain had agreed to arbitration for the purposes of section 9, SIA.

On different grounds, Dias J dismissed Zimbabwe’s application in Border Timbers v Republic of Zimbabwe [2024] EWHC 58 (Comm). She concluded that registration of an award was not an adjudicative act and did not engage the general immunity provided for under section 1(1) SIA. She also noted that Article 54 was not "a sufficiently clear and unequivocal submission to the jurisdiction of the English Courts", departing from Fraser J’s conclusion. This judgment is considered in more detail in our previous briefing, available here.

Spain and Zimbabwe appealed.

The CoA’s decision

In a judgment delivered by Phillips LJ, the CoA dismissed both appeals. Three issues were central to the appeals, discussed below.

1. Does s1(1), SIA apply, in principle, to the registration of an ICSID award against a foreign State under the 1966 Act?

The CoA disagreed with Dias J’s characterisation of the registration of an award as a purely “ministerial or administrative act”. It noted that registration required a judge to be “satisfied to the requisite standard as to the proof of authenticity and the “other evidential requirements” of the 1966 Act”. Thereafter, registration involved the adjudicative determination of whether a State enjoyed immunity and if not, which exceptions applied. Further, the CoA also dismissed the relevance of Micula, in which State immunity was not an issue and which therefore did not address legal authorities considering the application of the SIA.

The CoA held that State immunity is not "defence" to registration but rather a “barrier to the court assuming jurisdiction”. There was no reason why State immunity (and the exceptions thereto) should not be relevant to the registration of an ICSID award.

The CoA therefore held that the general immunity provided by the SIA applies to the registration of an ICSID award.

2. If so, do the provisions the Convention (specifically Article 54) constitute a prior written agreement for the purposes of s2(2) SIA?

Yes.

First, the CoA held that Article 54 refers to awards being recognised and enforced without qualification (against States and investors alike). Interpreting the Convention in accordance with the Vienna Convention on the Law of Treaties, the language of Article 54 is clear – States agree to recognise and enforce awards in their own jurisdictions, and for awards to which they are party to be recognised and enforced in other jurisdictions as though a final judgment. Further, Article 55 makes clear that State immunity is preserved in respect of execution.

The CoA cited extensively from the decision of the High Court of Australia in enforcement proceedings brought by the Infrastructure Services claimants against Spain considering the same award.

Second, the CoA considered whether Article 54 contained an express and sufficiently clear submission to the jurisdiction for the purposes of section 2(2), SIA. The CoA found that express use of the words “submit” and “waiver” are not necessary to satisfy section 2(2), provided that the words used amount to an unequivocal agreement by the State to submit to the jurisdiction. The wording of section 54 has this effect.

3. If s1(1) SIA applies, is a foreign State estopped from asserting the invalidity of the underlying award under s9 SIA?

The CoA held that it was unnecessary to consider whether the exception in section 9, SIA applies, given that the exception under section 2(2), SIA had already been established. Nevertheless, the CoA observed that “it is difficult to interpret section 9 of the SIA other than as imposing a duty on the court to satisfy itself that the state in question has in fact agreed in writing to submit the dispute in question to arbitration.”

Comment

The CoA’s judgment resolves the uncertainty created by the contradictory High Court decisions as to whether issues of state immunity are engaged by the registration of an ICSID award when a foreign State will be held to have submitted to the jurisdiction of the English courts, and the proper interpretation of Article 54 of the Convention. The CoA’s decision also aligns with the decisions of other jurisdictions on the effect of Article 54 of the Convention as a waiver to adjudicative immunity, and provides comfort for those seeking to enforce ICSID awards in the UK.