Infrastructure Services Limited and another v. Spain, and Border Timbers and another v. Zimbabwe, [2024] EWCA Civ 1257

The United Kingdom (UK) Court of Appeal has further strengthened the broad international consensus that Article 54 of the 1965 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the Convention) constitutes a waiver to adjudicative immunity and a submission to jurisdiction. This ruling came as the Court of Appeal dismissed Spain and Zimbabwe’s appeal against a decision refusing to set aside the registration of an ICSID award.

Background

In June 2018, an ICSID tribunal issued an award in Antin Infrastructure Services Luxemburg S.à.r.l. v. Kingdom of Spain, ordering Spain to compensate the claimants EUR 101 million. Spain’s request in the High Court to set aside the registration of this award on the grounds of state immunity was rejected by Justice Fraser. Similarly, Zimbabwe attempted to set aside the registration of the ICSID award rendered in Border Timbers and another v. Republic of Zimbabwe, but Justice Dias denied this request. However, both judges reached their conclusions “for entirely different reasons” (para. 4). Spain and Zimbabwe’s appeals were subsequently heard together.

Spain and Zimbabwe contended that foreign states cannot be deprived of state immunity from adjudicative jurisdiction under either the Convention or the Arbitration (International Investment Disputes) Act 1966 (the 1966 Act), which makes the provisions of the Convention effective in the UK (para. 6). Therefore, the states contended that their general immunity under Section 1(1) of the State Immunity Act 1978 (SIA) allows that the registration of the awards required by the 1966 Act are set aside and that Section 2 of the SIA, providing for an exception to that immunity, does not apply as Article 54 cannot be considered “a prior written agreement” to submit to the jurisdiction of the UK courts (para. 7). Instead, Section 9 of the SIA would apply under which the UK courts must reassess the validity of the reference to arbitration and the jurisdiction of the court (para. 8).

Accordingly, the following three central legal questions arose:

1. Does Section 1(1) of the SIA apply to the registration of ICSID awards against a foreign state under the 1966 Act?
2. If Section 1(1) applies, does the exception in Section 2 of the SIA apply, meaning that by signing the Convention, contracting states have agreed in writing to submit to the jurisdiction for the enforcement of the ICSID awards?
3. If Section 1(1) applies but the state has not agreed to submit to the jurisdiction merely by being a party to the Convention, is the state prevented from challenging the validity of the relevant award with as the result that Section 9 of the SIA is satisfied?

Applicability of Section 1(1) of the SIA to the registration of ICSID awards against foreign states

The Court of Appeal ruled on whether Section 1(1) of the SIA applies to the registration of ICSID arbitration awards. While reviewing the findings of Justice Dias, the Court of Appeal considered whether registering an ICSID award constitutes an adjudicative act that triggers state immunity. It rejected Justice Dias’s “novel approach” and concluded that the registration of an award is not a mere administrative or ministerial act (para. 36). The 1966 Act requires judges to verify that the proof of authenticity and other statutory requirements meet the requisite standard, making the process an “act of sovereignty” that falls within the scope of adjudicative immunity under Section 1(1) of the SIA. The fact that this decision to register the award seems straightforward does not undermine the adjudicative nature of this task to assess whether all requirements are met (paras. 37–38).

The Court of Appeal also disagreed with Justice Fraser’s reliance on the Supreme Court’s decision in Micula as binding authority on the issues to this appeal because that decision did not address state immunity or the application of Section 1(1) of the SIA to the registration of ICSID awards. The Court of Appeal, furthermore, concluded that the SIA constitutes a complete code that can be harmoniously applied with the 1966 Act due to the exceptions to the general immunity provided for in the SIA. Therefore, “the key question” is whether any of the exceptions to the general immunity are applicable (para. 58).

The Court of Appeal also briefly addressed the new argument raised by the claimants in the Border Timbers v. Zimbabwe case that Section 23 of the SIA would exclude the application of Section 1(1). Section 23(3) prevents that immunity would arise in matters that have occurred before the SIA entered into force. The Court of Appeal rejected that “matters” can be interpreted as referring to the Convention or the 1966 Act, as these instruments would have been expressly mentioned in Section 16 of the SIA (paras. 40–-41).

Interpretation of Article 54 of the Convention as constituting an agreement to submit to the jurisdiction for the purposes of Section 2 of the SIA

The English Court of Appeal confirmed that Article 54 of the Convention should be considered an agreement to waive jurisdiction and submit to the jurisdiction to the courts of another contracting state, aligning with decisions of foreign courts in New Zealand, the United States, France, Malaysia, and, in particular, the High Court of Australia in Infrastructure Services Luxembourg v. Spain with respect to the same award. ^[1] The English Court of Appeal deemed the decision of the High Court of Australia “plainly right” (para. 77).

Article 54 of the Convention obligates all contracting states to recognize and enforce ICSID awards as if they were “final judgement[s] of a court in that State.” The Court of Appeal interpreted this provision in the light of the rules on treaty interpretation, part of customary international law, as reflected in the Vienna Convention on the Law of Treaties (paras. 69–70).

First, the Court of Appeal considered the text of Article 54, in relation to Article 55 of the Convention, which preserves state immunity from execution and was introduced “for the avoidance of doubt” (para. 82). Article 54 of the Convention is not merely an obligation to recognize and enforce awards in the contracting states’ jurisdiction, but also has the effect that awards are binding as final judgments of that state’s courts (para. 79). It does not distinguish between the recognition and enforcement of awards against investors and awards against states as this would render Article 55 of the Convention meaningless (paras. 76–81). This interpretation is, furthermore, confirmed by the object and purpose of the Convention, reflected in the Preamble, and the travaux préparatoires (paras. 78–82).

In response to the objections of Spain and Zimbabwe that Article 54 cannot be considered an “express” agreement to submit to the jurisdiction of the UK courts for the purpose of the exception under Section 2(2) of the SIA, the Court of Appeal interpreted what is understood under the meaning of “express.”

Following the reasoning of the High Court of Australia, the waiver of immunity should not only follow from express terms but can also be drawn from implications that clearly follow from the words and context. ^[2] Accordingly, Article 54 of the Convention, based on its express words, must be interpreted as constituting an “unequivocal agreement by the [S]tate to submit to the jurisdiction” and to waive immunity (paras. 92–96). Therefore, the exception to the general immunity (Section 2(2) of the SIA) applies. Consequently, the Court of Appeal, following the High Court of Australia, found that contracting states to the Convention, in casu Spain and Zimbabwe, cannot oppose the registration of ICSID awards on the grounds of state immunity (para. 103).

Finally, the Court of Appeal addressed the objection of Spain and Zimbabwe that this reasoning goes against the “well-established” position in English law that [A]rticle III [of the New York Convention] does not constitute a waiver of adjudicative state immunity.” This argument was simply dismissed as the VCLT does not require that in the interpretation of one treaty, a potential read-across to another treaty with a different subject matter must be regarded (para. 102).

Exception to general adjudicative immunity under Section 9 of the SIA

Giving its findings on Article 54 of the Convention, the Court of Appeal did not further consider whether the exception under Section 9 of the SIA was applicable (para. 104).

Note

By dismissing both appeals on the grounds that the registration of an ICSID award cannot be opposed based on state immunity, the Court of Appeal has contributed to the—in the Court’s own words—“broad international consensus” that Article 54 has the effect that contracting states have waived their adjudicative immunity and constitutes a mutual agreement to submit to the jurisdiction of the other contracting states (paras. 60, 62).

The Court of Appeal, however, did not embark upon the review of the validity of the arbitration agreement between Spain and the claimant in Infrastructure Services Luxembourg v. Spain under Article 26 of the ECT. Consequently, in the registration process of an ICSID award there seems to be no room to challenge the validity of the underlying arbitration agreement unless these challenges would fall under the notion of “exceptional defenses” available if the award would be any other final judgment, as recognized in Micula (para. 107).

Author

Delphine Buyle is a law graduate from Ghent University and is currently pursuing an LL.M. at the University of Amsterdam in international trade and investment law.

^[1] Infrastructure Services Luxembourg S.à.r.l., Energia Termosolar B.V. v. Kingdom of Spain [2023] EWHC 234 (Comm); Antin Infrastructure Services Luxembourg S.à.r.l. and Antin Energia Termosolar B.V. v. Kingdom of Spain (Award) [2018] ICSID Case No. ARB/13/3.

^[2] Infrastructure Services Luxembourg S.à.r.l., Energia Termosolar B.V. v. Kingdom of Spain [2023] EWHC 234 (Comm), [26].