Case Law Digest: Court of Appeal Upholds Registration of ICSID Awards Despite State Immunity Claims

<center>Infrastructure Services Luxembourg SARL & Anor v. Kingdom of Spain; Border Timbers Ltd & Anor v. Republic of Zimbabwe [2024] EWCA Civ 1257</center>

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Summary

The Court of Appeal ruled that Spain and Zimbabwe, as contracting parties to the International Convention on the Settlement of Investment Disputes 1965 (the “ICSID Convention”), had submitted to the jurisdiction of the English courts through Article 54 of the ICSID Convention. Therefore, the states could not invoke state immunity to resist the registration of awards rendered by the International Centre for Settlement of Investment Disputes (“ICSID”).

Background and Issues

The appeals arose from the registration of adverse ICSID arbitration awards in the High Court under the Arbitration (International Investment Disputes) Act 1966 (the “1966 Act”). In both cases, Spain and Zimbabwe challenged the registration on the grounds of state immunity, relying on section 1(1) of the State Immunity Act 1978 (the “1978 Act”), which grants general immunity to foreign states from the jurisdiction of the English courts.

In Spain v Infrastructure Services Limited, an ICSID tribunal awarded the respondents, ISL, €101 million in compensation from Spain. Spain argued that, despite the registration of the award, the provisions of the 1978 Act preserved its immunity.
In Zimbabwe v Border Timbers Ltd, Zimbabwe was ordered to reinstate property and pay $29.2 million to the respondents, Border. Zimbabwe similarly contested the registration, asserting state immunity as a defence.

The central issue before the Court of Appeal was whether a contracting state to the ICSID Convention could rely on the 1978 Act to resist the registration of an ICSID award against it.

At first instance, Fraser J and Dias J in the High Court both dismissed the states’ applications to set aside the registration of the ICSID awards, reaching their conclusions through different legal reasoning:
- Fraser J relied on the Supreme Court’s decision in Micula v Romania [2020] UKSC 5, which found that the ICSID Convention precluded state immunity defences in cases involving the recognition and enforcement of awards.
- Dias J held that the act of registering an ICSID award was essentially ministerial in nature, and thus did not engage the general immunity conferred by the 1978 Act.

Court of Appeal’s Decision

The Court of Appeal dismissed the appeals, deciding that Spain and Zimbabwe could not rely on state immunity:

Not a Mere Ministerial Act: The Court disagreed with Dias J’s interpretation, finding that the registration of an ICSID award required the court to exercise its adjudicative jurisdiction. The process involves a judicial determination that the statutory requirements for recognition under the 1966 Act are met, which is a clear act of sovereignty. The Court followed General Dynamics United Kingdom Ltd v Libya [2021] UKSC 22, emphasising that such actions engage general immunity, unless one of the statutory exceptions applies.
Article 54 as Agreement to Jurisdiction: The Court held that Article 54(1) of the ICSID Convention constituted a binding agreement by contracting states to recognise and enforce ICSID awards in other contracting states as if they were final judgments. The Court drew from the reasoning of the High Court of Australia in its recent consideration of a related award between Spain and ISL. The broad language of Article 54 indicated that each contracting state had agreed to waive immunity and submit to the jurisdiction of the other contracting states’ courts for the enforcement of ICSID awards.
Submission to Jurisdiction under Section 2 of the 1978 Act: The Court concluded that Article 54(1) represented an agreement by Spain and Zimbabwe to submit to the jurisdiction of the English courts within the meaning of Section 2 of the 1978 Act. As a result, the general immunity under Section 1(1) did not apply, and the states could not resist the registration of awards against them on immunity grounds.

Held

The Court of Appeal reaffirmed that contracting states to the ICSID Convention are bound by their agreement to Article 54, which implies a waiver of immunity under the 1978 Act for the purposes of enforcing ICSID awards. Thus, the appeals by Spain and Zimbabwe were dismissed.

Implications