THE AUTHOR:
Zeyad Abouellail, Legal Content Officer at Jus Mundi
Introducing “Arbitration Aftermath” by Zeyad Abouellail: Your guide to the latest post-award developments in the evolving landscape of investor-State and commercial arbitration. Each week, Zeyad explores a range of post-award news involving sovereign States with a global perspective –– from post-award settlements, compliance with awards, to recognition and enforcement procedures, annulment, and more.
Border Timbers v. Zimbabwe
Zimbabwe fails in attempt to challenge registration of ICSID award in the UK
ICSID Case No. ARB/10/25
Institution: ICSID (International Centre for Settlement of Investment Disputes)
Tribunal: L. Yves Fortier (President), David A.R. Williams (Appointed by the investor), Michael Hwang (Appointed by the State)
Ad hoc Committee: Veijo A. Heiskanen (President), Azzedine Kettani, Jean E. Kalicki (Members)
On 19 January, Justice Dias of the High Court of Justice of England and Wales ruled that sovereign immunity is irrelevant at the stage of registration of an ICSID award but found that Article 54 of the ICSID Convention does not constitute a consent to the jurisdiction of the English courts for the purpose of applying section 2 of the Sovereign Immunities Act. “A novel approach with no direct authority”, Justice Dias noted in her judgment.
Background
The dispute originated from Zimbabwe’s appropriation of land and other assets, as part of its Land Reform Programme. In 2010, the investors initiated arbitration proceedings under the Switzerland-Zimbabwe BIT. In 2015, the tribunal found Zimbabwe in breach of the BIT and ordered it to pay more than USD 125 million in damages plus interest and costs.
Subsequently, Zimbabwe sought to annul the award. However, the application was dismissed by an ICSID ad hoc committee in 2018.
In 2021, the investors commenced proceedings to register the award in the UK. Justice Cockerill, on 8 October 2021, issued an ex parte order recognising the award (“recognition order”).
Zimbabwe sought to set aside the recognition order, arguing that it is immune from the jurisdiction of the UK courts. The investors countered that one or both of the exceptions of sections 2 and 9 of the 1978 Sovereign Immunities Act (“SIA”) applied, since Zimbabwe had submitted to jurisdiction by virtue of the ICSID Convention and had agreed to submit the dispute to ICSID arbitration.
Dismissal of Zimbabwe’s Request to Set aside the Registration Order
Interpretation of Articles 53 to 55 of the ICSID Convention
Justice Dias first highlighted that Articles 53 to 55 of the ICSID Convention should be interpreted in light of the Vienna Convention on the Law of Treaties.
In her analysis of the ICSID Convention’s travaux préparatoires, Justice Dias clarified that the Convention never aimed to standardise or alter the varying state immunity laws across Contracting States. Rather, it opted to treat an ICSID award akin to a final judgment of a national court, leaving execution matters to the domestic laws of the enforcing state, as per Article 54(3).
She pointed out that the assumption underpinning Articles 53 to 55 was that states would honour binding awards. Thus, enforcement against a state was initially deemed an “academic question”. However, Article 55 was introduced at a later stage for clarity and reassurance, explicitly stating that the Convention does not permit forcible execution against a state.
Justice Dias underscored the difficulty in interpreting Articles 53 to 55, particularly in distinguishing between recognition, enforcement, and execution, as the “precise scope of each term is not always clear”.
She observed that the French and Spanish versions of the ICSID Convention do not differentiate between enforcement and execution. This linguistic distinction provides “powerful support for interpreting the word “enforcement” as used specifically in Articles 54(1) and 54(2) as meaning a declaration of enforceability by according an award the same status as a final judgment.”
Referring to the High Court of Australia’s decision in Spain v. Infrastructure Services Luxembourg Sarl, [2023] HCA 11, she acknowledged that the English, French, and Spanish texts are equally authentic. However, she noted that the French and Spanish versions should be understood within the context of the civil law concept of exequatur, which combines recognition with a declaration of enforceability.
Justice Dias proposed that a coherent interpretation of the ICSID Convention, considering all authentic texts, would involve treating recognition as the court’s affirmation of an award’s binding nature on the parties and its preclusive effects. Enforcement would be the legal procedure that transforms an award into a court judgment, granting it equal status with other judgments. Execution, on the other hand, involves actions against the assets of the judgment debtor.
Furthermore, Justice Dias affirmed that her interpretation aligns, or at least does not conflict, with the Supreme Court’s decision in Micula v. Romania, [2020] UKSC 5.
Waiver of immunity
Justice Dias found that Article 54(1) was intended to amount to a waiver “in respect of recognition and enforcement but not in relation to processes of execution against assets, which were expressly carved out in Articles 54(3) and 55”.
However, she noted that for the purpose of applying section 2 of the SIA, Article 54 does not constitute a clear and unambiguous consent to the jurisdiction of English courts for the purpose of recognising and enforcing awards against Zimbabwe.
Acknowledging that this interpretation might seem contrary to the ICSID Convention’s objective “which was to preserve state immunity only in respect of execution while providing for mandatory recognition and enforcement across the board”, she affirmed that “this is simply the inevitable result of applying what seem […] to be the clear words of section 2 of the 1978 Act”.
Turning to the exception in section 9 of the SIA which applies where a state has agreed in writing to submit a dispute to arbitration, Justice Dias determined that this provision should apply uniformly to both ICSID and non-ICSID awards, rendering the distinction immaterial in this context. However, she found that the investors had not successfully demonstrated the applicability of section 9’s exception in this case.
Sovereign immunity at the stage of registration of the award
Yet, Justice Dias emphasised that Zimbabwe could not claim sovereign immunity in relation to the registration order and, therefore, refused to set it aside.
She established that the doctrine of state immunity is inapplicable when registering ICSID awards. At this juncture, the court’s role is fundamentally ministerial, aligning with the UK’s international obligations under the ICSID Convention. This process, she clarified, does not entail substantial actions against the state.
She specified that a state could only request to set aside an order “if the order made has strayed beyond mere recognition and enforcement or if there was a failure to make full and frank disclosure”.
Full and frank disclosure
Justice Dias rejected Zimbabwe’s argument that the investors failed to make full and frank disclosure since its application for registration made no mention of state immunity. She found the breach of duty in this case “as culpable, albeit not deliberate”.
Ultimately, Zimbabwe’s application to set aside the registration order was dismissed.
Enforcement in the United States
The investors are also pursuing enforcement in the United States. In August 2023, the District Court for the District of Columbia dismissed Zimbabwe’s motion to dismiss the enforcement petition for lack of subject matter jurisdiction.
Zimbabwe’s later appealed the decision. In response, the investors applied to the court to certify the appeal as frivolous. The motion was dismissed in October 2023 and the appeal remains pending.
GPGC v. Ghana
Ghana faces enforcement of USD 134 million award in the US
PCA Case No. 2019-05
Institution: PCA (Permanent Court of Arbitration)
Tribunal: John Beechey (President), J. William F. Rowley (Appointed by the claimant), Albert K. Fiadjoe (Appointed by the respondent)
Seat of Arbitration: London, United Kingdom
On 19 January, GPGC applied to enforce a USD 134 million PCA award against Ghana in the United States District of Columbia.
In its petition, GPGC says that Ghana has already made partial payments but that the remaining amount due with interest is USD 134 million (as of January 19).
GPGC is already seeking enforcement of the award in the UK. On 12 October 2023, the High Court of Justice of England and Wales rejected Ghana’s attempt to set aside an order allowing alternative service of interim charging orders against five London properties where the State held either freehold or leasehold interests (see our prior digest here).
In 2015, GPGC, a Ghanaian majority-owned subsidiary of Singaporean Trafigura Group, entered into an agreement with the Government of Ghana to install and operate two gas turbine power plants. Following elections and a change of government in 2017, the new government reviewed power purchase agreements that the prior government had entered into. Subsequently, Ghana terminated the agreement in 2018.
In a January 2021 Final Award, the arbitral tribunal declared Ghana’s termination of the contract unlawful and awarded GPGC USD 134 million in damages plus interest, along with legal and arbitration costs.
Güriş v. Libya
Paris Court of Appeal upholds award that found Libya in breach of BIT but refused to grant damages to Turkish investor
ICC Case No. 22137/ZF/AYZ
Institution: ICC (International Chamber of Commerce)
Tribunal: Pierre D. Tercier (President), Klaus M. Sachs (Appointed by the investor), Toby Landau (Appointed by the State)
Seat of Arbitration: Paris, France
In a recently published decision, the Paris Court of Appeal rejected on 19 December 2023 Guris’ application to set aside an award that established Libya’s violation of the Libya-Turkey BIT but declined to award damages to the investor.
Background
The dispute arose out of multiple construction contracts between Guris and the Libyan Organisation for Development of Administrative Centres. The outbreak of the civil war in Libya in 2011 led to a suspension of work on these projects until 2014.
Although some projects were later resumed, escalating violence compelled the investor to cease its operations in Libya. In 2015, the Libyan Anti-corruption Committee mandated the return of land assigned to one of these projects to Libyan citizens who had occupied the property. Further exacerbating the situation, the investor’s remaining employees in Libya were attacked in 2016 by an armed militia.
In response to these developments, the investor initiated arbitration proceedings under the BIT in July 2016.
The tribunal, in its February 2020 Partial Award, found that Libya’s actions constituted a breach of the standard of full protection and security and amounted to expropriation. Nonetheless, the November 2021 Final Award rejected the investor’s claim for damages, and ordered Guris to pay 70% of both the arbitration costs and Libya’s legal expenses.
The investor applied to set aside the Final Award in February 2022.
Dismissal of the Set Aside Request
The investor contended that the tribunal did not fulfil its mandate. This argument stemmed from the tribunal’s decision to deny damages while acknowledging Libya’s breach of the BIT. Guris maintained that this outcome represented a denial of justice, as the tribunal did not conclusively resolve the dispute.
However, the Court ruled that the tribunal had indeed addressed the damages request. It found that the tribunal’s rejection was based on the claim being unsubstantiated, with comprehensive reasons provided for this decision. The tribunal had considered the evidence presented by Guris but deemed it insufficient, a judgment within its discretionary powers.
Guris also claimed that the award violated the adversarial principle, mirroring the arguments in the first ground. The Court dismissed this claim as well, emphasising that the tribunal is not obligated to compensate for a party’s failure to provide adequate evidence or to extend beyond the evidence presented.
Additionally, Guris argued that the award contravened international public policy. The investor asserted that the tribunal’s failure to grant damages, despite finding a BIT breach, lacked sufficient motivation and violated Article 6.1 of the European Convention on Human Rights. Guris also claimed the Final Award contradicted the res judicata effect of the Partial Award.
The Court, addressing these concerns, reiterated that the tribunal had adequately motivated its decision not to award damages. It emphasised the tribunal’s autonomy in this matter, even after declaring a BIT breach in the Partial Award.
In conclusion, the Court rejected all of Guris’ claims and upheld the Final Award.
ABOUT THE AUTHOR
Zeyad Abouellail is a Legal Content Officer at Jus Mundi and a PhD candidate & teaching assistant at Paris-Saclay University. His research focuses on the post-award phase in investment arbitration, and he also lectures on civil and contract law. He holds two Master’s Degrees in International Business Law from Paris-Saclay University and Paris 1 Panthéon-Sorbonne University. Prior to joining Jus Mundi, Zeyad interned at several law firms in international arbitration and corporate law in Cairo, Egypt.
