Dias J’s “Novel” View Held “Misconceived”

THE AUTHOR:
Chris Lai, Associate at LK Law LLP

The ICSID arbitration system is known to be self-contained. Unlike New York Convention awards which are reviewable by the court of the arbitral seat, ICSID awards are subject only to the annulment procedure before ICSID ad hoc committees. Otherwise, under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1965) (“ICSID Convention”) art. 54(1), awards shall be recognised as binding and enforceable as if they were final judgments of courts of Contracting States. The UK implementing legislation, Arbitration (International Investment Disputes) Act 1966 (“1966 Act”), provides that ICSID awards shall be entitled to be registered in the English High Court subject to proof of certain prescribed matters (s.1(1)). Upon registration, pecuniary obligations under the ICSID awards will have the same force and effect as if they were High Court judgments (s.2(1)).

Infrastructure Services (Antin) v. Spain, Judgment of the High Court of Justice of England and Wales [2023] EWHC 1226, 24 May 2023 (“Infrastructure Services”) and Border Timbers v. Zimbabwe, Judgment of the High Court of Justice of England and Wales [2024] EWHC 58, 19 January 2024 (“Border Timbers”) are two English Commercial Court cases in which States applied to set aside the orders for registration of ICSID awards on the ground that they were immune from the UK courts’ jurisdiction.

The Court in these two cases dismissed the set-aside applications. However, Mrs Justice Dias (“Dias J”) in Border Timbers went one step further. She held that the registration of ICSID awards in the UK does not engage the Court’s adjudicative jurisdiction at all, and hence, the issue of sovereign immunity does not arise at all. Remarkably, Dias J herself admitted that “this is a novel approach for which there is no direct authority” (at [111]).

These two decisions were subsequently subject to combined appeals. On 22 October 2024, the Court of Appeal (“CA”) unanimously dismissed both appeals. Nevertheless, the CA held that Dias J’s novel approach was “misconceived” (at [36]).

This short piece starts by outlining the English legal framework for the registration of arbitral awards and sovereign immunity. It then dives into Dias J’s novel decision in Border Timbers, the CA’s decision in the combined appeals, and lastly followed by some concluding remarks.

Legal Framework

Registration of Awards

Part 62 of the English Civil Procedure Rules (“CPR”) governs arbitration claims. It provides separate mechanisms for the recognition and enforcement of non-ICSID and ICSID awards.

Under CPR r.62.18, non-ICSID award creditors must use an arbitration claim form to apply for permission to enforce. When the court issues an order granting permission, this order must be served on the award debtors. Upon service of the order, the award debtors have the right to apply to set aside the order.

In contrast, under CPR r.62.21, ICSID award creditors are only required to apply for registration through the CPR Part 8 alternative claim procedure. There is no equivalent express requirement for a claim form. Orders granting permission must then be served on the award debtors. Award debtors do not have the right to set aside the registration, unless the registration application was made without notice.

Sovereign Immunity

State Immunity Act 1978 (“SIA”) affords States general immunity from the UK courts’ jurisdiction unless one of the exceptions applies (s.1(1)). The two exceptions pertinent to Infrastructure Services and Border Timbers are:

The arbitration exception (s.9), where immunity is waived with respect to UK court proceedings relating to an arbitration to which the State has agreed in writing to submit a dispute.
The submission exception (s.2), where immunity is waived if the State has submitted to this jurisdiction by a prior written agreement.

In addition, s.23(3) provides that certain “matters” occurring before the coming into force of the SIA would not attract immunity. These matters are prior agreements, transactions, contracts and arbitration agreements.

Dias J’s Decision in Border Timbers

In Border Timbers, Award, 28 July 2015, the claimants obtained a US$125 million ICSID award in connection with claims arising from the Switzerland-Zimbabwe BIT (1996). Zimbabwe applied to have the award annulled, but the ad hoc committee dismissed the application in its entirety (Border Timbers, Decision on Annulment, 21 November 2018).

As the award was not satisfied, the claimants made a without-notice application to the English Court under CPR r.62.21 for registration of the award. The application was successful, resulting in an order recognising and entering the award as a High Court judgment. Zimbabwe subsequently applied to set the order aside on the ground of sovereign immunity.

Dias J dismissed the set-aside application.

No Waiver Under SIA

Dias J considered whether immunity was indeed waived under the SIA.

First, Dias J held that there was no waiver of immunity under SIA s.2. She found that s.2 is “drafted with reference to specific proceedings before a specific court” (at [68]). ICSID Convention art. 54 does not contain any express submission by a Contracting State to the jurisdiction of the court of another State in which enforcement is sought (at [71]). Therefore, it was not sufficiently clear and unequivocal that Zimbabwe submitted to UK courts with respect to the recognition and enforcement of the ICISD award (at [72]).

Second, Dias J held that Zimbabwe could, in principle, make jurisdictional objections to argue that immunity was not waived under SIA s. 9. Granted, the ICSID system is “hermetically sealed”, such that ICSID awards are final and not subject to further review in national courts (at [84]). However, for the purposes of determining whether the s.9 exception applies, the UK courts are not bound by the jurisdictional determination of ICSID tribunals and ad hoc committees. They must be “independently satisfied” that a valid arbitration agreement exists (at [87]).

But is Immunity Even Relevant in the First Place?

Noting that the procedure for recognising and enforcing ICSID is more straightforward than that for non-ICSID awards, Dias J invited the parties to make further submissions on whether sovereign immunity is engaged at all in relation to such an application (at [101]).

She ultimately concluded that, with respect to the application for registration of ICSID awards, sovereign immunity has no role to play (at [106]) because:

The UK court is not exercising its adjudicative jurisdiction as the claimant is entitled to register the award on an unqualified basis.
The UK court is simply performing a ministerial act in compliance with the ICSID Convention.
Even if the registration order in question was made following a without-notice application, the grounds for the set-aside of this order are limited – sovereign immunity is not one of such grounds.
A State is only “formally impleaded” later when it is served with the court’s order recognising the award – it is only at that stage that “the jurisdiction of the English court formally invoked against the state” and “the doctrine of sovereign immunity becomes engaged”.

Dias J, therefore, held that there was simply no basis for Zimbabwe to invoke sovereign immunity to challenge the registration order (at [110]).

CA’s Decision

Registration of ICSID Awards Engages Sovereign Immunity

The CA held that the registration of ICSID awards engages sovereign immunity. It explained why Dias J’s approach was “misconceived”:

The registration of an ICSID award is an adjudicative task. Administrative though it may seem, a judge (not just an official) must be satisfied as to the ICSID award’s authenticity and other evidential requirements under the 1966 Act and CPR r.62.21 (at [37]).
The UK court entering a judgment against a State is an “act of sovereignty”, despite service of the proceedings not having yet been effected. This can be supported by SIA s.1(2), which provides States with general immunity even if they do not appear in the proceedings in question (at [38]).
The immunity exclusion under SIA s.23 does not apply. The term “matters” cannot be construed as including treaties (e.g. the ICSID Convention) or legislation (e.g. the 1966 Act). Had the intention been to exclude them from the application of the SIA, that would have been stated expressly (at [40]-[41]).

Waiver Under SIA

The CA nonetheless held that the SIA s.2 exception is necessarily engaged. It found that ICSID Convention art.54, whilst not containing words like “submit” or “waiver”, should be interpreted as meaning that States unequivocally agreed to submit to the jurisdiction (at [92] and [103]).

Given that immunity is waived under s.2, the CA found it unnecessary to consider whether the s.9 waiver is also engaged (at [104]).

Border Timbers Remitted to the Commercial Court

Although the appeals were dismissed, Zimbabwe’s position has been that it has alternative non-immunity defences (at [107]). As explained in Micula v. Romania, Judgment of the UK Supreme Court [2020] UKSC 5, 19 February 2020, under “certain exceptional or extraordinary circumstances”, such defences against the enforcement of ICSID awards are available if national law recognises them in respect of final domestic judgments.

Consequently, the CA remitted the Border Timbers case to the Commercial Court for the determination of these defences (at [110]).

Concluding Remarks

The CA’s decision ultimately yields the same net outcome, i.e. States cannot oppose registration of ICSID awards by reason of immunity. The fundamental conceptual divide between Dias J and the CA’s decisions boils down to whether immunity is engaged from the outset.

As observed by Dias J, recognition and enforcement under ICSID Convention art.54(1) should be distinguished from execution against assets under arts.54(3) and 55 (at [42]). Unlike art.54(1), arts.54(3) and 55 specifically provide for the application of the law of the State where the execution is sought and the law relating to sovereign immunity (at [37]-[38]).

Dias J’s approach of removing sovereign immunity from the equation at the registration stage is arguably consistent with the UK’s treaty obligation to recognise ICSID awards without qualification. In any event, States can invoke immunity when the award creditors, having obtained the registration order, take further steps to execute the award (at [106(g)]).

In rejecting Dias J’s approach, the CA referred to AIC Limited v Nigeria [2003] EWHC 1357 (QB), 13 June 2003, where Stanley Burton J held that registration of a foreign judgment, albeit of a purely administrative nature, under the Administration of Justice Act 1920 (“1920 Act”) involved the court’s jurisdiction (at [37]). But this leaves one to wonder if the CA did take into account the discretionary nature of registration under the 1920 Act s. 9(1), which states “the court may, if […] they think it just and convenient that the judgment should be enforced in the United Kingdom […], order the judgment to be registered accordingly.” (emphasis added), whereas the 1966 Act contains no similar wording.

The relationship between the ICSID system and sovereign immunity is an area yet to be addressed systematically. As Dias J said, “these are deep waters” (at [18]). It remains to be seen whether the CA’s decision will be further appealed to the UK Supreme Court.

ABOUT THE AUTHOR:

Chris Lai is an Associate at LK Law LLP. He has a broad practice in commercial disputes, with a focus on international arbitration. He has worked on cases administered under HKIAC, ICC, ICSID, LCIA, LMAA, NAI, and UNCITRAL rules, and related post-award proceedings.

*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.