Immunity, Consent, and Arbitration Treaties

If a state agrees to arbitrate a dispute with a private party – through, for example, the operation of a bilateral investment treaty – and then loses the arbitration, has it waived its immunity in a suit to enforce the resulting judgment if it is a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) or the Convention on the Settlement of Investment Disputes between States and Nationals of other States (ICSID Convention)?  For many transnational litigators around the world, the question is a familiar one. In the United States, it is an open issue in the ongoing litigation in Antrix v. Devas (New York Convention), and it has also been the subject of litigation in the United Kingdom in Infrastructure Services v. Kingdom of Spain (2023) (ICSID).

Last week, the High Court of Australia issued a comprehensive and important opinion in CCDM Holdings, LLC. v. Republic of India holding that India had not waived its immunity from jurisdiction for the enforcement of an arbitral award by becoming a party to the New York Convention. The Australian decision was contrary to one of the lower court opinions in the case, to the views of the Attorney-General of the Commonwealth, and to recent lower court decisions in Canada involving the same parties (which are apparently on appeal to the Canadian Supreme Court).

Australian High Court Decision

Mauritian investors in an Indian state-owned satellite company won an arbitral award against the Republic of India for more than US$110 million. The arbitration took place in the Netherlands, pursuant to a bilateral investment treaty (BIT) between India and Mauritius. The investors sought to enforce the award in Australia pursuant to the New York Convention (as adopted into domestic Australian law).  The key question: is India immune under Australian law, or did India’s ratification of the New York Convention (to which Australia and the Netherlands are also parties) constitute a waiver of foreign immunity from jurisdiction in a suit to recognize and enforce the award?

The court began by citing The Schooner Exchange v. McFaddon (1812), the leading early U.S. case on foreign sovereign immunity, for the proposition that “there is a strong presumption that a foreign State has not abandoned its independence and autonomy by waiving that otherwise preserved immunity.” This presumption applies in Australia as it does in the United States, the court reasoned, and it gives rise to “the principle that any waiver of foreign State immunity in an international agreement must be clear and unmistakable.”

The plaintiffs failed to show a “clear and unmistakable waiver,” the court concluded. It noted that the text of the New York Convention makes no explicit mention of immunity, and that the “limited and ambiguous consideration of foreign State immunity in the travaux préparatoires” suggested that the drafters did not intend the Convention to serve as a waiver of immunity.  As for Article III of the Convention, which requires the enforcement of arbitral awards, the court noted that recognition and enforcement is to be “in accordance with the rules of procedure of the territory” where the recognition and enforcement is sought. Because rules of procedure include rules governing immunity, parties to the Convention preserved any immunity under domestic law to which they were otherwise entitled.

The plaintiffs (and the Attorney General) sought to analogize the New York Convention to the ICSID Convention, which has been interpreted as a waiver of immunity in several recent cases involving arbitral awards against Spain. One of those cases, The Kingdom of Spain (Appellant) v Infrastructure Services Luxembourg S.À.R.L., was issued by the U.K. Supreme Court last month; another was issued by Australian courts in global litigation that includes Blasket Renewable Investments LLC v Kingdom of Spain (2025). The Australian high court rejected the analogy to the New York Convention, however, reasoning that whereas the ICSID Convention explicitly refers to disputes that involve states as parties, the New York Convention does not. Indeed, the court noted later that there are several unresolved questions about the scope of the New York Convention, including whether it applies to inter-state disputes (not an issue here because this case involves a foreign state and a private investor). Also, unlike the New York Convention, ICSID expressly addresses immunity from jurisdiction (which is necessary to bring an enforcement proceeding). That ICSID has been construed as waiving immunity was accordingly not relevant to the interpretation of the New York Convention.

Implications for Litigation in the United States

The Australian High Court cited to foreign practice including that of the United States, but in the end gave it little weight. For a variety of reasons, the Australian decision will have little formal effect on the U.S. litigation. But the decision is unquestionably helpful to India, which faces similar litigation in the United States (and elsewhere) involving investors in Antrix and its dispute with Devas, the Indian state-owned satellite company.

The Australian court struggled to characterize foreign practice on the question at hand, in part because of changing positions and developing case law. The court concluded merely that it is “at least arguable that to the extent that any degree of common understanding can be discerned from the present authority in the United States, considered alongside authority in the United Kingdom and Canada, that understanding is that ratification of the New York Convention, by itself, is not a sufficient act of waiver of foreign State immunity.” In the end, however, even this conclusion was not relevant to the interpretation of the treaty because Article 31(3)(b) of the Vienna Convention on the Law of Treaties (1969) provides that “subsequent practice” is only relevant to interpretation if it shows a “common understanding of the parties,” which was not true of the foreign contested cases.

U.S. courts have accorded significant weight to foreign cases in treaty interpretation (the Vienna Convention notwithstanding) and they could do the same here, except that the Australian case explicitly refused to address one the strongest arguments in favor of waiver. The plaintiffs argued that the New York Convention itself constituted a waiver of immunity in a proceeding to enforce an arbitral award but apparently did not argue (or at least did not initially argue) that it was the bilateral investment treaty, coupled with the New York Convention, that constituted a waiver.

As Robert Kry has described, there is a strong argument that “[w]hen a party agrees to arbitrate in a New York Convention state, enforcement in other Convention states is part of the agreed-upon dispute resolution process. The party’s consent [thus] waives sovereign immunity.”  This argument, as applied to the Australian case, would base consent not on India’s ratification of the New York Convention, but instead on the BIT as an agreement to arbitrate in New York Convention state, in this case, the Netherlands.

Conclusion

This global set of cases raise a host of interesting questions, including whether under the domestic immunity statutes in question, the proper exception to immunity is “waiver” or instead the distinct exceptions related to arbitration, an issue previously explored on TLB with regard to the U.K. and the U.S. immunity statutes.  They also raise interesting questions about the incentives of states. Do states compete to be pro-enforcement jurisdictions?  Or when it comes to arbitral awards against states, do they instead compete to be pro-immunity jurisdictions, in order to attract investment from foreign sovereigns?