Immunity or Not? The English Court of Appeal Decides

“UK Flag” by PaulaM95 is licensed under CC BY-NC-SA 2.0.

In the United Kingdom, § 2 of the State Immunity Act 1978 (SIA) provides an exception to State immunity if a State has “submitted” to the jurisdiction of UK domestic courts. In a 2024 decision, the English Court of Appeal considered whether, under § 2 of the SIA, a State’s adoption of the Convention on the Settlement of Investment Disputes between States and Nationals of other States (ICSID Convention) constitutes a submission to the UK courts’ jurisdiction and a waiver of State immunity.

On this issue, the English High Court had earlier reached opposite conclusions in two cases. In Infrastructure Services v. Kingdom of Spain (2023), Justice Fraser found that Spain’s adoption of Article 54 of the ICSID Convention, which requires all State parties to recognize and enforce an ICSID Convention award as a judgment of their municipal court, constituted a waiver of Spain’s immunity and submission to the UK courts’ jurisdiction under § 2 of the SIA (¶ 95). In Border Timbers Limited v. Republic of Zimbabwe (2024), however, Justice Dias registered an ICSID Award against Zimbabwe on different grounds. Dias  concluded that although Article 54 is not sufficiently clear and unequivocal to constitute Zimbabwe’s waiver and submission to the UK courts’ jurisdiction (¶ 72), registering an ICSID award against Zimbabwe does not engage Zimbabwe’s immunity (¶ 106).

Both Spain and Zimbabwe respectively appealed these decisions to the English Court of Appeal. The Court of Appeal, in a significant ruling, held that: (i) registering an ICSID Convention award engages State immunity; however, (ii) by agreeing to the enforcement regime under Article 54 of the ICSID Convention, Spain and Zimbabwe waived their immunity by submitting to the UK courts’ jurisdiction under § 2 of the SIA. In this post, we analyze the Court of Appeal’s judgment and how it may help construe Article III of the New York Convention as a waiver and submission to jurisdiction under § 2 of the SIA.

Registration of ICSID Convention Awards and the SIA

In Border Timbers, Justice Dias had held that registering an ICSID Convention award does not engage State immunity because of its ministerial nature (¶ 106). However, the Court of Appeal overturned this finding, concluding that even such registration is an exercise of adjudicative jurisdiction and requires performing the judicial tasks of examining the authenticity of the ICSID Convention award and other evidentiary matters (¶¶ 37–38).

Both of the Court of Appeal’s observations are correct, and consistent with general international law. The International Law Commission, in the Draft Articles on Jurisdictional Immunities of States and Their Property (ILC Draft Articles), observes that adjudicative jurisdiction includes determining questions of facts and exercising administrative functions in the course of a legal proceeding (p. 14, ¶ 3). Accordingly, recognizing an ICSID Convention award against a foreign State, after examining authenticity and other evidentiary matters, would surely constitute a judicial function.

Article 54 of the ICSID Convention and Waiver of Immunity

In Dias’s opinion, Article 54 of the ICSID Convention did not constitute a submission to UK courts’ jurisdiction under § 2 of the SIA since it was unrelated to any specific or identifiable proceeding (¶¶ 68 and 71). The Court of Appeal disagreed and held that: (i) pursuant to Article 54, Spain and Zimbabwe agreed for other State parties (such as the UK) to recognize and enforce ICSID Convention awards against them (¶¶ 79 and 96); and (ii) this agreement was sufficiently precise and did not require further particularization of the parties or the dispute (¶ 98).

While Article 54 of the ICSID Convention does not contain the words “State parties waive their immunity,” a textual interpretation of Article 54 naturally results in a waiver of State immunity. First, Article 54 creates a mutual mechanism for enforcing ICSID Convention awards without differentiating between awards against investors or States. Second, at the time of ratifying the ICSID Convention, each State party contemplated and agreed to a mechanism wherein awards issued against them could be recognized and enforced by other State parties. For these reasons, courts of Australia, Malaysia (¶¶ 42 and 45–46), New Zealand (¶¶ 25 and 43) and the United States (p. 17) have uniformly considered Article 54 to reflect State parties’ waiver of immunity.

As a matter of general international law, in its Third Report on Jurisdictional Immunities (1981), the ILC Special Rapporteur observed that submission to jurisdiction may be expressed in advance through a prior international agreement for one or more categories of cases (¶ 53; see also ILC Draft Articles, p. 27, ¶ 10). Further, the ILC Draft Articles adopts the view that the ICSID Convention represents one such prior international agreement that evinces a State’s submission to jurisdiction (p. 28, footnote 78). Accordingly, the Court of Appeal rightly concluded that Article 54 of the ICSID Convention is sufficiently clear and unequivocal to constitute Spain and Zimbabwe’s submission to the UK courts’ jurisdiction.

Enforcement Regime under the New York Convention

Article III of the New York Convention when properly construed also results in a clear submission to UK courts’ jurisdiction under § 2 of the SIA. First, similar to Article 54 of the ICSID Convention, Article III obliges all State parties to recognize and enforce New York Convention awards in their territory. Second, by signing the New York Convention, State parties accepted that any New York Convention award, including those against them, could be recognized and enforced by other State parties. On these grounds, courts of Australia (¶ 51), Canada (¶¶ 168 and 174–175) and the United States (p. 20) have also considered Article III of the New York Convention to constitute a waiver of State immunity.

While Spain and Zimbabwe argued that interpreting Article III of the New York Convention as a waiver of immunity would result in unfortunate consequences, they failed to explain those consequences. Simply put, it is difficult to conceive any unfortunate consequence since this interpretation merely seeks to uphold the bargain States arrived at and agreed to when adopting the New York Convention. Rather, an unfortunate consequence would be if States were permitted to resile from a waiver of State immunity acted upon by an investor – which would go against the principle of pacta sunt servanda (every treaty in force is binding upon the parties to it and must be performed by them in good faith).

Notably, under international law, the New York Convention, like the ICSID Convention, is considered an example of a prior international agreement reflecting a State’s waiver and submission to jurisdiction (see ILC Draft Articles, p. 28 and footnote 78). The Constitutional Court of South Africa reached a similar conclusion regarding a similar international agreement, Article 32 of the Protocol on Tribunal in the Southern African Development Community (Protocol). The Constitutional Court held that Article 32 of the Protocol, requiring State parties to enforce Tribunal decisions in their jurisdictions, constituted Zimbabwe’s waiver and submission to South African courts’ jurisdiction to enforce Tribunal decisions against Zimbabwe (¶¶ 34–35).

Conclusion

The Court of Appeal’s approach in construing Article 54 of the ICSID Convention as a waiver and submission to jurisdiction under § 2 of the SIA is a simpler route to enforce ICSID Convention awards than § 9 of the SIA. While § 9 of the SIA provides an exception to State immunity for proceedings before UK courts relating to arbitration, as the Court of Appeal notes, § 9 imposes a duty on UK courts to determine if the State has “in fact agreed…to arbitration” (¶ 105). This results in another layer of issues that the UK courts must resolve before recognizing and enforcing ICSID Convention awards.

One example is Spain’s challenge to its agreement to arbitrate under Article 26 of the Energy Charter Treaty (ECT), which has been disapplied between EU Member States following the decisions in Slovak Republic v. Achmea BV (2018) and Republic of Moldova v. Komstroy LLC (2021). Instead of determining the status of the ECT as it relates to the arbitration and if Spain in fact agreed to arbitrate under it, the Court of Appeal simply relied on § 2 of the SIA to conclude that Spain submitted to the UK courts’ jurisdiction by ratifying the ICSID Convention. This interpretation of Article 54 of the ICSID Convention would significantly strengthen the enforcement regime for ICSID Convention awards within the UK.

Similar to Article 54 of the ICSID Convention, Article III of the New York Convention would also result in a waiver and submission to the UK courts’ jurisdiction under § 2 of the SIA. In our view, nothing in applying the above rationale to Article III of the New York Convention would be a seismic development or an undesirable outcome. Rather, construing Article III in this manner is merely a logical result of properly interpreting the terms of Article III as has been done by numerous domestic jurisdictions.

Notably, issues regarding State immunity and enforcement of ICSID and New York Convention awards persist globally. Of particular relevance, the U.S. Supreme Court is currently considering Devas v. Antrix, a case involving the relationship between the arbitration exception to foreign sovereign immunity, consent, and constitutionally required due process. The Court may decide whether arbitrating in one State party to the New York Convention not only waives a foreign State’s immunity from enforcement actions in other State parties (such as the United States) but also satisfies due process (see a previous blog post on this forum for more detail).

Views expressed in this post are personal and do not reflect the opinion of any institution with which the authors are affiliated.