April 25, 2024

All cases concerning investment disputes have something of interest in them somewhere and the judgment of Mrs Justice Dias in Border Timbers Ltd & anor v Republic of Zimbabwe is no exception to the general rule.

This was a dispute concerning the registration and entry of judgment on an arbitration award made almost 10 years ago under the 1965 Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the “ICSID Convention”). As readers will be aware, the ICSID Convention applies to many investment disputes referred to arbitration under various bilateral investment treaties; in England & Wales it has its own bespoke enforcement regime under CPR 62.21. The arbitration in Border Timbers was brought against the Republic of Zimbabwe and concerned the alleged expropriation of the Claimants’ land in Zimbabwe. By the award, Zimbabwe was ordered to pay to the Claimants some US$124 million plus interest, together with a further US$1 million in “moral damages” and costs. It did not therefore involve the current hot topic of the aggressive attempt by the CJEU to render invalid and unenforceable any investor dispute arbitration involving a member state, such as formed the background to the last major case in this area (Infrastructure Services Luxembourg Sarl v Spain [2023] EWHC 1226 (Comm), Fraser J) (currently on its way to the Court of Appeal).

The Claimants having obtained registration and entry of judgment on the award under section 2 of the Arbitration (International Investment Disputes) Act 1966, Zimbabwe applied to set it aside on the grounds of state immunity, by virtue of section 1(1) of the State Immunity Act 1978. It is the interaction between the 1966 Act, the ICSID Convention and the 1978 Act which is the chief source of interest in this case.

In the earlier Infrastructure Services Luxembourg case, Mr Justice Fraser had held that where a state was a signatory to the ICSID Convention, that was a prior written agreement waiving immunity for the purposes of the State Immunity Act 1978. Accordingly, Spain had submitted to the jurisdiction of the English court by reason of its accession to the Convention. This caused Mrs Justice Dias some concern, because of the potential implications for enforcement of awards under the separate enforcement regime under the New York Convention. At paragraph [20] of her judgment, she observed that “So far as I am aware, it has not hitherto been argued that a state is precluded from claiming sovereign immunity in relation to the recognition and enforcement of an award under the New York Convention”. In fact, not only has it been argued, but the Federal Court of Australia held that states were indeed so precluded, in the case of CCDM Holdings, LLC v Republic of India (No 3) [2023] FCA 1266. Nevertheless, an attempt to avoid what seemed to be an unwelcome potential paradox appears to underlie much of the reasoning in the judgment.

Mrs Justice Dias’ conclusion in relation to section 2 of the State Immunity Act 1978 (submission to jurisdiction) was that there had been no submission by Zimbabwe. Although Article 54(1) of the ICSID Convention was intended to amount to a waiver of state immunity in respect of recognition and enforcement (but not in relation to processes of execution against assets), it was not a “prior written agreement” because (she held) a waiver of immunity unrelated to any identifiable proceedings is not synonymous with a submission to the jurisdiction (paragraph [68]); further, Article 54 was not a sufficiently clear and unequivocal submission to the jurisdiction of the English courts for the purposes of recognising and enforcing the award against Zimbabwe. Mrs Justice Dias considered that Mr Justice Fraser in Infrastructure Services Luxembourg Sarl v Spain was wrong to find to the contrary, but said that the potential distinction between waiver and submission was not apparently argued before him. Mrs Justice Dias also recognized that her conclusion “could be said to run counter to the object and purpose of the ICSID Convention”, but this was “simply the inevitable result of applying what seem to me to be the clear words of section 2 of the 1978 Act”.

In relation to the immunity exception in section 9 of the State Immunity Act 1978 Act (ie where a state has agreed in writing to submit a dispute to arbitration), Mrs Justice Dias held that section 9 did not apply, because (paragraph [84]) “On the plain and ordinary meaning of the statute, therefore, before finding that section 9 is engaged, the English court must satisfy itself that the person accepting the offer of arbitration was entitled to do so and that the dispute in question fell within the scope of the arbitration agreement.” If this is correct (which it may not be in this context – Infrastructure Services Luxembourg Sarl v Spain is to the contrary), then this is similar to the basis on which the District Court for the District of Columbia in the US refused enforcement of an investment arbitration award in Blasket Renewable Investments LLC v Kingdom of Spain, Civil Case No. 21-3249 (RJL) (DDC 2023) (Spain is a serial litigator on these types of issues, in numerous jurisdictions). The US District Court refused to enforce an award because (i) the court was entitled to look at the validity of the arbitration agreement itself; and (ii) having done so, it was illegal and invalid under European law (see the line of decisions of the CJEU starting with Slovak Republic v Achmea BV, Case C-284/16).

Despite the above, Mrs Justice Dias did not set aside registration of the award, basing her refusal on what she herself admitted was a novel ground. In her judgment, in the case of applications to register ICSID awards, the foreign state is not impleaded unless and until the order granting registration is served on it. It follows that the doctrine of state immunity has no application at the stage of registration. It might be said that, since the order granting registration had by this time been served on Zimbabwe, it is not clear from the judgment why the issue needed to be further deferred. However, expect more developments when Infrastructure Services Luxembourg and Border Timbers reach the Court of Appeal.

Written by Jonathan Miler

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