High Court of Australia rejects Spain’s argument that enforcement of an arbitral award in Australia should be stayed
A recent decision of the High Court of Australia, while affirming Australia’s stance as a pro-arbitration jurisdiction, also serves to highlight the difficulties that can arise in investor-state dispute resolution generally, particularly when it comes to execution of the award.
Infrastructure Services Luxembourg S.a.r.l. obtained an arbitral award in their favour of €101 million against the Kingdom of Spain (Spain) under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention).
Proceedings were commenced in Australia seeking to enforce that award pursuant to section 35(4) of the International Arbitration Act 1974 (Cth). Spain resisted these proceedings, on the basis that they had Foreign State Immunity and were thereby immune from the jurisdiction of the Courts of Australia (as provided for by section 9 of the Foreign States Immunities Act 1985 (Cth)).
Spain argued that despite entering into the ICSID Convention (which provides that an award shall be binding on the parties (by Article 53) and that each Contracting State shall recognise an award as binding as if it were a final judgment in a court of that State (by Article 54), it had not expressly waived any rights to foreign state immunity, and that an implied waiver was not sufficient grounds under section 10(2) of the Foreign States Immunities Act to be considered ‘submitting to the jurisdiction’.
In the alternative, Spain argued that if its conduct had constituted a waiver of the immunity, its waiver was limited to bare recognition of the award and did not constitute a waiver with respect to enforcement or execution of the award.
The judgment contains within important considerations of the distinction between the terms ‘recognition’, ‘enforcement’ and ‘execution’ when it comes to arbitral awards.
- Recognition of an award – the courts determination that an international arbitral award is entitled to be treated as binding (which raises res judicata considerations in the jurisdiction);
- Enforcement of an award – “the legal process by which an international award is reduced to the judgment of a court that enjoys the same status as any judgment of that court.”
- Execution of an award – the means by which a judgment is given effect (including measures being taken against the debtor for the judgment debt).
The High Court held, unanimously, that the express words used in the ICSID Convention in their context and in light of their purpose, evidenced an inferred implication that signatories to the treaty intended to waive any sovereign immunity for recognition and enforcement of an award.
Principles of international law, when considering the objects and purpose of the ICSID Convention, supported the interpretation of Article 53 and 54 by their ordinary meaning. The appeal from the Full Court of the Federal Court of Australia was, accordingly, dismissed.
There, however, was no suggestion of any waiver to the principle of sovereign immunity for the execution of an award (rights which are expressly preserved by Article 55 of the ICSID Convention).
The dance continues: what does this decision mean?
The High Court decision highlights the difficulties in Investor-State disputes in regards to both recognition and thereafter enforcement of an arbitral award when a nation-state loses the arbitration. While the High Court dismissed Spain’s appeal, it now seems that the path is clear for Australian courts to recognise and enforce a binding arbitral award, particularly if the nation-state signed up to the ICSID Convention. As to whether the respondent can recover from Spain, that bullfight seemingly rages on.