By way of the decision in Infrastructure Services Luxembourg SARL & Anor v The Kingdom of Spain (“Antin v. Spain”), which was heard together with the appeal in Border Timbers Limited & Anor v Republic of Zimbabwe (“Border Timbers v. Zimbabwe”), the UK Court of Appeal has ruled that when ICSID Contracting States agree to Article 54 of the ICSID Convention, it constitutes a written waiver of sovereign immunity and acceptance of jurisdiction under the State Immunity Act 1978 (“SIA”).

Background:

The background for the cases is this:

1. In Antin v. Spain, the conflict stemmed from Spain’s modifications to its renewable energy regulations, affecting Antin’s solar power investments. Antin pursued ICSID arbitration under the Energy Charter Treaty, securing a favourable award exceeding €100 million in 2018. Enforcement proceedings were initiated in multiple jurisdictions, including the UK, where the award was registered in 2021. Spain’s attempt to overturn this registration was unsuccessful, as Mr Justice Fraser (as he then was), based on Micula & Ors v Romania [2020] UKSC 5, concluded that the Arbitration (International Investment Disputes) Act 1966 (“1966 Act”) precluded Spain from bringing any defence under the SIA to the recognition of an ICSID award.

2. The Border Timbers v. Zimbabwe case originated from Zimbabwe’s land reform program, which led to the expropriation of the claimants’ property. The investors sought ICSID arbitration under the Switzerland-Zimbabwe BIT, resulting in a favourable award of over $125 million in 2015. This award was registered in the UK in 2021, and Zimbabwe’s challenge to the registration was dismissed in January 2024. Briefly put, Mrs Justice Dias concluded that registration of an award was not an adjudicative act and did not engage the general immunity provided for under section 1(1) SIA. She also noted that Article 54 was not “a sufficiently clear and unequivocal submission to the jurisdiction of the English Courts”.

Both Spain and Zimbabwe appealed these decisions, asserting that:

1. Neither the ICSID Convention nor the 1966 Act nullified their immunity from UK court jurisdiction as guaranteed by section 1(1) SIA.
2. ICSID Convention Article 54 does not constitute a prior written agreement to submit to UK court jurisdiction under the SIA.
3. The appropriate immunity exception is found in SIA section 9, applicable when states agree in writing to arbitration. They argued for the right to contest the validity of the arbitration referral and the tribunals’ jurisdiction.

Spain specifically challenged the arbitration agreement’s validity under the Energy Charter Treaty (“ECT”) Article 26, citing intra-EU grounds. Spain argued that EU Court of Justice rulings in Achmea and Komstroy rendered investor-state arbitration between EU parties incompatible with EU law. Zimbabwe contended that the investors’ dispute fell outside the scope of the arbitration agreement in the Switzerland-Zimbabwe BIT.

Court’s Decision:

In a judgment delivered by Lord Justice Phillips, the CoA dismissed both appeals. This was because of three reasons:

1. The Court initially considered whether section 1(1) of the State Immunity Act (SIA) applied to the registration of ICSID awards against a foreign State. It concluded that registration is not a ministerial or administrative act, as found by Dias J, but an adjudicative one, as it requires the judge to ensure the requirements of the 1966 Act are met. Lord Justice Phillips ruled that the enforcement of an award against another State constitutes a sovereign act that implicates State immunity. Thus, he determined that section 1(1) of the SIA applies to the registration of ICSID awards, which led to the key question of whether any exceptions to sovereign immunity were applicable.

2. The Court then assessed whether Spain and Zimbabwe had “submitted to the jurisdiction of the courts of the United Kingdom” under Article 54 of the ICSID Convention. It concluded that Article 54, when properly interpreted, constitutes an agreement among ICSID Contracting States to recognize and enforce ICSID awards in their jurisdictions as final court judgments. Additionally, it found that this article contains a clear and express submission to the jurisdiction of UK courts, as required by section 2(2) of the SIA. The Court disagreed with Dias J, asserting that it was irrelevant that this agreement was part of a convention rather than a specific arbitration agreement between identified parties. Section 17(2) of the SIA clarifies that references to an agreement include references to treaties, conventions, or other international agreements.

3. Given the Court’s findings on section 2 SIA, it deemed it “unnecessary” to address whether section 9 applied. It also chose not to address Spain’s challenge to the validity of the arbitration agreement under Article 26 of the ECT on intra-EU grounds, referring to it as “a particularly complex issue.” The Court noted that Zimbabwe did not challenge the validity of the arbitration clause in the Switzerland-Zimbabwe Bilateral Investment Treaty (BIT). Despite this, Lord Justice Phillips made two remarks on section 9 SIA:

(i) he distinguished section 9 from section 2, emphasizing that section 9 requires the Court to confirm the existence of a valid arbitration agreement specifically for the dispute in question, imposing a duty on the court to verify that the state has agreed in writing to submit the dispute to arbitration; and
(ii) while Article 54 of the ICSID Convention provides a prior written agreement for section 2 SIA purposes, the Convention does not constitute a specific or valid arbitration agreement for section 9 SIA purposes.

With one exception being satisfied, there was no immunity from jurisdiction, and the Court dismissed the appeals. In Border Timbers v. Zimbabwe, it remitted the case to the lower court to address Zimbabwe’s other defences as requested by the State.