The judgment in Operafund Eco-Invest SICAV Plc v Kingdom of Spain, delivered by Lord Justice Fraser on 25 January 2024, presents a complex legal landscape surrounding the enforcement of an ICSID arbitration award against Spain. The case involves two primary applications: Spain’s attempt to set aside a Registration Order made by Cockerill J on September 14, 2021, and a subsequent application by Schwab Holding AG to vary the order’s terms. The judgment primarily deals with issues of state immunity, jurisdiction, and alleged non-disclosure in the context of enforcing an ICSID arbitration award.

Background:

The case stems from an arbitration award made under the Energy Charter Treaty (“ECT”) and ICSID Convention against Spain. The claimants, Operafund (domiciled in Malta) and Schwab (domiciled in Switzerland), sought to register the award in England under the Arbitration (International Investment Disputes) Act 1966. Spain challenged this registration on grounds of state immunity and jurisdiction. The claim for state immunity primarily rests on the alleged lack of jurisdiction of both the ICSID arbitral tribunal that issued the award, and the court tasked with registering it. These arguments are based on decisions by the Court of Justice of the European Union (“CJEU”), which Spain asserts provide authoritative grounds under both European Union law and international law to support the absence of jurisdiction.

Particularly, with respect to jurisdiction, Spain contended that the ICSID tribunal lacked jurisdiction to adjudicate the dispute, asserting that intra-EU investor-state arbitration under the Energy Charter Treaty (ECT) is incompatible with EU law. Spain relied on the CJEU’s decision in Achmea BV v. Slovak Republic (Case C-284/16), which held that arbitration clauses in intra-EU bilateral investment treaties are incompatible with EU law. Spain argued that this reasoning extends to the ECT, rendering the tribunal’s jurisdiction invalid. The claimants countered that the ICSID tribunal had properly exercised its jurisdiction under the ECT, emphasizing that the ECT is a multilateral treaty to which both EU member states and the EU itself are parties. They argued that the Achmea decision does not apply to the ECT and that the tribunal’s jurisdiction was valid.

Secondly, Spain invoked state immunity under the State Immunity Act 1978, asserting that as a sovereign state, it is immune from the jurisdiction of UK courts, including proceedings for the recognition and enforcement of the ICSID award. Spain contended that no exceptions to state immunity applied in this case. To this, the claimants argued that Spain had waived its immunity by consenting to arbitration under the ICSID Convention and the ECT. They contended that such consent constitutes a waiver of immunity concerning the recognition and enforcement of the resulting award. Additionally, they pointed to Section 9 of the State Immunity Act 1978, which provides that a state is not immune in proceedings relating to arbitration to which it has agreed.

Spain asserted that enforcing the ICSID award would violate EU law, particularly in light of the Achmea decision and subsequent EU declarations disapproving intra-EU investor-state arbitration under the ECT. Spain argued that EU law takes precedence and that UK courts must consider these developments. To this, the claimants contended that the UK’s obligations under the ICSID Convention are separate from EU law and that enforcement of the award does not conflict with EU legal principles. They argued that the Achmea decision does not apply to the ECT and that the award should be enforced in accordance with international obligations.

Court’s Decision:

The court, acknowledging the complexity of the matter, adopted a cautious approach. Lord Justice Fraser considered deferring certain issues until after the resolution of the Infrastructure Services appeal while also exploring the possibility of addressing case-specific matters beforehand. However, no final decision has been made on all issues. Given the pending appeal in the Infrastructure Services case, which could significantly influence this case, the court took the following steps:

1. Deferred some issues until the appeal in Infrastructure Services is resolved.
2. Considered addressing issues unique to this case prior to the appeal’s outcome.
3. Explored proceeding on various assumptions regarding the likely outcome of the Infrastructure Services appeal.

The court observed that certain arguments, such as those concerning non-disclosure, might be resolved before the Infrastructure Services appeal concludes. However, the case has proven to be more intricate than initially anticipated. Additionally, the court acknowledged that it might not have been fully informed of all the grounds underlying Spain’s appeal in the Infrastructure Services matter. Consequently, Lord Justice Fraser decided to defer all arguments in this case until the Court of Appeal delivers its judgment in Infrastructure Services, describing the decision as an “unhappy case”.