Infrastructure Services Luxembourg SARL & Anor v The Kingdom of Spain

Factual and Procedural Background

The 1965 Convention on the Settlement of Investment Disputes between States and Nationals of Other States ("the Convention") established the International Centre for Settlement of Investment Disputes ("ICSID") and provided for arbitration of disputes arising from investments between contracting states and nationals of other contracting states. The United Kingdom implemented the Convention through the Arbitration (International Investment Disputes) Act 1966 ("the 1966 Act").

The appeals concern whether foreign states subject to adverse ICSID arbitration awards can invoke state immunity to set aside registration of those awards in the High Court under the 1966 Act. Two cases are central: one involving Spain and claimants from Luxembourg and the Netherlands, and another involving Zimbabwe and claimants under a bilateral investment treaty with Switzerland. Both Spain and Zimbabwe sought to set aside registration orders of ICSID awards against them, but their applications were dismissed by Fraser J and Dias J respectively.

Spain and Zimbabwe were granted permission to appeal these dismissals. The appeals were heard together, focusing on the intersection of state immunity and the registration and enforcement of ICSID awards under UK law.

Legal Issues Presented

1. Whether section 1(1) of the State Immunity Act 1978 ("the SIA") applies to the registration of ICSID arbitration awards against foreign states under the 1966 Act.
2. If section 1(1) applies, whether the exception in section 2 of the SIA is engaged because Contracting States have submitted to the jurisdiction by virtue of article 54 of the Convention.
3. If section 1(1) applies and no submission to jurisdiction arises under article 54, whether a foreign state is estopped or otherwise prevented from asserting invalidity of the underlying award, such that the exception in section 9 of the SIA applies.

Arguments of the Parties

Appellants' (Spain and Zimbabwe) Arguments

• Neither the Convention nor the 1966 Act displaces the general immunity of foreign states from UK court jurisdiction under section 1(1) of the SIA.
• Article 54 of the Convention does not constitute a prior written agreement to submit to UK court jurisdiction as required by section 2 of the SIA.
• The exception in section 9 of the SIA, which removes immunity where a foreign state agrees in writing to arbitration, permits states to challenge the validity of arbitration agreements and awards before registration.
• Spain contends its arbitration agreement under article 26 of the Energy Charter Treaty has been disapplied between EU member states following CJEU decisions, thus invalidating the arbitration jurisdiction.
• Zimbabwe accepts the validity of the arbitration agreement but denies that the dispute falls within its scope.
• They argue the registration of ICSID awards should be subject to state immunity and that courts should be able to review jurisdiction and validity on set-aside applications.

Respondents' (Claimants) Arguments

• The Convention and the 1966 Act preclude foreign states from raising state immunity defenses to recognition of ICSID awards.
• Article 54 of the Convention constitutes a prior written agreement to submit to jurisdiction for the purposes of section 2 of the SIA.
• Even if section 1(1) of the SIA applies, exceptions in sections 2 and 9 apply automatically with respect to ICSID awards.
• The 1966 Act and the Convention form a separate regime that should be read harmoniously with the SIA, ensuring enforcement without immunity barriers.
• They do not advance a primary case that section 1(1) is disapplied but contend it has no practical effect due to applicable exceptions.

Table of Precedents Cited

Court's Reasoning and Analysis

The court undertook a detailed statutory and treaty interpretation exercise, focusing primarily on the relationship between the 1966 Act, the ICSID Convention, and the State Immunity Act 1978 ("SIA").

Firstly, the court rejected the argument that registration of ICSID awards is a mere ministerial act not engaging adjudicative jurisdiction or state immunity, concluding instead that registration involves judicial exercise of jurisdiction and thus attracts the general immunity under section 1(1) of the SIA.

Secondly, the court analysed article 54 of the ICSID Convention, concluding that it constitutes a prior written agreement by Contracting States to submit to the jurisdiction of domestic courts for recognition and enforcement of ICSID awards. This satisfies the requirements of section 2(2) of the SIA, thereby engaging an exception to general immunity.

The court relied on persuasive authority from other common law jurisdictions, notably the High Court of Australia, which interpreted article 54 as an express waiver of immunity. The court rejected Spain and Zimbabwe's arguments that article 54 was an implicit or insufficient waiver, finding that express waiver may be inferred from clear and unequivocal treaty language supported by the treaty’s object and purpose.

Further, the court considered the travaux préparatoires and the drafting history of the Convention, confirming that article 54 was intended to require enforcement of awards against states as if they were final judgments, while article 55 preserved immunity only from execution.

The court distinguished article 54 of the ICSID Convention from article III of the New York Convention, noting that concerns about the latter’s interpretation do not detract from the clear waiver and submission to jurisdiction in article 54.

Regarding the exception in section 9 of the SIA, the court found it imposes a duty on courts to satisfy themselves of the existence of a valid arbitration agreement in writing, and that the Convention itself does not supply the arbitration agreement but only the framework for arbitration. The court declined to decide on the validity of the arbitration agreements challenged by Spain and Zimbabwe as it was unnecessary given the conclusion on section 2.

Finally, the court acknowledged Zimbabwe’s right to pursue non-immunity defences to enforcement and remitted that issue to the Commercial Court for further directions.

Holding and Implications

The court's final decision was to DISMISS the appeals by Spain and Zimbabwe against the refusal to set aside the registration of ICSID awards.

The court held that foreign states, by virtue of article 54 of the ICSID Convention, have submitted to the jurisdiction of the UK courts for the purpose of recognition and enforcement of ICSID awards under the 1966 Act, thus precluding reliance on state immunity under section 1(1) of the SIA.

As a consequence, states cannot invoke state immunity to resist registration of ICSID awards, although they may raise immunity or other defences at the enforcement stage. The court also clarified that the registration of ICSID awards is an adjudicative act engaging jurisdiction and immunity principles.

The appeals do not establish a new legal precedent but reaffirm and clarify the application of the ICSID Convention, the 1966 Act, and the SIA in the UK context, emphasizing the limited scope for states to avoid enforcement of ICSID awards on immunity grounds at the registration stage. The court remitted Zimbabwe's non-immunity defences for further consideration, preserving the opportunity for such challenges at a later stage.