English High Court rejects Spain’s immunity objection to registration of ICSID award

In recent years, investors in Spain’s renewable energy sector have brought a large number of claims against Spain for allegedly breaching its obligations under the ECT. One such case is Antin Infrastructure Services and another v Spain. In June 2018, Spain was ordered to pay the claimants around EUR 112 million (plus interest) for breaching the fair and equitable treatment standard under Article 10(1) of the ECT (the Award). Spain’s application to annul the Award was rejected by an ad hoc Committee in July 2021.

The claimants sought an ex parte application to register the Award in England under the Arbitration (International Investment Disputes) Act 1966 (1966 Act). On 29 June 2021, the registration order (the Order) was granted.

Spain’s Challenge to the Order

Spain challenged the Order on two grounds: State immunity and non-disclosure. This post focusses on the first of these grounds.

Spain argued that it was entitled to adjudicative immunity, depriving the High Court of jurisdiction to make the Order. Under s.1 of the State Immunity Act 1978 (SIA), a State has immunity from the jurisdiction of the courts of the UK unless an exception in the SIA applies.

The claimants had invoked two exceptions to immunity, in sections 2 and 9 of the SIA. Spain argued that neither exception applied. The exceptions provide as follows: 

s.2(1)-(2):

“(1) A State is not immune as respects proceedings in respect of which it has submitted to the jurisdiction of the courts of the United Kingdom.

(2) A State may submit after the dispute giving rise to the proceedings has arisen or by a prior written agreement; but a provision in any agreement that it is to be governed by the law of the United Kingdom is not to be regarded as a submission.”

s.9(1):

“Where a State has agreed in writing to submit a dispute which has arisen, or may arise, to arbitration, the State is not immune as respects proceedings in the courts of the United Kingdom which relate to the arbitration.”

In opposing the Order, Spain submitted as follows:

• The UK Supreme Court judgment in Micula and others v Romania (Micula) (where the Supreme Court lifted a stay of enforcement of an ICSID arbitral award decided against Romania despite an ongoing State aid investigation by the European Commission) was not determinative of the issues in this case, as Romania did not resist the recognition of the arbitral award on the basis of the SIA in that case.

• Spain did not agree to submit its dispute with the claimants (who were incorporated in the Netherlands and Luxembourg) to arbitration. Spain relied on the judgments of the European Court of Justice (CJEU) in Slovak Republic v Achmea and Republic of Moldova v Komstroy, to argue that the intra-EU application of the ECT was inconsistent with EU law and the arbitration provision in the ECT should be disapplied in an intra-EU setting.

High Court Rejects Spain’s Contentions on Immunity

Following a four-day hearing, the High Court rejected Spain’s objections. We highlight four notable findings below.

First, Mr Justice Fraser held that both exceptions in ss.2 and 9 SIA applied:

• Article 54 of the ICSID Convention and Article 26 of the ECT (which incorporates the ICSID Convention) constitute Spain’s submission to the jurisdiction of the English courts through “a prior written agreement”, engaging s.2 SIA. Article 54 provides, among other things, that “[e]ach Contracting State shall recognize an award rendered pursuant to this Convention as binding and enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that State”.

• The same provisions also engage s.9 SIA, as they reflect agreements in writing by Spain to submit disputes with investors from other contracting States to international arbitration. Spain rightly withdrew its argument that s.9(1) SIA only applied to commercial arbitrations and not arbitrations involving sovereign acts. The Court agreed that there is no basis, from the wording in s.9 SIA, to argue that it is restricted to commercial arbitrations.

Secondly, Mr Justice Fraser noted that Micula is direct and binding Supreme Court authority on the subject of recognition of an ICSID award in the UK. On that basis, he concluded that Spain could not rely on arguments relating to the jurisdiction of the arbitral tribunal and other matters already covered in its ICSID annulment application to oppose a registration order.

Thirdly, it was observed that the CJEU “is not the ultimate arbiter under the ICSID Convention, nor under the ECT”, and “Spain – or any other Member State ... – cannot rely upon the Achmea and/or the Komstroy cases to dilute the United Kingdom’s own multilateral international treaty obligations” (emphasis in original).

Lastly, with an eye to future cases, Mr Justice Fraser concluded that:

“[i]n cases such as this one in the future, if the ICSID Committee have considered and dismissed objections under the Convention procedure and the award is a valid and authentic one, I wish to make it clear that there are no grounds for repetition or rehearing of those in the Commercial Court. Unless a case is truly exceptional, it is difficult to foresee how a hearing of the length required in this case, and a judgment of this length, would occur again. To do so would be contrary to the ICSID Convention and the 1966 Act, and is exactly what international arbitration is designed to avoid.”

Comment

This decision is a welcome clarification by the English Commercial Court that the registration of ICSID awards, including intra-EU awards, is intended to be a straightforward process.

Judgment: Infrastructure Services v Spain