State immunity and the enforcement of ICSID awards

22 January, 2024

Mrs Justice Dias handed down judgment on 19 January 2024 in Border Timbers Ltd v. Republic of Zimbabwe [2024] EWHC (Comm) [2024] EWHC 58 (Comm), considering State immunity in the context of enforcement of ICSID arbitral awards.

The judgment declines to follow a body of English and international authority on whether the ICSID Convention constitutes an effective waiver of jurisdictional immunity, and affirms the duty of full and frank disclosure in relation to State immunity matters when making ex parte enforcement applications against States.

The underlying arbitration arose out of Zimbabwe’s Land Reform Programme, pursuant to which Zimbabwe acquired properties forming part of a large forestry estate. The claimants, two Zimbabwean companies, commenced an arbitration alleging ICSID jurisdiction under the Zimbabwe–Switzerland BIT, and seeking restitution of legal title in the properties and compensation. An arbitral tribunal issued an award on 28 July 2015, ordering restitution or alternatively compensation. The award was upheld by an ad hoc ICSID annulment committee in 2018. The principal amount of damages awarded was some US$125 million.

In 2021, the claimants commenced proceedings seeking to register the award pursuant to the Arbitration (International Investment Disputes) Act 1966, which implements the ICSID Convention in English law.

An enforcement order was made ex parte, which Zimbabwe then applied to set aside on the basis that it was immune from the Court’s adjudicative immunity under the State Immunity Act 1978. In turn, the claimants argued that that immunity was displaced by two statutory exceptions: submission under section 2, by way of Article 54 of the ICSID Convention; and the so-called arbitration exception under section 9, which the claimants said applied to ICSID awards so as to exclude any review by the enforcement court of arbitral jurisdiction (disputed by Zimbabwe on various grounds).

Dias J found against the claimants on both points:

  • Article 54 was held not to be a sufficiently clear and unequivocal submission to the jurisdiction of the English courts for the purposes of section 2 (applying the well-known judgment of Lord Goff in R v Bow Street Magistrates, ex parte Pinochet (no. 3), [2000] 1 AC 147).
  • Section 9 of the State Immunity Act required the enforcement court to make its own determination on whether there existed a valid arbitration agreement, and ICSID awards are no different. The enforcement court is therefore not bound by an ICSID tribunal’s own finding that it had jurisdiction.

In reaching those conclusions, Dias J declined to follow the recent judgment of Fraser J (as he then was) in Infrastructure Services Luxembourg Sarl v Spain, [2023] EWHC 1226 (Comm) (on both points); and authorities from the High Court of Australia, the High Court of New Zealand, and various United States courts (on the Article 54 point, referring in particular to material differences in their domestic laws of State immunity).

However, the Judge nevertheless declined to set aside the enforcement order, on the basis that the question of sovereign immunity from jurisdiction does not arise at all in relation to an application to register an ICSID award because of the particular procedural regime that applies under the 1966 Act and the CPR. That is described in the judgment as “a novel approach for which there is no direct authority”.

Finally, Dias J found that the Claimants committed a culpable (albeit not deliberate) breach of their duty of full and frank disclosure, because the witness statement in support of the ex parte application failed to make any mention of State immunity, or indeed address full and frank disclosure at all. Although the enforcement order was not set aside as a result, the claimants were penalised in costs. The judgment is therefore a salutary reminder that it is “incumbent on anyone making an application which names a state as respondent to address the question in order to allow the court to satisfy itself that immunity is not engaged”.

The Judge has granted Zimbabwe permission to appeal to the Court of Appeal.

Benedict Tompkins appeared for Zimbabwe (with Salim Moollan KC and Andris Rudzitis), instructed by Philip Beswick and Christopher Walke of Gresham Legal (with Quinn Smith and Domenico Di Pietro of GST LLP also advising).

The full judgment is available here.