HARARE (FinX) – The Court of Appeal of England and Wales has affirmed that states cannot rely on sovereign immunity to oppose the registration of ICSID awards rendered against them – dismissing appeals lodged by Spain and Zimbabwe.
In the case of Border Timbers Limited and Hangani Development Co. (Private) Limited v. Republic of Zimbabwe, the judgment delivered by Dias J on January 19, 2024, dismissed Zimbabwe’s application to set aside the order that registered the ICSID arbitration award. This award required Zimbabwe to reinstate properties to the claimants and pay compensation of US$124,041,223, along with an additional US$1 million in moral damages.
Zimbabwe appealed this decision, arguing primarily on state immunity grounds. However, the court found that the registration of the award was not merely a ministerial act but required judicial consideration. The appeal raised several key issues regarding the applicability of the State Immunity Act (SIA) and whether Zimbabwe had waived its immunity by being a party to the ICSID Convention.
Ultimately, the court dismissed Zimbabwe’s appeal on state immunity grounds but allowed for the possibility of remitting Zimbabwe’s application to set aside the registration order to the Commercial Court for further directions regarding its non-immunity defences, which had not yet been adjudicated upon.
The court recognised that there were other defences that Zimbabwe wanted to raise against the enforcement of the award—referred to as “non-immunity defences.” These defences had not been fully considered or adjudicated in the earlier proceedings. Therefore, the court allowed for the possibility of sending Zimbabwe’s application back to the Commercial Court. This means that the Commercial Court would have the opportunity to examine and rule on these additional defences that Zimbabwe had not yet had the chance to present fully.
The judgment reinforces the principle that ICSID arbitration awards are enforceable in the UK, even against sovereign states like Zimbabwe. This means that Zimbabwe may face challenges in avoiding compliance with the award, which requires it to reinstate properties and pay substantial compensation to the claimants.
The judgment may have broader implications for Zimbabwe’s investment climate. The enforcement of the award could signal to potential investors that the country is subject to international arbitration rulings, which may either deter or encourage foreign investment depending on how Zimbabwe responds to the ruling and its willingness to comply with international obligations.
In the case of Infrastructure Services Luxembourg S.À.R.L. and Energia Termosolar B.V. v. Kingdom of Spain, the judgment delivered by Fraser J on May 24, 2023, addressed several key points regarding Spain’s appeal against the registration of the ICSID arbitration award.
The court dismissed Spain’s application to set aside the order that registered the ICSID arbitration award, which required Spain to pay the claimants compensation of €101 million. This decision was based on the court’s interpretation of the legal framework governing the recognition and enforcement of ICSID awards.
Spain contended that the ICSID Convention and the 1966 Act did not deprive foreign states of their general immunity from the adjudicative jurisdiction of UK courts. However, the court found that the registration of an ICSID award does not involve an exercise of adjudicative jurisdiction but rather gives effect to the statutory entitlement under the 1966 Act. Therefore, the question of sovereign immunity did not arise in relation to the registration of the award.
Spain argued that its agreement to arbitrate under the Energy Charter Treaty (ECT) was disapplied due to decisions by the Court of Justice of the European Union (CJEU) in cases involving EU member states. Spain claimed that these decisions affected how EU states deal with arbitration under the ECT, particularly regarding disputes between EU member states. However, the court considered the implications of these arguments in the context of the ICSID Convention and the enforcement of arbitration awards.
