Enforcement of ICSID awards and State Immunity

Published on January 30, 2024

On 19 January 2024, Mrs Justice Dias handed down judgment in Border Timbers Limited and another v Republic of Zimbabwe [2024] EWHC 58 (Comm), concerning Zimbabwe’s application to set aside a without notice order for the recognition and enforcement of an award rendered under the International Centre for Settlement of Investment Disputes (ICSID) Convention.

The underlying arbitration arose out of measures taken by Zimbabwe under its Constitution, pursuant to which it acquired certain of the Claimants’ properties, as part of its Land Reform Programme.  The Claimants submitted a request for arbitration under the ICSID Convention, relying on the provisions of a Bilateral Investment Treaty between Switzerland and Zimbabwe (BIT), as a result of which an award of US$125 million was made in their favour.

In 2021, the Claimants obtained a without notice order in the High Court in London registering the award.  Zimbabwe applied to set aside the order on grounds that it was immune from the jurisdiction of the UK courts by virtue of section 1(1) of the State Immunity Act 1978 (SIA) (and, as part of that claim, that the Claimants had failed to make full and frank disclosure in not drawing the Court’s attention to the potential arguments on state immunity on their without notice application).

On the issue of state immunity, the Claimants argued that Zimbabwe did not have immunity under the SIA, relying on the exceptions under sections 2 and 9 of the SIA. The Claimants submitted that Zimbabwe had waived its immunity pursuant to: (i) section 2(2) of the SIA on the basis that, in particular, Article 54(1) of the ICSID Convention constituted a prior written agreement to submit to the jurisdiction of courts of the United Kingdom; and/or (ii) section 9(1) of the SIA because of Zimbabwe’s alleged agreement to submit the dispute to arbitration and because the Court must accept as final and binding the ICSID tribunal’s decision that it had jurisdiction.

In her Judgment, Dias J determined that neither of the exceptions relied upon by the Claimants applied. As regards section 2(1) of the SIA, she found that although Article 54(1) of the ICSID Convention obliges Contracting States to recognise and enforce an award, it was not sufficiently clear to amount to a waiver of immunity by prior written agreement for the purposes of section 2, which requires an express submission to the jurisdiction in respect of the particular proceedings that are before the Court.

The Judge also determined that before finding that section 9(1) of the SIA is engaged, the Court must satisfy itself that there is an agreement to arbitrate and that the dispute in question falls within the scope of the arbitration agreement, and found that the enforcement court was not bound by the ICSID tribunal’s own finding in that regard.  Accordingly, in circumstances where the existence of the arbitration agreement was disputed, Article 10 of the BIT did not constitute an agreement in writing for the purpose of section 9 of the SIA.

Nevertheless, Dias J declined to set aside the order on the basis that the doctrine of state immunity was not, in fact, engaged on an application to register an ICSID award under the regime that applies pursuant to the Arbitration (International Investment Disputes) Act 1966 and the English Civil Procedural Rules.  In doing so, she recognised that this was “a novel approach for which there is no direct authority”.  Zimbabwe has been granted permission to appeal on all issues, save for those relating to full and frank disclosure.

The Judge also found that the Claimants had breached their duty of full and frank disclosure in failing to bring to the Court’s attention the potential arguments on state immunity in its application for registration and enforcement of the award. While the order was not set aside on this ground alone, the Claimants were penalised in costs, being made to bear their own costs of their without notice application.  The Judge also determined that no order as to costs was appropriate in respect of Zimbabwe’s application to set the order aside, on the basis that the Claimants had lost on both of the points that they contested at the hearing, even if ultimately the Court had declined to grant Zimbabwe the relief sought.

The judgment therefore provides a useful exposition of the relationship between the ICSID Convention and the SIA, as a well as being a valuable reminder of the importance of parties complying with their duty of full and frank disclosure at the without notice stage, and of the adverse costs consequences that can follow if that duty is breached.

Gresham Legal acted for Zimbabwe, instructing Salim Moollan KC and Andris Rudzitis (both Brick Court Chambers), and Benedict Tompkins (Essex Court Chambers) (with Quinn Smith of GST LLP, also advising).

Philip Beswick (Partner) and Christopher Walke (Senior Associate), Gresham Legal

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