In Infrastructure Services Luxembourg SARL & Anor v Kingdom of Spain (Rev1) [2023] EWHC 1226 (Comm), the English High Court reaffirmed the primacy of the special regime for the recognition and enforcement of ICSID awards. The court rejected a challenge that Spain had raised opposing the recognition of an ICSID award on the basis of intra-EU objections.

Background

The claimants received an ICSID award worth EUR 120 m against Spain in 2018 under the Energy Charter Treaty (“ECT”). In 2021, Spain’s annulment application failed within ICSID. In 2021, the claimants successfully registered the award in England under the Arbitration (International Investment Disputes) Act 1966 (the “1966 Act”, the statute under which the UK incorporated its obligations under the 1966 Washington (ICSID) Convention (the “Convention”)). Spain challenged the registration order (the “Order”) on two grounds: state immunity and material non -disclosure by the claimants. The latter ground was factual and found not to be made out. We focus on the first ground, being the one relevant for the discussion of the enforcement regime for ICSID awards in the UK.

Spain’s immunity challenge

Spain argued that it was immune from the action for registration of the ICSID award on the basis of s.1(1) State Immunity Act 1978 (“SIA”). Its argument included, among others, objections to the jurisdiction of the tribunal derived from EU law, and cases in which the Court of Justice of the European Union (the “CJEU”) has found that intra-EU investment arbitration is incompatible with EU law (see e.g. here and here).

The judge (Fraser J) rejected this attempt to evade registration of the award. The main problem for Spain was the UKSC decision in Micula in which the UKSC rejected a stay of enforcement of an intra-EU ICSID award pending determination in the CJEU of whether the award was illegal state aid (see here). That decision highlighted the special, almost automatic, regime for the treatment of ICSID awards under the 1966 Act and how intra-EU objections did not override the UK’s pre-existing treaty obligations in that respect. That decision, and approach, was binding, so as to leave no space for Spain’s objections ([67-68,79]).

The UKSC, in Micula, did, however, leave space for limited defences to be raised “in certain exceptional or extraordinary circumstances which are not defined” and which “do not directly overlap with those grounds of challenge to an award which are specifically allocated to Convention organs under articles 50 to 52 of the Convention”. Was there such a defence available to Spain?

Spain raised two. The first was immunity, under the SIA, to the court’s adjudicative jurisdiction in the recognition proceedings. In that respect the judge rejected any such defence. Briefly, this was for two reasons. First, Fraser J held, for the first time, that a state’s consent to Article 54 of the Convention was a written submission to the court’s jurisdiction for the purposes of removing adjudicative immunity under s.2(2) of the SIA [95] (the judge noted that accepting Spain’s arguments in this respect would, in effect, leave the 1966 Act applicable against the UK only). Second, Fraser J accepted that s.9(1) SIA would also have applied. That concerns the removal of adjudicative immunity in respect of court proceedings relating to an arbitration consented to by a state. Spain withdrew arguments attempting to draw distinctions between commercial activity and sovereign acts, which in any event the judge rejected [96-100]. And the judge also, referring to his prior dismissal of such arguments, rejected any attempt by Spain to say that EU law arguments meant that it had not consented to the arbitration; in the judge’s view that was found in Spain being party to both the ICSID Convention and the ECT [101-102].

Second, Spain revisited its arguments concerning EU Law’s effect on the agreement to arbitrate as a stand-alone “exceptional” defence under Micula. The judge did not think that this seriously be raised as such as the arguments were based on objections of precisely the type of issues allocated to ICSID by the Convention [90]. In a more detailed consideration of the point, he concluded that allowing the argument would simply be akin to allowing Spain’s arguments to trump the UK’s international obligations under the Convention [125].

Practical significance

The decision is an important one in the reaction of the wider world of investment treaty arbitration to the EU’s objections to intra-EU disputes. The decision upholds the UK’s established, and orthodox, obligations under international law; and effects an undeniably investor friendly outcome in upholding the workings of the ICSID regime. Case-law such as this and Micula may well encourage investors to look to the UK for assets in such cases.

Finally, under the ICSID regime, great primacy is given to a tribunal’s own determination of its jurisdiction (including the impact of any intra-EU objections).It is therefore worth remembering that the approach of national courts to awards is not the only battleground in this debate.