LONDON – The English Court of Appeal (CoA) has issued a landmark ruling clarifying the interaction between the UK’s State Immunity Act 1978 (SIA) and the Arbitration (International Investment Disputes) Act 1966, which implements the ICSID Convention in UK law.
By Brighton Musonza
The court ruling, script seen here by The Zimbabwe Mail, which involved Zimbabwe’s appeal in the Border Timbers case, confirms that Article 54 of the ICSID Convention constitutes an express waiver of state immunity, allowing enforcement of ICSID awards in UK courts.
The judgment resolves uncertainty stemming from earlier decisions, offering clarity for investors seeking enforcement of international arbitration awards against sovereign states.
Case Background
The Border Timbers case arose from a US$124 million ICSID arbitration award against Zimbabwe over its controversial land reform programme initiated under former President Robert Mugabe. Zimbabwe challenged the enforcement of the award in the UK on grounds of sovereign immunity, arguing that the ICSID Convention did not constitute a submission to the jurisdiction of UK courts.
The CoA’s judgment was delivered alongside a related case, Infrastructure Services Luxembourg S.à.r.l. & Energia Termosolar B.V. v. Spain, which involved a €101 million Energy Charter Treaty award against Spain. Both cases raised similar issues regarding the interplay between state immunity and international arbitration agreements.
Key Findings of the Court
- Application of Sovereign Immunity
The CoA confirmed that the statutory immunity provided under section 1(1) of the SIA applies to the registration of ICSID awards. This overturned a lower court’s interpretation that registration was a ministerial act and not subject to sovereign immunity. - Waiver of Immunity Under Article 54
The court held that by signing the ICSID Convention, contracting states like Zimbabwe had expressly waived their immunity and agreed to submit to the jurisdiction of UK courts under section 2 of the SIA. This means Zimbabwe cannot invoke state immunity to block enforcement of the Border Timbers award.Quoting the judgment, the CoA stated:
“Article 54(1) of the ICSID Convention constitutes a clear agreement by contracting states to waive immunity and submit to the jurisdiction of the UK courts for the purposes of enforcement of ICSID awards.” - Implications for Arbitration Agreements
While the court did not delve deeply into section 9 of the SIA, which governs arbitration agreements, it observed that courts are obligated to confirm the validity of an arbitration agreement when deciding if this exception to state immunity applies.
Significance of the Ruling
The ruling provides much-needed clarity for investors with ICSID awards, reinforcing the UK’s alignment with international practice on enforcement.
For Zimbabwe, the decision underscores the legal obligations arising from its participation in the ICSID framework, particularly in disputes linked to the country’s controversial policies, such as the land reform programme.
The CoA ruling also sends a message to other sovereign states that agreements under the ICSID Convention carry enforceable commitments, offering greater confidence to investors relying on international arbitration mechanisms.
This decision marks a pivotal moment in the interplay between sovereign immunity and international investment arbitration, solidifying the role of UK courts as a venue for the enforcement of arbitration awards.