Sovereign Immunity in the UK: Two Conventions, Two Answers

[Shantanu Kanade is an Assistant Professor at Jindal Global Law School.

Paridhi Jain is a student at Jindal Global Law School.]

The International Court of Justice in Jurisdictional Immunities of the State (Germany v Italy) noted that rules of state immunity reflect the principle of sovereign equality of states. In little under a year, English courts have thrice dealt with the question of state immunity vis-à-vis recognition and enforcement of arbitral awards. In CC/Devas v India (Devas Judgement), the Court of Appeal affirmed the decision of the High Court (High Court Judgement) that a state’s ratification of the New York Convention (NYC) is not, by itself, a waiver of adjudicative immunity from English courts within the terms of the State Immunity Act, 1978 (SIA). While the Supreme Court of the United Kingdom (UKSC) held in Spain v Infrastructure (Infrastructure Judgement) that ratification of the ICSID Convention does amount to a waiver of such immunity. Why has the same test under the SIA yielded two different answers from English courts? This post argues that divergence arises not from interpretative inconsistency but from the difference in the enforcement regimes of the two treaties. 

Infrastructure Judgement: The ICSID Convention Answer

The arbitral award concerning Spain arose from the investment of Infrastructure Services Luxembourg S.À.R.L. and Energia Termosolar B.V. (collectively, Infrastructure) in the Andasol solar power station in Granada in reliance on Spain’s renewable-energy regime. When Spain amended that regime, Infrastructure commenced ICSID arbitration under the Energy Charter Treaty. The tribunal awarded Infrastructure €112 million (reduced by €11 million on rectification) (Infrastructure Award). The award against Zimbabwe arose from an investment made by Border Timbers Limited and Hangani Development Co. (Private) Limited (collectively, Border Timbers) in land that was expropriated by the government without compensation. In this case, an ICSID tribunal ordered Zimbabwe to pay US$124 million in principal damages, plus moral damages and costs (the Border Timbers Award). Both these awards were registered in the High Court under the Arbitration (International Investment Disputes) Act 1966 (1966 Act), which gives the ICSID Convention effect in English law. Spain and Zimbabwe (collectively, Concerned States) each filed an application in the High Court to set aside the registration of the respective award, claiming immunity under Section 1(1) of the SIA. Both applications were dismissed on the ground that the Concerned States did not have adjudicative immunity as regards recognition and enforcement of ICSID awards. In joint appeals filed by the Concerned States, the Court of Appeal held that they had submitted to the jurisdiction of English courts “by prior written agreement” under Section 2(2) and were not entitled to adjudicative immunity (Appellate Judgement). 

The Appellate Judgement was appealed to the UKSC, leading to the Infrastructure Judgement in which the UKSC upheld the Court of Appeal’s findings. The UKSC applied the general rule of interpretation (Article 31, VCLT) to the words “each contracting state shall recognise an award … as if it were a final judgment of a court in that state” in Article 54(1) as setting out mutual and reciprocal obligations: each contracting state agrees not only to enforce awards in its own territory but also that awards against it are enforced by other contracting states. The UKSC opined that the said scheme is inconsistent with the preservation of adjudicative immunity with respect to recognition and enforcement of awards. In the context of the said provisions, it concluded that Article 54(1) must be viewed as part of a self-contained enforcement regime that requires national courts to recognise and enforce awards without re-examining them on merits and/or refusing their enforcement on public policy grounds (para. 92). This was furthered by the object and purpose of the ICSID Convention: to encourage foreign investment by reducing sovereign risk through a self-contained and reciprocal enforcement regime (paras 106–107). The Court also used the travaux préparatoires as a supplementary means of interpretation (Article 32, VCLT) to confirm its findings. Its findings concern adjudicative immunity only. Immunity from execution (actual seizure of State assets) is expressly preserved by Article 55 of the ICSID Convention.

Devas Judgement: The New York Convention Answer

The Devas Judgement pertains to a non-ICSID award. CC/Devas (Mauritius) Ltd., Devas Employees Mauritius Private Limited, and Telcom Devas Mauritius Limited (Devas Investors) had commenced arbitration proceedings against India under the Mauritius-India BIT over India’s annulment of a satellite-spectrum agreement. An UNCITRAL tribunal rendered a jurisdiction and merits award in July 2016 (Jurisdiction and Merits Award) and a quantum award in October 2020 (Quantum Award). Both awards fell to be enforced under the NYC. 

In 2021, the Devas Investors sought enforcement of both awards in the High Court and secured an enforcement order. India applied to set aside this order, claiming adjudicative immunity under the SIA. The question was whether India, by ratifying the NYC, had submitted to the jurisdiction of English courts by “prior written agreement” under Section 2(2) of the SIA. The Devas Investors relied on Article III of the NYC, which obliges each contracting state to recognise and enforce arbitral awards “in accordance with the rules of procedure of the territory where the award is relied upon”. The High Court answered in the negative. It held that state immunity is a procedural rule in English law and that Article III, by conditioning enforcement on the forum’s rules of procedure, preserves such rule (para. 107).

The Devas Investors appealed to the Court of Appeal, which recalled the test set out by the UKSC in the Infrastructure Judgement: a waiver of immunity by treaty requires a clear and unequivocal expression of the state’s consent to the exercise of jurisdiction. The Devas Investors argued that the opening words of Article III (“each Contracting State shall recognize arbitral awards as binding and enforce them”) are identical to those of Article 54(1) of the ICSID Convention, which the UKSC had held to be the clearest possible submission to jurisdiction. Given the NYC’s pro-enforcement bias, Article III must carry the same consequence regardless of its second clause (para. 24). The Court of Appeal rejected this submission, noting that the two provisions differ in wording, context, and purpose (para. 30). Unlike Article III, Article 54(1) of the ICSID Convention contains no requirement that domestic rules of procedure be followed. It noted further differences: (1) the ICSID Convention necessarily involves a state party, whereas the NYC applies to state and non-state parties alike; and (2) the ICSID Convention aims to encourage investment through a mutual, reciprocal enforcement regime whereas the NYC generally facilitates international arbitration. The dispositive question thus narrowed to the meaning of “rules of procedure” used in Article III. 

The Court held that “rules of procedure” encompass the forum state’s law of state immunity. The Devas Investors accepted that state immunity is procedural in both international and English law, but pressed for a functional reading limited to rules that facilitate recognition and enforcement. Rejecting that reading, the Court held that a rule of procedure is one that bars a claim for reasons not going to its legal merits – and that state immunity is such a rule. The Court further reasoned that if state immunity fell outside “rules of procedure”, there would be no basis for retaining immunity from execution either – a state ratifying the NYC would then be taken to have waived immunity at both stages. The Court noted the absurdity wherein such a waiver would be wider than that under the ICSID Convention, achieved without any mention of state immunity and despite Article III expressly preserving rules universally understood to encompass it. (para. 36). 

The practical reach of these findings is, however, narrow. Section 9(1) of the SIA already provides a direct exception to adjudicative immunity where a state has agreed in writing to arbitrate, stating that in such circumstances “the State is not immune as respects proceedings in the courts of the United Kingdom which relate to the arbitration”. The Article III argument is thus relevant only where, as in Devas, the state contests the existence or scope of the arbitration agreement itself. India resists Section 9 here on the basis that the dispute fell outside its offer to arbitrate in the Mauritius-India BIT. (para. 52).

Where the Two Conventions Diverge

The ICSID Convention creates a self-contained enforcement system in which challenges to an award’s validity can only be made before an ad hoc annulment committee on the specific grounds set out in Article 52. If an award survives this process, domestic courts in the state of enforcement have no power to review it on the merits or refuse enforcement on public policy grounds. Under this scheme, an ICSID award is to be treated as if it were a final judgement of the enforcing State’s court. Article 55 carves out immunity only at the stage of execution of an award (the actual seizure of a state’s assets). Submission to the enforcing court’s jurisdiction is thus a necessary implication of the Convention’s express words.

The NYC is worded differently. It does not require unconditional recognition of awards by a contracting state. Article V contains a list of grounds on which enforcement may be refused by the enforcing court, and Article III subjects enforcement to the “rules of procedure” of the forum state. It is into this procedural space that English law inserts its doctrine of state immunity. Lewison LJ observes that the NYC is pro-arbitration and pro-enforcement once an English court’s jurisdiction is engaged, but that does not answer the question of whether such jurisdiction is engaged at all (para. 64). The Devas Investors’ argument was self-contradictory because they accepted that Article III subjects enforcement to the forum’s rules of procedure, yet contended that the same provision waived a rule English law classifies as procedural (para. 67).This explains why the same statutory test under the SIA, applied through the same interpretive rules of the VCLT, has produced opposing outcomes. 

The deeper lesson of the two judgments is that whether a state’s ratification of a treaty waives immunity under the SIA depends on what the particular treaty says. Commentators note how the two treaties approach enforcement-related immunity differently, and the treaty-by-treaty interpretation of English courts ensures such difference is respected.

Australia’s Parallel Path

Australia has travelled a parallel path. The High Court of Australia (HCA) has held that Spain, as an ICSID contracting State, cannot invoke immunity against enforcement of the Infrastructure Award. On the NYC, as discussed here, the Federal Court of Australia upheld India’s adjudicative immunity over the Quantum Award, holding that it fell outside India’s “submission to jurisdiction” under the Foreign State Immunities Act because it did not arise from a “commercial” relationship, and was thus caught by India’s commercial reservation (paras 72, 82). On appeal, the HCA agreed, but on the broader ground that NYC ratification is not, by itself, a waiver — reasoning the (English) Court of Appeal has since called “highly persuasive” in the Devas Judgement (para. 43).

Concluding Reflections

Four implications follow. 

Firstly, the judgements have created a bifurcated enforcement landscape in the UK. For ICSID awards, investors face no immunity obstacle at recognition and enforcement stage, though immunity from execution against state assets remains governed separately by the SIA and Article 55 of the ICSID Convention; for non-ICSID awards, they cannot invoke a waiver of adjudicative immunity under Section 2(2) of the SIA. They may, however, rely on the Section 9(1) arbitration exception noted above. Investors would nonetheless be well-advised, when negotiating the underlying investment contract and before any dispute arises, to weigh the availability of ICSID arbitration and where it is unavailable (e.g. where the respondent state is not an ICSID party), to obtain express waiver of immunity from the host state. 

Second, immunity from execution remains unaffected even for ICSID awards. An investor enforcing an ICSID award must still confront the separate, often decisive, barrier of immunity from execution against State assets. This has led commentators to opine that “considerable uncertainty remains as to the extent to which investors will, in fact, be able to monetise ICSID awards”. 

Third, the English law position on whether NYC ratification waives adjudicative immunity is not yet settled. Both the High Court and the Court of Appeal have answered in the negative, but the Devas Judgement remains subject to a potential UKSC appeal. The prospects of a different outcome appear slim, however, since the Court of Appeal applied the very test laid down by the UKSC in the Infrastructure Judgement.  

Four, these outcomes are part of a broader global trend. As the parallel developments in Australia demonstrate, courts in different jurisdictions seem to be converging on their views concerning the availability of sovereign immunity under the ICSID Convention and the NYC respectively for states seeking to resist enforcement of awards. The judgements of English courts discussed above are best read as one strand of this wider convergence rather than as an isolated development.