Federal Court: April 2021

ARBITRATION 

International arbitration – applications for recognition and enforcement of awards of the International Centre for Settlement of Investment Disputes under s 35(4) of the International Arbitration Act 1974 (Cth).

Background

The principal issue raised for determination by the Full Court of the Federal Court of Australia (Allsop CJ, Perram and Moshinsky JJ) in Kingdom of Spain v Infrastructure Services Luxembourg S.a.r.l. [2021] FCAFC 3 was whether foreign sovereign immunity applied to prevent parties in whose favour an arbitral award was given from seeking recognition of that award against the Kingdom of Spain. 

Spain is a party to the International Centre for the Settlement of Investment Disputes (‘ICSID’) Convention 1966 (‘Convention’). The issue turned upon the proper construction of Art 54 and Art 55 of the Convention. 

Art 54 of the Convention provides that each contracting state shall ‘recognise an award rendered pursuant to the Convention as binding and enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that State…’ and sets out the procedure by which that recognition is to be effected. Art 55 recognises sovereign immunity as applying to actions for ‘execution’ only. 

Spain characterised the application as an enforcement action under Art 54(2) and argued that ‘execution’ in Art 55 includes ‘enforcement’ of an award which is the subject of foreign sovereign immunity under s 9 of the Foreign States Immunities Act 1985 (Cth). It provides that a foreign State is immune from the jurisdiction of the courts of Australia in a proceeding unless, for example, it has ‘submitted to the jurisdiction’ including by entering into an agreement to that effect.