The High Court of Australia (HCA) has unanimously dismissed an appeal by the Kingdom of Spain (Spain) in a decision concerning foreign state immunity handed down on 12 April 2023 in Kingdom of Spain v Infrastructure Services Luxembourg S.à.r.l. [2023] HCA 11.[1]
The HCA unanimously rejected Spain’s appeal from a decision of the Full Federal Court of Australia (Federal Court)[2] that had determined:[3]
- that Spain had waived any foreign state immunity from the jurisdiction of Australian courts by Spain’s entry as a contracting party to the “Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1965)” (the ICSID Convention); and
- to enforce two investment arbitral awards of the ICSID in Australia under s 35(4) of the International Arbitration Act 1974 (Cth) against Spain.
Factual Background
In an article published by Baker McKenzie on 23 April 2020, we reported on the background to this proceeding and the decision of the Federal Court of Australia on 24 February 2020. This article can be accessed here – [Australian court enforces ICSID awards against Spain – Global Litigation News (bakermckenzie.com)].
Section 9 of the Foreign States Immunities Act 1985 (Cth) (FSIA) provides that, except as provided in the FSIA, a foreign state is immune from the jurisdiction of Australian courts. However, section 10 of the FSIA sets out provisions regarding submission to the Australian jurisdiction and provides, in section 10(2), that:
“A foreign State may submit to the jurisdiction at any time, whether by agreement or otherwise, but a foreign State shall not be taken to have so submitted by reason only that it is a party to an agreement the proper law of which is the law of Australia.“
Foreign state immunity – Spain’s appeal
Spain’s appeal to the HCA primarily concerned two questions:[4]
- whether, under section 10 of the FSIA, Spain’s entry into the ICSID Convention and agreement to Articles 53-55 of that Convention, constituted a waiver of the foreign state immunity codified in section 9 of the FSIA, where, relevantly, Article 54(1) of the ICSID Convention provides that: “Each Contracting State shall recognize an award rendered pursuant to this 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
- whether Spain’s amenability to the Australian courts’ jurisdiction was limited to “bare recognition” of ICSID awards, or to “recognition” and “enforcement” of those awards, and whether the orders made by the Federal Court of Australia amounted to “enforcement”.
Waiver of state immunity
The HCA ultimately determined that the waiver in section 10(2) of the FSIA was “unmistakable”.[5] In doing so, the Court stated that section 10(2) aligns with the approach taken in the United States to waiver of immunity, where: [6]
- general immunity of a foreign State from jurisdiction does not apply where the state has “waived its immunity either explicitly or by implication”;
- any construction of words claimed to amount to waiver needs to be construed narrowly; and
- waiver will rarely be established by implication and will only arise where the waiver is unmistakeable.
Interpretation of the ICSID Convention
The HCA then considered Articles 53-55 of the ICSID Convention, finding that:
- the words “recognition”, “enforcement” and “execution” in some contexts pertaining to international arbitration have been used in “vague, overlapping and interchangeable senses”[7] and that these words have been used separately and with different meanings in Articles 53-55 of the ICSID Convention;
- given the ICSID Convention has translations in English, French and Spanish, and that each text is authentic and authoritative, the HCA needed to reconcile any inconsistencies in meaning of these words in each language text of the ICSID Convention;
- there is a clear enough distinction between these words in the English text to draw a distinction, namely, that:
- to “recognise” is expressed to apply to the entirety of an ICSID award and involves a “recognition” of that award as “binding” under domestic law of the contracting State;[8]
- to “enforce” an ICSID award is to apply to enforce any pecuniary obligations imposed by the award but to not go any further; and
- to “execute” is the formal means by which a judgment enforcing the arbitral award is executed and given effect by the contracting State;
- however, on a literal interpretation, the concepts of “enforcement” and “execution” in the French and Spanish texts would have the same meaning, such that enforcement would be synonymous with execution, which would mean there would be a conflict between the French and Spanish texts on the one hand, and the English text on the other; and
- the best approach to deal with that conflict was to proceed on the basis that there was no real difference in the meaning of the texts that required reconciliation (at least in respect of the key terms “recognition”, “enforcement” and “execution”).[9]
Ultimately, the HCA dismissed Spain’s appeal, finding that Spain, by being subject to binding ICSID arbitral awards and consenting to Articles 53-55 of the ICSID Convention, had waived foreign State immunity from the jurisdiction of Australian courts to recognise and enforce, the ICSID awards but not to execute them[10], affirming the Full Federal Court’s findings in respect to the distinction between “enforcement” of an award under Article 54(1) of the ICSID Convention and “execution” of an award under Article 54(3) of the Convention. The HCA also accepted the Full Federal Court’s finding that there remains an exception to immunity relating to commercial property.[11]
Conclusion
This is an important decision from the HCA which demonstrates that Australian courts will continue to take a supportive approach to arbitration, including investment arbitration.
[1] The full text of the decision can be accessed here.
[2] Eiser Infrastructure Ltd v Kingdom of Spain [2020] FCA 157; 142 ACSR 616.
[3] Kingdom of Spain v Infrastructure Services Luxembourg S.à.r.l. [2023] HCA 11 at [8].
[4] [2023] HCA 11 at [7].
[5] [2023] HCA 11 at [29]
[6] [2023] HCA 11 at [29]
[7] [2023] HCA 11 at [42]
[8] [2023] HCA 11 at [43]
[9] [2023] HCA 11 at [62].
[10] [2023] HCA 11 at [8].
[11] [2023] HCA 11 at [9].
