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Foreign State Immunity and the New York Convention


The Federal Court of Australia has confirmed that foreign states may not invoke sovereign immunity to avoid the recognition and enforcement of arbitration awards falling within the scope of the New York Convention.


Australia’s Foreign States Immunities Act 1985 provides that foreign states are immune to the jurisdiction of Australian courts unless they have submitted to the jurisdiction, which may be done by agreement. In CCDM Holdings LLC v Republic of India, India invoked the Foreign States Immunities Act in an application to set aside an application to enforce an award it had obtained in an investor-State arbitration under a bilateral treaty between India and Mauritius.


The judgment of Jackman J follows the recent decision of the High Court in Kingdom of Spain v Infrastructure Services Luxembourg. In that case, the High Court held that, by ratifying the ICSID Convention and agreeing to enforce awards made under that Convention, states expressly waived their sovereign immunity to the recognition and enforcement of relevant awards by foreign courts. Awards against states, however, are not all made within the ICSID process – many (such as the award against India in this case) fall to be enforced under the scheme created by the New York Convention. India argued that the High Court’s decision in Spain v Infrastructure Services Luxembourg was based upon a close analysis of the ICSID Convention, and so did not apply to awards under the New York Convention.


Accepting that reasoning, Jackman J embarked upon a close analysis of the effect of a state’s ratification of the New York Convention. He concluded that, by Article III of the New York Convention, each party to the Convention had agreed to “recognise and enforce arbitral awards which fall within the scope of the Convention. If India is a party to such an arbitral award, it is an obvious and necessary implication that India is requiring Australia to recognise and enforce that award. As Australia would be unable to do so if India were at liberty to oppose the recognition and enforcement of that award on the ground of foreign State immunity, the terms of Art III are inconsistent with India being able to deploy such a defence.” The fact that India had entered into the bilateral treaty with Mauritius (which contained an agreement to submit disputes to arbitration) and the New York Convention (by which India consented to the mechanism for enforcing awards in the courts of other Convention countries) together amounted to a submission to jurisdiction.


This judgment confirms that the High Court’s conclusion in Spain v Infrastructure Services Luxembourg – that a state against which an ICSID award has been made is not immune from the recognition and enforcement of that award in Australia – applies equally to awards falling within the scope of the New York Convention (which will be, in practice, virtually every other award against a state). However, like the High Court decision, CCDM Holdings LLC v Republic of India leaves one critical question untested. The High Court distinguished between recognition (an acknowledgment that the award is binding), enforcement (a ruling that the award may be enforced as an order of the Australian court) and execution (the step at which property is seized to satisfy the award). While it is now entirely clear that the Foreign States Immunities Act provides no defence to the recognition and enforcement of an award against a state, it remains to be seen whether state immunity is available in Australia as a defence against execution. It seems likely that this point will be tested, perhaps by Spain or India, in the near future.

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