International investment arbitration has emerged as a vital component of international business law, offering a specialised mechanism for resolving disputes between foreign investors and host States of investment. The enforcement of investment arbitration awards is one of the most critical aspects of the dispute resolution process. Unless the decisions reached were legally binding and effectively carried out by the parties involved, investor-State arbitration would be a costly but pointless endeavour.
The enforcement regimes established under the International Centre for Settlement of Investment Disputes Convention (the “ICSID Convention”) and the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”) provide robust enforcement mechanisms. Furthermore, unlike businesses, States cannot simply be liquidated in order to frustrate the enforcement of arbitration awards against them.
Nevertheless, there can be difficulties in enforcing arbitration awards against States. This note focuses on the recognition and enforcement procedures for investment arbitral awards and sheds light on the challenges that may arise during the enforcement process.
Recognition and Enforcement of Investment Arbitration Awards
For an investment arbitral award to be enforced, two steps must typically be taken: first, the award must be recognised and converted into a domestic judgment. Second, the recognised judgment must be enforced according to domestic procedures governing the execution of judgments.
Two main international instruments potentially apply to ensure the recognition and enforcement of investment arbitration awards: the ICSID Convention and the New York Convention.
Recognition and Enforcement of ICSID Awards
The ICSID Convention provides a specialised and automatic enforcement regime, ensuring that the award is recognised as binding and can be enforced within the territories of contracting States.
- Contracting States must recognise ICSID awards as binding, which requires domestic courts to acknowledge the legally binding nature of the award and to take the necessary steps under domestic law to grant legal effect to the award. The ICSID Convention provides no grounds for national courts to refuse recognition of ICSID awards.
- The ICSID Convention does not provide a statute of limitations to apply for the recognition of an arbitral award. An award creditor can, therefore, apply for recognition prior to or even in parallel with annulment or review proceedings.
- According to Article 54(1) of the ICSID Convention, each contracting State must “enforce the pecuniary obligations imposed by [the ICSID] award within its territories as if it were a final judgment of a court in that State.”
- However, although contracting States are legally bound by ICSID awards, the enforcement of such awards does not supersede laws related to immunity from execution.
Recognition and Enforcement of New York Convention Awards
The New York Convention provides a detailed framework governing the recognition and enforcement of investment arbitration awards. The New York Convention sets forth States’ obligations to recognise arbitral awards as binding and enforce them. Courts of the Contracting States have often highlighted the mandatory nature of the obligation under Article III.
Obstacles to the Recognition and Enforcement of Investment Arbitration Awards
While the ICSID Convention and the New York Convention offer robust mechanisms for the recognition and enforcement of awards, challenges such as the annulment procedure and sovereign immunity can hinder the enforcement process. In this section, we will explore the key obstacles parties may encounter when seeking to recognise and enforce investment arbitration awards under both conventions.
Annulment of ICSID Awards
ICSID awards can only be annulled through the “self-contained” ICSID annulment process. In other words, parties who wish to challenge an ICSID award can only do it by requesting its annulment in accordance with the ICSID Convention provisions and are notably precluded from challenging ICSID awards before national courts.
The list of the limited grounds for annulment is outlined in Article 52(1), being:
- the tribunal was not properly constituted;
- the tribunal manifestly exceeded its powers;
- there was corruption on the part of a member of the tribunal;
- there has been a serious departure from a fundamental rule of procedure; or
- the award has failed to state the reasons on which it is based.
The fact that an annulment ground is established does not imply the annulment of the award. Annulment tribunals have discretion in exercising their power to annul an award, and “annulment will ensue only if the flaw has had a serious adverse impact on one of the parties.”
If an award is annulled, the dispute or parts of it can be reheard at the request of a party by a new tribunal, which means that the parties will have a second chance to arbitrate the same issues.
Prevention of Enforcement of New York Convention Awards
According to Article V(1) of the New York Convention, a court can refuse to grant recognition and enforcement of an award:
- in case of incapacity or invalidity of the agreement to arbitrate under the applicable law;
- in case of improper notice of the appointment of the arbitrator or the arbitration proceedings or otherwise inability to present one’s case;
- in case the tribunal does not comply with the mandate conferred to it by the parties;
- if the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties or the law of the place of arbitration;
- if the award has not become binding or is not final;
Article V(2) of the New York Convention provides that recognition and enforcement “may also be refused” if the competent authority in the country where the recognition and enforcement are sought finds that (i) the dispute is not arbitrable under the laws of that country or (ii) the recognition or enforcement of the award would be contrary to the public policy of that country.
Arbitral tribunals have confirmed that the list of grounds for the refusal to recognise or enforce an award should be interpreted restrictively.
The main obstacle in enforcing awards against recalcitrant States that refuse to comply with arbitration awards is typically sovereign immunity.
Immunity from Recognition of an Arbitral Award
Most States adhere to a “restrictive theory” of immunity, which protects a sovereign State and its assets from the jurisdiction of the courts of another State with respect to sovereign acts. This protection does not generally extend to commercial activities, however.
States following the restrictive theory of immunity tend to recognise an “arbitration exception” to sovereign immunity, preventing foreign States from using sovereign immunity to impede the recognition of an arbitral award.
Immunity from Execution
Sovereign immunity from execution is a legal protection that shields certain assets or property of the State from being seized or confiscated to satisfy the creditors’ claims pursuant to arbitral awards rendered in their favour.
The New York Convention does not address the matter of sovereign immunity from execution.
In contrast, the ICSID Convention explicitly provides that the enforcement of awards does not affect domestic laws in force relating to immunity from execution.
Assets protected by sovereign immunity from execution often include:
- property (including bank accounts) used for diplomatic and consular purposes;
- military property;
- central bank accounts;
- property considered as part of a country’s cultural heritage; and
- property included in exhibitions of objects of scientific, cultural or historical interest.
In other words, not all assets owned by States are shielded from being seized and confiscated. Protection is usually granted to assets used for official State purposes, however. Assets used for commercial purposes (as opposed to those used for non-commercial or public purposes) are typically not protected by sovereign immunity. Therefore, State assets used for commercial activities might be subject to seizure, whereas those used for governmental functions typically would not be.
Finally, even if assets are technically available for seizure under the principles above, practical and political considerations might still influence the enforcement process. For instance, seizing certain State-owned assets could result in significant diplomatic tensions.
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The ICSID and New York Conventions offer avenues for parties to obtain the enforcement of their awards. However, the enforcement process often faces challenges. While there is a key advantage in enforcing awards against States as opposed to commercial entities – they will not disappear – enforcing an award against a recalcitrant State requires persistence and locating assets not protected by sovereign immunity.
 ICSID Convention, Art. 54.
 CMS Gas Transmission Company v. The Argentine Republic, ICSID Case No. ARB/01/8, Memorandum Opinion & Order, United States District Court Southern District New York, 30 September 2012, para. 61.
 ICSID Convention, Article 54(1); see also Electrabel S.A. v. The Republic of Hungary, ICSID Case No. ARB/07/19, Decision on Jurisdiction, Applicable Law and Liability, 30 November 2012, para. 3.50.
 ICSID Convention, Art. 55; see also “Immunity From Execution and Attachment” below.
 New York Convention, Art. II.
 Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974).
 New York Convention, Art. III.
 See, e.g., Gater Assets Ltd. v. Nak Naftogaz Ukrainiy  EWHC 725 (Comm), para. 11.
 See e.g., InfraRed Environmental Infrastructure GP Limited and others v. Kingdom of Spain, ICSID Case No. ARB/14/12, Decision on Annulment, 10 June 2022, para. 339; OI European Group B.V. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/11/25, Decision on the Application for Annulment of the Bolivarian Republic of Venezuela, 6 December 2018, para. 58.
 ICSID Convention, Art. 53(1).
 ICSID Convention, Art. 52(1).
 Orascom TMT Investments S.à r.l. v. People’s Democratic Republic of Algeria, ICSID Case No. ARB/12/35, Decision on Annulment, 17 September 2020, para. 125; Compañía de Aguas del Aconquija S.A. (formerly Aguas del Aconquija) and Vivendi Universal S.A. (formerly Compagnie Générale des Eaux) v. Argentine Republic (I), ICSID Case No. ARB/97/3, Decision on the Argentine Republic’s Request for Annulment of the Award rendered on 20 August 2007, 10 August 2010, para. 252.
 Tulip Real Estate Investment and Development Netherlands B.V. v. Republic of Turkey, ICSID Case No. ARB/11/28, Decision on Annulment, 30 December 2015, para. 45; Orascom TMT Investments S.à r.l. v. People’s Democratic Republic of Algeria, ICSID Case No. ARB/12/35, Decision on Annulment, 17 September 2020, para. 125.
 ICSID Convention, Art. 52(6).
 L. Reed L., J. Paulsson and N. Blackaby, Guide to ICSID Arbitration, Kluwer Law International, 2004, p. 99.
 New York Convention, Art. V(1).
 New York Convention, Art. V(2).
 See, e.g., CME Czech Republic B.V. v. The Czech Republic, Judgment of Svea Court of Appeal, 15 May 2003, para. 265.
 In 2023, the highest court of appeal in Australia and the UK’s Commercial Court have each considered that States cannot plead sovereign immunity to avoid the recognition of an ICSID Award; see Kingdom of Spain v Infrastructure Services Luxembourg S.à.r.l.  HCA 11; Infrastructure Services Luxembourg SARL & Anor v Kingdom of Spain  EWHC 1226 (Comm).
 ICSID Convention, Art. 55; see, e.g., Eiser Infrastructure Limited and Energía Solar Luxembourg S.à r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/36, Judgment of the Federal Court of Australia  FCA 157, 24 February 2020, para. 168; Mobil Cerro Negro Holding, Ltd., Mobil Cerro Negro, Ltd., Mobil Corporation and others v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/07/27, Decision of the US Court of Appeals for the Second Circuit Rejecting Ex Parte Recognition of the Award, 11 July 2017, para. 14.