Key takeaways
State immunity
The English Court distinguishes between adjudicative and enforcement jurisdiction over States.
Scope of state immunity defence
The English Court construes this narrowly.
Waiver of state immunity by treaty
There has to be a clear and unequivocal expression of the State's consent to the exercise of jurisdiction.
The Kingdom of Spain -v- Infrastructure Services Luxembourg S.À.R.L. and another; Republic of Zimbabwe -v- Border Timbers Ltd and another [2026] UKSC 9
These were conjoined appeals, in which the Kingdom of Spain (Spain) and the Republic of Zimbabwe (Zimbabwe), each the subject of arbitration awards rendered pursuant to the 1965 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention), sought to rely on their sovereign immunity to set aside the registration of those awards in the English High Court under the Arbitration (International Investment Disputes) Act 1966 (1966 Act).
The Supreme Court held that both States had submitted to the jurisdiction of the English Court by virtue of s.54 of the ICSID Convention. Specifically, article 54(1) provides that Contracting States must recognise ICSID awards and enforce them as if they were a final judgment of a court in that State.
Consequently, Spain and Zimbabwe could not object to registration of the awards against them on the grounds of state immunity.
State Immunity Act 1978
S.1 of the State Immunity Act 1978 (SIA 1978) gives foreign states immunity from the jurisdiction of UK courts, except as provided for in ss.2 to 11 of the SIA 1978.
S.2(2) provides that a state is not immune regarding proceedings in respect of which it has submitted to the jurisdiction of the UK courts by a prior written agreement. S.17 of the SIA 1978 explains that an agreement includes international treaties.
S.9(1) provides that a state is not immune, if it has agreed in writing to submit a dispute to arbitration, as respects proceedings which relate to arbitration.
The background facts
Kingdom of Spain -v- Infrastructure
Infrastructure Services Luxembourg S.À.R.L. and Energia Termosolar BV (together Infrastructure) are companies domiciled in Luxembourg and the Netherlands respectively.
Infrastructure claimed that changes made by Spain to its regulatory regime governing its energy market breached the 'fair and equitable treatment' standard in article 10(1) of the Energy Charter Treaty (ECT) in respect of their investments in renewable energy facilities in Spain. All three countries are EU Member States and were all parties to the ECT and the ICSID Convention at the relevant time.
Infrastructure made a request for arbitration against Spain under article 26 of the ECT and the ICSID Convention, leading to the constitution of an arbitral tribunal and the commencement of arbitration proceedings on 22 November 2013. Spain challenged the jurisdiction of the arbitral panel, including on the basis that a claim under the ECT between an EU Member State and the national of another EU Member State infringed article 344 of the 2007 Treaty on the Functioning of the European Union (TFEU), and that the ECT had in any event to be interpreted as excluding such 'intra-EU' claims.
By an award dated 15 June 2018, the Tribunal rejected those objections and found in favour of Infrastructure. The Tribunal held that, by amending its regulatory regime, Spain had breached the 'fair and equitable treatment' standard in article 10(1) of the ECT. Spain was ordered to pay €112 million in compensation, plus interest and costs (subsequently reduced by €11 million in a rectified award).
Spain then applied to challenge the award under the annulment procedure in the ICSID Convention, alleging (among other things) that the arbitral tribunal had exceeded its powers by exercising jurisdiction over the arbitration on the basis that any intra-EU arbitration under the ECT is precluded by EU law. The ICSID Ad Hoc Committee rejected the application for annulment on 30 July 2021. Spain also sought a stay of enforcement which was initially granted but then lifted.
On 4 June 2021, Infrastructure applied without notice to the English Court to register the rectified award as a judgment in the sum of €120,083,287.88 under s.1 of the 1966 Act. The 1966 Act is the legislation by which the UK has given effect to its obligation to make the provisions of the ICSID Convention effective in its territories.
On 29 June 2021, the Court registered the award as if it were a final judgment of the High Court. Infrastructure had also applied to the Federal Court in Australia for recognition of the award as well as to the US District Court for the District of Columbia in Washington DC. Recognition in those jurisdictions was challenged by Spain on broadly the same grounds as advanced in this jurisdiction.
On 28 April 2022, Spain applied to set aside the registration order on the basis that it was immune from the adjudicative jurisdiction of the English courts under section 1(1) of the SIA 1978.
The Commercial Court dismissed the application, finding among other things that:
By becoming a party to the ICSID Convention (article 54(1) in particular) and the ECT (article 26), Spain had submitted to the jurisdiction of the English courts by prior written agreement under section 2(2) of the SIA 1978.
Alternatively, pursuant to earlier Supreme Court authority, Spain was precluded from contesting the existence of an arbitration agreement between itself and Infrastructure, such that s.9(1) of the SIA 1978 (which excepts a state from immunity as respects proceedings which relate to an arbitration) was automatically satisfied.
Alternatively, pursuant to article 26 of the ECT and the ICSID Convention, there was a valid arbitration agreement between Infrastructure and Spain for the purposes of s.9(1) of the SIA 1978.
Republic of Zimbabwe -v- Border Timbers
This dispute arose out of investments in land made by Border Timbers Ltd and Hangani Development Co. (Private) Ltd, (together Border Timbers) which Zimbabwe later expropriated without compensation.
Border Timbers initiated arbitral proceedings against Zimbabwe pursuant to a bilateral investment treaty (BIT) with Switzerland, which provided for the submission of disputes to arbitration under the ICSID Convention. Border Timbers commenced arbitration under article 10 of the BIT.
Zimbabwe disputed the Tribunal's jurisdiction, arguing that article 10 did not apply to the 'investments' purportedly made by Border Timbers as a purported 'investor' (also a term defined in the treaty) in Zimbabwe. Accordingly, Zimbabwe argued that it had not agreed to arbitrate disputes with Border Timbers under the BIT and so the ICSID Convention did not apply because there was no valid agreement to arbitrate.
In July 2015, the Tribunal dismissed Zimbabwe's objections to jurisdiction and ordered Zimbabwe to pay US$124,041,223 together with interest, a further US$1m in moral damages and costs.
Zimbabwe’s application to have the award annulled was dismissed by the ICSID Annulment Committee on 21 November 2018, with further costs ordered to be paid by Zimbabwe. Zimbabwe also sought a stay of enforcement, which was refused by that Committee.
When the award was not satisfied, Border Timbers applied without notice to the English Court to register the award as a judgment of the Court under s.1 of the 1966 Act. In October 2021, the Court registered the award as if it were a final judgment of the Court.
Zimbabwe applied to set aside the registration order on the basis that it was immune from the adjudicative jurisdiction of the English courts under s.1(1) of the SIA 1978. Border Timbers objected, contending that Zimbabwe fell within one or both exceptions to immunity set out in ss. 2 and 9 of the SIA 1978 on the basis that Zimbabwe had submitted to the jurisdiction by virtue of its agreement to the ICSID Convention and/or had agreed to submit the underlying dispute to ICSID arbitration and so was not immune in respect of proceedings in the UK relating to that arbitration.
The Court held that article 54(1) constituted a general waiver of immunity but did not amount to a submission to the jurisdiction for the purposes of s.2 of the SIA 1978. However, registration of an ICSID award was a purely administrative act and therefore not an exercise of adjudicative jurisdiction, such that the SIA 1978 did not apply at all to registration proceedings under the 1966 Act.
Both Spain and Zimbabwe appealed to the Court of Appeal.
The Court of Appeal decision
The Court of Appeal held that registration of an ICSID award under s.1 of the 1966 Act did in fact engage the adjudicative jurisdiction of the English courts. However, in relation to s.2(2) of the SIA 1978, article 54(1) of the ICSID Convention constituted a prior written agreement by which the contracting states to the ICSID Convention submitted to the jurisdiction of the courts of other contracting states. Article 54(1) was a sufficiently express and clear submission to the jurisdiction to satisfy s.2(2) and displace the immunity afforded by s.1(1) of the SIA 1978 in respect of both Spain and Zimbabwe.
The Supreme Court decision
The Supreme Court unanimously dismissed the appeals, finding that both Spain and Zimbabwe had submitted to the jurisdiction of the English courts under s.2(2) of the SIA 1978 by virtue of article 54(1) of the ICSID Convention. Consequently, they could not rely on state immunity to oppose the registration of ICSID awards against them.
S.2(2) of the SIA 1978 required a waiver of immunity by treaty to be a clear and unequivocal expression of the State's consent to the exercise of jurisdiction. Such an expression of consent did not require explicit words such as waiver or submission; the Court looked at the meaning of the words used and whether they amounted to a submission to jurisdiction.
Looking at Articles 53 to 55 of the ICSID Convention:
Article 53(1) contained an agreement (in writing) by each contracting party that awards rendered under the ICSID Convention should be final and binding. Each party agreed to abide by and comply with the terms of such an award except to the extent that enforcement was stayed. Article 53 was directed at achieving finality and an enforcing court could not re-examine the award on its merits or refuse enforcement on grounds of public policy.
Article 54(1) provided that 'Each Contracting State shall' recognise an award as binding and enforce the award within its territories as if it were a final judgment of a court in that state. The ordinary meaning of article 54(1) was that each contracting state consented to awards to which it was a party being recognised and enforced in other contracting states.
Article 55 provided that 'Nothing in Article 54 shall be construed as derogating from the law in force in any Contracting State relating to immunity of that State or of any foreign State from execution.'
In the Supreme Court’s view, the mutual and reciprocal obligations under article 54(1) were inconsistent with the preservation of adjudicative immunity. Article 54 was part of a self-contained scheme intended to result in binding and enforceable awards which a national court might not re-examine.
The scheme of articles 54 to 55 of the ICSID Convention distinguished between recognition and enforcement on the one hand and execution on the other. Article 55 preserved only immunity from execution, and this applied equally to awards against both private investors and Contracting States.
Such mutual and reciprocal enforcement obligations were consistent with the primary purpose of the ICSID Convention; namely, to encourage the flow of private investment and protect private investors against sovereign risk in the host state.
In conclusion, the object of the ICSID Convention was to preserve state immunity only in respect of execution while providing for mandatory recognition and enforcement in respect of all parties, investors and states alike. The Supreme Court added that there was a broad international consensus in other jurisdictions that article 54(1) was a waiver of adjudicative immunity by each Contracting State and national courts should interpret international conventions consistently.
Comment
For the purposes of state immunity defences, the Supreme Court has highlighted the clear distinction between adjudicative and enforcement proceedings against a State.
The decision is reflective of the English courts’ inclination to interpret state immunity narrowly. This can be seen in decisions arising out disputes where a state, or a government branch, has acted in a commercial capacity. It is also seen here in the interpretation of an international treaty.
