Border Timbers Ltd v Republic of Zimbabwe

Hearing dates: 17 – 20 June 2024

Approved Judgment

This judgment was handed down remotely at 2 pm on 22 October 2024 by circulation to the parties or their representatives by e-mail and by release to the National Archives

The 1965 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (“the Convention”) established the International Centre for Settlement of Investment Disputes (“ICSID”) and provided for the conciliation or arbitration of legal disputes arising directly out of investments between a contracting state and a national of another contracting state.

The question on these appeals is whether foreign states, the subject of adverse arbitration awards rendered pursuant to the provisions of the Convention, can rely on state immunity to set aside the registration of those awards in the High Court under the Arbitration (International Investment Disputes) Act 1966 (“the 1966 Act”). The 1966 Act is the legislation by which the United Kingdom gave effect to its obligation to make the provisions of the Convention effective in its territories.

In his judgment in Infrastructure Services Luxembourg SARL and another v The Kingdom of Spain dated 24 May 2023, Fraser J answered that question in the negative. By order dated 25 May 2023 he dismissed Spain's application to set aside the order of Cockerill J dated 29 June 2021 ordering registration of the award of the arbitral tribunal in ICSID Case No. ARB/13/31 (as rectified), as if it had been a judgment of the High Court. By that award, originally issued on 15 June 2018 and rectified on 29 January 2019, Spain is required to pay the claimants (“the ISL claimants”) compensation of €101m.

Dias J reached the same conclusion, but for entirely different reasons, in her judgment in Border Timbers Limited and another v Republic of Zimbabwe dated 19 January 2024. By order of the same date she dismissed Zimbabwe's application to set aside the order of Cockerill J dated 8 October 2021 registering the award of the arbitral tribunal in ICSID Case No. ARB/10/25. By that award, rendered on 28 July 2015, Zimbabwe is required to reinstate properties to the claimants (“the Border claimants”) and pay US$29,263,498, or, in default of reinstatement, pay US$124,041,223. In either event Zimbabwe is to pay a further US$1m in moral damages.

Spain and Zimbabwe now appeal those decisions, with permission granted by Males LJ in the case of Spain, and by Dias J herself in the case of Zimbabwe. The appeals were heard together.

The central issues in the appeals

Spain and Zimbabwe's contention is that neither the Convention nor the 1966 Act deprives foreign states of their general immunity from the adjudicative jurisdiction of the courts of the United Kingdom conferred by section 1(1) of the State Immunity Act 1978 (“the SIA”) which provides:

“A State is immune from the jurisdiction of the courts of the United Kingdom except as provided in the following provisions of this Part of this Act.”

Further, they contend that the provisions of the Convention (and in particular article 54) do not constitute a prior written agreement by them to submit to the jurisdiction of the courts of the United Kingdom in respect of proceedings on an ICSID arbitration award within the meaning of the exception from state immunity set out in section 2 of the SIA.

Spain and Zimbabwe argue that the exception to state immunity which does permit registration of an ICSID arbitration award against a foreign state is that provided by section 9 of the SIA, removing immunity where a foreign state has agreed in writing to submit a dispute to arbitration. But Spain and Zimbabwe contend that they are entitled to challenge, and the English courts must determine afresh, the validity of the reference to arbitration and the jurisdiction of the arbitral tribunal, and therefore the applicability of section 9, on an application to set aside registration. Both Spain and Zimbabwe dispute the validity of the arbitration proceedings against them (and the resultant award), although on very different grounds:

i) Spain submits that its agreement to arbitrate with the ISL claimants, found in article 26 of the Energy Charter Treaty (“ECT”), which in turn provides for ICSID arbitration, has been disapplied as between EU member states following the CJEU's decisions in Slovak Republic v Achmea BV, Case C-284/16 ECLI:EU:C:2018:158 and Republic of Moldova v Komstroy LLC Case C-741/19 ECLI:EU:C:2021:655. Spain argues that those decisions have effect not only as a matter of “domestic” EU law but also, as a matter of international law, to delineate the manner in which EU States deal (amongst themselves) with the perceived conflict between the ECT's reference of disputes to ICSID arbitration on the one hand, and the primacy of the CJEU under the TFEU on the other. As the ISL claimants are incorporated in EU member states (Luxembourg and the Netherlands respectively), Spain contends that article 26 is therefore disapplied.

ii) Zimbabwe does not challenge the validity of the relevant arbitration agreement to be found in article 10 of a bilateral investment treaty between Zimbabwe and Switzerland, but denies that its dispute with the Border claimants falls within that article.

Fraser J rejected each of the above contentions advanced by Spain. His primary finding, based firmly on his reading of the decision of the Supreme Court in Micula & Ors v Romania (European Commission intervening) [2020] UKSC 5, [2020] 1 WLR 1033, was that the Convention, as given effect in this jurisdiction by the 1966 Act, precluded Spain raising any “defence” under the SIA to the recognition of an ICSID arbitration award. In the alternative, if the SIA was engaged, Fraser J found that Spain did not have immunity because (i) article 54 of the Convention constituted a submission to the jurisdiction for the purposes of the exception in section 2 of the SIA; and/or (ii) it was not open to Spain to dispute that it had agreed to arbitration within section 9 of the SIA. Spain appeals each of those findings.

Dias J, contrary to the submissions of both the Border claimants and Zimbabwe, held that section 1(1) of the SIA had no application to the registration of an ICSID arbitration award because such registration was an essentially automatic ministerial act, not involving any adjudicative step on the part of the English courts in respect of which immunity could arise. She held that questions of immunity would only arise if the judgment creditor sought to execute the registered award against the property of the state: section 13(2)(b) of the SIA. Had she found that registration did engage section 1(1) of the SIA, Dias J would have found (contrary to Fraser J's judgment) that (i) article 54 of the Convention was not a sufficiently clear and unequivocal submission to the jurisdiction for the purposes of section 2 of the SIA; and (ii) the exception in section 9 is only engaged if the court is itself satisfied that there was a valid reference to arbitration.

Zimbabwe appealed Dias J's primary finding that registration of an ICSID arbitration award was not an adjudicative act, an appeal that the Border claimants do not resist. The Border claimants instead, by way of Respondent's Notice, seek to uphold Dias J's order by challenging her findings in respect of section 2 and section 9 of the SIA and also on the basis of a new argument, namely, that Zimbabwe did not have immunity from the adjudicative jurisdiction because section 23(3) of the SIA excluded from the scope of section 1(1) “matters that occurred before the date of the coming into force of [the SIA]”, arguing that the Convention and the 1966 Act were such “matters”.

The appeals therefore give rise to three central issues:

i) whether section 1(1) of the SIA applies, in principle, to the registration of ICSID arbitration awards against a foreign state under the 1966 Act.

ii) if section 1(1) does apply, whether the exception to state immunity in section 2 of the SIA is necessarily engaged because states, in signing the Convention, have agreed in writing to submit to the jurisdiction in relation to the enforcement of ICSID arbitration awards.

iii) if section 1(1) does apply, and a state has not submitted to the jurisdiction by the very fact of being a party to the Convention, whether a foreign state is estopped or otherwise prevented from asserting the invalidity of the underlying award, with the result that the exception in section 9 of SIA is necessarily satisfied.

If its appeal fails on state immunity grounds, Zimbabwe seeks an order that its...