Eiser Infrastructure Ltd v Kingdom of Spain: The ICSID Convention, Sovereign Immunity, and the Federal Court of Australia Dealing with a Supposed "Zombie Judgment".

• Author: Dautaj, Ylli

1. Introduction

   This extended case note walks the reader through a particular contemporary issue of international law and arbitration law that was adjudicated in (initially) Eiser Infrastructure Ltd. (Eiser) and the Kingdom of Spain (Spain); that is, whether the International Centre for Settlement of Investment Disputes (ICSID) Convention preserves immunity from enforcement and execution, or only for the latter. (2) The interpretation and application rests on the linguistic and semantic understanding of the concepts recognition, enforcement, and execution, in general, and as those pertain to the ICSID Convention, in particular.

   The case at hand neatly underscores the perplexing interaction and intersection between international arbitration law and sovereign immunity law. More specifically, the case invited a nuanced comparative analysis of whether an ICSID award-debtor state can invoke the plea of sovereign immunity to shield against enforcement of an arbitral award, namely, the converting of an award into a judgment of the court.

   But why does this case merit international attention? Put simply: it navigates the Federal Court of Australia's approach to--and categorization of--the distinction between recognition, enforcement, and execution as pertains to the ICSID Convention. (3) Judicial decisions stemming from the Australian courts play a prominent role as subsidiary means of determining rules of public international law. (4) Thus, it plays an important role in international comparative law. (5)

   There are unfortunately many instances where award-creditors are forcefully turned into applicants and must rely on local courts' coercive function to make the promise of arbitration a real one. (6) When two competing claims are made at the enforcement phase, the court is sometimes tasked with the difficult and sensitive responsibility of adjudicating at the intersection of--and ultimately defer to either--international economic law or sovereignty. This conundrum is one of many manifestations of the everlasting dichotomy of private and public interests in international commerce, trade, and investment. The underlying premise for this author is that an effective transnational legal regime--such as manifested by the elaboration of the international arbitration regime--ultimately rests on the shoulders of local courts willing to enforce a global rule of law.

   This case note does not deal with other issues addressed before the Federal Court of Australia, nor does it deal with other post-award proceeding issues. (7) This case note deals only with award enforcement pursuant to the ICSID Convention. Finally, for the reader to better understand the issues at hand and the reasoning of the judges, articles 54 and 55 of the ICSID Convention are spelled out below with relevant parts marked in bold and/or underlined:

   Article 54

   (1) 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. A Contracting State with a federal constitution may enforce such an award in or through its federal courts and may provide that such courts shall treat the award as if it were a final judgment of the courts of a constituent state.

   (2) A party seeking recognition or enforcement in the territories of a Contracting State shall furnish to a competent court or other authority which such State shall have designated for this purpose a copy of the award certified by the Secretary-General. Each Contracting State shall notify the Secretary-General of the designation of the competent court or other authority for this purpose and of any subsequent change in such designation.

   (3) Execution of the award shall be governed by the laws concerning the execution of judgments in force in the State in whose territories such execution is sought.

   Article 55

   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. (8)

2. Federal Court of Australia

   The Honorary Justice Stewart heard the initial matter between Eiser and Spain on October 29, 2019, and he delivered the judgment on February 24, 2020. (9) The applicants were initially Eiser, Energia Solar Luxembourg S.A.R.L (Energia SARL), Infrastructure Services Luxembourg S.A.R.L (Infrastructure SARL), and Energia Termosolar B.V. (Energia BV) (jointly, the Applicants). Later, the Applicants were reduced to Infrastructure SARL and Energia BV. (10) Spain (the Appellant) appealed from Eiser v. Spain. (11) The appeal was head by three justices--Allsop CJ, Perram J, and Moshinsky J (jointly, the Appeals CJJ)--on August 24, 2020. (12) The respondents were now only Infrastructure SARL and Energia BV (jointly, the Respondents). (13) The judgment was delivered on February 1, 2021. (14) The matter was heard again on the form of "order for recognition" on May 25, 2021. (15) The final order judgment was delivered on June 25, 2021. (16)

   To depict the background to the saga, the Applicants had invested substantially in Spain as a result of regulatory measures "promoting the development of solar power and other sources of renewable energy" (in 1997). (17) Spain later adopted a series of laws "reducing, and eventually revoking, the financial incentives," reducing the subsidies and therefore the value in the Applicants investment. (18) The Applicants sought recourse through investor-state arbitration by invoking the Energy Charter Treaty (ECT), claiming among other things the right to fair and equitable treatment (FET). (19) The ECT provides for the optional recourse to ICSID arbitration. (20) The ICSID proceedings were commenced in 2013. (21) The tribunals issued awards in favor of the Applicants in 2017 and 2018. (22) Thus, the Applicants were turned award-creditors, while Spain became an award-debtor. (23) Due to non-voluntary compliance, the Applicants turned, among others, to the Federal Court of Australia to recognize and enforce their ICSID awards. (24)

   The case (25) underscores the interaction and intersection between sovereign immunity laws and international arbitration law. More particularly, Justice Stewart first, and later Allsop CJ, Perram J, and Moshinsky J, had to interpret the ICSID Convention and determine whether a state could invoke the plea of sovereign immunity (26) vis-a-vis enforcement and execution, and whether the signing of the ICSID Convention constituted a submission to the jurisdiction of the court for such purposes. (27)

   In this case, as in other similar cases, the Applicants rely on international arbitration law to have their awards recognized and enforced, while the state, Spain, relies on sovereign immunity to resist such attempt. (28) The judge is thus tasked to adjudicate at the intersection between enforcing the global rule of law as manifested in international economic law, on the one hand, and practice enough deference to the award-debtor's public interest reliance on sovereign immunity, on the other.

   1. EISER INFRASTRUCTURE LTD. V. KINGDOM OF SPAIN, [2020] FCA 157

      1. Facts

         The Applicants sought the recognition and enforcement of ICSID awards rendered in their favor against Spain, while Spain invoked sovereign immunity from the jurisdiction of the court. (29) Spain argued that the plea of immunity covers enforcement and execution, but not recognition. (30) The Applicants argued that the plea of immunity can only be invoked with respect to execution, but not with respect to recognition nor enforcement. (31) Justice Stewart succinctly summarized the matter at hand as follows:

         [T]he applicants seek, under s 35 of the Arbitration Act, the recognition and enforcement of arbitration awards in their favour by converting them into judgments of the Court. They do not, at least not at this stage, seek to execute on the judgments. The distinction between recognition and enforcement, on the one hand, and execution on the other, is central to these reasons. (32) 2. Issues

         The Applicants put forth four major arguments: (1) ICSID excludes "any claim for foreign state immunity in proceedings for the recognition and enforcement of an award, as opposed to in relation to any steps to execute upon a judgment that recognises and enforces such an award"; (2) "by becoming a Contracting party to the ECT and a Contracting State to the [ICSID Convention], Spain submitted to the jurisdiction of this Court"; (3) the sovereign immunities act "does not apply at the recognition and enforcement stage"; and (4) the ICSID Convention has impliedly repealed the sovereign immunities act "to the extent of an inconsistency." (33)

         This case note deals only with the first and second argument, the so-called "foundational argument" and the "submission to jurisdiction." Spain's response is the following: the Applicants' "foundational argument must fail principally on the basis that the French and Spanish versions of the [ICSID Convention] draw no distinction between recognition/enforcement, on the one hand, and execution, on the other." (34) The point Spain is making is that properly interpreted, the ICSID Convention "makes no such distinction with the result that Art. 55 expressly preserves the operation of domestic law on foreign state immunity in relation to the enforcement that the applicants seek." (35) ultimately, this argument rests on the lack of distinction between linguistic/semantic lack of distinction between enforcement and execution in the French and Spanish versions of the ICSID Convention. Justice Stewart summarized the crux of the matter as follows:

         In the French and Spanish texts of Arts 53 to 55, there is no clear distinction in the language between what in English is reflected as "enforcement" and "execution". In the title to Section 6 of Ch Iv, the French text speaks of reconnaissance et de l'execution and the Spanish text...