Introduction
The development of the doctrine of international arbitration, considered from the standpoint of its ultimate benefits to the human race, is the most vital movement of modern times. In its relation to the well-being of the men and women of this and ensuing generations, it exceeds in importance the proper solution of various economic problems which are constant themes of legislative discussion and enactment.
Modern arbitration can be divided into three (3) basic categories based on the type of parties namely, arbitration between private parties (international commercial arbitration); investor state arbitration for disputes between states; and investor-state arbitration for disputes between a private party and a state. The latter form, i.e. investor-state arbitration, is the focus of this essay. Litigating international investment disputes has become a crucial aspect of global commerce. Usually, the post final arbitral award process in investor-state arbitration involves the investor-state arbitral tribunal rendering an award which is mostly voluntarily complied with by the states. Where voluntary compliance is absent, the award creditor may seek to litigate and have a national court enforce the award. This brings to the fore two (2) main issues namely, recognition or confirmation of the award and second, the execution of the award. Recognition generally involves the award creditor petitioning a national court to certify the authenticity of the award, to declare that the award is legally binding on the parties and to confirm that the award is res judicata as to any claims addressed therein. On the other hand, execution involves the award creditor petitioning the court to order seizure, constraint or other coercive measures against specific assets belonging to the award debtor. This essay explores the intricacies of litigating international investment disputes, focusing on the enforcement of investor-state awards. It highlights the current state of the law, drawing attention to opportunities for improvement.
Recognition of investor-state arbitral awards
Both the International Centre for Settlement of Investment Disputes (ICSID) Convention and the New York Convention play a significant role in the recognition of awards. The most significant difference between the 2 is that Articles III and V of the New York Convention allows courts to refuse recognition based on certain narrow exceptional grounds while Article 54 of the ICSID Convention does not allow for any court review beyond verifying the award’s authenticity. Aside the differences, both conventions expressly obligate a State party’s courts to recognize and enforce arbitral awards. Despite the express obligation for states to recognize arbitral awards, state debtors may raise defences to the recognition of an arbitral award entered against that state. These defences include the defence of sovereign immunity; the defence relating to the scope of the agreement; and the defence relating to the appropriateness of the forum. Regarding the defence of sovereign immunity, the International Court of Justice (ICJ) has explained that the law of sovereign immunity in accordance with Article 2 of the United Nations Charter derives from the principle of sovereign equality of states which constitutes one of the fundamental principles of international legal order. Article 4 of the 1992 Constitution further emphasizes the concept of sovereignty in relation to the state of Ghana.
The modern trend is that states may raise immunity as a defence to a foreign court’s jurisdiction over disputes arising from the state’s sovereign acts but not from its commercial acts. On the defence relating to the scope of the agreement, a state may raise the argument that the dispute falls beyond the scope of the submission to arbitrate. This implies that, as seen in the case of Republic of Argentina v BG Group 572 US 25, a court may vacate an award on the basis that the dispute was not arbitrable where it is found that the claimant did not comply with the investment treaty’s predicate requirement to exhaust local remedies before commencing an ICSID arbitration. On the defence relating to the appropriateness of the forum, this is very controversial and so far confined to the US where award debtors have successfully resisted recognition of foreign awards in the US by arguing that the US court was not the appropriate forum for enforcement based on the domestic doctrine of forum non conveniens.
Execution of investor-state arbitral awards
After an investor-state award has been recognized in a judgment by a national court, the focus shifts to the execution of the obligations set forth in the award. The ICSID and the New York Conventions play a reduced role in this aspect. Rather according to Article 54(3) of the ICSID Convention and Article III of the New York Convention, the domestic law ordinarily applicable to the execution of court judgments and arbitral awards assumes greater importance. The execution involves the court deciding whether to order coercive measures against specific assets belonging to a foreign State. There are two (2) common defences to Execution of arbitral awards against a state judgment debtor. These include the defense of sovereign immunity from execution; and the defense of separate legal entity.
Regarding sovereign immunity and execution, Article 19 of the UN Immunities Convention, though not widely ratified, addresses measures of constraint such as attachment, arrest or execution against the property of a State. This defence may however not apply in instances where the state has waived its sovereign immunity or the property in question relates to property of the state with a commercial purpose. Thus, in the Ara Libertad case decided by the Supreme Court of Ghana [2013-2014] SC GLR 990, the court recognized that a foreign state’s warship is a non-commercial asset that enjoys sovereign immunity from execution, and that international law also permits waiver of such sovereign immunity. However, the Supreme Court stressed that Ghanaian courts possess no obligation in municipal law to accept the waiver in cases where military conflict is a possibility. On the exception of state property with a commercial purpose, Article 19(c) of the UN Immunities Convention excludes property used for diplomatic, military, cultural and scientific purposes as well as property used by a foreign state’s central bank, from the category of commercial property. This means that when a foreign government acts, not as a regulator of a market, but in the manner of a private player within it, the foreign sovereign’s actions are “commercial”.
Finally, regarding the defence of separate legal entity, a number of jurisdictions recognize this concept as a matter of domestic law including Ghanaian jurisprudence. State-owned entities in particular have in some cases resisted execution of investor-state awards against their property by persuading courts that these entities are in fact legally distinct from the States against which the investor-state awards were originally rendered. Thus, in the case of Benvenuti et Bonfant Srl v. Banque Commerciale Congolaise et al, Court of Appeal, Paris (26 June 1981) 1 ICSID Reports 368 at 371, an Italian award creditor attempted to execute an ICSID award rendered against the People’s Republic of Congo by obtaining an order of attachment from the French courts against funds owned by Banque Commerciale Congolaise. The court held that the bank could not be regarded as an emanation of the State of the Congo, from which it is distinct. In the court’s view, because the bank’s capital was “held in part by various foreign banks including Credit Lyonnais and by various individuals,” and because the bank’s activities included “the performance of commercial banking operations on its own account,” the bank could not be held responsible for the State’s obligations under the ICSID award.
Conclusion
The enforcement of an investor-state award still appears to become necessary in only a minority of cases due to the concept of voluntary compliance. Nonetheless, it is important to consider early on the various issues and the intricacies it entails and to plan the arbitration strategy in a way that is beneficial to, and does not prejudice a party’s position at the enforcement state. International investment disputes require a nuanced understanding of enforcement mechanisms for investor-state awards. The ICSID framework and the New York Convention provide a crucial foundation for this process. Continuous development of international investment law and even domestic law on the subject is necessary. By promoting transparency, accountability and consistency, the enforcement of investor-state awards can be strengthened.
God bless!
