Treaty Obligations to Honor Awards and Diplomatic Protection - Chapter 2 - Enforcement of Arbitral Awards Against Sovereigns

R. Doak Bishop is a Partner in the Houston office of King & Spalding LLP. Mr. Bishop has over 27 years experience focusing on international arbitration and litigation of oil and gas, energy, construction, and environmental disputes. He has developed a global reputation for his experience in international arbitration, serving both as an arbitrator and counsel in large business disputes.

Mr. Bishop presently serves as Vice Chairman of the Institute of Transnational Arbitration and as a member of the U.S. delegation to the NAFTA Advisory Committee on Private Commercial Disputes. He has previously served as Chairman of the Litigation Section of the State Bar of Texas (1998) and Co-Chair of the American Bar Association International Litigation Committee (1998-1999). His experience in litigation and arbitration includes international litigation and arbitration, oil & gas and energy disputes, construction disputes, environmental disputes, and high technology disputes

Mr. Bishop received his B.A. degree with high honors and departmental distinction from Southern Methodist University in 1973, and his J.D. degree with honors from The University of Texas in 1976 where he served as Research Editor of the Texas Law Review.

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Originally from Enforcement of Arbitral Awards Against Sovereigns

With the recent rapid increase of arbitrations commenced against states pursuant to investment treaties, it is useful to examine respondent states’ treaty obligations (or not) to honor final treaty-based awards. This chapter briefly describes treaty obligations to honor awards under specific treaties (Section I below), including obligations under the New York Convention,1 the ICSID Convention,2 NAFTA,3 the Energy Charter Treaty (ECT)4 and various bilateral investment treaties (BITs).5 Treaty obligations to honor awards may be overlapping, for example if the investor institutes ICSID arbitration pursuant to the ECT, in which case the investor can rely on the strongest of the obligations owed by the respondent state. A state’s treaty obligations to honor the final award may be used by an investor as leverage in settlement and award enforcement negotiations, or potentially be interpreted as a waiver of the state’s immunity from enforcement or execution of the award.

This chapter also discusses options for enforcing these treaty obligations to honor awards (Section II below). Where there is a treaty obligation to honor an award, and the respondent state fails to comply with this obligation, the thwarted investor may choose to file a new arbitration (although this is unlikely to appeal to an investor who has just prevailed in one form of arbitration against the same state), or, under some treaties, the investor may approach its own state and seek diplomatic protection. This diplomatic protection may take the traditional forms of correspondence or economic pressure, or the investor’s home state (theoretically) could choose to commence arbitration itself, or bring a claim before the International Court of Justice (ICJ).