Sovereign Immunity as a Barrier to the Enforcement of Investor-State Arbitral Awards: The Re-Politicization of International Investment Disputes - Chapter 10 - International Arbitration and the Courts
Author(s):
Andrea K. Bjorklund
Page Count:
42 pages
Media Description:
1 PDF Download
Published:
September, 2015
Description:
Originally from International Arbitration and the Courts
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“Successful” claimants in investment arbitrations increasingly find
that they have earned a hollow victory if the losing state refuses to pay
the arbitral award voluntarily. Immunity inhering in the state’s assets
may prevent execution against them. This difficulty arises from the
distinction between waivers of sovereign immunity with respect to
jurisdiction and waivers of sovereign immunity with respect to
execution.1 By entering into investment treaties states have waived their
jurisdictional immunity, but the argument that a state’s waiver of
jurisdictional immunity should encompass a waiver of immunity in
sovereign assets themselves has so far been unsuccessful in the
investment treaty context, and has met with only minimal success in
cases involving state contracts.2 Investors are left to proceed against a
state’s commercial assets, assuming they can locate them and defeat any
arguments the state makes respecting their governmental function. These
hurdles might prove too large for many investors to surmount.3 Thus, the
international community has created an elaborate international
architecture with respect to investment protection but at the back end –
the stage of actual collection – the edifice is built on shaky ground.4
The most frequent vehicles for enforcing investment arbitration
awards are the ICSID Convention5 and the New York Convention on the
Recognition and Enforcement of Foreign Arbitral Awards.6 The ICSID
Convention specifically provides that states do not waive execution
immunity by consenting to arbitration under it.7 The New York
Convention does not address immunity, and therefore at least permits the
argument of an implied waiver of execution immunity by virtue of an
agreement to arbitrate.8 In either an ICSID Convention or a New York
Convention case one could argue that investment treaties themselves, by
permitting investors to submit claims against states, contain implied
waivers of execution immunity, but winning this argument would be an
uphill struggle.9 Moreover, enforcement under either Convention in the
event a respondent state does not pay voluntarily will take place in the
domestic courts of the states party to the Convention. Each of those
courts will decide the question of execution immunity by application of
its municipal law on immunity.
Municipal laws on sovereign immunity vary. In almost all cases,
however, they distinguish between jurisdictional immunity and execution
immunity, a distinction that finds support in both customary international
law and international treaties on immunity.10 A few jurisdictions have
proved more receptive to the argument that a state’s agreement to
arbitrate a dispute necessarily includes an implied waiver of immunity
from execution. Yet even in those cases, most of the time a claimant
seeking execution of an award will need to locate commercial assets to
satisfy it. State practice over the last several decades has shifted towards
a restrictive theory of immunity with respect to assets subject to
execution, meaning that government-owned assets used for commercial
purposes are not protected by state immunity law.11 Thus, a successful
investor might be able to execute his arbitral award against commercial
assets of a state, assuming he is able first to identify those investments
and second to overcome any argument made by the state that the assets
are properly classified as used for government rather than for commercial
purposes. In any event the investor’s success will depend on the
immunity law of the state in which he is seeking execution.
As yet it is early to tell how strong a threat state immunity from
execution poses to the viability of investment arbitration. As the late
Lou Henkin famously said, “Almost all nations observe almost all
principles of international law and almost all of their obligations almost
all of the time.”12 Several recent refusals to pay, including those by
all of the time.”12 Several recent refusals to pay, including those by