Presentation

Sovereign Immunity from Execution in Investment Treaty Arbitration – A Necessary Evil?

Aliz Káposznyák
Eötvös Loránd University, Budapest
Hungary

Saturday, 14 September – 9:00 am
Room V 005, Faculty of Law – Professor-Huber-Platz 2, 80539 Munich

Sovereign immunity, as one of the most traditional rules of international law, can be considered the main barrier to the enforcement of investor-State arbitral awards and, based on the most recent trends, sovereign immunity seems to remain one of the biggest issues in enforcement of arbitral awards rendered against sovereign States.

The most significant international legal instruments applied to enforcement of investment treaty arbitral awards are the ICSID Convention and the New York Convention. The ICSID Convention lays down a self-contained, delocalized system insulated from domestic laws and state court involvement by regulating the entire arbitration procedure, including enforcement of the awards. Nevertheless, there is one exception and this is the issue of sovereign immunity from execution. The ICSID Convention expressly provides that the Contracting States do not waive execution immunity by consenting to arbitration under the ICSID Convention. Consequently, the enforcement of ICSID Convention arbitral awards is subject to the local laws on state immunity.

Although the New York Convention does not expressly address the issue of immunity, in the vast majority of cases, national courts do not accept the argument of implied waiver of execution immunity by way of an arbitration clause. Thus, even though each Convention describes a different path to enforcement, ultimately, the effectiveness of investor-State arbitration both under the ICSID Convention and the New York Convention will depend on the local laws on sovereign immunity as well as the state court practice where the investor is seeking execution.

Having reviewed the most recent legislations on state immunity and the relevant case law1, it can be established that there is a general trend towards acceptance of the restricted immunity approach both in relation to waiver of jurisdictional and execution immunity. Nevertheless, based on the latest developments, it can also be seen that States do notintend to give up “the last fortress, the last bastion of State immunity”2, but rather seek to strengthen the execution immunity by introducing new rules and additional requirements forconducting a seizure of a foreign State’s property. Belgium and France recently amended its existing rules on State immunity and conditioned the attachment of State-owned goods to the prior authorization of a judge. In such a legal environment, the French Supreme Court has already reversed its previous pro-enforcement case law in the Société Commissions ImportExport v. Republic of Congo case in January 2018.

In my paper, after a brief review of the enforcement regime provided for in the ICSID Convention and the New York Convention, I intend to focus on the recent trends in the field of sovereign immunity from execution which lead us to the conclusion that sovereign immunity cannot be ignored during the enforcement of investment treaty arbitral awards, but rather it currently plays an even greater role in certain jurisdictions.

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