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Border Timbers Ltd v Republic of Zimbabwe: A Landmark Case for ICSID Enforcement
The English Commercial Court recently delivered a significant judgment in the case of Border Timbers Ltd v Republic of Zimbabwe EWHC 58 (Comm), which has important implications for the enforcement of ICSID awards in the UK and beyond.
Background
The case concerned an application by Zimbabwe to set aside an order for the registration and entry of judgment on an ICSID award in favour of two Zimbabwean companies, Border Timbers Ltd and Hangani Development Co. (Private) Ltd (the Claimants), who had brought an arbitration against Zimbabwe under the ICSID Convention for the expropriation of their land.
Main Issue
The main issue before the court was whether Zimbabwe was immune from the jurisdiction of the UK courts under section 1(1) of the State Immunity Act 1978, which provides that a state is immune from the jurisdiction of any court in the UK except as provided by Part I of the Act.
The Claimants argued that Zimbabwe had waived its immunity by agreeing to the ICSID Convention and/or by agreeing to submit the underlying dispute to ICSID arbitration and that therefore one or both of the exceptions to immunity in sections 2 and 9 of the 1978 Act applied.
Section 2 provides that a state is not immune where it has submitted to the jurisdiction following section 2(2), which includes cases where a state has agreed in writing to submit a dispute to arbitration. Section 9 provides that a state is not immune in respect of proceedings in the UK relating to arbitration where it has agreed in writing to submit a dispute to arbitration.
Zimbabwe contended that neither section applied, because its agreement to the ICSID Convention and/or to ICSID arbitration did not amount to an agreement to submit to the jurisdiction of any court in the UK, but only to an autonomous system of arbitration under international law.
Court's Decision
The court rejected Zimbabwe's arguments and held that both sections 2 and 9 applied. The court followed the approach of Lord Collins in Dallah Real Estate and Tourism Holding Co v Ministry of Religious Affairs, Government of Pakistan UKSC 46, who stated that "the effect of section 9 is that a state which has agreed in writing to submit a dispute which has arisen or may arise to arbitration is not immune as respects proceedings in England which relate to that arbitration".
The court also relied on the decision of Lord Justice Gross in Micula v Romania EWHC 31 (Comm), who held that "the effect of section 2(2) is that a State which has agreed in writing to submit a dispute which has arisen or may arise to arbitration is not immune as respects proceedings brought against it in England where those proceedings are brought according to an arbitration agreement".
The court concluded that Zimbabwe's agreement to the ICSID Convention and/or to ICSID arbitration fell within both sections, as they were agreements in writing to submit disputes to arbitration, and that the proceedings for registration and entry of judgment on the award were proceedings relating to that arbitration.
The court also rejected Zimbabwe's alternative argument that it was entitled to rely on its immunity at this stage because it had not been properly served with the order for registration and entry of judgment, as required by section 12(1) of the 1978 Act. The court held that section 12(1) did not apply at this stage, as it only applied where a state was being sued as a defendant or respondent, not where it was being served with notice of an order already made against it.
The court therefore dismissed Zimbabwe's application and upheld the order for registration and entry of judgment on the award.
Significance
This decision is significant for several reasons. First, it confirms that states that have agreed to the ICSID Convention and/or to ICSID arbitration have waived their immunity from the jurisdiction of UK courts for enforcement of ICSID awards under sections 2 and 9 of the 1978 Act. This is consistent with the object and purpose of the ICSID Convention, which is to provide an effective mechanism for resolving investment disputes between states and foreign investors.
Second, it clarifies that states cannot rely on their immunity at the stage of registration and entry of judgment on an ICSID award, as this is not a stage where they are being sued or made subject to any coercive measures, but merely notified of an order already made against them. This ensures that states cannot frustrate or delay the enforcement process by raising procedural objections based on immunity.
Third, it reinforces the position that ICSID awards are directly enforceable in UK courts without any review or challenge on their merits, as provided by section 1(2) of
the Arbitration (International Investment Disputes) Act 1966. This gives effect to Article 54(1) of the ICSID Convention, which requires contracting states to recognise and enforce ICSID awards as if they were final judgments of their courts.
The decision is also likely to have an impact on the enforcement of ICSID awards in other jurisdictions, as it provides a persuasive authority for the interpretation and application of the ICSID Convention and the relevant provisions of the 1978 Act, which are based on the United Nations Convention on Jurisdictional Immunities of States and Their Property 2004.
The decision is a welcome development for ICSID award creditors, as it confirms that the UK is a favourable jurisdiction for the enforcement of ICSID awards against states that have agreed to the ICSID system. It also sends a clear message to states that they cannot evade their obligations under the ICSID Convention by invoking their immunity from the jurisdiction of UK courts.
References:
: https://essexcourt.com/wp-content/uploads/2024/01/CL-2021-000541-FINAL.pdf
: https://hsfnotes.com/publicinternationallaw/tag/border-timbers-ltd-v-republic-of-zimbabwe/
: https://www.greshamlegal.co.uk/enforcement-of-icsid-awards-and-state-immunity/
- Zimbabwe's immunity challenge dismissed by English court.
- ICSID awards enforceable in UK courts without any review or challenge on merits.
- Immunity not relevant at registration and entry of judgment on award.
