Facts
The claimant appellants sought to enforce final arbitral awards against the defendant respondent (“the Awards”).
The first was on jurisdiction and merits. The respondent breached its obligation under a bilateral investment treaty to provide fair and equitable treatment. The second was on quantum.
The Awards were made by the Permanent Court of Arbitration in arbitration proceedings. They were brought by the first, second and third claimants against the defendant country. This was pursuant to a bilateral investment treaty between Mauritius and India.
The fourth, fifth and sixth claimants claimed to be assignees of the benefit of the Awards.
Procedural history
Cockerill J granted the first, second and third claimants leave to enforce the Awards, judgment in terms of the Awards, and confirmed the respondent’s right to apply to set aside.
The respondent applied to set aside, asserted sovereign immunity, and that the exception to sovereign immunity did not apply. This was because the respondent did not agree in writing to submit the dispute to arbitration.
The fourth, fifth and sixth claimants were added, and the respondent claimed declaratory relief.
In response, the claimants further claimed that the exception to state immunity was engaged because the respondent ratified the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“the New York Convention”).
The relevant part of the exception prescribes that a state is not immune to proceedings where it has submitted to the jurisdiction by prior written agreement. This may be by treaty, convention or other international agreement.
Sir Nigel Teare decided to determine whether the respondent had submitted to the jurisdiction by prior written agreement as a preliminary issue.
Sir William Blair held that the respondent had not submitted, and gave permission to appeal.
Separately, the claimants sought to enforce the Awards in multiple jurisdictions. The respondent’s claim to state immunity was upheld in Australia. It was rejected in Canada.
Law
This was a pure question of interpretation; it did not turn on the facts.
In a separate, unrelated appeal, the UK Supreme Court (“the Supreme Court”) provided helpful guidance:
“We consider that a waiver of immunity by treaty requires a clear and unequivocal expression of the state’s consent to the exercise of jurisdiction. Whether this exists depends upon an exercise of treaty interpretation in accordance with the treaty’s governing law, public international law. For this purpose, the relevant rules of interpretation are to be found in articles 31 and 32 of the Vienna Convention on the Law of Treaties [“the Vienna Convention”]. Such an expression of consent does not require explicit words such as waiver or submission. Meaning is conveyed not only by the express words used but also by what is necessarily inherent in those words, and by what necessarily follows as a consequence of the use of those words. Accordingly, when considering the waiver of state immunity by treaty, the test is whether the words used necessarily lead to the conclusion that the state has submitted to the jurisdiction.”
Article 31 of the Vienna Convention prescribes the general rule of interpretation. Treaties will be interpreted in good faith, and in accordance with their ordinary meaning to be given to the terms in their context, and in light of its object and purpose.
Article 32 of the Vienna Convention prescribes that, in certain circumstances, recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty.
Longstanding case law from the Judicial Committee of the House of Lords further provides that recourse to supplementary means should be “rare”.
Further, the supplementary material should be public, accessible, and the preparatory work should “clearly and indisputably point to a definite legislative intention”.
Finally, Article 32 of the Vienna Convention cannot be used to change, or contradict, the meaning resulting from the preceding article.
The Supreme Court confirmed that a treaty should be given the same meaning by all states which become parties to it. Accordingly, regard should be had to how it has been interpreted by the courts of different countries. Especially where there is a consensus.
Discussion
Phillips LJ (with whom Lewison and Newey LJJ agreed) gave the leading judgment.
The appellants submitted that the treaty in the instant appeal was materially similar to another that had already been interpreted by the Supreme Court. It followed that, to use the language of the Supreme Court, it “could not be a clearer submission to the jurisdiction”.
Phillips LJ disagreed. The reasoning of the Supreme Court could not simply be read across from the treaty in that appeal, to the one in the instant appeal. In other words, the wording, context, object and purpose of the New York Convention in this appeal was different.
The nub of this appeal was the meaning of “rule of procedure” in the New York Convention.
It was agreed that state immunity is a rule of procedure.
There is a distinction between rules of procedure, and substantive rules of international law.
The High Court of Australia, determining the same issues, between the same parties, stated that:
“[T]he provision principally relied upon by the appellants as establishing a waiver of foreign State immunity by State parties to the New York Convention, implies the preservation of foreign State immunity. … it is widely accepted that the rules of procedure also include defences to a claim such as limitation periods. So too, the rules of foreign State immunity, although jurisdictional, are treated at international law as rules of procedure.”
Phillips LJ therefore said: “The reasoning of the High Court of Australia, on precisely the same point as under consideration on this appeal, is therefore highly persuasive.”
Accordingly, “rules of procedure … encompasses state immunity where that is a rule of procedure in the territory in question, as it is in this jurisdiction”.
The New York Convention preserves state immunity by its own terms.
The meaning of the New York Convention is not ambiguous, or obscure, and it does not lead to a result which is manifestly absurd, or unreasonable. It accords with common sense.
States would not have agreed to waive immunity from the enforcement of awards against them where they have not agreed to arbitrate. Especially without this being made explicit.
Supplementary means of interpretation (Article 32 of the Vienna Convention) may only be referenced to confirm the interpretation pursuant to the general rule of interpretation (Article 31 of the same).
That confirmation is found in a report by a UN Committee on the Enforcement of International Arbitral Awards, and, separately, a summary of the preparatory material to the New York Convention quoted by Sir William Blair. Both provide that the New York Convention was not intended to preclude an immunity-based argument in enforcement actions against states.
Disposal
The appeal was dismissed.
A state party to the New York Convention has not submitted to the adjudicative jurisdiction of the UK in respect of proceedings to enforce international arbitration agreements adverse to that state, and thereby waived sovereign immunity.
Written by Dominic Bright.
Commercial. International. Technology.