International Investment Dispute Awards

Facilitating Enforcement

Esra Yildiz Üstün

• Éditeur: Informa Law from Routledge
• Année: 2022
• ISBN:
  9781000568097
• Édition: 1
• Sujet: Law
• Sous-sujet: Arbitration, Negotiation & Mediation in Law

This book examines how international investment arbitral awards can be facilitated. It sets out to achieve a fuller conceptualisation and theorisation of awards through a discussion of relevant issues and themes, as well as demonstrating how they can be achieved through a comparative approach that has been conceived and developed with reference to existing deficiencies in the research literature. This contribution is particularly important given the worldwide emergence of investment arbitration as a powerful form of alternative dispute resolution (ADR).

The book ultimately seeks to explore and develop solutions that can be directed to an existing oversight and deficit within the international investment architecture. In considering the advantages and disadvantages of each 'solution', it will work towards an approach best-suited to upholding the interest of the victorious party at the enforcement stage. The enforcement of arbitral awards on a voluntary basis has proven to be insufficient, and this created a real and ongoing shortcoming that needs to be addressed. International Investment Dispute Awards: Facilitating Enforcement therefore seeks to directly influence existing practice on the part of international institutions, with the intention of helping to develop a more effective resolution.

The readerships for this book will include arbitration practitioners, policy-makers (including treaty drafters), academics and postgraduate students interested in the enforcement of investment arbitral awards.

Chapter 1 Obstacles in enforcement of ICSID awards

DOI: 10.4324/9781003216919-2

1.1 Introduction

As Waelde pointed out many years ago, a mere 10 per cent of disputes are actually about application and interpretation of the law; the other 90 per cent are entirely about evidence and enforcement.¹ The importance of being a winner in a case is to derive benefit from the court decision or tribunal award. Otherwise, the decision or award is just a piece of paper. Thus, it is vital to effectively enforce the award rather than just win the case.

1 Freya Baetens, ‘Enforcement of Arbitral Awards: “To ICSID or Not to ICSID” is Not the Question’ (2011) 5 Investment Treaty Arbitration and International Law, Juris Arbitration Series 211–28.

Lawmaking and law enforcement are the cornerstones for ‘the survival of a society governed by the rule of law.’² According to public international law, lawmaking is mainly focused on ‘assessing the normative desirability, interpretation or application of substantive rules.’³ Nevertheless, taking more regulatory measures does not necessarily lead to the well-being of society.⁴ In other words, merely having a legal right does not make much sense in practice if such a right is not enforceable.

2 ibid 211. 3 ibid. 4 ibid.

This situation continues in international cases, particularly in the foreign investment field. The increase of cross-border trade and development of science has become the new driving power of the world. The subsequent development in the world economy reached a point where the states, in order to secure their economic development, fought for investment of foreign capital in different fields of their economy.⁵ Bilateral investment treaties (BITs) place foreign investors and states at the same level with the result that foreign investors feel secure and are encouraged to invest in other territories.

5 Vasily Shubin, ‘Enforcement of ICSID Arbitral Awards, Practice and Problems’ (2012) 12 Korea University Law Review 11.

After the proliferation of BITs, arbitration emerged as the popular method to resolve disputes arising from foreign investment treaties.⁶ Its popularity can be attributed to the fact that disputing parties are free to choose arbitrators, governing law, and also the seat of arbitration with ‘efficiency, simplicity and manageable costs.’⁷ However, the mechanism cannot be expected to be entirely independent from domestic jurisdictions⁸ because in many cases arbitration awards are not enforced voluntarily by host states. Thus, when a losing party refuses to pay, the winning party then attempts to enforce the award through a local court within whose jurisdiction the losing party has assets.⁹ This demonstrates that there is no guarantee that the losing party will comply with the terms of the award rendered by the arbitral tribunal.¹⁰

6 ibid. 7 Vincent O Nmehielle, ‘Enforcing Arbitration Awards under the International Convention for the Settlement of Investment Disputes (ICSID Convention)’ (2001) 7 Ann Surv Intl & Comp L 21. 8 ibid. 9 Edward Baldwin, Mark Kantor, and Michael Nolan, ‘Limits to Enforcement of ICSID Awards’ (2006) 23 J Intl Arb.1. 10 Ifueko Uwaifo, ‘What is the Effect of the Defence of State Immunity on the Enforcement of Arbitral Awards? (“The Argentine Perspective”)’, (2009) 9 CAR 14. Also available at <http://www.dundee.ac.uk/cepmlp/gateway/?news=31250> accessed 7 June 2015.

In such circumstances, enforcement obstacles in third-party states crop up. In order to facilitate and provide identical (uniform) standards for enforcement of international arbitration awards, the ICSID Convention¹¹ and the New York Convention,¹² have been brought into force. The New York Convention moderately overlaps with the ICSID Convention (the scope of application of the New York Convention also covers state–investor arbitral awards), and the relationship between the two conventions on the topic of enforcement is significant.¹³ The point of similarity between these two conventions is that both conventions have provided the winning party with a facility whereby the said party is not required to procure an order of enforcement in two countries. In other words, one is where the decision is reached and the other is the enforcing country.¹⁴ Under the provisions of the ICSID Convention, only a certified copy of the award is requested by the enforcing court.¹⁵ In addition, both conventions include provisions about restricting the grounds upon which domestic courts can reject enforcement of such arbitral awards.¹⁶ The conventions have successfully laid down uniform standards for national courts and have limited their discretion in rejecting enforcement of international arbitral awards.¹⁷

11 Susan Choi, ‘Judicial Enforcement of Arbitration Awards under the ICSID and New York Conventions’ (1995–96) 28 NYU J Intl Law & Pol 175. 12 Flávio Spaccaquerche Barbosa, ‘The Enforcement of International Investment Arbitral Awards: Is There a Better Way?” (2009) 6 Revista Brasileira de Arbitragem 7–34. 13 Giuliana Cane, ‘The Enforcement of ICSID Awards: Revolutionary or Ineffective?’ (2004) 15 Am Rev Intl Arb 439. 14 ibid 3. 15 Convention on the Settlement of Investment Disputes Between States and Nationals of OtherStates (1965) <https://icsid.worldbank.org/ICSID/StaticFiles/basicdoc/CRR_English-final.pdf> accessed 8 September 2021 Art. 54/2. 16 Convention on the Recognition and Enforcement of Foreign Arbitral Awards(New York Convention) (1958) <http://www.uncitral.org/pdf/english/texts/arbitration/NYconv/XXII_1_e.pdf> accessed 8 September 2021. Art. 5/2 and ICSID Convention (n 15) Art. 54. 17 Nmehielle (n 7) 22–24.

The ICSID Convention regulates only investment disputes and enforcement of ICSID awards between a member state and a foreign investor who is another member state’s national. Their enforcement is hindered by sovereign immunity (ICSID awards are not reviewed by other courts or tribunals). The importance of the state sovereignty principle is that a sovereign state cannot be forced to obey the jurisdiction of another state.¹⁸ This plea of sovereign defence is reproduced within national legislation (which varies from jurisdiction to jurisdiction)—this creates a clear sense of unpredictability and unreliability in international investment arbitration.¹⁹ The fundamental problem arises from a difference in interpretation: some scholars assert that states accept an absolute waiver of immunity by entering into an arbitration agreement, while others claim that state immunity only applies to the jurisdiction in question. Although the principle applies to execution, it can be restricted to the commercial assets of the state, being set apart from diplomatic property, the state bank, or the central bank account.²⁰ An additional complication is introduced by the question of whether the state’s commercial assets are mixed with public assets. This in turn leads into the question of whether they are attached or unattached. On the other hand, all of these enforcement obstacles pertain to unfavourable host states. If the losing party is a foreign investor, the result of enforcement changes is brought into question.²¹

18 Uwaifo (n 10) 1. 19 ibid. See also Leonardo S. Borlini and Stefano Siligardi, ‘Enforcement of Investment Arbitration Awards’ (2020) Bocconi Legal Studies Research Paper 3730569 <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3730569> accessed 9 July 2021. 20 Uwaifo (n 10) 1. 21 Anna Joubin-Bret and Cabinet Joubin-Bret, ‘The Effectiveness of the ICSID MechanismRegarding the Enforcement of Arbitral Awards’ in Julien Fouret (ed) Enforcement of Investment Treaty Arbitration Awards (Globe Business Publishing Ltd. 2015) 1.

In light of these circumstances, it is undeniable that international awards run the risk of being refused enforcement. This is attributable to public policy provisions and sovereign immunity obstacles (particularly within the foreign investment field). By virtue of the fact that there is no hierarchy among states, they cannot waive their immunity from jurisdiction and execution. If the award is rendered by other national courts, the enforcing state is justified in reviewing whether or not the award is against its own rules. The enforcement of non-national awards is complicated in instances where the enforcing state has not reviewed them. In order to obey a rule, the state should waive its immunity, indicating its will by signing conventions or agreements. However, if the conventions or agreements are insufficiently clear as to whether signatory states can waive their immunity by signing these conventions or agreements, the plea of immunity applies. The situation is further complicated by the fact that even if the waiver of immunity is...