A recent decision in Australia opens the door for recipients of investor-state awards to enforce the award in that country.
In 2019, companies incorporated in England, Luxembourg and the Netherlands were awarded €229 million against the Kingdom of Spain in an investor-state arbitration. On 24 February 2020, the Federal Court of Australia enforced the arbitral awards. How did that happen? The Federal Court held that as Australia is a contracting party to the Convention on the Settlement of Investment Disputes ("Convention"), it is bound to enforce awards against other contracting countries to the Convention (here Spain), and Spain could not rely on foreign state immunity laws to resist the enforcement of the awards.
The applicants invested in solar projects in Spain between 1997 and 2012. During this period, Spain adopted a series of regulatory measures subsidising development of renewable energy sources. The applicants invested €265 million in solar power projects in reliance on these incentives. After 2012, Spain revoked the financial incentives, and the applicants commenced arbitral proceedings under the multilateral Energy Charter Treaty 1998 ("ECT"), claiming that Spain had breached its obligation to afford fair and equitable treatment to investors. The ECT provided for the submission of investor-state disputes to arbitration before the International Centre for the Settlement of Investments Disputes ("ICSID") pursuant to the Convention. ICSID found that Spain was in breach of its obligations under the ECT and awarded damages to the applicants.
The applicants then brought proceedings in Australia (as well as parallel proceedings in the United States), seeking recognition and enforcement of the ICSID awards. Spain sought to resist enforcement on the basis of foreign state immunity. The Honourable Justice Stewart dismissed Spain's argument, reasoning that Spain was a contracting party to the ECT and had actively participated in the proceedings before ICSID. On this basis, Spain had submitted to the arbitrations under the Convention, and Australia, as a contracting party to the Convention, is obliged to recognise and enforce ICSID awards. Therefore, Justice Stewart held that Spain had consented to contracting states, such as Australia, having the power to recognise and enforce awards against it. It is to be noted that there remains a moot question concerning the interplay between Australia's foreign immunity laws and its obligations under the Convention to execute ICSID awards. The applicants in Eiser have had their award enforced in Australia but have not yet sought to execute the award against property held by Spain in Australia.
The Federal Court's decision in Eiser should encourage other recipients of ICSID awards who face challenges of enforcement in the home jurisdiction of the foreign state against whom the award is made, that Australia is a viable option for the enforcement of ICSID arbitral awards.