First Tuesday Update is our monthly take on current issues in judgment enforcement. This month we discuss enforcing non-pecuniary obligations in an ICSID award. While a rarity, an ICSID panel has the power to issue an award that includes non-pecuniary obligations. But Article 54 of the ICSID Convention is clear, Contracting States are only obligated to enforce "the pecuniary obligations" imposed by an award. What then is an award-creditor to do? In short, the New York Convention authorizes the enforcement of arbitral awards—all awards, including ICSID awards—and is not limited to pecuniary obligations.
As a threshold matter, an ICSID panel has broad powers to impose non-pecuniary obligations. These could include specific performance, restitution, or a cease and desist order. And while each of these non-pecuniary obligations could be recognized by courts, i.e., have res judicata effect, with enforcement such relief in the award is a Pyrrhic victory.
Based on the negotiation history of the treaty, scholars suspect that the limitation to pecuniary obligations was because the drafters had misgivings about the feasibility of enforcing non-pecuniary obligations.1 This is why in most ICSID cases, tribunals have framed the obligations imposed by their awards in pecuniary terms. Goetz v. Burundi is an example of an interim award whereby the tribunal provided the sovereign with a choice of non-pecuniary relief or pecuniary obligation—either "give an adequate and effective indemnity to the claimants" or "to return the benefits of the free zone to them." Enron v. Argentina is another example where an ICSID tribunal decided "that, in addition to declaratory powers, it [had] the power to order measures involving performance or injunction of certain acts."
Should litigants shy away from asking for non-pecuniary relief given the difficulty of enforcing such obligations through the ICSID Convention? Will future cases—especially those that involve ongoing relationships challenged on the basis of fair and equitable basis as opposed to an all-out taking—call for equitable remedies to restore the relationship?
When faced with non-pecuniary obligations in an ICSID arbitral award, the award-creditor should look to the New York Convention, which is not limited to enforcing pecuniary obligations. To be sure, there are many advantages to the ICSID Convention versus the New York Convention. For starters, an ICSID award under the ICSID Convention is "automatically" enforceable in a Contracting State. There are almost no grounds upon which to challenge enforcement of an ICSID award under the ICSID Convention (other than challenges to the authenticity of the award). Though limited, the New York Convention does provide Contracting States with the discretion not to enforce an arbitral award, including ICSID awards, and permits the award-debtor to question, among other issues, the lack of a valid agreement, lack of authority, procedural process, lack of agreement, violation of public policy, etc. But if the award includes non-monetary relief, the New York Convention is the best option.2
Whatever your specific circumstances, we can help enforce an arbitral award or judgment. Feel free to contact us directly with any questions.