High Court rejects Spain’s foreign state immunity claim and reinforces Australia’s reputation as ‘pro-arbitration’

In April 2023, the High Court of Australia handed down its long-awaited decision in Kingdom of Spain v Infrastructure Services Luxembourg S.à.r.l. [2023] HCA 11

Background

In the late 1990s, Spain implemented measures to promote investment in its renewable energy industry. Several investors, including Eiser Infrastructure Ltd, Energia Solar Luxembourg S.ὰ.r.l., Infrastructure Services Luxembourg S.ὰ.r.l., and Energia Termosolar BV, invested approximately €265.5 million in Spain’s renewable energy market. However, after the global financial crisis and a change in government, Spain reduced and eventually revoked the subsidy scheme, causing significant harm to the value of these investments.

The investors claimed that Spain had violated the fair and equitable treatment requirement under the European Energy Charter Treaty (ECT) and initiated arbitration proceedings under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States 1965 (ICSID Convention). The arbitrations resulted in awards in favor of the investors, totaling €128 million and €101 million in damages.

Procedural history

In 2019, the investors sought recognition and enforcement of the ICSID awards in the Federal Court of Australia. Spain argued that it was immune from the jurisdiction of Australian courts under the Foreign States Immunities Act 1985 (FSIA). The Federal Court initially ruled in favor of the investors, finding that Spain had waived its immunity for recognition proceedings but not for execution. Spain appealed to the Full Court of the Federal Court, which upheld the decision but clarified that Spain had waived its immunity only for recognition proceedings. Spain then appealed to the High Court.

High Court’s decision

The High Court dismissed Spain’s appeal and upheld the Full Court’s decision. It concluded that Spain’s entry into the ICSID Convention constituted a waiver of foreign state immunity from the jurisdiction of Australian courts for recognition and enforcement proceedings, but not for execution.

Impact of the decision

This decision reinforces Australia’s reputation as a pro-arbitration jurisdiction and demonstrates its support for the enforcement of arbitral awards. It also clarifies the distinction between recognition, enforcement, and execution under the ICSID Convention. However, questions remain regarding the successful execution of the awards, as Spain still retains immunity from execution under the FSIA. The investors will need to establish exceptions to immunity from execution to receive payment.

SDGs, Targets, and Indicators Analysis

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 16: Peace, Justice, and Strong Institutions
• SDG 17: Partnerships for the Goals

The article discusses the High Court of Australia’s decision regarding the recognition and enforcement of arbitral awards made under the ICSID Convention. This issue is connected to SDG 16, which aims to promote peaceful and inclusive societies, provide access to justice for all, and build effective, accountable, and inclusive institutions at all levels. It is also connected to SDG 17, which focuses on strengthening global partnerships to support the achievement of the SDGs.

2. What specific targets under those SDGs can be identified based on the article’s content?

• SDG 16.3: Promote the rule of law at the national and international levels and ensure equal access to justice for all.
• SDG 17.16: Enhance the global partnership for sustainable development, complemented by multi-stakeholder partnerships that mobilize and share knowledge, expertise, technology, and financial resources.

The article highlights the importance of recognizing and enforcing arbitral awards, which relates to the target of promoting the rule of law and ensuring equal access to justice (SDG 16.3). It also emphasizes the need for partnerships and cooperation in the field of arbitration to support sustainable development (SDG 17.16).

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• Indicator 16.3.1: Proportion of victims of violence in the previous 12 months who reported their victimization to competent authorities or other officially recognized mechanisms for the protection and promotion of human rights.
• Indicator 17.16.1: Number of countries reporting progress in multi-stakeholder development effectiveness monitoring frameworks that support the achievement of the sustainable development goals.

The article does not explicitly mention indicators related to the identified targets. However, Indicator 16.3.1 can be used to measure progress towards promoting the rule of law and ensuring access to justice. Indicator 17.16.1 can be used to measure progress in establishing multi-stakeholder partnerships in the field of arbitration to support sustainable development.

Table: SDGs, Targets, and Indicators

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Source: lexology.com

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