UK state immunity waived by ICSID membership, judges confirm

Cem Kalelioglu, who specialises in investor-state dispute settlement (ISDS) at Pinsent Masons, was commenting after the UK Supreme Court ruled that countries that have signed the ICSID Convention waived their rights to claim state immunity in the UK against the enforcement of ICSID awards against them before the UK courts.

The Supreme Court confirmed the point in a new ruling on Wednesday (48-page / 411KB PDF) in which it dismissed claims to state immunity by Spain and Zimbabwe. Kalelioglu said the judgment aligns the UK's position with that of the courts in Australia, New Zealand, the US and Malaysia, all of which have interpreted Article 54(1) of the ICSID Convention as a waiver of state immunity and a submission to their domestic jurisdiction.

International investment treaties provide the legal basis on which investors may access ISDS mechanisms such as ICSID arbitration. Investors considering cross‑border investments therefore need to review the applicable treaty framework to understand whether, and to what extent, they may benefit from the protections offered under the ICSID Convention, including the recognition and enforcement of awards in contracting states.

Where investors are granted awards in ISDS proceedings, they must then enforce them before national courts. However, the ease with which investors can enforce awards varies globally – with states’ claims to immunity, if recognised by courts, liable to leave investors out of pocket, even where the states are found to have been responsible for a treaty breach.

ICSID is the leading institution for resolving investor-state disputes, globally. The ICSID Convention provides a framework for enforcement of ICSID awards.

Article 54(1) of the ICSID Convention provides that each contracting state shall recognise an award as binding and enforce the award within its territories as if it were a final judgment of a court in that state.

Kalelioglu said that unlike arbitration awards governed by the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which typically require a recognition or exequatur process and may be subject to limited grounds for refusal, ICSID awards are enforceable directly under Article 54, subject to the terms of the ICSID Convention.

Slava Tretyak, an expert in multi-jurisdictional disputes at Pinsent Masons, noted that, in its ruling, the Supreme Court said that it is “a matter of ordinary language” that states that ratify the ICSID Convention agree not only to recognise and enforce such awards themselves but that “awards to which it is a party will be recognised and enforced in other contracting states which have undertaken the same obligation”. However, it acknowledged that this position is at odds with the “the preservation of adjudicative immunity” that foreign states enjoy under UK law.

Foreign states’ rights to state immunity in the UK are set out in the State Immunity Act 1978. Both Spain and Zimbabwe argued before the Supreme Court that their rights to state immunity trumped the rights the foreign investors sought to assert to enforce the ICSID awards in the UK.

In two separate cases, foreign investors in Spain and Zimbabwe had secured ICSID awards against the two states and then applied for an order under the English Arbitration Act 1996 to register those awards as judgments of the court for enforcement purposes. When those registration orders were granted, both states sought to get those orders set aside on the grounds of state immunity.

The UK Supreme Court had to consider whether signing of the ICSID Convention constituted a waiver of rights to state immunity for the purposes of the State Immunity Act 1978. At an earlier stage in the cases, the Court of Appeal in England and Wales had considered that it did and now the Supreme Court has agreed, determining that Spain and Zimbabwe had subjected themselves to the jurisdiction of the English courts for the enforcement of ICSID awards. It said the states’ agreement to Article 54(1) of the ICSID Convention demonstrated “a clear and unequivocal expression of the state’s consent to the exercise of jurisdiction”.

Tretyak added that the decision underlines that ICSID arbitration is intended to be a self‑contained regime, in which national courts play a limited, facilitative role rather than acting as a further forum for disputes. It also significantly reinforces the reliability of the ICSID enforcement mechanism from the perspective of investors, he said.

“By confirming that Article 54(1) of the ICSID Convention constitutes a clear waiver of adjudicative immunity, the Supreme Court removes a major procedural obstacle that states have increasingly sought to deploy at the enforcement stage,” said Tretyak. “Investors can now have greater confidence that an ICSID award will be capable of recognition and registration in key enforcement jurisdictions, such as England, without being stalled by immunity arguments.”

Kalelioglu said that the judgment may influence future treaty practice and state behaviour: “For investors, it highlights the importance of understanding the scope and operation of the treaty and enforcement framework applicable to their investments, particularly given the enhanced enforceability of ICSID awards confirmed by the court. For states, the decision may accelerate reassessments of exposure under existing investment treaties and the ICSID Convention itself, especially for states already sceptical of investor–state arbitration.”

“It remains to be seen what impact this decision will have in practical terms. States may respond not by seeking to revive immunity arguments before domestic courts, but by modifying or terminating treaty commitments, recalibrating consent clauses, or withdrawing from multilateral instruments altogether. The judgment therefore has implications beyond enforcement litigation: it may shape the future architecture of investment protection by clarifying that consent to ICSID arbitration carries robust and enforceable consequences in national courts, including in traditionally pro‑arbitration jurisdictions such as England,” he added.