ziemons & raeschke‑kessler rechtsanwÄlte beim bundesgerichtshof

ZIEMONS & RAESCHKE‑KESSLERRECHTSANWÄLTE BEIM BUNDESGERICHTSHOF

Riga, 26 June 2014/2 2

The Influence of International Public Law on the En-forcement of Arbitral Awards Rendered under Invest-ment Treaties

Prof. Hilmar Raeschke-Kessler


Riga, 26 June 2014/2 3

The case:

The Kingdom of T. had authorised a foreign Company to build a motorway between its capital and its national airport.

After two years of construction it revoked the licence and refused to pay the company for the work done.

The Company sued the Kingdom under the BIT between Germany and the Kingdom. The Arbitral Tribunal in its award ordered the Kingdom to pay to the Company € 35 mio. The Kingdom refused to pay.


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I. Basics:

1. Any action by a state is either the exercise of its sovereign rights

= acta jure imperii;

examples:

- law making, - granting of a license to an investor, - acts of expropriation;


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2. or

a commercial activity = acta jure gestionis;

examples:

- the purchase of fighter planes for the air force, - renting out of state owned property in a foreign country for commercial purposes.


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3. International public law:

a) Immunity of any state

- from jurisdiction of other states,

- from execution of judgements or awards by arbitral tribunals by courts of other states into its property or any of its assets within the other state.

(ICJ Reports 2012, p. 99 pp., Germany v. Italy)


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b) General rule:

(1) no jurisdiction of other states on acta jure imperii unless consented to,

(2) jurisdiction of other states on acta jure gestionis,

(3) no execution of judgements or awards in property / assets serving acta jure imperii.


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c) Origin of the principles:

Customary international public law condensed to

UN-Convention of Jurisdictional Immunities of States and Their Property of 2004,

not yet in force but serves as “restatement”.


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4. The purpose of multilateral investment treaties (ICSID) and of BITs:

Protection of foreign investors against expropriation without a fair compensation.

Expropriation = actus jure imperii;

obstacle of state immunity has to be overcome on jurisdiction and enforcement.


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II. Waiver of state immunity on jurisdiction

1. Enforcement of an award requires its prior recognition by a state court;

→ needed a waiver on jurisdiction.

Art. 7 UN-Convention:

“Express consent to exercise of jurisdiction1. A State cannot invoke immunity from jurisdiction in a proceeding before a

court of another State with regard to a matter or case if it has expressly consented to the exercise of jurisdiction by the court with regard to the matteror case:

(a) by international agreement …“


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1. Bilateral investment treaties – BITs-establish jurisdiction of arbitral tribunals for investment disputes between host states and investors.

So do multilateral treaties like the ICSID Convention of 1984.


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Art. 10 (2) German Model BIT 2009:

“If the dispute cannot be settled within six months of the date on which it was raised by one of the parties to the dispute, it shall, at the request of the investor of the other Contracting State, be submitted to arbitration. The two Contracting States hereby declare that they unreservedly and bindingly consent to the dispute being submitted to one of the following dispute settlement mechanisms of the investor's choosing:”


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2. The choice of the investor:

(1) ICSID Arbitration,

if at least one of the states is a member of the ICSID- Convention of 1965,

(2) ad hoc arbitration under the UNCITRAL-Rules,

(3) institutional arbitration under ICC-Rules, LCIA-Rules or Stockholm-Rules.


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III. Enforcement of award in favor of investor

1. Immunity of states extends to enforcement of judgements or arbitral awards.

Waiver of immunity to jurisdiction ≠ waiver of immunity of enforcement.

Required: specific waiver, expressed or implied, allowing enforcement.


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Art. 19 UN-Convention 2004:“State immunity from post-judgment measures of constraint

No post-judgment measures of constraint, such as … execution, against property of a State may be taken in connection with a proceeding before a court of another State unless and except to the extent that:

(a) the State has expressly consented to the taking of such measures as indicated:

(i) by international agreement

(ii) by an arbitration agreement;”


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2. Waiver allowing enforcement of an award

a) Award rendered under ICSID Convention:

Art. 54 ICSID Convention:

“(1) Each Contracting State shall recognize an award rendered pursuant to this Convention as binding and enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that State. …“

Award final ≙ decision of state court.

No judicial review of award in recognition and enforcement proceedings by a state court.

No review under Art. V NYC 1958.


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b) BIT-awards rendered under UNCITRAL-Rules:

Art. 32 II UNCITRAL-R. 1976 = Art. 34 II UNCITRAL-R. 2010:

2. All awards shall be … final and binding on the parties. The parties shall carry out all awards without delay.

Enforcement possible without judicial review of award under Art. V NYC.


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UNCITRAL-Rules are for Commercial arbitration.

In commercial arbitration Art. 32 II 1976 = Art. 34 II 2010 do not exclude review under Art. V NYC.

By incorporating UNCITRAL-Rules into a BIT they participate in the internatio-nal public law character of the BIT.


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→ Interpretation according to the Vienna Convention on the Law of Treaties 1969.

Article 31 Vienna Convention:

“General rule of interpretation

1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.”


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c) BIT-awards rendered under institutional rules like ICC-Rules:

Art. 34 (6) ICC-Rules 2012:

“Every Award shall be binding on the parties. By submitting the dispute to arbitration under these Rules, the parties undertake to carry out any Award without delay and shall be deemed to have waived their right to any form of recourse insofar as such waiver can validly be made.”

→ No review of award

(Cour de Cassation. civ. 1re, 6.7.2000 – Creighton Ltd., US-Court of Appeals 5th Cir., 395 F.3d 229, Walker v. Republic of Congo (2004).

≙ no. 26.9 LCIA Rules 1998.


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d) BIT-awards rendered in ad-hoc arbitration:

execution possible,

but at the request of the host state full review of award under Art. V NYC, unless excluded in modern BITs:

Art. 10.3 German Model-BIT 2009:

“(3) … The award shall be enforced by the Contracting States as a final and absolute ruling under domestic law.


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3. State property available for execution of the award:

all objects serving for acta jure gestionis are suitable for execution

= property used for commercial-non official purposes,

(Swedish Supreme Court of 1.7.2011 – ö 170-10);

example: state owned building rented out to third parties unrelated to the government,

disputed: bank accounts at a foreign national bank or commercial bank.


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4. Objects not suitable for execution of the award:

all objects serving acta jure imperii;

example:

embassy building,

air traffic fees due from airline to state (BGH VII ZB 9/05, 4.10.2005).


ziemons & raeschke‑kessler rechtsanwÄlte beim bundesgerichtshof

Documents

state court

waiver of state immunity

state owned property

acta jure imperii examples

acta jure gestionis

foreign company

arbitral awards

property assets