Sovereign immunity and enforcement of arbitral awards

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Introduction

The recent exponential growth of international investment agreements, providing foreign investors with guarantees and the right to refer a dispute against a state to a qualified tribunal, evidences the fact that investor-state arbitration, as a form of dispute settlement, got widespread. Offering objective judicial procedure, international investment arbitration ensures direct access of investor to public justice without dependence on a State. At the same time investors, even having a positive decision of tribunal, may face problems on the stage of recognition and enforcement of arbitral award mostly due to specific character of national legislation and State sovereignty. The following paper basically tries to identify situations, when immunity of States may affect the course of investment-treaty arbitration, more thoroughly focusing on execution stage. Accordingly, the main goal of the thesis is to establish the relevance of sovereign immunity principle to process of recognition and enforcement of arbitral awards against States in different jurisdictions, revealing general trends in this sphere.

The paper is divided into several parts. The first chapter is devoted to analysis of sources, governing the enforcement of investor-state arbitral awards, identifying strengths and deficiencies of different enforcement systems. The second part focuses on the application of doctrine of sovereign immunity on different stages of investor-state arbitration, revealing the most common challenges, which investor may meet during enforcement proceedings. Finally, the third chapter is aimed to provide an overview on provisional measures in investor-state arbitration, focusing on limitations, arising due to State sovereignty.

It should be noted that the chosen topic is of high significance, especially for the Russian Federation, which is a signatory to a number of investment treaties, stipulating the opportunity to file a claim to a tribunal, and at the same time is a defendant in 24 arbitral hearings Russian Federation as respondent State. Retrieved May, 8 2018, from http://investmentpolicyhub.unctad.org/ISDS/CountryCases/175?partyRole=2. Moreover, presently, Arbitrazh court of Moscow is reviewing the case PJSC Tatneft' v. Ukraine, case ¹ À40-67511/2017. Retrieved May, 8 2018, from https://kad.arbitr.ru/Card/f541a5b1-ebae-4581-83f9-461efa202274 which will probably have an impact on the further state practice of the Russian Federation concerning the question of existence of sovereign immunity on the stage of enforcement and execution of arbitral award. Taking into account a great variety of attempts of other states to collect Russian property abroad the delivered position of the court will be relevant not only on the Russian territory but also in foreign courts, allowing enforcement of awards against the Russian Federation.

arbitral investor sovereign immunity

Chapter I. Regulatory framework

Originally, the demand in creation of method of dispute settlement between foreign investors and hosts states was triggered by weak position of investor, which was granted with very few or even no options to protect his rights, violated by a host state. Surely, investor was entitled to file a claim against host state in national courts or seek diplomatic protection before investor's national state after exhaustion of all other remedies, but in such a case investor was totally isolated from the proceedings and obtained no information about the course of the plea, while a State had a full power of discretion as to protect or not. What is more, resort to diplomatic protection could result in threat of use of force (so called “gunboat diplomacy” Johnson, O., & Gimblett, J. (2012). From gunboats to BITs: the evolution of modern international investment law. In Yearbook on International Investment Law & Policy 2010-2011 (p. 652). New York: Oxford University Press. ), what could sufficiently influence the state of international affairs.

Therefore, reference to a treaty-based system of dispute settlement between investors and states as an alternative to political-based system of diplomatic protection was essential. Investment treaty arbitration allowed foreign investors to directly institute proceeding against host states and seek enforcement of arbitral awards against sovereigns before domestic courts in various jurisdictions. Accordingly, the following chapter is devoted to analysis and comparison of international legal acts, ensuring the enforceability of arbitral awards in investment-treaty arbitration.

1.1 ICSID Convention

The Convention on Settlement of Investment Disputes between States and National of Other States (hereinafter referred to as “ICSID Convention”) entered into force on 14 October 1966 and is aimed to ensure protection of foreign investors under international law from acts of host States, which may undermine investments. Simultaneously, the ICSID Convention and the ICSID Arbitration Rules were designed in order to provide host States neutral dispute resolution mechanism, which protect them from developed States and their economic manipulations. It should be noted that the scope of application of the ICSID Convention is limited only to investment disputes, having been submitted to International Centre for the Settlement of International Disputes, which has jurisdiction under Article 25(1) of the Convention, if parties consented in writing about the competence of the Centre.

The mechanism of enforcement of arbitral awards against States is governed by Section 6 of Chapter 4 of the ICSID Convention, which consists of articles 53-55, more thoroughly examined below.

Article 53 of the ICSID illustrates the pacta sunt servanda and res judicata concepts in investment treaty arbitration. By wording of Article 54 the Convention stipulates the binding force of the award and creates the legal duty to comply with an award, while the refusal to do so leads to violation of legal obligation under international law and state responsibility. Schreuer, C. (2009). The ICSID convention: a commentary (pp. 1077, 1081). Cambridge: Cambridge Univ. Press.

It should be noted that obligation to comply with an award is independent from procedural challenges, which may occur during enforcement. Particularly, even sovereign immunity does not have an impact on the obligation to comply with an award. Thus, in MINE v. Guinea the Ad Hoc Committee declared that:

“It should be clearly understood, ..., that State immunity may well afford a legal defense to forcible execution, but it provides neither argument nor excuse for failing to comply with an award. In fact, the issue of State immunity from forcible execution of an award will typically arise if the State party refuses to comply with its treaty obligations. Non-compliance by a State constitutes a violation by that State of its international obligations and will attract its own sanctions.” Rayfuse, R. (1997). ICSID reports (p. 115). Cambridge: Grotius.

The finality of an award is ensured by direct indication that award is not a subject to relitigation by a different forum except by means, prescribed by the Convention, and thus becomes res judicata for the parties. The following provision is significant and demonstrates the advantage over the New York Convention, which entail a possibility to challenge the award by courts of country, where award is sought. Oppositely, self-contained system of review under the ICSID Convention assumes that any plea for annulment of an award before domestic courts of States, which are parties to the Convention, should be dismissed.

Such autonomy from national legislation and procedures signifies the irrelevance of the place of arbitration for purposes of enforcement and validity of an award. Furthermore, due to the analyzing provision domestic courts, dealing with enforcement of an ICSID award, are not authorized to review it on procedural or substantive grounds. This proposition is supported by the Decision on Annulment in MINE v. Guinea, where the Ad Hoc Committee reaffirmed the binding force of an award and impossibility of its review by any authority other than stipulated in the Convention. The Committee further specified:

“It appears from these provisions that the Convention excludes any attack on the award in national courts. The award is final in that sense.” Rayfuse, R. (1997). ICSID reports (p. 84). Cambridge: Grotius.

Article 54 of the ICSID Convention is designed in order to ensure compliance with an award in case of failure of voluntary fulfillment by the parties and represents a simplified mechanism of recognition of an award in States-signatories to the ICSID Convention. This article imposes a highly unusual obligation for all States, which are parties to the Convention to enforce ICSID awards as if they were final judgments of national courts. Traditionally, procedures of enforcement are governed by the domestic legislation, which can specify possibilities for review of an award, while the ICSID Convention introduce the new machinery of enforcement without dependence on domestic legislation and national courts, which are not allowed to refuse recognition or examine the merits of an award on the basis of public policy considerations, as the Convention does not stipulate any grounds for refusal of enforcement. Schreuer, C. (2009). The ICSID convention: a commentary (p. 1139). Cambridge: Cambridge Univ. Press.

Therefore, recognition of ICSID awards constitutes an automatic procedure regulated by the Convention, which limits the power of domestic courts to simple confirmation of authenticity of an award. Gerlich, O. (2015). State Immunity from Execution in the Collection of Awards Rendered in International Investment Arbitration: the Achilles' Heel of the Investor - State Arbitration System?. American Review Of International Arbitration, 26(1), 56. Surely, more elaborate procedure may be established by the national legislation, which, however, should not supplement the general approach, introduced in the ICSID Convention Ku, J. (2013). The Enforcement of ICSID Awards in the People's Republic of China. Contemporary Asia Arbitration Journal, 6(1), 37..

Recognition of an arbitral award has two effects. The first is that through recognition it is confirmed that award (both pecuniary and non-pecuniary) becomes binding and final, what means that the original dispute should not be a subject of proceedings before national court or arbitral tribunal. The second effect constitutes in the fact that after recognition an award becomes valid for purposes of enforcement or execution. As a general rule recognition is a preliminary step leading to enforcement of award and even if perspectives of enforcement are uncertain due to absence of appropriate property of defendant in State, where enforcement is sought, the existence of recognized award can make execution easier once suitable assets will be allocated.

It should be noted that the terms “enforcement” and “execution” are used interchangeably in the Convention what leads to concerns as to whether aforementioned notions have the same meaning and therefore should be treated synonymously or separately. The fact that equally authentic Spanish and French texts of the ICSID Convention do not distinguish between these terms leads to the proposition introduced by Professor Schreuer, who suggested to interpret notions “enforcement” and “execution” in accordance with 1969 Vienna Convention on the Law of Treaties (hereinafter referred to as “VCLT”) and considered them as identical ones Schreuer, C. (2009). The ICSID convention: a commentary (p. 1135). Cambridge: Cambridge Univ. Press. . However, some authors make a distinction between aforementioned notions, stating that enforceability of an award is governed by the Convention, while its implementation by execution is subject to regulations of domestic legislation Broches, A. (1987). Awards Rendered Pursuant to the ICSID Convention: Binding Force, Finality, Recognition, Enforcement, Execution. ICSID Review, 2(2), 304. . This view corresponds to the Kardassopoulos & Fuchs v. Georgia decision on the stay of enforcement of the award, where the Ad Hoc Tribunal noted that

“The simplified and automatic enforcement system of Article 54(1) of the ICSID Convention should not be conflated with the measures of execution that follow the order granted by the court or authority designated in accordance with Article 54(2) for enforcement of the award and which are referred to in Article 54(3) providing that `[e]xecution of the award shall be governed by the laws concerning the execution of judgments in force in the State in whose territories such execution is sought” Ioannis Kardassopoulos and Ron Fuchs v. Georgia. Decision of the ad hoc Committee on the Stay of Enforcement of the Award, 30 (2010). Retrieved from https://www.italaw.com/sites/default/files/case-documents/ita0348.pdf .

The self-contained character of the ICSID Convention ends on the execution stage, as it is regulated by the national legislation of State where the execution is sought. Therefore, only remedies and procedures stipulated in domestic law are available for successful investor. Despite the fact that Article 54 (3) provides signatories to the Convention with an opportunity to review the award on procedural grounds, such as sovereign immunity, it does not allow the domestic legislation in the enforcing state to review an arbitral award on merits Therefore, Article 54 (3) does not affect the finality and enforceability of the ICSID awards, while the States even successfully relying on sovereign immunity defense and refusing to comply with award will be “in breach of a treaty obligation leading to state responsibility” Joemrith, K. (2015). Enforcing arbitral awards against sovereign states : The validity of sovereign immunity defence in investor -state arbitration. (PhD Thesis). SOAS University of London. (p. 124). Retrieved from http://eprints.soas.ac.uk/22784/ .

Generally, the relationship between obligation to comply with an award, prescribed by Article 53, and obligation to recognize and enforce, stipulated in Article 54, was scrutinized by the ICSID, which stated that aforementioned obligations under these provisions are different and independent. Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic. Decision on the Argentine Republic's Request for a Continued Stay of Enforcement of the Award, 61 (2008). Retrieved from https://www.italaw.com/sites/default/files/case-documents/ita0296.pdf The Ad Hoc Committee noted, in particular, that obligations are addressed to different subjects: the obligation to comply is binding on parties of arbitration, while obligation to recognize and enforce is directed to all signatories to the Convention. The Committee also stated that obligation to comply with an award was unconditional, it arose when award was rendered and remained unaffected by any national procedures. Other interpretation, which forces the successful investor to start enforcement proceedings as a prerequisite for compliance with an award by the State, thus, implying the supervisory function of national courts in the enforcement of awards would be “inconsistent with the purpose of the ICSID Convention” Enron Corporation and Ponderosa Assets, L.P. v. Argentine Republic. Decision on the Argentine Republic's Request for a Continued Stay of Enforcement of the Award, 68 (2008). Retrieved from https://www.italaw.com/sites/default/files/case-documents/ita0296.pdf.

Finally, Article 55 represents the specification of Article 54(3) of the Convention, stipulating that provisions of Article 54 should not be interpreted as derogation from law on sovereign immunity from execution of any state. Probably, the logic of this provision was in protection of “sanctity” of sovereign immunity concept Filipiuk, A. (2016). Enforcement of ICSID Arbitration Awards and Sovereign Immunity(LL.M Short Thesis). Central European University. (p. 9) Retrieved from www.etd.ceu.hu/2016/filipiuk_anastasiia.pdf and preventing forced execution especially against public assets of sovereign states.

1.2 BITs and IIAs

The majority of bilateral investment treaties (hereinafter referred to as “BITs”) and international investment agreements (hereinafter referred to as “IIAs”) provide rules for the settlement of disputes between investors and host States, which identify, in particular, consent to arbitration, applicable law, rules of arbitration, competent forum, combination of tribunal. One of the interesting provisions, contained in nearly 90% of BITs and IIAs, is an obligation of an investor to wait until expiration of cooling-off period before bringing a claim Pohl, J., Mashigo, K., & Nohen, A. (2012). Dispute Settlement Provisions in International Investment Agreements: A Large Sample Survey. SSRN Electronic Journal, 17. doi: 10.2139/ssrn.2187254. It is assumed that within this period parties should try to settle the dispute amicably, while an investor is entitled to submit an application to an arbitral institution only after the failure of an attempt to resolve a dispute by the way of negotiations or consultations. The duration of waiting periods varies: the majority of BITs prescribe 6 months cooling-off period For instance, Japan - Oman BIT (2015). Retrieved from http://investmentpolicyhub.unctad.org/Download/TreatyFile/3481 or Eurasian Economic Union - Viet Nam FTA (2015). Retrieved from http://investmentpolicyhub.unctad.org/Download/TreatyFile/3457 , however, occasionally, the period may reach up to 12 months Egypt - Mauritius BIT (2014) Retrieved from http://investmentpolicyhub.unctad.org/Download/TreatyFile/3285. The significance of the following provision constitutes in a fact that without compliance with stipulated time limit, investor will be unable to resort to arbitration and, therefore, enforce an award. Therefore, an investor should pay attention on provision of a relevant BIT in order to establish his eligibility to file a claim to arbitral institution.

Apart from procedural provisions on arbitration process, BITs and IIAs frequently determine the issues concerning enforcement of awards. For instance, some investment treaties establish pre-conditions to enforcement. Thus, North American Free Trade Agreement between Canada, The United States and Mexico in Article 1136 NAFTA (1992). Retrieved from http://investmentpolicyhub.unctad.org/Download/TreatyFile/2412 determines the terms, after expiration of which successful party may seek enforcement, that are: 120 days after the date the award was rendered under the ICSID Convention and 3 months - under ICSID Additional Facility Rules or the UNCITRAL Arbitration Rules. This provision should be taken into account by a successful investor during the enforcement proceedings, as non-compliance with aforementioned terms may be one of the grounds for refusal to enforce an award against a State, what may delay the subsequent enforcement proceedings and require additional costs from investor.

What is more, a number of BITs and IIAs stipulate the status, enjoyed by awards, rendered by an arbitral tribunal. According to OECD Working Papers on International Investment, Pohl, J., Mashigo, K., & Nohen, A. (2012). Dispute Settlement Provisions in International Investment Agreements: A Large Sample Survey. SSRN Electronic Journal, 36. doi: 10.2139/ssrn.2187254 61% of treaties analyzed provide that award of a tribunal is final and/or binding. The wording of an investment treaty on binding force should be analyzed thoroughly, as it may shed light on consequences of non-compliance with an award and conditions of further enforcement of an award.

For instance, the General Approaches to conclusion of international treaties on investment protection, which are intended to be used by the Russian Federation, while negotiating investment treaties with other countries, stipulates:

“Decisions of arbitral tribunals, issued in accordance with the treaty, are binding upon the parties of the dispute. State parties of the treaty should ensure enforcement of arbitral decisions in accordance with national legislation.” Russian Federation Government Decree ¹ 992 dated September, 30 2016 “On the conclusion of international treaties of the Russian Federation on investment promotion and protection”, 55. Retrieved from http://pravo.gov.ru/proxy/ips/?docbody=&nd=102412234%3E&rdk=&backlink=1

The abovementioned provision is a model clause and appears in the majority of investment treaties with the Russian Federation For instance, Iran, Islamic Republic of - Russian Federation BIT (2015), Article 9. Retrieved from http://investmentpolicyhub.unctad.org/Download/TreatyFile/5424 ; Kazakhstan - Russian Federation BIT (1998), Article 10 .Retrieved from http://investmentpolicyhub.unctad.org/Download/TreatyFile/1785. Under the strict interpretation, it follows from the wording of the provision that the award is obligatory for an investor and a host State (parties to the dispute). From the first glance, it may seem that provision on binding force creates the same obligation, as stipulated in the ICSID Convention, to enforce an award in case of non-compliance with it. However, this obligation to enforce an award differs with regard to subjects it addresses. Unlike the ICSID Convention, which establishes a duty to enforce an award for every contracting State, the abovementioned provision imposes this obligation only on a State party to a dispute, bound by an award. The following conclusion is supported by the fact that the provision does not specify any international regime of enforcement of arbitral award, merely referring to domestic legislation on this issue. What is more, it does not contain a clear intent of contracting parties to consent to jurisdiction of foreign courts on any stage of arbitration process. Therefore, under the analyzed provision, an investor may seek enforcement only in a host State, the only party, obliged to enforce an award. The other interpretation of the provision will possibly affect the immunity of a host State, which merely agrees to comply with and enforce an award but does not consent to jurisdiction of courts of other jurisdictions. Meanwhile, in the event of refusal to enforce an award, an investor usually has an opportunity to rely on protection from his national State, what also follows from General Approaches to conclusion of international treaties on investment protection Russian Federation Government Decree ¹ 992 dated September, 30 2016 “On the conclusion of international treaties of the Russian Federation on investment promotion and protection”, 68. Retrieved from http://pravo.gov.ru/proxy/ips/?docbody=&nd=102412234%3E&rdk=&backlink=1 and from majority of investment treaties Bahrain - Russian Federation BIT (2014), Article 11. Retrieved from http://investmentpolicyhub.unctad.org/Download/TreatyFile/1785 ; Canada - Russian Federation BIT (1989), Article 11. Retrieved from http://investmentpolicyhub.unctad.org/Download/TreatyFile/3403 . Thus, any disputes, relating to application of an investment treaty, including disputes connected with non-enforcement of an award by a State party, should be first settled by diplomatic channels and referred to arbitration in case of failure of friendly settlement.

On the other hand, Japan - Oman BIT in Article 15 Japan - Oman BIT (2015). Retrieved from http://investmentpolicyhub.unctad.org/Download/TreatyFile/3481 provides that:

“This award shall be executed in accordance with the applicable laws and regulations, as well as relevant international law including the ICSID Convention and the New York Convention, concerning the execution of award in force in the country where such execution is sought”.

In contrast to provision, analyzed before, the following clause expressly refers to international regime of enforcement of an award, therefore, granting a possibility to enforce an award not only in a host State but in other States, which are parties to relevant Conventions. It should be noted, however, that provisions on applicable law on enforcement are not commonly embedded into the BITs and IIAs texts.

Considering the aforementioned, it may be supposed that, generally, any arbitral award is legally binding only upon a host State and an investor, therefore, an obligation to enforce an award arises only for a host State, provided that investment treaty does not contain reference to Conventions, ensuring international enforcement of award. It should be mentioned that a foreign investor may, potentially, initiate enforcement proceedings in other States, if all the relevant subjects are parties to relevant Conventions but then award will be enforced under these Conventions, not an investment treaty.

One of the other important questions that may be regulated through BITs and IIAs is the possibility of invocation of state immunity on different stages of arbitration. In principle, a waiver of sovereign immunity may be specified in an investment treaty, depriving a State party of its right to rely on immunity. Although this trend is marginal due to requirement of reciprocity but, for example, Romania and Switzerland included provisions that prohibit States from asserting their immunity in several agreements. Switzerland - Trinidad and Tobago BIT (2010). Retrieved from http://investmentpolicyhub.unctad.org/Download/TreatyFile/3043 ,

Switzerland - Tajikistan BIT (2009). Retrieved from http://investmentpolicyhub.unctad.org/Download/TreatyFile/3257 ,

Bosnia and Herzegovina - Romania BIT (2001). Retrieved from http://investmentpolicyhub.unctad.org/Download/TreatyFile/3325

Furthermore, Article 10 of Kuwait - Mauritius BIT (2013) prescribes that:

“In any proceedings, judicial, arbitral or otherwise or in an enforcement of any decision or award, concerning an investment dispute between a Contracting Party and an investor of the other Contracting Party, a Contracting Party shall not assert, as a defense, its sovereign immunity” Kuwait - Turkey BIT (2010). Retrieved from http://investmentpolicyhub.unctad.org/Download/TreatyFile/3157 .

Therefore, the provisions of investment treaties may significantly undermine applicability of sovereign immunity defense on different stages of arbitral proceedings, providing more chances for an investor to enforce an award.

Conclusively, investment treaties provide certain guidance and regulate procedures of enforcement of arbitral awards against sovereign States. Provision of some investment agreements may establish additional requirements for investors to initiate arbitral proceedings and subsequently enforce arbitral awards against sovereign States. What is more, the wording of investment treaty may be significant for purposes of establishing the legal regime of enforcement and consequences for refusal to comply with an award. Finally, BITs and IIAs may contain clauses, specifically concerning sovereign immunity of States and specifying a waiver of immunity on different stages of arbitral proceedings. Therefore, investment agreements should be thoroughly analyzed by the parties in order to reveal peculiarities, which may affect enforcement process.

1.3 NY Convention

The other instrument, which may govern enforcement of investor-state arbitral awards, is the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (hereinafter referred to as “NY Convention”), entered into force in 1959. The Convention represents lex generalis and does not take into account specific features of investor-state arbitration and its public character.

It should be noted that despite seeming similarity of investment treaty and commercial arbitration, these mechanisms of dispute settlement are distinct. Particularly, international commercial arbitration concerns disputes between private parties, and even if a State is a party in commercial arbitration, it is regarded as acting in a private capacity, therefore not enjoying sovereign privileges. On the contrary, the primary goal of investor-state arbitration is to resolve disputes arisen in hierarchical relationships between a private party (an investor) and a sovereign State, possessing a wider range of powers. What is more, if an arbitral tribunal in commercial arbitration deals exclusively with breach of contract provisions without interference in internal affairs of a State, arbitrators in investor-state arbitration have regulatory powers to review State's decisions and regulations even in the most sensitive spheres such as taxation For example, in Tza Yap Shum v. Republic of Peru (2011), the Tribunal found that imposition of interim measures by the taxation authority due to existence of underreported sales volumes constituted an indirect expropriation. Retrieved from https://www.italaw.com/cases/1126 . Accordingly, investor-state arbitral tribunals are able “to override domestic law with public international law, obliged by a state” Joemrith, K. (2015). Enforcing arbitral awards against sovereign states : The validity of sovereign immunity defence in investor -state arbitration. (PhD Thesis). SOAS University of London. (p. 50). Retrieved from http://eprints.soas.ac.uk/22784/ under investment treaties, thus representing a form of public law adjudication used for settlement of disputes beyond a State and its national law. Given to this specific character of investment treaty arbitration, application of rules on commercial arbitration may not be always appropriate, these rules are supplementary.

Thus, the NY Convention establishes a general pattern of enforcement of international arbitral awards, providing that “each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon”. Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958). Article III. Retrieved from http://www.uncitral.org/pdf/english/texts/arbitration/NY-conv/New-York-Convention-E.pdf Essentially, this provision means that, while all the parties of the Convention are obliged to enforce an award, the course of enforcement proceedings is fully dependent and regulated by national legislation of contracting States. Unlike the ICSID Convention, the New York Convention was not designed in order to delocalize disputes from domestic courts, what leads to a consequence that arbitral award basically can be reviewed or refused enforcement based on judicial, economic, political considerations or due to application of Article V of the Convention.

Therefore, the NY Convention, on the one hand, tries to ensure the compliance with an award rendered by the chosen forum and, simultaneously, provides opportunity for supervision by domestic courts, thus, balancing competing interests of parties.

Article IV of the Convention obliges party, which seeks enforcement, to provide to competent authority of State an authenticated original award or a duly certified copy thereof and arbitration agreement. The defendant is entitled to oppose an award in domestic courts on grounds, set out in Article V, while the national court may also ex officio raise two grounds. In order to refuse enforcement of an award the party should prove one of the following circumstances: the absence or invalidity of arbitration agreement, violation of due process, excess of powers by arbitral tribunal, incorrectness of formation of tribunal or rules of procedure, lack of binding force of the award due to suspension or setting aside by a competent authority. Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958). Article V (1). Retrieved from http://www.uncitral.org/pdf/english/texts/arbitration/NY-conv/New-York-Convention-E.pdf The next two grounds, namely: non-arbitrability and non-compliance with public policy, may be raised on the own initiative of the court.

Although the NY Convention does not expressly specify the possibility of its application in execution proceedings against States, it is well established that the Convention permits enforcement against sovereigns. However, a State, in order to prevent execution, may raise its sovereign immunity defense in various ways. For instance, a State can rely on jurisdictional immunity based on lack of capacity, non-arbitrability of the dispute or excess of powers by the tribunal. Moreover, on the enforcement stage, a sovereign may resort to immunity from execution by referring to public policy concerns or national procedural laws, containing provisions on sovereign immunity.

1.4 Comparison of legal regimes

After providing a short overview on sources, ensuring recognition and enforcement of arbitral awards, it seems necessary to summarize the aforesaid, compare these instruments and identify distinctions in collecting mechanisms.

The first issue, which should be analyzed, is the difference between Conventions and investment treaties, which constitutes in subjects, obliged to enforce an award. Both the ICSID and the NY Conventions impose a duty to enforce an award for all the signatories to the Conventions. Therefore, an investor is eligible to initiate enforcement proceedings in various jurisdictions, provided that suitable property of a host State is located in the country, where enforcement is sought. The refusal to enforce an award in one jurisdiction does not necessarily mean that investor loses his right to seek enforcement in any other State. The situation is different with regard to enforcement under investment treaties. Stipulating the binding force of arbitral awards, BITs and IIAs establish the duty to comply with an award and to enforce it only for a party to a dispute (the host State). Therefore, it seems impossible to seek enforcement of award in other jurisdictions under BITs and IIAs, as they may not impose an obligation to enforce an award for States, which are non-signatories to the relevant investment treaties. In the event of refusal to enforce an award, an investor typically would not be entitled to any opportunity, other than seek diplomatic support from a home State. Surely, BITs and IIAs may specify an international regime of enforcement, then the obligation to enforce an award will arise for all contracting parties to the relevant Convention, enforcement will be governed by this Convention, not an investment treaty. Accordingly, the enforcement regimes under the Convention and investment treaties differ with regard to subjects, bearing an obligation to enforce an award and to consequences of the refusal to comply with this duty. Refusal to enforce an award in accordance with provisions of Conventions in the host State usually leads to attempts to enforce the award in other jurisdictions, while non-enforcement of an award by the host State in case of enforcement under investment treaties may result in either diplomatic support or simple impossibility to get a redress.

The next part of the analysis will be devoted to comparison of legal regimes of enforcement under the ICSID and the NY Conventions. The first and foremost that should be noted is the different purpose of purely the ICSID Convention and the NY Convention in international arbitration. If the former is exclusively applied to resolve disputes between states, acting in sovereign powers, and foreign investors; than the latter is used in disputes between private parties and states, acting in private capacity, i.e. in international commercial arbitration.

The further distinction reveals in applicable law. As was mentioned above, the NY Conventions fails “to limit the role of the courts” Choi, S. (1996). Judicial Enforcement of Arbitration Awards under the ICSID and New York Conventions. New York University Journal Of International Law And Politics, 28, 190., applying national legislation and giving domestic courts the power to interpret awards and decide on their enforceability. Therefore, system of enforcement of arbitral awards under the NY Convention is not delocalized, but dependent on legislation of seat of arbitration and place of enforcement, what can lead to forum shopping “for countries with the most inclusive view of the scope of the New York Convention” Joemrith, K. (2015). Enforcing arbitral awards against sovereign states : The validity of sovereign immunity defence in investor -state arbitration. (PhD Thesis). SOAS University of London. (p. 137). Retrieved from http://eprints.soas.ac.uk/22784/.

At the same time, in the Vivendi v. Argentina stay of enforcement decision the Ad Hoc Tribunal stated:

“..one of the fundamental issues which the drafters of the ICSID Convention were keen to achieve was a total divorce from the recognition and enforcement system which prevailed under domestic laws or under the 1958 New York Convention governing commercial arbitration in the Member States Compan˜ý´a de Aguas del Aconquija SA and Vivendi Universal SA v. the Argentine Republic (Second Annulment Proceeding). Decision on the Argentine Republic's Request for a Continued Stay of Enforcement of the Award, 35 (2008). Retrieved from https://www.italaw.com/sites/default/files/case-documents/ita0217.pdf ”.

Therefore, unlike NY Convention, the ICSID system represents a self-contained structure independent from domestic regulations, providing autonomous procedural rules irrespectively of national legislation of host state and allowing application of municipal law only on execution stage.

The next point to consider is the possibility of review of an award and its finality. In the Sempra v. Argentina stay decision the Ad Hoc Committee noted that:

“It must be observed that there is a fundamental difference between enforcement of awards under the New York Convention and the ICSID Convention, in that Article 5 of the New York Convention envisages certain grounds on which the award may be subject to judicial review at a national level and which may entitle a State to refuse enforcement…The ICSID Convention, on the other hand, does not offer any scope for review on the national plane. An award given under the ICSID Convention shall… be enforced “as if it were a final judgment of a court in that State” Sempra Energy International v. the Argentine Republic. Decision on the Argentine Republic's Request for a Continued Stay of Enforcement of the Award, 40,41 (2009). Retrieved from https://www.italaw.com/sites/default/files/case-documents/ita0772.pdf ”.

It follows from the decision and the wording of Conventions that the ICSID Convention restricts review of the award only to procedures, prescribed by the Convention, that are interpretation, revision and annulment, prohibiting intervention of national courts. Thus, in the Vivendi v. Argentina stay decision it was stated:

“Any possible intervention by a judicial authority in the host State is unacceptable under the ICSID Convention, as it would render the awards simply a piece of paper deprived from any legal value and dependent on the will of State organs” Compan˜ý´a de Aguas del Aconquija SA and Vivendi Universal SA v. the Argentine Republic (Second Annulment Proceeding). Decision on the Argentine Republic's Request for a Continued Stay of Enforcement of the Award, 36 (2008). Retrieved from https://www.italaw.com/sites/default/files/case-documents/ita0217.pdf .

By contrast, the NY Convention provides an opportunity of review by national courts on both due process and substantial correctness of an award. Moreover, the NY Convention allows national courts to rely on public policy as an escape clause in reluctance to enforce arbitral award. It should be noted that the ambit of public policy is not properly defined elsewhere, therefore, states enjoy a wide margin of appreciation while referring to it as a ground for non-enforcement of arbitral award. On the contrary, the ICSID Convention does not explicitly refer to public policy, but mentioning some notions, which can fall within the ambit of public policy in the Article 52, stipulating grounds for annulment. However, due to finality of ICSID awards, domestic courts are not empowered to review these awards and refuse enforcement based on public policy concerns.

Considering the aforementioned, it can be supposed that the ICSID system of enforcement is more effective in comparison with the NY Convention, as providing a higher degree of finality of arbitral awards due to independence from national orders.

However, some scholars are of the opinion that the ICSID Convention is not as perfect, as it may seem at a first glance. Thus, it is criticized for the lack of governmental control in situations, when an investor successfully challenges governmental act, which concerns not only particular investor but affects lager audience (or even all population of a country). Ispolinov, A. (2015). Kuda idet sovremenniy investitsionniy arbitrazh?. Rossiiskiy Iuridicheskiy Zhurnal, 3, 90.What is more, it is argued that due to protectionist character, the ICSID system cannot adequately take into consideration plurality of existing interests, only safeguarding rights of the investor. Skvortsov, O. (2015). Ob investitsionnom arbitrazhe Evraziiskogo Ekonomicheskogo Soiuza. In I. Greshnikov, Mezhdunarodniy kommercheskiy arbitrazh i voprosi chastnogo prava (p. 37). Moscow: Statut.

Other scholars express the position that regimes of enforcement under both Conventions are equally effective and “do not affect a claimant's chances of success as much as often portrayed” Baetens, F. (2012). Enforcement of Arbitral Awards: «Òî ICSID or Not to ICSID» is Not the Question. In T. Weiler & I. Laird, Investment Treaty Arbitration and International Law (pp. 211-228). New York: Juris Arbitration Series.. In support of this idea F. Baetens argues that both Conventions provide safeguarding mechanisms against “blind” enforcement, although on different stages, namely: review by national courts and annulment procedure under the ICSID, whereby the former has advantage, as refusal to enforce an award does not lead to termination of an award in international legal order, unlike annulment of award in ICSID system.

Taking into account the abovementioned considerations, it seems logical to conclude that both systems of enforcement have disadvantages depending on position taken. However, considering that the ICSID systems was specifically designed to resolve investment disputed and protect investors from violation of their rights by host states, trying to minimize unfairness and ensure effectiveness of an award, the ICSID Convention seems to provide more complete pro-enforcement mechanism in comparison with the NY Convention.

After providing a brief comparison, it seems necessary to outline the main problem, which arises irrespectively of enforcement system, that is the dependence on national legislation of a State, where execution of an award is sought. Despite the fact that both the ICSID and the NY Conventions and the majority of BITs and IIAs stipulate the binding force of an award, the award does not automatically become self-executing. Hence, in order to get redress in the event of non-compliance with an award an investor should apply to domestic court, which may confirm effectiveness of an award and allow execution or refuse it, depending on national law. At the same time the provisions of domestic law may create additional requirements for an investor, complicating the execution procedure. For instance, recently amended French Code of Civil Enforcement Procedure introduce an obligatory authorization procedure, requiring the award creditor, previously obtained exequatur, to seek for an order from French court for purposes of initiation of enforcement actions against foreign State. An investor should demonstrate that property of a State is attachable under the French law, and only afterwards a competent court will allow execution proceedings. The following amendment significantly lengthens the course of enforcement proceedings and impose heavy burden of proof on an investor, who may face difficulties, while providing evidence that certain type of property is suitable for execution. Enforcement of Investment Arbitration Awards in the Context of Protectionism and Backlash. Retrieved from http://berkeleytravaux.com/enforcement-investment-arbitration-awards-context-protectionism-backlash/

1.5 Alternatives to enforcement

It is not always necessary for a successful investor to initiate enforcement proceedings against a host State to obtain a remedy. Alternatively, several opportunities to avoid proceedings in domestic courts and overcome reluctance of a State party to comply with an award exist.

Post-arbitral settlement

If parties are willing to resolve the dispute peacefully, they may consent to post-arbitral award settlement, which refers to an agreement, altering the conditions, stipulated in the original award in return for a guarantee of timely fulfillment of obligation to pay. The rationale behind this mechanism is to balance interests of both parties, on the one hand, safeguarding the payment of agreed sum of money, and at the same, providing more preferable conditions to the state party by means of lowering an amount of money to pay, changing the terms of payment or allowing payment in installments. In order to avoid potentially costly and lengthy enforcement proceedings and to maintain relatively good relationships with host states Gerlich, O. (2015). State Immunity from Execution in the Collection of Awards Rendered in International Investment Arbitration: the Achilles' Heel of the Investor - State Arbitration System? American Review Of International Arbitration, 26(1), 85, investors may find it reasonable to negotiate post-award settlement and accept a compromise. For instance, Argentina settled five cases with award creditors CMS, Azurix, Vivendi, Continetal Casualty, and National Grid. The parties consented to modification of payment method reduction of amount of compensation and termination of enforcement proceedings relating to the awards Argentina settles five investment treaty awards. Retrieved from http://www.allenovery.com/publications/en-gb/Pages/Argentina-settles-five-investment-treaty-awards.aspx .

Human rights courts

If an investor exhausted all the remedies, while a host State, nevertheless, refuses to pay, an award investor may file an application to one of the regional human rights courts, namely: the European Court of Human Rights (hereinafter referred to as “ECtHR”), the Inter-American Court of Human Rights (hereinafter referred to as “IACtHR”), African Court of Human and Peoples' Rights (hereinafter referred to as “ACtHPR”). The first case, which affirmed the possibility of protection of creditor in case of failure to enforce an award, was the Stran Greek Refineries & Stratis Andreadis v. GreeceStran Greek Refineries & Stratis Andreadis v. Greece, Application 13427/87 (1994). Retrieved from http://hudoc.echr.coe.int/eng?i=001-57913, where the creditors were trying to enforce an arbitral award against Greece. Although the courts of the first and the appellate instances confirmed the award, the Cassation Court annulled it due to the entry into force of legislative act, retrospectively nullifying the contract and its arbitration clause. Subsequently, the creditors filed an application before the ECtHR, claiming, in particular, that their right to property, guaranteed by Article 1 of the Protocol 1 to the European Convention on Human Rights (hereinafter referred to as “ECHR”), was violated by Greek legislature and judiciary. The Court held that the award was a possession of creditors, as long as it “had given rise to a debt in their favor that was sufficiently established to be enforceable” Ibid., 59. Further, the Court found governmental interference with creditors' property, which was not justified, because termination of contract without the compensation as well as voidance of the arbitration clause “upset … the balance that must be struck between the protection of the right of property and the requirements of public interest” Ibid., 75 . Conclusively, the Court established the violation of creditors' right to property and obliged Greece to pay them the awarded sum of money plus interest.