Sovereign immunity and enforcement of arbitral awards

Despite the fact that the following case concerned the enforcement of domestic arbitral award, the Court subsequently applied the analogous principles in its further jurisprudence. Thus, in Regent Company v. Ukraine Regent Company v. Ukraine, Application ¹ 773/03 (2008). Retrieved from http://hudoc.echr.coe.int/eng?i=001-85681 , the Court found that non-enforcement of international arbitral award constituted a violation of Article 6 of the ECtHR. Further, the Court adopted an approach similar to Stran Greek Refineries & Stratis Andreadis v. Greece and held that Ukraine failed to comply with obligation to ensure enforceability of award, which constitutes possession, and breached Article 1 of the Protocol 1 to the ECHR.

Sedelmayer v. Germany Sedelmayer v. Germany, Applications ¹ 30190/06 and 30216/06 (2009). Retrieved from http://hudoc.echr.coe.int/eng?i=001-95943 represents an example of unsuccessful attempt to obtain redress due to non-enforcement of arbitral award. In the following case, the applicant, relying on Article 1 of the Protocol 1 to the ECHR, claimed that German authorities violated the BIT and the UN Convention, refusing to enforce the arbitral award against the Russian Federation. Although the Court qualified an award as a possession, it found that German Courts, rightly weighed principle of sovereign immunity against Mr. Sedelmayer's interest in execution against Russian assets and managed to strike a balance between requirements to protect human rights and demands of common interest. Therefore, the application was declared manifestly ill-founded and inadmissible.

The above-mentioned examples illustrate that human right claims may be a remedy for non-enforcement of arbitral awards against States, as scope of Article 6 of the ECHR and Article 1 of the Protocol 1 to the ECHR extends to enforcement proceedings. However, if State property enjoys immunity under the international law, a human rights court will unlikely provide a redress to an award creditor.

Diplomatic protection

The other alternative to enforcement proceedings is recourse to diplomatic protection, requiring engagement of a State by espousal of investor's claim, which arose from internationally wrongful act. Traditionally, customary international law outlines three requirements for exercise of diplomatic protection, namely: exhaustion of domestic remedies, existence of violation of international law and presence of connection between an injured person and protecting state. The possibility to rely on diplomatic protection is stipulated, for instance, in Article 27 of the ICSID Convention, which prescribe that contracting party is entitled to grant diplomatic protection, if the other party refuses to comply with an arbitral award. Although the Convention in Article 26 excludes the condition of exhaustion of domestic remedies, the fact that diplomatic protection was considered as an ultima ratio during negotiation of the Convention Vinuales, J., & Bentolila, D. (2012). The Use of Alternative (Non-Judicial Means) to Enforce Investment Awards Against States. In L. Boisson de Chazournes, M. Kohen & J. Viñuales, Diplomatic and Judicial Means of Dispute Settlement: Assessing their Interactions (p. 269). The Hague: Brill. intimates the necessity for an investor to attempt the collection of an award under Article 54 of the ICSID Convention before seeking diplomatic protection.

Moreover, a number of investment treaties provide an opportunity for diplomatic support on behalf of national state of an investor on enforcement stage. Thus, the general rule, prohibiting diplomatic protection in case of existence of consent to arbitration or after initiation of arbitral proceedings, is frequently limited by an exception, allowing state support in the event of non-compliance of a host State with an award. For instance, Article 8.4. of Slovenia-Bosnia and Herzegovina BIT represents the provision, which fully correlated with Article 27 of the ICSID Convention and reads as follows:

“Neither Contracting Party shall pursue through diplomatic channels any matter referred to arbitration until the proceedings have terminated and a Contracting Party has failed to abide by or to comply with the award rendered in those proceedings” Slovenia-Bosnia and Herzegovina BIT (2001). Retrieved from http://investmentpolicyhub.unctad.org/Download/TreatyFile/492 .

The similar provision appears in Singapore - United Kingdom BIT, which allows for diplomatic protection not only in the event of non-compliance with an award but also when a competent authority founds that a dispute falls outside the jurisdiction of an arbitral tribunal. Singapore - United Kingdom BIT (1975). Retrieved from http://investmentpolicyhub.unctad.org/Download/TreatyFile/2261

Hypothetically, diplomatic protection may be a good solution for an award creditor, failed to enforce an arbitral award against a host State. However, the exercise of diplomatic protection is fully dependent on the national State discretion, and to date no State initiated diplomatic protection proceedings on behalf of investor in order to force a host State to comply with an award.

Interstate proceedings

In case of non-compliance with an arbitral award, the host state may be involved in interstate proceedings before the International Court of Justice (hereinafter referred to as “ICJ”) under Article 64 of the ICSID Convention. It should be noted that the ambit of Article 64 is wider than of Article 27, as it allows submission of a case to the ICJ by every contracting party of the ICSID Convention but not only by the national State of the investor.

What is more, Article 64 allows resorting to the ICJ against any signatory to the Convention, which failed to enforce the ICSID award, but not merely a host State. Therefore, Article 64 permits participation in interstate proceedings of a wider range of subjects, what potentially may encourage States to comply with an award or enforce it in order to avoid international responsibility.

Diplomatic pressure

In order to force a host State to comply with an award a national State of an investor, in principle, is able to impose unilateral measures of retaliation, which are retorsions and reprisals. The former may be expressed in suspension of trade benefits initially granted to a host State. Thus, the United States, supporting attempts of national investors to get a redress in accordance with arbitral awards against Argentina, suspended preferential trade status of Argentina under US Generalized System of Preferences United States Suspends Argentina's Preferential Trade Status for Failure to Pay ICSID Arbitral Awards. Retrieved from https://www.sidley.com/en/insights/newsupdates/2012/03/united-states-suspends-argentinas-preferential-trade-status-for-failure-to-pay-icsid-arbitral-awards . This decision was issued due to the Argentinian failure to comply with an award contrary to the United States-Argentina BIT and the ICSID Convention.

Reprisals may be possibly demonstrated in freezing assets or withholding payments. It was supposed that “if successful state is free under international law unilaterally to apply coercive measures against the recalcitrant state … it should be free to seize assets of the debtor state within its control for the purpose of satisfying an award of damages.” Gross, L. (1969). International law in the twentieth century (p. 936). New York: Appleton-Century-Crofts. These measures will be legitimate provided that they comply with requirements for lawful countermeasures, stipulated in Articles 49-54 of the International Law Commission Articles on Responsibility of States for Internationally Wrongful Acts.International Law Commission Articles on Responsibility of States for Internationally Wrongful Acts (2001), Articles 49-54. Retrieved from http://legal.un.org/ilc/texts/instruments/english/draft_articles/9_6_2001.pdf

Conclusively. it should be noted that despite the fact that States are able to compel another States to comply with an award by means of diplomatic pressure, they are, in general, reluctant to apply measures of retaliation, probably, due to unwillingness to ruin good diplomatic relationships or possible application of reciprocal measures by a host State.

Investor-state dispute settlement reform

Initially, the proposition to renew and enhance dispute settlement system emerged in the course of negotiations of the Transatlantic Trade and Investment Partnership (hereinafter referred to as “TTIP”) Agreement between the European Union and the United States. Within the Agreement it was suggested to create an investment court system, composed from the permanent Tribunal and the permanent appellate Tribunal, specifically functioning for resolution of disputes between the EU members and the US Commission draft text of TTIP Agreement on investment, Articles 9, 10. Retrieved from http://trade.ec.europa.eu/doclib/docs/2015/september/tradoc_153807.pdf . However, the EU decided to go further and suggested establishment of multilateral investment dispute settlement system, what follows from the Concept Paper “Investment in TTIP and beyond - the path for reform”, aimed to outline the perspectives of improvement of dispute resolution provisions in investment treaties. The Concept Paper “Investment in TTIP and beyond - the path for reform”. Retrieved from http://trade.ec.europa.eu/doclib/docs/2015/may/tradoc_153408.PDF Currently, the EU institutions are working on realization of the proposition, discussing the suggestion with interested third parties, incorporating provisions on transition to a permanent multilateral investment court in investment treaties. For instance, both Comprehensive Economic and Trade Agreement with Canada (CETA) and the EU-Vietnam Free Trade Agreement (EUVFTA) contain provisions on transition from bilateral court system to a permanent Multilateral Investment Court. In July 2017 the UNCITRAL agreed to consider possible multilateral options of investor-state dispute settlement reformation and in its fiftieth session touched upon the question of enforcement of decisions of international investment court. The Commission highlighted the need to examine two different situations: enforcement of decisions in States, consented to the statute of international investment court, and enforcement in the territories of States, which are not parties to the statute. Regarding the former situation it was suggested to include special enforcement provisions in the text of the stature or allow enforcement under the NY Convention. With respect to non-signatories to the Convention scenario becomes more interesting as no legal basis for enforcement of decisions of international courts exists nowadays. Hence, enforceability of investment court decisions would be dependent on whether these decisions fall within the ambit of the NY Convention under its evolutionary interpretation. Possible future work in the field of dispute settlement: Reforms of investor-State dispute settlement (ISDS). Retrieved from https://documents-dds-ny.un.org/doc/UNDOC/GEN/V17/023/69/PDF/V1702369.pdf?OpenElement The chosen position would significantly affect an investor's possibility to get a redress in investor-state disputes, either simplifying procedure of enforcement or complicating it, especially if enforcement is sought in State, which is not a party to a Statute.

Conclusively, the following chapter defines the main sources, governing the enforcement of arbitral awards against States, as well as outlines the possible alternatives, available for an investor, who seeks redress from a host State. The main intention of this part of the research is to provide an overview on the course of enforcement process and to illustrate possible problems that investor may face during enforcement proceedings. Clearly, the core problem of investor-state arbitration is sovereign immunity of States, which may significantly affect the opportunity of an investor to receive a compensation for a wrongful act. Therefore, the next chapter will consider the significance of sovereign immunity principle on different stages of arbitral proceedings.

Chapter II. Sovereign immunity and enforcement of arbitral awards

Originally, States, pursuant to understanding of absolute immunity and concept par in parem non habet jurisdictionem, could not be sued in institutions different than their national courts by other sovereign states in order to prevent interference in an exclusive inter-state system Sinclair, I. (1980). The law of sovereign immunity (p. 167). Leiden, the Netherlands: Martinus Nijhoff..

Although, during last years the attitude to sovereign immunity has changed, what is represented by a shift from absolute to restrictive approach on sovereign immunity, which distinguishes between commercial acts (jure gestionis) and sovereign acts (jure imperii), thus creating dual personality vision on States. Under restrictive theory, States are prohibited to rely on immunity, when they are involved in commercial activities or agreed to jurisdiction.

Due to the fact that a State is always a party in investment treaty arbitration, the problem of sovereign immunity becomes apparent, as State is able to raise its sovereign immunity defense on various stages of arbitration, either procedurally or substantially, what may result in the disruption of the entire process of arbitration Delaume, G. (1987). Judicial Decisions Related to Sovereign Immunity and Transnational Arbitration. ICSID Review, 2(2), 404..

2.1 Immunity from adjudication

It is generally accepted that immunity from jurisdiction and immunity from enforcement represent different regimes of immunity, as jurisdictional immunity may be raised during all arbitration process in order to prohibit the exercise of jurisdiction of arbitral tribunal, whilst enforcement immunity relates to pre-award or post-award measures of constraint.

According to Article 5 of the United Nations Convention on Jurisdictional Immunities of States and Their Property United Nations Convention on Jurisdictional Immunities of States and Their Property (2004), Article 5. Retrieved from https://treaties.un.org/doc/source/RecentTexts/English_3_13.pdf , “a State enjoys immunity, in respect of itself and its property, from the jurisdiction of the courts of another State subject to the provisions of the present Convention”. However, this immunity is not absolute and “may be waived by the state concerned either expressly or by conduct” Crawford, J. (2012). Brownlie's Principles of Public International Law (8th ed., p. 501). New York: Oxford University Press..

Due to the fact that arbitration is based on the consent of parties to submit a dispute to a tribunal, arbitration agreement is widely regarded as a waiver of sovereign immunity from jurisdiction. Consenting to arbitration, a State upholds a jurisdictional undertaking, which may be found in BITs, multilateral investment treaties, investment legislation or international conventions (for example, the ICSID Convention).

In Lanco v. Argentina the Tribunal stated that:

“…consent…is understood to be given by the State party to the dispute in the bilateral investment treaty from the moment the State extends a generic invitation to all the investors who are nationals of the other Contracting State to submit the settlement of their possible disputes to ICSID jurisdiction. In contract, the consent of the investor who is a national of the other Contracting State, must be given by the investor in writing, since the consent of the State is not binding on the investor.” Lanco International Inc v. Argentina. Preliminary Decision on Jurisdiction, 43 (1998). Retrieved from https://www.italaw.com/sites/default/files/case-documents/ita0450_0.pdf

Investor-state arbitration is called as arbitration without privity Paulsson, J. (1995). Arbitration Without Privity. ICSID Review, 10(2), 232., because jurisdictional undertakings contained in investment treaties or agreements create a consensual bond between a host state and a national state, not engaging a particular investor. Nolan, M., & Sourgens, F. (2010). Limits of Consent - Arbitration Without Privity and Beyond. Kluwer, 30. Thus, State consent to arbitration, as obligation of international character, arising at time of its making, is independent of the investor's consent to arbitration, which allows an arbitral tribunal to resolve a dispute. Ibid., 34 A state consent exists autonomously from acts of an investor and is binding vis-à-vis a home state of an investor.

Therefore, according to the doctrine pacta sunt servanda, State consent to arbitration is deemed to have an effect of waiver of immunity, while “the plea of sovereign immunity in the sense of a procedural bar to jurisdiction based on the personal capacity of the litigant” Fox, H. (1986). Sovereign Immunity and Arbitration. In J. Lew, Contemporary problems in international arbitration (p. 323). Dordrecht: Springer. should not affect arbitral proceedings.

At the same time, the burden of proof in establishment the existence of state consent to arbitration lays on a claimant, which should provide evidence, that a State is not able to plead immunity from jurisdiction. Thus, in Southern Pacific Properties (Middle East) Limited v. Arab Republic of Egypt the Tribunal found that submission to arbitration constitutes a waiver of immunity, although stated that:

“In approaching this general question of jurisdiction, one must begin by noting that the onus of proving an agreement to submit a particular dispute or disputes to arbitration rests upon the claimant. At least in normal case, special care is required where an independent sovereign is alleged to have made a submission for it would amount to waiver of any immunity that it would otherwise posses.”

It should be pointed out that a State can still rely on sovereign immunity, if it considers that arbitration agreement is invalid or absent. For instance, in Yukos case, The Russian Federation objected jurisdiction of the Permanent Court of Arbitration, particularly, based on the absence of arbitration agreement due to non-ratification of the Energy Charter Treaty. The Russian Federation contended that, according to national legislation, “disputes arising from sovereign acts or omissions, including claims for damages for expropriation” Yukos Universal Limited (Isle of Man) v. The Russian Federation. Interim Award on Jurisdiction and Admissibility, 71, 353 (2009). Retrieved from https://www.italaw.com/sites/default/files/case-documents/ita0910.pdf , could not be subject to arbitration in the absence of specific legislative enactment, which included ratification of the Energy Charter Treaty. Therefore, Russia could be bound only by provisions, which were compatible with its national law. Further, Mr. Martynov, a witness on behalf the Russian Federation, expressed an opinion that international dispute resolution clause of the Energy Charter Treaty was not applicable, because Russia follows the doctrine of absolute immunity what was demonstrated in national legislation and therefore, the duly consent by ratification was required in order to involve Russia in international arbitration proceedings Yukos Universal Limited (Isle of Man) v. The Russian Federation. Interim Award on Jurisdiction and Admissibility, 106 (2009). Retrieved from https://www.italaw.com/sites/default/files/case-documents/ita0910.pdf . Although the Tribunal did not uphold Russian arguments and found that Russia was bound by the investor-State arbitration clause, but, subsequently, the Hague District Court overturned all arbitral awards against the Russian Federation and found that the Tribunal lacked jurisdiction to hear the case, because “the arbitration clause of Article 26 ECT does not have a legal basis in Russian law and is incompatible with the starting points laid down in that law” Judgment of Hague District Court, 5.65 (2016). Retrieved from https://www.italaw.com/sites/default/files/case-documents/italaw7258.pdf , while a simple signature of the Energy Charter Treaty did not create legal obligations for the Russian Federation.

It should be noted, however, that setting aside of the award in the place of arbitration (Hague) did not prohibit claimants from seeking enforcement in other jurisdictions This conclusion is supported by the existence of enforcement proceedings in France and Belgium after rendition of decision by the Hague District Court. . For example, practice of French courts illustrates, that arbitral award is treated as non-attachable to any domestic legal system and, therefore, may be enforced in France in the absence of grounds for annulment, provided in domestic legislation Gaillard, E. (1999). The Enforcement of Awards Set Aside in the Country of Origin. ICSID Review, 14(1), 19-25.. However, recent attempts to enforce an award against Russia were unsuccessful.

Considering the aforementioned, existence of arbitration clause, as a general rule, prohibits a State from referring to sovereign immunity defense on stage of adjudication, because valid consent to arbitration is regarded as obligation, which should be performed in a good faith Vienna Convention on the Law of Treaties (1969), Article 26. Retrieved from .

2.2 Immunity from jurisdiction on post-award stage

Even after receiving a positive decision of arbitral tribunal a victorious investor possibly can confront with plea of jurisdictional immunity on enforcement stage before municipal courts. In order to undermine the effectiveness of arbitration process a state will likely rely on sovereign immunity on stage of recognition of an award, rather than wait for application of measures of constrained against itself and refer to immunity from execution. G. Bernini and A. J. Van den Berg, `The Enforcement of Arbitral Awards against a State: The Problem

of Immunity from Execution' in Lew (eds), Contemporary problems in international arbitration (Queens

Mary college 1986) pp. 359. (The Enforcement of Arbitral Awards against a State)

It may seem from the literal interpretation of the abovementioned provision that the waiver of immunity under arbitration agreement exception does not extend to post-judgment phase of recognition of an award. This proposition correlates with Democratic Republic of Congo and others v. FG Hemisphere Associates LLC ruling. In the following case the Hong Kong Court was asked to hold that by entering into arbitration agreement the Democratic Republic of Congo waived its jurisdictional immunity before Hong Kong courts on recognition stage. The Court refused this argument, stating:

“Obviously, when a State enters into an arbitration agreement with a private individual or company, that act does not constitute a submission to any other State's jurisdiction. It involves merely the assumption of contractual obligations vis-à-vis the other party to the agreement” Democratic Republic of Congo and others v. FG Hemisphere Associates LLC. Judgment of the Court of Final Appeal of the Hong Kong Special Administrative Region, 377 (2011). Retrieved from http://legalref.judiciary.hk/lrs/common/ju/ju_frame.jsp?DIS=76747 .

The Court highlighted that in order to allow the application for the grant of leave to enforce the award the interested party was obliged to demonstrate “that a submission to the court's jurisdiction was actually what the impleaded State intended Ibid., 386”. Taking into account the fact that Congo objected the jurisdiction of Hong Kong Courts and impossibility of FG Hemisphere Associates LLC to provide any other evidence apart from arbitration agreement, confirming an existence of waiver of suit in foreign courts, the Hong Kong Court concluded that Congo did not waive its immunity. Accordingly, the Court, protecting the value of sovereign immunity, affirmed that arbitration clause does not imply a waiver of immunity on recognition phase of enforcement.

However, this approach is not the only one that exists. According to International Law Commission Commentary to UN Convention on Jurisdictional Immunities of States and Their Property,

The ICSID Convention provides that consent to ICSID arbitration represent an irrevocable waiver of immunity from jurisdiction both on adjudication and recognition stage. Delaume, G. (1987). Sovereign immunity and transnational arbitration. Arbitration International, 3(1), 36. Subsequently, a State's attempt to prevent recognition of an award in domestic courts should be precluded by national courts with reference to self-contained enforcement provisions of the ICSID Convention.

The following conclusion is supported by a number of rulings of national courts. In Blue Ridge v. Argentina, Argentina argued that it enjoyed sovereign immunity from jurisdiction courts according to provisions of United States law on immunities - Foreign Sovereign Immunities Act (hereinafter referred to as “FSIA”), as consent to arbitration under ICSID “hardly constitutes proof of a foreign state's intent to waive immunity to suit in United States courts”. Blue Ridge Investments v. Republic of Argentina, Decision of United States District Court Southern District of New York, p.5 (2012). Retrieved from https://law.justia.com/cases/federal/district-courts/new-york/nysdce/1:2010cv00153/356988/29/ . The Court rejected the aforementioned argument and held that Argentina waived sovereign immunity from jurisdiction due to implied waiver by signing the ICSID Convention Ibid, p.8.. The Court relied on the LETCO v. Liberia case, where it was held that “Liberia, as a signatory to the [ICSID] Convention, waived its sovereign immunity in the United States with respect to the enforcement of any arbitration award entered pursuant to the Convention.” Ibid, p.6 Therefore, in the light of ICSID enforcement mechanism Argentina “must have contemplated enforcement actions in other [Contracting] [S]tates,” in particular, US. Further, the Court came to the conclusion that Argentina waived immunity under arbitral award exception. According to the FSIA, foreign State loses immunity from jurisdiction of US courts, which are dealing with question of confirmation of an award made pursuant to agreement to arbitrate, if this agreement or award may be governed by international act in force in the US calling for the recognition and enforcement of arbitral awards. Ibid, p.9. Due to the fact that award was issued pursuant to the ICSID Convention, to which both US and Argentina were signatories, an arbitration clause represented a waiver of jurisdictional immunity.

Similar position is illustrated in CMS Gas Transmission Company v. The Republic of Argentina CMS Gas Transmission Company v. The Republic of Argentina. Enforcement Decision by the US Court of Appeals (2013). Retrieved from https://www.italaw.com/sites/default/files/case-documents/italaw1562.pdf , where it was concluded that Argentina waived its immunity from suit pursuant to implied waiver and arbitral award exception.

In Benvenuti et Bonfant S.R.L. v. People's Republic of the Congo an Italian company got an exequatur for recognition of the ICSID award in France with reservation that “no measure of execution, or even conservatory measure, shall be taken pursuant to the said award, on any assets located in France without the prior authorization of this Court”. Benvenuti et Bonfant S.R.L. v. People's Republic of the Congo, Cour d'Appel de Paris (1981) in Bishop, R., Crawford, J., & Reisman, W. (2014). Foreign investment disputes (p. 1181). Alphen aan den Rijn: Wolters Kluwer Law & Business. The company appealed a ruling, arguing that under the ICSID Convention national courts could only confirm an arbitral award, but was not entitled to make a reservation, which led to impossibility of execution of award. The appellate court stated that Article 54 of the ICSID Convention “lays down a simplified procedure for obtaining an exequatur and restrict the function of the court designated for the purposes of the Convention by each Contracting State to ascertaining the authenticity of the award”. Ibid., 1182 The court ruled in favor of the company, noting that the court of first instance exceeded its competence and could not intervene into execution stage, at which the sovereign immunity becomes relevant.

The similar approach on jurisdictional immunity is maintained with respect to the NY Convention. It is claimed that a plea of sovereign immunity from jurisdiction on recognition stage will be generally unsuccessful, because the scope of waiver of immunity from jurisdiction extends to proceedings for confirmation or recognition of the resulting award. Delaume, G. (1987). Sovereign immunity and transnational arbitration. Arbitration International, 3(1), 33. Professor C. Schreuer alleged that “the combination of an agreement to arbitrate in a State Party to the [New York] Convention and of the obligations under the Convention should lead to the withdrawal of immunity for purposes of the arbitration in all other Parties to the Convention” Scheurer, C. (1988). State immunity: Some recent developments (p. 87). Cambridge: Grotius.. He mentioned additionally that combined operation of consent to arbitration and provisions of Convention should not be regarded as an unjustifiable extension of jurisdiction over sovereign States, as they should foresee this consequence once agreed to arbitration.

Thus, in Ipitrade International S.A. v. Federal Republic of Nigeria, Ipitrade sought enforcement of arbitral award, pursuant to the NY Convention, against Nigeria in US. The court stated that valid arbitration agreement issued by a tribunal under International Chamber of Commerce Rules represented an implicit irrevocable waiver of sovereign immunity under the FSIA. Therefore, despite the fact that parties consented to submit disputes to arbitration in Switzerland, claimant was entitled to enforce an arbitral award in US, because all the relevant parties in dispute (US, France, Nigeria, Switzerland) were signatories to the UN Convention and were obliged by its provisions.

Moreover, during enforcement proceedings under the NY Convention the Swedish Court of Appeal noted that:

“it is shocking per se that one of the contracting parties later refuses to … respect a duly rendered award. When a state is concerned, it is therefore a natural interpretation to consider, in accepting the arbitration clause, committed itself not to obstruct the arbitral proceedings or their consequences, by invoking immunity.” Libyan American Oil Company v. Socialist People's Arab Republic of Libya Sweden, Svea Court of Appeals (1980) in Sanders, P. (1999). Quo Vadis Arbitration?:Sixty Years of Arbitration Practice (p. 195). The Hague: Kluwer Law International.

It should be noted that recent Russian practice reveals the similar trend. Thus, the Cassation Court of the Moscow region overturned the decision of Moscow arbitrazh court, which refused enforcement of arbitral award against Ukraine, issued by ad hoc tribunal in accordance with UNCITRAL Rules, due to the absence of explicit waiver of immunity from recognition and enforcement. The Cassation Court noted that Ukraine ratified the BIT, which provided the dispute resolution clause, stipulating that any decision of arbitral tribunal should be final and binding upon either of the Contracting Parties. Accordingly, due to the fact that Ukraine consented to arbitration and was engaged in arbitral proceedings, it waived its immunity both from jurisdiction and from recognition and enforcement. PJSC Tatneft' v. Ukraine, case ¹ À40-67511/2017. Judgment of Moscow District Court, p.11 (2017). Retrieved from

https://kad.arbitr.ru/Card/f541a5b1-ebae-4581-83f9-461efa202274 Although the case is still pending, the following ruling may, probably, have an effect on further state practice of the Russian Federation.

Considering the aforementioned, it is possible to conclude that jurisdictional immunity has a previling meaning on recognition and enforcement stage of arbitration, therefore, the consent of a State to refer disputes to arbitration usually gives rise to a waiver of immunity from recognition, which does not necesserily extend to execution stage. However, some countries uphold the opposite approach, restricting the application of waiver on recognition stage and protecting the value of sovereign immunity.

2.3 Immunity from execution

Due to the fact that the NY Convention, the ICSID Convention and the majority BITs provide that enforcement and execution of awards should be governed by the national legislation, States enjoy wider immunity from execution in comparison with jurisdictional immunity. The objective behind this constitutes in the fact that seizure of property of a State is regarded as a greater intervention in its sovereignty in contrast with referring a case against State to foreign adjudicative authority.

It is widely accepted that State immunity from execution same as jurisdictional immunity is not absolute but the restrictive doctrine has not affected this type of immunity to that extent as immunity from jurisdiction, accordingly, some States, mostly due to political considerations, continue to deny execution against other State's property even after rendition of arbitral award against State concerned. The following situation can lead to situation of impossibility for investor to restore his rights. Professor C. Schreuer noted that:

“allowing plaintiffs to proceed against foreign States and then to withhold from them the fruits of successful litigation through immunity from execution may put them into the doubly frustrating position of having been lured into expensive and seemingly successful lawsuits only to be left with an unenforceable judgment plus legal costs.” Scheurer, C. (1988). State immunity: Some recent developments (p. 216). Cambridge: Grotius.

The UN Convention on Jurisdictional Immunities of States and Their Property clearly distinguish between immunity from jurisdiction (Article 7 of the Convention) and immunity from execution (Articles 18,19 of the Convention), requiring a separate expressed waiver of each type of immunity. The similar approach is revealed in the United Kingdom State Immunity Act Section 13(3) UK SIA. Retrieved from http://www.legislation.gov.uk/ukpga/1978/33/section/13

Articles 5, 15 Federal law and in the Federal Law on Jurisdictional Immunities of a Foreign State and the Property of a Foreign State in the Russian Federation Federal Law on Jurisdictional Immunities of a Foreign State and the Property of a Foreign State in the Russian Federation, Articles 5, 15. Retrieved from http://pravo.gov.ru/proxy/ips/?docbody=&nd=102381335&%D0%98%D0%9D%D0%A2%D0%95%D0%9B%D0%A1%D0%95%D0%90%D0%A0%D0%A6%D0%A5= . What is more, Article 20 specifically stipulates that consent to jurisdiction shall not imply consent to the taking of measures of constraint. Article 20 of the UN Convention on Jurisdictional Immunities of States and Their Property provides:

“Where consent to the measures of constraint is required under articles 18 and 19, consent to the exercise of jurisdiction under article 7 shall not imply consent to the taking of measures of constraint.”

Retrieved from https://treaties.un.org/doc/source/RecentTexts/English_3_13.pdf The requirement of existence of separate expressed waiver may be explained by the need to establish the real intent of a State to allow execution against its property in order to prevent unlawful interference in internal sovereignty of a State. Due to specific features of investor-state arbitration, enforcement of awards, rendered in disputes, which concern public functions of a sovereign (taxation, security, monetary policy) disregarding immunity from execution, may sufficiently and negatively affect sovereignty of a State. Accordingly, it may be supposed that deprivation of a State of immunity from execution due to extension of waiver of immunity from jurisdiction on post-judgment stage is not allowed under international law, as it may undermine sovereignty of a State. The support for such a proposition may be found in the Resolution of UN General Assembly, which stipulates that “sovereign immunity from jurisdiction and execution … is a right of States before foreign domestic courts and exceptions should be restrictively interpreted.” Resolution on Basic Principles on Sovereign Debt Restructuring Processes (A/69/L.84), section 6 (2015). Retrieved from http://www.un.org/en/ga/search/view_doc.asp?symbol=A/RES/69/319 The provision represents the obligation to respect sovereign immunity of States and to treat different types of immunities separately, applying strict approach to any exceptions. The rationale behind this provision is to prevent massive forced arrests and execution against foreign property under the simplified procedure, not requiring a separate waiver of immunity from execution. Starzhenetsky, V. (2017). Recognition and Enforcement of International Investment Arbitration Awards and Jurisdictional Immunities of Foreign States. Vestnik Ekonomicheskogo Pravosudia, (12/2017), 75.

The fact that waiver of immunity from jurisdiction does not constitute an immunity from execution may be also supported by the decision of the Court of Final Appeal of the Hong Kong Special Administrative Region in Democratic Republic of Congo and others v. FG Hemisphere Associates LLC case. The Court overturned the decision of the lower Court, which found that Congo did not enjoy immunities and famously stated:

“It is well-established at common law that a party seeking to enforce an arbitration award (or a judgment) against a foreign State on the basis of a waiver of state immunity must establish a waiver at two distinct stages. The impleaded State must have waived both its jurisdictional immunity from suit in the forum State and the immunity of its property from execution by the forum State's process. Democratic Republic of Congo and others v. FG Hemisphere Associates LLC. Judgment of the Court of Final Appeal of the Hong Kong Special Administrative Region, 379 (2011). Retrieved from http://legalref.judiciary.hk/lrs/common/ju/ju_frame.jsp?DIS=76747

In the following case, the Court found that consent to arbitration under the ICC Rules did not evidence the existence of waiver “either in respect of recognition or execution of the arbitral awards” Ibid., 390.

Considering the aforementioned, and taking into account the fact that UN Convention on Jurisdictional Immunities of States and Their Property systemized the general practice of States on question of form of the waiver, it may be supposed that majority of States follow the approach, prohibiting application of implied waiver on execution stage and requiring a separate and concrete waiver for this type of immunity.

At the same time, the aforementioned position may be criticized for its conservatism and excessive protection of sovereignty disregarding the need to restore rights of investors. Logically, it can be supposed that waiver of jurisdictional immunity include all the stages of arbitration, and particularly, execution, as a final stage of adjudication procedure. Therefore, if a State agrees to arbitration, it should not confirm its consent to pay up under an award and, accordingly, consent to coercive measures in case of non-compliance with an award. This conclusion corresponds to principle of effectiveness of arbitral award, arising “from the legitimate expectations of the parties that have agreed to resolve certain of their disputes through arbitration” E. Gaillard and J. Younan eds., State Entities in International Arbitration, IAI Series on International Arbitration No.4 (2008), 179, 181 (2008). P. 181, which however, would not be valuable, if a State could unilaterally decide on enforceability of an award by exercising its immunity. Moreover, Bernini and Jan Van Den Berg consider that:

“By agreeing to arbitration, a state must be deemed to have waived immunity. For the same reason, we deem it inappropriate to distinguish between immunity from jurisdiction and immunity from execution in relation to arbitration. It is in our opinion, illogical that having agreed to arbitration a state would have waived its right to invoke immunity from jurisdiction but not its right to immunity from execution.” Bernini and Jan van den Berg, `The enforcement of arbitral awards against

a state: The problem of immunity from execution' in Lew (ed.), Contemporary problems in international

arbitration (Queens Mary college 1986), pp. 359

The US FSIA clearly establishes two different types of immunity: from jurisdiction and from execution Section 1604 and 1609 of the US FSIA, requiring a separate waiver, corresponding to each type of immunity, as a general rule G.R. Delaume, `Three Perspectives on Sovereign Immunity Public Debt and Sovereign Immunity: The

Foreign Sovereign Immunities Act of 1976', 71(3) AJIL 399 (1977) pp. 410. However, Section 1610 of the FSIA represents an exception, according to which a State cannot claim immunity from execution regarding the property, used for commercial purposes, if it has waived its immunity, either explicitly or implicitly. In other words, to allow execution on the territory of the US, an investor should prove the existence of waiver and property, used for commercial purposes in the US.

It should be pointed out, that, in overall, courts are reluctant to grant execution of arbitral awards due to unwillingness to interfere in internal sovereignty of States, therefore, judiciaries thoroughly examine, whether all conditions for execution are satisfied. Accordingly, the establishment of waiver by the US courts does not necessarily mean that execution will be allowed. Thus, one can mention a case Walker International Holdings Ltd v. The Republic of Congo Walker International Holdings Ltd v. The Republic of Congo, 395 F. 3d 229 (5th Cir. 2004).. The Claimant (Walker) was trying to enforce the decision of International Chamber of Commerce (hereinafter referred to as “ICC”) in the US, claiming that Congo waived its immunity once agreed to arbitration and that it had assets used for commercial purposes within the US territory. The Court of appeal found that Congo, by signing an agreement with arbitration clause, which was formulated as follows “irrevocably renounces to claim any immunity during any procedure relating to any arbitration decision handed down by an Arbitration Court....” Ibid., 16 definitely waived its sovereign immunity. The Court pointed out that

“The plain language of "any immunity" indicates that sovereign immunity is also waived. This “procedure” relates to the “arbitration decision” since Walker seeks to garnish funds owed to the ROC to collect on the ICC's judgment.”

Additionally, the Court noted that by consenting to apply ICC rules, Congo undertook an obligation to carry out an award without delay and was deemed to have waived right to any form of recourse insofar as such waiver can validly be made. Ibid., 17 Therefore, the Court found that Congo has waived its sovereign immunity from attachment. At the same time, the Claimant failed to demonstrate that property was used for commercial purposes, what led to impossibility of application of waiver.

Another national law, concerning sovereign immunities, is the United Kingdom State Immunity Act (hereinafter referred to as “SIA”). It provides that the assets of foreign States are not subject to enforcement in any form, however, stipulating that it “does not prevent the giving of any relief or the issue of any process with the written consent of the State concerned; and any such consent (which may be contained in a prior agreement) may be expressed so as to apply to a limited extent or generally” Ibid., 13 (3). Therefore, an existence of written consent of a State represents a waiver of sovereign immunity from execution, which allows execution against non-commercial property of foreign States. At the same time implied waiver does not suffice for purposes of attachment, in particular, when a State consents only to adjudicative jurisdiction. Jeremy Ostrander. The Last Bastion of Sovereign Immunity: A Comparative Look at Immunity from Execution of Judgements Berkeley Law Scholarship Repository, 2004 Volume 22 | Issue 3 However, it may seem that in specific circumstances Courts may interpret a waiver, formulated rather in vague terms, as waiver of immunity from both jurisdiction and execution.

In Company v. Republic of X, English court decided that a waiver of immunity from execution arose from a written waiver by a State of “whatever defense it may have of sovereign immunity for itself or its property (present or subsequently acquired)” A Company v. Republic of X (1990) 2 Lloyd's Rep. 520, 523.. In the ruling the Court concluded that the provision constitutes both a waiver of immunity from jurisdiction and execution, because the reference to “property” was reasonably enough to represent a waiver for purposes of Section 13 of UK SIA.

In Svenska Petroleum Exploration AB v Lithuania, the Claimant was seeking enforcement of the award made in Denmark under the ICC rules. UK Court of Appeal noted that:

“the Arbitration is a consensual procedure and the principle underlying section 9 is that, if a state has agreed to submit to arbitration, it has rendered itself amenable to such process as may be necessary to render the arbitration effective” Svenska Petroleum Exploration AB v Lithuania, 117 (2006). Retrieved from http://www.nadr.co.uk/articles/published/ArbLawReports/Svenska%20v%20Lithuania%202006.pdf 117 .

Although the Court did not referred exactly to immunity from execution, it can be supposed that written consent to arbitration can probably constitute a waiver of immunity from execution, as a logical consequence of arbitral proceedings.

In France provisions on execution of arbitral awards against states are stipulated in Code of Civil Enforcement Procedures, which provides that enforcement measures cannot be taken against property of a foreign State without prior authorization of an award by a judge French Code of Civil Enforcement Procedures L.111-1-1. At the same time a judge is able to authorize execution only if State either consented to application of measures of constraint, or “affected this property to the satisfaction of the claim which is the purpose of the proceedings”, or when a judgment or an arbitral award has been rendered against the State concerned and the property at issue is specifically in use or intended to be used by the State concerned for other than government non-commercial purposes and is linked to the entity against which the proceedings are initiated.” Article L.111-1-2.