Lunch seminar with Yue Zhao

Recognition and enforcement of investor-State arbitration awards: interaction between international instruments and domestic legislation


Investor-State arbitration (ISA) has experienced remarkable development since the initiation of its first case AAPL v. Sri Lanka in 1987. By the end of 2017, the total number of publically known ISA cases has reached 855. The actual number of cases is likely to be (much) higher as some ad hoc arbitrations can be conducted with complete confidentiality. Although, ISA attracts criticism for lack of transparency, consistency and legitimacy, it remains the most important guarantee for foreign investors that, in case of disputes, they will be able to bring claims vis-à-vis host States to neutral and independent arbitrators who will issue enforceable awards. Investors choose to submit investment disputes to international arbitral tribunals mainly because national jurisdictions are perceived to be biased and to lack independence. Another important advantage of arbitration over national courts is the degree of certainty a party can have through almost universal recognition and enforcement of arbitral awards. By contrast, there is no universal instrument that preserves the effect of court decisions abroad. However, the recent national decisions indicate that the presumed enforceability of ISA awards might be a mere illusion due to insufficient domestic commitment implementing international conventions pertaining to this issue.

International Centre for the Settlement of International Disputes (ICSID), established by the ICSID Convention, is a specialized forum for investor-State dispute settlement that has administered over 70% of all known ISA cases. Contracting States are obliged to recognize an award rendered under the Convention and enforce the pecuniary obligations imposed by it as if they were a final judgment of one national court in their territories. At this point, the ICSID Convention goes further than the New York Convention, since the former provides no ground for refusal on which domestic courts may conduct judicial review. However, practice proves to be not satisfactory enough. In Benvenuti and Bonfant v. People’s Republic of Congo, French courts were inclined to retain the power of prima facie review over the ICSID award to safeguard public order and domestic mandatory rules. Although, the self-contained enforcement system provided in the ICSID Convention may bespeak success, commitment on domestic level has not always followed.

Outside the ICSID Regime, a party seeking recognition and enforcement of an arbitral award will find it helpful to rely on the New York Convention. Nevertheless, the applicability of this Convention to ISA awards has been denied or at least questioned in some jurisdictions. The enforceability of a non-ICSID ISA award largely depends on how a domestic court interprets the New York Convention, in particular, on whether the country where enforcement is sought made Commercial Reservation under Art. I (3) of the Convention and if it did, on how domestic legislation of the country defines commercial relationships. For example, one major participant in international investment, China, has precluded the application of the New York Convention to investor-State disputes by narrowly defining commercial relationships in its domestic law. Therefore, the enforceability of a non-ICSID ISA award in China is left to the full discretion of Chinese courts.

The presentation will reveal the uncertainty surrounding enforceability of ISA awards in some jurisdictions. It will demonstrate the current interaction between international instruments and domestic legislation is not sufficient for the recognition and enforcement of ISA awards in domestic courts and cannot satisfy the demand of enhancing stability and effectiveness of ISA.

All interested are welcome to attend. Registration is not necessary.