[This article has been authored by Shuchi Agrawal, a fourth year law student at JGLS, Sonipat.]
Keywords: Investment treaty arbitration, enforcement of award
This article is the second installment of a two-part series. The first part, available here, provides a brief introduction of the mechanisms for enforcing investment treaty arbitration awards and presents India’s position on the issue. This part offers a comparative analysis and suggests alternatives which the Indian State can follow to enforce investment treaty arbitration awards.
Comparative Analysis with Other Jurisdictions
The United Kingdom is a signatory to the ICSID Convention and party to the New York Convention. In the case of Occidental Exploration and Production Company v. Republic of Ecuador, the Court of Appeal had to decide if the English Arbitration Act, 1966, would govern a challenge to an investment treaty arbitral award. The English Arbitration Act, 1966, generally applies to commercial arbitrations. However, the English court had held that the concerned statute would govern challenges to investment arbitral awards even if the UK was not a party to the treaty which led to the relevant arbitration. This decision by the Court followed the same reasoning as was adopted by the Calcutta High Court in The Board of Trustees of the Port of Kolkata v. Louis Dreyfus. Further, in GPF GP S.a.r.l. v. Republic of Poland, this position was affirmed by the England and Wales High Court. Moreover, the Czech-Belgium-Luxembourg Economic Union bilateral investment treaty was interpreted to provide jurisdiction to the arbitral tribunal over “issues of liability and quantum of expropriation” by the Commercial Court in the case of European Media Ventures SA v. Czech Republic.
In addition to this, in OAO Tatneft v. Ukraine, it was held that the Court had jurisdiction over an application of enforcement of a “Paris-seated treaty award” as per the Russia-Ukraine bilateral investment treaty. Therefore, it has been claimed that non-ICSID awards in any country that is party to the New York Convention will be enforceable in the United Kingdom “under the English 1996 Act” in the same manner as an international commercial arbitral award.
Singapore’s laws governing international arbitration are contained in two legislations, namely, the Arbitration (International Investment Disputes) Act, and the International Arbitration Act. Singapore had enacted the International Arbitration Act after becoming a signatory to the ICSID Convention, to grant to an ICSID award the same status as a “judgment of the Singapore High Court”, for the purposes of execution. Further, in Sanum Investments Ltd. v Government of the Lao People’s Democratic Republic and Kingdom of Lesotho v Swissbourgh Diamond Mines (Pty) Ltd, the courts of Singapore exercised jurisdiction, in accordance with the International Arbitration Act. Both of these cases dealt with challenges to investment treaty arbitration awards which were seated in Singapore. It has been claimed, pursuant to the exercise of jurisdiction in these cases, that applications for the enforcement of investment treaty arbitration awards would also be within the court’s jurisdiction. Furthermore, it has been suggested that even non-ICSID awards which are seated in Singapore or any other country which is party to the New York Convention, may be enforced within Singapore in the same manner as an international commercial arbitration award. Additionally, the Singapore International Arbitration Centre is the first arbitral institution to provide arbitration rules governing investment treaty arbitration.
United States of America
The position in the United States of America resembles that of Singapore. In Chevron Corporation and Texaco Petroleum Co. v. Republic of Ecuador, an arbitration award was challenged in the Dutch courts by Ecuador. However, after it was upheld, Chevron attempted to get it enforced in the United States of America. The District Court had held that the award could be enforced in the United States of America, according to the New York Convention.
On the other hand, while China is a party to the New York Convention, it has opted for both “the reciprocal reservation” as well as the “commercial reservation.” Thus, only those arbitration awards are enforceable in China, which arise from commercial disputes. Hence, India’s present position on the enforceability of investment treaty arbitration awards is similar to China.
Conclusion and The Way Forward
The Delhi High Court, through its decisions in Union of India v. Vodafone Group PLC and Union of India v. Khaitan Holdings (Mauritius) Ltd. & Ors., has stated that the Arbitration and Conciliation Act, 1996, is not applicable to investment treaty arbitration awards. Due to this, is a lack of a clear mechanisms for enforcing bilateral investment treaty awards in India. Consequently, investors are forced to discover other innovative methods for enforcing investment treaty arbitration awards, including seeking enforcement of the award in a jurisdiction where some assets of the award debtor are located. In such a situation, it is imperative for India to clarify the manner in which bilateral investment treaty arbitration awards may be enforced in India, in order to promote the commercial development of the country.
There are various methods for addressing this issue. One such method would require the legislature to widen the ambit of the Arbitration and Conciliation Act, 1996, in order to include the enforcement of bilateral investment treaty awards. Further, India may amend its domestic laws, to recognize investment treaty arbitrations as commercial in nature, and therefore, not covered by the commercial reservation availed by India, under the New York Convention. This would allow investment treaty arbitration awards to be enforced in India, under the New York Convention.
Alternatively, India could become a signatory to the ICSID Convention. This would provide a predictable mechanism for the enforcement of ICSID awards, which would be “final, binding, and directly enforceable.” Additionally, being a signatory to the ICSID Convention would improve India’s perception as an emerging market and would inspire investor confidence. It would also indicate India’s respect for its commitments under BITs. Nevertheless, India has resisted the ICSID Convention for various reasons, including the fact that it does not allow for the awards to be reviewed on the basis of public policy. In spite of this, it has been claimed that the regulatory freedoms and protections provided by the ICSID Convention allow for a “more level regime between states and investors.” Article 42(1) of the ICSID Convention allows for a dispute to be decided in accordance with the law agreed upon by the relevant parties to the dispute. Hence, the parties could agree on domestic law to be used in resolving the dispute. This would ensure that the award would not be contrary to India’s public policy.
Another method for addressing this issue of enforcing investment treaty awards would require the legislature to create a new regime that would govern investment treaty arbitrations and the enforcement of bilateral investment treaty awards. This has previously been done by South Africa, which has a distinct legislation for investment treaty disputes.
In conclusion, it is submitted that at present there exists a vacuum with respect to the mechanisms for the enforcement of investment treaty arbitral awards. In order to uphold India’s reputation of respecting and abiding by international commitments, it is essential that India devise a regime for the enforcement of investment treaty arbitral awards, or expand the scope of the existing laws to include it.