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High Court decision will enhance Australia’s reputation as pro-arbitration

Yesterday’s unanimous decision by the nation’s highest court affirms Australia’s international standing “as an efficient, pro-arbitration jurisdiction”.

user iconJerome Doraisamy 13 April 2023 The Bar
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On Wednesday, 12 April, the High Court of Australia unanimously dismissed an appeal from the full court of the Federal Court in Kingdom of Spain v Infrastructure Services Luxembourg S.a.r.l.

As reported by Lawyers Weekly in early November 2022 — when proceedings in the High Court first started — the full court case saw Infrastructure Services Luxembourg (ISL) undertake an arbitration against Spain in relation to a €139 million investment it had made in solar power, which was made based on the existence of a Spanish subsidy program, which Spain later withdrew.


ISL alleged that the withdrawal of the subsidy was a breach of the Energy Charter Treaty (ECT) between Spain and other contracting states.

The ECT contains an arbitration agreement by which Spain had agreed to arbitration with investing parties under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID).

ICSID is a treaty to which both Australia and Spain are parties, providing a mechanism for the conduct of international arbitrations and affords powers of recognition and enforcement of awards in states that have agreed to it.

An ICSID arbitration took place in 2018 over the dispute, and the arbitrators awarded ISL a sum of over €101 million.

After obtaining the award, ISL commenced proceedings in the Federal Court to have the arbitration award recognised as if it were a judgment of the court, under the International Arbitration Act 1974.

Australia was chosen, presumably, because Spain has assets in the country and it is recognised as an arbitration-friendly jurisdiction, Resolution Institute deduced at the time.

Spain appealed the decision to the full court on the basis that the terms “enforcement” and “execution”, as stated in the ICSID Convention, have different meanings in Spanish and English, and argued that the ambiguity in the words means a waiver of immunity cannot arise because they are not sufficiently clear.

The High Court would ultimately be, Resolution Institute said, one of the first courts outside the European Union to consider the enforceability of ICSID awards against a nation-state — while being a jurisdiction with well-established domestic rules that give effect to sovereign immunity.


In conversation with Lawyers Weekly at the time the proceedings commenced in November, Toby Shnookal KC — an arbitrator and board member of the Resolution Institute — said that the High Court’s ultimate decision would determine Australia’s standing, in being regarded as a state that either recognises or does not recognise the enforceability of international arbitration verdicts.

If the court found that the award was not enforceable, he theorised, it would “likely mean any foreign awards against any nation-state will be difficult, if not impossible, to enforce in Australia”.

“That would affect Australia’s reputation as supportive of arbitration as a means of resolving international disputes,” he warned.

“There are clear advantages to conducting arbitrations in Australia, and one of them is the positive support that our courts give,” Mr Shnookal posited, citing that arbitration is “booming” in the Asia-Pacific region, with Australia being boosted as a “strong competitor” to Singapore and Hong Kong.

However, he added, “the attractiveness of Australia as a venue for arbitration will be lessened if the immunity given by the Foreign States Immunities Act is found not to be extinguished by a nation-state entering into a treaty that expressly provides for the enforcement and recognition of arbitration awards made under it”.

Bolstering Australia’s reputation

Speaking to Lawyers Weekly post-judgment, Justin Hogan-Doran SC — who was one of the silks representing the respondents — explained that this case was one of a series filed by international investors in the Federal Court since 2019, seeking enforcement of awards worth over US$7 billion against a number of foreign states.

“Investors spend some years and millions of dollars obtaining awards against sovereign states, whether in ICSID or private arbitration. They must then demonstrate enforceability, both for their own recovery efforts and to offer the award to an emerging global secondary market, which buys or invests in enforceable international awards,” he outlined.

“The general repute, pro-arbitration approach and, above all, speed of the Federal and High Court of Australia, even in a novel case, supported by Australian lawyers with expertise in international law, was critical to attracting much of this work.” 

The High Court’s decision to unanimously dismiss the appeal, Mr Hogan-Doran proclaimed, “will enhance the international reputation of Australia as an efficient, pro-arbitration jurisdiction”.

“There are also many subtleties to the judgment that will be important to future arbitration and international law cases, and no doubt it will be carefully studied here and abroad,” he mused.

Lingering issues

However, according to Ironbridge Legal partner Trevor Withane, some concerns remain in light of the High Court’s decision to affirm the one made by the full Federal Court.

“Chief amongst which is still the elephant in the room — how can a judgment creditor actually obtain the benefits of the judgment if execution is still prevented by virtue of foreign state immunity?”

“However, that is not to say that recognition and enforcement obligations are meaningless — the fact that there exists something with the same force of law as a judgment of a court carries with it ‘soft’ implications that will force the state to think twice about not complying with that order, especially as so much of a state’s credibility is dependent on its compliance with the law in this rules-based international order we live in,” he submitted.

Further, Mr Withane went on, it seems that the High Court “left open a door” when their Honours held that “whether or not enforcement against a state party can lead to execution is left entirely to be determined under the domestic law of the contracting state concerning state immunity or foreign state immunity from execution”.

“Arguably, this means that if there be legislative changes to overcome the hurdle of enforcement,” he argued.

“It is not altogether inconceivable that Parliament may choose to so legislate, especially in the interests of maintaining Australia’s status as a favoured seat of arbitration globally and a jurisdiction of choice for enforcement — however, the political implications of such a momentous change will, of course, have to be carefully considered.”

Case details

The case citation is Kingdom of Spain v Infrastructure Services Luxembourg S.a.r.l. [2023] HCA 11.

The Kingdom of Spain was represented by Dr Christopher Ward SC with Philip Santucci, who were instructed by K&L Gates.

The respondents were represented by Bret Walker SC with Justin Hogan-Doran SC and Chester Brown, who were instructed by Norton Rose Fulbright.