Overview
Introduction
Recently, the Full Court of the Federal Court of Australia (Full Court) held that a foreign State was immune from Australian proceedings seeking to enforce an investor-state arbitral award which had not been rendered pursuant to the ICSID Convention. India, the State in question, and an original signatory to the New York Convention (NYC), was found not to have waived its sovereign immunity vis-à-vis such proceedings, in view of its NYC Art. I(3) reservation to apply the Convention only to differences arising out of "commercial" relationships (Reservation).
The Full Court's approach contrasts with the courts of cognate jurisdictions operating similar sovereign immunity regimes, which have been more open to enforcing non-ICSID awards notwithstanding any Art. I(3) Reservation. It is also difficult to reconcile with the letter and spirit of the UNCITRAL Model Law applied in Australia. If the court's reasons survive appeal, its decision presents a potentially significant setback for private parties who may win the 'battle' in a non-ICSID tribunal, only to risk losing the 'war' before an enforcement court.
CC/Devas (Mauritius) Ltd & Ors v. Republic of India (PCA Case No. 2013-09)
Republic of India v. CCDM Holdings, LLC [2025] FCAFC 2
Factual and Procedural Background
Three Mauritian entities – CC/Devas (Mauritius); Devas Employees Mauritius; and Telecom Devas Mauritius (Investors) – were shareholders in an Indian company, Devas Multimedia. The company in 2005 contracted with Antrix, an Indian State-owned entity, to lease "space segment capacity in the S-band electromagnetic spectrum on two Indian satellites," in order to develop a telecommunications system providing broadband services in India.
In 2011, the Indian Cabinet Committee on Security annulled the 2005 agreement, citing among other reasons that "an increased demand for allocation of spectrum for national needs" superseded "existing contractual obligations" (Annulment). In parallel, Antrix proceeded (or otherwise purported) to terminate the agreement.
In 2012, the Investors commenced arbitration against India pursuant to the (now terminated) India-Mauritius BIT (BIT). The proceedings were conducted under UNCITRAL (rather than ICSID) arbitration rules, as India is not party to the ICSID Convention.
The Investors' primary contentions were that India’s Annulment violated the BIT's provisions on unlawful expropriation and fair and equitable treatment. Their claims prevailed in a 2016 Award on Jurisdiction and Merits (2016 Award), and culminated in a 2020 Quantum Award for USD 111 million in compensation (2020 Award). India has to date not succeeded to set aside either the 2016 Award or the 2020 Award.
Meanwhile, the Investors assigned their rights under the Awards to three American entities (Assignees) and sought enforcement worldwide, including in, among other jurisdictions, the District of Columbia, France, Québec, and the Southern District of New York. In 2021, the Investors (later substituted by the Assignees) commenced proceedings in the Federal Court of Australia to enforce the 2020 Award, which India resisted on sovereign immunity grounds.
Sovereign Immunity and Arbitration in Australia
As explained in an earlier Steptoe client alert, Australia subscribes to the restrictive doctrine of sovereign immunity based on the Foreign State Immunities Act 1985 (FSIA). Under this scheme, a foreign State is deemed to be generally "immune from the jurisdiction of the courts of Australia," unless an exception provided by the FSIA is engaged.
In particular, a State's presumptive jurisdictional immunity may be waived by "agreement" to submit to the Australian courts' jurisdiction, including by way of "a treaty or other international agreement in writing." The FSIA thus mirrors cognate statutory regimes such as those in the US, the UK and Canada, under which immunity may likewise be waived by some act tantamount to submission to domestic proceedings.[1]
In Spain v Infrastructure Services,[2] the High Court of Australia held, with respect to the ICSID Convention, that Art. 54(1) therein (i.e., that "Each Contracting State shall recognize an [ICSID award] as binding …") amounted to an effective waiver of jurisdictional immunity by the relevant State vis-à-vis domestic proceedings to enforce an ICSID award against it (see the same client alert for a full analysis of that landmark decision).
India's appeal to the Full Court appears to be the first Australian appellate decision determining whether an analogous waiver with respect to a non-ICSID award may be inferred from a respondent State's ratification of the NYC. Like the ICSID Convention, Art. III therein similarly provides that "Each Contracting State shall recognize arbitral awards as binding and enforce them …". Australia in this regard has committed to give effect to the NYC by its enactment of the International Arbitration Act 1974 (IIA).
Federal Court Proceedings
At first instance, the Federal Court construed India's ratification of the NYC as an implicit but clear waiver of its immunity vis-à-vis domestic enforcement proceedings. Given the mutual 'promise' "made by each [NYC] Contracting State to all other Contracting States" in Art. III therein, "it is an obvious and necessary implication that India is requiring Australia to recognise and enforce th[e 2020 A]ward." Permitting a sovereign immunity “defence” would thus be "inconsistent" with those terms of the Convention.
Its reasoning in this regard echoes the Québec Cour d'appel in Republic of India c. CCDM Holdings concerning similar Canadian proceedings to enforce the same Awards in Québec: "… India has necessarily submitted to the courts' jurisdiction at the stage of award recognition and enforcement by consenting to the terms of the [NYC] in this regard. Any other interpretation of the [C]onvention's terms would deprive it of its effect, which is to ensure the effectiveness of international arbitral awards …".[3]
The Federal Court noted in passing that the NYC permitted States to declare an Art. I(3) Reservation, as India did. However, it did not consider this to be "directly relevant … in that Australia did not make any such reservation."
Full Court Appeal
India appealed to the Full Court, disputing that it waived its jurisdictional immunity under the FSIA with respect to enforcement of the 2020 Award. The court analyzed this as two interrelated issues:
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- First, whether India's ratification of the NYC waived its immunity vis-à-vis Australian proceedings to enforce an award otherwise "excluded" by its Reservation (i.e., what is the effect of the Reservation); and
- Second, whether the 2020 Award was "non-commercial" for the purposes of India's Reservation (i.e., what is the nature of the 2020 Award).
Effect of the Reservation
The Full Court did not disturb the first instance finding that, prima facie, ratification of the NYC effected a waiver of immunity vis-à-vis domestic proceedings to enforce an award against the relevant State.
However, under established principles of treaty interpretation, Australia's 'promise' under the NYC concerning enforcement of awards was "qualified" by India's Reservation. Specifically, it modified inter se the relevant treaty obligations between India and Australia "to the extent of the reservation."[4] As India opted to restrict the Convention’s application to differences arising out of "commercial" relationships (and Australia did not object to this),[5] the two States need only recognize and enforce 'commercial' awards between them.
Under FSIA jurisprudence, notably Spain v Infrastructure Services, the Reservation was thus "a sufficiently equivocal expression of India's intention not to waive [sovereign] immunity in proceedings enforcing the Convention in respect of non-commercial disputes." Ratification of the NYC could only be construed as a limited waiver of India’s jurisdictional immunity vis-à-vis Australian proceedings concerning ‘commercial’ awards against it.
Nature of the 2020 Award
Whether India was subject to Australian enforcement proceedings thus depended on the 2020 Award being 'commercial' (in which case it would be amenable) or otherwise (in which case it would remain immune). The Full Court decided this briefly and "essentially [as] a formality" against the Assignees, who did not otherwise contend that the Award was "within the scope of India's [R]eservation."
Framing the BIT and Annulment as "the source of the [Original Investors'] right to compensation," the court opined that the Award was "non-commercial." In its view, neither that treaty, "in the realm of public international law," nor India's actions, "by the body vested with the highest form of executive policy-making," evinced a qualifying commercial relationship. India was accordingly immune from Australian enforcement proceedings.
Comment and Takeaway
The Full Court's finding that non-ICSID awards are "non-commercial" in light of a valid Art. I (3) Reservation, and unaffected by any waiver of sovereign immunity flowing from ratification of the NYC, strikes as an unusually prescriptive interpretation of commerciality under the Convention. Such an approach contrasts with those of comparable jurisdictions like the US and Canada, which have both declared their own Reservations, yet the courts of which have been open to enforce non-ICSID investor-state awards – for example:
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- In the US District of Columbia, Nigeria in the relatively recent Zhongshan Fucheng v Nigeria proceedings resisted enforcement of an ad hoc investor-state award under the US Foreign Sovereign Immunities Act and Federal Arbitration Act. It argued, among other grounds, that an Art. I(3) Reservation "limit[ed] the N[YC] to arbitral awards arising from direct transactions between a signatory state and a private party."
The US Court of Appeals rejected this and affirmed that, for the purposes of the NYC and US law, "[a] relationship 'may be commercial even though it does not arise out of or relate to a contract, so long as it has a connection with commerce’."[6] It found the requisite 'connection' in this instance, highlighting that a treaty with investor-state protections and arbitration provisions "creates a legal relationship between the parties [i.e., foreign investors and host States] that is commercial in nature, and an arbitral award arising from that relationship satisfies the commercial [R]eservation."[7]
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- In Québec, Canada, the first instance CC/Devas (Mauritius) c. Republic of India proceedings (preceding the Cour d'appel decision above) was not confronted with arguments over India's (or Canada’s) Reservation, but considered in a related context whether India's immunity had been waived under the Canadian State Immunity Act's "commercial activity" exception. Analyzing the "entire context of the activity" underlying the Awards, the court concluded that they ultimately arose from a commercial dispute:
"The activity at stake herein is predominantly commercial: [India] breached a commercial treaty by annulling a commercial contract … the subject matter of the dispute before the PCA Tribunal was plainly a commercial investment dispute involving [India], and the PCA Tribunal found that [India] breached its obligation under a commercial treaty … Thus, the nature, the purpose and the entire context of [India]'s actions giving rise to the Treaty Arbitration are commercial."[8]
In addition, the Full Court's narrow characterization of the 2020 Award in light of India's Reservation is difficult to reconcile with the letter and spirit of the UNCITRAL Model Law, which is incorporated with force of law in Australia pursuant to the IIA. Relevantly, it provides that "'commercial' should be given a wide interpretation so as to cover matters arising from all relationships of a commercial nature, whether contractual or not … includ[ing], but are not limited to … investment …" (emphasis added).
The UNCITRAL digest on commercial arbitration jurisprudence (which the IIA recognizes as an extrinsic aid) highlights in this regard that a non-ICSID, NAFTA proceeding qualifies as "a commercial arbitration for the purposes of the Model Law as the primary relationship between the investor and the host State related to investment."[9] This same view has been essentially endorsed by a leading NYC commentary opining that investor-state awards "will be easily recognised and enforced" notwithstanding any Art. I(3) Reservation.[10] Additionally, Indian academic opinion has recommended that investor-state awards be fairly construed as 'commercial' for the purpose of enforcement in India pursuant to the Convention:
"Even if disputes arising out of investment treaties are grounded on State guarantees and assurances, these State guarantees and assurances must therefore be considered in their proper perspective, as incidental to, and not at the foundation of, the relationship between the investor and the host State. The State assurances provided in investment treaties are driven by commercial objectives, i.e. to attract higher volumes of foreign investment into the host State."[11]
The Assignees in this instance have applied for special leave to appeal. It will thus fall to the High Court of Australia to re-examine this decision should it be found to engage a question of law of public importance or the interests of the administration of justice. As matters stand, however, the Full Court's decision presents a potentially significant setback for private parties who have won the 'battle' in a non-ICSID arbitration, only to risk losing the 'war' on enforcement should the relevant State have declared an Art. I(3) Reservation under the NYC.
[1] US Foreign Sovereign Immunities Act 1976, §1605(a)(1); UK State Immunity Act 1978, s2; Canada State Immunity Act 1985, s4.
[2] [2023] HCA 11.
[3] Republic of India c. CCDM Holdings, 2024 QCCA 1620 (CanLII) [81] (free English translation of original French: "… l'Inde s'est nécessairement soumise à la juridiction des tribunaux au stade de la reconnaissance et de l'exécution des sentences en consentant aux termes de la Convention de New York à cet égard. Toute autre interprétation des termes de cette convention priverait celle-ci de son effet, soit d'assurer l'efficacité des sentences arbitrales internationales …" ; original emphasis).
[4] Vienna Convention on the Law of Treaties (adopted 23 May 1969, entered into force 27 January 1980) 1115 UNTS 331 (VCLT), art.21.
[5] VCLT, arts. 20-21.
[6] See also Belize Social Dev. Ltd. v. Government of Belize, No. 14-7002 (D.C. Cir. 2015).
[7] N.B. Nigeria has petitioned the US Supreme Court for a writ of certiorari.
[8] See also Republic of India c. CCDM Holdings, 2024 QCCA 1620 (CanLII) [2] (original French: "Ces deux sentences arbitrales … découlent d'un différend commercial entre Devas [Mauritius] et [Antrix], une société d'État de l'Inde." ; free English translation: "These two arbitral awards … arise from a commercial dispute between Devas [Mauritius] and [Antrix], an India State-owned company."). The Federal Court of Australia however rejected at first instance the same line of argument under the analogous "commercial transaction" exception of the FSIA: CCDM Holdings, LLC v Republic of India [2023] FCA 1266 [114]-[121].
[9] Citing United Mexican States v. Metalclad Corp., 2001 BCSC 664 (CanLII).
[10] Aliz Káposznyák, "Chapter 25: The Expanding Role of the New York Convention in Enforcement of International Investment Arbitral Awards" in Katia Fach Gomez and Ana M. Lopez-Rodriguez (eds), 60 Years of the New York Convention: Key Issues and Future Challenges (Kluwer Law International 2019), §25.02.
[11] Promod Nair, Bhavya Mohan, et al., "Enforcement of Investor-State Arbitral Awards in India" in Gourab Banerji, Promod Nair, et al. (eds), International Arbitration and the Rule of Law: Essays in Honour of Fali Nariman (Permanent Court of Arbitration 2021), p.313.
