Non-Compliance with Investment Arbitration Awards and State Responsibility

ICSID Review, Vol. 37, No. 1-2 (2022), pp.
247–271
doi: https://doi.org/10.1093/icsidreview/siac012
Published Advance Access 20 June 2022 WINTER/SPRING 2022
SPECIAL ISSUE ON
Downloaded from https://academic.oup.com/icsidreview/article/37/1-2/247/6611712 by Gujarat National Law University user on 16 April 2024
20TH ANNIVERSARY OF ARSIWA
Non-Compliance with Investment
Arbitration Awards and State Responsibility
Aniruddha Rajput1
I. INTRODUCTION
Compliance with an investment arbitration award is the adherence to the outcome of
the arbitration proceedings by the award-debtor State and the ability of the foreign
investor to cherish the fruits of the award.2 A foreign investor working on finan-
cial considerations would have large-scale sunk-in investments in the host State and
would not be content with a mere paper decree. The realization and the ability to
enforce the successful outcome of arbitration proceedings are critical. An award-
debtor State may voluntarily comply with an award. But an important and integral
part of compliance is the ability or at least the possibility of achieving involuntary
compliance. Compliance is a broad term, generally expressing good faith perfor-
mance of treaty obligations. It is distinct from procedural issues of enforcement,
recognition and execution of arbitral decisions, which are narrower in compari-
son.3 Also, enforcement and execution are the legal means to achieve compliance.4
Although prominent, they are not the exhaustive means.
The importance of compliance with an investment arbitration award is recognized
in the preamble of the Convention on the Settlement of Investment Disputes between
States and Nationals of Other States (ICSID Convention): ‘Recognizing that mutual
consent by the parties to submit such disputes … and that any arbitral award be
complied with’, article 53(1) of the ICSID Convention announces the binding nature
of an award by declaring that ‘[e]ach party shall abide by and comply with the terms
of the award’.
The perception is that States comply with investment arbitration awards, inter alia,
due to the fear of loss of their reputation as an investor-friendly environment.5 This
1
Member, UN International Law Commission; Consultant, Withers LLP. I thank Advaya Hari Singh, Anjali
Sasikumar, Mansi Avashia, Pradosh Shetty, Bharatt Goel and Sameer Gupta for their excellent research assistance.
2
The instances of non-compliance by an investor with an award are not covered by this article since issues of State
responsibility would not be involved in such a situation.
3
Alan Alexandroff and Ian Laird, ‘Compliance and Enforcement’ in Peter Muchlinski and others (eds), The Oxford
Handbook of International Investment Law (OUP 2012) 1173.
4
W Michael Reisman, ‘The Enforcement of International Judgments’ (1969) 63 AJIL 1, 6; Yuval Shanny, Assessing
the Effectiveness of International Courts (OUP 2014) 119.
5
Patrick Mitchell v Democratic Republic of Congo, ICSID Case No ARB/99/7, Decision on the Stay of Enforcement of
the Award (30 November 2004) para 41.
© The Author(s) 2022. Published by Oxford University Press on behalf of ICSID. All rights reserved.
For permissions, please e-mail: journals.permissions@oup.com
248 ICSID Review VOL. 37 1-2
perception no longer holds true.6 Most investment disputes are bitterly fought during
the arbitration proceedings, but, most importantly, after an award is issued against
the host States. A 2020 survey on compliance with investment awards shows that
States paid damages in 85 of the 170 cases. No information was available in 51 cases
or 30.5 per cent of the cases. The survey was based on investment arbitrations involv-
ing the 32 most sued States, covering almost 70 per cent of the cases. The survey
concluded that compliance, and most importantly timely compliance, is difficult and
enforcement proceedings are unavoidable. Yet, they may not succeed in achieving
compliance. States may not comply for political reasons, where there is a series of
arbitrations on the same or similar issues, a strong disagreement with the correctness
of the outcome, or may initially agree to pay and later back out.7 With the devel-
opments in the European Union (EU) after the decision of the Court of Justice of
the European Union in Achmea,8 certain States have taken the position that they will
not comply with awards that are contrary to EU law and accordingly they have not
complied with some awards.9
The increasing instances of non-compliance raise the question of a proper legal
response. This article looks at non-compliance and the consequences thereof under
the law of State responsibility, as codified and progressively developed by the
International Law Commission (ILC) in its work on Responsibility of States for
Internationally Wrongful Acts (Articles on State Responsibility or ARSIWA).10 The
prospect of a State being declared responsible for non-compliance with an award was
raised before the Permanent Court of International Justice (PCIJ), but the claim was
abandoned by the Claimant in the oral hearing.11 The PCIJ found itself to be neither
in a position to affirm or reject the conclusions arrived at by the Tribunal.12 The
current state of doctrinal international law can be applied to investigate the prospect
of State responsibility for non-compliance with an investment award.
This introductory section is succeeded by Section II briefly explaining the meaning
and potential situations of non-compliance. Section III discusses the applicability of
the law of State responsibility in situations of non-compliance. This section traces
the source of non-compliance as a binding legal obligation followed by an analysis
that investigates whether the elements for establishing State responsibility are sat-
isfied if there is non-compliance; followed by the way restitution can be resorted
to by an award-creditor investor. The section discusses the possibility of circum-
stances precluding wrongfulness being raised as a defence to resist compliance and
in particular the relevance of countermeasures, force majeure and necessity. Section
IV identifies the ways to seek compliance through legal means, such as proceedings
before domestic courts and international courts and tribunals and political means.
Section V discusses the obstacles to seeking compliance, in the form of sovereign
immunity and nullity of an award. Section VI presents concluding observations.
6
See Emmanuel Gaillard and Ilija Mitrev Penusliski, ‘State Compliance with Investment Awards’ (2020) 35(3)
1 ICSID Rev—FILJ 540. For a theoretical analysis of the reasons for non-compliance, see Moshe Hirsch, ‘Explaining
Compliance and Non-Compliance with ICSID Awards: The Argentine Case Study and a Multiple Theoretical Approach’
(2016) 19 J Intl Econ L 681, 692–706.
7
Gaillard and Penusliski (n 6) 588–95.
8
Slovak Republic v Achmea BV, Case C-284/16, [2018] ECR 158.
9
Gaillard and Penusliski (n 6) 561.
10
International Law Commission, ‘Draft Articles on the Responsibility of States for Internationally Wrongful Acts
with Commentaries’, UN GAOR 56th Session Supp 10, ch 4, UN Doc A/56/10 (2001) (ARSIWA).
11
Société Commerciale de Belgique (Belgium v France) (Judgment) PCIJ Rep Series A/B, No 78, 174.
12
ibid 174–75.
Non-Compliance with Arbitration Awards and State Responsibility 249
II. MEANING OF NON-COMPLIANCE

Non-compliance exists where the award-debtor State does not comply, fully or par-
tially, or in good faith, or if there is a delay in compliance. As per article 12 of
the Articles on State Responsibility, breach of an international obligation exists
if a State does not act ‘in conformity with what is required of it by that obliga-
tion’. The expression ‘not in conformity’ is sufficiently broad to include partial
non-compliance.13 Partial non-compliance also invokes complete responsibility, and
the degree of non-compliance is immaterial.14
Normally, an award ‘shall be carried out in good faith immediately, unless the
Tribunal has fixed a time limit within which it must be carried out in its entirety or
partly’.15 However, the mere fact of delay could not be termed as non-compliance.16
During the negotiations of the ICSID Convention, there was discussion about spec-
ifying the duration for compliance. Eventually, any such formulation was dropped.17
At present, the obligation to comply arises once an award is rendered, ie the day
on which the certified copies are dispatched.18 States have to take steps promptly.
However, this may take some time, for example to make budgetary arrangements.19
There must be some steps taken by a State to comply and no steps that would evade
or obstruct compliance.20 A State would not be in breach of the obligation to com-
ply if it has initiated its challenge under one of the recognized legal means. Under
the ICSID Convention, the period for which a State would not be responsible on the
ground of delay of non-compliance would be until the period for commencing annul-
ment proceedings has expired or if the proceedings were commenced until they were
completed, provided a stay is granted by the Annulment Committee.21 Under the
New York Convention, it would be until the challenge could be or is actually made.
If a domestic court where a challenge to the award is raised declines to stay an award
that may be a potential situation of non-compliance for the delay.
III. STATE RESPONSIBILITY FOR NON-COMPLIANCE

WITH AN AWARD
The ‘basic principle underlying’ the law of State responsibility and encapsulated in
article 1 of the Articles on State Responsibility is that ‘[e]very internationally wrongful
act of a State entails the international responsibility of that State’.22 A State commits
13
ARSIWA (n 10) art 12, commentary para 2.
14
As noted by the Tribunal: ‘it must be concluded that the responsibility of States can be denied or accepted only in
its entirety and not in part; it would not then be possible for the Tribunal to declare this responsibility in the matter of
monetary debts inapplicable without extending this inapplicability to all the other categories of responsibilities’. Russian
Claim for Interest on Indemnities, Award of the Tribunal (11 November 1912) para 4 (Russia v Turkey).
15
ILC YB 1958, vol II, 85.
16
James AR Nafziger, ‘National Implementation of International Court Decisions’ in Rainer Grote, Frauke Lachen-
mann and Rüdiger Wolfrum (eds), Max Planck Encyclopedia of Comparative Constitutional Law (OUP 2017) para 28; Iain
Scobbie, ‘Case Concerning Certain Phosphate Lands in Nauru (Nauru v Australia), Preliminary Objections Judgment’
(1993) 42 ICLQ 710, 711.
17
Christoph Schreuer, Loretta Malintoppi, August Reinisch and Antony Sinclair, The ICSID Convention: A
Commentary (CUP 2009) 1110–11.
18
Convention on the Settlement of Investment Disputes between States and Nationals of Other States (opened for
signature 18 March 1965, entered into force 14 October 1966) art 49 (1) (ICSID Convention).
19
Schreuer and others (n 17) 1110–11.
20
ibid 1113–14.
21
ICSID Convention (n 18) arts 51(4) and 53(1).
22
an internationally wrongful act through either action or omission and if the twin tests
of ‘attribution’ and ‘breach of an international obligation’ are satisfied.23 Normally,
when a State refuses to comply with an award or if it deliberately stalls the efforts of
enforcement beyond the permitted legal means, that would be conduct or omission
resulting in an internationally wrongful act, provided those actions or omissions are
attributable to the State and there is, in fact, a breach of an international obligation.
A. Source of the Obligation

It is first necessary to trace and establish the source of the obligation to comply with
a decision of an international court or tribunal generally and an investment award in
particular.
An early codification of the obligation to comply with decisions of international
courts and tribunals was article 37(2) of the Hague Convention for the Pacific Set-
tlement of International Disputes of 1907, which stated: ‘Recourse to arbitration
implies an engagement to submit in good faith to the award’.24
Article 32 of the Model Rules on Arbitration Procedure, prepared by the ILC
provides: ‘Once rendered the award shall be binding upon the parties’.25
The binding nature of the decision of an international court or tribunal emanates
from its authority to adjudicate.26 In the Free Zones of Upper Savoy and the District
of Gex, the PCIJ noted that ‘it would be incompatible with the Statute, and with its
position as a Court of Justice, to give a judgment which would be dependent for its
validity on the subsequent approval of the parties’.27 Such a condition, if the consent
is to be subsequent to the judgment, cannot be reconciled with articles 59 and 60
of the Statute of the Court, which provide that the judgment is binding and final.28
Similarly, in the Avena case, the ICJ observed that domestic law, which hindered the
implementation of the obligation incumbent upon the United States, cannot relieve
it of its obligation to comply with the decision of the ICJ. It further observed that
the Avena case nowhere lays down or implies that the courts in the United States are
required to give direct effect to the judgment. The relevant sections of the judgment,
according to the ICJ, were ‘an obligation of result’ which had to be performed uncon-
ditionally and its non-performance constituted internationally wrongful conduct.29
These observations of the ICJ were in reaction to the decision of the US Supreme
Court in Medellín v Texas, which held that even if an international treaty may con-
stitute an international commitment, it is not binding domestic law unless Congress
has enacted statutes implementing it or unless the treaty itself is ‘self-executing’ and
therefore held the Avena decision of the ICJ was not directly enforceable as domestic
law in a State court.30
23
ibid art 34.
24
Convention for the Pacific Settlement of International Disputes (signed 18 October 1907, entered into force 26
January 1910) art 37.
25
ILC Yearbook 1958 (n 15) 10.
26
Abdul G Koroma, ‘The binding nature of the decisions of the International Court of Justice’ in Laurence Boisson
De Chazournes and Marcelo Kohen (eds), International Law and the Quest for Its Implementation: Le droit international et
la quête de sa mise en oeuvre - Liber Amicorum Vera Gowlland—Debbas (Martinus Nijhoff 2010) 436–39.
27
Free Zones of Upper Savoy and the District of Gex (France v Switzerland) (Judgment) (1938) PCIJ Series A/B, No 46,
661.
28
ibid para 197.
29
Request for Interpretation of the Judgment of 31 March 2004 in the Case Concerning Avena and Other Mexican Nationals
(Mexico v US) (2008) 47 ILM 726, para 44.
30
Jose Ernesto Medellin, Petitioner v Texas, 552 US 491, 8, 15 and 27 (2008).
At times, investment treaties contain express provisions stating that the award is
final and binding and States undertake to carry out awards without delay.31 In addi-
tion to these obligations, the United States–Mexico–Canada Agreement (USMCA)
stipulates the constitution of a Panel to ensure compliance with an award.32 Rules
of arbitral institutions also make similar provisions.33 Normally in commercial arbi-
tration when parties agree to the administration of the arbitration proceedings by an
institution, there is a deemed agreement to abide by the rules of the institution.34
The situation of States in investment arbitration proceedings is different since a State
can be bound by a treaty and not a mere contractual arrangement like a private party.
The rules of arbitral institutions may not have the same binding force in investment
arbitration proceedings as in commercial arbitration. Where the investment treaty
refers to some rules specifically, such as the United Nations Commission on Interna-
tional Trade Law (UNCITRAL) Arbitration Rules, then the rules on finality in those
rules will be applicable.35
For awards delivered under the ICSID Convention, the finality and non-
appealability arise from article 53(1):
The award shall be binding on the parties and shall not be subject to any appeal or to any
other remedy except those provided for in this Convention. Each party shall abide by and
comply with the terms of the award except to the extent that enforcement shall have been
stayed pursuant to the relevant provisions of this Convention.
Additionally, all members of the ICSID Convention are obliged to recognize the
award as a final judgment of a court in that State. Article 54(1) specifies this obligation
in the following words:
Each Contracting State shall recognize an award rendered pursuant to this Convention as
binding and enforce the pecuniary obligations imposed by the award within its territories
as if it were a final judgment of a court in that State. A Contracting State with a federal
31
Treaty between the United States of America and the Republic of Kazakhstan concerning the Encouragement and
Reciprocal Protection of Investment (signed 19 May 1992, entered into force 12 January 1994) arts VI (4) and (6);
North American Free Trade Agreement (signed 17 December 1992, entered into force 1 January 1994, terminated 1
July 2020) (NAFTA) arts 1136(2) and (4); Agreement between the Lebanese Republic and the Republic of Austria on
Reciprocal Promotion and Protection of Investment (signed 26 May 2001, entered into force 30 September 2002) art
17(1); Agreement between the Government of the Federal Democratic Republic of Ethiopia and the Government of the
Republic of Sudan on Reciprocal Promotion and Protection of Investments (signed 7 March 2000, entered into force 30
November 2000) art 8(5); Agreement between the Republic of Lebanon and the Republic of Hungary for the Promotion
and Reciprocal Protection of Investments (signed 22 June 2001, entered into force 23 July 2002) art 8(3); Agreement
between the Government of the Republic of India and the Government of United Arab Emirates on the promotion
and protection of investments (signed 12 December 2013, entered into force 30 August 2014) art 10(7)(e); Bilateral
Agreement for the Promotion and Protection of Investments between the Government of the United Kingdom of Great
Britain and Northern Ireland and Republic of Colombia (signed 17 March 2010, entered into force 10 October 2014)
art IX(10).
32
Agreement between the United States of America, the United Mexican States and Canada (signed 30 November
2018, entered into force 1 July 2020) (USMCA) arts 14.D.13 (8)–(10). Erstwhile NAFTA also contained identical
provisions: see art 1136(5), NAFTA.
33
London Court of International Arbitration, Arbitration Rules (2020) art 26.8; International Chamber of Commerce
Rules of Arbitration (2021) art 35(6); Singapore International Arbitration Centre Rules (2016) r 32.11.
34
See Rémy Gerbay, The Functions of Arbitral Institutions (Wolters Kluwer 2016).
35
Investment Agreement between the Government of Australia and the Government of the Hong Kong Special
Administrative Region of the People’s Republic of China (signed 26 March 2019, entered into force 17 January 2020)
art 25; Agreement between the Swiss Confederation and the Republic of Uzbekistan on the Promotion and Reciprocal
Protection of Investments (signed 16 April 1993, entered into force 5 November 1993); Agreement between the Gov-
ernment of the Kingdom of Norway and the Government of the Republic of Poland on the Promotion and Reciprocal
Protection of Investments (signed 5 June 1990, entered into force 24 October 1990) art 9; Arbitration Rules of the United
Nations Commission on International Trade Law (2013) art 34.
constitution may enforce such an award in or through its federal courts and may provide that
such courts shall treat the award as if it were a final judgment of the courts of a constituent
state.
Three consequences flow from these provisions. First, the ICSID award is final and
operates as res judicata since the parties cannot seek a remedy on the same dispute
in another forum. Second, there is no external review of an ICSID award, except
that provided for in articles 49(2), 50, 51 and 52. Third, all States have to carry
out an ICSID award as if it were a final decision of their own courts. Therefore,
‘non-compliance by a party with an award would be a breach of a legal obligation’.
Provisions on finality are contained in the rules of other arbitral institutions.36 These
provisions do not apply to proceedings conducted under the ICSID Additional Facil-
ity Rules, hence those arbitrations are not insulated from national laws. They are
governed by the national law of the seat or other applicable treaties.37 In most cases,
they would be regulated by the United Nations Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (New York Convention). The general obli-
gation to recognize and enforce awards, subject to other provisions of the New York
Convention, is noted in article 3 in the following words:
Each Contracting State shall recognize arbitral awards as binding and enforce them in accor-
dance with the rules of procedure of the territory where the award is relied upon, under the
conditions laid down in the following articles.
Some investment tribunals have found the non-enforcement of commercial arbi-

tration awards as a breach of an international obligation arising from the New York
Convention.38 If an investment arbitration award is treated as enforceable under the
New York Convention and the domestic law implementing the New York Conven-
tion,39 then the refusal by a State to comply contrary to the New York Convention
36
Schreuer and others (n 17) 1097.
37
ibid 1098; see also United Mexican States v Metalclad, Canada, Supreme Court of British Columbia, 2 May 2001,
2001 BCSC 664, 1529 (2002) 5 ICSID Reports 236 (2004) 6 ICSID Reports 52. See also William S Dodge, ‘Metalclad
Corporation v. Mexico. ICSID Case No. ARB(AF)/97/1.40 ILM 36 (2001), and Mexico v. Metalclad Corporation. 2001
B.C.S.C. 664’ (2001) 95 AJIL 910; Henri C Alvarez, ‘Setting Aside Additional Facility Awards: The Metalclad Case’, in
Emmanuel Gaillard and Yas Banifatemi (eds) (2004) 1 IAI International Arbitration Series No 1, Annulment of ICSID
Awards 267.
38
Saipem SpA v People’s Republic of Bangladesh, ICSID Case No ARB/05/07, Award (30 June 2009); ATA Construction,
Industrial and Trading Company v Hashemite Kingdom of Jordan, ICSID Case No ARB/08/02, Award (18 May 2010);
Frontier Petroleum Services Limited v The Czech Republic, UNCITRAL, Award (12 November 2010).
39
Convention on the Recognition and Enforcement of Foreign Arbitral Awards (opened for signature 10 June 1958,
entered into force 7 June 1959) 330 UNTS 4739 (New York Convention). It may not always be the case that an investment
arbitration award would be enforced under art V of the New York Convention due to the ‘commercial’ exception under
its art 1(3). See Union of India v Vodafone Group PLC United Kingdom & Anr, CS (S) 383/2017, High Court of Delhi,
para 90; the High Court of Delhi held that the Convention applies to ‘disputes arising out of legal relationships whether
stricto sensu contractual or not provided they are considered as commercial under the domestic law of the State making
such a declaration’ (Gas Authority of India Ltd v Spie Capag SA and others, 1993 SCC OnLine Del 561, 571; see also
European Grain and Shipping Ltd v Bombay Extractions Ltd., High Court of Bombay, India, 5 November 1981, AIR 1983
Bom 36, 41); a US court has held that the notion of ‘commercial relationship’ is broad, noting that its purpose is only
‘to exclude matrimonial and other domestic relations awards, political awards, and the like’ (Island Territory of Curacao
v Solitron Devices, Inc., Court of Appeals, Second Circuit, United States of America, 14 February 1973, 356 F Supp
1 para 9); see generally, Aniruddha Rajput, ‘Balancing the Power of Anti-Arbitration Injunction with the Competence
of Investment Tribunals: Union of India v. Vodafone Group Plc United Kingdom’ (2020) 7 GNLU L Rev 109. The
USMCA Agreement gets over this obstacle by declaring that all investment awards are to be treated as ‘commercial’ for
enforcement under the New York Convention, USMCA (n 32) art 14.D.13. A Tunisian court held that a contract for an
architectural plan for a resort was not commercial under Tunisian law (Taieb Haddad v Hans Barett, Société d’Investissement
Kal, Supreme Court, Tunisia, 10 November 1993 (1998) XXIII YB Com Arb 770). In yet another case, a US court held
that a dispute arising out of proceedings to disqualify counsel was non-commercial (R3 Aerospace v Marshall of Cambridge
ought to result in international responsibility. This may not always be the case and
the situation would depend on the position under domestic law since the enforce-
ment happens under domestic law, as long as the interpretation and application of
law is in conformity with the standard of discretion provided under the New York
Convention.
There is enough material to suggest that compliance with an award is not just a
treaty obligation but also possesses the characteristics of an international custom.40
Consequentially, any ‘violation of a duty imposed by an international judicial stan-
dard’ is sufficient to raise international responsibility.41 On the theoretical level,
compliance with awards is suggested to be necessary to uphold the value of inter-
national arbitration.42 This expectation of compliance arises from the consent of the
parties to the arbitration.43
Non-compliance with an award may cause a breach of another obligation, which
will, in turn, result in the responsibility of a State. The European Court of Human
Rights (ECtHR) has treated the failure of the judiciary to enforce an award within
a reasonable time as a breach of the right to a fair trial under article 6 of the Euro-
pean Convention of Human Rights (ECHR).44 Additionally, an award is treated as
a ‘possession’ hence covered by the right to property under Protocol 1. Awards are
treated as a right in personam: the same as any other pecuniary right. If it is estab-
lished that a State wrongfully interfered with rights arising from an award that has
not been enforced, the award may be enforced by the ECtHR, thus giving special
protection to awards as opposed to judgments.45 Thereby, non-compliance with an
award was found to be an expropriation and wrongful deprivation of the right to
property.46 Within the EU legal system, once it is found that a State has failed to
respect the property rights by non-enforcement of an award under Protocol 1, there
is no need to additionally establish delay or deprivation of the right of a fair trial
under article 6.47 Overall, ‘the State must make sure that the execution of such an
award is carried out without undue delay and that the overall system is effective both
in law and in practice’.48 The threshold of fair trial required under article 6 is tailor-
made to the EU system and a delay in enforcement, which may not be treated as
Aerospace Ltd., District Court, Southern District of New York, United States of America, 29 May 1996, 927 F. Supp.
121). Other States use the procedure under the New York Convention to enforce investment arbitration awards (BG Grp
plc v Republic of Argentina, 572 US 25 (2014); PAO Tatneft v Ukraine, [2018] EWHC 1797 (Comm)).
40
Bernardo Sepulveda-Amor and Merryl Lawry-White, ‘State Responsibility and the Enforcement of Arbitral
Awards’ (2017) 33(1) Arb Intl 1, 15–17, 26–27; Oscar Schachter, ‘The Enforcement of International Judicial and Arbitral
Decisions’ (1960) 54 AJIL 1, 2–6.
41
ARSIWA (n 10) art 12, commentary para 2; D Anzilotti, Corso di dirittointernazionale, vol 1 (4th edn, 1955) 385; W
Wengler, Völkerrecht, vol 1 (Springer 1964) 499; GI Tunkin, Teoria mezhdunarodnogoprava (Mezhdunarodnyeotnoshenia
1970) 470, trans WE Butler, Theory of International Law (George Allen & Unwin 1974) 415; E Jiménez de Aréchaga,
‘International Responsibility’ in M Sørensen (ed), Manual of Public International Law (Macmillan 1968) 533; I Brownlie,
Principles of Public International Law (5th edn, OUP 1998) 435; B Conforti, Diritto internazionale (4th edn, Editoriale
Scientifica 1995) 332; P Daillier and A Pellet, Droit international public (Nguyen Quoc Dinh) (6th edn, Librairie générale
de droit et de jurisprudence 1999) 742; P-M Dupuy, Droit international public (4th edn, Dalloz 1998) 414; R Wolfrum,
‘Internationally Wrongful Acts’ in R Bernhardt (ed), Encyclopedia of Public International Law, vol II (North-Holland 1995)
1398.
42
Sepúlveda-Amor and Lawry-White (n 40) 33.
43
Lucy Reed and Lucy Martinez, ‘Treaty Obligations to Honor Arbitral Awards’ in Doak Bishop (ed), Enforcement
of Arbitral Awards Against Sovereigns (JurisNet 2009) 13.
44
Regent Company v Ukraine App no 773/03 (ECtHR, 3 April 2008) 59, 60.
45
Deyan Draguiev, ‘State Responsibility for Non-Enforcement of Arbitral Awards’ (2014) 8(4) WAMR 577, 594–5.
46
Case of Stran Greek Refineries and Stratis Andreadis v Greece App no 13427/79 (ECtHR, 9 December 1994) 62, 64;
Regent Company v Ukraine (n 44) 61, 62.
47
Bijelić v Montenegro and Serbia App no 11890/05 (ECtHR, 28 April 2009) 88.
48
Kin-Stib and Majkic v Serbia App no 12312/05 (ECtHR, 4 October 2010) 83.
unreasonable in other jurisdictions, may be so treated by the ECtHR.49 So is the sit-

uation with the wide approach of treating an award as a possession. Therefore, the
EU has a highly effective system for the enforcement of awards as compared to other
enforcement regimes, including potential State–State dispute resolution for compli-
ance with awards.50 The net for catching non-compliance is quite broad in the EU
legal system51 —although available only against European States for investors having
the standing to avail themselves of those provisions. It needs to be seen how these
courts will react to investment arbitration awards arising out of intra-EU investment
treaties after the Achmea judgment.
Also, denial of justice may be invoked if there is a deliberate failure of the judiciary
to enforce an award or to shield the other branches of government and obstruct com-
pliance. Denial of justice, however, is a high standard and limited only to procedural
irregularities and often difficult to meet.52 Some argue that if not precisely the invo-
cation of denial of justice, then something akin to it must be applied in case of failure
of a State to enforce an award.53 Even if assumed desirable, there does not appear to
be any such rule or legal principle.
B. Attribution
For a State to be responsible under international law, the alleged breach of an inter-
national obligation must be attributable to the State. A State, acting through all its
organs, is responsible to comply with the award. The specific duty to comply with an
international judicial decision would be determined based on the domestic constitu-
tional framework.54 The duty of compliance is discharged once the internal organs
according to their constitutional competence comply with the decision.55
In most cases, the refusal to comply would be on the part of the executive, which is
normally responsible for international relations. Additionally, the domestic courts or
some other agencies56 of the State may be involved in the process of enforcement of
an award. As a consequence of the principle of unity of State,57 these entities being
organs of the State, their actions or omissions would be attributable to the State.58
Inaction on the part of State authorities due to failure to undertake necessary
steps where they were evidently called for, are attributable to the State and attract
responsibility.59 Additionally, failure to comply with an award may take the nature
of a composite act. In such a case, the non-compliance with an award would be
49
Draguiev (n 45) 601–03.
50
ibid 617–18.
51
ibid 584–87.
52
Jan Paulsson, Denial of Justice in International Law (CUP 2005).
53
Alexandroff and Laird (n 3) 1186.
54
Constanze Schulte, Compliance with Decisions of the International Court of Justice (OUP 2004) 24–25.
55
Karin Oellers-Frahm, ‘Article 94’ in Bruno Simma and others (eds), The International Court of Justice (OUP 2012)
1965.
56
Article 4 covers a wide range of organs, especially the judiciary, even where it is independent as per domestic law:
‘whether the organ exercises legislative, executive, judicial or any other functions’.
57
See ARSIWA (n 10) art 4, commentary para 4.
58
ibid 40, 42; James Crawford, The International Law Commission’s Articles on State Responsibility: Introduction, Text
and Commentaries (CUP 2003) 98; ‘State Responsibility and Attribution’ in Rudolf Dolzer and Christoph Schreuer (eds),
Principles of International Investment Law (2nd edn, OUP 2012); UAB v Latvia, ICSID Case No ARB/12/33, Award (22
December 2017) paras 825–27; Saipem SpA v People’s Republic of Bangladesh, ICSID Case No ARB/05/7, Award (30 June
2009, paras 188–91; EDF (Services) Limited v Romania, ICSID Case No ARB/05/13, Award (8 October 2009) para 197.
59
United States Diplomatic and Consular Staff in Tehran (United States of America v Iran) (Judgment) [1980] ICJ Rep
3, 63, 67.
‘through a series of actions or omissions’.60 These may be undertaken by different

branches of the State. The individual actions or omissions that affect compliance and
the composite act of non-compliance would be a breach of international legal obliga-
tions.61 The breach would continue over the entire period of actions and omissions.62
In other words, for the entire period, the award will not have been complied with.
C. Breach of Obligation
Breach of an international obligation would occur ‘when an act of that State is not
in conformity with what is required of it by that obligation, regardless of its origin or
character’.63 The contents of the obligation are decisive, and the extent of compliance
of an international legal obligation is derived from the primary obligation.64 As noted
in the Commentary of the Articles on State Responsibility:
But in the final analysis, whether and when there has been a breach of an obligation depends
on the precise terms of the obligation, its interpretation, and application, taking into account
its object and purpose and the facts of the case.65
To establish a breach of an international obligation, there has to be ‘dis-conformity

between the conduct required of the State by that obligation and the conduct actually
adopted by the State’.66 The extent of the obligation to be complied with depends on
the precise terms of the award—the dispositive (the operative part).67 Most investment
awards are monetary in nature and determination of their compliance or breach is
fairly straightforward, unlike in many inter-State cases involving disputes over the
precise scope of the decision.
International responsibility would arise for ‘one or more actions or omissions or a
combination of both’.68 A ‘refusal to fulfil a treaty obligation involves international
responsibility’.69 Non-compliance with an award would take the form of an ‘omis-
sion’ to comply with an international obligation flowing from the award. A State may
not breach the obligation to comply with an award through ‘actions’, by seeking to
challenge the award, as long as the challenge is based on a legal right emanating from
an international instrument or domestic laws protected by international law. The
defence of immunity is available under international law and domestic law, but it is
hard to argue that such efforts would amount to an ‘action’ undertaken for commit-
ting the breach. That does not dilute the fact that non-compliance with an award on
substance remains a breach of an international legal obligation. The right to chal-
lenge the award or protect properties based on immunity are matters of procedure,
60
ARSIWA (n 10) art 15.
61
ibid.
62
ibid 63.
63
ibid 54.
64
ibid 96, 97.
65
ibid 54.
66
ibid.
67
Oellers-Frahm (n 55) 1960.
68
69
Interpretation of Peace Treaties with Bulgaria, Hungary and Romania, Second Phase (Advisory Opinion) [1950] ICJ
Rep 228.
although they may ultimately affect the substantive right to seek enforcement of the
award.70
D. Nature of Non-Compliance
Non-compliance with an award is a separate breach of an international obliga-
tion from the underlying breach that led to the proceedings and the award. An
international court or tribunal would be reluctant to specify the consequences of non-
compliance with its decision while delivering the decision. Since non-compliance is
a separate breach, separate proceedings, if maintainable, would have to be initiated.
Potential non-compliance cannot be addressed.71 The International Court of Justice
(ICJ) said the following in the Mavrommatis case:
In these circumstances, the Court does not find it necessary to consider the question of
whether in certain cases, it might have jurisdiction to decide disputes concerning the non-
compliance with the terms of one of its judgments.72
Non-compliance with an award is viewed as non-payment of a debt owed by a State.

Non-compliance with an award would make the State a debtor towards the investor
since non-fulfilment of the obligation results in financial implications for the State
concerned.73 The question of non-payment of debt owed by a sovereign is a matter
governed by public international law.74 The Tribunal in the Russian Indemnity case
declined to distinguish between debts owed from different sources and concluded
that:
It is certain, indeed, that all liability, whatever its origin, is finally valued in money and
transformed into an obligation to pay; it all ends, or can end, in the last analysis, in monetary
debt.75
Furthermore, a State is responsible for ‘delay in the payment of a monetary debt,

unless the existence of a contrary international custom is established’.76 Additionally,
a State would be responsible for the payment of interest caused by such delayed
payments.77
E. Reparation for Non-Compliance

Non-compliance with an international obligation has to be remedied by a ‘full repa-
ration for the injury caused by the internationally wrongful act’.78 As explained in the
70
The effect of immunity as an obstruction to enforcement and its effect on State responsibility for non-compliance
with an award is discussed in greater detail below.
71
In SS Wimbledon, the PCIJ declined to grant punitive interest for possible non-compliance with its decision: ‘The
Court does not award interim interest at a higher rate in the event of the judgment not being complied with at the
expiration of the time fixed for compliance. The Court neither can nor should contemplate such a contingency.’ SS
Wimbledon (United Kingdom, France, Italy and Japan v Germany) [1923] PCIJ Series A No 1, 32; Interpretation of Peace
Treaties (n 69) 229–30.
72
Case of the Readaptation of the Mavromattis Jerusalem Concessions (Greece v United Kingdom) (Jurisdiction) (Judgment)
[1927] PCIJ Series A, No 11 13–14.
73
Russia v Turkey (n 14) 11 .
74
ibid 9.
75
ibid 10.
76
ibid.
77
ibid 12.
78
famous paragraph of the Factory at Chorzów case: ‘reparation must, as far as possible,
wipe out all the consequences of the illegal act and re-establish the situation which,
would, in all probability, have existed if that act had not been committed’.79 Since the
breach in question would be non-compliance with an award, the award-debtor State
would have to comply with the contents of the award. In the context of diplomatic
protection, the ICJ observed in the Barcelona Traction case that:
reparation due... as a result of the internationally unlawful acts for which the latter State is
responsible, must be complete and must, so far as possible, reflect the damage suffered by
its nationals whose case the [other] State has taken up; and that, since restitutio in integrum
is, in the circumstance of the case, practically and legally impossible, the reparation of the
damage suffered can only take place in the form of an all-embracing pecuniary indemnity.80
The relief is limited to the injury,81 ie a host State would have to comply with
the award to the extent that it removes the consequences of non-compliance. Full
reparation in the context of non-compliance means nothing more than the payment
of the award amount and consequential interest since compensation as a form of
reparation cannot be of a punitive or exemplary nature.82
The ILC debated the use of full reparation, with members expressing their doubt
on its effectiveness.83 It was felt that the insistence on full reparation could be fraught
with consequences for developing countries.84 In further discussions, full reparation
was considered unsuitable since reparation could only be used to remedy the con-
sequences of the wrongful act as much as possible and seldom fully.85 Factors like
the weak financial position of the responsible State would affect its ability to make
full reparation.86 However, since the governments had not objected to the use of full
reparation, the Commission decided to retain the provision along with the seminal
dictum of the ICJ from the Factory at Chorzów case.87 This meant that full reparation
had to wipe out the consequences of the illegal act as far as possible.88
Despite the rule of full reparation, practice suggests that the parties may settle the
amount through negotiations.89 Thus, even where an investor is entitled to a higher
amount, the investor and the host State may negotiate and settle for a lesser amount
than that of the award. There is extensive State practice that suggests the accep-
tance of less-than-full reparation.90 In the preparatory work at the ILC, there was
an acknowledgment of the impossibility of full reparation in certain situations.91 The
79
Factory at Chorzo´w (Germany v Poland) (Jurisdiction) [1927] PCIJ, Series A, No 9, 47.
80
Case Concerning the Barcelona Traction, Light and Power Company, Limited (Belgium v Spain) (Judgment) [1970] ICJ
Rep 3, 24.
81
82
ibid 99.
83
Benoit Mayer, ‘Less-than-Full Reparations in International Law’ (2016) 56(3–4) Indian J Intl L 463.
84
Summary record of the 2314th meeting, ILC YB 1993, vol 1, 78 (PS Rao).
85
ILC YB 2000, vol II(2), 27.
86
ibid.
87
ibid 29.
88
James Crawford, State Responsibility—The General Part (CUP 2013) 482; ARSIWA (n 10) art 31, commentary para
2; International Law Commission, Summary Records of the 2288th Meeting (20 July 1992), UN Doc A/CN4/SR.2288
(1992) para 16 (p 217); International Law Commission, Report of the International Law Commission on the Work of Its
Forty-Fifth Session (3 May–23 July 1993), UN Doc A/48/10 (1993), art 6 bis commentary, para 2 (p 59); International
Law Commission, Third Report on State Responsibility by Mr James Crawford, UN Doc A/CN4/507 and Add 1–4
(2000), para 20 (p 16).
89
For examples of practice, see ARSIWA (n 10) art 36, commentary paras 11–20.
90
Mayer (n 83).
91
Report of the Working Group on International Liability for Injurious Consequences Arising out of Acts Not Prohibited by
International Law ILC YB 1996, vol 2(2) (Annex I), para 4 (p 130).
Eritrea–Ethiopia Claims Commission has also discussed the prohibitory impact that
a huge quantum of compensation has on the responsible State’s ability to provide
basic services to its own citizens.92 Special Rapporteur Professor Crawford (as he
then was) criticized this decision for hastily concluding the emergence of State prac-
tice which shows that States take into account the impact of high compensation
amounts on the population of the responsible State.93 He offers a competing example
of Iraq’s payments for claims arising from its invasion and occupation of Kuwait to the
United Nations Compensation Commission.94 In traditional State–State litigation,
the amounts of compensation awarded by international tribunals would normally be
trivial as compared to the resources of the State.95 This position has changed dras-
tically after investment arbitration, where the amounts awarded are large enough to
have a crippling effect on the economy of a State.96 While the rule is for full repara-
tion, there is a possibility of an argument, based on State practice, for excluding full
reparation where the effect is crippling.97
F. Circumstances Precluding Wrongfulness

Non-compliance may be justified on the ground of circumstances precluding wrong-
fulness.98 The determination of breach of an international obligation is linked to the
defences contained in circumstances precluding wrongfulness.99
The circumstances precluding wrongfulness provide ‘a shield against an otherwise
well-founded claim for the breach of an international obligation’.100 According to
the ICJ, if present, the obligations on the State ‘cease to be binding upon it’ and the
international responsibility would not be incurred.101 However, the circumstance
precluding wrongfulness would not obliterate the obligation—it may simply suspend
the need for compliance until the situations that force non-compliance have ended.102
Once the situation ceases, ‘the duty to comply… revives’.103
The defences listed as circumstances precluding wrongfulness are of general appli-
cation and apply across all range of breaches.104 Since these defences are available
for any party which has been alleged to have committed a breach, they would be
92
Final Award: Eritrea’s Damages Claims (2009) 26 RIAA 505, 523–24; Final Award: Ethiopia’s Damages Claims
(2009) 26 RIAA 631, 650–51.
93
Crawford (n 88) 484 (The Commission ‘relied, for example, on the Treaty of Peace with Japan which, as explained
in the ILC debates, was a situation in which full reparation was waived and which does not provide guidance regarding
the general principles to be used in determining the quantum of compensation owed’).
94
ibid 484–85 (‘While Iraq’s ability to pay was considered in establishing the Compensation Commission, it only
affected the method by which compensation payments were to be met; it did not affect Iraq’s obligation to provide full
reparation’).
95
James Crawford and Jeremy Watkins, ‘International Responsibility’ in Samantha Besson and John Tasioulas (eds),
The Philosophy of International Law (OUP 2010) 283, 294.
96
For a detailed discussion of this topic see in this issue Martins Paparinskis, ‘Crippling Compensation in the Inter-
national Law Commission and Investor-State Arbitration’. See also Martins Paparinskis, ‘A Case Against Crippling
Compensation in International Law of State Responsibility’ (2020) 83(6) Modern Law Review 1246, 1248–50.
97
Paparinskis (n 96) 1256–63.
98
Shabtain Rosenne, The Law and Practice of International Court 1920–2005, vol II (Martinus Nijhoff 2006) 227–30.
99
ARSIWA (n 10) art 12, commentary para 1. The relevant section of the commentary states that:
In order to conclude that there is a breach of an international obligation in any specific case, it will be necessary to take
account of the other provisions of Chapter III which specify further conditions relating to the existence of a breach of an
international obligation, as well as the provisions of Chapter V dealing with circumstances precluding wrongfulness of an
act of a State.
100
ARSIWA (n 10) ch V, commentary para 1.
101
Gabčíkovo–Nagymaros Project (Hungary v Slovakia) (Judgment) [1997] ICJ Rep 7, 39 (para 48).
102
103
Gabčíkovo–Nagymaros Project (n 101) 63 (para 101)
104
available for States. Additionally, these are rules of customary international law on
which a State can always rely as a defence. In situations of non-compliance with an
award, it is conceivable that award-debtor States may potentially rely upon three such
defences: non-compliance as a countermeasure against an internationally wrongful
act, force majeure or necessity. The onus of establishing them lies with the State relying
on these defences.105
(i) Countermeasures
A State may invoke countermeasures in respect of an internationally wrongful act106
as a justification for its non-compliance with an award. As discussed in this issue
by Eran Sthoeger and Christian Tams in ‘Swords, Shields and Other Beasts: The
Role of Countermeasures in Investment Arbitration’, doctrinal questions remain out-
standing as to whether the defence of countermeasures can be invoked against an
investor, as opposed to their home State that is a party to the relevant investment
agreement, and cases addressing this question are rare, but include three NAFTA
proceedings against the government of Mexico. In these cases, which arose out of
the same set of facts, Mexico argued in its defence that the challenged measures
were lawful countermeasures aimed at forcing the USA to provide market access for
Mexico’s surplus sugar production. These three tribunals were divided: two of them
concluded that countermeasures are not available against a foreign investor for the
actions of its home State.107 However, in the third case, the Tribunal held that coun-
termeasures may be adopted against the investor for actions of the home State.108
Depending on which approach a tribunal takes, a State may or may not succeed in
defending non-compliance as a legitimate countermeasure. However, the require-
ments of a valid countermeasure—which are strict in nature—have to be complied
with. State responsibility is suspended and not terminated for the duration of the
countermeasure.109
A home State may resort to a countermeasure if an award in the favour of
its national is not satisfied.110 Such countermeasures have to comply with certain
requirements which are outlined in articles 49–53 of ARSIWA. Importantly, coun-
termeasures must be proportionate to the injury suffered by the injured State, which
has to also take into account the gravity of the wrongful act in its own right.111 Given
105
ibid ch V, commentary para 8.
106
ibid art 22.
107
Corn Products International Inc v United Mexican States, ICSID Case No ARB(AF)/04/1, Decision on Responsibility
(15 January 2008) paras 161–62, 167–69; Cargill, Incorporated v United Mexican States, ICSID Case No ARB(AF)/05/2,
Award (18 September 2009) paras 422, 424. These Tribunals held that, just as countermeasures are not available against
‘third’ States, they should not be available against foreign investors, even though the countermeasure is taken against the
home State. Countermeasures are available only between the injured State and the State that committed the internation-
ally wrongful act. ARSIWA (n 10) art 22, commentary para 5, citing Execution of German–Portuguese Arbitral Award of
June 30th, 1930 (Germany v Portugal) (Award) (1933) 3 UNRIAA 1371, 1056–57; Gabčíkovo–Nagymaros Project (n 101)
55 (para 83). Based on these cases, commentators argue that there is no countermeasure available for a State against an
investor.
108
Archer Daniels Midland Company and Tate & Lyle Ingredients Americas, Inc v United Mexican States, ICSID Case
No ARB(AF)/04/5, Award (21 November 2007) paras 120–21. According to the Tribunal, countermeasures are an out-
come of State–State relationships and part of customary international law. They continue to apply in relations between
States, and a host State can justify its breach of an international obligation based on the right to undertake countermea-
sures. Investment arbitration provides a procedural avenue for dispute resolution between investors and the host State
but does not remove the substantive law obligations that are essentially inter-State in nature, and hence the defence of
countermeasures is available. ibid paras 169–74.
109
110
Roberto Echandi, ‘Non-Compliance with Awards: The Remedies of Customary International Law’ (2012) 106
Am Socy Intl L Proc 118, 120.
111
ARSIWA (n 10).
the extreme nature of countermeasures, the home State of the award-creditor investor
will have to justify their proportionality against the wrongful act of non-compliance
with an award.112
(ii) Force majeure
The defence of force majeure, codified in article 23 of the Articles on State
Responsibility ‘may qualify as a general principle of law’.113 As discussed in Wen-
hua Shan and Lu Wang’s article in this issue, ‘Force Majeure and Investment
Arbitration’, in order to claim this defence, non-compliance would have to be
occasioned by ‘the occurrence of an irresistible force or an unforeseen event,
beyond the control of the State, making it materially impossible in the circum-
stances to perform the obligation’.114 The non-compliance with the obligation, ie
an award, would have to be involuntary or at least without an element of free
choice.115 Material impossibility to perform may arise due to a ‘natural or physical
event’.116
Force majeure excludes circumstances that make the performance of the obligation
difficult such as a political or an economic crisis.117 Some argue that instances of non-
compliance with an award, which arise from an inability to pay the compensation,
may not be covered by force majeure.118 Such a general proposition is doubtful. In the
Russian Indemnity case, the Tribunal acknowledged the possibility of the defence of
force majeure for the failure to make timely payment of a debt. The Tribunal reasoned
that: ‘however little the responsibility may imperil the existence of the State, it would
constitute a case of force majeure which could be pleaded in public international law
as well as by a private debtor’.119 But force majeure will not be established if the debt
does not ‘imperil the existence … or seriously compromise its internal or external
situation’.120 Arguably, whether circumstances justifying force majeure exist is to be
decided based upon the amount owed by the State and its overall impact on the
economy and functioning of the State.
(iii) Necessity
Finally, a State may seek to justify non-compliance on the basis of necessity (état
de nécessité),121 which is an extremely narrow defence,122 as discussed in greater
detail in Federica Paddeu and Michael Waibel’s contribution to this issue, ‘Necessity
20 Years On: The Limits of Article 25’. Mere financial distress may not be suffi-
cient to establish necessity, so in the context of non-compliance with an award, it
may be more feasible to defend non-compliance on the basis of force majeure than
necessity.
112
See Juörgen Kurtz, ‘The Paradoxical Treatment of the ILC Articles on State Responsibility in Investor-State
Arbitration’ (2010) 25(1) ICSID Rev—FILJ 200–17.
113
114
ibid art 23(1).
115
ibid art 23, commentary para 1.
116
ibid commentary para 3.
117
ibid art 23.
118
Gaillard and Penusliski (n 6) 589.
119
Russia v Turkey (n 14) 11 (para 4).
120
ibid 12 (para 6).
121
122
ibid art 25, commentary para 14.
IV. WAYS OF ACHIEVING COMPLIANCE

When an award-debtor State does not voluntarily comply, an award-creditor investor
can seek compliance with an award on its own. The commentary under article 33 of
the Articles on State Responsibility acknowledges this: ‘where a primary obligation
is owed to a non-State entity’.123 When these efforts fail, it can seek the support
of its home State. The steps the award-creditor investor can take on its own are
predominantly judicial and the outcome of those proceedings would be based on
legal considerations. Whereas the steps taken by its home State may be either judicial
or political. In both these cases, whether to seek compliance on behalf of its national
is a matter of discretion of that State. The decision of the home State may or may
not be influenced by legal considerations.
A. Enforcement Proceedings in Domestic Courts

The most usual way to seek compliance with an investment award is to com-
mence enforcement proceedings before domestic courts. The regime created by the
ICSID and New York Conventions has greatly facilitated this process, as opposed
to the process for compliance with the decisions of other international courts and
tribunals—including the ICJ. Domestic courts may decline to entertain proceedings
for the enforcement of decisions of international courts and tribunals.124 But State
parties to the ICSID and New York Conventions are under an obligation to recognize
and enforce awards covered by these conventions.
The rules on recognition and enforcement are contained in domestic law enforc-
ing the ICSID Convention or the New York Convention, where relevant. Due to the
finality attached to ICSID awards under article 54(1), an ICSID award is treated as
a ‘final judgment of a court’ of a State party. An ICSID award is delocalized and
it cannot be reviewed or annulled in domestic courts.125 An ICSID award would
have to be directly executed. However, this execution is subject to the exception of
sovereign immunity.126 The New York Convention is relevant if the place of enforce-
ment is not a party to the ICSID Convention or the obligation to be enforced is
non-pecuniary in nature127 —article 54(1) expects giving finality and execution lim-
ited to the pecuniary obligations imposed in the award. The New York Convention
does not give the same status of finality as given under the ICSID Convention. It
allows domestic courts to refuse recognition and enforcement based on certain nar-
row grounds.128 There are inherent uncertainties in enforcement proceedings under
the New York Convention due to widely different approaches of domestic courts on
different aspects of the New York Convention. Article V of the New York Convention
leaves the discretion with domestic courts as long as it is exercised through one of the
123
ibid art 33, commentary para 4
124
See Schachter (n 40) 5.
125
Schreuer and others (n 17) 1103; Maritime International Nominees Establishment v Republic of Guinea, ICSID Case
No ARB/84/4, Decision on Annulment (22 December 1989) para 4.02. Some States argue that grounds for challenge
available in domestic law against a final decision of domestic courts are applicable. Aniruddha Rajput, ‘National Courts
as Actors in Investment Arbitration’ in Catharine Titi (ed), European Yearbook of International Economic Law (Springer
2021) 37, 47.
126
See Section VI.A.
127
128
New York Convention art V.
ways mentioned in article V.129 The standard of review applied by domestic courts
differs vastly. Some apply an ‘autonomous’ standard unconnected and uninfluenced
by domestic law, whereas others use their domestic law to determine whether to
recognize a commercial arbitration award or not.130
Enforcement proceedings can be brought before domestic courts of a State having
primary or secondary jurisdiction. Primary jurisdiction is the place where the award
was rendered (the ‘seat’ of arbitration) and secondary jurisdiction is any other place
where recognition and enforcement are sought. The host State may not be a pri-
mary or secondary jurisdiction and recognition and enforcement may be sought in a
third State. Also, when there is more than one award or the same award with several
judgment creditors, successful enforcement may involve negotiations and settlement
with all of them collectively. Pursuing coercive enforcement by one or some or all may
complicate the situation. These proceedings may serve as pressure tools for coercing
a State to comply with such awards.131 The proceedings may be initiated in different
jurisdictions. It is arguable whether a secondary jurisdiction that fails to enforce an
award contrary to its obligation to enforce awards under the ICSID or New York
Convention has itself committed a breach of an international obligation through ‘aid
or assistance in the commission of an internationally wrongful act’.132 It would be
necessary to establish that the third State voluntarily aided or assisted ‘with a view to
facilitate the commission of an internationally wrongful act’,133 ie conniving to block
the enforcement. Arguably, for parties to the ICSID Convention, a general obliga-
tion to enforce ICSID awards may be said to exist under article 54. This cannot be
the case for the New York Convention due to different approaches taken by domestic
courts. Some jurisdictions have refused to enforce an award because it was annulled
in another jurisdiction.134 Other jurisdictions have enforced awards even when they
were annulled in another jurisdiction.135
Once the decision of an international court or tribunal is brought before a domes-
tic court, there is inevitably some element of review involved and it is impossible
to remove it completely. Even where the given grounds are technical, such as com-
petence or immunity, the influence of substantive considerations cannot be ruled
out.136 A possibility cannot be ruled out that a domestic court may appear to be acting
perfectly within its jurisdiction but acting with the aim of resisting the enforcement.137
129
Christian Borris and Rudolph Henneck, ‘Article V General Remarks’ in Reinmar Wolf (ed), New York Convention
on the Recognition and Enforcement of Foreign Arbitral Awards: Commentary (Hart 2012) 264–65.
130
Nadia Darwazeh, ‘Article V (1)(e)’ in Herbert Kronke and others (eds), Recognition and Enforcement of Foreign
Arbitral Awards (Wolters Kluwer 2010) 312–19.
131
Such complications were experienced in enforcement of sovereign debts against States. See Mark Cymrot, ‘Enforc-
ing Sovereign Arbitral Awards: State Defences and Creditor Strategies in an Imperfect World’ in Tom Ruys, Nicolas
Angelet and Luca Ferro (eds) The Cambridge Handbook of Immunities and International Law (CUP 2019) 374–77.
132
133
ibid commentary para 1.
134
TermoRio SA v Electranta, 487 F 3d 928 (DC Cir 2007) para 930; Getma International v Republic of Guinea, 862
F.3d 45 (DC Cir 2017) 5; Maximov v OJSC Novolipetsky Metallurgichesky Kombinat (Supreme Court of the Netherlands,
2017); Maximov v OJSC Novolipetsky Metallurgichesky Kombinat [2017] EWHC 1911 (Comm).
135
Yukos Capital SARL v OJSC Rosneft Oil Company [2014] EWHC 2188 (Comm); Yukos Capital SARL v Rosneft
(Amsterdam Court of Appeal, 2011); Hilmarton v Omnium (French Cour de Cassation, 1994); Corporación Mexicana de
Matenimiento Integral S De RL De CV v Pemex-Exploración y Producción, 832 F.3d 92 (2d Cir 2016); Chromalloy Aeroservices
v Arab Republic of Egypt, 939 F Supp 907 (DDC 1996).
136
Christoph Schreuer, ‘The Implementation of International Judicial Decisions by Domestic Courts’ (1975) 24 ICLQ
153, 153–54.
137
ibid 180–82.
In all cases of execution, even if the domestic court recognizes and enforces the
award, execution would be subject to the rule of sovereign immunity.
In some situations, after approaching a domestic court, if a State fails to comply,
monetary contempt sanction may be sought. But domestic courts may or may not
allow such proceedings against a State.138 These efforts may not always be success-
ful since domestic courts of one State may not want to intimidate another State by
protecting the interests of private creditors due to the fear of reciprocity.139
B. Proceedings before the International Court of Justice

If the award-creditor investor fails in achieving compliance even after having
approached the appropriate domestic court for enforcement, the home State can take
up the cause by invoking diplomatic protection. Where both the concerned States
are parties to the ICSID Convention, if an award-debtor State has ‘failed to abide by
and comply with the award rendered in such dispute,’ the home State of the award-
creditor investor can grant diplomatic protection under article 27.140 Member States
of the ICSID Convention can resort to article 27 if ‘the State party to the dispute
fails to honor the award rendered in that dispute’.141 This procedure is ‘an alternative
and supplement to the judicial enforcement of awards’.142
Furthermore, article 64 permits a State to bring a dispute with another State
regarding the ‘interpretation or application’ of the ICSID Convention before the ICJ.
Non-compliance with an award would fall within the wide purview of ‘interpretation
or application’ of the ICSID Convention, coupled with the fact that the home State
can grant diplomatic protection in case of non-compliance by the host State. Arti-
cle 27 allows the home State to grant diplomatic protection, but article 64 allows
any Contracting State to the ICSID Convention to commence proceedings against
any other Contracting State. The question that remains open is whether proceed-
ings under article 64 could be brought before the ICJ against a third State for having
declined to comply with an award or whether the purview of article 64 would be
limited by article 27.
If one of the States is not a party to the ICSID Convention, the home State would
have to find avenues to commence proceedings. Proceedings can be brought before
the ICJ if the home State and the host State both have a declaration accepting the
compulsory jurisdiction of the ICJ under article 36(2) of the ICJ Statute.143 If there
is no such declaration, then it is for the concerned States to enter into a compromis to
refer the issue of non-compliance. They may agree to refer the dispute to the ICJ or
constitute a tribunal.
Often the foreign investor is a multinational corporation availing itself of the most
convenient bilateral investment treaty, with only a legal link to the home State rather
138
American Law Institute, Restatement (Fourth) of Foreign Relations Law of the United States, Sovereign Immunity,
Council Draft No 3, para 464.
139
See generally T Araya, ‘A Decade of Sovereign Debt Litigation: Lessons from the NML v Argentina Case and the
Road Ahead’ (2016) 17 Bus L Intl 83.
140
ICSID Convention (n 18) art 27(3).
141
Report of the Executive Directors on the Convention on the Settlement of Investment Disputes between States and Nationals
of Other States (18 March 1965) para 33.
142
143
Andreas Zimmerman and others (eds), The Statute of the International Court of Justice (OUP 2012) paras 68–81.
than a real connection of nationality.144 For diplomatic protection, a link of nation-

ality would be required.145 Moreover, whether to grant diplomatic protection is a
political decision, completely at the discretion of the home State.146 The home State
decides whether, to what extent, subject to which conditions and how long to grant
diplomatic protection. The home State may withdraw diplomatic protection at any
time. The decision to grant diplomatic protection is not based on legal considerations
and is unrelated to the given case.147 Political considerations are decisive.148 Third
States may have an interest in ensuring compliance with awards but they cannot grant
diplomatic protection to the investor due to the absence of a link of nationality.149
Even if the home State takes non-compliance with an award to the ICJ under arti-
cle 64 of the ICSID Convention or otherwise, enforcement of that decision could be
challenging. To seek compliance with an ICJ decision, the home State would have to
approach the Security Council under article 94, which has its own structural deficien-
cies and political compulsions.150 The political methods for collective enforcement
by the Security Council may include partial interruption of economic relations or
freezing of assets in third countries.151 Once the home State is involved and con-
sidering the overall tendency of compliance with the ICJ decisions, one may expect
that there may be enough pressure from diplomatic means that may achieve com-
pliance, although, without any assurance of compliance. Also, efforts at enforcing
ICJ decisions in domestic courts are not always effective.152 In dualist jurisdictions,
a domestic court may decline to enforce the decision of an international court or
tribunal on the ground that the underlying treaty is not incorporated in its domestic
law.153
C. Political Means
Legal methods for achieving involuntary compliance have their limitations. A com-
bination of non-legal methods such as external political influence, through the
international community, third States or international organizations, reputational
cost, the closeness of relations between concerned States and internal political influ-
ence driven by a need for a definitive solution is relevant in achieving compliance.154
144
See generally Stephan Schill, Multilateralisation of International Investment Law (CUP 2010) 197–249.
145
Barcelona Traction, Light and Power Co. Ltd (Belgium v Spain) [1970] ICJ Rep 4, para 70; Notteböhm Case
(Liechtenstein v Guatemala) (Judgment) [1955] ICJ Rep 4, 23 and 24.
146
J Dugard, ‘First Report on Diplomatic Protection’ (2000) UN Doc A/CN.4/506, paras 80–87.
147
Barcelona Traction, Light and Power Co Ltd (Belgium v Spain) [1970] ICJ Rep 4, 44, paras 78–79.
148
Zachary Douglas, The International Law of Investment Claims (2009) 17 (2009); Barcelona Traction, Light and Power
(n 148) paras 78–79
149
Notteböhm Case (Liechtenstein v Guatemala) (Judgment) [1955] ICJ Rep 4, 23; Schreuer and others (n 17) 1109.
150
For a detailed account of these issues, see Schulte (n 54) 18–19.
151
Attila Tanzi, ‘Problems of Enforcement of Decisions of the International Court of Justice and the Law of the United
Nations’ (1995) 6 EJIL 539, 561–62.
152
A US court dismissed the claims seeking enforcement of the ICJ decision in the Military and Paramilitary Activities
case on the ground that private individuals do not have cause of action to enforce the decisions of the ICJ before US
courts. See Committee of United States Citizens Living in Nicaragua v Ronald Wilson Reagan 859 F 2D 929 (DC Cir 1988)
85 ILR 248, p 936.
153
The Supreme Court of Ghana declined to enforce the decision of International Tribunal of the Law of the Sea
on the grounds that the decision was not binding on its because UNCLOS was not incorporated into domestic law
through appropriate legislation. Republic v High Court (Commercial Division) Accra, Ex parte Attorney General, NML
Capital and the Republic of Argentina, (Civil Motion no J 5/10/2013) (Supreme Court of Ghana, 2013), referred to in
Richard Frimpong Oppong and Angela M Barreto, ‘Enforcement’ in William A Schabas and Shannonbrooke Murphy
(eds), Research Handbook on International Courts and Tribunals (Elgar 2017) 289.
154
Heather L Jones, ‘Why Comply? An Analysis of Trends in Compliance with Judgments of the International Court
of Justice since Nicaragua’ (2012) 12 Chi-Kent JICL 57, 60–85.
The UK government linked payment of amounts due under the Lena Goldfields case
to trade negotiations with the USSR and the amounts due were accordingly settled.155
The home State of the award-creditor investor may adopt different political means
to achieve compliance with an award. Self-help remains the prominent method for
enforcement of international judicial decisions.156 Normally, States could undertake
countermeasures to achieve compliance.157 The home State may resort to ‘self-help’,
including the imposition of ‘sanctions’ to ensure compliance.158 Political interven-
tion by the Obama administration ensured compliance with five unpaid awards of
Argentina, which involved the suspension of trade benefits under the Generalized
System of Preferences (GSP) Programme for Argentina.159 Use of sanctions may
work, but there are arguments against the use of them for achieving compliance with
investment awards—for example that the regime of investment arbitration aims at
achieving compliance in the form of monetary compensation for losses and not to
impose punitive damages or sanctions. Since the same protection is not extended to
domestic investors, it may result in market distortions.160
Since negotiations and diplomacy are involved in these processes, there is inherent
unpredictability. Their outcome is dependent on the negotiating strength of the par-
ties concerned and may significantly water down the entitlements under the award.161
Often, resort to such methods may strain relations between the home and host States
and is a choice of the home State rather than the affected party.162 Political methods
involve the use of diplomatic and economic pressure, which may result in the rupture
of relations,163 or involve a strong State using such means against weak States.
Unlike States, a foreign investor can rarely resort to self-help; or, rather, it can but
with little or no consequence. For any effective result, it would have to rely upon its
home State or a third State. As noted in the above section on proceedings before the
ICJ, there may not always be a clear link with a State for the foreign investor.
International organizations may play a role in achieving compliance. The World
Bank Policy No. 7.40 provides that the Bank can limit lending to States that have
expropriated property or failed to fulfil their contractual obligations.164 In practice,
the World Bank would be reluctant to apply this clause for achieving compliance with
an award.165
If the home State is willing to undertake the cause of non-compliance, the issue
could be raised also before regional organizations, such as the Organization of African
155
Prime Minister Baldwin, Statement in the House of Commons (13 March 1933) <https://api.
parliament.uk/historic-hansard/commons/1933/mar/13/lena-goldfields-limited#S5CV0275P0_19330313_HOC_81>;
Arthur Nussbaum, ‘The Arbitration between Lena Goldfields Ltd. and the Soviet Government’ (1950) 36 Cornell L
Rev 31.
156
Rosenne (n 98) 225.
157
See discussion in Section IV.A.; Massimo Lando, ‘Compliance with Provisional Measures Indicated by the
International Court of Justice’ (2017) 8 JIDS 22, 27–28.
158
Echandi (n 110) 119–20.
159
For a discussion of the narrative, see Cymrot (n 131) 374–75.
160
Anna Joubin-Bret, ‘Is There a Need for Sanctions in International Investment Arbitration?’ (2012) 106 Am Socy
Intl L Proc 130, 131–32.
161
Oppong and Barreto (n 153) 284.
162
Echandi (n 110) 118–20.
163
Schachter (n 40) 6–7.
164
World Bank, Operations Manual O.P 7.40—Disputes over Defaults on External Debt, Expropriation, and Breach of
Contract, para 5 (2012) <https://ppfdocuments.azureedge.net/1660.pdf>.
165
Antonio Parra, ‘The Enforcement of ICSID Arbitration Awards’ in Bishop (n 43) 137.
Unity or Organization of American States, through the political process.166 Ordi-

narily, pressures of regional organizations have greater prospects of success than
international organizations such as the UN.167
V. OBSTRUCTIONS TO COMPLIANCE
An award-debtor State may rely on legal mechanisms available in general interna-
tional law to avoid compliance. These are sovereign immunity and challenge of the
award on the ground of nullity.
A. Sovereign Immunity
An award-debtor State can resist enforcement and consequentially evade its obli-
gation of compliance through the defence of sovereign immunity. This protection
accorded to States is based on the principle of sovereign equality of States168 and
‘[e]xceptions to the immunity of the State represent a departure from the princi-
ple of sovereign equality’, as per the ICJ.169 It is a rule of customary international
law,170 available even in the absence of a treaty.171 It is difficult to achieve compliance
through execution till the exception to immunity prevails. Immunity is procedural in
nature and the breach of an underlying legal obligation is not sufficient to allow the
exercise of jurisdiction against the defence of immunity.172 It functions as a jurisdic-
tional obstacle and, unless it has crossed the issue of substantive breaches, cannot be
addressed.173
Immunity functions on two levels, immunity from jurisdiction and immunity from
execution, both of which are rules of customary international law.174 In cases of
immunity from jurisdiction, proceedings cannot be brought against a foreign State
before domestic courts; in cases of immunity from execution, even if proceedings can
be brought, certain assets are protected from execution proceedings.175 These are
those assets used for governmental purposes.176 Compliance is not possible through
execution proceedings against these protected assets and the rule of absolute immu-
nity applies, until waived.177 In both cases, immunity is a default rule and has to be
waived to allow domestic courts to exercise jurisdiction.178
In major jurisdictions—particularly in places that are favourite seats of
arbitration—consent to arbitration is deemed to be a waiver of immunity from juris-
diction.179 Ratification of the ICSID Convention or the New York Convention is
166
Schulte (n 54) 76–77.
167
Reisman (n 4) 10.
168
Jurisdictional Immunities of the State (Germany v Italy: Greece intervening) (Judgment) [2012] ICJ Rep 99, 123
(para 57).
169
ibid.
170
United Nations Convention on Jurisdictional Immunities of States and Their Property (opened for signature 17
January 2007, not yet entered into force), preamble.
171
Jurisdictional Immunities of the State (n 168) 123 (para 54).
172
ibid 142 (para 97).
173
ibid 140–41 (paras 93–95).
174
NML Capital Ltd v Argentina, UK Supreme Court, 6 July 2011 (2011) UKSC 31, para 8.
175
UN Convention on Jurisdictional Immunities of States and Their Property (n 170) art 5.
176
Hazel Fox and Philippa Web, The Law of State Immunity (OUP 2013) 1733–90.
177
The European Convention of State Immunity, ETS No 074 (opened for signature 16 May 1972, entered into force
11 June 1976) art 23.
178
Jurisdictional Immunities of the State (n 168) 123 (para 56).
179
PAO Tatneft v Ukraine [2018] EWHC 1797 (where the Court held that Ukraine’s consent to arbitrate pursuant to
the Russia–Ukraine BIT amounted to a waiver of sovereign immunity) paras 34–37; Svenska Petroleum Exploration AB v
treated as an implied waiver of immunity from jurisdiction.180 Although rarely, sub-

mission of arbitration proceedings to arbitral institutions such as the International
Chamber of Commerce (ICC) is treated as a waiver from immunity in certain
jurisdictions.181 Compliance with an investment award can be achieved in these
jurisdictions by commencing execution proceedings before domestic courts. Excep-
tionally, in jurisdictions where absolute rule of immunity is adhered to it may be
possible to initiate proceedings to seek involuntary compliance.182 The effect of
waiver of jurisdiction is that enforcement proceedings can be brought against an
award-debtor State for compliance.
Even if execution proceedings are undertaken based upon exceptions to immunity
from jurisdiction, the assets of States are protected by immunity from execution.
Article 54 of the ICSID Convention grants finality to an investment award, but makes
the award subject to article 55. Article 55 is as follows:
Nothing in Article 54 shall be construed as derogating from the law in force in any
Contracting State relating to immunity of that State or of any foreign State from execution.
Article 55 is treated as an interpretation of article 54. Particularly since article 54(3)

states that enforcement is governed by the law of the State where execution is sought.
This includes the law of State immunity.183 Moreover, while subjecting article 54 to
article 55, the latter specifically mentions the domestic law on immunity. The Report
of the Executive Directors elaborates upon this relationship in the following words:
In order to leave no doubt on this point, Article 55 provides that nothing in Article 54
shall be construed as derogating from the law in force in any Contracting State relating to
immunity of that State or of any foreign State from execution.184
It is worth emphasizing that article 55 applies only to immunity from execution

and not from jurisdiction.185
The expression of immunity from execution was part of a necessary compromise
for the ICSID Convention. Suggestions for its removal were resisted since that was
treated as drastic and attracting opposition from a lot of developing countries, thereby
Lithuania [2006] EWCA Civ 1529; Sokaogon Gaming Enter. Corp, et al v Tushie-Montgomery Assoc, Inc 86 F3d 656 (7th
Cir 1996) para 661; Creighton Limited v Minister of Finance, Decision of 6 July 2000, Cass ILDC 772 (2000) (Fr); M
Schneider and J Knoll, ‘Enforcement of Foreign Arbitral Awards against Sovereigns—Switzerland’ in Bishop (n 43) 331;
Cymrot (n 131) 555–58.
180
See TMR Energy Ltd v State Property Fund of Ukraine, 411 F3d 296 (DC Cir 2005), for implied waiver in the context
of the New York Convention. See also Collavino Inc v Tihama Development Authority, 2007 ABQB 212, where the Queen’s
Bench of Alberta (Canada) ruled that the respondent State had waived immunity from execution of awards by agreeing
to international commercial arbitration; Canadian Planning and Design Consultants Inc v Libya, 2015 ONCA 661, where
the Ontario Superior Court of Justice issued an Order stating that Libya was deemed to have waived its immunity from
execution by agreeing to ICC arbitration; TMR Energy Ltd v State Property Fund of Ukraine, 2003 FC 1517 (Canada)
where the obiter states that an agreement to arbitrate constitutes a waiver of immunity.
181
Schneider and Knoll (n 179).
182
Democratic Republic of the Congo and others v FG Hemisphere Associates LLC [2011] HKCFCA 41, paras 118–23;
Jackson v People’s Republic of China (1986) 794 F.2d 1490. See also Yilin Ding, ‘Absolute Restrictive or Something More:
Did Beijing Choose the Right Type of Sovereign Immunity for Hong Kong?’ (2012) 26 Emory Intl L Rev 997. China is a
Member State of the ICSID Convention and submits to the jurisdiction only to disputes over compensation resulting from
expropriation and nationalization. It is not clear how the law of absolute sovereign immunity in China would function
with its obligations under the ICSID Convention and whether its reservation to the ICSID jurisdiction would have any
impact on its role as merely a place for enforcement of ICSID awards.
183
184
Report of the Executive Directors on the Convention on the Settlement of Investment Disputes between States and
Nationals of Other States (n 141) para 43.
185
jeopardizing the wide ratification of the Convention.186 It was kept intact and barely
questioned, although there was some discontent at the unequal treatment that would
be meted out to awards, depending on where execution is sought.187 In current
literature, however much one decries it, little can be achieved towards neutraliz-
ing its effect.188 Article 55 is called the ‘Achilles’ heel of the Convention’ since it
weakens the efforts of enforcement.189 States were reluctant to let go of immunity
during the drafting of the Convention190 —consequentially creating an obstruction
for compliance.
Major jurisdictions make a ‘commercial exception’ to the rule of immunity from
execution.191 This would allow execution against properties used by a State for
commercial purposes. Properties of the State used for a public purpose, such as
embassy premises or bank accounts of governmental agencies, enjoy absolute immu-
nity.192 The distinction between ‘commercial’ and ‘non-commercial’ is not always
clear under domestic laws, making the execution difficult.193 It may not always be
possible to locate commercial properties, allowing a State to avoid compliance.
Immunity creates a situation where there is a right of execution against a sovereign
but without a remedy. As per the US Court of Appeals, the abstract principle of statu-
tory interpretation that there cannot be a right without a remedy is of no relevance
on the issue of immunity of property of a State from execution.194 Domestic courts
are sensitive towards forced execution against properties of a foreign sovereign since
‘execution of judgments against foreign-state property creates greater impositions on
sovereign interests and potentially generates significantly greater friction, with the
possibility of reciprocal action’.195
Nevertheless, successful invocation of immunity does not eliminate the obligation
of the award debtor to comply with the award.196 State responsibility for non-
compliance continues. The observations in MINE v Guinea are instructive in this
regard:
186
ibid 1154; Aron Broches, ‘The Convention on the Settlement of Investment Disputes between States and Nationals
of Other States’ (1972-II) 136 Recueil des Cours 331, 403.
187
ICSID, History of the ICSID Convention: Documents Concerning the Origin and the Formulation of the Convention on
the Settlement of Investment Disputes between States and Nationals of Other States (ICSID 1968) vol II-2 429, 671.
188
Some suggest the need to review the doctrine of sovereign immunity in its entirely. See Alexandroff and Laird
(n 3). Hunter suggests that investors should enter into another contract that waives immunity of States from execution. J
Martin Hunter and Javier Gracía Olmedo, ‘Enforcement/ Execution of ICSID Awards Against Reluctant States’ (2011)
12 JWIT 307, 318–19. The suggestion is interesting but unrealistic since investment arbitration does not happen after
an agreement to arbitrate—it is mostly accidental and unexpected. It would be difficult to imagine that States would be
ready to agree to waive immunity once disputes have arisen.
189
History of the ICSID Convention (n 187) vol II 1154.
190
Aron Broches, ‘The Convention on the Settlement of Investment Disputes between States and Nationals of Other
States’ (1972-II) 136 Recueil des Cours 331, 333–34, 403.
191
Article 10 read with 2(1)(c), which defines commercial transactions; Foreign Services Immunities Act 28 USC
§ 1605(A)(2) (1977); State Immunity Act 1978 s 3 (UK); State Immunity Act, RSC 1985 s 5 (Can); Xiadong Yang,
State Immunity in International Law (CUP 2012) 75–131; Blue Ridge Investments, LLC v Republic of Argentina, 735 F.3d
72 (2d Cir 2013); Philippine Embassy Bank Account Case (13 December 1977) Constitutional Court, 65 ILR 146, 155
(Ger); Société Sonatrach v Migeon (1 October 1985) Cass civ 1, 77 ILR 525, 527 (Fr); United Arab Republic v Mrs X
(10 February 1960) Federal Tribunal, 65 ILR 385, 391–92 (Switzerland).
192
Liberian Eastern Timber Corporation v Liberia, 650 F Supp 73 (SDNY 1986); SARL Benvenuti & Bonfant v People’s
Republic of the Congo, ICSID Case No ARB/77/2, Award (8 August 1980) (1993) 1 ICSID Rep 330; AIG Capital Partners
Inc and another v Republic of Kazakhstan [2005] EWHC 2239 (Comm); Sedelmayer v Russian Federation, Decision on
Jurisdiction and Final Award (7 July 1998); Fox and Web (n 176) 1746–59, 1765–77.
193
194
Letelier v Chile, 20 November 1984, United States, Court of Appeals, Second Circuit, 748 F. 2d 790 (2d Cir 1984),
799.
195
American Law Institute (n 138) para 464, p 48.
196
History of the ICSID Convention (n 187) vol II, 763.
State immunity may well afford a legal defense to forcible execution, but it provides neither
argument nor excuse for failing to comply with an award. In fact, the issue of State immunity
from forcible execution of an award will typically arise if the State party refuses to comply
with its treaty obligations. Non-compliance by a State constitutes a violation by that State
of its international obligations and will attract its own sanctions.197
Under the ICSID Convention, refusal to comply with an award on the grounds of
State immunity may become the basis for invocation of diplomatic protection under
article 27(1) and proceedings before the ICJ under article 64.198
B. Nullity of an Award
Although rarely, nullity of an award has been raised as a ground for justifying non-
compliance in inter-State disputes. If not before domestic courts, but when non-
compliance is taken before an international court or tribunal by the home State of
the award-creditor against the judgment-debtor State, the possibility of the argument
of nullity being raised cannot be ruled out, especially in the currently highly contested
environment of investment arbitration.
An arbitral award may be vitiated if the claim of nullity is established.199 In its work,
the Institut de Droit International noted that: ‘The arbitral award is void when the
compromis is void, or when the Tribunal has exceeded its jurisdiction, or in the case
of proved corruption of one of the arbitrators, or the case of essential error.’200
The ICJ has not ruled out the possibility of challenges to an arbitration award on
the ground of nullity. It has implicitly suggested that nullity may be a ground to chal-
lenge an arbitral award.201 In the Arbitral Award Made by the King of Spain case, it
simply rejected Nicaragua’s challenge to the award on the grounds that there was a
delay in raising these challenges and that ‘by express declaration and by conduct, rec-
ognized the Award as valid and it is no longer open to Nicaragua to go back upon that
recognition and to challenge the validity of the Award’.202 In fact, the ICJ entertained
arguments challenging the validity of the award on the grounds of nullity. Elucidating
the scope of inquiry it would conduct the ICJ noted that ‘the Award is not subject to
appeal and that the Court cannot approach the consideration of the objections raised
by Nicaragua to the validity of the Award as a Court of Appeal’.203 While deciding
nullity, the Court is not to decide whether the decision is ‘right or wrong’.204 Ulti-
mately, the ICJ found that the grounds for nullity were nevertheless not established,
and these grounds were given detailed consideration.205 Thus, nullity may be raised
as a ground for non-compliance with an arbitration award. At the same time, the
grounds to establish nullity are narrow and a higher standard would be required.
197
Maritime International Nominees Establishment v Republic of Guinea, ICSID Case No ARB/84/4, Interim Order No
1 (12 August 1988) para 25.
198
History of the ICSID Convention (n 189) vol II, 1153–54; Patrick Mitchell v Democratic Republic of Congo, ICSID
Case No 99/7, Decision on the Stay of Enforcement of the Award (30 November 2004) para 41.
199
See generally Arpad Balasko, Cases de Nullité de la Sentence Arbitrale en Droit International Public (Pedone 1938); W
Michael Reisman, Nullity and Revision: The Review and Enforcement of International Judgments and Awards (Yale UP 1971).
200
[1877] Annuaire de l’Institut de Droit International 133.
201
Effect of Awards of Compensation Made by the United Nations Administrative Tribunal (Advisory Opinion) [1954] ICJ
Rep 47, 55–56.
202
Arbitral Award Made by the King of Spain on 23 December 1906 (Honduras v Nicaragua) (Judgment) [1960] ICJ Rep
192, 213–14.
203
ibid 214.
204
ibid.
205
ibid 214–17.
Without assessing the merits or the correctness of an award, the following grounds
have been raised in the past as the basis for a challenge of nullity. The ILC noted three
grounds in the Model Rules on Arbitral Procedure: (i) excess of power; (ii) corruption
of a member of the tribunal; or (iii) a serious departure from a fundamental rule of
procedure.206 The ICJ considered challenges based on the excess of jurisdiction;207
acting beyond the scope of a treaty forming the basis of the proceedings;208 essential
and manifest error on the part of the arbitrator;209 lack or inadequacy of reasons
in support of the conclusions210 and that the award was ‘incapable of execution by
reason of omissions, contradictions or obscurities’.211 Additionally, nullity may be
based on a void or invalid compromis.212
Nullity has been raised in the past not only in proceedings before international
courts and tribunals, but also during diplomatic negotiations between the home and
the host States. In the Camizal Tract dispute, the USA refused to carry out the arbitral
award with Mexico for 50 years on the ground of nullity of an award on the basis of
excès de pouvoir, ‘that the arbitrators had gone beyond the terms of the parties’ consent
to submit the dispute’.213
Whether a State can succeed in obstructing compliance would depend not only on
the legal processes adopted by the State, but importantly on the quality of its reasons.
VI. CONCLUSIONS
Non-compliance is normally associated with the political and controversial nature
of the underlying dispute.214 Investment arbitration involves adjudication of a wide
range of disputes involving governmental actions with differing degrees of sensitivities
and public concerns. From a political perspective, compliance with an investment
award is less attractive in situations where a negative reaction by the public opinion
can be expected and where the government has publicly denounced the investor’s
claims before.215 It is often noted that ISDS and the debate surrounding its legitimacy
could have led to a political climate in which governments would not expect strong
political backlash from the public in case of non-compliance with an investment treaty
award.216 At times, excess haste in seeking enforcement may backfire.217 Especially
in multi-party proceedings, concerted efforts at negotiations may bear better results
than coercive enforcement sought by some parties.218
206
ILC, Model Rules on Arbitral Procedure, in [1958-II] ILC YB, art 35.
207
Arbitral Award Made by the King of Spain on 23 December 1906 (Honduras v Nicaragua) (Judgment) [1960] ICJ Rep
192, 214–15.
208
ibid 215.
209
ibid 215–16.
210
ibid 216.
211
ibid 216–17.
212
[1874] Annuaire de l’Institut de Droit International 45, 84.
213
Chamizal Case (Mexico v United States) (1911) 11 RIAA 316; Lori F Damrosh, ‘Comparative Look at Domestic
Enforcement of International Tribunal Judgments’ (2009) 103 Am Socy Intl L Proc 39, 39.
214
Schachter (n 40) 4–5.
215
George K Foster, ‘Collecting from Sovereigns: The Current Legal Framework for Enforcing Arbitral Awards and
Court Judgments Against States and Their Instrumentalities, and Some Proposals for its Reform’ (2008) 25 Ariz J Intl
& Comp L 665, 668.
216
Julian Scheu and Petyo Nikolov, ‘The Setting Aside and Enforcement of Intra-EU Investment Arbitration Awards
after Achmea’ (2020) 36(2) Arb Intl 14.
217
Reisman (n 4) n 78 at 22.
218
Such complications were experienced in enforcement of sovereign debts against States (Cymrot (n 131) 374–77).
Compliance with decisions of international courts and tribunals is a comparatively

underdeveloped area of international law. Existing mechanisms for achieving com-
pliance with decisions of international courts and tribunals were developed in the
inter-State context. Recent developments have enhanced the avenues for individu-
als to participate in international adjudication and consequentially the possibility of
an individual being effective in achieving compliance against a sovereign State. The
most effective mechanisms available for individuals, whether persons or legal per-
sons exist in domestic law. To seek remedy under international law, there would be a
need to fall back on the home State, to commence a State–State exercise to achieve
compliance.
In inter-State disputes, compliance has been considered ‘political’ and has not been
a matter for legal consideration.219 The area continues to be influenced by diplomacy
and politics. Probably for obvious reasons: States may not wish themselves to be
tied down conclusively. Awards of investment tribunals are in a comparatively better
position since the ICSID and New York Conventions provide for procedures and
binding obligations on State parties to recognize and enforce awards, despite some
leeway to evade compliance. Legal means are insufficient and resort to political means
may be necessary.
The procedural formalities or obstacles, whichever way one sees them, do not take
away the normative quality of an award as a binding obligation under international
law. This normative quality may not translate into practical terms. On the practical
side, the rule of politics in achieving non-compliance can never be ruled out. To that
extent, political involvement may become inevitable, although it goes against the very
objective of investment arbitration to depoliticize the process.
Success in achieving compliance is subjective. The extent of success depends on
the abilities of an award-creditor investor. Professor Reisman aptly notes the practi-
cal problem in the following words: ‘Securing enforcement of a particular decision
in the contemporary international arena depends ultimately upon the ingenuity,
resourcefulness, and energy of the winning party.’220
Therefore, apart from the strictly legal side to compliance, there are practical con-
siderations as well. It is a choice, whether to succeed in receiving the outcome of an
award or simply have the satisfaction of a paper decree of having declared a sovereign
to be in default of international judicial decisions. Particularly for a foreign investor,
who would be functioning on economic considerations.
219
Schachter (n 40) 6.
220
Reisman (n 4) 23.

Non-Compliance with Investment Arbitration Awards and State Responsibility

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Non-Compliance with Investment Arbitration Awards and State Responsibility

Uploaded by

Copyright:

Available Formats

ICSID Review, Vol. 37, No. 1-2 (2022), pp.

II. MEANING OF NON-COMPLIANCE

III. STATE RESPONSIBILITY FOR NON-COMPLIANCE

A. Source of the Obligation

Some investment tribunals have found the non-enforcement of commercial arbi-

unreasonable in other jurisdictions, may be so treated by the ECtHR.49 So is the sit-

‘through a series of actions or omissions’.60 These may be undertaken by different

To establish a breach of an international obligation, there has to be ‘dis-conformity

Non-compliance with an award is viewed as non-payment of a debt owed by a State.

Furthermore, a State is responsible for ‘delay in the payment of a monetary debt,

E. Reparation for Non-Compliance

F. Circumstances Precluding Wrongfulness

IV. WAYS OF ACHIEVING COMPLIANCE

A. Enforcement Proceedings in Domestic Courts

B. Proceedings before the International Court of Justice

than a real connection of nationality.144 For diplomatic protection, a link of nation-

Unity or Organization of American States, through the political process.166 Ordi-

treated as an implied waiver of immunity from jurisdiction.180 Although rarely, sub-

Article 55 is treated as an interpretation of article 54. Particularly since article 54(3)

It is worth emphasizing that article 55 applies only to immunity from execution

Compliance with decisions of international courts and tribunals is a comparatively

You might also like