The proceeding at first instance was a recognition proceeding
39 The preceding conclusion will lack utility unless the proceeding at first instance was relevantly a recognition proceeding. What is a recognition proceeding? Art 54(2) does not stipulate how an application for recognition is to be made and the question is therefore governed by the relevant domestic law of the Contracting State in which recognition is sought. Procedures differ between jurisdictions.
40 Many civilian jurisdictions have a procedure known as exequatur where a foreign judgment or arbitral award is recognised by a domestic court. After the grant of an exequatur a party may subsequently seek execution. It is established in relation to the ICSID Convention that recognition under Art 54(2) may be afforded by the grant of an exequatur: Benvenuti at 845.
41 In the United States the practice which appears to have been adopted by the United States District Court for the Southern District of New York in relation to recognition under Art 54(2) involves an order in this form (LETCO at 384):
…it is ORDERED that the annexed arbitration award, as rectified, in favour of LETCO be docketed and filed by the Clerk of this Court in the same manner and with the same force and effect as if it were a final judgment of this Court…
42 In Australia, the position is not entirely clear. However, it appears that the recognition under Art 54(2) may be afforded by entry of judgment on the award or by making an order granting leave to enforce the award 'as if it were a final judgment' of this Court. This emerges from the domestic legislation governing ICSID awards. In Australia the ICSID Convention is given effect to by ss 31 to 38 of the International Arbitration Act which between them constitute all of Part IV of that Act. Section 35 provides:
35 Recognition of awards
(1) The Supreme Court of each State and Territory is designated for the purposes of Article 54.
(2) An award may be enforced in the Supreme Court of a State or Territory with the leave of that court as if the award were a judgment or order of that court.
(3) The Federal Court of Australia is designated for the purposes of Article 54.
(4) An award may be enforced in the Federal Court of Australia with the leave of that court as if the award were a judgment or order of that court.
43 The interpretation of this provision is not altogether without difficulty. It does not, in terms, confer an entitlement on a party to seek recognition of an award but instead refers only to enforcement. On the other hand, it is headed 'Recognition of awards' so that there is a degree of tension between the heading and what the provision appears to say.
44 Other provisions in Part IV are relevant to the ascertainment of the meaning of s 35(4). Section 34 proceeds on the assumption that s 35 deals with both the recognition and enforcement of an award. It operates to make Part IV an exhaustive code in relation to the recognition and enforcement of an ICSID award. It provides:
34 Investment Convention awards to prevail over other laws
Other laws relating to the recognition and enforcement of arbitral awards, including the provisions of Parts II and III, do not apply to:
(a) a dispute within the jurisdiction of the Centre; or
(b) an award under this Part.
45 If s 35 does not apply to recognition proceedings under Art 54(2) then the effect of s 34 will be to prevent the possibility of recognition of the award as an award to which the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Opened for signature 10 June 1958. 330 UNTS 3 (entered into force 7 June 1959) ('New York Convention') or the UNCITRAL Model Law on International Commercial Arbitration (as adopted by the United Nations Commission on International Trade Law on 21 June 1985, and as amended on 7 July 2006) ('UNCITRAL Model Law') (which are also given effect by the International Arbitration Act) might otherwise apply.
46 So construed, s 35 would appear to achieve an outcome contrary to the plain words of Art 54(2). Article 54(2) requires Australia to provide a mechanism for a party to apply to a competent court for recognition of an award. This is relevant because, in general, a construction of the International Arbitration Act which gives effect to Australia's international obligations should, if possible, be preferred. As Gleeson CJ stated in Plaintiff S157/2002 v Commonwealth of Australia [2003] HCA 2; 211 CLR 476 at 492 [29]:
where legislation has been enacted pursuant to, or in contemplation of, the assumption of international obligations under a treaty or international convention, in cases of ambiguity a court should favour a construction which accords with Australia's obligations.
47 This is particularly so in light of s 32 which gives the ICSID Convention the force of law in Australia:
32 Application of Investment Convention to Australia
Subject to this Part, Chapters II to VII (inclusive) of the Investment Convention have the force of law in Australia.
48 If the word 'enforced' is not construed to include 'recognised' then s 35(4) will not give effect to the recognition procedure required by Art 54(2). The heading to s 35 and the specification by s 34 that Part IV is a code with respect to the recognition of awards under the ICSID Convention strongly suggest that Parliament intended s 35 to include an entitlement to apply for recognition. Such a conclusion would involve reading 'enforced' in s 35(4) as including 'recognised', a meaning which it can in my opinion comfortably accommodate.
49 On the other hand, having concluded that 'recognise' and 'enforce' are distinct concepts in Art 54 there is perhaps something anomalous about concluding that they are not distinct for the purposes of s 35, particularly where Part IV is evidently intended to give effect to the ICSID Convention. This consideration may tend in the opposite direction to suggest that 'enforced' should not include 'recognised'.
50 However, if that were correct, it would leave the recognition procedure unaccountably missing from the provisions which itself would infringe Australia's obligations under Art 54. On balance, it seems to me that the preferable construction of s 35(4) is one in which 'enforced' includes 'recognised'.
51 That conclusion makes it unnecessary to consider whether the Court would, in any event, have jurisdiction arising from the conferral on this Court of jurisdiction in matters arising under a law of the Parliament by s 39B(1A)(c) of the Judiciary Act 1903 (Cth). Here the thinking would be that s 32 gives the force of federal statute law to Art 54(2) itself which thereby becomes a surrogate federal law under which a federal matter may directly arise. The same reasoning supports this Court's jurisdiction in the recognition of arbitral awards under the UNCITRAL Model Law: TCL Air Conditioner (Zhongshan) Co Ltd v Judges of the Federal Court of Australia [2013] HCA 5; 251 CLR 533 ('TCL') at 543 [2] per French CJ and Gageler J and 561 [52] per Hayne, Crennan, Kiefel and Bell JJ. There would appear to be no relevant distinction insofar as federal jurisdiction is concerned between the position of this Court under the UNCITRAL Model Law as explained in TCL and under the ICSID Convention.
52 There may, however, be a difficulty with this approach which relates to s 34. To the extent that s 39B(1A)(c) confers a jurisdiction on this Court to entertain a recognition proceeding, it may be arguable that it is one of the 'other laws' referred to in s 34. If so, it may not be an available source of jurisdiction. In light of the manner in which I would construe s 35(4), however, it is not necessary to form a view on that issue.
53 I therefore conclude that the Court has jurisdiction to entertain a recognition proceeding under s 35(4). So to conclude does not, however, assist in identifying the procedural features of a recognition application. The question of procedure will be governed by the domestic law of the Contracting State in whose territory recognition is sought. Nevertheless, Art 54 and Art 55 provide some guidance on the legal consequences of recognition and from these consequences some guidance, limited perhaps, may be gleaned as to its procedural features.
54 The purpose of recognition is to give effect to the stipulation of Art 54(1) that each Contracting State (here, relevantly, Australia) will recognise the award as binding. Because it is binding, a party may seek to enforce its pecuniary obligations as if they were a final judgment of a court of that State: Art 54(1). But the binding effect of an award may also be asserted by other non-pecuniary methods which include, as French CJ and Gageler J observed in TCL at 552 [23], a plea of former recovery or the assertion of a res judicata or issue estoppel. Further, the binding effect extends not only to the pecuniary obligations imposed by the award but also to its non-pecuniary terms.
55 What Art 54(2) requires of a Contracting State is a procedure which will result in relief which, if granted, will have those kinds of effects. Furthermore, the procedure must be such as to enliven in a party with the benefit of an award an entitlement to apply for the kind of 'execution' referred to in Art 54(3). As the primary judge, with respect, correctly observed the expression 'the laws concerning the execution of judgments' can only refer to judgments which exist (for completeness, I reject out of hand Spain's submission that an application for a pre-trial asset seizure order can be described as a form of execution). But this does not mean that Art 54 requires that recognition should be afforded only by means of the entry of a judgment. It is instead merely to be understood as a reference to a body of law.
56 What Art 54(1) does require, however, is that the enforcement of an award's pecuniary obligations will proceed 'as if it were a final judgment'. So viewed, Art 54(3) then furthers this fiction. The award-cum-as-if-judgment is to be executed (or enforced - it really does not matter) by applying to the award the law which ordinarily applies to the execution (or, on Spain's submissions, enforcement) of judgments.
57 So whatever recognition constitutes as a matter of local procedure it nevertheless must be sufficient to enliven the execution (or, as Spain submits, enforcement) procedures which Art 54(3) expressly contemplates. And, as noted, it must also be sufficient to enable the entry of pleas of res judicata and the like.
58 As a matter of Australian law, it is possible that one way of achieving these outcomes is to enter judgment in the amount of the pecuniary obligations imposed by the award. Such a judgment has all the procedural qualities just described. It can give rise to a plea of res judicata, it can be used by way of a plea of prior satisfaction and its existence fits tidily into a legal framework that contains the 'laws concerning the execution of judgments' referred to in Art 54(3). If execution is available against the other party to the award it will be a straightforward procedural matter to apply for it if a judgment has been entered.
59 The statutory framework governing arbitral awards under the New York Convention is contained in Part II of the International Arbitration Act and is materially different to the provisions dealing with the ICSID Convention under Part IV. Nevertheless, it seems well-established in relation to such awards that recognition is afforded by the entry of a judgment: Traxys Europe SA v Balaji Coke Industry Pvt Ltd (No 2) [2012] FCA 276; 201 FCR 535 at [71]-[72] per Foster J (and the cases there collected). It seems difficult to identify any point of principle which would justify a departure from that practice in the case of ICSID awards.
60 On the other hand, it is also possible that recognition may also be granted by means of an order that the award be recognised 'as if' it were a judgment of the Federal Court. This was the approach of French CJ and Gageler J in TCL at 551 [21] in relation to awards under the UNCITRAL Model Law although their Honours were clear that this was not the only procedure available ('An appropriate order, although not necessarily the only appropriate order … would be an order that the arbitral award be enforced as if the arbitral award were a judgment or order of the Federal Court': at [24]). Gleeson J used this 'as if' form of order in Lahoud which is the same procedure adopted by the United States District Court for the Southern District of New York in LETCO.
61 In my view, either approach may be procedurally open and, if that is the case both would be essentially equivalent to an exequatur. My tentative preference would be for the former procedure. The process of relying upon an award in another court for the purpose of establishing a res judicata is likely to be more straightforward, at least from a practical perspective, if recognition takes the form of a Federal Court judgment rather than the possibly more perplexing order for non-initiates that the award has the effect as if it were a judgment of the Federal Court. Similar practical considerations may suggest that an application to this Court's registry for enforcement remedies such as a writ of execution may run more smoothly if what is entered is an actual judgment.
62 The relief which was sought by the Respondents at first instance was as follows (figures in points 4 and 5 as they appear in the original):
Orders sought
The Applicants, being parties to an arbitral proceeding, apply to the Court to enforce an award under section 35(4) of the International Arbitration Act 1974.
The Applicants seek the following orders:
1. Pursuant to s 35(4) of the International Arbitration Act 1974 (Cth), the Applicants have leave to have the award of the International Centre for Settlement of Investment Disputes in Case No. ARB/13/31 against the Respondent dated 15 June 2018 as rectified by the Award dated 29 January 2019 enforced as if it were a judgement of the Court.
2. A declaration that the Respondent has breached Article 10(1) of the Energy Charter Treaty by failing to accord fair and equitable treatment to the Applicants' investments.
3. The Respondent pay the Applicants EUR101,000,000.00.
4. The Respondent pay the Applicants interest on the amount of EUR101,000,000.00 from 20 June 2014 to 15 June 2018 at the rate of 2.07%, compounded monthly, and interest from 16 June 2018 to the date of payment at the rate of 2.07%, compounded monthly.
5. The Respondent pay the Applicants USD635,431.70 as a contribution to the payment of their share of the costs of the proceedings and GBP2,447,008.61 as a contribution to the payment of their legal representation costs and expenses.
6. Pursuant to s 43(1) of the Federal Court of Australia Act 1976 (Cth), the Respondent is to pay the Applicants' costs of this proceeding as agreed or assessed.
63 Some of this relief seems not to have been pressed, although elements of prayers 1, 3, 4, 5 and 6 can be seen in the orders eventually made by the trial judge set out at [14] above. In any event, the primary judge reasoned that the appropriate way to recognise an award was to enter judgment on it: [78]. Despite that conclusion, this was not the order his Honour in fact made. Instead, by order 1 his Honour granted the Respondents leave under s 35(4) of the International Arbitration Act to enforce the award against Spain and by order 2 ordered it to pay EUR101,000,000 rather than entering judgment in that sum (together with ancillary orders). There are problems, with respect, with both of these orders although it is difficult to see that the trial judge could have been expected to apprehend what they were, given the way the case was presented.
64 Although the grant of leave under s 35(4) in order 1 partially tracks the language of that provision, it omits the words 'as if the award were a judgment' of the Federal Court. Further, on its face it leaves open the possibility that enforcement may now proceed without any further consideration of the issues arising under Art 55. It is plain from the trial judge's reasons that he intended no such operation for the order but it is an operation it appears to have.
65 The requirement of order 2 that Spain pay the Respondents EUR101,000,000 may also be seen as an order requiring Spain to do something, whereas under the process of recognition what occurs is that the award is put on the same footing as if it were a final judgment, no more and no less.
66 In my view, orders 1 and 2 should be set aside as they do not reflect a correct approach to recognition. It is possible that order 2 should have been in the form of a judgment for EUR101,000,000 or the 'as if' order contemplated in TCL. I would set aside order 3 and order 4 (which relate to interest and the costs of the arbitral proceeding) for the same reason.
67 I would hear the parties further on what form recognition should take. There was no argument before this Court on appeal on this issue and I apprehend the same was true before the trial judge. This has the procedural consequence that the appeal must be allowed to permit the correction of the form of recognition although the substantive conclusion of the trial judge that Spain was not entitled to rely upon a plea of foreign state immunity stands vindicated.
68 On appeal, Spain submitted in writing that the Respondents had not put their case below as being one purely concerned with recognition but had instead characterised the application as one for recognition and enforcement. It submitted that it was too late for the Respondents now to submit that it was purely a case of recognition. Spain did not seek to elaborate on how the trial was conducted. The Respondents claim that a submission was made to the trial judge at T66.1ff that the relief sought was in the nature of recognition. There it was said:
And coming back to your Honour's question about the "or", there's nothing in even the French or Spanish version that talks of immunity from recognition.
One way in which this court recognises an international award as being - as having the status of a judgment of this court is by making a declaration that it does have that status, and the question is what flows from that.
69 I incline to the view that this was not sufficient to raise the point. However, it makes no difference. The issue is directly raised by ground 3 of the Respondents' amended notice of contention and was addressed in their written submissions in the Full Court. Although Spain submitted that it was too late for the matter to be raised it did not point to any species of procedural prejudice occasioned to it by the alleged late raising of the matter. Further, it did not make any substantive submission as to why the proceeding could not be characterised as a recognition proceeding although it had an abundant opportunity to do so in this Court.
70 Generally speaking a party is bound on appeal by the way their case was put at trial which reflects the public interest in the finality of litigation: University of Wollongong v Metwally (No 2) [1985] HCA 28; 60 ALR 68 ('Metwally (No 2)') at 70 per the Court. Nevertheless, it has also been accepted that where a question of law is raised for the first time on appeal but proceeds on the same proven or admitted facts, it may nevertheless be expedient in the interests of justice to entertain it: O'Brien v Komesaroff [1982] HCA 33; 150 CLR 310 ('O'Brien') at 319 per Mason J. O'Brien initially confined the principle's application to ultimate appellate courts but it is now accepted that it extends to intermediate courts of appeal as well: Coulton v Holcombe [1986] HCA 33; 162 CLR 1 at 8 per Gibbs CJ, Wilson, Brennan and Dawson JJ. Further, as Metwally (No 2) shows at 71, in some cases it may appear that a decision was made not to run a point at trial in which case the party will be held to their election save perhaps in 'exceptional circumstances'.
71 In this case, the point is not so much the raising of a fresh ground but rather the narrowing of a ground pursued at trial. On the assumption that the Respondents did not squarely put their case at trial as one only of recognition, it is clear nevertheless that they did put it as one of recognition and enforcement. What they now wish to say is, therefore, not by way of supplement but rather in the nature of a subtraction. On the assumption that such a narrowing is governed by the principles in cases such as Coulton v Holcombe (a proposition I doubt), nevertheless I would still grant leave if necessary to pursue the matter in that fashion. The issue is solely whether the relief granted by the primary judge can be legally characterised as recognition within the meaning of Art 54(2). This involves no evidence and is purely a question of law. Further, it is a question of law decisive of this appeal and of considerable importance for the operation of the ICSID Convention. The ground also reflects the way the self-same issue has been approached by other courts considering the operation of Art 54(2): Benvenuti, SOABI, LETCO and Lahoud.
72 The conclusion that the proceeding was a recognition proceeding means that Art 55 has no application. Consequently, for the reasons I have already given, Art 54(2) operates as an agreement by Spain not to raise any immunity it would otherwise have and hence to submit itself to the jurisdiction of the competent court referred to in that article. There is therefore an agreement within the meaning of s 10(1) and (2) and immunity is not available under s 9. However, for the reasons I have given, the appeal must be allowed on a limited basis so as to hear further argument on the form that recognition should take.