Appeal Issue 1: Is India's submission limited by its reservation?
57 It is convenient at this point to identify what was decided in Kingdom of Spain with respect to the requirements for establishing a waiver of foreign state immunity under s 10(2) of the Immunities Act. The Court identified the principle of international law to be that waiver of immunity, to be effective, is required to be "express" (at [22]-[23]). That should be understood as "requiring only that the expression of waiver be derived from the express words of the international agreement, whether as an express term or as a term implied for reasons including necessity" ([25], emphasis in the original). Any inference of waiver of immunity "must be drawn with great care when interpreting the express words of that agreement in context" ([26]). If an international agreement does not expressly use the word "waiver", "the inference that an express term involves a waiver of immunity will only be drawn if the implication is clear from the words used and the context" ([26]). The expression of consent must be "in a clear and recognisable manner" ([26]).
58 Against that background of international law, the Court held that there was no basis to interpret s 10(2) of the Immunities Act as excluding "the possibility of a waiver of immunity being evidenced by implications inferred from the express words of a treaty in their context and in light of their purpose" ([27]). "A high level of clarity and necessity are required before inferring that a foreign State has waived its immunity in a treaty because it is so unusual, and the consequence is so significant" ([28]). Putting the matter slightly differently, the Court said that waiver by implication only arises where the waiver is "unmistakable" ([29]).
59 As summarised at [33] above, the primary judge reasoned (at J[43]) that India agreed by the terms of the Convention that Australia will recognise and enforce arbitral awards which fall within the scope of the Convention; "[i]f India is a party to such an arbitral award, it is an obvious and necessary implication that India is requiring Australia to recognise and enforce that award." His Honour concluded that as Australia would be unable to recognise and enforce such an award if India were at liberty to oppose the recognition and enforcement on the ground of foreign State immunity, the terms of Art III are inconsistent with India being able to deploy such a defence. The primary judge also reasoned that the Art I(3) provision for reservations in respect of disputes arising from commercial relationships "is not directly relevant to the present dispute, in that Australia did not make any such reservation and Australia is the State where recognition and enforcement is presently sought" (J[58]).
60 One of the errors that India contends that the primary judge made focusses on the fact that India ratified the New York Convention subject to the reservation that it would apply it only to differences arising out of legal relationships considered to be commercial under its law. The essence of India's submission is that by its "commercial reservation" India did not submit to a process in an Australian court enforcing against it an award that is outside of that reservation. To put it differently, it is said that to the extent that India waived its foreign state immunity by ratifying the New York Convention, it has only waived immunity with regard to awards meeting the description of those that it undertook to enforce and not with regard to awards outside of that description.
61 The respondents' answer to India's submission is to say that the reciprocity in Art III is that States shall enforce awards to which the Convention applies and shall do so without discriminating against foreign awards and to refuse to do so only within the common grounds articulated in Art V. They submit that the "commercial reservation" is a unilateral reservation that does not oblige other States to limit recognition and enforcement in the same way. They submit that by ratifying Art I, even with its own reservation with respect to the enforcement of the Convention in its own territory, India agreed that Australia can enforce the Convention in its territory without the commercial reservation. Also, it is said that Australia undertook to other Contracting States, including the investors' home State, that it would enforce the Convention without reservation in Australia.
62 Reliance by India on its commercial reservation directs attention to Arts 19 to 21 of the Vienna Convention as outlined at [26]-[27] above. India's reservation is a reservation contemplated by Art 20(1) of the Vienna Convention, being one expressly authorised by the treaty (by Art I(3)) and therefore not requiring any subsequent acceptance by other Contracting States. Article 21 is then engaged with regard to the effects of the reservation.
63 The International Law Commission published a Guide to Practice on Reservations to Treaties as an addendum to the Report of the Commission to the General Assembly on the work of its sixty-third session (2011) (Document A/66/10/Add.1). The Guide contains a set of guidelines with commentaries based on law and practice relating to reservations. Guideline 4 concerns "Legal effects of reservations and interpretive declarations."
64 Guideline 4.2.4 deals with the "Effect of an established reservation on treaty relations" relevantly as follows:
1. A reservation established with regard to another party excludes or modifies for the reserving State or international organization in its relations with that other party the legal effect of the provisions of the treaty to which the reservation relates or of the treaty as a whole with respect to certain specific aspects, to the extent of the reservation.
2. To the extent that an established reservation excludes the legal effect of certain provisions of a treaty, the author of that reservation has neither rights nor obligations under those provisions in its relations with the other parties with regard to which the reservation is established. Those other parties shall likewise have neither rights nor obligations under those provisions in their relations with the author of the reservation.
3. To the extent that an established reservation modifies the legal effect of certain provisions of a treaty, the author of that reservation has rights and obligations under those provisions, as modified by the reservation, in its relations with the other parties with regard to which the reservation is established. Those other parties shall have rights and obligations under those provisions, as modified by the reservation, in their relations with the author of the reservation.
65 As explained in the commentary, the first paragraph sets out the principle contained in Art 21(1)(a) of the Vienna Convention. The second paragraph explains the consequences of that principle specifically when an established reservation excludes the legal effect of certain provisions of the treaty, and the third does the same when the reservation modifies that legal effect. It may be a matter of some debate whether the reservation in the present case is one that excludes the legal effect of certain provisions of the treaty or modifies them. It does not matter, because the consequence is the same. The point is that a validly established reservation affects the treaty relations of the reserving State in that it excludes or modifies the legal effect of one or more provisions of the treaty with respect to a specific aspect "on a reciprocal basis" (Guideline 4.2.4, Commentary (8)).
66 The result is that the reserving State "is not only released from compliance with the treaty obligations which are the subject of the reservation but also loses the right to require the State … with regard to which the reservation is established to fulfil the treaty obligations that are the subject of the reservation." Also, "the State … with regard to which the reservation is established is released from compliance with the obligation which is the subject of the reservation with respect to the reserving State or organisation." As it has been put, "[a] reservation operates reciprocally between the reserving State and any other party to the treaty, so that both are exempted from the reserved provisions in their mutual relations." See Guideline 4.2.4, Commentary (26)-(27).
67 Thus, the effect of a reservation is that between the reserving and accepting state (which in the case of the New York Convention is all other states), the reservation modifies the provision of the treaty to the extent of the reservation for each party reciprocally (see Art 21(1)(a) and (b) of the Vienna Convention). As noted in the definition at Art 2(1)(d) of the Vienna Convention, a valid reservation can "exclude" or "modify" the legal effect of certain provisions of the treaty "in their application to that State." It is those final words that bear particular weight here, for waiver must be considered in the context of the reservation modifying the application of the Convention to India as a Contracting State to the Convention.
68 Thus, India has no obligation to Australia to enforce the New York Convention other than in respect of "differences arising out of legal relationships, whether contractual or not, which are considered as commercial" and, critically, vice versa. To be clear, that means that Australia has no obligation to India to enforce awards that do not arise from differences arising from legal relationships which, in India, would not be considered as commercial, and India has no right to insist on Australia enforcing such awards.
69 That analysis is not affected by Art XIV of the New York Convention which provides that a contracting State shall not be entitled to avail itself of the Convention against other Contracting States "except to the extent that it is itself bound to apply the Convention." Thus, even though Australia has obligations to other States that have not made commercial reservations to enforce the Convention in relation to differences arising from non-commercial relationships, India cannot insist on Australia enforcing the Convention in respect of such disputes. The effect of the reservation is to thus modify the relationship between the reserving state and other states in the application of the Convention between and amongst them. See van den Berg AJ, The New York Arbitration Convention of 1958 (Kluwer Law International, 1981) at 14-15; Nacimiento P, "Article XIV" in Kronke H et al (eds), Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention (Kluwer Law International, 2010) at 545-549; Kölbl A, "Article XIV" in Wolff R (ed), New York Convention (CH Beck, Hart and Nomos, 2nd ed, 2019) at 556-557; UNCITRAL Secretariat, Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (2016) at 329-330.
70 The result is that we are persuaded that the primary judge erred in concluding that by reason of Art III India requires Australia to enforce an award within the scope of the Convention - Australia is not bound to India to enforce the Convention on a basis that is broader than India's reservation. It is also not the case, as the primary judge said, that the promises contained in Art III are promises made by each Contracting State to all other Contracting States - the promises made to, and by, a Contracting State that has made a commercial reservation under Art I(3) are limited by its reservation.
71 The question then becomes whether by ratifying the Convention subject to the "commercial reservation" India submitted to the jurisdiction of an Australian court within the meaning of s 10(2) of the Immunities Act in a proceeding to enforce an award under the Convention that arises from a dispute falling outside that reservation. More specifically, does India's ratification of the Convention in those circumstances give rise to a waiver of foreign State immunity in "a clear and recognisable manner" to the requisite "high level of clarity and necessity" such that it is "unmistakable" as identified in Kingdom of Spain at [26], [28] and [29]?
72 There is much to be said in support of a conclusion that by ratifying the Convention India waived immunity in respect of awards that are within India's commercial reservation. That is essentially for the reasons that the primary judge gave in respect of awards within the scope of the Convention as a whole (ie without regard to any reservation). However, it is hard to see how India, by ratifying the Convention, can have waived that immunity in respect of awards that are outside that reservation. By its reservation, India made it plain that it did not and would not treat differences arising from legal relationships that are not commercial (ie non-commercial disputes) as being subject to the Convention. Moreover, as explained, other Contracting States have no obligation to India in respect of such disputes. India's ratification of the Convention subject to the commercial reservation is (at least) a sufficiently equivocal expression of India's intention not to waive foreign state immunity in proceedings enforcing the Convention in respect of non-commercial disputes to defeat any argument that it clearly and in a recognisable manner waived immunity in such proceedings.
73 The effect of India's commercial reservation is to qualify its obligation and undertaking under Art III to "recognise arbitral awards as binding and enforce them" as being applicable only to awards determining differences arising from legal relationships which are considered as commercial under its law. No necessary implication arises from India's qualified obligation under Art III that it waives foreign state immunity in respect of other awards.
74 Notably, in concluding that Spain, by becoming a party to the ICSID Convention (ie the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1966)), had waived its immunity from proceedings in an Australian court to recognise and enforce an award under that Convention, the High Court in Kingdom of Spain referred to Art 53 of that Convention as having the effect that awards shall be "binding" on Contracting States and the preservation in Art 55 of immunity from execution only ([69]). Article 53(1) states that each Contracting State "shall abide by and comply with the terms of the award" ([71]). There are two critical features of that reasoning that distinguish the present case. First, the obligation undertaken by Spain under the ICSID Convention was not qualified in the way India's obligation is qualified under the New York Convention - Spain was obliged to recognise the relevant award as "binding" and to "abide by and comply with the terms of the award" whereas India has no obligation under the New York Convention to recognise as binding and enforce an award that is excluded by its reservation. Secondly, under the New York Convention there is no express preservation of foreign state immunity in some limited way so as to give rise to the implication, which arose under the ICSID Convention, that immunity is not preserved in relation to matters outside that limitation.
75 In the result, India did not waive foreign state immunity in respect of awards that do not determine differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the law of India.