Appellate Australian court finds no jurisdiction to enforce investor-state award under the New York Convention

In a continuation of recent case law considering attempts to enforce investor-state arbitration awards in Australia, the Federal Court of Australia has held that it did not have jurisdiction to enforce an award against India in Republic of India v CCDM Holdings, LLC [2025] FCAFC 2.

The Full Court determined that by ratifying the New York Convention with a commercial reservation, India had not waived sovereign immunity with respect to the enforcement of arbitral awards that were non-commercial in nature, such as investor-state awards that were not rendered pursuant to the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (ICSID Convention).

As a result, the Full Court overturned the earlier decision of the Federal Court of Australia in CCDM Holdings, LLC v Republic of India (No 3) [2023] FCA 1266 which had held that the Court did have such jurisdiction, which we addressed in our previous post.

Background

India ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) subject to the reservation that it would “apply the Convention only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the Law of India” (Commercial Reservation).

The question on appeal was whether India had waived its sovereign immunity and had submitted to the jurisdiction of the courts of Australia under s 10(2) of the Foreign States Immunities Act 1985 (Cth), and the effect of this reservation on any immunity it might otherwise be able to claim.

Decision

In answering the central question, the Full Court identified two issues:

1. whether India had, by ratifying the New York Convention, waived foreign state immunity in respect of the enforcement of an award that is generally within the scope of the Convention but excluded by India by the Commercial Reservation; and
2. whether the relevant award was outside the scope of the Commercial Reservation.

India contended that, to the extent it had waived its foreign state immunity by ratifying the New York Convention, it had only waived immunity with respect to awards that were commercial in nature, i.e. awards that fell within the Commercial Reservation. Therefore, India argued that it had not submitted to the jurisdiction of Australian courts for the purposes of the enforcement of non-commercial awards, which would include investor-state (non-ICSID Convention) awards.

The award creditors, CCDM Holdings and others, argued that the Commercial Reservation (which was a unilateral declaration by India) was only relevant to the enforcement of awards by India in its own territory, and not to the enforcement of awards in other Contracting States which had ratified the New York Convention without any such reservation. Therefore, India had waived sovereign immunity in respect of all awards within the scope of the New York Convention.

With respect to the first issue, the Full Court held that India had not waived foreign state immunity with respect to the enforcement of non-commercial awards. The Court relevantly found:

• A validly established reservation, such as the Commercial Reservation, modified the operation of the New York Convention between the reserving State and all other Contracting States reciprocally.
• As a corollary, India had no obligation to Australia to enforce awards under the New York Convention that fell outside the Commercial Reservation and vice versa Australia also had no obligation to India to enforce awards that fell outside the Commercial Reservation.
• While India may have waived sovereign immunity in respect of enforcement of commercial awards under the New York Convention (although the Court did not positively conclude that it had in fact done so), by making the Commercial Reservation, India had made plain its intention not to waive foreign state immunity for the enforcement of non-commercial awards.

With respect to the second issue, the parties did not dispute that the award fell outside the Commercial Reservation. Thus, the Court considered the issue as a formality only and accepted that the award was non-commercial in nature and therefore outside the scope of the Commercial Reservation.

Comment

The New York Convention, in contrast to the ICSID Convention, does not include any language concerning state immunity. How such immunity will be considered at the recognition and enforcement stage is a matter for the domestic law of the place where enforcement is sought. Many States include in their domestic legislation an exception from immunity for court proceedings which relate to international arbitration.

However, this decision from the Full Court is noteworthy as it indicates that a commercial reservation to the New York Convention may effectively oust the jurisdiction of courts in Contracting States. It remains to be seen as to whether this decision will stand within Australia, CCDM has applied for special leave to appeal the decision to the High Court of Australia, or be followed in other jurisdictions considering enforcement of investor-state awards against states under the New York Convention.

For further information, please contact Andrew Cannon, Partner, Antony Crockett, Partner, Chad Catterwell, Partner, James Allsop, Partner, Louise Barber, Of Counsel, Imogen Kenny, Senior Associate, Caitlin Setter, Solicitor or your usual Herbert Smith Freehills contact.