HIGH COURT CLARIFIES RULES SURROUNDING REGISTRATION OF ICSID AWARDS IN ENGLAND AND WALES

In a helpful clarification of the rules surrounding the registration of International Centre for Settlement of Investment Disputes (“ICSID”) awards in England and Wales, the English High Court has ruled in Union Fenosa Gas SA v Egypt [2020] EWHC 1723 (Comm) here, that service of a claim form on a state is not required under CPR 62.21. The court also confirmed that an application to register an ICSID award can be made through a without notice application.

Background

The underlying dispute relates to ICSID proceedings between Union Fenosa Gas, S.A (“Claimant”) and Egypt (“Defendant”) where the Claimant secured a favourable award in August 2018. Consequently, the Claimant made a without notice application to register the award under CPR 62.21. The application for registration was granted by Males J in December 2018 (“Males order”).

In March 2019, the Claimant then attempted the service of the Males order on Egypt, notably, without the claim form, through the Foreign and Commonwealth Office (“FCO”). On receiving the Males order and other associated documents from the British Embassy in Cairo, the Egyptian Ministry of Foreign Affairs returned the documents, informing the British Embassy that it could not accept service. This correspondence was transmitted by the British Embassy back to FCO which attempted to forward the same to the Claimant via the Foreign Process Section (“FPS”). The FPS however claimed that it had been unable to identify the package in question or confirm receipt. The Claimant was therefore unaware that Egypt had rejected service.

In June 2019, the Claimant’s solicitors (“CS”) was contacted by the Defendant’s solicitors (“DS”) requesting that all communications be directed to it but noting that it had not been authorised to accept service. DS also stated that CPR r. 62.21(3) required service of the claim form on the Defendant and that, since this had not happened, there was no effective service on Egypt.

In October 2019, the Claimant made a without notice application for a) an order dispensing with the service of Males order and b) a declaration that Claimant was not required to serve the claim form on Egypt as contended by DS. Teare J. granted both the applications (“Teare order”). In November, the Claimant made a further without notice application seeking permission for alternative service of the Teare order on DS who had been corresponding with CS on behalf of the Defendant since June. Walksman J. granted the application (“Walksman order”).

The Challenge

The Defendant applied to set aside both the Teare order and the Walksman order, but not the Males order. The Defendant claimed that since the Males order was not properly served, the time had not come to challenge the order. The Defendant advanced three substantive grounds for setting aside the two orders:

• Claimant failed to effect proper service of the Males order as it did not serve the claim form on the Defendant (“Issue 1”);
• There was no proper basis for Teare J to dispense with service of the Males order as there were no “exceptional circumstances” that justified it (“Issue 2”); and
• There was no proper basis for Walksman J to grant alternative service of Teare order as there were no “exceptional circumstances” that justified dispensing with ordinary service (“Issue 3”),

Issue 1

The Defendant argued that CPR r. 62.21(3) provided that an application to register an ICSID award must be made in accordance with the Part 8 procedure and that the Part 8 procedure necessarily required the service of a claim form. The Defendant contended that when the court is lending assistance to a process involving a state, it is natural and appropriate for that state to be given notice of the proceedings by way of service of claim form. The Defendant also contended that since Part 8 applies to the entirety of CPR 62.21, the Part 8 process should be followed. Accordingly, a without notice application for registration of the award was impermissible.

The court noted that CPR 62 includes explicit provisions in relation to service of a claim form in relation to certain types of applications:

• applications covered under Part 1 of CPR 62 which deals with ‘Claims under the 1996 Act’ (the Arbitration Act 1996 or the “Act”) including applications to appoint an arbitrator or challenge an award require service of claim form unless the court orders otherwise.
• applications to enforce awards governed by the Act as provided in CPR r. 62.18 do not require service of claim form unless the court orders so. Just like in CPR Part 1, CPR r. 62.18 also has explicit provisions dealing with service of notice.
• CPR r. 62.21 (dealing with enforcement of ICSID awards) has no provisions on the service of a claim form which reflects the different and simplified procedure that exists for registration of ICSID awards.

Against that background, the court considered that any requirement for service of claim form in an application to register an ICSID award would have been spelt out expressly in CPR 62.21 rather than required to be deduced by a journey that started with the reference to Part 8 proceedings in CPR r. 62.21 (3).

The court then considered the Defendant’s argument that applications under CPR r. 62.21 required a full-fledged Part 8 procedure and that applications could not be made without notice to register ICSID awards. The court noted that such an argument was inconsistent with the cross reference in CPR r. 62.21 to CPR r. 74(3) which explicitly provides that applications made to the High Court “may be made without notice”. The court considered that the reference to Part 8 in CPR r. 62.21 was an administrative device to ensure that an application to register an ICSID award had a claim number to which the application could be allotted.

The court also dismissed the defendant’s argument that the involvement of a state party required that that state be given notice when proceedings are initiated against it. An application to enforce an ICSID award will arise in the background of an award resulting from ICSID proceedings of which the state is bound to have notice. Further, the state will receive notice of the order made and will have an opportunity to apply to set it aside.

Issue 2 

The court noted that in General Dynamics UK Limited v State of Libya [2019] EWCA Civ 1110, the Court of Appeal had indicated that the test of ‘exceptional circumstances’ when dispensing with normal service applied when the order permitting enforcement of award was to be the first time the foreign state would have received notice of the claimant’s attempt to enforce the award. In this instance, the Defendant’s had notice of the Claimant’s intent to enforce the award since April 2019, long before the Claimant moved the application to dispense with service of Males order. Consequently, the test of ‘exceptional circumstances’ was not applicable. In any case, the court noted that the test of ‘exceptional circumstances was met in this case. ‘Exceptional circumstances’ do not mean that service should be impossible. It is a broad and flexible test that has been applied in a variety of circumstances including where the government seeks to delay, frustrate and thwart attempts at service. Courts can also exercise the power to dispense with service even if there was a defect in service or if the claimant attempted service and failure to achieve successful service was not the claimant’s fault.

The Defendant also argued that service was defective in this case since Claimant had attempted service on the wrong government department. Under the Hague Convention of 1965, service on Egypt was to be effected at the Ministry of Justice and not at the Ministry of Foreign Affairs. The court noted that CPR 6.44, which deals with service on states, does not require service to be directed to the correct department in a government. In any case, the Hague Convention relates to service of documents on third parties abroad via authorities of another state and has no application where proceedings are brought directly against a state. The court observed that the Defendant had received the documents and had notice of the present proceedings and also instructed solicitors to act on its behalf. The return of documents were indicative of an attempt to frustrate or delay service, which are circumstances which can justify the dispensing with service.

Issue 3

When deciding applications in relation to alternative service the court is required to consider:

• Whether there is good reason to validate the proposed steps for service;
• Whether the document has come to the attention of the party intended to be served; and
• The conduct of the claimant and the defendant : if one party is playing technical games, this will count against them.

The court noted that in this case the Teare order had come to Egypt’s attention through its solicitors who were instructed by them and had asked for correspondence to be directed at them. The judge concluded that Egypt was playing “technical games” by authorising solicitors to act on its behalf for some purposes but not for others and this course of action had unjustifiably delayed and escalated cost of these proceedings. Under such circumstances, the court came to the conclusion that Teare J was justified in allowing alternative service.

Comment

The case clarifies that service of claim form is not mandatory in applications to register ICSID awards. It also clarifies that an application to register an ICSID award can be made through a without notice application. The court observed that it would be a curious outcome if registration of ICSID awards required a more cumbersome procedure than registration of non-ICSID awards (where the default position is that service of claim form is not required unless ordered by the court) considering the fact that the defences available to enforcement of ICSID awards (if such defences exist outside the ICSID Convention) are much narrower than defences available under the New York Convention. The case also reflects the pragmatic approach courts will take to consider if service is to be dispensed with when faced with a state that may be using delaying tactics to frustrate the service of documents on it.

For more information, please contact Craig Tevendale, Partner, Vanessa Naish, Professional Support Consultant, or your usual Herbert Smith Freehills Contact.