CL-2021-000481 - [2025] EWHC 2874 (Comm)

The starting point is the Vienna Convention, because the rules of interpretation set out in Articles 31 and 32 are themselves rules of customary international law binding on all parties to treaties and (by necessary extension any other persons claiming rights under such treaties) – see Ben Nevis (Holdings) Limited v. HMRC [2013] EWCA Civ 578. In so far as is material for present purposes those articles respectively provide:

“Section 3. Interpretation of Treaties

Article 31 General rule of interpretation

1.

A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.

2.

The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes:

(a)

any agreement relating to the treaty which was made between all the parties in connection with the conclusion of the treaty;

(b)

any instrument which was made by one or more parties in connection with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty.

3.

There shall be taken into account, together with the context:

(a)

any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions;

(b)

any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation;

(c)

any relevant rules of international law applicable in the relations between the parties.

4.

A special meaning shall be given to a term if it is established that the parties so intended.

Article 32 Supplementary means of interpretation

Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31:

(a)

leaves the meaning ambiguous or obscure; or

(b)

leads to a result which is manifestly absurd or unreasonable.”

The claimants and Blasket argue that where the authors of the ICSID Convention intended to refer only to the parties to a dispute referred to arbitration in accordance with the ICSID Convention arbitration scheme they did so expressly. They submit that this is apparent for example from Article 25(1) of the ICSID Convention, which provides that the arbitration scheme is available in relation to “… any legal dispute arising directly out of an investment, between a Contracting State (or any constituent subdivision or agency of a Contracting State designated to the Centre by that State) and a national of another Contracting State, which the parties to the dispute consent in writing to submit… When the parties have given their consent, no party may withdraw its consent unilaterally.” Some care needs to be taken with this submission because what the phrases “a party” or “the parties” tend to be used interchangeably with the phrase “party to a dispute ” or “parties to the dispute”. This is apparent in Article 25 itself where the phrases “… the parties…” and “…no party…” plainly refer back to the phrase “… the parties to the dispute…” referred to in the part of the first sentence quoted above.

The claimant and Blasket rely on clauses 32, 35, 64 and 67 for similar purposes. Article 32 is concerned with the ability of an arbitral tribunal to rule on its own competence. A party other than a “party to the dispute…” would not or is highly unlikely to be involved in such a dispute. It does not lend support to the notion that use of the phrase “party” or “parties” necessarily means something other a “party to the dispute…”. Article 35 is concerned with the privileged nature of communications made in the course of a Convention mandated conciliation process. That is clear because the article appears in Chapter III, entitled “Conciliation”, Section 3, entitled “Conciliation Proceedings” which are the proceedings referred to in Article 28(1). Similar considerations apply to Article 35 as apply to Article 32. The assignee of an award nor anyone else other than a party to the relevant dispute would have no need to refer to such communications or is highly unlikely to wish to do so. Article 64 is a self-contained provision concerned with disputes between Contracting States and in that context refers expressly to “…any party to such dispute…”. It does not support the conclusion that use of the phrase “party” or “parties” necessarily means something other a party to a ICSID Convention arbitration. Article 67 is concerned with which states were entitled to sign the ICSID Convention and in that context defined the states that could sign as including a qualifying “… State which is a party to the Statute of the International Court of Justice…”. Again that form of description is to be expected in a provision which is concerned with defining which states were entitled to become Contracting States and does not support the conclusion that use of the phrase “party” or “parties” necessarily means something other a party to an ICSID Convention arbitration.

The claimants and Blasket place substantial reliance on Article 54(2) of the ICSID Convention. It provides:

“(2)

A party seeking recognition or enforcement in the territories of a Contracting State shall furnish to a competent court or other authority which such State shall have designated for this purpose a copy of the award certified by the Secretary-General. Each Contracting State shall notify the Secretary-General of the designation of the competent court or other authority for this purpose and of any subsequent change in such designation.”

The claimants and Blasket submit that the phrase “a party” is used in Article 54(2) without limitation and so permits a person other than a party to an award to seek recognition or enforcement. It follows, so it is submitted, that this is implicit acknowledgement that awards are capable of being validly assigned. I consider that submission is mistaken applying the construction principles to which I refer earlier. I reach that conclusion for the following reasons.

Article 54 appears in Section 6 of the ICSID Convention entitled “RECOGNITION AND ENFORCEMENT OF THE AWARD”. That Section appears as part of Chapter IV of the ICSID Convention which is entitled “ARBITRATION”. Article 53 is the first article that appears in the Section and Article 53(1) provides that 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.”. The phrase “the parties” first appears in Chapter IV in Article 37(2)(b) which is within Section 2 of Chapter IV. When viewed in that context the phrases “the parties” and “a party” plainly refer to the parties or a party to the arbitration in which the award referred to in Article 53(1) has been rendered. It is one example of the language on which the claimants and Blasket rely being used to refer exclusively to the parties to an ICSID Convention arbitration. Similar usage appears in Articles 38, 39, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51 and 52, but occasionally (Article 41 is an example) the phrase “… a party to the dispute…” is used. In my judgment the authors used the phrases “the parties” or “a party” interchangeably with the longer form “party [or parties] to the dispute…” where the context in which the phrases “the parties” or “a party” are used show that they relate back or otherwise clearly refer to or mean the parties or a party to the arbitration in issue. In my judgment this provides significant textual context for the construction of Article 54(2) and undermines the submission that the phrase “a party” in that article was intended to mean anyone other than a party to the arbitration in which the award to be registered had been rendered.

There are a number of contextual points that tend to support this analysis. Firstly, there is no obvious reason why the meaning of “a party” in Article 54(2) should mean anything other than one of “the parties” referred to in Article 53(1) or why if that was what the authors of the ICSID Convention intended, they could not have made that clear. I was not shown any of the travaux préparatoires relevant to the ICSID Convention but it was not suggested that there was anything in those materials that would support such a construction nor any reason why if that was intended Article 54(2) could and would not have said so explicitly. The absence of a clearly expressed provision permitting assignment and/or recognition and enforcement by parties other than the parties to the dispute is much more consistent with the restrictive approach identified above being the correct approach applying the Vienna Convention principles.

Secondly, the requirement in Article 54(2) “… to furnish to a competent court or other authority which such State shall have designated for this purpose a copy of the award certified by the Secretary-General…” suggests that it was not contemplated that any party other than a party to the dispute would seek to enforce the award since on the face of the award it could be binding only on the parties mentioned in it. This point is given added force by Article 53(1), which on its face provides that the award will be binding on and only on the parties by requiring only that each party will comply with the terms of the award. In its context that can mean only the parties to the dispute – see the point made above concerning Articles 37, 38, 39, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51 and 52.

Aside from the points so far considered, this analysis is supported by the commentaries on the ICSID Convention. In “Schreuer’s Commentary On The ICSID Convention”, Article 54(2) is considered in Vol. II at paragraph 133 and following. It describes the provision as establishing a “… procedure [which] is merely administrative and does not grant the courts or other authorities any possibility to review the copy of the award certified by the Secretary-General…” and as a provision that “… merely organizes the logistics of seeking the recognition and enforcement, through the identification of a given judicial or other authority whose function is merely administrative, in the sense of undertaking the operation of receiving the copy of the award…” At Para 139, the authors express the view that:

“Only a party to the original ICSID arbitration proceeding may initiate the procedure under Art. 54(2). This would exclude action by an interested third party.”

The authors identify as a consequence of this construction that the “… requirement that only one of the original parties may initiate a proceeding for the recognition and enforcement of an award may also lead to problems of State succession or corporate succession.” That issue does not arise in this case and may engage different principles and is best left to a case where the issue arises. Later in the same work there is some commentary that addressed the possibility of claims (as opposed to awards) being assigned. However even in that section (and consistently with what had been said in relation to Article 54(2)) the authors record at paragraph 723 that “… tribunals have looked with disfavor upon situations in which parties sought to transfer existing treaty claims, that is, actual claims for the alleged breach of an investment treaty based on past conduct of the host State, from an entity that did not fulfil the Convention’s nationality requirements to another that did.”

This has received academic support – see by way of example “The Transfer of Investments and Rights of Investors under International Investment Agreements – Some Unresolved Issues” written by Hanno Wehland and published in Vol 30, number 3 of Arbitration International, the Journal of the London Court of International Arbitration. He referred to the same published tribunal decision referred to in “Schreuer’s Commentary On The ICSID Convention” at paragraph 723, and concluded that the tribunal was correct in the decision it had reached and then added “…(w)hile IIAs do not explicitly address the transferability of rights arising under them, an interpretation in accordance with the principles embodied in Articles 31 and 32 of the [Vienna Treaty] will typically reveal that neither damages claims nor jurisdictional offers under these treaties are freely transferable…” and then:

“… it would be surprising if States had intended to allow investors to freely transfer rights in an area that is still being perceived as particularly sensitive and closely linked to issues of sovereignty. In particular, the possibility of an assignment of treaty rights to a national of a non-signatory would seem to be an implausible assumption. But even if transfers were limited to an investor’s co-nationals, States would still lose control over who could assert treaty breaches and bring arbitral proceedings against them. In the absence of clear treaty language to such an effect it must be concluded that this could not have been the intention of the signatories.”

Another leading commentary is “The ICSID Convention, Regulations And Rules - A Practical Commentary”. It addresses the issue I am now considering at Para 4.1363 in these terms:

“Recognition and enforcement proceedings can only be initiated by a ‘party’ to the Award, as the terms of Article 54(2) state. This excludes the ability for third parties to commence such proceedings, which would include the investor’s home State acting on a diplomatic protection basis and the State of origin of any constituent subdivision or agency that was the respondent to an Award.”

As Mr Miles submits, the consequence that follows is that where a party (here Spain) is required to pay another party or parties to a dispute (here the claimants) then a party in Spain’s position cannot be required to pay an assignee (here Blasket) because that is not what the award requires. I accept that is the literal effect of the language used in Article 54(2) when read in its relevant context as set out earlier.

In my judgment adopting the approach I have adopted does not work commercial absurdity or injustice contrary to Mr Harris KC’s submission on behalf of the claimants and Blasket. Subject to the outcome of the currently stayed set aside application, the claimants remain entitled as between them and Spain to enforce the Award by registration under the 1966 Act and Blasket can control the process and recover any sums recovered by the claimants by enforcement as is already expressly provided for by clause 7 of the Assignment Agreement between the claimants and Blasket.

The claimants and Blasket submit that applying Article 31(1) of the Vienna Convention precludes interpreting a treaty in a way that would render some of its words surplus and that therefore there must be a distinction between the meaning of the phrase “a party to the dispute” and the phrase “a party”, with the latter designating a broader category and to interpret the two in the same way “… would impermissibly render the words “to the dispute” surplus to requirements.” I consider this to be mistaken. There is nothing in Article 31(1) of the Vienna Convention which requires a court construing a treaty to adopt such an approach – see by way of example the approach adopted by the High Court of Australia in Kingdom of Spain v Infrastructure Services Luxembourg SARL (2023) 275 CLR 292 at [70] cited with approval by Phillips LJ in ISL at [76]. Rather the focus is on arriving at the ordinary meaning of the words used - see Article 31(1) of the Vienna Convention. The requirement to carry out the exercise in good faith points to the need to examine the use of the word or phase in its treaty or convention specific context and to construe the provision in dispute as a whole and so as to give effect to its purpose.

Drawing these various points together, I do not consider that the phrase “a party” in Article 54(2) of the ICSID Convention refers to anyone other than a party to the arbitration in issue and in consequence only a party to the underlying arbitration can seek recognition or enforcement of a ICSID Convention award. As I have explained already, the use of the phrases “the parties” or “a party” is used predominantly throughout Chapter IV and Section 6 within that chapter of the ICSID Convention to mean the parties to the arbitration in issue. Whilst it is true to say that the phrase a party or the parties “… to a dispute…” is used elsewhere in the Convention that does no more than demonstrate that those who drafted the ICSID Convention used the long and short form phrases interchangeably and emphasises the need to construe the words “party” or “parties” in the context in which the phrases are used. Approaching the issue in that way, there is no reason to suppose that the phrase used in Article 54(2) of the ICSID Convention was intended to refer to anyone other than the parties to the arbitration.

Since it is not alleged that the ECT contains a provision that positively permits assignment of rights, it is probably unnecessary to refer to that instrument in any detail. However, it is worth noting that Article 15 of the ECT provides:

“Article 15: Subrogation

(1)

If a Contracting Party or its designated agency (hereinafter referred to as the “Indemnifying Party”) makes a payment under an indemnity or guarantee given in respect of an Investment of an Investor (hereinafter referred to as the “Party Indemnified”) in the Area of another Contracting Party (hereinafter referred to as the “Host Party”), the Host Party shall recognise:

(a)

the assignment to the Indemnifying Party of all the rights and claims in respect of such Investment; and

(b)

the right of the Indemnifying Party to exercise all such rights and enforce such claims by virtue of subrogation.

(2)

The Indemnifying Party shall be entitled in all circumstances to:

(a)

the same treatment in respect of the rights and claims acquired by it by virtue of the assignment referred to in paragraph (1); and

(b)

the same payments due pursuant to those rights and claims, as the Party Indemnified was entitled to receive by virtue of this Treaty in respect of the Investment concerned.

(3)

In any proceeding under Article 26, a Contracting Party shall not assert as a defence, counterclaim, right of set-off or for any other reason, that indemnification or other compensation for all or part of the alleged damages has been received or will be received pursuant to an insurance or guarantee contract.”

Spain submits that this provision is inconsistent with the notion that the ECT permitted the assignment of the benefit of claims or awards or judgments resolving such claims because the requirement that the Host Party recognise the assignment to the Indemnifying Party would be entirely unnecessary if the authors of the ECT had intended rights acquired under or by reference to the ECT to be assignable generally or had intended any of the provisions of the ECT to have such an effect or such if such rights were understood by the authors to be assignable as a matter of customary international law. In my judgment this submission has significant force. As Hanno Wehland states in his article referred to earlier:

“While IIAs do not explicitly address the transferability of rights arising under them, an interpretation in accordance with the principles embodied in Articles 31and 32 of the [Vienna Convention] will typically reveal that neither damages claims nor jurisdictional offers under these treaties are freely transferable. …

IIAs frequently contain subrogation provisions, which stipulate a cessio legis of both treaty claims and jurisdictional offers where the investor’s home State or its designated agency indemnify the investor for losses suffered with regard to the investment under an indemnity or guarantee agreement. Since the indemnity or guarantee agreement will typically already provide for the transfer of the investor’s rights in the event of payment, the function of these clauses can arguably not be seen as limited to the subrogation itself. Rather, it would appear that these provisions are really meant to provide for an exception to what is the rule in the mind of the signatories – namely that an investor’s claims and other rights under the treaty cannot be assigned without the host State’s consent.”

I consider that that is the correct analysis applying Articles 31 and 32 of the Vienna Convention. In the result claims and awards concerning claims under the ECT are not assignable as a matter of construction of the ECT even if (contrary to my conclusions set out above) other claims in arbitrations under the ICSID Convention may be.