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13 August 2020
In Union Fenosa Gas, SA v Egypt,(1) the High Court confirmed that the procedure for the registration and enforcement of an award made pursuant to the International Centre for the Settlement of Investment Disputes (ICSID) Convention 1965 does not require service of the claim form. The court upheld an order dispensing with service on a state of an order for the enforcement of an ICSID award. Exceptional circumstances need not exist for that power to be exercised. In addition, the court upheld an order for alternative service against the state.
The registration and enforcement in the English courts of ICSID arbitration awards is governed by the Arbitration (International Investment Disputes) Act 1966 (1966 act). In addition, Civil Procedure Rule (CPR) 62.21 sets out the procedure which a claimant must follow to enforce an award. The regime is different to that for enforcement under CPR 62.18, which applies to other types of award, including those made pursuant to the New York Convention 1958.
Section 12(1) of the State Immunity Act (SIA) 1978 provides that any document required to be served for instituting proceedings against a state must be served by being transmitted through the Foreign and Commonwealth Office (FCO). In General Dynamics UK Ltd v Libya,(2) the Court of Appeal held (in the context of enforcement of a New York Convention award) that the order permitting enforcement was not a document instituting proceedings (for further details please see "Court of Appeal dispenses with service of enforcement of arbitral award against sovereign state"). While the order had to be served – unless service was dispensed by the court – this was a consequence not of the SIA but rather of CPR 6.44. That rule requires service to be arranged by the FCO, with a certificate of service to be provided by the FCO once the document is duly served.
CPR 6.15 empowers the court to permit alternative service of a claim form, and CPR 6.27 extends that power to service of any document in the proceedings.
In 2018 the investor claimant obtained a favourable award against Egypt in an arbitration heard pursuant to the bilateral investment treaty between Egypt and Spain and the ICSID Convention.
The claimant made a without notice application under CPR 62.21 and on 19 December 2018 obtained from Males J an order for registration and enforcement of the award (Males order). Following this, a request for service of the Males order – but not the claim form – was lodged pursuant to CPR 6.44, and the relevant documents were passed to the FCO. In due course, the claimant's solicitors were told that the relevant diplomatic bag sent from Egypt to London, which would have been expected to contain the certificate of service, had been lost. Egypt's solicitors stated that they had not been authorised to accept service.
On 10 October 2019 the claimant obtained from Teare J an order, made on a without notice basis, dispensing with the requirement to serve the Males order and declaring that the claimant was not required to serve the claim form on Egypt (Teare order).
Following another without notice application, on 15 November 2019 the claimant obtained from Waksman J an order permitting alternative service on Egypt's solicitors in respect of, principally, the Teare order and the papers which had been lodged in support thereof (Waksman order).
Egypt applied to set aside the Teare and Waksman orders on the basis that:
Egypt's application did not cover the Males order, as Egypt contended that it had not yet been properly served with that order or the claim form.
Was service of a claim form required in an application to enforce pursuant to the 1966 act and CPR 62.21?
Other parts of CPR 62, dealing with the enforcement of non-ICSID awards, refer to service of a claim form. However, neither CPR 62.21 nor the parts of CPR 74 that it incorporates refer to the claim form or service of the same. The judge held that this lack of references is intentional and reflects the different and simplified procedure for the registration of ICSID awards; any requirement for service of the claim form in an ICSID award registration would be expected to be set out expressly.
The judge noted that CPR 62.21 incorporated CPR 74.3, which allows for an application for registration to be made to the High Court without notice, and CPR 74.6, which expressly provides that permission is not required to serve a registration order out of the jurisdiction. The fact that express provision was made for service of the order indicated that this was the only service that was required.
Egypt asserted that CPR 62.21(3) and its requirement that an application for registration be "made in accordance with the Part 8 procedure" meant that the claimant had been obliged to serve the claim form (a requirement of CPR Part 8). The court found that CPR 62.21(3) should be read consistently with CPR 62.21(2), which permits a without notice application leading to an order for registration. As such, the application of Part 8 to CPR 62.21 was somewhat limited and while requiring a claim form, did not require the form to be served. The procedure gave the state an opportunity, as and when any without notice application is made, to set aside the order. Further, an application will always take place in the context of an award arising from an ICSID arbitration of which the state is "bound to have had notice".(3) The different and simplified procedure, with no requirement to serve a claim form, was in the judge's view sufficient.
Was there a proper basis for dispensing with service of the Males order for registration and enforcement?
In General Dynamics, the Court of Appeal held that it was permissible to dispense with service of the relevant order on a state pursuant to CPR 6.28. This did not require exceptional circumstances in order for the discretion to be exercised. However, General Dynamics indicated that a test of exceptional circumstances should be applied when an order permitting enforcement of an award is to be the first time that the state receives notice of the claimant's attempts at enforcement.
In Union Fenosa, the court found that the exceptional circumstances test did not apply as the application to dispense with service had been made after Egypt received notice of the claimant's attempts to enforce the award.
Holding that there was a proper basis to dispense with service, the judge noted that even if the exceptional circumstances test were applicable, it would have been met as the test does not require service to be impossible. Rather it is "a broad and flexible test which should not be unduly complex to apply and should not be rigidly circumscribed".(4)
Should alternative service of the Teare order have been granted?
The judge held that it followed from General Dynamics that the equivalent order in the present case was not a 'document required to be served for instituting proceedings' and did not come within the purview of Section 12 of the SIA, which necessitates service through the FCO.
In considering whether there was a proper basis for alternative service of the Teare order, pursuant to CPR 6.27, the judge considered the applicable principles as summarised by the Court of Appeal in Barton v Wright Hassall LLP.(5) Those include whether the document has come to the attention of the party intended to be served and the conduct of the claimant and the defendant.
Here, the relevant orders had come to the attention of Egypt. The claimant had served the Males order via the FCO, even if a certificate of service had not been received. Further, Egypt's authorisation of its lawyers to act for some purposes, but not others, had unjustifiably delayed and escalated the cost of the proceedings. In concluding that there was a proper basis for the order for alternative service, the judge noted that the delays and escalated costs had occurred against a background where the 1966 act and CPR 62.21 envisage speedy registration of ICSID awards.
Separately, Egypt failed in its arguments that the Teare and Waksman orders should both be set aside for failure to give full and frank disclosure.
The court's clarification of the different and simplified procedure for registration and enforcement of ICSID awards will be welcomed by award creditors commencing such proceedings in England. Similarly welcome will be the court's pragmatic approach to service on a state of enforcement proceedings in circumstances where service through diplomatic channels cannot be certified. The court's decision to uphold the orders dispensing with service and for alternative service is consistent with the English courts' supportive approach to arbitration in respect of enforcement and in general.
For further information on this topic please contact Benjamin Barrat at Clifford Chance LLP by telephone (+44 20 7006 1000) or email (email@example.com). The Clifford Chance LLP website can be accessed at www.cliffordchance.com.
Ciara Beades, trainee solicitor, assisted in the preparation of this article.
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