[Page 94]
AUSTRALIA
[2025] HCATrans 073
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Sydney
No S90 of 2025
Between-
CCDM HOLDINGS, LLC
First Appellant
DEVAS EMPLOYEES FUND US, LLC
Second Appellant
TELCOM DEVAS, LLC
Third Appellant
and
THE REPUBLIC OF INDIA
Respondent
GAGELER CJ
GORDON J
EDELMAN J
STEWARD J
GLEESON J
JAGOT J
BEECH-JONES J
[Page 95]
AT CANBERRA ON WEDNESDAY, 5 NOVEMBER 2025, AT 10.02 AM
(Continued from 4/11/25)
Copyright in the High Court of Australia
GAGELER CJ: Mr Gleeson.
MR GLEESON: Your Honour yesterday asked us at transcript 71 about the status of the overseas cases. The answer is that the appeal from Sir William Blair is listed for hearing on 24 March next year. The Infrastructure Services Case is before the United Kingdom Supreme Court listed on 1 December this year. Kingdom of Spain v Blasket is the subject of an application for certiorari to the United States Supreme Court, which is under consideration.
In respect to that United States decision, could I refer you to the respondent's book of further materials at tab 7, page 59. For the brief which was filed by the United States government in the proceedings in the Appeal Court, between pages 87 and 90 you will see the position taken by the United States Executive before its court is that the waiver exception cannot be made out unless there is proof of an agreement to arbitrate, particularly page 88, five lines from the bottom.
The position of the United States Executive on page 89, consistent with what I put yesterday, is that that is supported by all of the relevant United States case law, including all of the cases relied upon here by in particular the Commonwealth in their written submissions and their outline from this morning. That is, Creighton, Seetransport, Process & Industrial, Tatneft. At page 90, the Executive urges that, as I put yesterday, their real difficulty is with finding sufficient clarity from a mere agreement to arbitrate to lead to a waiver to enforce the award, even under the NYC - - -
GAGELER CJ: So, this also addresses the ICSID Convention, I see.
MR GLEESON: Yes.
GAGELER CJ: So, the position is inconsistent with our decision in Kingdom of Spain.
MR GLEESON: Yes, your Honour, is the answer. So, I only refer to it as an example of – I do not think State practice is really at the centrepiece of the arguments
[Page 96]
4145 before you. There was something in the written submissions particularly against us to say that all States have taken a particular view on this question. It is pretty clear the United States – which is a relevant State – does not take the State position before its courts that the Commonwealth apparently wishes to take today.
4150 GORDON J: Its position on page 90, I think, explains what would be the preferable route.
MR GLEESON: The route is the arbitration exception - - -
4155 GORDON J: Which explains much of the United States cases which we have been taken to.
4160 MR GLEESON: Yes, and they give the reason on page 92. Perhaps it does not appeal to the Commonwealth currently, but the United States is acutely aware that it can be sued in hundreds of countries in thousands of lawsuits and, as they say there:
4165
Although United States courts have historically exercised restraint in construing implied waivers, other countries may not do so, especially if they perceive the United States as changing course.
So, in terms of State practice, we certainly do not have the United States supporting the appellants' or the Commonwealth's position here.
4170 GORDON J: And then the bottom at 92 is their primary position, that is that the:
agreement to arbitrate is a necessary prerequisite under both the waiver and arbitration exceptions . . . to establish jurisdiction –
4175 MR GLEESON: Yes, and that, we submit, is the correct principle under international law and under our statute, and if it matters, under the - - -
4180 EDELMAN J: Although the basis – maybe I am wrong, but it looks like the basis for that argument seems to be that the arbitration exception is a carve-out from the waiver exception.
4185 MR GLEESON: Well, I do not think they are going that route, your Honour. What they are saying is there should be great caution using the waiver exception, because it simply gets you into a lack of unmistakable clarity. The way to go is the arbitration exception, but in either case, you would need proof of an argument to arbitrate. That is the common theme of them.
[Page 97]
4190 EDELMAN J: It is at page 90, where it said:
The plain text of the arbitration exception indicates that it was intended to displace the waiver exception –
4195 MR GLEESON: That may go further than we need, your Honour.
EDELMAN J: Yes.
4200 MR GLEESON: I do not go that far. I draw attention to that because – if your Honours have the Commonwealth outline from this morning, there are three propositions I need to deal with in chief. The second one is the proposition in paragraph 6 that we disagree with as vigorously as we can. It is a new proposition, or at least it is a refinement of the written submissions of the Commonwealth. You are now asked to find that:
4205
the United States authorities support the proposition that a State waives immunity by ratifying the New York Convention (without requiring proof of the existence of a valid agreement to establish waiver).
4210 Now, everything I took you to yesterday disproves that proposition. The Commonwealth goes on to say:
4215
India's submission . . . blurs reasoning that is directed to two distinct exceptions –
I have sought to show you yesterday that the reasoning in fact has addressed the arbitration exception, it has addressed the waiver exception, it has come to the same common ground. No agreement to arbitrate, no waiver, as it was expressed in Global Voice. The submission goes on:
4220
To the extent that the “waiver exception” authorities refer to the existence of an arbitration agreement, they are identifying a factum that must exist before Art III can be engaged, rather than requiring a valid arbitration agreement as a component of waiver –
4225 Now, that, with respect, is just wrong. I will not go back to Seetransport, we went through it in detail yesterday and Seetransport said to establish any form of waiver, you need 1, 2 and 3. Element 1 was the NYC, 2 was the agreement to arbitrate, 3 was the conduct in consenting to the arbitration. Your Honour the Chief Justice asked me about whether there were any cases which required anything less than 1, 2 and 3.
4230 Now, all of that discussion was in the context of what was necessary for the waiver. Can I go then to the other two cases that I did not address
4235
[Page 98]
yesterday. So, NextEra is in volume 5 at tab 34. This is the decision that is the subject of the certiorari application, District of Columbia Circuit 2024. On page 1209 of the book, at paragraph [3]:
4240
The first question is whether the FSIA gives the district courts jurisdiction to enforce (or decline to enforce) the arbitration awards against Spain.
And the two lower courts had decided that question differently. Then in the right-hand column, under section 1:
4245
The waiver exception provides –
and then the terms of it are set out:
4250
The companies contend that Spain implicitly waived its immunity by ratifying the ICSID and New York Conventions –
So, as Your Honour the Chief Justice observed, both were in issue in this case. That was the argument for the investors, then beneath that:
4255
Embracing that logic, the Second Circuit has held that, by ratifying either convention, a country implicitly waives its sovereign immunity –
4260 Then there is reference to some decisions, including Seetransport, which we know does require elements 1, 2 and 3. So, the submission that has been put here is rolling up a great deal. Then there is a reference to this Court's decision in Spain. Then on page 1210:
4265
The waiver issue remains "unsettled" in our Circuit.
There is a reference to Process & Industrial Developments:
4270
To be sure, we have twice approvingly cited the Second Circuit's decision in Seetransport.
Which requires the three elements:
4275
In Creighton . . . we opined in dicta that Seetransport “correctly" held that a foreign sovereign waives sovereign immunity when it joins the New York Convention.
4280 That is to summary a proposition because what they have in fact approved was Seetransport with its 1, 2 and 3 elements:
[Page 99]
Then, in Tatneft . . . we held in an unpublished judgment that “a sovereign, by signing the New York Convention, waives its immunity –
4285 I interpose, Tatneft was the case where there was a binding arbitration agreement, and so that issue did not need to be reached. Tatneft is the unpublished case:
4290
More recently, however, we emphasized that "[a]lthough we have favorably cited Seetransport and its reasoning in dicta and in an unpublished opinion, we have not formally adopted it."
Reference to Process & Industrial Developments:
4295
And the United States urges against doing so –
We do not decide the case on the waiver exception. So, if you come back to the Commonwealth's proposition, NextEra does not stand for the proposition that the existence of the valid arbitration agreement is not a necessary part of the proof of the waiver exception. The court then goes on to deal with the arbitration exception. Consistently with what we put yesterday, at paragraph [6]:
4300
we have explained –
4305 it requires:
4310
three "jurisdictional facts”: (1) an arbitration agreement, (2) an arbitration award –
relevant treaty. At the foot of that column on 1210:
4315
In its view, the plaintiff, as the party invoking the federal court's jurisdiction, must satisfy both the burden of production and persuasion.
So, it is not enough to go down the prima facie route – this looks like a duck - you have to, as part of establishing the exception to foreign State immunity, establish jurisdictional facts which include the existence of the arbitration agreement.
4320 This, for the arbitration agreement, is totally inconsistent with any idea of the Commonwealth that existence to the agreement is a mere anterior factum and, in the particular case, what was put in issue over the page was the existence of an arbitration agreement. You see at the foot of the first full paragraph on 1211:
4325
[Page 100]
To make the issue jurisdictional, the sovereign must attack the existence or validity of the arbitration agreement.
4330 So, the very thing that India did at trial which the appellants left as it was, undertermined an attack on the existence of the agreement – is a central issue within establishing the exception to immunity, not some anterior faction.
4335 There is then, in paragraphs [9] and [10, 11], an interesting and helpful discussion of how a BIT with its arbitration provision may, when combined with other matters, ultimately produce an agreement to arbitrate. It is not of itself the agreement to arbitrate with an investor. You need other matters because it is regarded as a “unilateral offer to arbitrate" see the top of 1212 - and you then need relevant conduct accepting that offer. They are all the issues that have not been taken up in the present case. So, NextEra does not support the proposition.
4340 The last one is Process & Industrial Developments. That is volume 6 at tab 39. I will pick it up at page 1323. Section B is about the waiver exception. On 1324, at the end of the first paragraph:
4345
The D.C. Circuit has cautioned that the implied-waiver provision should be construed “narrowly," –
4350 referencing Creighton.
GLEESON J: So, the primary judge did not have NextEra.
MR GLEESON: That is correct, your Honour, yes.
4355 GLEESON J: But did have Process & Industrial?
MR GLEESON: Yes. Paragraph [8] says:
4360
There is no settled law in this Circuit either adopting or rejecting this theory - - -
GORDON J: Where are you reading now, Mr Gleeson?
MR GLEESON: Page 1324, paragraph [8].
4365 GORDON J: So, this is the case where they found waiver?
MR GLEESON: Yes, and the reason they found it – looking at paragraph [8], the precise argument is:
4370
[Page 101]
Nigeria waived its sovereign immunity by implication because it entered the New York Convention, then agreed to arbitrate within the territory of another Convention –
4375 country. So, your Honour sees the acts – the additional acts – they were a centrepiece of the argument. It is both NYC plus the agreement to arbitrate. That is the alleged waiver inconsistent with the Commonwealth's proposition. The proposition, then expressed, is:
4380
There is no settled law in this Circuit either adopting or rejecting –
it. There is then a reference to Seetransport. Seetransport is described exactly as we have put it, second column. It is a case of implicit waiver of immunity because knowing that the other States:
4385
were all New York Convention signatories-it agreed to an arbitration clause with a German company –
4390 that is element 2, and then:
participated in the arbitration in France.
4395 Element 3. Then there is the statement in the next paragraph: Seetransport has not been adopted, but the Court has “come close".
4400 GORDON J: Just before you go to that bit, what do we make of the passage after that you have just cited? So, if the court found that Navimpex had implicitly waived its immunity under the relevant act because they were signatories, and then:
agreed to an arbitration clause with a German company –
4405 and then:
participated in the arbitration –
4410 So, that is your 1, 2 and 3. What do we make of the next passage?
MR GLEESON: The next passage is illustrating element 1. Namely – on this view, at least – if you sign the treaty, you may be taken to contemplate that there could be future acts, and if those future acts are proven, then you may have lost your immunity.
4415 GORDON J: I will ask a direct question. Is it freestanding, or is it just further clarification or elaboration of your first limb?
[Page 102]
4420 MR GLEESON: It is the latter, your Honour. So, in terms of the Commonwealth's proposition, it is clear from this that the existence of the arbitration argument – step 2 – plus the conduct in the arbitration – step 3 are part of the three steps needed for the waiver. Then over the page, on the particular case, the court accepts that approach – the Seetransport approach - and on page 1325, the foot of the first column, says:
4425
Nigeria's entry into the Convention –
step 1:
4430
combined with its agreement to arbitrate in the territory of another Convention signatory –
step 2:
4435
is strong evidence that Nigeria intended to subject itself to the jurisdiction of U.S. courts in an action such as this one.
GAGELER CJ: I am sorry, that is steps 1 and 2?
4440 MR GLEESON: Yes. The authority they were adopting was that you need 1, 2 and 3. So, strictly, you would need to show their conduct in consenting to the arbitration itself to apply the reasoning that they had said they were prepared to adopt.
4445 GORDON J: In paragraph [9] which follows, it identifies the tension i.e., the tension between a foreign state ratifying the New York Convention – and I understand your argument to be that, although the goal of convention is to promote the enforcement of arbitral agreements in the way it is set out there, about which there is no dispute – we were taken to that yesterday by Mr Walker – it still requires that paragraph to be read in these circumstances. That picks up your steps 1 and 2 at least, if not 1, 2 and 3.
4450 MR GLEESON: Yes.
4455 GORDON J: Because that is the same tension that Sir Willam Blair identifies in the English decision, which is – it is the elephant in the room.
4460 MR GLEESON: Yes, and it is the way to reconcile satisfactorily, on the one hand, giving a generous interpretation to the treaty promise together with recognising the continuing existence of the fundamental obligation in international law to respect the equality of your other sovereigns. They come together by saying signing the treaty may open you up to the
4465
[Page 103]
possibility you have lost your immunity, but you will need to have step 2 – and we would say 2 and 3 – to complete the waiver.
4470 GORDON J: The explanation given in the balance of that paragraph about access to international markets and the like, which is the underlying tension identified by Sir William Blair, is that no more than to explain why the Convention came into existence?
4475 MR GLEESON: I think Sir William Blair took it a step further, which is because the convention is often applied in the context of complex trans-border markets, including financial markets, between experienced arms-length powerful parties, that is not always its application. Parties are perfectly capable in their individual contracts of being very precise about how far they wish to engage in an act of waiver, and in turn that may affect the pricing of the transaction.
4480 So, if you are dealing with a State and you wish to have in your arbitration agreement an advance waiver which will operate in the courts of any New York Convention country, you are perfectly capable of expressing that in the agreement.
4485 GORDON J: But you could also express it in the BIT.
MR GLEESON: You could express it in the BIT, although as the previous case I showed you explained, the BIT is the starting point of a chain of consent towards waiver, not necessarily the conclusion of it. But you could express it in the BIT itself and equally, as your Honours raised yesterday, you could say the exact opposite in either the agreement or the BIT. Namely: my consent goes this far and I fully preserve all my rights of immunity in respect of the courts of X, Y and Z countries. So, all that confirms that the proof of the agreement plus its terms is quite correctly a central exercise in the waiver issue and not something to be diminished in the way the Commonwealth suggests.
4490
4495
4500 Your Honour Justice Gordon asked yesterday about the overlap between the issues in the case before you and the case before Sir William Blair in the Court of Appeal. The waiver issue before you is the identical issue in the United Kingdom. In each of Australia and the United Kingdom, there is no finding of a binding agreement to arbitrate. In fact, there was dispute about that and not resolved.
4505 So, the pure issue of law has come up in both courts on the basis that there is element 1, but not element 2 and 3. As we apprehend it, the final decision of your Honours in this case will be the end of the foreign State immunity question one way or the other because the way the parties joined issue in this case was the only exception relied upon was section 10 plus
4510
[Page 104]
section 11 – 11 is gone, section 17 was never relied upon – and the whole of the argument and debate about section 10 has been framed and had, and there is no ability in either party to have a further go at that issue.
4515 The only different issue in the United Kingdom is that there is reliance upon the equivalent to section 17 – which is section 9, the arbitration exception – that question has not yet been reached. As I explained yesterday, the arbitration exception in the UK is in different language to our section 17. Ours is much tighter.
4520 It requires proof of an arbitration agreement, plus the dispute is one in which the sovereign would not have been immune had it been litigated in the courts and one can understand for good reason why the appellants did not run the arbitration exception, because the answer to it would have been the same reason that Justice Jackman gave on the commercial transactions exception. Namely, this dispute arises out of an alleged breach of international law obligation arising in a BIT. Australian courts would not have jurisdiction in that as a suit. Therefore, even if there were an agreement to arbitrate, it would not attract the arbitration exception.
4525
4530 Your Honours, on the question of – your Honour Justice Gordon put it to me about forensic choices made at trial. This is pages 61 to 62, 74 to 75 of the transcript. Could I add in addition to what appears from the primary judge's judgment these two or three points just to put it beyond doubt. If you have the respondent's book of further materials, at tab 6. At trial - - -
4535
4540 BEECH-JONES J: What is the page number, Mr Gleeson?
MR GLEESON: Page 57. I am referring you to paragraphs [31], [48] and [81] on page 57. What happened at trial – and this was resolved by evidentiary rulings – was there was some issue as to exactly how the appellants were alleging the acts of waiver. What they did by way of this clarification or withdrawal of their written submissions in these paragraphs – particularly [81] – was to make clear that their position was that the:
4545
application of the Convention –
4550 for the purpose of FSI:
4555
is established by producing the . . . award . . . and the original arbitration agreement . . . It is not necessary, beyond the presentation of these documents, to prove the validity of the agreement or the award.
[Page 105]
4560 So, from the very trial, they staked their claim on that basis, which is what his Honour perfectly accurately recorded in the judgment. In the submissions to the – sorry, the next step was in the notice of appeal to the Full Court – which is core appeal book, page 108 – grounds 3(a) and 3(b)(iv) expressly challenged his Honour's finding that this was sufficient.
4565 GAGELER CJ: What page is that?
MR GLEESON: Page 108.
GAGELER CJ: Thank you.
4570 MR GLEESON: Ground 3(a) and, over the page, 3(b)(iv) and (vi) put the matters in issue. As we have seen, there was no notice of contention by the appellants saying his Honour should have, contrary to their approach, found there was a binding agreement. This issue was then advanced squarely in appellants' book of further materials volume 3 at page 913, which were our submissions.
4575
4580 GORDON J: What page was that again?
MR GLEESON: Page 929 – of this section, paragraph 52 over to paragraph 57 – we squarely put in issue that merely tendering what looked like an agreement was not enough. The response at page 952 – paragraphs 52 and following – was they did not need to do anything more than they had done. They did not have any notice of contention saying in the alternative they wished to prove there was an agreement to arbitrate. Our reply at page 1002, paragraph 24, reasserted our position and that was the issue the court had to decide. So, the parties have chosen their ground on that issue.
4585
4590 Your Honours, these are the remaining points I wish to put on Article III. Firstly, if you have the Commonwealth's outline, again could I just identify the two remaining major disputes we have with the Commonwealth. The first dispute concerns their paragraphs 4 and 5 read together.
4595 The Commonwealth's answer to our submission from yesterday, that a promise in Article III does not exclude the obligations under foreign State immunity, is to say that they accept that in respect to non-contracting States the Article I and the Article III promise does not cut down their foreign State immunity, but they say Article III operates differently in respect to contracting States, which is that by signing it you have waived your immunity.
4600
[Page 106]
4605 As we see it, that is creating some form of differential operation of the promises in Article I and Article III. The best way you can look at the second limb of it is that if you are a contracting State - - -
4610 BEECH-JONES J: Mr Gleeson, just so I get the framework for that – I might be being slow – is that saying when Australia signs the Convention it says to all other contracting States: we will treat you as having waived when we come to recognise and enforce an award – but to non-contracting States it will say: we will respect your immunity?
4615 MR GLEESON: Exactly.
BEECH-JONES J: I understand. Thank you.
4620 MR GLEESON: So, the proposition is that you get out of the general words of Article I and Article III, which draw no distinction between the position of contracting States and non-contracting States, this differential operation. Exactly as your Honour put it to me, that is logic of the proposition. We submit that the far more straightforward and correct interpretation is that the Convention in Article I has identified a scope of operation. These are the awards to which it applies.
4625 It does not define the awards by reference to whether you are a contracting State at that stage. It may allow you to contract it under later provisions. The promise is it preserves foreign State immunity in all cases, and there would be something of an oddity in saying non-contracting States have foreign State immunity. Contracting States have it, but they have given it up immediately by signing the very document in which they otherwise have it. Certainly, by the standard of clear and unmistakable waiver, it would seem to be a rather strange conclusion to reach.
4630
4635 Now, you see there the references are Creighton – there is nothing in Creighton that supports that. Then there is a reference to Professor Crawford, and you have been given Brownlie's Principles of Public International Law, the 2019 edition, at page 370. So, the Commonwealth proposition seems to be that the promise in Article III and Article I can comfortably sit next to the pacta tertiis principle, but you do not carry with it the broader foreign State immunity obligation.
4640
4645 You pick up only pacta tertiis, therefore you protect non-contracting States, but you do not pick up foreign State immunity more generally. What Professor Crawford has accurately expressed in page 370 is firstly the nature of the pacta tertiis principle, but what he says is that it is sourced in the VCLT – footnote 121 – particularly Articles 34 to 38, plus a lot of other material, but he goes on to say:
[Page 107]
it is a corollary of the principle of consent and of the sovereignty and independence of states.
4650 So, the idea that by our treaty we do not take away the rights of non-treaty parties is but another working out of the idea that States treat each other as equal sovereigns. Foreign State immunity is another working out of the same fundamental principle the equality of sovereigns and the independence of States.
4655 Our short point would be, once the Commonwealth correctly accepts that the pacta tertiis principle can sit comfortably with Articles I and III, even though it is not mentioned in terms, the foreign State immunities principle also sits comfortably with it.
4660 GAGELER CJ: How many States are not party to the UN Convention?
4665 MR GLEESON: It is now up to 167 members. At the time, Professor Crawford was writing it was about a third of that. So, if one is trying to understand an objective intention as of 1958, it is a treaty looking forward hoping to attract a lot of participation, but at that stage at least recognising that it may be a fairly small pool of attracting States. Because it has been so successful, it is a much larger pool of contracting States.
4670 GORDON J: And is there any international move I am referring to what Sir William Blair identified – to deal with this at that treaty level? This issue? I could not find anything.
4675 MR GLEESON: Sorry, your Honour, is there any international - - -
GORDON J: Is there any move at the international level – that is, at the UN level – to deal with this issue?
4680 MR GLEESON: Not to our knowledge.
GORDON J: Thank you.
4685 MR GLEESON: The other point of difference concerns the Commonwealth's paragraph 7, where we take rather different views on what follows from the reference to rules of procedure in Article III. The Commonwealth says that William Blair is wrong, and the reference to rules of procedure is wholly circular. Can I put this on the topic of rules of procedure, and this is in elaboration of our outline at paragraph 11.
4690 The starting point is that foreign State immunity is recognised as a procedural rule under international law. We have given you some of the references in writing to identify the high point of that, and this is identified
4695
[Page 108]
in Sir William Blair's decision. It is the decision of the ICJ in the Jurisdictional Immunities Case, which is volume 5, tab 31, page 1061. It is pages 1044 to 1045, paragraphs 56 through to 61. Paragraph 56 identifies foreign State immunity:
4700
as a general rule of customary international law solidly rooted in the current practice –
The foot of 56 identifies that in international law this is:
4705
a right -
on the one side and:
4710
a corresponding obligation –
on the other side. So, in Hohfeldian terms, we are talking about rights and corresponding duties. Paragraph 57, it:
4715
occupies an important place in law . . . It derives from the principle of sovereign equality of States, which, as Article 2, paragraph 1, of the Charter ... makes clear, is one of the fundamental principles of the international legal order. This principle has to be viewed together with the principle that each State possesses sovereignty over its own territory ... Exceptions to the immunity of the State represent a departure from the principle of sovereign equality. Immunity may represent a departure from the principle of territorial sovereignty and the jurisdiction which flows from it.
4720
4725 So, the fundamental importance of the principle of foreign State immunity in international law is sourced back to the principles of sovereign equality, the very principals from which pacta tertiis also follows. Then paragraph 58, near the end:
4730
as the Court has stated . . . the law of immunity is essentially procedural in nature –
citing the Arrest Warrant's Case:
4735
It regulates the exercise of jurisdiction in respect of particular conduct and is thus entirely distinct from the substantive law which determines whether that conduct is lawful or unlawful.
4740 So, we have a rule which, in the international conception, is regarded as procedural for the reason there stated. The parties in the treaty have used the expression: subject to the rules of procedure. One would naturally
[Page 109]
understand foreign State immunity as one of the rules of procedure capable of being dealt with by the domestic court. The Commonwealth's contention is best seen from their written submissions at paragraph 30(a), which is an extraordinarily narrow contention:
4745
the phrase "rules of procedure" refers to the relevant Contracting State's procedures for the recognition and enforcement of arbitral awards.
4750 In Australia's case, that is sections 9 and 10. On that view, rules of procedure do not pick up the full international meaning that I have explained. They are narrowed down to that category of rules which concerns the method for recognition and enforcement of the award.
4755 To take a very practical example which has been dealt with in the cases not addressed by the Commonwealth is: what about limitation periods? Is each domestic State entitled to impose limitation periods, as Australia does, on the enforcement of arbitral awards? The answer that has been comfortably reached in the cases and the commentators is of course yes, because limitation periods within the international framework constitute a rule of procedure in the way I have explained from the Jurisdictional Immunities Case.
4760
4765 Yet on the Commonwealth's approach, Australia's limitation periods in the State statutes, or a federal statute if there be one, cannot be permissible under international law and would put Australia in breach of international law. That indicates the incredible narrowness of this view. There is then a submission at paragraph 30(b) that:
4770
The travaux . . . support the conclusion that . . . "rules of procedure" –
were limited to:
4775
presentation of documents and the need for translations, not the rules of State immunity.
Your Honours will not find in the travaux support for the last part of that statement. Namely, that the parties turned their mind to it and said: by adopting the term rules of procedure, we do not intend to allow rules of State immunity to continue to exist at State level. There is one reference given in footnote 35, which is to a:
4780
Record of the Tenth Meeting –
4785
[Page 110]
The date is wrong, it is not “12 September 1958”, it is 27 May 1958, and you will find that at Volume 7, tab 76. In the chronology of the travaux that we have given your Honours, this is dealt with at item 32.1 on page 25.
4790 What happened on this date, at the 11.25 am meeting – particularly pages 2046 to 2050 was there was a lot of discussion which might bring back headaches to your Honours from the Kingdom of Spain about executor and differences between different jurisdictions as to how you went about enforcing awards. There was a large amount of disagreement between the States as to not only what their domestic procedures were but how you could possibly accommodate these in an international Convention.
4795
4800 Nothing in these pages identifies any of the delegates addressing themselves to the present question, which is whether foreign State immunity or limitation periods would be in or out of any final resolution of this topic, and indeed you see at the foot of page 2050, it was too hard to reach any resolution at this stage at all. So, if that is said to be the proof that rules of procedure do not include foreign State immunity or limitation periods, it is a slender proof.
4805
4810 GORDON J: Can I ask, this was an issue which was not addressed by the court below?
MR GLEESON: No, your Honour is correct, not addressed by the court below. Justice Jackman found against us, around paragraph 96 – he said we were being "arid”, we were being merely taxonomical - - -
4815 GORDON J: That was in response to the submission put by Mr Walker.
MR GLEESON: Yes, he adopted that submission. The reason it is not arid or taxonomical is that, as I have said, the express reference to rules of procedure, once one understands its meaning in international law, is amply capable of being a mechanism to give effect to the more fundamental conception in Article I and Article III that these promises are not to cut down foreign State immunity.
4820
4825 Therefore, it is not arid. It is an important textual recognition of the more fundamental point, and it is not circular, because it is allowing the domestic States to, through their own implementation of their international law obligation, preserve the foreign State immunity which this Convention was never designed to take away.
4830 GORDON J: You appealed that ground, and it was not dealt with.
MR GLEESON: Sorry, your Honour?
[Page 111]
GORDON J: You appealed that ground, and it was not dealt with.
4835 MR GLEESON: Not dealt with, yes. So, we do not need it to win on our Article III argument. It is a particular of it; it is an illustration of the larger point that when you read this provision in its full context, it was never designed to achieve the Commonwealth's goal of effectively eliminating foreign State immunity for everyone except non-contracting States.
4840 Indeed, as the Commonwealth would say, eliminating your immunity even if you have a viable case that you were deceived by fraud into entering what appears to be an arbitration agreement. That is the extreme logic of the Commonwealth's position. It is a strange position for a State to take but they are taking it, but the logic of it must be confronted.
4845 Their logic is that if the Commonwealth of Australia finds itself on the wrong side of an award, from Mr Palmer or someone else, and if the Commonwealth of Australia has a viable argument that it never agreed to the arbitration – for example, it was deceived by fraud – then the Commonwealth of Australian is then the defendant in any one of the 167 contracting States.
4850
4855 It has lost its immunity merely upon Mr Palmer presenting his piece of paper and is left to try and run Article V defences if it can, subject to the jurisdiction of that court having lost its right as a sovereign to claim its immunity. That is where the Commonwealth wants you to go.
4860 On the topic of rules of procedure, I showed you yesterday that Professor Crawford's opinion was that rules of procedure amply picked up foreign state immunity. The other commentators to this effect we have referred to in paragraph 11. Could I just mention Professor Bjorklund, which is volume 8, tab 86?
4865 BEECH-JONES J: Was that paragraph 11 of your outline or your submissions?
MR GLEESON: The outline. Professor Bjorklund holds senior academic positions in McGill University. She was an advisor to the American Law Institute on the restatement of arbitration. She is a noted authority in the area. At page 2255 of the book, having dealt with ICSID on the previous page, she draws the distinction between ICSID and the New York Convention. She says:
4870
4875
Unlike the ICSID Convention, the New York Convention was designed primarily to permit the enforcement of arbitral awards in arbitrations between private parties.
[Page 112]
4880 Then says:
Though nothing in the Convention explicitly refers to states, there is no doubt that it permits enforcement against sovereign states.
She there cites Jan van den Berg. The limits of that will be addressed later on. She then recognises the New York Convention has:
4885
silence on the topic of state immunity.
The success of the New York Convention is traced to the limited grounds on which a court may refuse enforcement of an award. State immunity is not one of them.
4890
Expressly:
4895
It is clear, however, based on the negotiating history of the Convention, that the delegates did not intend to preclude an immunity-based argument in enforcement actions against states.
The reference at footnote 41 is to Hazel Fox, the noted authority on foreign State immunity. Then says:
4900
Municipal state immunity law has inserted itself into the New York Convention in two ways. First, Article III ... provides –
4905 and then sets out the rules of procedure provision:
Accordingly, municipal immunity laws have been treated as preliminary matters of procedure which claimants seeking to –
4910 enforce:
awards must overcome.
That is precisely how we would put it. She then goes on to say that it could be also dealt with under the public policy exception. She then refers to, at the bottom of the page, “a mixed degree of success” in seeking enforcement. Then on page 2256, under section A, she correctly recognises – as this Court did in Spain – that Article 54 of ICSID:
4915
4920
effectively waives a state's jurisdictional immunity for recognition proceedings.
Then notes:
[Page 113]
The New York Convention . . . does not include a similar provision. This silence caused several hiccups along the way as different courts adopted competing theories as to when and whether states, by agreeing to arbitrate a dispute, had waived jurisdictional immunity in subsequent New York Convention enforcement proceedings.
4925
4930 So, the core of the immunity loss is through the agreement to arbitrate, and she says that directly in the next paragraph:
4935
It is now widely, though not universally, accepted that a state's agreement to arbitrate in a forum leading to a New York Convention award constitutes a waiver of immunity for jurisdictional purposes in any enforcement action.
4940 And the balance of that paragraph and the reference to the draft UN State Immunity Convention all concern agreements to arbitrate.
GORDON J: Mr Gleeson, the passages you took us to in relation to 2255 and 2256 are dealing with execution, are they not? Not with enforcement.
4945 MR GLEESON: They are recognition and enforcement. They are not dealing with execution over assets.
GORDON J: I see.
4950 MR GLEESON: Professor Bjorklund deals with that topic separately on 2257:
Establishing Jurisdiction Over State Assets –
4955 and the issue I tentatively raised yesterday as to whether Mr Walker is arguing New York Convention also is a waiver of execution immunity. Professor Bjorklund deals with that on 2257 to 2258; all of it in the context that you do have an agreement to arbitrate, not that you do not.
4960 I then wanted to refer you to Professor Bermann, which is volume 9 tab 101; well known at Columbia University for 50 years, and the chief reporter for the American Law Institute restatement on arbitration. At page 2911 at the foot of that page – summarising his experience over almost the entire life of the Convention, he says:
4965
4970
Although opinions differ, the prevailing view is that States do not, by ratifying the New York Convention, waive their sovereign immunity to suit, in national court to the extent they enjoy such immunity, even where the suit seeks only enforcement . . . but that, by entering an agreement to arbitrate, they do waive such immunity.
[Page 114]
So, at least step 2 if not step 3 is needed, and he fleshes that out over the following page and the various footnotes.
4975 BEECH-JONES J: Mr Gleeson, step 3, if I remember rightly, was actually participating in the arbitration, is that right?
MR GLEESON: Yes, because as the reason explained in the process decision, the BIT may be construed only as a unilateral offer by the State to the investor to arbitrate. The investor has to do something to take up that offer, which the investor does, and then the first question for the State in the arbitration is: do I simply enter an unconditional appearance?
4980
4985 If you do that, that might be argued to be step 3. If what the State does as first step in the arbitration is to say: I do not consent to this, I have not lost my immunity, I do not waive it – then you are in the territory of saying you have not completed the three-pronged waiver.
4990 BEECH-JONES J: Has any case ever looked at whether steps 1 and 2 were enough, or step 3 did not matter, or - - -
MR GLEESON: I think that is a variation of what Your Honour the Chief Justice asked me yesterday. I cannot give you a simple neat answer to that, because most of the cases have either been steps 1, 2 and 3, or more recently just step 1.
4995
5000 GAGELER CJ: Although, there is statements, are there not, in that unpublished opinion of the DC Circuit that would suggest that step 3 is not necessary?
MR GLEESON: Is necessary, yes.
5005 GORDON J: We had the debate this morning where it would only refer to steps 1 and 2.
MR GLEESON: Yes, but primarily it is stated the principle is 1, 2 and 3. So, our position is you would need at least steps 1, 2 and 3, and in the course of doing 1, 2 and 3, 2 is going to be proof of the agreement plus construction of its terms to make sure it is truly a consent to enforcement in the place where you are enforcing it.
5010
5015 Your Honours, I wanted to refer on this topic, finally, to a document called the UNCITRAL guide, which is in volume 9, at tab 98. The status of this document, it is not an authoritative guide that sits next to the Convention. What it really is UNCITRAL's compilation of where the authorities have reached on the Convention, and it is helpful on the rules of
[Page 115]
procedure topic between pages 2864 and 2871, and particularly 2870 at paragraph 30.
5020 This is an example of the point I made about limitation periods being regarded as procedural rules. It is a decision of the Supreme Court of Canada, in Yugraneft v Rexx Management Corporation [2010] SCC 19. Unlike decisions that have been reached in the Russian Federation, India and the United Kingdom, treating limitation periods as procedural rules under Article III, the Commonwealth would deny that is permissible under the Convention.
5025
5030 If your Honours have the chronology that we filed, which should now be annotated by the references to the joint book of authorities, can I just indicate that on the current argument, without reading them out, you will find, I submit, considerable assistance from the entry at 17.1, particularly paragraphs 14 and 17, a central purpose to preserve and:
maintain generally recognized principles of justice and respect the sovereign rights of States.
5035
5040 That purpose and object could not be achieved on the Commonwealth submission. Next, at item 25.1, the statement of the Italian delegate, that the compromises being reached were intended to safeguard the jurisdictional prerogatives of States, cannot be met, on the Commonwealth's construction. At 36.2 a comment by Australia's delegate will be relevant to the notice of appeal because it indicates a view that the commercial reservation, if activated, did have some reciprocal work, because:
5045
other Contracting States –
would need to:
5050
know the exact extent of their obligations.
That is effectively the Full Court's approach on that. Then at 40.1, this is relevant to the notice of appeal because it explains that Article XIV, which contains the general reciprocity provision, came in only at the very end without perhaps full consideration of how it interacted with everything else that had gone before, but it was a general reciprocity clause covering every part of the Convention, including the reservation.
5055
5060 Then finally at 41.1, the Final Act is important. Your Honour the Chief Justice asked: can you work off the version of the Convention attached to the International Arbitration Act? You can for most purposes, but in terms of the full international law VCLT exercise, you may have
[Page 116]
regard to the Final Act as an agreement entered at the same time as the treaty and/or as a supplementary means of interpretation, and it is perfectly clear from that Final Act that the purpose was to increase:
5065
the effectiveness of arbitration in the settlement of private law disputes –
5070 and no broader than that. If your Honours could return to our outline, please, that is proposition 13. Before concluding the Article III argument, can I advert to two additional matters. The first is proposition 14, which is that his Honour in paragraph 43 regarded the Convention as creating interdependent obligations to and from the contracting States, and that is part of what formed his analysis of requirement.
5075
5080 We submit that a broader view should be taken of the Convention. It is a multilateral convention which in a sense is creating erga omnes obligations because it creates benefits in favour of non-contracting States and in favour of award creditors who are not parties to it. In the concept of that type of treaty, there is discussion that the obligations of the parties should not be treated as interdependent in the sense of a narrow bilaterial contract.
5085 The two sources we would give you for that are, firstly, Fitzmaurice, which is in the supplementary JBA at tab 8, page 118, paragraphs 125 to 126, where the learned author described this type of treaty as one where the obligations are:
5090
self-existent, as opposed to concessionary, reciprocal or interdependent obligations –
And there is detailed discussion of that question in the work of Greig, which is volume 9, tab 96, where he discussed in great details how reciprocity works in these sorts of treaties, including in respect to reservations. The passages we rely upon are at 2585. He picks up the work of Fitzmaurice - - -
5095
5100 GAGELER CJ: Sorry, what tab is this, please?
MR GLEESON: Tab 96. He picks up the work of Fitzmaurice, bottom of 2585, and then, over the next two pages, discusses two ICJ authorities, the Reservations Case and Barcelona Traction, where the court discussed this type of case where the obligations are understood as erga omnes, owed to the treaty community as a whole, rather than narrow bilateral obligations. Then discusses over 2588, that creates problems with enforcement, because how do you enforce a right that is held collectively? Indeed, collectively not only with other treaty parties but with non-treaty parties.
5105
[Page 117]
5110 At the bottom of 2588 over to 2599, explains that Australia – in the Nuclear Tests Case in the ICJ, and Portugal against Australia in the East Timor Case; footnote, Professor Crawford as counsel – sought to develop jurisdiction that where you have erga omnes obligations, individuals may be able to sue internationally, but as a representative of, as it were, the body of either contracting States or an even larger body who are the ultimate beneficiaries of the rights.
5115
5120 Now, I am not asking your Honours to resolve any of this. What I am seeking to indicate is that when you look at paragraph 43 of the judgment, which is the key one we need to overcome - - -
BEECH-JONES J: This is the primary judge?
5125 MR GLEESON: Primary judge. What his Honour has done, if you breakdown paragraph 43, the first step he has taken on the top of page 31, is to say the submissions put to him:
5130
do not capture the full force and scope of Art III in circumstances where it is sought to be applied against a Contracting State which is a party to an arbitral award.
So, his first step is to narrow the construction of Article III to the case of a contracting State, as opposed to giving it its general meaning in all cases. His second step is:
5135
The promises in Art III are made by each Contracting State to all other Contracting States.
That is true but incomplete for the reason I have just explained. He talks about it as a "set of promises” whereas, really, it is a Fitzmaurice-type treaty. Then where it really gets difficult, we submit, is:
5140
India, along with all other Contracting States, requires by Art III that Australia relevantly shall recognise arbitral awards as binding and enforce them, just as Australia requires India –
5145 to do so. We submit: no. There is no requirement. At the most:
5150
India, along with all other Contracting States –
has assumed its own Article III obligations directed to its own territory and has obtained such rights – probably held collectively – against Australia to perform its obligations. The holding of a right does not turn into a duty to assist Australia to perform its side of the obligation. So, the whole
[Page 118]
requirement logic does not follow from the holding of a right. In any event, Australia's obligation is qualified by foreign State immunity so that even if there were a requirement, it does not lead to the conclusion reached.
5155 BEECH-JONES J: That submission does cut away a bit, though, at the Full Court's reasoning, does it not?
5160 MR GLEESON: Completely, because we say the Full Court started at the wrong premise. It assumed there is this idea of requirement. We say, it is not there at all. The Full Court should never have started down the track it went down.
5165 Your Honours, paragraph 15 is our last point on Article III. It is how the reservation in Article I(3) intersects with Article III. Can I show you how we put the argument in the Full Court, which is in the appellants' book of further materials, volume 3. This was, in the Full Court, one of a suite of arguments, the rest of which I have put to you this morning. This particular of the argument is found at tab 15, page 926.
5170
5175 So, having advanced the core argument on Article III, between paragraphs 31 to 41 – all of which were sufficient for primary judge 43 to be overturned we put an additional argument, which was that his Honour at that paragraph had:
5180
overread the scope and content of signatory states' agreement in construing that provision. In the sphere of multilateral international instruments –
that is the point I have made a moment ago:
5185
and particularly those in respect of which states have lawfully made reservations –
so, it is picking up that this is a convention where there may be lawful reservations:
5190
it is dangerous to infuse the construction exercise with the assumption that the treaty promises are akin to bargains struck between parties to a commercial contract. The terms of the Art III promise made by each signatory State is narrow. It concerns what the state will do in its territory in respect of “arbitral awards”, where recognition or enforcement is sought before its courts. Further, that promise may be made subject to reservations by the state (as India in fact made) that it will only apply the treaty to differences arising out of legal relationships which are considered commercial under it
5195
[Page 119]
national law: Art I(3). Signatory states may also make reservation of reciprocity -
5200 So, to the extent Mr Walker was suggesting he may not have been, we did not put into play in the Full Court the actual fact of India's reservation, that is wrong. We put it into play in saying, when you look at this treaty's structure, the parties have to contemplate that different parties may be making different choices in respect of reservations. Indeed, India has made its choices clear.
5205
5210 The question is: what does that do for his Honour's requirement logic? What it does, we submit and did submit, is that it destroys that logic because every State has to accept from the outset that every other State will be making its own choices on reservations or not. One cannot contemplate a situation where the contours of a State's obligation will vary depending upon choices made by other States.
5215
5220 Therefore, when India signs the Convention, including with its reservation, it is not requiring Australia to perform Australia's Article III promise, that is the general point. In particular, it is certainly not requiring it to do it in an area where India has said: I am not prepared to take on that obligation.
GAGELER CJ: So, this is the opposite of the point that was taken up in your favour by the Full Court?
5225 MR GLEESON: This is the broader way of looking at it. The way we put it was, in terms of treaty architecture, once you accept: I am signing up to something where different people will make different decisions – and we mention India made a particular decision – given that circumstance, the requirement logic is broken because this is necessarily a treaty contemplating fragmented legal relationships. That was taken slightly further in the next paragraph - - -
5230
5235 BEECH-JONES J: Just so I get this right, you say we put it in play in support of our argument that just merely signing up to the Convention is not a waiver, and you say what happened was the Full Court took it and applied it in a different way by effectively picking up some sort of bilateral concept and using it in a reciprocal.
5240 MR GLEESON: What happened was that 90 per cent of Dr Roughley's argument, which was correct, should have been adopted by the Full Court. They said: we do not need to get there, we think that may all be wrong because of Justice Jackman. So, they never treat it with our full argument.
[Page 120]
5245 What they then did was to perceive within what was in effect particular 6 of our argument, which was a point about treaty architecture illustrated by the fact India had actually made a reservation – they treated that as our only argument. Then within our only argument, they said: in order to make it really bite, what we are interested in is not just the fact that India made a reservation – which is what we advanced – but we want to be further interested in whether that reservation destroys this particular award.
5250
5255 So, if you read 43 – I will not read it out – we are clearly referring to our reservation and we are saying exactly what we have done, and I might read this part out:
5260
India relevantly agreed by entering into the NY Convention that Australia will recognise and enforce awards against India free of the “commercial reservation”, and requires it to do so.
That is referring to his Honour's logic. Then saying the problem with it is, on that:
5265
analysis, the contours of the express and implied Art III obligations India –
that is, including our reservation:
5270
ultimately hinge on the scope of the obligations assumed by other signatory States . . . Art III does not contain an implied requirement by each signatory State as to what every other signatory State will do. Far less does it contain any promise that a signatory State will waive immunity –
5275 you fall before the courts in other States. That is where we put it. We put it that argument today. It is particular 6, which confirms that the appellants' approach cannot be correct. I notice the time, your Honour. I think under the program we have until when?
5280 GAGELER CJ: Until 12.15 pm.
MR GLEESON: Until 12.15 pm, and then we had sought to reserve half an hour to rejoin to the Commonwealth plus new matters raised by Mr Walker, not that he would ever dare do that.
5285 GAGELER CJ: We will take the morning adjustment.
5290 AT 11.17 AM SHORT ADJOURNMENT
[Page 121]
UPON RESUMING AT 11.31 AM:
5295 MR GLEESON: Your Honours, to complete what occurred in response to those submissions I have just shown you, in the Full Federal Court – in the appellants' book of further materials at tab 16, page 945 – the response to our argument was that it went nowhere because the commercial reservation operated one way, and:
5300
As such, Art I is a consent to Australia not limiting its obligations –
5305 under the reservation. The Full Court at paragraphs 60 and 61 understood the exchange of submissions I have just shown you as creating a joinder of issue as per those paragraphs, and that is the question they then decided.
5310 If the Full Court has correctly understood the exchange of submissions, then there is no procedural fairness problem. If the Full Court has overread what we were putting and what the appellant was responding to, there is a procedural fairness problem, which is cured as a matter of law by the ability for both sides to put full arguments on the legal question in this Court, as has now occurred.
5315
5320 STEWARD J: Could I just ask, as a matter of clarification, you agreed that the reservation has the same operation that Mr Walker says it has, that it operates by India promising what it will do in its territories, and that is it?
MR GLEESON: Your Honour, the short answer is no. We have given you an aide-mémoire. Could I ask your Honours go to that. It might clarify certainly what we put now, and I will explain what we put then. The purpose of the aide-mémoire is to say the first column is the promise of Article I(1), the second column is the reservation under Article I(3), whether it will be territorial or commercial.
5325
5330 The direct effect for the reserving State of a reservation, which is the third column, we agree with Mr Walker on. That is its immediate inward-looking effect, that as a reserving State, I have no obligations under the Convention to anyone: in the first case, to enforce awards made in the territory of a non-contracting State; in the second case, to enforce awards which are not commercial under my law.
5335 That much we all agree upon. The fourth column is what the Full Court has done, and it has taken two steps. The first step, and it is
[Page 122]
quite a narrow step, really, is to say: if I am a reserving State, and I say I will not take on obligations in respect to awards either made in the territory of a non-contracting State or in respect to matters non-commercial under my law.
5340
5345 The immediate narrow reciprocal effect is that the obligations of every other contracting State to me not inter se, but to me have likewise been contracted so that those contracting States are not bound to me to apply the Convention in respect of the reserved areas. That is what the Full Court has found is the direct and immediate reciprocal effect. I cannot say we put that in those terms to the Full Court.
STEWARD J: But do you agree with that now?
5350 MR GLEESON: We agree with that now, to the extent it is necessary to reach it. That is the - - -
5355 STEWARD J: Can I ask a practical question, then. In the case of an arbitral award to which a country like India has been a party to, the reservation will never be engaged because, as you say, India has sovereign immunity for the purpose of enforcement. So, I understand that. In a case where it is two investors who have been subject to an arbitral award, how does it practically kick in?
5360 MR GLEESON: So, with two investors, that would be commercial under the law of India, so the reservation will not bite.
STEWARD J: Yes.
5365 MR GLEESON: So, we would have to contemplate something closer to the present where we have, let us say, an award under an international law obligation which we would say is outside India's - - -
5370 STEWARD J: But what is the nexus with India that is required in order for the reservation to bite in that case?
MR GLEESON: The direct effect is – the only nexus is: am I in India being asked to enforce the award?
5375 STEWARD J: I understand that.
MR GLEESON: With the reciprocal or the flip effect, it is quite a narrow effect. All it is saying is: I, India, cannot compel the Netherlands or Australia or anyone else to enforce an award if in India it would be non-commercial. So, we have to contemplate an award which would be
5380
[Page 123]
non-commercial in India: I, India, cannot compel the Netherlands, et cetera, to enforce that award.
5385 BEECH-JONES J: But that narrow effect does not engage here because – sorry, I will let you finish.
MR GLEESON: That is the narrow effect. So, the Full Court had two critical steps in its argument. The first step is to look at the narrow reciprocal effect, and that is our first paragraph in the fourth column. The Full Court then said if it has the narrow effect that India cannot call upon Australia to enforce an award of that character – that is just the reciprocity under 21(2) – then if the primary judge's original reasoning had been correct that India was requiring Australia to enforce such an award, the basis of the requirement has disappeared.
5390
5395
5400 So, the second step in the fourth column is not a VCLT Article 21 step, it is a step about waiver, all of it premised on this original idea that India was requiring to do it. That is why the notice of appeal is strictly in the alternative, because if the whole requirement idea is flawed in the first place, then you do not need to unpack it through the reservation. But if the requirement idea had any legs to it, then you take the two steps in the final column and you say therefore there is no requirement from India that Australia enforce the award and, if there is no requirement, therefore there is no inconsistency with claiming your FSI. That is the logic.
5405
BEECH-JONES J: And one of the problems with that is that Holland does require.
5410 MR GLEESON: Let me answer the “Holland does require". There are two answers to that, and this is again where perhaps our Article III argument is what matters. If we are correct under Article III that Australia's promise to Holland and to everyone else has always been subject to Australia's FSI obligations to other States, then Holland never requires Australia to enforce an award absent a waiver by India. That is why, if the original requirement logic is flawed, this plays out the way it does.
5415
5420 There is a second answer, your Honour, and I can just give it this way. It is hard to express this because it is all off a premise of PJ 43 that we do not accept. The logic of PJ 43 seems to be because India required Australia to enforce the award against India, it would be inconsistent with that if India asserted its immunity. Therefore, you have lost it; therefore, there is a waiver, but here is the further step.
5425 If the effect of the reservation is that India is saying to all contracting parties: I am letting you know now that my scope of obligation does not
[Page 124]
extend to non-commercial awards under the law of India, and I am never going to be requiring you to enforce awards of that character, that is as between me and you – then, when Holland comes to ask Australia to do something, it must do so consistently with the scope of India's reservation and its consequence for the relations between India and Holland.
5430
5435 Another way of testing that is, if Holland sued India in the ICJ, India would be able to say: but the package of rights between us was one which was contracted by reason of the reservation. Therefore, the requirement logic fails.
5440 BEECH-JONES J: But the problem with that is that it assumes that India's reservation in its terms expresses a nexus with India, but one way of looking at that nexus – it simply says, if you have an arbitration that is not a commercial dispute under the law of India – but it does not have to have a nexus with India.
5445 MR GLEESON: That is correct, your Honour.
BEECH-JONES J: So, you can have arbitration between a French company and a German company that is not commercial under the law of India, conducted in Holland, enforced in Australia; that has nothing to do with India, does it? On its face.
5450
MR GLEESON: That is all correct.
BEECH-JONES J: Yes.
5455 MR GLEESON: What the reservation is saying as between India and every other State, including Holland: if the award, wherever it be made, is not one I regard as commercial, I will not apply this Convention to that award. That is the language of Article I(3). So, the question is by saying: I will not apply to the award; can India compel any other party to the Convention to apply to that award? The answer is no. That is the Article I step. Then the second step, according to the Full Court, is that has destroyed the underlying requirement which had founded the waiver in the first place.
5460
5465 BEECH-JONES J: I see.
STEWARD J: Does all of that mean that, practically speaking, it really has no relevance to much? This reciprocal obligation whereby India will not enforce an award that does not meet the requirements of India law as to commerciality. I mean, is India ever going to do that if the award has got nothing to do with it? To take the example of Justice Beech-Jones.
5470
[Page 125]
5475 MR GLEESON: The answer to your Honour's question is just about yes - - -
STEWARD J: Okay, all right.
MR GLEESON: - - - because the only time it matters – which is this bizarre case is where the Full Court is trying to find a way to test whether the requirement still applies in the face of a reservation. But if the Full Court had taken the correct approach and said the whole requirement logic fell because Australia's promise was always qualified by FSI – there was never a waiver – you did not need to go down this path at all.
5480
5485
EDELMAN J: Basically, it is India's way – if you start from the premise that India has waived its sovereign immunity under the Convention, it is India's way of trying to cut back that waiver.
5490 MR GLEESON: To cut back the waiver.
EDELMAN J: If that premise is correct.
5495 MR GLEESON: That is all it is. It is saying: can India get any purchase out of the fact that its reservation directly cut back India's obligations through reciprocity, cut back India's rights against every other Contracting State and, if it cut back those rights, they were the very rights which primary judge thought conveyed the waiver.
5500 STEWARD J: Can I ask you a different question. If you are wrong on your immunity main argument, I think you can still rely upon your reservation here – you will invoke to claim that the award cannot be enforced in Australia – do you have anything to say about Mr Walker's state of the evidence about what is commercial and not commercial under the reservation?
5505
5510 MR GLEESON: Yes. So, if we defend the Full Court on the legal question after full argument in this Court, then the question is: what do you do with the matter? We have indicated in our material so, let me go further. The procedural fairness ground that is joined in ground 5 of the notice of appeal does not in fact say that they were denied the chance to lead evidence on the law of India.
5515 I heard Mr Walker say yesterday something beyond ground 5, and I do not object him raising it beyond ground 5. I think he said yesterday that they have been denied the chance to try and prove the law of India. If your Honours are satisfied that they should have been given that realistic chance, and there is something they genuinely wish to say about it, we cannot strongly resist to remitter.
[Page 126]
5520 We have given your Honours in the materials the two decisions that exist from the High Court of India in the State of Gujarat and New Delhi which both say that a BIT is non-commercial under the law of India.
5525 GAGELER CJ: We cannot receive that.
MR GLEESON: You cannot receive them under section 73, but on the question of whether you grant a remitter and whether there is utility to remitter, all we can say is we have something strong to say about it. Therefore, I am not heavily resisting a remitter if you get to that point.
5530
5535 What also follows from what I have just said is the Commonwealth submissions about whether the presumption should have applied should not be reached by this Court – particularly through an intervener – because what would happen on a remitter is we would each get the chance to lead the law of India – which we will do – if for some reason no-one led any evidence on the law of India, the remittal court can decide what to do with the resumption. So, we think all that issue collapses pretty quickly.
5540 The only final thing I wanted to say on the legal issue is, on Article XIV, we see Article XIV as positively supporting the Full Court's approach as a matter of law because it embedded reciprocity in every obligation. The effect of that was that if, as I have said, India carves out its obligation in respect to non-commercial awards, it therefore cannot claim that any other State should enforce such awards, and that destroys the effect of the requirement that is on the legal point. Your Honours, given the time, we otherwise rely upon the written submissions on the notice of appeal. Could I hand over to Dr Roughley on notice of contention ground 1.
5545
5550 GAGELER CJ: Thank you. Ms Roughley.
MR GLEESON: And we have the terms of a remitter, your Honours, which we have circulated between the parties. If we cannot agree it by after lunch, we will give you our version of it.
5555 GAGELER CJ: Well, we have the respondent's proposed remitter, Mr Gleeson.
MR GLEESON: That is our proposal, if your Honours reach a remitter.
5560 GAGELER CJ: Thank you.
MS ROUGHLEY: It is NOC 2 I will be addressing, and the premise of NOC 2 is that not all awards to which one or more States are a party are within the literal terms of Article I(1). The appellants have ultimately
5565
[Page 127]
agreed with that premise. Thus, as between the parties, there is no dispute that only sometimes will awards concerning States be within the scope of Article I(1).
5570 The contest between the parties is the definitional criteria for inclusion. India's position is that the words in Article I(1), “differences between persons”, is concerned with the field of private law and, whatever the outer limits of that field, it excludes arbitral awards where the rights and obligations at issue are sourced in international law. The Quantum Award is an award of that kind, and for that we can rely essentially on the primary judge's findings for rejecting the section 11 commercial transaction exception.
5575
5580 Perhaps the best way for me to provide your Honours with all the references is in our written submissions, paragraphs 9 to 12, which summarise that whilst there was a contract called the “Antrix Agreement" – often referred to – it was not one to which India was a party. The arbitration in issue here that resulted in the Quantum Award was against India, not Antrix, and it involved allegations of breach of international law. That is the BIT that your Honours saw yesterday in tab 1 of the appellants' book of further materials volume 1.
5585
5590 Your Honours will read on in paragraph 9 that there was an express disavow by the appellants of any contention that the BIT or the Antrix agreement fell:
within the definition of “commercial transaction" in s 11(3), the former not being commercial in nature –
5595 that is the BIT:
and the latter not being a transaction which India itself had entered into.
5600 Paragraphs 10 through to 13 then address the balance of how section 11 was dealt with, the focus being that this Quantum Award is wholly the result of considerations of rights and obligations under public international law in respect of India.
5605 In that sense, in order to decide notice of contention 2, this Court does not need to decide the outer parameters of the field of private law. It only needs to be satisfied that the field of operation of private law does not include arbitral awards concerning States where the rights and obligations at issue are sourced in international law. We do not think it will be at all in dispute that the Quantum Award is not of that kind.
5610
[Page 128]
GAGELER CJ: You are anchoring this submission on the reference in Article I(1) to “differences between persons", is that right?
5615 MS ROUGHLEY: Yes.
GAGELER CJ: What about differences being physical or legal? Is it that you are limiting the legal differences to differences arising under what you call private law as distinct from public international law?
5620 MS ROUGHLEY: Yes.
GAGELER CJ: I see, and where does that leave the work to be done by the second of the potential reservations that is referred to in Article I(3)?
5625 MS ROUGHLEY: At the commercial reservation?
GAGELER CJ: Yes.
5630 MS ROUGHLEY: So, can I explain the commercial reservation this way. If we put aside whether or not this New York Convention applies to States at all and focus what was at least the primary focus of awards concerning private parties, this commercial reservation was intended to do some work in that circumstance.
5635 It derives from the precursor Geneva Conventions. In the Geneva Conventions, which no-one has ever suggested had application to States, this opportunity for States to restrict their obligations under both the 1923 and 1927 Geneva treaties was restricting their obligations for disputes that were, on any view, within the field of private law.
5640 So, the commercial reservations are saying there might be this broad category of private law, but whatever its limits, a reserving State is saying: if I do not consider that to be commercial – for example matrimonial disputes - that is not an award that I would enforce. Some States it might be employment disputes are not considered to be commercial.
5645
5650 There is a whole raft of ways in which States which make a reservation of this kind would invoke it to exclude from the field of operation, even within respect of things that could never be said to be anything other than private law disputes from the operation of the treaty. So, that is what Article I(3) is problem solving for, and so the correct way to understand it is that it is a contraction of obligations to recognise and enforce – or the Article II obligation under the New York Convention – in respect of arbitrations within the field of private law.
5655
[Page 129]
EDELMAN J: The background to that contraction is that the debate about whether or not the whole of the agreement in the first place would be confined to commercial transactions, and that that debate having been lost, it was left to parties themselves to exclude non-commercial transactions.
5660
5665 MS ROUGHLEY: That is the way it has been put against India. So, the logic of that reasoning is that if you have the facility to contract to what you consider to be commercial and you do not do it, every other kind of dispute is within the frame. That is the logic and that immediately breaks down when it is accepted that at least some kinds of disputes concerning States – at least certain kinds of inter-State disputes, perhaps all of them – the appellants' position has shifted a bit – are outside the frame.
5670
5675 EDELMAN J: Unless one does not found that in the notion of persons, as the United States cases have not, and one says, well, it is just the presupposition upon which the whole of Article I is operating is that it does not operate in a State-State case.
MS ROUGHLEY: So, it was suggested yesterday the Court would not have to reach whether State-State cases are in our out. We take a different view. We think it is necessary to understand whether the State-State distinction is the exhaustive statement of exclusionary criteria or if it is an illustration of a broader exclusionary category.
5680
5685 We say the latter, and that is given the whole circumstances in which this Convention came to pass, and we do not need to rely on little tidbits of comments by persons in a 1955 ad hoc process who may or may not have been talking as representatives of the State or little tidbits that happened in the 1958 conference. We can rely on the fact that the key institutional components that led to this Convention were squarely concerned with arbitral processes and disputes in the field of private law. That is the territory from which all of this has then proceeded.
5690 So, if that is the proper way to understand it – and I will come to the parts in the travaux we most rely on and the commentators we most rely on – then India is correct in saying the inter-State arbitral awards is just merely an illustration of the category of exclusion from scope. Arbitral awards that are concerned with rights and obligations under international law – it is not the entire parameters of what might be arbitrations concerned with rights and obligations concerned with rights and obligations under international law that are outside the scope of this Convention.
5695
5700 Can I come to the key parts of the travaux on which we rely. Most of this I will do by reference to our chronology, but the first one is item 17.1 in our chronology and if I can take the Court to it, it is volume 7, tab 66,
[Page 130]
page 1920. There your Honours will see that the resolution which started this process is the resolution of the Economic and Social Council and it is:
5705
Taking note of the draft convention on the enforcement of international arbitral awards submitted by the International Chamber of Commerce –
and:
5710
Establishes an Ad Hoc Committee comprised of representatives of –
just:
5715
eight Member States –
with:
5720
qualifications in that field –
to consider the proposal. If I can ask your Honours to also have our chronology open, in our chronology, item 4, we have set out there what Article I of the ICC draft provides, and the terms of Article I there are not terms which lend themselves to an understanding that this project is concerned with the rights and obligations of States under international law that may be the subject of arbitration.
5725
5730 In any event, the representatives of just eight States are identified on page 1921, and at the top of the page, 5, I just ask your Honours to note these names because they are two of the commentators I will come to. You will see there:
5735
Mr. Oscar Schachter, Director of the General Legal Division of the United Nations Secretariat –
and the capacity in which he was here. He later is the secretary for the 1958 conference, and he wrote a paper in 1960, on which we rely, that treated public international law disputes as outside, and this whole process has been about the field of private law. The second person there is the secretary of the committee, Mr Paolo Contini.
5740
BEECH-JONES J: Sorry, Ms Roughley, where are you reading from? Which page?
5745 MS ROUGHLEY: Page 1922, paragraph 5.
BEECH-JONES J: Thank you.
[Page 131]
5750 MS ROUGHLEY: The second person there is:
Mr. Paolo Contini, Senior Legal Officer –
and he too has authored one of the key papers on which we rely. Paragraph 11 is where your Honours see:
5755
In view of the technical nature of the subject matter –
If it was truly in scope to consider the rights and obligations of States in public international law, the technical nature of that is far different to the mere technical issues of arbitration concerning the field of private law. At paragraph 17 is where the committee – this is their report – refers to:
5760
the expression “International Arbitral Awards" used by the International Chamber of Commerce –
5765 and it would normally refer to arbitrations between States, but this draft convention just does not deal with them. In paragraph 20, where they were explaining what they were intending to do by 20, it is done by reference to the Geneva Convention, which as I say, did not have any application to arbitral awards concerning states.
5770 They are seeking there to explain the advances that are being made, having regard to what we are seeing as some of the drawbacks. Not one of the drawbacks identified or the problems that they are seeking to solve for concerns the rights and obligations of States under public international law, where they are parties to an arbitration.
5775
5780 GAGELER CJ: Going back to paragraph 17, it would be possible to have a State-State private law arbitration covered by the convention even on your submission, would it not?
MS ROUGHLEY: If the source of it is private law rights, possibly, but it would all depend on the set up for it. If for - - -
5785 BEECH-JONES J: A joint venture over a dam on a river, between the two countries.
MS ROUGHLEY: Where a foreign State has in fact entered the private law domain of activities in another State.
5790 GAGELER CJ: Or an arms sale
MS ROUGHLEY: Sorry, I missed the - - -
[Page 132]
5795 GAGELER CJ: An arms sale.
MS ROUGHLEY: Yes, but that is all entering a field of private law. So then, can I come back to the chronology and the other parts of this institutional moment. So, item 19 in the chronology. After the publication of the report I have just taken your Honours to, the Secretary-General has published comments by other States, not limited to the eight member states, on their comments on what they have seen. Item 19.1 is Austria raising an issue about:
5800
5805
'legal persons' –
but it is limited to States consenting:
5810
arbitral awards made in their favour or against them in cases of disputes with subjects of private law.
And goes on to identify an extent to which a possible convention might apply to States or:
5815
corporate bodies under public law –
as being to the extent they have:
5820
rights and duties under private law –
In the comments of Switzerland in 19.4 and the comments of the Society of Comparative Legislation, that private law understanding of being the object of the project continues. Now, that is the ad hoc committee and the response of the States. We then move forward to the second institutional moment, which is item 22, the calling by ECOSOC by resolution 604(XXI) of a conference to conclude a convention, and the recital we have captured in the chronology. It is taking into account the activities of various organisations and the council:
5825
5830
aiming at furthering the development of arbitration - - -
GAGELER CJ: Sorry, where are you reading from, please?
MS ROUGHLEY: Item 22 of the chronology, the ECOSOC resolution 604. The recital itself is:
5835
aiming at furthering the development of arbitration in private law disputes as a measure beneficial to international trade –
[Page 133]
5840 That is the umbrella for this project, and then the resolution:
1. Decides:(a) To call a conference of plenipotentiaries with the following terms of reference:
5845
(i) To conclude a convention . . . on the basis of the draft Convention prepared by the –5850 ad hoc:
Committee . . . taking into account the comments and suggestions made by Governments . . .5855
(ii) To consider, if time permits, other possible measures for increasing the effectiveness of arbitration in the settlement of private law disputes –
We say this hangs together just as the recital is talking about private law and (ii) is talking about private law; (i) and the purpose of what was being contemplated, we say would fall into the same category.
5860
5865 EDELMAN J: One of the difficulties is that the distinction between public and private is not the same between, say, civilian and common law jurisdictions. That may have been one of the reasons why confining the Convention to commercial was abandoned.
5870 MS ROUGHLEY: Given the significance of the courts of one country exercising jurisdiction over a foreign State – or even doing anything with respect to wholly internal affairs in a foreign state which might be the subject of an arbitration – the possibility that this Convention was seeking to create circumstances in which the courts of one State would be doing that - not just in respect of signatory parties but in respect of anyone else – that is a very large proposition, given the whole premise for immunity is that that does not happen but the underlying principle is that sovereign equality and States are sovereign within their territories.
5875
5880 So, this Convention which was providing for recognition on a broader basis than merely having a territorial connection to a contracting party, it is immediately – if it is read so expansively as outside the field of private law - going further. There is nothing in any of this material – and we have sought to be balanced about how we put together the chronology – there is nothing in any of this material that suggests that we are seeking to go beyond, and problem solve with those types of things.
5885
[Page 134]
So, the key parts of this on which would rely is 24. At the first
meeting of the conference, we have Mr Schurmann of the Netherlands
opening the conference as president and identifying that:
5890
A successful conference would constitute some small progress
towards the rule of law and to the smoother settlement of private law
disputes.
5895
Without going into the small parts of what different people have said, can I
come to 38.5 and 38.6, which is where, getting towards the hill of the hunt,
Italy’s delegate wonders:
whether the words “arising out of –
5900
differences:
might not furnish grounds for invoking the Convention in a dispute
between States –
5905
and the president states he:
thought that the Ad Hoc Committee had had no such intention when
it had prepared the draft Convention.
5910
At one point, the appellants sought to say that that was the exclusionary
criteria: only inter-State disputes submitted to the PCA. They now seem to
go beyond that and accept it is all inter-State disputes but have not been
able to identify the exclusionary principle that emerges from this that would
limit the exclusion just to inter-State disputes.
5915
Then we come to the Final Act. Item 41, the Final Act in the
conference on recognition, to which Mr Gleeson referred. We have capped
it at 41.1; the key parts of that text which repeated the terms of the
ECOSOC resolution and its limitations to private law. Then there has been
some papers written by persons who were involved in that project and had
some type of official role in what was happening. The first one I wish to
come to is Mr Contini. You will find his article in volume 10, tab 119,
page 3475.
5920
5925
GAGELER CJ: Are you planning to go through all of the references in
paragraph 20 of your outline?
5930
MS ROUGHLEY: No, just the key ones: Mr Contini, Mr Sanders, if I
have time, and Mr Schachter. Mr Contini, at 3486, Roman (ii). Page 3486
is where he captures what the conference was intending to deal with, its
[Page 135]
object. He notes the reservation – this is about a third of the way down –
and to go to the question Justice Edelman asked me, it does not mean that it:
5935
may apply also to differences of a noncommercial nature. What
other type of differences should then be regarded as falling within
the scope?
It goes on to say:
5940
the most persuasive indication –
is the:
resolution on Other Measures –
5945
in the Final Act:
which refers to the Convention as contributing to “increasing the
effectiveness of arbitration in the settlement of private law disputes.”
5950
And it:
tends to support the conclusion that, except for states making the
reservation mentioned above, the Convention is applicable to arbitral
awards arising out of any private law dispute, whether commercial or
not.
5955
5960
He then goes on in the next paragraph to deal with whether it can capture
States or public bodies, and he concludes, in the last five lines, that it is only
if it is:
a dispute of a private law nature –
5965
and:
There seems to be no apparent reason why the Convention should
not apply also where both parties in an arbitration proceeding are
states or public bodies.
5970
GORDON J: So, there are two matters there. There is, first, that it was
explained in the report that the public enterprises and utilities acting within
the realm of private law are to be regarded as within the scope. Then the
second sentence says:
5975
Although there was no specific discussion on this point, there are
clear indications of a general understanding . . . that where a state or
[Page 136]
other public body has agreed to submit to arbitration a dispute of a
private law nature –
5980
would also apply. You do not challenge that aspect of it?
MS ROUGHLEY: No, both are limited to private law.
GORDON J: And then the next sentence is consistent with your analysis?
5985
MS ROUGHLEY: Yes, I said I would go to Professor Sanders. I will
not, given the time, but I will give the reference. It is joint bundle of
authorities, volume 11, tab 122, page 3560. It is a 1960 article, and the
relevant pages is page 3562 and 3566. Professor Sanders is described as the
grandfather of this Convention. He is the author of the Dutch proposal that
ultimately carried the day.
5990
5995
Oscar Schachter, his is at volume 10, tab 118, and this is relevant to a
question that Your Honour Justice Steward asked yesterday about how far
was the New York Convention trying to solve a problem of sovereign risk.
At 3458, Professor Schachter has, consistent with his role at the
United Nations, set out to present – I am reading from point 4 of the page –
seeking to present:
6000
to survey this area of international activity with the aim of indicating
the extent to which international mechanisms and laws are being
used and developed in regard to the promotion and protection of
private foreign investment.
6005
Can I come then to page 3464, where he looks at investment treaties and
codes and what the suggestions were about was helping facilitate foreign
investment and that these had not, so far, gone far enough. At about point 6
of the page, the end of the last full paragraph, your Honours will see
reference to a code being developed:
6010
by the International Chamber of Commerce, and in recent years
similar proposals have been made by unofficial groups.
6015
And if you look at the footnote, footnote 27, it is a proposed code for the
treatment for foreign investments and other things, squarely dealing with
the types of questions we say the New York Convention was not trying to
problem-solve for. On 3465 is recognising that it would be beneficial to
have such a code and ICSID obviously comes later. Coming through
to 3470, Mr Schachter deals with arbitration between governments and
investors and notes that:
6020
[Page 137]
Whatever may be the obstacles to reaching agreement in
general terms on procedural remedies, experience has shown that
satisfactory provisions –
6025
can be:
in bilateral negotiations –
6030
At the page of the next page, 3471:
From this point of view, the measures which various United
Nations bodies have taken to further arbitration in disputes of a
private law character should, at least in the long run, have a
beneficial effect on the flow of investment capital to
under-developed countries.
6035
6040
That then is the context on 3472, top of the page, where Mr Schachter is
referring to “recognition and enforcement”, and in particular the:
United Nations Convention on the Recognition and Enforcement of
Foreign Arbitral Awards.
6045
We rely on all of this page, but middle of the page, there is a sentence:
The Convention contains no express provision on this point, but its
scope extends to –
6050
the words and then looks at:
The records of the drafting Conference –
and again the restriction to:
6055
an entity having rights and duties under private law.
And the paragraph ends with:
transactions having a private law character.
6060
So, just on 3473, bringing this all together at the conclusion, bottom of the
paragraph, this is the survey of all of the activities that were being
undertaken by the United Nations. There was much going on, but the New
York Convention is not being seen as – to use Mr Schachter's language,
fourth line from the end – “a one-shot” answer to having recognition and
enforcement of awards that relate to arbitrations sourced in public
international law rights and obligations.
6065
[Page 138]
6070
Now, the primary judge – I note the time, if I can just finish off in
three minutes – the travaux and came to the view, after going through it,
that it does not say it is not dealing with States with rights and obligations
under international law. So, the absence of exclusion was significant. At
paragraph 88 through to 92 he then comes to commentators, and he
notes that there is a number of them. We did refer to all of them below.
Mr Contini is dealt with at paragraph 89. Mr Schachter is dealt
with at paragraph 90. He then comes to Professor Crawford –
Professor Crawford's article, the Court was taken to yesterday – at
paragraph 91.
6075
6080
Ultimately, the resolution of all of this is Professor van den Berg and
Professor Bjorklund. In the relevant page of Professor van den Berg that is
ultimately referred to, Professor van den Berg cites the views of Sanders
and Contini. When he says awards, commercial and commercial to be
construed broadly, that is his qualification is to those authors. Fairly read,
we say Professor van den Berg was intending to go no further, and all that
Professor Bjorklund does, as your Honours saw when Mr Gleeson took the
Court there, Professor Bjorklund just refers back to Professor van den Berg.
So, we say none of that undermines what is the real object of his
Convention once properly understood.
6085
6090
That then would bring me to Justice Katsas, to the decision in
Nigeria that your Honours saw yesterday. We would deal with that this
way. In the majority opinion, ultimately they end up deciding that Nigeria
and the award was in scope because they saw the arbitration was governed
by Nigerian law and they took the view that this was not
Convention-excluded because it dealt with international law matters.
6095
6100
Judge Katsas in dissent took a different view of that. On one view it
is a narrow difference between them, but to the extent the Court is dealing
with this question, we do rely on the reasoning of Justice Katsas at least
insofar as it is carving out from the scope of the New York Convention
arbitral awards of the kind to which the Quantum Award is, which concerns
rights and obligations arising under public international law. I note the
time.
6105
EDELMAN J: Just a very quick question before you sit down. If there is
an arbitration between an investor and a State that raises private law issues
of dispute, what happens if the investor also wishes to raise an issue of, say,
public international law in the same dispute? Is there no jurisdiction then or
is that carved out?
6110
MS ROUGHLEY: I would say it will always be fact-specific, but can I
do it by a concrete example by reference to the BIT here. We have a BIT
[Page 139]
6115
here that in Article 8 gives investors certain rights then in Article 9 provides
for arbitration between States. In both of those cases it is rights and
obligations being determined in the arbitration that are purely a matter of
international law, and we would say that carves it out. If there ends up
being some difficulty because an arbitration is partly a private law field and
partly out, we would say it is outside the scope. The New York Convention
is dealing with arbitration explicitly concerned with private law.
6120
6125
GAGELER CJ: Was Judge Katsas drawing the same distinction between
private law and public international law that you are drawing? Or was he
drawing a different distinction between States acting in one capacity and
States acting in another capacity – the other capacity being what he calls a
sovereign capacity like an act-of-State notion?
6130
MS ROUGHLEY: Judge Katsas goes further and what I sought to do was
saying this Court does not need to decide the “further”. It is enough to
carve out the States acting on the international plane. The majority said that
was a question that they were reserving until later. They said, at page 1639
of the joint book of authorities, or page 1071 of the report:
6135
We do not resolve that ambiguity –
of inter-State arbitrations:
for there are at least two things that may distinguish arbitration
between states –
6140
GORDON J: Where are you reading from, Ms Roughley?
6145
MS ROUGHLEY: The very bottom of joint book of authorities 1649, at
the very bottom of report 1071. They go on to give two reasons, and the top
reason on page 1640, report 1072, is:
there is other evidence from the drafting history suggesting that the
Convention does not apply to disputes between states over violations
of international law.
6150
And then notes that, ordinarily:
disputes between states are ordinarily governed by public
international law, while disputes between states and individuals are
not.
6155
And they go on in that same paragraph, so left-hand column, middle of the
page:
[Page 140]
6160
the arbitration between Nigeria and Zhongshan was governed by “the
law of Nigeria as supplemented by international law –
6165
So, Judge Katsas in dissent did not think that that distinction would solve it.
Judge Katsas says this is all arising from rights and obligations in
international law, and he goes further than that to say the convention does
not apply to governments acting as sovereigns, and he expresses it in that
general way. But there is that degree of overlap between them as to
working out: is the arbitration governed by rights or dealing with rights and
obligations under international law? That is the territory on which we
say - - -
6170
6175
GAGELER CJ: Sorry, there are lots of cases where, by reason of there
being an arbitration agreement and a submission to arbitration that you have
United States courts enforcing awards made in an investor-State context
under the New York Convention. All of those cases would be wrongly
decided on this submission, insofar as they relied on the arbitration
exception to sovereign immunity in the United States.
6180
MS ROUGHLEY: Two answers to that. One, as Judge Katsas goes
through them in descent, the issue was not raised, and so not wrongly
decided in the sense issue not joined. Two is that we say it will always
depend on the facts as to working out whether what the arbitration is
concerning a private law field or is concerning public international law
rights and obligations, and that would be fact-specific. One would need to
go through each of the cases in order to work out which side of the line it
would fall on, but what we do get is a line and exclusionary criteria.
6185
GAGELER CJ: Thank you. Mr Solicitor.
6190
MR DONAGHUE: Your Honours, the Attorney-General in oral argument
will focus on three of the arguments, but given the constraints imposed by
the division of time, I am going to have to pick out particular points of
significance within those arguments rather than attempt to address any of
them in a comprehensive way. So, I hope your Honours will forgive me for
that.
6195
6200
The three topics are, first, something briefly on the scope question of
the New York Convention – the matter that has just been addressed arising
out of notice of contention 2. Second, arising out of notice of contention 3,
some arguments in support of the proposition that ratification of the
New York Convention clearly unmistakably waives sovereign immunity
with respect to proceedings to recognise or enforce awards subject to the
effect of the commercial reservation.
[Page 141]
6205
On those two issues, the Commonwealth broadly supports the
appellant in this Court. The third issue relevantly to the appeal grounds is
the reciprocal effect of the commercial reservation, and on that we support
India and the conclusion reached by the Full Court below. On the notice of
contention 2 question – and I will endeavour to be very brief here – there
was some discussion yesterday of whether a State can be a person at all for
the purposes of Article I(1). You have been taken to some passages in the
travaux that refer to that topic and Professor Crawford's article from 1980
that also refers to that topic.
6210
6215
The passage of time since those sources came into existence is, we
submit, important because there has been very considerable State practice in
the application of the New York Convention in the last 45 years since
Professor Crawford wrote what he wrote. That State practice is relevant to
the interpretation of the Convention as expressly contemplated by
Article 31(3)(b) of the Vienna Convention which permits recourse to:
6220
Any subsequent practice in the application of the treaty which
establishes the agreement of the parties regarding its interpretation –
6225
There is, as your Honours know, decades now – four or five decades
worth – of investor-State disputes being conducted in particular under the
UNCITRAL rules, where they are almost invariable enforced by reason of
the New York Convention.
6230
You will have seen in the primary judge's reasons in the paragraph
just after the paragraph Ms Roughley just took you to – it is in the core
appeal book at 54, paragraphs 92 and 93, but in the commentary –
particularly Professor Bjorklund commentary – she notes that:
6235
many bilateral investment treaties permit investors to choose –
between:
the ICSID Convention or to convene proceedings under other arbitral
rules, and that under the latter option –
6240
I am reading the middle of the page here:
nearly always –
6245
the awards are:
subject to enforcement under the New York Convention –
[Page 142]
6250
The primary judge accepted that view and then there is a reference in
paragraph 93 to the researchers that underpinned the annexure to
his Honour's reasons revealing:
30 occasions when the New York Convention has been applied to
investor-State arbitral awards, 20 of them involving breaches by
States of bilaterial investment treaties.
6255
6260
The United Kingdom decision of Sir William Blair you have been referred
to recognises in paragraph 29 that awards against States:
are frequently enforced under the NYC.
6265
In Zhongshan in the Court of Appeal, at page 1066 of the report, the
DC Circuit Court of Appeal recognises the same thing. So, in our
submission, there is a large body of subsequent State practice including not
just the awards mentioned there but also all of the agreements the States
reach, including I might say major both bilateral investment and multilateral
investment treaties that contemplates at least the possibility of arbitration
under the UNCITRAL rules to be enforced by the New York Convention.
6270
That is all predicated on the idea that at least some of the time
disputes involving States are within the scope of “person” under the
New York Convention, and it would be a truly seismic event in the world of
international arbitration if this Court were to hold that States can never be
persons for the purpose of events of that kind.
6275
6280
There were at times in the argument yesterday – it seemed to be
being suggested – that that issue was in play in this Court under notice of
contention 2, but we submit it is not. The terms of notice of contention 2
begin by saying: insofar as States may be persons. I will just get the
language exactly right.
BEECH-JONES J: I do not think Dr Roughley contradicted that a second
ago.
6285
MR DONAGHUE: No, I do not think she did either. I was more
referring to some of the exchanges yesterday. As Dr Roughley just
developed, it is about what the subset is, but it acknowledges that there is no
line that says – based on the very consistent State practice over the last
decades it is clear, we submit, that “persons” sometimes includes States.
6290
6295
As Professor Crawford acknowledged long ago, once you reach that
conclusion, it is quite difficult to see why “person” does not always include
States, and that is the submission that we take, but I immediately emphasise
that that is not to say that State-State disputes are necessarily within the
[Page 143]
Convention, because that assumes there are no other limiting concepts to be
found in Article I(1), and your Honours have in the course of argument
identified a number.
6300
So, the Chief Justice, yesterday you referred to the possibility that
legal differences bears on the question, and there are a number of other
hooks that in an appropriate case would need to be explored to work out
whether, for example, the public international law line that Dr Roughley
just developed should be accepted or not.
6305
6310
Our submission though is that your Honours should not accept the
invitation made expressly in terms in India's rejoinder in paragraph 3,
where it said the Court has to decide whether all awards to which States are
a party are always or never within the scope of the Convention, or to
attempt to state exhaustively the “preferable criterion” for answering that
question. That would be a substantial advisory effort on your Honours'
part. What you have to do, in our submission, is much narrower than that.
You have to rule upon the argument just developed by Dr Roughley to the
effect that there is a carve-out as developed just then by reference to private
law matters.
6315
6320
Your Honours will immediately recognise – and some of the
question has highlighted this – that within the commentary within the
submissions this morning, indeed comparing the submissions this morning
to the written submissions, there are quite a range of different ways that that
carve-out might be identified. In writing, our friends said “commercial or
private law disputes". Today, I think it was “private law disputes", but in
writing our friends also said: is it a distinction between conduct of a "State
jure imperii or in its governmental capacity” idea – which is closer to
Judge Katsas – or is it something different?
6325
6330
The very range of possible confinements, in our submission, points
against that kind of argument in circumstances where, as Justice Edelman
pointed out, you had an attempt back at the negotiating stage to limit the
Convention expressly to commercial matters, which failed, and you then
have as an answer to that, we submit, the commercial reservation which
allows States to ensure that, so far as their own obligations are concerned,
the Convention can be tied back in that way.
6335
Given the limits of time, I do not really propose to say anything more
on this point than to refer your Honours to the majority in Zhongshan, and
in particular to pages 1068 to 1074, where you see the majority discussing
multiple examples of United States courts enforcing awards under the
New York Convention which, according to the majority, are awards with
respect to sovereign conduct. That is Zhongshan itself but also the
6340
[Page 144]
authorities that they there discuss. Having looked at arguments based on
the travaux of a similar kind advanced here, their Honours say on 1073:
The "[c]herry-picked generalizations from the negotiating and
drafting history" that –
6345
are cited:
"cannot be used to create a rule that finds no support in the treaty's
text."
6350
6355
And we submit your Honours should reach the same conclusion. You can,
as the Court did there, leave for another day the question of whether there is
a line drawn by reference to public international law or private law or the
hybrid kind of case your Honour Justice Edelman mentioned. In
Zhongshan, the line that was drawn was that it was said that it applies at
least to:
sovereign activity directed at a non-state entity and that is governed,
in part or in whole, by domestic law.
6360
That is at the bottom of the left-hand column to the top of the right-hand
column on 1072. That is all I seek to say about notice of contention 2.
6365
GORDON J: Can I just ask three questions about that. Is that to say that
in Zhongshan they said you do not find anything in the text but it is
apparent, at least from the materials we have been taken to yesterday and
today, that it was initially concerned with private international law, which I
understand you accept?
6370
MR DONAGHUE: Private law, yes.
6375
GORDON J: Private law. I had meant to say private law, thank you. The
third proposition, then, is time has moved on and one then deals with it by
reference to those materials rather than having the initial materials dictating
the result?
6380
MR DONAGHUE: Well, yes, your Honour, because we now know that
bilateral investment treaty arbitrations are very commonly enforced under
this award. They have their sources, the Chief Justice pointed out, in
international law.
6385
Those agreements can contemplate the – both provide the agreement
to arbitrate and the content of the law that is in existence in the arbitration,
but your Honours just do not need to decide anything more than that the
proposition as it now seems to be advanced – which is that there is an
[Page 145]
unstated limit that this convention can only apply to something identified as
private law according to whatever standard that might be, because it does
vary from place to place – we submit your Honours should not accept that.
6390
6395
You should say that limitation has no foundation in the text. There
may be other limitations, including limitations by reference to the content of
the source of law, but that is a question for another time, just as it was in
Zhongshan. Your Honours, on topic 2, the effect of the ratification, at times
yesterday this issue was approached on the basis that it is in some way a
radical or a new idea that ratifying the New York Convention involves a
waiver of immunity. Given the time, I largely adopt what Mr Walker has
said on this topic.
6400
But we do note that the conclusion that the primary judge reached, at
paragraph 43 – that the Full Court said had much to be said for it – is the
conclusion that is supported not just by the unqualified text of Article III,
but also by the United States cases that I am about to come to and by the
International Law Commission in work that was cited by this Court in
Kingdom of Spain where the ILC listed multilateral conventions which
involved waiver of immunity.
6405
6410
The list that they included set out both ICSID and the New York
Convention, and in Kingdom of Spain the inclusion of ICSID in that list was
regarded as a matter of some significance, and we say the same is true here.
Without going to it, the reference is paragraph 75 of Kingdom of Spain,
which refers to an ILC report that your Honours have in volume 10,
tab 105, and that in turn refers to a list of multilateral treaties which
your Honours have in volume 12, tab 129.
6415
BEECH-JONES J: Sorry, what paragraph of Kingdom of Spain was that,
again?
MR DONAGHUE: In Kingdom of Spain?
6420
BEECH-JONES J: Yes.
MR DONAGHUE: Paragraph 75, your Honour, and particularly
footnote (134).
6425
BEECH-JONES J: Thank you.
6430
MR DONAGHUE: Whether or not your Honours accepted there is a long
history of that being ratification resulting in waiver being a view that has
been taken about the New York Convention, it is not something that an
ultimate appellate court anywhere in the world has ever ruled.
Your Honours would be the first.
[Page 146]
6435
One of the propositions that has been advanced against that
argument – and Mr Gleeson foreshadowed that I would make this
submission based on our outline – is that it is said that the consequence of
our argument would be that it would be necessary for parties to the
New York Convention to enforce awards against non-parties to the
Convention – the Nauru and Tuvalu situation – because it is said, well, if
Article III is not subject to sovereign immunity, it must follow that once
States accept an obligation to recognise and enforce awards, they will have
that obligation in the same way as against parties and non-parties. We
submit that that is simply not so.
6440
6445
The reasoning path by which we get there is we start at the same
position as India, in that we accept, of course, that all States have a
customary international law right to sovereign immunity and that that right
carries with it a corresponding obligation on the part of other States to
respect the immunity. Mr Gleeson took you to the ICJ decision in
Jurisdictional Immunities, and we agree with what he said about that case.
So, the starting point is that all States have an international obligation to
respect the sovereign immunity of all other States.
6450
6455
Against that starting point, the New York Convention cannot
properly be interpreted as affecting the sovereign immunity of States that
are not party to it, and the interpretative route by which one arrives at that
conclusion is that Article 31(3)(c) of the Vienna Convention says that it is
necessary to take into account an interpretation:
6460
Any relevant rules of international law applicable in the relations
between the parties.
And one of the most fundamental of such rules is the pacta tertiis rule. It is
described by Professor Crawford in the handout we gave you that
Mr Gleeson took you to as a fundamental principle of international law. It
is the treaty version of privity of contract.
6465
6470
In effect, the rule means State A and State B cannot get together and
agree with each other that they will infringe the rights of State C. Treaties
just do not work that way, so that the non-party is properly treated as never
in the contemplation of obligations that are taken on by the parties to either
a bilateral or a multilateral agreement, because States do not contract about
the rights of non-party States. That idea is found partly expressed in
Article 34 of the Vienna Convention, which is a partial statement of the
pacta tertiis rule. Article 34 says:
6475
A treaty does not create either obligations or rights for a third State
without its consent.
[Page 147]
6480
And the reason we gave your Honours Professor Crawford's extract from
Brownlie is that he points out that that paragraph, that article of the Vienna
Convention, falls slightly short of a complete statement of the pacta tertiis
rule, because, to quote Professor Crawford:
This falls slightly short of expressing the customary rule, however:
besides not creating obligations or rights, treaties cannot infringe the
rights of third states without their consent.
6485
6490
So, for the non-party State, we submit that the fact that other States have
agreed with each other that they will enforce awards can say nothing about
their customary right to immunity. They just still have that right.
Article III is construed as subject to it, but for the parties, that rule – the
pacta tertiis rule – has nothing to say.
6495
The question – the interpretive question concerning Article III is
then, once you ratify the Convention and take on Article III obligations and
accept that other States will have Article III obligations with respect to you:
does that involve a waiver of immunity? The United States cases in
particular say yes, and I am about to come to them, but the distinction that I
have just drawn between the effect of the Convention on parties and
non-parties has been recognised in the United States case law.
6500
6505
So, it was first recognised in a case I do not think you have been
taken to, which is Creighton v State of Qatar, it is in Volume 5, tab 24. It is
one of the line of cases in the DC Circuit, this one decided in 1999. When
your Honours have it, if you could turn to page 122, you see at 122 the
beginning of the relevant discussion, it is a discussion of the waiver
exception. So, you see in the left-hand column:
6510
Implied Waiver –
The waiver exception from the United States statute is set out, and the
argument reflects a distinction that is of some significance in the argument I
will develop about the United States cases, which is the distinction between
whether an agreement to arbitrate subject to the law of a foreign State is a
waiver of immunity, which is one kind of argument, and an agreement that
ratification of the New York Convention involves a waiver, which is
another kind of argument.
6515
6520
This argument was the former. The argument was that by agreeing
to arbitrate in France, Qatar had waived its sovereign immunity. The
argument was sought to be developed by reference to Seetransport and
some of the other cases that you have heard about. Over the page on 123,
[Page 148]
6525
you will see, in the right-hand column after a citation of Seetransport and
some others:
In each of these cases, however, the defendant sovereign was (unlike
Qatar) a signatory to the Convention. In Seetransport the Second
Circuit reasoned, correctly we think, that “when a country becomes a
signatory to the Convention, by the very provisions of the
Convention, the signatory state must have contemplated enforcement
actions in other signatory states.” . . .
6530
Qatar not having signed the Convention, we do not think that
its agreement to arbitrate in a signatory country, without more,
demonstrates the requisite intent –
6535
6540
So, two points out of that. Clearly, the court distinguishes in the waiver
effect between parties and non-parties. Second, it endorses the reasoning in
Seetransport – this is the Circuit Court endorsing the reasoning of a
different circuit, the second circuit from Seetransport, correctly, we think –
that by becoming a signatory, there was waiver. No elements - - -
6545
GORDON J: I do not think they are saying that, though, in Seetransport
or here. What they are saying is that it was not sufficient for waiver, you
were just on notice that they contemplated enforcement. The words are:
the signatory state must have contemplated enforcement actions in
other signatory states.”
6550
I think it is less than waiver.
MR DONAGHUE: Well, your Honour - - -
6555
EDELMAN J: Necessary but not sufficient.
MR DONAGHUE: That is - - -
6560
BEECH-JONES J: Are they saying, we have condition – unlike in
Mr Gleeson's conditions, where here we have condition (2) – we have
condition (1), but we do not have condition (2).
MR DONAGHUE: We had condition (2), but we did not have
condition (1) in this case.
6565
BEECH-JONES J: Yes.
MR DONAGHUE: So, we had an agreement to arbitrate but no - - -
[Page 149]
6570
BEECH-JONES J: Convention. You are right, yes.
MR DONAGHUE: - - - ratification, and because there was no ratification,
no waiver.
BEECH-JONES J: Yes.
6575
MR DONAGHUE: It was the conclusion.
BEECH-JONES J: You need - - -
6580
MR DONAGHUE: So, I recognise I am going to need to meet the
condition (1), (2) idea, but certainly immediately seeing no sign of
condition (3). In most of these cases, you see no sign of condition (3), for
reasons that I will come to in a minute.
6585
GORDON J: So, I just want to make clear – I had misunderstood – are
you putting that that passage you have just taken us to is suggesting that the
mere signing or ratifying of the Convention is the waiver?
6590
MR DONAGHUE: Yes, but I do not suggest that that means that there
does not need to be an arbitration agreement on the scene, because unless
you have an arbitration agreement, you will never have an arbitration
award, and unless you have an arbitration award, you are not within the
territory of Article I. So, clearly it needs to be there as at least a factual
precondition, but what I contest - - -
6595
GORDON J: What does that mean “at least needs to be there”, what
does that mean?
6600
MR DONAGHUE: It means you do not need, as Mr Gleeson would have
it, to embark upon proof or to have a debate about the legality or otherwise
of the arbitration agreement if the waiver argument is based on the waiver
exception. You do if it is based on the arbitral exception, and that is one of
the distinctions that you find expressed in the case law, which we submit
has been suppressed in this - - -
6605
GLEESON J: Why do you need it if, as you comment, you already have
an award?
6610
MR DONAGHUE: Well, once you have an award, in my submission, you
do not need more, but you will not have an award unless you have
something that has at least been treated as an arbitration agreement as a
factually prior condition.
[Page 150]
6615
GLEESON J: My question is why do you need an agreement if you
already have an award, if it is only an ex facie agreement? What on earth
could it add?
MR DONAGHUE: What could the agreement add?
6620
GLEESON J: Yes.
6625
MR DONAGHUE: Well, your Honour, I think I am in heated agreement
with you in that. In my submission, what these cases say – Seetransport
and a number of the other cases say – is what they treat as significant is
what a country must have been taken to have accepted by ratification of the
Convention. But that does not mean – the references in the authorities to
there being an award or to there being an agreement are totally explicable,
we submit, because it is – will always be at least an award, as your Honour
put; always be part of the factual context that gets you into the New York
Convention.
6630
6635
Where I think I part company from Mr Gleeson is that he says, well,
the kind of issue about the validity of an arbitration agreement or not, which
is one of the things that you can litigate under Article V of the New York
Convention – Article V(1)(a) of the New York Convention says one of the
limited grounds you can fight about on a set-aside application is whether
there was an agreement or not. He takes that and tries to put it into
Article I, and we say no.
6640
BEECH-JONES J: On your view, if the domestic law of a particular
treaty country said: you can invoke our arbitration procedures against the
foreign State without them agreeing for some underlying dispute – you then
get an award, you can go off and enforce. The mere fact of them entering
the Convention is enough for waiver and you can enforce that award under
the sovereign immunity exception around the world.
6645
MR DONAGHUE: Well, your Honour, there I am not sure I fully
understand what the - - -
6650
BEECH-JONES J: In other words, you do not have an agreement to
arbitrate.
6655
MR DONAGHUE: Well, whether you can truly describe what
your Honour has just put to me as an arbitral award is, in my submission, a
very live question, because in this Court's jurisprudence – and including I
think on TCL, for example – it is the consent to arbitrate that is at the heart
of the whole idea. So, a unilateral process that labels something as an
award but that does not have that consent as part of it might – I said there
[Page 151]
6660
are other limiting concepts, one of them is the concept of an arbitral
award - - -
BEECH-JONES J: I see.
6665
MR DONAGHUE: - - - and I would submit, in answer, that you would
bite on a different limiting concept. I note the time, your Honours, I have
gone - - -
6670
GAGELER CJ: Mr Solicitor, how are we going for time?
MR DONAGHUE: Well, we are moving as fast as we can, and I
understand I have to finish. The five minutes I have just taken into the
lunch break were borrowed back from my friend.
6675
GAGELER CJ: Yes, of course.
MR DONAGHUE: So, I will stop when I am supposed to stop,
your Honour.
6680
GAGELER CJ: Very well. We will take the luncheon adjournment.
6685
AT 12.49 PM LUNCHEON ADJOURNMENT
UPON RESUMING AT 2.13 PM:
6690
MR DONAGHUE: Your Honours, can I turn now to the United States
cases, and in particular to address India's proposition that the United States
cases support the proposition that you need the three elements that they
have identified in order to engage the waiver exception. I am going to take
your Honours to two cases, in due course, in relation to that.
6695
6700
Can I say at the outset that while India's submissions acknowledge
that there are two distinct exceptions under the relevant United States
statute – the waiver exception, which resembles our section 10, and the
arbitration exception – their oral submissions took your Honours, on some
occasions at some length, to passages in the cases that concerned the
arbitration exception, and in particular to passages in those cases where the
need for a valid arbitration agreement is emphasised as a component of the
application of the arbitration exception.
6705
[Page 152]
6710
We take no issue with that proposition but submit that it helps
your Honours not at all in resolving the question that is before you, because
there is no cross pollination between the requirements of those two quite
different statutory exceptions, so that in many of the authorities – and it
happened again this morning in NextEra – having dealt with the part of the
reasoning concerning waiver, your Honours were then taken on to a
separate discussion in the case that required things, including things that
look a lot like the three-part test that is being urged upon you, which were
occurring in the United States authorities in the context of the different
statutory provision, and I will make that good when I get there.
6715
6720
As to the three conditions, we submit that the third condition, which
is participation in the arbitration in which the award was issued, is rarely
mentioned in the authorities. It seems to have its genesis in what, at least on
one view of it, was a recounting of what had factually occurred in
Seetransport. It is not mentioned in NextEra or Tatneft at all. It is not
mentioned in some of the authorities, including the authorities that our
friends that – the commentaries, rather, that our friends have taken you to.
6725
6730
As a matter of principle, condition 3 in particular is completely
unjustified, because it would mean that a State that has ratified the
New York Convention and has entered into an arbitral agreement could
escape the consequences of having a binding and enforceable award made
against it by defaulting an appearance before the tribunal. So that, if it had
honoured its legally binding commitments under the arbitration agreement
on our friends' case, provided you do not show up - - -
6735
EDELMAN J: You can only escape that outside the courts of a
supervisory jurisdiction or the courts of the seat of the arbitration.
MR DONAGHUE: They would say, I think, your Honour, that they have
sovereign immunity, which would answer that supervisory jurisdiction.
6740
EDELMAN J: I think the respondent's position was that that the second
condition was perhaps limited to the seat of the arbitration in the
supervisory courts over the seat of the arbitration, but that it would not
apply to all State parties to the Convention.
6745
MR DONAGHUE: I had not understood that, your Honour, but that may
be so. Even if that would be so, we still submit that it is an unprincipled
additional requirement to participate in the arbitration and not one that you
find having any particular support in the authorities.
6750
Condition 2 is more complicated – this is the requirement for there to
be an arbitration agreement. I have called it in writing that it needs at least
[Page 153]
to exist as a factum, but it may be that much depends on exactly what that
condition is said to mean, because we understand India to assert that what
that condition requires is that the existence of a valid arbitration agreement
be proved in order to engage the waiver exception. We submit the United
States cases do not support that proposition.
6755
6760
If instead it meant that what you need to do is have an arbitration
agreement that meets the requirements of Article IV of the New York
Convention, because your Honours will recall that in order to obtain – in
order to give effect to the Article III obligation to obtain recognition and
enforcement of an award, the party applying for recognition and
enforcement needs to provide both a duly or authenticated original award,
or a duly certified copy, and the original agreement referred to in Article II.
6765
That having been done, the scheme of the New York Convention is
that, under Article V, there are a limited and exclusive set of grounds upon
which recognition and enforcement can be refused. The first of which is
that:
6770
The parties to the agreement referred to in article II were, under the
law applicable to them, under some incapacity, or the said agreement
is not valid under the law to which the parties have subjected it –
6775
So, the scheme of the Convention, we submit, is that the question of the
validity or otherwise of the arbitration agreement is one of the exclusive
grounds that can be relied upon on a set-aside under Article V.
6780
If what our friends were saying – or what your Honours were to
find – was that you need to have an arbitration agreement that can meet
Article IV, and so the validity of which can be tested under Article V, then
that is a plausible reading of the authorities, because you will not be in the
territory of having an award that is capable of recognition and enforcement
under the New York Convention unless you have that. Our submission is
that if you have that – which I think was referred to as a prima facie award
in some of the argument yesterday – and you have ratification, we submit
that the United States authorities do not support the idea that you need
anything more.
6785
6790
Justice Jackman at first instance looked at the United States
authorities, and can your Honours go to the core appeal book at page 32,
paragraph 45; you will see the commencement of that discussion. So, in
paragraph 45 there is a discussion of Seetransport, including a block quote
of the key reasoning. Then in paragraph 46 there is a discussion of
Creighton, and at the of that paragraph reference to Tatneft, and then in 47 a
reference to the first instance decision in Blasket, which I think is the case
that comes on appeal next year, which is one of the two cases I am about to
6795
[Page 154]
go to, where Judge Leon had found – and you see this about 10 lines
down – that it was a prerequisite to the existence of the waiver exception
that there was a valid agreement to arbitrate. Justice Jackman records that:
6800
Judge Leon did not undertake any detailed analysis of the terms of
the New York Convention –
6805
to support that:
From the point of view of an Australian Court –
it is under appeal:
6810
From the point of view of an Australian Court –
he did not find its reasoning persuasive. Then his Honour said:
6815
While I accept that the reasoning in Seetransport in the passage
which I have extracted above does refer to the parties having entered
into an arbitration agreement as a matter of fact, that was in the
context of a case in which there was no issue as to the validity or
applicability of the arbitration agreement. It was not necessary for
the Court in Seetransport, Creighton or Tatneft to consider whether it
would have been sufficient . . . to have tendered what appears on its
face to be an arbitration agreement, together with the award.
6820
6825
And we submit that his Honour was right to read the cases in that way. Can
I take your Honours first to NextEra, which is volume 5, tab 34.
BEECH-JONES J: Although what again was the agreement on its face
amounting to an arbitration agreement? Was that the BIT in this case?
6830
MR DONAGHUE: In this case, I think so, yes, your Honour, the
agreement to arbitrate in the BIT. So, NextEra was a case decided last year.
It discusses both the waiver exception and the arbitration exception. It is
true that the Court ultimately decides the case on the basis of the arbitration
exception, but the fact that the matter is being litigated and discussed in the
DC Circuit last year rather points against the proposition that it is all now
about the arbitration exception and that there is no need to consider the
waiver exception anymore. Quite a number of the cases are quite recent
cases which discuss both.
6835
6840
So, you see in NextEra that it was decided on the waiver exception at
page – I am using the pages in the report, rather than the joint book of
authority pages, but on page 1100. The discussion of the waiver exception
[Page 155]
occurs relevantly on page 1099. So, your Honours see in the right-hand
column, just above the heading 1:
6845
The companies contend that two of the FSIA exceptions apply in
these cases: the waiver exception and the arbitration exception.
6850
Heading 1 then discusses the waiver exception. The arguments recorded in
the middle of that paragraph which Mr Gleeson read out, the contention that
there was an implicit waiver from ratifying ICSID from the New York
Convention, and the argument effectively is, the last few lines of that
paragraph:
6855
By mutually agreeing with other sovereigns to enforce arbitral
awards . . . the logic goes, Spain waived its immunity defense against
such an enforcement action in U.S. court.
6860
Embracing that logic, the Second Circuit has held that, by
ratifying either convention, a country implicitly waives its sovereign
immunity from suits seeking to enforce awards under that
convention.
6865
Now, you do not see there the court reading Seetransport as saying by
ratifying and by having a valid arbitration award and by participating in
arbitration itself. That is not how they identify it. That proposition is
supported in part in the ICSID context by this Court's decision in Spain.
6870
Then in the left-hand column on page 1100, the waiver issue is
acknowledged as being remaining “unsettled”. There is citation of
Seetransport. So, to be sure, we have twice approvingly cited Seetransport,
the cases being Creighton, which correctly held that the foreign sovereign
waives immunity when it joins the Convention – again, you do not see
elements 2 and 3 – then there is a reference to Tatneft:
6875
“a sovereign, by signing the New York Convention, waives its
immunity from arbitration-enforcement actions in other signatory
states."
6880
And then their Honours say, well while:
we have favorably cited Seetransport and its reasoning in dicta . . .
we have not formally adopted it."
6885
and we leave that for another day. So, that - - -
GORDON J: So, it was put against you in relation to that paragraph by
Mr Gleeson that they are not deciding it and that one should read the
[Page 156]
reference to Seetransport as having approved steps 1, 2 and 3. Then, in
relation to Tatneft – that there was a binding arbitration agreement – there
was no issue in dispute in that case about that fact.
6890
6895
MR DONAGHUE: I think Justice Jackman was right to say there was no
issue in dispute about any of those cases. In Seetransport itself, the three
limbs – there is no passage in Seetransport that says, in order for the waiver
exception to be engaged, you must have 1, 2 and 3.
6900
There is a paragraph at the end of the reasoning in Seetransport that
refers to all of those three things having happened, but the reasoning in the
passage that Justice Jackman set out – and that your Honours have already
seen – focuses on the effect of ratification of the Convention. It is seeking
to do a lot of work to take the reasoning in NextEra, citing those other cases
which focus on the ratification being the critical thing, and saying: well,
actually, there are these additional requirements.
6905
STEWARD J: So, your point is that step 1 is the principal. Steps 2 and 3
are merely descriptive of what may have happened in the case.
6910
MR DONAGHUE: Indeed. That is how Seetransport can easily be read.
While it can easily be read in that way, I am seeking to acknowledge that, as
a practical matter – as Justice Jackman put it, I think as a matter of fact –
unless you have got an arbitration agreement leading to an award, you could
never have a recognition and enforcement proceeding under Article I. So, if
your Honours said you need to have that – you need to have an agreement
that at least, on its face, would satisfy the requirements of Article IV – then
that would make no difference, in my submission. You could characterise
the waiver.
6915
6920
What you do not see in these cases, and what India is inviting you to
find, is a requirement that a State – I think a requirement that a person
making a claim against a State – proves, as part of establishing a waiver
exception, that there is a valid arbitration agreement. So, import the whole
litigation debate that might happen under Article V(1)(a) into the prior stage
at sovereign immunity. You just do not see the United States courts saying
that.
6925
6930
In contrast to the discussion, you do see in the context of the
arbitration exception where that very thing must be done in order to
establish the exception. Can I try to make that good by taking you to –
sorry, actually, just before you leave NextEra - - -
GAGELER CJ: Why would it be harder to establish the arbitration
exception in principle?
[Page 157]
6935
MR DONAGHUE: Because, your Honour, in principle that agreement –
that exception is directed to the previously-contested question about
whether just agreeing to arbitrate in a foreign country is enough for you to
lose your immunity by itself. Well, I say “by itself”. That plus one of a
number of different alternative criterion, one of which is the applicability of
the New York Convention, but there are various other limbs as well.
6940
6945
They are dealing with a situation in which waiver might have
nothing to do with an international convention relating to recognition or
enforcement, it is where just agreeing to a contract with an arbitration
clause in it might get you there. If that is the basis upon which waiver is
said to have occurred, in my submission, one can readily see why there
needs to be a valid agreement.
6950
If the agreement itself, the arbitration agreement, is the source of the
waiver, then it needs to be a valid agreement. If the arbitration agreement is
not the source of the waiver but it is the ratification of the Convention that
is the source of the waiver that then depends contingently upon a
subsequent entry into an agreement to be recognised or enforced, then that
takes you somewhere different.
6955
GAGELER CJ: So, is the effect of your submission that those cases that
have required a valid agreement for the arbitration exception to apply, they
have just made hard work of it, and that the waiver exception was
applicable all along.
6960
MR DONAGHUE: Well, if the relevant party has ratified the New York
Convention. So, in Creighton, for example, it had not. Qatar had not. So,
that is one of the cases where there was a relevant difference between the
two. If your Honours still have NextEra, you will see on the right-hand
column, paragraph [6, 7] together, and Mr Gleeson read to you part of this.
6965
So, their Honours have just said: we will leave waiver aside, we will
decide on the arbitration exception – they set out part of the exception, at
the top of that column, and then they say:
6970
To proceed under this clause of the FSIA's arbitration
exception, we have explained, a district court must find three
"jurisdictional facts”: (1) an arbitration agreement, (2) an arbitration
award, and (3) a treaty potentially governing award enforcement.
6975
And then they say:
The plaintiff must initially satisfy a burden of –
[Page 158]
establishing these facts, et cetera, et cetera. That looks a lot like the kind of
argument that India is trying to import into the waiver exception. You see
something similar – your Honour Justice Gordon asked some questions
about Zhongshan v Nigeria yesterday, on page 1067, where those
requirements are exactly what the court is discussing, but they are doing it
in an arbitration exception case, not a waiver exception case.
6980
6985
Your honour the Chief Justice asked in that context, he referred to
the sentence and I think the majority were also focusing just on that. They
make that express in footnote 4 on that page, on page 1067. So - - -
6990
GORDON J: Is the high point of this line of argument what appears in
Seetransport at 578 at the bottom up to the top of the page? Bottom of the
first column up to the top of the next column?
6995
MR DONAGHUE: Did your Honour say 578?
GORDON J: I did.
7000
MR DONAGHUE: Yes. So, in the middle of 578, in the left-hand
column:
Thus, when a country becomes a signatory . . . by the very provisions
of the Convention, the signatory State must have contemplated –
7005
then the paragraph your Honour puts to me. Where the three parts seem to
come from is from the last paragraph in the bottom of the right-hand
column on 578 over on to the top of 579, which reads as a concluding
paragraph referring to what has happened factually:
7010
when Navimpex entered into a contract with Seetransport that had a
provision that any disputes would be submitted to arbitration, and
then participated . . . logically –
7015
as a signatory, it must have contemplated involvement. That is an
application of the legal test stated in the left-hand column on the previous
page, and it has turned into this three-part test in the submissions against us,
but that it is not how – it is true, as our friends say, that there are
single-judge decisions that have read it in that way, as having the three-limb
requirement, but equally there are other decisions in which it has not been
read in that way.
7020
We submit, as a matter of principle, your Honours should not
effectively import from the arbitration exception or from Article V a
requirement to do something that none of these cases, certainly in terms,
[Page 159]
suggest needs to be done in order to engage the waiver exception, which is
to prove a valid agreement.
7025
7030
Your Honours, given the time, I would seek to leave the United
States cases there, although I should perhaps also note there is one more
case, Amaplat v Zimbabwe, in volume 4, tab 13. It is another appellate
decision of the DC Circuit from this year. Again, it mentions Seetransport,
Creighton and Tatneft; again, it was not necessary to decide whether to – in
the same way as the cases you have seen, but there is nothing in any of
these cases that casts doubt on the correctness of the Seetransport analysis.
7035
In my submission, the worst it should go for the argument that I have
just advanced is that your Honours would conclude that ratification of the
New York Convention and an award that satisfies Article IV – those two
things – would be enough. The United States cases, in my submission,
cannot fairly be read as imposing an additional requirement to prove the
validity of the award.
7040
7045
BEECH-JONES J: But on your case the award answering Article IV has
nothing to do with whether there is consent or agreement under 10(2) of the
Immunities Act.
7050
MR DONAGHUE: In my case, you do not need it, but if I am wrong
about that, an agreement satisfying Article IV and by ratifying – a State that
ratifies and agrees to arbitrate under an agreement that satisfies 10(4) would
have waived immunity whether or not it has a good argument under
Article V(1)(a).
7055
BEECH-JONES J: But logically that would only be right if the
agreement was a real agreement, not one vitiated by fraud, would it not?
MR DONAGHUE: But the structure of Article V contemplates that that is
an issue that comes later.
7060
BEECH-JONES J: I understand, but the structure of section 10(2) is not
that. That is not the structure of the Foreign State Immunities Act, and that
is what we are looking at.
7065
MR DONAGHUE: That is true, your Honour, but where the argument is
that adoption of the New York Convention framework constitutes the
waiver, that is a framework which – and indeed I have failed to take
your Honours to one of the cases I was going to take your Honours to, to
make this point. It is a framework that contemplates that when you sign up
to it that you might be, to use my friend's phrase, dragged before the courts
of another State to prove the Article V grounds. So, you are consenting to
have to do that in a case where - - -
7070
[Page 160]
7075
BEECH-JONES J: Well, I understand that in a case out where there is no
question of sovereign immunity, so that if you are a private party you might
not be able to say: well, my agreement to this arbitration was procured by
fraud – and you would be required to go through Article V, but we are in a
specialised world of sovereign immunity and a different Act. What I was
querying with you is if you say, well, at worst it is convention plus prima
facie award under Article IV, how does the fact that it is prima facie add
anything to a consent or agreement under 10(2)?
7080
MR DONAGHUE: As your Honour's question acknowledges, I have said
at worst my primary argument is - - -
BEECH-JONES J: I understand.
7085
MR DONAGHUE: - - - that I do not need to get there, but it can add,
because in my submission when – and this builds really on an answer I gave
to your Honour earlier, that when Article I(1) refers to an arbitral award,
that phrase is to be read in the context of the New York Convention as a
whole, which includes Article IV and Article V.
7090
GAGELER CJ: I think what you are really saying is that the waiver is in
Article III and the award, and with it the written agreement, is just the
mechanics.
7095
MR DONAGHUE: Yes, that is what I am saying.
GORDON J: Can I ask another question. It may - - -
7100
MR DONAGHUE: So if you did not have the mechanics - - -
GAGELER CJ: You would not be invoking Article III anyway.
MR DONAGHUE: - - - you would never get to Article III.
7105
GAGELER CJ: Yes.
MR DONAGHUE: That is a clearer way of putting it, sorry,
your Honour.
7110
GORDON J: It may be the answer to this question is the same answer you
just gave Justice Beech-Jones, but when you talk about a valid arbitration
agreement, what do you mean? You said a valid arbitration agreement, and
now you have moved to an award.
7115
[Page 161]
MR DONAGHUE: Your Honour, I have said you do not need to prove a
valid arbitration agreement, by which I mean you do not need to prove an
arbitration agreement which could not be set aside under Article V(1)(a).
On my argument, it may be the case that a State has, by ratifying and
accepting the Article III obligations, waived sovereign immunity even
though it will ultimately succeed in a particular case before a domestic court
of setting aside an award because there was no valid agreement under
Article V.
7120
7125
That would not affect the sovereign immunity conclusion. I have run
out of time to take your Honours to it, but can we commend to
your Honours the analysis in Process & Industrial Developments, which is
volume 6, tab 39. Particularly pages 7 through 11.
7130
BEECH-JONES J: Sorry, what was that tab again?
7135
MR DONAGHUE: So, it is tab 39, volume 6. So, that is a first-instance
decision of the DC Circuit, decided on a waiver exception. Both were
argued, but it was decided on the waiver exception. On appeal, the Court
did not disapprove of the reasoning on the waiver exception but said it
would prefer to decide it on the arbitration exception. So, there is the other
Process & Industrial Case that your Honours have in the bundle, but I am
referring to it just because it is a helpful analysis.
7140
GORDON J: So, I know you do not want to us to it, but page 8, it said:
Nigeria's entry into the Convention, combined with its agreement to
arbitrate . . . is strong evidence that Nigeria intended to subject
itself –
7145
MR DONAGHUE: Indeed. So, that is one of the reasons that I have
developed the submission in the way that I have a moment ago, but there is
also much in that discussion that – your Honour, I acknowledge that it does
say that. It is responding to the fact that that is the argument that was being
put. So, the argument is recorded in paragraph [8], and the argument is that
Nigeria waived because of those two things. So, the Court is responding to
it, but I cannot really add to the submissions I have made and the answers I
have given.
7150
7155
Your Honours, I only have five minutes left. Can I use them to try to
address the reciprocity question. So, we start, in our submission, by the
most obvious effect of the commercial reservation. The most obvious effect
is that India did not itself agree to recognise or enforce awards that are not
considered commercial under its own law. The direct effect of the
reservation is to confine India's obligations under Article III.
7160
[Page 162]
So, they are narrower than they would otherwise have been. They
apply only in relation to a subset of the awards in Article I(1), and
Article 21(1)(a) of the Vienna Convention supports that effect. The less
obvious effect of the commercial reservation is the reciprocal effect it has
on other parties, vis-à-vis India.
7165
7170
I acknowledge immediately that that reciprocal effect does not jump
off the page except, it turns out, to specialist international lawyers, and it
does not jump off the page because of the words "it will apply" in the
reservation which Mr Walker emphasised yesterday, and he said, well, “it
will apply” – he is obviously talking about what India will do within its own
territory, and that says nothing about what anybody else will do.
7175
Our answer to that is to point out that reservations, if not invariably,
almost invariably – I cannot think of an example where they would not –
are concerned with a State's own obligations under a convention. That is
what States do when they are reserving, they are limiting what they are
required to do. It is therefore not surprising that they would be expressed in
a way that is concerned with what the State is required to do usually within
its own territory.
7180
7185
So, the fact that the reservation is expressed in that way is not a
barrier to reciprocity, which is a very established international law principle
that applies to the overwhelming majority of reservations. The way you get
the translating effect of the words "it will apply to other parties" is via the
Vienna Convention on the law of treaties 21(1)(b), which says that the
reservation:
7190
Modifies those provisions to the same extent for that other party in
its relations with the reserving State.
7195
So that the operative words are "modifies . . . to the same extent". As a
matter of methodology, we submit what one must do is work out what the
obligation modifies for India – I have already described that – then apply
that exact modification to the other parties vis-à-vis India. Because India's
obligations under Article III have been limited so they do not apply to
non-commercial awards, the same is true for other parties. Their
obligations under Article III do not apply to non-commercial awards
vis-à-vis India.
7200
7205
EDELMAN J: The Vienna Convention is not concerned with modifying
the obligations. It modifies the provisions. It is the provisions of the treaty.
In other words, it means that the reduction of one State's obligations means
that the reciprocal rights that other States have against that State are
correspondingly modified.
[Page 163]
7210
MR DONAGHUE: Yes. So, Article III is contracted, in effect, from both
ends. There is no obligation between India and any of the other contracting
parties with respect to non-commercial awards. That is, we submit, how it
works.
STEWARD J: You say on your case that it can be used as a shield by
India to avoid awards that are non-commercial being enforced in other
countries against it?
7215
7220
MR DONAGHUE: I do not go quite that far, your Honour. In my
submission, what it means is that Australia has – or the Netherlands or
anyone else – no obligation, vis-à-vis India, to enforce a non-commercial
award. So, that would prevent India from seeking to enforce a
non-commercial award in the domestic courts of any other State because
they would be seeking to invoke an obligation that does not exist, because
Article III has been confined, but it is not about standing or who can call
upon people to enforce the awards, it is just about the nature of the
obligation that actually exists as between the parties.
7225
7230
Australia and the Netherlands obviously can agree as between
themselves whether or not they are going to enforce non-commercial
awards, and they are unlikely to do so by reference to the domestic law of
India, but the critical point – and this comes to your Honour
Justice Steward's point about a shield – the shield is not the limited effect of
Article III, it is that, because of the limited effect of Article III, acceptance
of the obligations under Article III does not reveal a clear and unmistakable
intention to waive.
7235
7240
Because the logic of the waiver argument I have already developed is
that if you accept Article III, you must be accepting that people can enforce
these awards against you. If you can fine Article III in a way that has
reciprocal effects for the obligation of other parties, you have not accepted
that those non-commercial awards can be enforced. So, you have not
clearly and unmistakably done the thing – the very thing that on the waiver
argument engages the waiver.
7245
Can I have one or two minutes your Honour? To illustrate the point,
or to try to illustrate the point, if your Honours engage in a thought
experiment that says when the New York Convention first commenced it
had two parties – Australia and India – the reservation under Article III
means that you cannot apply the Seetransport analysis to a non-commercial
award as between those two parties, because there is no obligation with
relation to non-commercial awards.
7250
Then the Netherlands joins by ratifying. Between India and the
Netherlands, there is likewise no obligation with respect to non-commercial
[Page 164]
awards. One cannot then point, we submit, to the relationship – the
obligations between the Netherlands and Australia that have come into
existence subsequently and say, well, by reason of those new obligations
between Australia and the Netherlands, India has somehow waived its
immunity.
7255
7260
The building up of this web of relations between other contracting
parties tells you nothing about what States are required to – what clear and
unmistakable submission or waiver of sovereign immunity might have
occurred. It is really by analogy with the pacta tertiis rule I advanced
earlier – and by analogy because India is a party – but building up new
treaty obligations between different parties cannot take away any sovereign
immunity that India has not itself given up. The extent of what it has given
up is, in our submission, defined by the reservation.
7265
7270
EDELMAN J: But in your example, the treaty between let us just say
India and Australia as the only two parties, the reservation that India
makes – that it will apply the Convention only to differences arising out of
non-commercial relationships – has effect on Australia's promise without
reservation, so that in effect Australia's promise to apply it generally is
reduced.
7275
MR DONAGHUE: Yes.
EDELMAN J: That is what you understand the principle of reciprocity to
do.
7280
MR DONAGHUE: That it is reduced to – in this way, you need to be
clear how it is reduced. It is reduced only with respect to awards involving
India. So, there was a question earlier about the - - -
7285
GORDON J: Of a particular kind.
MR DONAGHUE: The non-commercial ones. That is so.
BEECH-JONES J: When you say “involving” you mean India the State.
7290
MR DONAGHUE: India the State. Not Indian companies, not – so,
your Honour made that point that one has to be careful with the nexus. It is
only India the State, because it is only India the State that has the obligation
carved out by the commercial reservation not to enforce particular awards;
it is only India the State that loses the benefit of that.
7295
BEECH-JONES J: Well, India's reservation may also bite in relation to a
private company in India involved in a non-commercial dispute with, say,
an Australian company. India would be saying to the world, if they have an
[Page 165]
arbitration: we will not enforce the outcome of that private arbitration if it
does not answer, being a commercial - - -
7300
MR DONAGHUE: That is so in India, but in Australia if someone seeks
to enforce an award against an Indian company, the reservation will tell you
nothing, because - - -
7305
EDELMAN J: So, it is not reciprocal at all.
BEECH-JONES J: So, it is only reciprocal vis-à-vis immunity, you say.
7310
MR DONAGHUE: It is only reciprocal to the extent that the obligation
is – one first identifies what India does not have to do. India does not have
to enforce non-commercial awards under the law of India, and it is only
reciprocal to the extent, then, that India seeks to enforce non-commercial
awards somewhere else. It is a very narrow form of reciprocity.
7315
BEECH-JONES J: And that is India the nation.
GORDON J: India as a State.
7320
MR DONAGHUE: India as a State.
7325
GAGELER CJ: I just find it very difficult. If you start with the language
of Article III and you map out India's obligation with the reservation
included within it, and then you try to apply Article 21(1)(b) to work out
what Australia's reciprocal obligation is, I just do not know what it is. I do
not know how you state it.
EDELMAN J: Particularly the words “to the same extent”.
7330
GAGELER CJ: You need to go through that exercise, do you not?
MR DONAGHUE: You do need to go - - -
7335
GAGELER CJ: I have not seen it written out.
7340
MR DONAGHUE: No, I do not know that it has been written out, and I
am trying to do it in a compressed – but I accept that you need to go through
that process. My submission about what that process requires you to do is
that the only thing that is carved out of the Convention as between going
back from Australia to India by reason of “the same extent” language is that
because India the State has not agreed to enforce a certain kind of award, it
is not entitled to have Australia enforce that kind of award.
7345
GLEESON J: That not being a relevant issue in this case.
[Page 166]
MR DONAGHUE: No, that is so, but that is what it has agreed not to
have done. It is only a relevant issue in this case, your Honour, because of
the light it then sheds on - - -
7350
GORDON J: Waiver.
MR DONAGHUE: On waiver.
7355
GAGELER CJ: The reservation relates to any commercial relationship,
not one that is confined to India the State.
MR DONAGHUE: It relates to what India will do to any commercial
relationship.
7360
GAGELER CJ: Yes.
7365
MR DONAGHUE: It cannot be read, in my submission, as meaning that
where an Indian company engages in an arbitration with a Pakistani
company – or Pakistan and England, say – that just because there is an
Indian company, that arbitration in England is governed in some way by
Indian law; just because there is an Indian company involved, or even if it is
governed by Indian law, because they are not the nexus requirements that
are identified in the Article. It is the State of India applying the Convention
in a particular way is the nexus.
7370
7375
BEECH-JONES J: So, its only practical reciprocal effect is on sovereign
immunity. That is the only way the reciprocal effect bites, because we still
owe Holland and America, and every other country, an obligation to enforce
arbitral disputes that might happen to be not commercial under the law of
India.
7380
MR DONAGHUE: So, one of its effects is sovereign immunity, but if,
for example, India is under a multilateral investment treaty of some kind
and succeeds in obtaining an award and wants to get the benefit of that
award, and it is a non-commercial award, it cannot go to any of the
Convention States and use the New York Convention processes because it
has given them up.
7385
BEECH-JONES J: So, its only practical reciprocal effect is upon awards
involving India the State?
MR DONAGHUE: It is, India the State.
7390
BEECH-JONES J: I see.
[Page 167]
MR DONAGHUE: That is our submission. Your Honours, I am out of
time. Can I give your Honours a reference to the ILC guide commentaries
that you were taken to yesterday in volume 12, tab 106, referring in
particular to comments (25), (27) and (29) on pages 461 to 462, to illustrate
a discussion of just how fundamental reservations are and how the default
position is that they work both ways and a reference to –
Professor van den Berg in the article you see at volume 8, tab 84, on
page 14 for a discussion of why Article XIV of the Convention is fatal to
the proposition that the commercial reservation cannot operate reciprocally.
The whole point of Article XIV was to make it clearer that it could, in our
submission, your Honours.
7395
7400
7405
GAGELER CJ: Mr Solicitor, could I go back to my question about how
Article 21(1)(b) applies to modify Australia's obligations under Article III
of the Convention.
MR DONAGHUE: Yes.
7410
GAGELER CJ: It would be of assistance, I think, for you to provide us
with a version of Article III with any commentary that you think is
necessary to explain it.
7415
MR DONAGHUE: Okay. To explain how Australia's obligation under
Article III is to be read, is that what your Honour is asking?
GAGELER CJ: Yes, in light of India's reservation and through the
operation of Article 21(1)(b) of the Vienna Convention.
7420
MR DONAGHUE: Yes. Could we have 14 days? I ask, your Honour,
because next week I am otherwise occupied.
GAGELER CJ: You are doing other things.
7425
MR DONAGHUE: Yes.
GAGELER CJ: Yes.
7430
MR DONAGHUE: Thank you, your Honour. If the Court pleases.
GAGELER CJ: And 14 days for any response from any other party
further. Yes, Mr Walker.
7435
MR WALKER: Your Honours, we will not wait for the 14 days to expire
before saying something about that last topic. May I start with it?
GAGELER CJ: Certainly. You are not waiving your 14 days, are you?
[Page 168]
7440
MR WALKER: I am not waiving it. I am getting extra, I think. A
question that is raised by the course of argument concerning the reservation
is, with respect, well captured by a remark by the Solicitor not very long
ago. In truth, this has to do with a possible effect – one which is argued to
have been achieved by the solicitor, that we resist – upon the message sent
by India being a contracting party to the New York Convention, concerning
the waiver or consent argument for the purposes of our domestic section 10,
question of its immunity from an Australian proceeding of enforcement.
7445
7450
That is, more or less, the way in which the Full Court saw it below.
That it had an effect, and worked a fatal detriment, to the requisite clarity
with which an acceptance of the intended efficacy of the treaty, by way of
actual enforcement proceedings going ahead to produce orders, all of which
entailed, of course, an award debtor being bound. If the award debtor was a
foreign sovereign with immunity, it following in accordance with the
argument we put at first instance, accepted by Justice Jackman, as to which
the Full Court had nothing bad to say – though they did not rule on it –
leading to the conclusion of waiver or consent, or agreement or submission.
7455
7460
Now, that is to be distinguished from what one could be forgiven for
thinking was at least in the air during Mr Gleeson's submissions about this
concerning the effect of the reservation on the treaty obligation, relevantly
of Australia. Or for that matter, the treaty position – maybe the word is
"right" – in relation to the Netherlands. The Netherlands being the place
where the award was made, and the place where the award was made is no
mere adventitious matter. It is of considerable significance in relation to
this scheme, and it is of considerable interest, obviously, if countries that
host such arbitrations – that they are efficacious in the enforceability.
7465
7470
In our submission, it is not possible by way of reciprocity, either
within the Convention Article XIV or within the Vienna Convention
Article 21, for there to be any cutting back – contraction – of the obligation
of India or the right of the Netherlands, in relation to the enforcement of this
award. One could add, but I will do it only once, one could add obviously
the rights in the nature of a protection position of Mauritius with respects to
its nationals as investors.
7475
Now, that follows – with respect from the sovereign equality, as to
which India places a considerable amount of weight on another arm of this
case, and in particular in relation to the untrammelled autonomy with which
the sovereigns can become, or not, contracting parties, and equally, the
untrammelled autonomy with which sovereigns may take advantage of
Article I(3) as to the only permitted reservations – it is not the case that a
person who does not make a reservation thereby casts an adverse light or
7480
[Page 169]
detracts from the efficacy as a reservation from a State actor who does make
a reservation, and vice versa.
7485
That is why matters of reciprocity, as the commentary to Article 21 –
to which we drew attention in chief, and to which I am going to come
back – makes it clear that it is not every reservation that brings in its train,
straightforward if any, reciprocal effect on the position of other parties to
the treaty, particularly non-reserving parties to the treaty. Some of them are
obvious, in what I will call their reciprocity.
7490
7495
It is a ponderous way to describe what happens, that when by a
reservation, an obligation which would otherwise have existed, binding
party A is made that nobody can take advantage of that non-existent
obligation. If that be reciprocal, so be it. It is a ponderous way of saying
that the destruction of an obligation means that there is nobody who is able
to take advantage of that obligation. A correlative right, if you like.
7500
That is really what Article 21(1)(a) and (b) would do with respect to
the reservation concerning the commercial nature of the difference. That
has nothing whatever to do with the position in an Australian court, bearing
in mind that Australia's obligation has not been reduced one iota by India's
reservation as to what will happen in an Indian court. When one bears in
mind that the concerned parties as contracting parties are the Netherlands
and Mauritius, India is not a concerned party as a contracting party, it is
concerned only because it is an award debtor.
7505
7510
The coincidence I refer to in chief of it having not only the status of a
contracting party, which gives rise to our section 10 argument against it, but
also obviously its position as an award debtor, which makes it the potential
object of proceedings in Australia by way of enforcement and indeed in
other countries as well.
7515
EDELMAN J: Is the effect of that, then, that – the effect of a reservation
is just the reduction of an obligation.
MR WALKER: That is right.
7520
EDELMAN J: And the Article 21(1)(b) modification is just the
corresponding reduction of a right to compel that obligation.
MR WALKER: That obligation, yes. As I say, it is a little
ponderous - - -
7525
EDELMAN J: It is a statement of the blindingly obvious Hohfeldian
correlative.
[Page 170]
7530
MR WALKER: Yes. This might be first time any of your Honours have
seen legislation or treaties stating the blinding obvious, but there it is, it is a
very clear example of the - - -
EDELMAN J: And that is why the words “to the same extent” are there.
7535
MR WALKER: Yes, and in its relations with the reserving State, not in
its relations with other States, such as in this case the Netherlands or
Mauritius.
7540
BEECH-JONES J: Does it also mean that if you attempted to say, well,
India carves out this but its only correlative effect is on its own sovereign
immunity, then it is not to the same extent?
7545
MR WALKER: That is right. So, there is, in our submission, an
important point to be made about the operation together of Article 21(1)
and (2). Article 21(2) is perhaps - - -
EDELMAN J: Article 21(2) is another statement of another blindingly
obvious proposition.
7550
MR WALKER: That is right. It is perhaps unnecessary, but there is
unmistakable rigour with which it is said this does not affect the provisions
of the treaty for the other parties to the treaty inter se, and that must include
what happens when a national of Mauritius presents an award made in the
Netherlands to an Australian court. That is not affected. So, whatever is
said about this reservation, whatever chart is prepared of effects by a
misreading, as we would put it, of Article 21(1), Article 21(2) makes it
crystal clear it does not affect the position between Australia, the
Netherlands and Mauritius.
7555
7560
Now, that ought to be enough, with respect, to dispose of the idea of
a reciprocal effect concerning the obligation of Australia – owed inter alia
to the Netherlands and to Mauritius, Mauritius in its protecting role – that
ought to be enough to show that there is no detraction from the reasoning by
which India – who remains of course, with its reservation, a party to the
treaty – is to be seen by the Court in the following way.
7565
7570
First, a party who, recognising that others have not reserved,
understands that their obligations, unaffected by India's reservation, is to
enforce awards, regardless of their commercial character. That is the first
thing you can say of India. In other words, India does not by its reservation
say: I am to be treated as somebody not a party to, not affected by, and
owing no obligation of any kind with respect to the obligations without
reservation of other parties to the treaty.
[Page 171]
7575
Of course, the second proposition to be said is therefore it has to be
the case – as Justice Jackman correctly, I think it is in paragraph 43 – it
must be the case that India has accepted that this system for global
enforceability, which depends upon municipal court enforcement, is one
where that pre-existing and no doubt very important principle of sovereign
immunity will need to be sacrificed and is sacrificed by an acceptance of
that enforcement in other States' courts, of awards which – on the argument
we have put and which I will not return to in reply – will include, certainly,
awards against States sounding in compensatory sums of money to be paid.
7580
7585
Once one reaches that position concerning the nature of the
reservation, you are left only with the question: is there a lingering
decrement in the clarity with which India accepts that is the position
Australia has, as to its obligation, by reason of India's reservation? I do not
want to repeat what we have written or said in chief, but in answer to the
way in which it has been put, both by the learned solicitor at the end of his
recent remarks and more generally by Mr Gleeson, we need to emphasise
these points.
7590
7595
It is not the case that a reserving party thereby indicates in any way a
disapproval of, opposition to, or non-acceptance of the position of
non-reserving parties. That would be absurd and would fly in the face of
the autonomy and equality between sovereign equals, which is the hallmark
of the contracting parties in their making of a treaty.
7600
It follows, in our submission, that the acceptance by India of
Australia's position, non-reserving, is such as to give rise to the clear
consent to what Australia will do, it not having reserved, in Australian
courts – by Australian courts – notwithstanding that were the facts different
and it was an Australian award sought to be enforced in India, India would
apply the screen supplied by its reservation as to whether or not Indian
courts could be enlisted to enforce the award.
7605
7610
There would be a consideration of whether an award made in
Australia, perhaps with the proper law of Argentina, passes muster as
satisfying the reservation according to Indian law. That simply is not this
case, and this case is therefore one which is accepted by India. That is, this
case is not a remarkable one, it is a very ordinary one in this field.
7615
India therefore accepted that there would be a plethora of cases
imaginable – and indeed a fair few that have actually materialised – in
which there are sought to be enforced awards to which India is a party by
reason of having undertaken BIT obligations that can result in
compensatory payments being ordered. India must be taken to have
accepted that they might be sought to be enforced all around the world and
[Page 172]
obviously enough, most dangerously for India, in places who have not
reserved in the same way as India has reserved.
7620
7625
It is at the heart of our argument about the error in the Full Court on
this point, repeated in the arguments in this Court, that it cannot be the case
that India's reservation to any degree depicts India's message by its
accession to the Convention under which it has reserved as being any less
wholehearted in its acceptance of what non-reserving parties are obliged to
do than would have been the case in the absence of an Indian reservation.
7630
It is, in our submission, plain to demonstration from the nature of the
reservation which is contemplated about what will happen in Indian
territory that India accepts that where that is not the case, where
correspondingly Australia has not made that reservation, India accepts that
there is in force an obligation by reason of a treaty to which it is a party. It
is for that reason that we say an equivalence of concept to the way in which
this Court proceeded in relation to ICSID in Spain that there is, for the
reasons Justice Jackman described – found obviously to be of some weight,
they are not decided in the Full Court – there is the consent for the purposes
of our section 10.
7635
7640
EDELMAN J: So, the only way that there could be a relevant effect on
waiver would be if – assuming that by entry into the Convention, India
would have waived its sovereign immunity – on the proper construction of
its reservation and Article III what India had done was cut back that waiver,
then correspondingly that would have effect on all other countries.
7645
7650
MR WALKER: Yes, and that is absurd and an overreach which is really
massive. We cannot find it anywhere in the literature. One of the problems
about the literature is that there are several layers of literature and there is
kind of a compost approach going on. A lot of it is by dint of age and
disparate quality of not much use in terms of understanding quite precisely
the agreed terms of the treaty which govern – which talk about – the
reservation and the clear doctrine in this Court and the application of the
tests concerning consent by agreement, which include treaties for the
purposes of our section 10.
7655
We have not found anything that comes anywhere near this idea that
a reservation on what India will require or permit its courts to do has any
effect – could have any effect – consistently with basal propositions about
sovereign equality and the making of treaties, and particularly with a global
multilateral arbitral award enforceability treaty of this kind. Can I then
turn - - -
7660
[Page 173]
7665
GORDON J: Before you do that – if you step back from when you say to
yourself: what could they have done in order to achieve the level the
reciprocity – which is put against you - - -
MR WALKER: Can I take up the abstract now on reciprocity?
7670
GORDON J: Yes, please.
7675
MR WALKER: They are actually – what could they do to achieve the
immunity they are after? They are only here as an award debtor. We are
not in the ICJ, we are not debating their behaviour as a contracting party.
We have no complaints about their conduct as a contracting party. We
simply say that they have undertaken the obligations, correlatively and
cooperatively, that amount to the consent. They use reciprocity – it seems,
with respect, to us – as a stalking horse in this fashion.
7680
They seem to say – and I think this is, if anything, really an
Article XIV, to which I am about to come – that we, India, accept, as if it
were a burden – though they are going to make it and patent it – we accept
that we will not be able to ask we as a contracting party – not as an award
creditor, they are not talking about that – will never be in a position to go
off to the ICJ and complain that some other country that has not reserved is
with respect to, say, an Indian award creditor or, say, an award made in
India, that their courts are not enforcing the award.
7685
7690
We apprehend that is the argument. That seems to be an Article XIV
argument, if anything, and I am going to come back to that. I wanted to
address, first of all, that notion with respect to Article 21. Your Honours
have seen the aide-mémoire. I am not quite sure it has improved by being,
as it were, in diagrammatic form rather than narrative, but it is the cell on
the bottom-right to which I want to address attention.
7695
GORDON J: Is that the position? That you accept the other cells, which
is put against you.
7700
MR WALKER: If I may say so, I do not think they are against us at all.
If you look at the cell in the middle on the top row, that is the first kind of
reservation; the territorial reservation. That is exactly what we have put.
That is a classic reciprocal effect.
7705
So, I have no problem with any of the cells on the top line for the
territorial. I am not sure there is any real step involved between “Direct
effect" and so-called “Consequential effect". The territorial one presents no
difficulty and no analogy for our case. It says nothing about immunity.
[Page 174]
MR WALKER: I am not waiving it. I am getting extra, I think. A
question that is raised by the course of argument concerning the reservation
is, with respect, well captured by a remark by the Solicitor not very long
ago. In truth, this has to do with a possible effect – one which is argued to
have been achieved by the solicitor, that we resist – upon the message sent
by India being a contracting party to the New York Convention, concerning
the waiver or consent argument for the purposes of our domestic section 10,
question of its immunity from an Australian proceeding of enforcement.
7440
7445
7450
That is, more or less, the way in which the Full Court saw it below.
That it had an effect, and worked a fatal detriment, to the requisite clarity
with which an acceptance of the intended efficacy of the treaty, by way of
actual enforcement proceedings going ahead to produce orders, all of which
entailed, of course, an award debtor being bound. If the award debtor was a
foreign sovereign with immunity, it following in accordance with the
argument we put at first instance, accepted by Justice Jackman, as to which
the Full Court had nothing bad to say – though they did not rule on it –
leading to the conclusion of waiver or consent, or agreement or submission.
7455
7460
Now, that is to be distinguished from what one could be forgiven for
thinking was at least in the air during Mr Gleeson's submissions about this
concerning the effect of the reservation on the treaty obligation, relevantly
of Australia. Or for that matter, the treaty position – maybe the word is
"right" – in relation to the Netherlands. The Netherlands being the place
where the award was made, and the place where the award was made is no
mere adventitious matter. It is of considerable significance in relation to
this scheme, and it is of considerable interest, obviously, if countries that
host such arbitrations – that they are efficacious in the enforceability.
7465
7470
In our submission, it is not possible by way of reciprocity, either
within the Convention Article XIV or within the Vienna Convention
Article 21, for there to be any cutting back – contraction – of the obligation
of India or the right of the Netherlands, in relation to the enforcement of this
award. One could add, but I will do it only once, one could add obviously
the rights in the nature of a protection position of Mauritius with respects to
its nationals as investors.
7475
Now, that follows – with respect from the sovereign equality, as to
which India places a considerable amount of weight on another arm of this
case, and in particular in relation to the untrammelled autonomy with which
the sovereigns can become, or not, contracting parties, and equally, the
untrammelled autonomy with which sovereigns may take advantage of
Article I(3) as to the only permitted reservations – it is not the case that a
person who does not make a reservation thereby casts an adverse light or
7480
[Page 175]
detracts from the efficacy as a reservation from a State actor who does make
a reservation, and vice versa.
7485
That is why matters of reciprocity, as the commentary to Article 21 –
to which we drew attention in chief, and to which I am going to come
back – makes it clear that it is not every reservation that brings in its train,
straightforward if any, reciprocal effect on the position of other parties to
the treaty, particularly non-reserving parties to the treaty. Some of them are
obvious, in what I will call their reciprocity.
7490
7495
It is a ponderous way to describe what happens, that when by a
reservation, an obligation which would otherwise have existed, binding
party A is made that nobody can take advantage of that non-existent
obligation. If that be reciprocal, so be it. It is a ponderous way of saying
that the destruction of an obligation means that there is nobody who is able
to take advantage of that obligation. A correlative right, if you like.
7500
That is really what Article 21(1)(a) and (b) would do with respect to
the reservation concerning the commercial nature of the difference. That
has nothing whatever to do with the position in an Australian court, bearing
in mind that Australia's obligation has not been reduced one iota by India's
reservation as to what will happen in an Indian court. When one bears in
mind that the concerned parties as contracting parties are the Netherlands
and Mauritius, India is not a concerned party as a contracting party, it is
concerned only because it is an award debtor.
7505
7510
The coincidence I refer to in chief of it having not only the status of a
contracting party, which gives rise to our section 10 argument against it, but
also obviously its position as an award debtor, which makes it the potential
object of proceedings in Australia by way of enforcement and indeed in
other countries as well.
7515
EDELMAN J: Is the effect of that, then, that – the effect of a reservation
is just the reduction of an obligation.
MR WALKER: That is right.
7520
EDELMAN J: And the Article 21(1)(b) modification is just the
corresponding reduction of a right to compel that obligation.
MR WALKER: That obligation, yes. As I say, it is a little
ponderous - - -
7525
EDELMAN J: It is a statement of the blindingly obvious Hohfeldian
correlative.
[Page 176]
MR WALKER: Yes. This might be first time any of your Honours have
seen legislation or treaties stating the blinding obvious, but there it is, it is a
very clear example of the - - -
7530
EDELMAN J: And that is why the words “to the same extent” are there.
7535
MR WALKER: Yes, and in its relations with the reserving State, not in
its relations with other States, such as in this case the Netherlands or
Mauritius.
7540
BEECH-JONES J: Does it also mean that if you attempted to say, well,
India carves out this but its only correlative effect is on its own sovereign
immunity, then it is not to the same extent?
7545
MR WALKER: That is right. So, there is, in our submission, an
important point to be made about the operation together of Article 21(1)
and (2). Article 21(2) is perhaps - - -
EDELMAN J: Article 21(2) is another statement of another blindingly
obvious proposition.
7550
MR WALKER: That is right. It is perhaps unnecessary, but there is
unmistakable rigour with which it is said this does not affect the provisions
of the treaty for the other parties to the treaty inter se, and that must include
what happens when a national of Mauritius presents an award made in the
Netherlands to an Australian court. That is not affected. So, whatever is
said about this reservation, whatever chart is prepared of effects by a
misreading, as we would put it, of Article 21(1), Article 21(2) makes it
crystal clear it does not affect the position between Australia, the
Netherlands and Mauritius.
7555
7560
Now, that ought to be enough, with respect, to dispose of the idea of
a reciprocal effect concerning the obligation of Australia – owed inter alia
to the Netherlands and to Mauritius, Mauritius in its protecting role – that
ought to be enough to show that there is no detraction from the reasoning by
which India – who remains of course, with its reservation, a party to the
treaty – is to be seen by the Court in the following way.
7565
7570
First, a party who, recognising that others have not reserved,
understands that their obligations, unaffected by India's reservation, is to
enforce awards, regardless of their commercial character. That is the first
thing you can say of India. In other words, India does not by its reservation
say: I am to be treated as somebody not a party to, not affected by, and
owing no obligation of any kind with respect to the obligations without
reservation of other parties to the treaty.
[Page 177]
Of course, the second proposition to be said is therefore it has to be
the case – as Justice Jackman correctly, I think it is in paragraph 43 – it
must be the case that India has accepted that this system for global
enforceability, which depends upon municipal court enforcement, is one
where that pre-existing and no doubt very important principle of sovereign
immunity will need to be sacrificed and is sacrificed by an acceptance of
that enforcement in other States' courts, of awards which – on the argument
we have put and which I will not return to in reply – will include, certainly,
awards against States sounding in compensatory sums of money to be paid.
7575
7580
7585
Once one reaches that position concerning the nature of the
reservation, you are left only with the question: is there a lingering
decrement in the clarity with which India accepts that is the position
Australia has, as to its obligation, by reason of India's reservation? I do not
want to repeat what we have written or said in chief, but in answer to the
way in which it has been put, both by the learned solicitor at the end of his
recent remarks and more generally by Mr Gleeson, we need to emphasise
these points.
7590
7595
It is not the case that a reserving party thereby indicates in any way a
disapproval of, opposition to, or non-acceptance of the position of
non-reserving parties. That would be absurd and would fly in the face of
the autonomy and equality between sovereign equals, which is the hallmark
of the contracting parties in their making of a treaty.
7600
It follows, in our submission, that the acceptance by India of
Australia's position, non-reserving, is such as to give rise to the clear
consent to what Australia will do, it not having reserved, in Australian
courts – by Australian courts – notwithstanding that were the facts different
and it was an Australian award sought to be enforced in India, India would
apply the screen supplied by its reservation as to whether or not Indian
courts could be enlisted to enforce the award.
7605
7610
There would be a consideration of whether an award made in
Australia, perhaps with the proper law of Argentina, passes muster as
satisfying the reservation according to Indian law. That simply is not this
case, and this case is therefore one which is accepted by India. That is, this
case is not a remarkable one, it is a very ordinary one in this field.
7615
India therefore accepted that there would be a plethora of cases
imaginable – and indeed a fair few that have actually materialised – in
which there are sought to be enforced awards to which India is a party by
reason of having undertaken BIT obligations that can result in
compensatory payments being ordered. India must be taken to have
accepted that they might be sought to be enforced all around the world and
[Page 178]
obviously enough, most dangerously for India, in places who have not
reserved in the same way as India has reserved.
7620
7625
It is at the heart of our argument about the error in the Full Court on
this point, repeated in the arguments in this Court, that it cannot be the case
that India's reservation to any degree depicts India's message by its
accession to the Convention under which it has reserved as being any less
wholehearted in its acceptance of what non-reserving parties are obliged to
do than would have been the case in the absence of an Indian reservation.
7630
It is, in our submission, plain to demonstration from the nature of the
reservation which is contemplated about what will happen in Indian
territory that India accepts that where that is not the case, where
correspondingly Australia has not made that reservation, India accepts that
there is in force an obligation by reason of a treaty to which it is a party. It
is for that reason that we say an equivalence of concept to the way in which
this Court proceeded in relation to ICSID in Spain that there is, for the
reasons Justice Jackman described – found obviously to be of some weight,
they are not decided in the Full Court – there is the consent for the purposes
of our section 10.
7635
7640
EDELMAN J: So, the only way that there could be a relevant effect on
waiver would be if – assuming that by entry into the Convention, India
would have waived its sovereign immunity – on the proper construction of
its reservation and Article III what India had done was cut back that waiver,
then correspondingly that would have effect on all other countries.
7645
7650
MR WALKER: Yes, and that is absurd and an overreach which is really
massive. We cannot find it anywhere in the literature. One of the problems
about the literature is that there are several layers of literature and there is
kind of a compost approach going on. A lot of it is by dint of age and
disparate quality of not much use in terms of understanding quite precisely
the agreed terms of the treaty which govern – which talk about – the
reservation and the clear doctrine in this Court and the application of the
tests concerning consent by agreement, which include treaties for the
purposes of our section 10.
7655
We have not found anything that comes anywhere near this idea that
a reservation on what India will require or permit its courts to do has any
effect – could have any effect – consistently with basal propositions about
sovereign equality and the making of treaties, and particularly with a global
multilateral arbitral award enforceability treaty of this kind. Can I then
turn - - -
7660
[Page 179]
GORDON J: Before you do that – if you step back from when you say to
yourself: what could they have done in order to achieve the level the
reciprocity – which is put against you - - -
7665
MR WALKER: Can I take up the abstract now on reciprocity?
7670
GORDON J: Yes, please.
7675
MR WALKER: They are actually – what could they do to achieve the
immunity they are after? They are only here as an award debtor. We are
not in the ICJ, we are not debating their behaviour as a contracting party.
We have no complaints about their conduct as a contracting party. We
simply say that they have undertaken the obligations, correlatively and
cooperatively, that amount to the consent. They use reciprocity – it seems,
with respect, to us – as a stalking horse in this fashion.
7680
They seem to say – and I think this is, if anything, really an
Article XIV, to which I am about to come – that we, India, accept, as if it
were a burden – though they are going to make it and patent it – we accept
that we will not be able to ask we as a contracting party – not as an award
creditor, they are not talking about that – will never be in a position to go
off to the ICJ and complain that some other country that has not reserved is
with respect to, say, an Indian award creditor or, say, an award made in
India, that their courts are not enforcing the award.
7685
7690
We apprehend that is the argument. That seems to be an Article XIV
argument, if anything, and I am going to come back to that. I wanted to
address, first of all, that notion with respect to Article 21. Your Honours
have seen the aide-mémoire. I am not quite sure it has improved by being,
as it were, in diagrammatic form rather than narrative, but it is the cell on
the bottom-right to which I want to address attention.
7695
GORDON J: Is that the position? That you accept the other cells, which
is put against you.
7700
MR WALKER: If I may say so, I do not think they are against us at all.
If you look at the cell in the middle on the top row, that is the first kind of
reservation; the territorial reservation. That is exactly what we have put.
That is a classic reciprocal effect.
7705
So, I have no problem with any of the cells on the top line for the
territorial. I am not sure there is any real step involved between “Direct
effect" and so-called “Consequential effect". The territorial one presents no
difficulty and no analogy for our case. It says nothing about immunity.
[Page 180]
MR WALKER: I am not waiving it. I am getting extra, I think. A
question that is raised by the course of argument concerning the reservation
is, with respect, well captured by a remark by the Solicitor not very long
ago. In truth, this has to do with a possible effect – one which is argued to
have been achieved by the solicitor, that we resist – upon the message sent
by India being a contracting party to the New York Convention, concerning
the waiver or consent argument for the purposes of our domestic section 10,
question of its immunity from an Australian proceeding of enforcement.
7440
7445
7450
That is, more or less, the way in which the Full Court saw it below.
That it had an effect, and worked a fatal detriment, to the requisite clarity
with which an acceptance of the intended efficacy of the treaty, by way of
actual enforcement proceedings going ahead to produce orders, all of which
entailed, of course, an award debtor being bound. If the award debtor was a
foreign sovereign with immunity, it following in accordance with the
argument we put at first instance, accepted by Justice Jackman, as to which
the Full Court had nothing bad to say – though they did not rule on it –
leading to the conclusion of waiver or consent, or agreement or submission.
7455
7460
Now, that is to be distinguished from what one could be forgiven for
thinking was at least in the air during Mr Gleeson's submissions about this
concerning the effect of the reservation on the treaty obligation, relevantly
of Australia. Or for that matter, the treaty position – maybe the word is
"right" – in relation to the Netherlands. The Netherlands being the place
where the award was made, and the place where the award was made is no
mere adventitious matter. It is of considerable significance in relation to
this scheme, and it is of considerable interest, obviously, if countries that
host such arbitrations – that they are efficacious in the enforceability.
7465
7470
In our submission, it is not possible by way of reciprocity, either
within the Convention Article XIV or within the Vienna Convention
Article 21, for there to be any cutting back – contraction – of the obligation
of India or the right of the Netherlands, in relation to the enforcement of this
award. One could add, but I will do it only once, one could add obviously
the rights in the nature of a protection position of Mauritius with respects to
its nationals as investors.
7475
Now, that follows – with respect from the sovereign equality, as to
which India places a considerable amount of weight on another arm of this
case, and in particular in relation to the untrammelled autonomy with which
the sovereigns can become, or not, contracting parties, and equally, the
untrammelled autonomy with which sovereigns may take advantage of
Article I(3) as to the only permitted reservations – it is not the case that a
person who does not make a reservation thereby casts an adverse light or
7480
[Page 174]
7710 JAGOT J: Could I just ask you a question before you go to the bottom, so I understand the argument.
MR WALKER: Yes, your Honour.
7715 JAGOT J: Is Article II of the New York Convention relevant in the sense that "Each Contracting State", which would be the Netherlands relevantly on your - - -
MR WALKER: Yes.
7720 JAGOT J: This is the:
shall recognize an agreement in writing
7725 So, the Netherlands had to recognise the BIT which has clause 8, which is the submission to arbitration – is that how this clause would work?
MR WALKER: Yes, and I do not think of any real moment, but you will have noticed in Justice Chapman's reasons, there is a reference also to the tender of an appointment agreement of - - -
7730 JAGOT J: Of the arbitrators, yes.
7735 MR WALKER: As your Honours are familiar, those are often mined by parties, one way or the other, for agreements; substantive agreements concerning arbitration. So, it is a package. It does not, I think, affect what your Honour is saying - - -
JAGOT J: No, I do not think it would affect what I am saying.
7740 MR WALKER: So, it is either the BIT or the steps taken to - - -
JAGOT J: Pursuant to the BIT clause, though.
MR WALKER: - - - accept the so-called standing offer, if that is the analysis you like and then actually to record the appointment of arbitrators, all of which happened in this case
7745 JAGOT J: So, Netherlands had to recognise the agreement. The only qualification on Article II seems to be concerning a subject matter capable of settlement by arbitration. That is a different concept from the reservations in Article I(3). So, your argument is: step 1, Netherlands directed by Article II(1) could not go backwards looking at Article III, because that is not relevant to concerning a subject matter capable of arbitration.
7750
[Page 175]
7755 So, they make the award, and then you come to Article III, and Australia shall recognise the award as made in the Netherlands as binding, et cetera, and it is as simple as that. You never – because of what is happening, you on your reading of the reservation – get to the effect of the reservation impacting on the operation of Articles II or III. Is that - - -
7760 MR WALKER: As I was bold enough to put – one might say belied by the hours devoted to it since I said this – it has nothing to do with the matter, and I still say that. In terms of the mainspring of our argument about section 10 consent – namely, India’s position as a party to the treaty under which Australia happens to have this obligation under Article III – the fact that India says it does not have that kind of obligation says nothing, bearing in mind what flows from the general principles to which I have referred – sovereign autonomy, if you like, and equality – plus as well what we see in the Vienna Convention in Article 21 and in particular 21(2).
7765
7770 Now, Article II is of some significance because it is, as you know, one of the ways in which contracting States apply the Convention, including by their court systems. So, Article II and Article III. In that context, can I then move immediately to Article XIV. We rely on what we have written about this as well, but if Article XIV is the way in which something under the name of reciprocity is to operate to our detriment in the argument here, we still insist, with respect, that notwithstanding what has been written about that – to which I will come directly – by our friends, Article XIV does not, with respect, according to its tenor, do anything to the obligation of Australia, let alone to the effect that India does not recognise or accept by the treaty that those are Australia’s obligations.
7775
7780 India’s reservation does not say that it will not recognise or accept the position of non-reserving parties under the treaty. To the contrary, if you are a reserving party under a treaty, you are accepting the treaty except with the contraction of your obligation by reason of your reservation, but being a party to the treaty you in every way essentially accept – recognise and accept – the obligations of others.
7785
7790 Article XIV against that context simply finds no application to the present case or to a case like the present case. What is it? Who is the contracting State – is it India or Australia? We think it is intended in the argument against us to be India, but if you test it with Australia, it is even more absurd. What is it that India is not entitled to avail itself of?
7795 It is not trying to avail itself of anything in this case. Because it is coincidentally an award debtor, it is trying to avail itself not of something provided by the treaty but rather as something that pre-exists the treaty and may be affected by the treaty. That is, its immunity from the courts of other
7800
[Page 176]
sovereigns. So, it fails at the first part in Article XIV. It is not trying to avail itself of the present Convention at all. If it were availing itself of its own reservation, that is absurd because - - -
7805 BEECH-JONES J: Well, India was trying to enforce – India the State was trying to enforce an arbitration over a dispute that was not commercial under the law of India.
MR WALKER: Which is a totally different question and not our question.
7810 BEECH-JONES J: Yes.
EDELMAN J: But that is Article XIV.
7815 BEECH-JONES J: That might be Article - - -
MR WALKER: Yes, your Honours anticipate me. The only way in which it has any footing is something that has nothing with this case. India, not as an award debtor, had nothing to do with that. India, going away presumably as an award creditor, query in a protective sense: one, an Indian national – and India insisting that its nationals can do this, et cetera – then XIV comes in. It for those reasons that XIV has nothing to do with this case and says nothing for our section 10 purposes.
7820
7825 Could I go to the distinguished commentator at van den Berg, to whom reference has been made against us, and it is in the bundle at tab 84, volume 8, starting at page 2130. I want to go to the passage to which you have been referred. It starts at the very foot of 2140 in the main text:
7830 The first reservation is also called the reciprocity reservation.
You see how the word “reservation” is there referred to.
7835 GORDON J: Sorry, Mr Walker, what page is that?
MR WALKER: It is 2140.
GORDON J: Thank you.
7840 MR WALKER: And I am just picking it up at the foot of that page, because it is the language of reciprocity with which a deal of what is on this page is concerned. It refers to, piquantly:
7845 The Russian delegate . . . proposing the phrase “on the basis of reciprocity” –
[Page 177]
the commentator saying:
must be deemed superfluous as the reciprocity . . . already ensues from the first reservation itself.
7850 That is the territorial reservation about which I made that comment in chief. Then there is a paragraph talking about what I will call, in broad terms, the difficulties about that abstract noun. There is immediately a reference to XIV, with which I have dealt for our present case already. Then there is a reference with respect to XIV, after again pointing out the redundancy of the reference to reciprocity. Then the paragraph at the foot of 2141:
7855
7860
Article XIV itself has not caused problems in practice. It has scarcely been referred to by the courts and has not precluded enforcement of an award so far. As far as the commercial reservation of Article I(3) is concerned –
7865 so, the second of the reservations:
Article XIV might be invoked in a case where enforcment is sought in a Contracting State which has not used the commercial reservation –
7870 that is Australia in our case:
in respect of an award relating to a non-commercial matter made in a Contracting State which has used the commercial reservation.
7875 Well, that is not the Netherlands in this case:
In such a case the court of the State where the enforcement is sought may be inclined to refuse enforcement on the basis of lack of reciprocity, that is to say, on the ground that the State in which the award was made would not enforce awards made in the forum State relating to non-commercial matters.
7880
7885 It obviously did not occur to the commentator – why would it – that somehow if a reserving contracting State was, as it happened, an award debtor, there would be some reciprocal effect by reason of its reservation as a contracting party, which reservation has nothing to do with its status as being an award debtor. In our submission, if that is the kind of material being relied upon us with respect to reciprocity, it just does not work.
7890
[Page 178]
Could I go back to the plan handed up by way of the aide-mémoire. The consequential effect – which, of course, we oppose and say is wrong – is the one that you will see in the bottom right-hand cell. So:
7895 All obligations of every other Contracting State to the Reserving State –
that is, obligations of States to States here:
7900 are likewise contracted such that no Contracting State is bound to the Reserving State –
and that is emphasised by underlining, inspiring one to note parenthetically: but is bound to all others:
7905 to 'apply' the Convention to the recognition and enforcement of awards in respect of differences arising –
et cetera, et cetera. It is said by way of, as it were, a third pass, that equally the reserving State does not require any other contracting State to so act. That is not, with respect, a reciprocal effect of a reservation which concerns only what will not happen in an Indian court.
7910
7915 More to the point, the words I have read – and my comments are in relation to the emphasised text – makes it quite plain that this cannot possibly touch or affect the state of affairs between Australia, the Netherlands and Mauritius, who are the three contracting parties and the only three contracting parties with what might be called a treaty interest of such a kind as to give rise to the necessity to consider something under the difficult rubric of reciprocity. It certainly has nothing to do with a contracting party who happens to be an award debtor, as India is; significantly, in this case.
7920
7925 Your Honours, could I then come to a matter which is pertinent to the concern that the parties have raised in their opposite ways with the Bench and some remarks that have come from the Bench concerning the American case law. I am going to be able to either rely on writing, adopt in particular what the learned Solicitor has said about that and make a few small points about the American law itself.
7930 Before I get to that, more importantly – for our purposes – is to frame it in relation to the issues in this case. Though I will not dwell on it, the forensic course was, with great respect, impeccably put by my learned friend Mr Gleeson, except that it stopped at this Court where, you will recall, there is ground 4 in our notice of contention which, like ground 1, is not pressed. Indeed, ground 4 is expressly not pressed.
7935
[Page 179]
I do not want to parse and analyse the ground, I simply want to make it clear that Justice Jackman took a position concerning what – to use a phrase in Latin for his English, and apropos some matters that Justice Gleeson raised with me in particular in chief – might be called the state of proof - I use that word advisedly – including by reference to the ex facie tender. That is, the tender of documents which ex facie have a certain character.
7940
7945 Your Honours can see immediately how that might appertain to a consideration, for what it is worth, of the American case law. In a nutshell, we say it is wrong to see the American case law as proposing that the enforcing party is bound to take on proof beyond what they call production. I will come to that when I come to some of the cases, but in this country - - -
7950
GORDON J: You mean proof beyond production of an arbitration agreement.
7955 MR WALKER: Yes, that is exactly right. The Americans talk in terms of shift of burden. This might be heresy, might I just talk about Australian law and that which affects our position, not because of a problem of the use of comparative law, because there are differences, but they are not either as great or as serious for our case as might have been proposed by some of the arguments against us in the American law.
7960
7965 Under Australian law, could I remind your Honours that one starts with the way in which the Convention deals with the matter, which as you know is in Article IV. Article IV commences with words that are extremely evocative of the way in which this matter affects the running of the case in relation to alleged invalidity or vitiation. So, either inception or performance of an arbitration agreement. It starts off:
7970
To obtain the recognition and enforcement . . . the party applying . . . shall . . . supply –
and then there is the paper. Then in Article V, the way the Convention deals with this – in Article V, it:
7975
may be refused –
only if:
7980
the party against whom it is invoked . . . furnishes to the competent authority –
[Page 180]
That will be the court:
7985
proof –
and then there are the familiar matters, which will include invalidity, vitiation – all sorts of matters, and then ultimately in Article V(2) matters with which you are familiar and which no doubt will lead to antennae twinkling in relation to fraud such as public policy. That is where you will also find the basal proposition as to whether or not the subject matter was capable of settlement by arbitration at all.
7990
7995 Those are matters in Article V which are for the proof by the party against whom enforcement is sought by somebody who, in order to obtain that enforcement under the Convention, supplies the award and an agreement. All of that happened by us. That is what the Convention does. How did we implement it? We implemented it in section 9, to start with.
8000 BEECH-JONES J: Section 9 or Article IX?
MR WALKER: No, it is in our Act.
BEECH-JONES J: Yes, section 9.
8005 MR WALKER: In our Act, it works this way. Article IV is implemented by section 9 and Article V is implemented by section 8. There is a little bit of crossover at the margin that does not matter. In our section 9, you can see the implementation of the “To obtain” provision in Article IV:
8010
In any proceedings in which a person seeks the enforcement . . . he or she shall produce to the court –
there is the paper. Then there is some more detailed stipulation as to what will be adequate paper. Then in subsection (5), familiar words – and one might say having observed what is ex facie shown by that paper – in section 9(5):
8015
8020
prima facie –
it is:
evidence of the matters to which it relates.
8025 And as to an arbitration agreement, if it be necessary as to appointment of arbitrators as to the making of an award, and the terms of the award – all of those matters ex facie on the documents referred to in subsection (2) will be:
[Page 181]
8030
prima facie evidence –
of those matters, and that stands, of course, for the state of affairs where, unless something is proved by the party against whom enforcement is sought, then there will be enforcement. That then brings us in our legislation to section 8 which starts off – as I say, it does not exactly track the Convention, but you can see that there are elements of Article III in subsection (8)(1).
8035
8040 Subsection (8)(2) spells out that which would be implicit among all the different legal systems – political systems – covered by the Convention; spells out that in this country, the enforcement will be:
as if the award were a judgment or order of that court.
8045 That is one of the reasons, of course, why State-State peace treaties, for example - if they are arbitrated – are not going to be awards which fall under this kind of provision. Subsection (3A) makes it clear that the matters that can produce refusals enforcement are exhaustively stated. I will not read it, your Honours are well familiar with it, but you see that it covers everything that Article V contemplates, and it includes matters, which under UNCITRAL laws, Article 16, are within competence-competence.
8050
8055 This is all about the enforcement of an award. You know there is a series of awards in this case which resulted in the Quantum Award, and those awards included dealing with and disposing of objections to the validity, existence, binding nature of the arbitration agreement – fraud, et cetera - all of that has been dealt with by awards. Now, that is competence-competence and is subject to being revisited by an enforcing court, under Article V of the Convention and section 8 of the statute.
8060
8065 Meantime – the onus is of course on the party against whom enforcement is sought – in terms of the proceeding in the Australian court, it is enough for the party seeking to attain that enforcement to have tended those documents which ex facie show the things which are then prima facie proved.
BEECH-JONES J: Those things do not govern what constitutes agreement for the purposes of section 10(2).
8070 MR WALKER: I am sorry, I did not catch the first part of your Honour’s - - -
[Page 182]
8075 BEECH-JONES J: Those matters do not govern what constitutes agreement for the purposes of section 10(2) of the Immunity Act, though, do they?
8080 MR WALKER: The two statutes – they are not carpentered to fit together, but they have to be read together in this case. What they do is absolutely to show that with respect to these enforcement proceedings, which are just one of the multifarious proceedings that section 10 might arise in, it says that the Australian Parliament – the same Parliament as in Act section 10 – says that there are proceedings that can be entertained against award debtors. If we are right with some fundamental propositions, those proceedings can be proceedings against a State contracting party or a nod to the Convention, and certainly can be proceedings against a State – an award debtor – who is a contracting party.
8085
8090 For those reasons, in our submission, that which this statute recognises as being a state of affairs apt to produce consideration of whether to enforce or not, proceeds on the basis of the prima facie proof of the agreement. That prima facie proof of the agreement must be taken as being an agreement for the purposes of all other statutes which are germane to the question of those proceedings. It happens to include the Foreign States Immunity Act as well.
8095
8100 It is for those reasons – though of course they do not speak directly to each other, they can and do operate to each other. FSIA refers to one of cardinal features of proceedings. That is, the amenability of a person to jurisdiction of the court. This refers to another aspect of proceedings; the state of proof stipulated by reference to a prima facie evidence provision such as you see in section 9.
8105 It is for those reasons, in our submission, that Justice Jackman was of course correct to determine that it would be absurd – bearing in mind the provisions of section 10(7)(b) of the FSI Act – for there to be a full canvassing, presumably via the votee evidence, of fraud allegations with respect to an immunity claim, bearing in mind these are awards which Parliament obviously appreciates have competence-competence.
8110 So, the award is the subject of the enforcement, including matters which can be revisited that have been determined by the arbitrators. Not the amount of damages, that will not be revisited under Article V, but whether or not there is an agreement to arbitrate, for example, that will be revisited under Article V.
8115 That plainly contemplates, in our submission, that the accession to the New York Convention, which is the critical thing for our section 10 argument, can operate upon a footing which is considered by the Australian
[Page 183]
8120 Parliament entirely adequate for the mounting of a case under Article V provisions – section 8 of the International Arbitration Act – concerning the merit of all those answers, going right back to whether or not there is an arbitration agreement at all.
8125 GAGELER CJ: That is an argument, I think, that your position that there is an automatic waiver by accession to the Convention fits with the scheme of these two Acts.
MR WALKER: Yes, that is right.
8130 GAGELER CJ: But you are not using this argument in any way to read down section 10.
8135 MR WALKER: No. No-one doubts – the New York Convention is not the subject of only prima facie proof. No, there is no reading down. Bearing in mind the time, could I briefly say this in relation to the American case law, upon which otherwise we rely upon what the Commonwealth has said and what we have written. Could we make it clear – and you have had a number of references to NextEra, which is tab 34 – that if you look, say, at 1210 of the bundle, 1100 of the report, paragraphs [6, 7], right-hand column, there is a reference to finding:
8140
three “jurisdictional facts” –
8145 GORDON J: Sorry, what was that page again, Mr Walker?
MR WALKER: 1210 bundle - - -
GORDON J: Yes, I have it, thank you.
8150 MR WALKER: - - - 1100 report. In that right-hand column, those jurisdictional facts – the jargon, if I might call it that, is that we apply, they say:
8155
a burden-shifting framework. The plaintiff must initially satisfy a burden of production as to these facts –
There is a very close, perhaps exact, resemblance of that to what happens under section 9:
8160
which when met requires the foreign sovereign to “establish the absence of the factual basis by a preponderance of the evidence.”
8165 BEECH-JONES J: Sorry, Mr Walker, I lost you. So where are you reading from again?
[Page 184]
MR WALKER: Right-hand column. The paragraph commences [6, 7].
GLEESON J: So this dealing with the arbitration exception.
8170 MR WALKER: No, I understand. This is talking about a different issue concerning – I am now talking about the nature of the proof. Those jurisdictional facts which my friend yesterday said have to be proved – true, for this arbitration exception, those jurisdictional facts do not have to be proved in the full-fledged way that his submissions might have been understood.
8175
8180 There was a burden-shifting way which greatly resembles what occurs in our ordinary section 9 approach. Now, that has nothing to do with questions of waiver or consent. I am simply saying you should not read these United States cases as if they require a full contested trial on those issues, even for something like the arbitration exception where you do have to prove, as my friend says, there is an arbitration agreement. Well, that is true, but the way in which it is done resembles what is done in this country for our purposes.
8185
8190 Your Honours, I will have to rest on our writing otherwise. We have earlier circulated forms of orders. I have seen our friends – were this case to justify a remitter, there is nothing wrong, with respect, in the way in which our friends have formulated an issue for determination on remitter. We are agreed that the remitter should permit no more than investigating whether or not the reservation is engaged, in case we have failed in our argument about the effect of the reservation upon a consent argument. I have forms of an order which your Honours have.
8195 GAGELER CJ: I think we have it, Mr Walker.
MR WALKER: I do not know why, this takes me back two decades I think. So, we have framed it as order, but we do not see – I hope I am correct in saying this – any substantive difference in terms of the intent. We entirely accept – we volunteer, indeed – that if this event were to happen upon our failure with respect to the effect of the reservation, then of course we need no more than an opportunity on remitter to consider the position and to act as we may be advised concerning that question of Indian law and characterisation of the dispute. If it please your Honours.
8200
8205
GAGELER CJ: Thank you, Mr Walker. Ms Roughley, do you have anything in reply and rejoinder?
8210 MS ROUGHLEY: Yes. I think the terms of the timetable were limiting me to only things that are new - - -
[Page 185]
GAGELER CJ: Yes.
8215 MS ROUGHLEY: - - - that Mr Walker. I appreciate that I lost some time earlier. Can I start with following up on a question that your Honour Justice Gordon asked me about how many States have signed the New York Convention. Twenty-two States have not signed the New York Convention; one hundred and seventy-two are parties to it.
8220 May I then go in the order of NOC 2 and then I will come to NOC 3 in the United States case law and, finally, the reservation and the last point that was made about NOC 4. As to NOC 2, the Solicitor-General advocated the position that the Court should leave for another day where the line is drawn by reference to public international law or private law. He said that this followed for a few reasons.
8225
8230 One of them was that the Solicitor-General suggested that NOC 2 is confined. In the Commonwealth’s outline, paragraphs 2 and 3, the same point is advanced. It appears to us that involves a misreading of what is notice of contention 2 and the terms in which it appears at core appeal book, tab 11, page 161.
8235 The Commonwealth seems to think that NOC 2 all depends on the meaning of the word “person”. That is not how NOC 2 has been limited. NOC 2 the Court will read for itself and does not refer to any particular words in Article I(1). However, in our submissions, we have referred to particular words. Paragraph 19, of our submissions, we have expressly stated, second sentence:
8240
India contends that the reference to “awards”, “differences” and “persons” in Art I(1) refer to awards and differences of a commercial or private law nature, and do not include acts of State jure imperii or in its governmental capacity.
8245 Now, the last bit was perhaps wider than I put it orally - - -
GAGELER CJ: Certainly, it is.
8250 MS ROUGHLEY: - - - but it certainly was not the case that we were limiting it to just the word “person”.
GAGELER CJ: Well, how do you limit it, because it is not the whole of that sentence, and it is not what you have got in NOC 2 itself?
8255 MS ROUGHLEY: No.
[Page 186]
GAGELER CJ: You should state precisely how you would put it.
8260 MS ROUGHLEY: Yes, and I thought I did. India’s position is that the reference in the New York Convention, Article I(1), to awards:
arising out of differences between persons, whether physical or legal –
8265 is concerned with the field of private law, and whatever the outer limits of that field it excludes arbitral awards where the rights and obligations at issue are sourced in international law. The other references in our submissions for how we put it is paragraphs 41 and rejoinder 12.
8270 The second reason that the Solicitor-General said it was not necessary for this Court to decide where the line is drawn, by reference to public international law or private law, was exposed in questions with your Honour Justice Gordon. It was first that there is nothing in the text. Second, there was a concession that the Convention is concerned with private law, but the third point was that times have moved on and State practice shows that it has been assumed, and there are cases which have proceeded on the basis, that investor-State arbitrations are under the BIT.
8275
8280 There are aspects of that that go to the question your Honour the Chief Justice, but it was put more boldly than that. In effect, that the truck of history has moved on and that it is too late to reverse the truck. None of the State practice that has been referred to by the Commonwealth and by reference to the primary judge 93, at core appeal book page 55, includes India’s State practice. That is the reason why the primary judge said, none of that could be relied on for the purposes of VCLT Article 31(3)(b) as subsequent State practice that reflects the agreement of State parties.
8285
8290 EDELMAN J: Why does that matter? I mean if there is widespread and uniform State practice that does not include India, but it concerns the construction of the scope of the Convention, that will ultimately affect the way the Convention is interpreted in favour of or against India, will it not?
8295 MS ROUGHLEY: No. Article 31 of VCLT, volume 7, tab 59, page 1837, provides general rules of interpretation which limits the extent to which subsequent State practice might affect the interpretation of the treaty. It is very precise – 31(3)(b) – it is:
8300
Any subsequent practice . . . which establishes the agreement of the parties regarding its interpretation –
[Page 187]
There is nothing in conduct of national courts of some countries to which India was not a litigant and has never expressed a concurring view that gives rise to India’s agreement as to the interpretation of this Convention.
8305 The third reason that was put, along the lines of the truck of history has moved on, is that if it had not, it has now been decided by the majority decision in Zhongshan v Nigeria, volume 10, tab 50. We rely, and I will not go back to it, that page 1640 of the joint book of authorities – page 1072 of the report, at the bottom of the page – as far as the court there, the majority, was prepared to go was to say that there is a categorical inapplication of the Convention.
8310
8315 They left open questions about where the line is drawn in respect of public international law and they left it open because they took the view, on the facts of that case, that the issue did not arise. Of course, we have different facts that the arbitration was solely governed by public international law obligations. It was not governed by the law of India, and so this case does squarely raise the question of whether the scope of Article I(1), irrespective of its literal terms, does not apply in the circumstances I have put.
8320
8325 Of course, to the extent that the Attorney falls back on a textual answer, in circumstances where there is a concession, it does not apply to at least some State-State disputes. Text does not go far enough to decide this question. One will have to consider questions of object revealed by the travaux, but also context, and that certainly includes the rest of the machinery that is in the New York Convention. As aspects of even the appellants’ submissions yesterday said, there are parts of this treaty that are just inapposite to deal with certain kinds of disputes that involve States.
8330
EDELMAN J: So, can I just take you back to Article 31(3)(b).
MS ROUGHLEY: Yes.
8335 EDELMAN J: That interpretation of Article 31(3)(b) would require evidence to establish that agreement. It could not ever be established by the case law, even the case law of a State. It would be a matter of fact to be determined, would it not?
8340 MS ROUGHLEY: That is right, yes. That does not make the case law irrelevant of course, to the extent it is persuasive, but it would have to have been dealing with the issue in order to provide any type of persuasive answer, and it would just be a question of whether another court agrees or disagrees with the application of VCLT principles, or the general principles of interpretation embodied in them, to the position.
8345
[Page 188]
There can be a difference though, of course, as the court in Nigeria was dealing with, which is where certain States have made an agreement, including by treaty. This is dealt with at JBA 1656, page 1088 of the report, dissenting reasons of Judge Katsas. Left-hand column, top of it, he refers to the ECT containing a particular agreement by those States which are party to it, that they will treat the arbitral awards:
8350
8355
as if they arose under the New York Convention –
That brings me to the second topic, which is NOC 3. The argument put on behalf of the Attorney appears to have these elements. One, there is a waiver exception and an arbitration exception in the United States. Two, there are three requirements which have been articulated in the case law and those requirements apply to the arbitration, but there is a way to read the cases such that they may not or do not all apply for the waiver exception.
8360
8365 Three, the reason you do not need all three requirements – you just need the first for a waiver exception – is because, putting it in a practical application, it would allow States that are party to the New York Convention to invade enforcement. If that is the way to understand how the United States position is thought to be deployed, India’s response is this.
8370 One, the Attorney identifies no case that supports that understanding of the waiver exception in the United States, whether before or after waiver. When I say “supports”, I mean explicitly supports. In fact, primary judge 47 - to which the Court was taken – shows that in none of those cases were those particular matters put in issue, and the extent to which the second and third requirements did not apply.
8375
8380 Second, the Court was taken to NextEra, joint book of authorities volume 5, tab 34, page 1209, which cites the cases which contain the three requirements. Nowhere does it say there: we cite these cases – but they do not stand for what they say. In qualified terms, you could ignore the last parts of it. Seetransport is being cited as relevant to waiver cases.
8385 Third, it seems that the Commonwealth’s argument is, in effect, seeking to recharacterise the United States case law based on this fearmongering that, assuming its own correctness, Article III has to be a waiver because otherwise a contracting State might object to the Federal Court of Australia exercising jurisdiction over it. The policy concern that underlines waiver there, as here – as articulated by this Court in Spain, paragraph 26, volume 3, tab 11, page 399 of the JBA – is that the starting point is that it is a very significant thing for the courts of one State to be exercising jurisdiction over another and that:
8390
In this sense, the insistence –
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8395 that it must be expressed is:
that any inference of a waiver of immunity must be drawn with great care when interpreting the express words of that agreement in context.
8400 And this Court cited Chief Justice Rehnquist in the United States Supreme Court, that:
8405
a foreign State will not waive its immunity merely “by signing an international agreement that contains no mention of a waiver of immunity to suit in United States courts or even the availability of a cause of action in the United States”.
And that that is reflecting what I was referring to as:
8410
the “political principle that those who are independent and autonomous cannot, except by consent, exercise authority over, or establish an external source of authority over, others of independent and autonomous status”.
8415 So, that is the driving policy of the foreign State immunity, and it picks up a question Justice Beech-Jones asked to Mr Walker at the end as to when we are looking at the International Arbitration Act and the Foreign States Immunities Act that the policy for section 10 remains unmistakable waiver.
8420 Fourth, India’s answer is that once those policy concerns and the strictness of the test for waiver are put into place it would be indeed a very surprising result if the test for waiver, in the case of arbitration, is more liberal than the test for arbitration – the test for arbitration, when courts are using the language of “unmistakable”, it suggests even of itself that the requirement is higher, not lower.
8425
8430 Five is that, of all the cases that the Commonwealth went to which expressly say something about waiver – sorry, the cases the Commonwealth did not go to include ones that make it clear, as Mr Gleeson took the Court, that you need an arbitral agreement as well as the New York Convention. Those, just to record them, were Preble-Rish, volume 6, tab 38, at 1311; Global Voice, which is volume 5, tab 27, at 937 to 938; and Process & Industrial Developments, volume 6, tab 39, at 1324 to 1325. That is what we wish to say about notice of contention 3 and the submissions put on behalf of the Attorney.
8435
That brings me to the issue of the reservation. Of course, if we are into this part of the case, one has to keep in mind what approach is being
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8440 taken but for the reservation to the meaning and effect of Article III – for Australia, I will put it in that way. The stronger and more inflexible that requirement of Australia is seen to be, and the more one reads a corresponding requirement of India that Australia recognise and enforce awards to the greatest extent possible, the more important the reservation features in the way to understand the case.
8445
8450 Now, it was said that there is no commentary which really grapples with this. There is one that does so quite usefully. It has a bit in it for everyone, but ultimately the most in it for India. This one is volume 8, tab 94 – this is Müller – and relevantly starting at 2509. I refer the Court to paragraphs 33 through to 36, which seek – in quite a balanced way – to work through all of the complexity the Solicitor-General was referring to about how reservations might work in different kinds of treaties and having regard to the nature of the – can I put it this way – positive obligations being imposed.
8455
8460 Ultimately it all depends, is the answer, but if PJ 43 is the prism through which we are approaching this, then the answer for present purposes is paragraph 36 on page 2511:
Even in these exceptional circumstances –
where the reservations are not affecting, in this case, the scope of, in this case, Australia’s obligations to the rest of the world:
8465
the reciprocity principle has one repercussion on the treaty relations established between a reserving State and a State with regard to which the reservation has been established: even if the latter must respect and honour the obligations contained in the treaty –
8470 that is Australia:
the reserving State –
8475 India:
has no right to request the execution of the treaty obligations it does not accept for itself.
8480 So, if PJ 43 is the way to understand it, there is no requirement being made by India and no right to request Australia to recognise and enforce in accordance with this quite extreme construction of Article III. That is enough to defeat the premise that India does not have a right anymore to claim immunity because it is, according to PJ 43, agreed and accepted that
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8485 Australia will and must recognise and enforce awards against it. I will defer anything else we say on that to the 14 days procedure.
8490 So, that leaves last that notice of contention 4. It is a creative way to get around a problem, but it does not work because of this. The appellants have the onus on waiver. They have appealed to this Court and agreed with the framing of the issue at respondent’s submissions 2, that the only act on which they rely is the conduct of India in ratifying, subject to reservations, the NYC. What NOC was doing – and we have met that. That is the case that we have joined issue on, and met.
8495 What NOC 4 was doing was something different, which was in effect advancing a positive defence which, as we have said in writing, we just do not need to prove – we just do not need to press, and that is something more is needed. So, we have not put that positive case in issue. That does not undermine their onus and their obligation to establish that mere ratification of the NYC is enough of an act to constitute unmistakable waiver.
8500
8505 BEECH-JONES J: So, is this meeting Mr Walker’s last argument that it is enough to have effectively prima facie an agreement to arbitrate? Is that what you are addressing?
8510 MS ROUGHLEY: Yes, in a sense. I understood him to be responding to Mr Gleeson saying we had a big argument at trial when it was unclear precisely what acts were relied on. They narrowed their case at the end on appeal. It was an issue whether that was enough, and that was the basis on which it was fought, and I understood Mr Walker to say that was all well and good until we get to NOC 4, and NOC 4 somehow involved some change to what acts are relied upon.
8515 So, if their case is ratifying subject to reservations is enough, which seems to be how they put it, it does not seem that the tendering of an award and prima facie proof adds anything as an act of consent, that is the case that we are required to meet, and met, and NOC 4 does not change it. May it please the Court.
8520
GAGELER CJ: Thank you, Ms Roughley. Subject to the receipt of the further submissions that have already been directed, the Court will consider its decision in this matter and will adjourn until 10.00 am tomorrow.
8525
AT 4.11 PM THE MATTER WAS ADJOURNED