The effect of an arbitral award outside the state in which it was rendered depends on its recognition and enforcement. In determining the consequences of a foreign arbitral award in another country, the content and nature of the award are examined. If the foreign arbitral award is of an executory nature, an action must be brought for its enforcement. The ability of a foreign arbitral award to produce the effects of res judicata or conclusive evidence in another country is possible only through its recognition in that country.
In other words, for an arbitral award to have legal effect in a state other than the one in which it was rendered, its recognition and enforcement are subject to review by the courts of that other state. The brief explanation above reflects the traditional recognition and enforcement procedure. Under the traditional approach, recognition or enforcement of an award is possible only if certain conditions are met.
When we look at Chapter VI of the ICSID Convention, we see that its title is “Recognition and Enforcement of the Award.” However, according to Article 54 of the ICSID Convention, the procedure for recognition and enforcement of ICSID arbitral awards differs from the traditional procedure described above. In terms of recognition and enforcement, ICSID arbitral awards are placed entirely outside the jurisdiction of national courts by virtue of Article 54 of the ICSID Convention.
This provision establishes that the ICSID system envisages the direct execution/implementation of arbitral awards and precludes national courts from intervening in the arbitration process. According to Article 54(1) of the ICSID Convention, “Each Contracting State shall recognize an award rendered pursuant to this Convention as binding and enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that State.”
Decisions imposing obligations other than pecuniary ones—such as the lifting of restrictions on foreign currency transfers or the return of confiscated property—will also be recognized. However, the recognition procedure here is not recognition in the traditional sense. Pursuant to Article 54(2) of the ICSID Convention, Contracting States are obliged to notify the Secretary-General of the court or other authority they designate for the recognition and enforcement of ICSID arbitral awards.
Article 69 of the ICSID Convention complements Article 54 by providing that Contracting States must take the necessary legislative and other measures to implement the provisions of the Convention. In a Contracting State, a party seeking recognition or enforcement of an ICSID tribunal’s award must submit to the designated authority or court an authenticated copy of the award certified by the ICSID Secretary-General. The authority or court to which such a request is made may not review the award under its domestic law and must recognize it as binding.
The simple and expeditious procedure for recognition and enforcement of ICSID arbitral awards provided by the ICSID Convention produces another consequence: at the recognition stage, a plea of sovereign immunity may not be raised.
In this thesis, “recognition and enforcement of ICSID arbitral awards” refers to the procedure applicable to ICSID awards under the ICSID Convention. As briefly explained above, this procedure is distinct from the traditional procedure for the recognition and enforcement of arbitral awards.¹
If a Contracting State is also a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the provisions of the ICSID Convention shall apply as lex specialis, taking precedence.²
¹ That is, a procedure different from the conventional recognition and enforcement mechanisms for arbitral awards.
² Lex specialis derogat legi generali – the specific law overrides the general law. Here, the ICSID Convention’s provisions take precedence over the New York Convention where both apply.