Escaping Sovereign Immunity Through Arbitration Treaties

Sovereign Immunity presents a challenge to business transactions with state-owned (or closely related) entities. It can also present challenges when State action interferes with international business ventures. International arbitration, whether by contract or even treaty, can in many cases mitigate such risks and potentially make the difference between recovering just compensation or walking away with nothing.

The Problem of Sovereign Immunity

The Sovereign Immunity doctrine typically protects States from suits brought against them or their various organs. Under this doctrine, domestic courts will usually decline to adjudicate cases against sovereign States, to confirm judgments entered against sovereign States, or to execute judgments against State-owned property.

In other words, the principle of sovereign immunity imposes a substantial obstacle at each step in the pathway to a remedy. In some cases, these obstacles are simply insurmountable.

The Solution of International Arbitration Treaties

There are, however, ways to overcome Sovereign Immunity’s obstacles. The most reliable method is to include an arbitration agreement and waiver of Sovereign Immunity in your contract with the State or State-owned entity. But even if such an agreement and waiver do not exist, all hope may not be lost. International arbitration treaties, and most notably bilateral investment treaties, may provide an alternative mechanism to avoid Sovereign Immunity.
Two recent North American decisions illustrate this point: NextEra v. Spain and Devas v. India.

The Origins of NextEra and Devas

In NextEra Energy v. Spain, two Dutch companies decided to build solar power plants in Spain pursuant to an incentive scheme that Spain adopted in 2007. The companies spent about € 750 million developing these plants. After this money had been spent, however, Spain dramatically altered its incentive scheme in ways that wiped out the profitability of the Dutch companies’ investments.

In Devas v. India, a number of Mauritian companies invested in an Indian private company that subsequently contracted with an Indian state-owned company to lease “S-band” broadcast capacity on two satellites. Just five years later, however, the Government of India adopted a resolution reserving all S-band broadcast capacity for state use and terminating the state-owned company’s contract with the Indian private company.

In NextEra, the foreign investors did not have a contract with the State or any State-related entity. Their claim against the State arose exclusively out of the State’s interference with their legitimate business interest. In Devas, by contrast, the investors had a contract with a State-owned entity. Their claim against the State arose both from the State-owned entity’s breach of that contract and the State’s role in causing the breach. In both cases, however, the States raised Sovereign Immunity to bar the investors’ claims.

In many cases, the story would have ended here for the foreign investors in NextEra and Devas. Sovereign immunity would have prevented the investors from bringing their disputes with Spain and India before an impartial tribunal for resolution on the merits. And even if the investors had managed to obtain a judgment against Spain or India, sovereign immunity would likely have prevented the investors from confirming and executing those judgments in the jurisdictions in which Spain and India maintain property.

Fortunately for the foreign investors in NextEra and Devas, however, Spain and India had signed treaties providing for arbitration of disputes with foreign investors and thereby waived their right to Sovereign Immunity.

The First Step: Treaty Mandated International Arbitration

Because Spain and India had signed arbitration treaties, the investors in NextEra and Devas were able to have their disputes heard before impartial tribunals regardless of whether they had secured contractual waivers of Sovereign Immunity directly from Spain and India.

In NextEra, the relevant treaty was the Energy Charter Treaty. Under this treaty, Spain had given “unconditional consent to the submission of” its disputes with foreign investors “to international arbitration.” In Devas, the relevant treaty was a bilateral investment treaty between India and Mauritius. Under this treaty, India had agreed that international arbitration would serve as a mechanism for resolving “[a]ny dispute between an investor of one Contracting Party and the other Contracting Party in relation to an investment of the former” under the treaty.

Relying on these treaties, the investors in NextEra and Devas brought Spain and India into arbitration proceedings and obtained arbitral awards recognizing the harm the investors had suffered. But the treaties’ benefits went further than that.

The Second Step: Confirming the Arbitral Award in a Domestic Judgment

Because of Spain’s and India’s arbitration treaties, the investors in NextEra and Devas were also able to confirm their arbitral awards in domestically enforceable judgments in the jurisdictions in which Spain and India maintain property.

In NextEra, the investors sought to confirm their arbitral award in the United States. They brought their petition before the United States District Court for the District of Columbia. Spain resisted the proceedings, arguing that the principle of sovereign immunity deprived the court of jurisdiction over Spain. But, in an opinion issued February 15, 2023, the court rejected Spain’s assertion of sovereign immunity.

The court reasoned that the investors’ petition fell within an exception to the United States’ foreign sovereign immunity statute that eliminates sovereign immunity for proceedings to confirm an award made pursuant to “an agreement to arbitrate.” The Court noted that Spain was a signatory of the Energy Charter Treaty and that this treaty had required Spain to submit its dispute with the plaintiff-investors to arbitration. On this basis, the court concluded that the Energy Charter Treaty’s arbitration provision was an “agreement to arbitrate” and that Spain had surrendered its sovereign immunity from the investors’ suit by signing the Energy Charter Treaty. Notably, the United States is not a signatory of the Energy Charter Treaty, but this had no impact on the court’s willingness to recognize the treaty’s arbitration provision as a valid agreement to arbitrate within the foreign sovereign immunity statute’s exception.

The court in Devas reached a similar result, albeit through slightly different reasoning. In Devas, the investors sought to confirm their arbitral award in Canada and brought their petition before the Superior Court of Quebec. India raised sovereign immunity as a bar to the proceedings. Like the court in NextEra, the Superior Court of Quebec rejected this assertion of sovereign immunity.

One of the court’s rationales for rejecting sovereign immunity was that India had waived its sovereign immunity by entering a bilateral investment treaty that requiring arbitration of disputes like the one that had arisen in Devas. The court reasoned that, by signing that treaty, and by participating in an arbitration with the Devas investors pursuant to that treaty, India had waived its sovereign immunity from proceedings in Canada to confirm the arbitration’s result. The court also noted that India has also signed the New York Convention, which requires signatories to enforce arbitral awards. The court concluded that India’s acceptance of the New York Convention reflected yet another waiver of its sovereign immunity. And since Canada is also a signatory of the New York Convention, Canadian courts must recognize and enforce valid arbitral awards.

Thanks to Spain’s and India’s arbitration treaties, the investors in NextEra and Devas now have domestic judgments reflecting their arbitral awards that are enforceable in the countries in which Spain and India maintain property.

The Third Step: Executing Against State-Owned Property

The story is not yet over for the investors in NextEra and Devas. While they have cleared he first two sovereign immunity hurdles in their pursuant of a remedy, they will still have to execute their judgments against Spain’s property in the United States and India’s property in Canada. Spain and India will surely raise sovereign immunity arguments again in this next step. Given the courts’ reasoning in NextEra and Devas, however, Spain’s and India’s arbitration treaties could play a substantial role in mitigating the effects of sovereign immunity at this step as well.


As NextEra and Devas make clear, if you do business in countries with large numbers of state-owned enterprises or with volatile regulatory regimes, you should speak to a lawyer about how Sovereign Immunity could affect your transactions. In addition to negotiating for arbitration agreements and express waivers of Sovereign Immunity in your contracts, you should consider what enforcement mechanisms could be available to you under international treaties should dispute resolution become necessary. And you should also consider whether the country in which or with which you are doing business maintains property in jurisdictions that are known to enforce arbitral awards, whether under the New York Convention or otherwise.

UK Government announces intention to sign and ratify the Singapore Convention on Mediation

On 2 March 2023, the Ministry of Justice published the UK Government’s response (“Consultation Response”) to the consultation on the United Nations Convention on International Settlement Agreements Resulting from Mediation (New York, 2019) (the “Singapore Convention on Mediation”, or the “Convention”) concluding that “it is the right time for the UK to become a Party”.

In some measure, the Singapore Convention on Mediation seeks to replicate the success of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”). Continue reading “UK Government announces intention to sign and ratify the Singapore Convention on Mediation”

A Review of Two Recent Cases: Arbitration Against Consumers in Digital Asset Disputes

There are many reasons (both commercial and legal) as to why a party or parties might elect to refer a dispute as between them to arbitration. In cross-border cases, this could be to ensure that a dispute is determined within a certain jurisdiction, language or otherwise pursuant to specific laws. In addition, and in the absence of a flagrant disregard of the relevant terms or the referral to Court for assistance, the arbitration will be confidential (which could be important).

To read the full text of this post by Duane Morris attorney Chris Recker,  please visit the Duane Morris London Blog.

An Overview on Summary Procedure in International Arbitration


The benefits and advantages of international arbitration as a dispute resolution process are well known: arbitration proceedings are confidential in nature; there is flexibility to decide on the rules and procedures governing the arbitration; parties have the ability to choose arbitrators with industry or specialist knowledge; and there can be significant savings in time and costs when compared to litigation.

Given that one of the key traits of international arbitration is the savings in time and costs, it is logical that arbitration tribunals and institutions find ways to reduce costs and the length of proceedings in natural ways – summary procedures are a great tool to achieve this goal, however, litigants and arbitral tribunals have been slow to take advantage of such procedures.


Summary procedures in international arbitration enable an arbitral tribunal to reach an early determination of the matter on the merits, without a full hearing of the evidence, or can be used to narrow the issues. Akin to summary judgment motions in common law court proceedings, summary procedures allow the arbitral tribunal to dispose of unmeritorious claims and defences at an earlier stage.

There is a difference between summary procedures from expedited proceedings as the latter provides for a more streamlined arbitration proceedings, usually by the prescription of shorter timelines, while the former is an application taken out in the ordinary arbitration proceedings.

For a period of time, there was doubt as to whether arbitral tribunals have the authority to summarily issue awards or dispose of a party’s claim and arbitral tribunals appeared to be hesitant to decide on such matters. To address this concern, an increasing number of major arbitral institutions amended their rules to expressly provide arbitral tribunals with such authority, including:

(a) In 2006, the International Centre for Settlement of Investment Disputes (ICSID) introduced Rule 41 which allows parties to file an objection that a claim is manifestly without legal merit.

(b) In 2016, the Singapore International Arbitration Centre (SIAC) introduced Rule 29 to the SIAC Rules which allows parties to apply for the early dismissal of a claim or a defence on the basis that the claim or defence is manifestly without legal merit or manifestly outside the jurisdiction of the Tribunal.

(c) In 2017, Article 39(1) was introduced the Stockholm Chamber of Commerce Arbitration Rules allowing parties to request the arbitral tribunal to decide on issues of jurisdiction, admissibility or merits.

(d) In 2017, the International Chamber of Commerce Court of Arbitration issued a revised practice note confirming that Article 22 of the ICC Rules allows applications for the expeditious determination of manifestly unmeritorious claims or defences.

(e) In 2018, Article 39 of the 2018 Hong Kong International Arbitration Centre (HKIAC) Administered Arbitration Rules introduced an early determination procedure empowering the arbitral tribunal to decide on points of law or fact on the basis that they are manifestly without merit, manifestly outside the arbitral tribunal’s jurisdiction or in instances where no award could be rendered in favour of a party even if the facts or law as alleged are assumed to be correct.

(f) In 2020, the London Court of International Arbitration introduced Article 22(viii) which provided for an early determination procedure which empowered arbitral tribunals to make an order or award in the event that a claim, defence or counterclaim is inadmissible or manifestly without merit.

Given the significant uptake in the number of major arbitration institutions which have adopted rules permitting summary procedures, arbitral rules permitting summary procedures would likely be the default option moving forward.


As summary procedures have only taken root in institutional rules relatively recently, and with the historical hesitancy of arbitral tribunals relying on such powers, there is some level of uncertainty regarding the enforcement of summary awards given the limited quantity of such cases. This uncertainty creates a self-perpetuating cycle as it has been one of the reasons why arbitral tribunals have been reluctant to grant summary awards.

Nevertheless, so long as parties adhered to the agreed rules and parties were able to present their respective cases, there is no reason to believe that summary awards would not be enforced in the same manner as an arbitral award obtained after the conclusion of an arbitration. In particular, parties that see the benefit of summary procedure should consider adopting rules that explicitly authorise summary procedures.

This position is supported by the English decision of Travis Coal Restructured Holdings LLC v Essar Global Funding Ltd [2014] EWHC 2510 (Comm) where ICC arbitral tribunal had already granted an award against the defendant by way of a summary judgment procedure. In the enforcement proceedings brought by the plaintiff, the defendant alleged, amongst others, that the arbitral tribunal had exceeded its powers by adopting the summary judgment procedure and that the summary judgment process is a violation of due process. These arguments were rejected by the Commercial Court which noted that the arbitral tribunal had made every effort to conduct the arbitration in an expeditious and cost-effective manner, had given each party a fair opportunity to present its case and that the summary judgment procedure fell within the arbitration clause.


The most obvious benefit of summary procedures are the significant savings in time and costs. For instance, the average duration of cases in the SIAC is 13.8 months and even cases involving the SIAC Expedited Procedure would only an expect an award issued within 6 months of the constitution of the arbitral tribunal. By comparison, pursuant to the various summary procedures under the SIAC, ICSID and HKIAC Rules, the arbitral tribunals would be required to issue a decision or award within 60 days of the application or the constitution of the tribunal. The shortened length consequently means that there is a corresponding reduction in the parties’ cost and legal fees.

Interestingly, commentators have also voiced some concerns that the introduction of summary procedures can have an opposite effect by extending arbitration proceedings as a party may file an unmeritorious application for summary procedure in order to further delay matters and cause the other party to incur further unnecessary costs. In this regard, given the expedited timelines contained in many of the institutional rules on summary procedures, as well as the potential costs orders that may be made against such applications, there is limited cause for concern that summary procedures would be abused.

Summary procedures may also reduce the number of unmeritorious claims being brought forth in the first place as such claims would likely face an application for the case to the summarily dismissed almost immediately. This can give parties additional comfort that unmeritorious claims can be disposed of without incurring the cost of a full arbitration as they would otherwise have to wait until the conclusion of a full arbitration before receiving a cost award.

While summary procedures may not always be useful, it serves as a helpful tool that can and should be relied upon in the appropriate circumstances and advocates and arbitrators should not be afraid to rely on the same when the time arises.

Reaping the Awards – Avoiding the Pitfalls of Enforcing Arbitral Awards

By Charlyn Cruz

As with litigation, a successful arbitral award is a hollow victory if the responding party refuses to honour it, and enforcement proceedings are necessary. Given the international nature of arbitration, a number of things could go wrong at this stage and put a downer on a successful award. There are matters that ought to be considered strategically at the outset at contract stage and beyond to be ready to deal with a reluctant party after the award. It is therefore crucial to take certain steps at various stages to ensure you cross the finish line and reap those awards. Continue reading “Reaping the Awards – Avoiding the Pitfalls of Enforcing Arbitral Awards”

The Glass Ceiling Looms Large – Gender Diversity in Arbitration

In a previous blog, we looked at diversity, specifically in relation to gender parity, in the context of adjudication.[1] Although we have come a long way in this arena, the issue of gender diversity still casts a long shadow. It should therefore be no surprise that the world of arbitration suffers much of the same problem. Continue reading “The Glass Ceiling Looms Large – Gender Diversity in Arbitration”

Jurisdictional challenges and arbitration clauses – that old chestnut! – The UK perspective

By Oliver Kent

Picture this. You are a Director at a substantial widget manufacturing company. One of your key materials suppliers, with whom you’ve had a relationship for many years, is causing you grief. There have been a number of complaints from customers in recent times about a decline in widget quality, which appear to be the fault of your supplier. However, you’re behind on your payments to the supplier and they are starting to threaten supply, with disastrous effects for the company. A dispute is brewing.

You have been involved with litigation before and have experience of court proceedings. However, when you check with your legal team about next steps, you learn that your agreement with the supplier contains a clause which appears to indicate that all disputes must be referred to arbitration. The clause is perhaps not drafted with the certainty it should and could have been, and it is not clear the extent to which it is enforceable. The issue usually is framed on the basis of whether there is a valid and enforceable agreement to refer disputes to arbitration.

There are also commercial considerations that may be relevant. Is it preferable to litigate in the domestic courts or arbitrate? This may be a commercial call, just as much as a legal one. This blog shares some of the practical considerations around these issues.
Continue reading “Jurisdictional challenges and arbitration clauses – that old chestnut! – The UK perspective”

Expedited Arbitrations: Can We Learn Anything from Adjudications?

By Luis Duhart


Construction projects are a ripe ground for disputes. When these disputes arise, they often threaten to bring the project itself to a halt if not resolved expeditiously. However, many large-scale construction projects (particularly international ones) provide for their disputes to be referred to arbitration. Continue reading “Expedited Arbitrations: Can We Learn Anything from Adjudications?”

Growing Acceptance and Benefits of International Arbitration in the Banking and Finance Industries

By Nicole Mirjanich Moore

The banking and finance industries have historically chosen litigation as their preferred dispute resolution, generally in the New York or London courts. Due to increased globalization and participation from emerging markets (e.g., Africa and Asia), international arbitration of banking and finance disputes is rising in popularity. Continue reading “Growing Acceptance and Benefits of International Arbitration in the Banking and Finance Industries”

Future of International Energy Arbitration – Trends

Queen Mary University of London has undertaken a major International Arbitration Survey, focusing on the energy sector entitled “Future of International Energy Arbitration, Survey Report 2022”. This was led by Professor Loukas Mistelis FCArb[1] and his team. The Survey was based on feedback from over 900 respondents from a diverse range of jurisdictions, end users, leading practitioners, arbitrators and experts, as well as arbitral and academic institutions. Continue reading “Future of International Energy Arbitration – Trends”

© 2009- Duane Morris LLP. Duane Morris is a registered service mark of Duane Morris LLP.

The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

Proudly powered by WordPress