BSP Litigation Team obtains the first decision in Luxembourg on the recognition and enforcement of arbitral awards issued by the ICSID

On 11 February 2021, the Luxembourg Court of Appeal handed down a landmark judgment, confirming the recognition and the enforcement of arbitral award issued by an ICSID arbitration panel pursuant to the “Washington Convention”, strictly limiting the degree of judicial review and the possibility to refuse recognition.

Exequatur procedures under the aegis of the New York and Washington Conventions

The recognition of a foreign award does not automatically allow for its enforcement, which is why exequatur proceedings may be necessary to enforce a claim under a foreign award.

The recognition and execution of foreign arbitral awards is mainly governed by the New York Convention of 1958 (the “New York Convention”), whose scope and applicability has already been clarified in a series of Luxembourg law precedents.  The New York Convention provides that, under certain conditions, a State Court can refuse the recognition and enforcement of an arbitral award. In a previous decision, the Luxembourg Court of appeal has already clearly indicated that whenever a convention relating to the recognition and enforcement of arbitral awards has been ratified by Luxembourg, the internal provisions provided by article 1251 of the NCCP (which provides for grounds of refusal of recognition and enforcement of the award) do not apply.

In the decision at hand, the Court of appeal had to deal, for the first time in Luxembourg, with a different convention, i.e. the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the “Washington Convention”) which lays down specific rules in relation to the recognition of ICSID awards. The Washington Convention was ratified by the Luxembourg parliament on April 8^th,1970.^[1]

The autonomous recognition regime of the Washington Convention

Reminding the governing principle it held in relation to the New York Convention, i.e. that the internal provisions provided by article 1251 of the NCCP do not apply in case an international convention applies, the Court of appeal rejected the application of such internal provisions. Therefore, the recognition of an ICSID award should be analysed solely with regards to the Washington Convention.

ICSID awards under the Washington Convention are automatically recognized in any ratifying State as if they were a final judgment of the national courts.

National courts have therefore very little discretion, if none, to oppose the recognition of such an arbitral award.  Indeed, the involvement of Luxembourg judges, is limited to verifying the existence of an arbitral award under article 54-1 of the Washington Convention.

It should be emphasized that the Court of appeal made a clear distinction in its decision between the recognition of an ICSID award, for which the national courts have very little discretion and its enforcement, where the national courts can apply their national rules.

Conclusion and considerations

The impact of this decision in the Grand Duchy of Luxembourg is notable as it sets clear boundaries to national law and the power of national courts when the Washington Convention applies.  Indeed, on the basis of this decision the Washington Convention, as a strict and autonomous instrument, does not give any ground to challenging the recognition of an ICSID award, leaving however the debate fully opened when it comes to the enforcement of such recognized award in Luxembourg.

The members of the team involved in this matter were the Head of the Dispute Resolution department Fabio Trevisan together with the Partner Laure-Hélène Gaicio-Fievez and the Senior Associate Magedeline Mounir.