Australian Court upholds India’s immunity from proceedings to enforce an investment treaty award under the New York Convention

In Republic of India v CCDM Holdings, LLC [2025] FCAFC 2, the Full Court of the Federal Court of Australia held that India was entitled to exercise rights of state immunity when overturning a decision not to set aside an application for enforcement of an arbitration award. Crucially, the decision found that India had not waived foreign state immunity by accession to the New York Convention in respect of non-commercial disputes.

Background

Three Mauritian shareholders (Investors) invested in an Indian company that contracted with an Indian state-owned entity to lease capacity on two Indian satellites. The agreement was later annulled by the Indian Cabinet Committee on Security (an administrative arm of the Government of India) on grounds of increased demand for capacity for public purposes. The Investors instituted arbitral proceedings under the Mauritius-India bilateral investment treaty (BIT), claiming unlawful expropriation and breach of the obligation to treat foreign investors fairly and equitably.

The arbitral tribunal upheld those claims and awarded a total of USD 111 million in damages against India.

Application for enforcement and decision at first instance

The Investors applied to enforce the award under Australia’s International Arbitration Act 1974 which incorporates the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (New York Convention). In the previous proceeding CCDM Holdings, LLC v Republic of India (No 3) [2023] FCA 1266, India filed an interlocutory application to set aside the application on the basis that it was inconsistent with its rights to state immunity under the Foreign States Immunities Act 1985 (FSIA).

By way of background, section 9 of the FSIA provides that foreign states have immunity from the jurisdiction of Australian courts, which means that Australian courts will not generally entertain claims against foreign states. Section 10 provides an exception to this general rule, where a State has submitted to the jurisdiction by agreement. The key question in this case was whether by signing the New York Convention, India had submitted to the jurisdiction by agreement under section 10.

At first instance, a single judge of the Federal Court of Australia concluded that India’s accession to the New York Convention did amount to a submission to the jurisdiction. The Federal Court concluded that there was no basis in the text of the New York Convention for India’s contention that the Convention was limited to commercial or private law disputes, of which this case was one. India had relied on its commercial reservation to the Convention, whereby it undertook under Art I(3) to:

However, the Federal Court decided that this reservation was not directly relevant as Australia, where the enforcement application was made, had not made a reservation of this kind.

Consequently, India’s application to set aside the enforcement proceedings failed and India appealed.

The Appeal

On appeal, the Full Court of the Federal Court of Australia (Full Court), comprised of three judges, considered two issues:

1. whether by ratifying the New York Convention, India waived state immunity in respect of the enforcement of an award that is generally within the scope of the New York Convention but excluded by India’s reservation; and
2. whether the award was outside India’s commercial reservation, i.e., whether it arose out of a legal relationship, whether contractual or not, which is considered as commercial under the law of India.

The second issue was in fact not contested in the Full Court. On the first issue, the Full Court considered the scope of the Convention in light of India’s reservation and held that the New York Convention applies to India, and reciprocally to other States, only to the extent of the reservation, i.e., only to commercial disputes. In considering whether that amounted to a waiver, the Full Court applied the test standard established by the High Court of Australia in the landmark decision in Kingdom of Spain v Infrastructure Services Luxembourg S.à.r.l [2023] HCA 11.

The High Court of Australia established, in the context of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention), that any waiver of rights to state immunity must have been made in a “clear and recognisable manner” to a “high level of clarity and necessity” such that it is “unmistakable”.

Applying that standard, the Full Court held that by its reservation, India had made it plain that it did not and would not treat non-commercial disputes as being subject to the New York Convention and therefore had not waived immunity in respect of those disputes. While the Full Court appeared to indicate support for the conclusion that India has waived immunity in respect of awards within its reservation, i.e., awards arising from commercial disputes, it did not decide this point.

The Full Court also distinguished India’s ratification of the New York Convention from Spain’s accession to the ICSID Convention in Kingdom of Spain. India, unlike Spain under the ICSID Convention, has no obligation under the New York Convention to recognise as binding and enforce an award that was excluded by its commercial reservation. Further, the ICSID Convention expressly preserves immunity from execution. By contrast, the New York Convention contains no limited express preservation of state immunity that gave rise to an implication that other immunity was not preserved. The Full Court accordingly ordered that the Investors’ originating application be set aside by reason that India is immune from the jurisdiction of the Federal Court in that proceeding pursuant to section 9 of the FSIA.

Takeaways

Foreign state immunity in the context of award enforcement has been a hot topic in Australia in recent years with multiple judgments issued in both the Spanish and Indian enforcement sagas. This judgment may not yet be the end of the story.

On 28 February 2025, the Investors filed an application for special leave to appeal to the High Court of Australia. If granted, it will be interesting to see whether the High Court upholds the Full Court’s analysis. Notably, courts internationally have adopted one of two different approaches. In Union of India v Vodafone Group PLC UK & Anr 2018:DHC:2956 and Union of India v Khaitan Holdings (Mauritius) Ltd & Ors 2019:DHC:571, the courts in India have followed a similar approach to the Full Court in this case, while the Quebec Court of Appeal recently concluded that India had waived immunity in proceedings brought by the same Investors in Republic of India v CCDM Holdings 2024 QCCA 1620.

Whether or not special leave is granted, this case serves as a timely reminder to companies investing in foreign jurisdictions of the importance of thorough planning and analysis in structuring those investments to secure effective protection whether by treaty or in contract.

We will report on the High Court’s decision in a later edition of the Arbitration Quarterly if leave is granted.

Nicholas Bea, Law Graduate, assisted in the preparation of this briefing.