First Malaysian Judgment Recognising ICSID Arbitration Award

The High Court at Kuala Lumpur, in the first-ever decision of its kind, recognised a foreign award made by an arbitral tribunal under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (“ICSID Convention“). This recognition resulted in the foreign award being treated as if it is a judgment of the High Court.

To give context, the ICSID Convention was formulated by the World Bank and aims to facilitate conciliation and arbitration of investment disputes between countries that have ratified the ICSID Convention (“Contracting States“) and nationals of other Contracting States. The ICSID Convention also provides for the recognition and enforcement of an arbitral award made thereunder.

The ICSID Convention, which came into force on 14 October 1966, has been ratified by 158 countries as of 28 October 2022. Malaysia ratified the ICSID Convention on 14 October 1966 and domestically enacted the Convention on the Settlement of Investment Disputes Act 1966 (“Malaysian ICSID Act“) in the same year to give domestic effect to the ICSID Convention.

In Elisabeth Regina Maria Gabriele Von Pezold & Ors v Republic of Zimbabwe [2023] MLJU 2657 (“Von Pezolds Case“), the High Court had to decide whether an ICSID arbitration award is enforceable in Malaysia as if it is a judgment obtained from the High Court by virtue of section 3 of the Malaysian ICSID Act. Various issues were considered by the High Court including its jurisdiction to hear such an application, and the entitlement of a foreign state to claim state sovereign immunity.

The following provisions of the ICSID Convention took centre stage in the Von Pezolds Case:

• Article 53 which in essence provides that an ICSID arbitral award is binding on the parties and each party is required to abide by and comply with the terms of the award;
• Article 54 which in essence stipulates that each Contracting State is required to recognise an ICSID arbitral award rendered under the ICSID Convention as binding, and enforce the pecuniary obligations imposed therein within its territories as if it were a final judgment of a court in that Contracting State. Execution of the award should be governed by the laws concerning the execution of judgments in force in the Contracting State; and
• Article 55 which preserves the law in force in any Contracting State relating to sovereign immunity of that Contracting State or of any foreign state from execution.