Partner Sydney
"The effect of India’s reservation was that Australia had no obligation to India to enforce the New York Convention other than in respect of commercial relationships and vice versa."
In Republic of India v CCDM Holdings, LLC [2025] FCAFC 2 (“India v CCDM Holdings”), the Full Court upheld an appeal by India and concluded that India had not waived its foreign state immunity under the Foreign States Immunities Act 1985 (Cth) (“FSIA”). Whilst the primary judge had agreed with the respondent companies that India’s membership of the New York Convention meant that India did not have immunity from the enforcement proceedings, the Full Court disagreed, focussing on a reservation India had made when ratifying the New York Convention that limited the Convention’s application to commercial disputes only (the “commercial reservation”).
Although there have been cases from other jurisdictions considering the scope of a state’s commercial reservation and whether a dispute is properly considered “commercial” for the purposes of the New York Convention, this may be the first time a superior court of a common law jurisdiction has considered whether a foreign state has waived its immunity by ratifying the New York Convention with the commercial reservation in respect of a non-commercial dispute.
Critical to the outcome were the Full Court’s findings that:
- through the commercial 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
- ratifying a treaty subject to a reservation excludes or modifies the legal effect of one or more provisions of the treaty “on a reciprocal basis”. The effect of India’s reservation was that Australia had no obligation to India to enforce the New York Convention other than in respect of commercial relationships and vice versa.
This was not the first time a superior Australian court has considered foreign state immunity in the context of enforcing an arbitral award under an international treaty. In 2023, the High Court of Australia (the “High Court”) ruled that waiver of a foreign state’s immunity under the FSIA may be inferred from the words of an international treaty to which that state adheres, but that the state’s expression of submission to jurisdiction must be “unmistakable” (in Kingdom of Spain v Infrastructure Services Luxembourg S.à.r.l [2023] HCA 11 at [29] (“Kingdom of Spain”)). The High Court found that Spain had waived its immunity in that case by ratifying the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (1965) (the “ICSID Convention”) as the ICSID Convention obliged Spain to recognise a relevant award as ‘binding’.
By contrast, in India v CCDM Holdings, the Full Court found that India’s ratification of the New York Convention with the commercial reservation was “sufficiently equivocal” such that the High Court’s threshold for waiving immunity was not met. The nature of the commercial reservation was such that India had “made it plain that it did not and would not treat differences arising from legal relationships that are not commercial” as being subject to the New York Convention (at [72]).
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"In India v CCDM Holdings, the Full Court found that India’s ratification of the New York Convention with the commercial reservation was “sufficiently equivocal” such that the threshold for waiving immunity was not met."
The commercial reservation findings
A key factor in the Full Court’s decision was that the respondent companies did not challenge India’s assertion that the award fell outside the commercial reservation and did not seek to persuade the Court that the award was in relation to a commercial dispute. Instead they contended that India’s ratification of the New York Convention (even with the commercial reservation) in and of itself amounted to submission to the Federal Court’s jurisdiction under the FSIA, including with respect to disputes that fell outside the commercial reservation.
The respondents had been awarded US$111m in damages in an international investment arbitration arising from the annulment of a satellite lease agreement with an Indian state-owned enterprise. The Full Court found that the dispute the subject of the arbitration arose from a bilateral investment treaty (“BIT”) and India’s annulment actions. Regarding the BIT, the Full Court noted that this was a public international law instrument that “gave international law rights” to the respondents and so was not a commercial relationship. The Full Court also accepted that the Indian government annulled the lease agreement on national security and public policy grounds and that the decision was not based on any commercial considerations.
As such, the Full Court concluded that the award was not an “award with regard to differences that arose from a commercial relationship” and thus did not fall within any waiver of foreign state immunity that may result from India’s membership of the New York Convention.
What does this mean for enforcement of arbitral awards in Australia?
The respondents were successful on the merits in their arbitration against India, but they failed in their bid to enforce the award of damages even though both Australia and India are parties to the New York Convention. This decision could have significant implications for any party seeking to enforce a foreign arbitral award in Australia where the counterparty is a foreign state that adheres to the New York Convention subject to a commercial reservation.
"This decision could have significant implications for any party seeking to enforce a foreign arbitral award in Australia where the counterparty is a foreign state that adheres to the New York Convention subject to a commercial reservation."
Investors or companies entering agreements with foreign state entities or quasi-governmental entities should seek advice about the level of risk that could arise in a dispute that may not be considered “commercial” in nature. These considerations could also influence the choice of forum when an arbitral award comes to be enforced. In particular, we recommend considering the following:
- has the counterparty state acceded to the New York Convention? If yes, has the counterparty state acceded to the New York Convention with a form of the commercial reservation? Approximately 30% of the 172 New York Convention member states have some form of reservation that limits the application of the Convention to commercial disputes. The effect of the Full Court judgment is that enforcement by Australian courts of awards against these states may not be able to rely on membership of the New York Convention to demonstrate waiver of immunity. This highlights the importance of dispute strategy planning early in a dispute, taking into consideration potential enforcement jurisdictions and obstacles to enforcement;
- how does the law of the counterparty member state define and interpret whether something is commercial? No evidence was presented to the Full Court explaining how the law of India determines whether an action is commercial, and the Court was accordingly bound to address the issue from the perspective of Australian law. Ordinarily the relevant question will be what counts as “commercial” under the municipal law of the counterparty state, which could vary across jurisdictions. If the law of the counterparty state would treat an award as falling outside a commercial relationship, Australian courts will likely refuse to enforce an award against that state based on the Full Court’s reasoning. Parties should not assume that just because they enter a lease agreement or contract of sale that any dispute with the relevant counterparty will be commercial;
- who are the counterparties: are they government agencies or departments, state-owned enterprises, private companies with a government/public shareholder or a purely private company providing products or services on behalf of a government agency, department, ministry or state-owned enterprise? Whilst not determinative, this may play a role in determining whether the dispute arises out of a commercial relationship. Agreements with a government agency or department, state-owned enterprise, private company with a government/public shareholder and/or a purely private company providing products or services on behalf of a government agency, department, ministry or state-owned enterprise should be carefully assessed to determine whether such a counterparty is entering the agreement as a commercial transaction, whether it is doing so pursuant to a government or public order or decree or in the exercise of a public duty or role; and
- if a favourable arbitral award is issued, which forum would be most favourable for enforcing the award? Different jurisdictions have differing legal principles through which they will apply the doctrine of foreign state immunity, with many common law jurisdictions and EU member states recognising the potential for foreign states to waive their immunity. Consider also whether there is scope to incorporate a waiver of foreign state immunity into the relevant agreement. Courts in Australia, on the basis of Kingdom of Spain, will require any waiver of immunity to be “unmistakable”. Similarly, in the UK, the Court of Appeal’s recent decision in General Dynamics United Kingdom Ltd v The State of Libya [2025] EWCA Civ 134 reinforces that a contractual submission to jurisdiction should be in clear and unambiguous language. That case determined that a contractual provision that an arbitral award would be “final, binding and wholly enforceable” amounted to a submission to jurisdiction.
The respondents have sought special leave to appeal to the High Court. If the High Court, as Australia’s highest appellate court, grants leave to appeal, its ruling will likely define the law on this issue for some time, at least until it next has an opportunity to consider a similar case. Given the lack of international jurisprudence on the effect of ratifying the New York Convention subject to the commercial reservation on a foreign state’s immunity in a non-commercial dispute, we expect that other jurisdictions will closely watch the approach of Australian courts.
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