Can an Arbitration Award Be Expropriated? Introductory Note to European Court of Human Rights: Kin-Stib and Majkic v. Serbia

Abstract

The European Court of Human Rights recently ruled that failure to enforce an arbitration award amounts to a violation of the right to peaceful enjoyment of possession. This note first summarizes the ruling in Kin-Stib and Majkic v. Serbia and then considers its implications. In particular, it discusses whether an arbitration award can be expropriated by a State by virtue of non-enforcement in domestic courts.

This note concludes that under Kin-Stib and Majkic v. Serbia domestic arbitration awards, or to be more precise the contractual rights crystallized in such awards, are generally capable of being expropriated if the award is final and enforceable as such.

Applying the logic of the case to awards rendered under the ICSID Convention is more nuanced because non-enforcement in one jurisdiction does not fully deprive the award of its value. It is possible to enforce ICSID awards in other jurisdictions and therefore a case-by-case analysis is necessary to determine whether the award can be expropriated.

On the other hand, it appears that the logic of Kin-Stib cannot be applied to awards rendered under the New York Convention because such awards are unenforceable without formal judicial recognition. There is no clear-cut standard of international law to determine what degree of economic deprivation constitutes expropriation.

The most suitable method of determining what kind of interference constitutes a ‘‘taking’ under international law is to analyze each situation on a case-by-case basis. In the context of enforcement of arbitration awards, the extent of economic deprivation depends on the enforcement prospects of the award. It appears that it should not be possible to expropriate awards from the New York Convention because they are not ‘‘enforceable as such,’’ but require recognition by domestic courts.

Keywords: ECHR, ICSID, New York Convention, Enforcement of Arbitration Awards, Investor-State Arbitration; International Dispute Resolution, ICSID Convention, International Arbitration, Human Rights; Expropriation

JEL Classification: F21, K33, K40