Full Federal Court reverses ruling on India’s foreign state immunity defence

11 February 2025

The Full Federal Court has overturned a previous decision regarding India’s foreign state immunity defence in an application to enforce a US $111m investment treaty award in Australia. It found that India did not waive immunity by becoming a party to the New York Convention subject to a commercial reservation.

The Full Court of the Federal Court of Australia (Full Federal Court) recently handed down its decision in Republic of India v CCDM Holdings, LLC [2025] FCAFC 2 finding that India did not waive foreign state immunity under the Foreign States Immunities Act 1985 (Cth) (FSIA) for the purposes of recognition and enforcement of arbitral awards in Australia by becoming a party to the 1958 New York Convention on the Recognition and Enforcement of Arbitration Awards (New York Convention).^[1] The decision turned on India’s reservation carving out non-commercial disputes from the scope of the New York Convention. This judgment overturns the first-instance decision of the Federal Court in CCDM Holdings, LLC v Republic of India (No 3) [2023] FCA 1266 and represents a significant development in Australia’s arbitration regime.

Background

The background to this case is canvassed in detail in our earlier insight, Federal Court finds India waived foreign state immunity in proceedings to recognise and enforce US$111 million award. It concerns a US $111 million award (Award) won by three Mauritian shareholders (Investors) in the Indian telecommunications company Devas Multimedia Private Ltd, pursuant to the India–Mauritius bilateral investment treaty.^[2] In 2021, the Investors applied to have the Award recognised and enforced in Australia under s 8(3) of the International Arbitration Act 1974 (Cth). India applied to have the Investors’ application set aside on the basis that it was immune from the jurisdiction of the Australian courts under the FSIA. On 24 October 2023, Jackman J of the Federal Court dismissed India’s application, finding that India was not immune. India appealed the first-instance judgment, relying on immunity conferred upon foreign states under s 9 of the FSIA, which provides that ‘[e]xcept as provided by or under this Act, a foreign State is immune from the jurisdiction of the courts in Australia in a proceeding’.

India is a party to the New York Convention, subject to a reservation that the treaty only applies to ‘differences arising out of legal relationships, whether contractual or not, which are considered as commercial’ under Indian law (which is expressly permitted under Article I(3) of the New York Convention) (commercial reservation).

Procedural history

CCDM Holdings, LLC v Republic of India (No 3) [2023] FCA 1266

In the primary judgment, the Court rejected India’s attempt to set aside an application for the recognition and enforcement of an arbitral award. It held that India had waived its immunity from jurisdiction by signing the New York Convention. Jackman J applied the High Court’s reasoning in Kingdom of Spain v Infrastructure Services Luxembourg S.a.r.l (2023) 275 CLR 292 (Kingdom of Spain) that a waiver of immunity in a treaty had to be either:

express; or
implied from the express words used in the treaty interpreted in context, provided that waiver arises by ‘necessary implication’ that is ‘unmistakable’.^[3]

In that case, the Court found that such an implied waiver of immunity had been established by India’s ratification of the New York Convention. It reasoned that Article III, which provides that ‘each Contracting State shall recognise arbitral awards as binding and enforce them’ created the ‘obvious and necessary implication’ that India required Australia to recognise and enforce awards which fall within the scope of the New York Convention.^[4] Upholding immunity from Australian courts’ jurisdiction for the purposes of recognition and enforcement was seen to be inconsistent with that express obligation in Article III.^[5] As such, the Court ultimately found that India had waived immunity by necessary implication.

The primary judge also rejected India’s submission that its commercial reservation had a material impact on the dispute. Jackman J held that the reservation was not directly relevant, because ‘Australia did not make any such reservation and Australia is the state where recognition and enforcement is presently sought’.^[6] It was this finding that was overturned by the Full Federal Court, as detailed below.

The Full Federal Court’s reasoning

The broad question on appeal was whether India had, by ratifying the New York Convention, waived foreign state immunity by ‘submit[ting] … by agreement’ within the meaning of s 10(2) of the FSIA to the jurisdiction of the Australian courts. The key contention was the effect of India’s commercial reservation to the New York Convention on the scope of its jurisdictional immunity.

Both parties agreed that India’s ratification of the New York Convention was subject to the commercial reservation. Two main appeal issues had arisen out of India’s reservation, namely:

whether by ratifying the New York Convention, India waived foreign state immunity in respect of the enforcement of an award that is generally within the scope of the Convention, but excluded by India by its reservation under Article I(3);^[7] and
whether the Award is outside the scope of India’s commercial reservation, i.e. ‘did the award arise out of a legal relationship, whether contractual or not, which is considered as commercial under the law of India’, such that the New York Convention is applicable.^[8]

The scope of India’s reservation to the New York Convention

The joint judgment by Sarah C Derrington, Stewart and Feutrill JJ relied on the reasoning in Kingdom of Spain that inference of a waiver of immunity ‘will only be drawn if the implication if clear from the words used and the context’^[9] and must be ‘unmistakable’.^[10]

The Full Federal Court rejected the Investors’ submission that the commercial reservation is a ‘unilateral reservation that does not oblige other States to limit recognition and enforcement in the same way’.^[11] Relying on Articles 19 and 21 of the Vienna Convention on the Law of Treaties and the International Law Commission’s Guide to Practice on Reservations to Treaties, the joint judgment found that the reservation:

was expressly authorised by Article I(3) of the New York Convention, and as such did not require subsequent acceptance by other Contracting States; and
modified ‘the relationship between the reserving state and other states in the application of the Convention between and amongst them’^[12] and, therefore, had a reciprocal effect.

Therefore, the Full Federal Court found that the commercial reservation qualified India and Australia’s mutual obligations. It concluded, as a result, that Australia has no obligation to India to enforce awards that do not arise from differences arising from legal relationships which, in India, would not be considered commercial, and vice versa.^[13] Consequently, India’s ratification of the New York Convention, considered with the commercial reservation, did not give rise to a waiver of foreign state immunity to the ‘unmistakable’ standard identified in Kingdom of Spain in respect of awards that do not determine differences arising out of legal relationships considered as commercial under the law of India.^[14]

The scope of India’s commercial reservation to the New York Convention

The Full Federal Court considered the subsidiary question of whether the Award fell within the scope of India’s reservation. As India did not adduce evidence about whether the Award arose out of issues considered commercial under the law of India, the presumption that foreign law is the same as Australian law applied.^[15] The Court found that ‘India’s relationship with the BIT was in the realm of public international law that gave international law rights to private investors in India’, and as such, ‘was not a commercial relationship’.^[16] India’s annulment of the agreement, which considered reasons of ‘public policy’, was ‘also not based on, nor did it arise from, a commercial relationship’.^[17] As such, the Full Federal Court found that the Award fell outside the scope of the reservation, and India’s immunity was not waived in any proceeding for the recognition and enforcement of such an award.

Impact of the decision

Approximately one third of the state parties to the New York Convention have made a commercial reservation pursuant to Article I(3). The New York Convention, however, does not define the term ‘commercial’, nor does it clarify that it applies to awards made under investment treaties.

The global trend of national courts has been to interpret the term ‘commercial’ broadly, to include disputes arising under investment treaties. A recent example can be seen in the majority judgment by the Court of Appeals for the D.C. Circuit in Zhongshan Fucheng Industrial Investment Co. Ltd v Nigeria,^[18] which concerned an application to confirm an award made under the China–Nigeria Bilateral Investment Treaty (BIT) in the United States. Like India, the United States adopted the commercial reservation under Article I(3) of the New York Convention.

Relying on circuit precedent,^[19] the D.C. Circuit Court found that the BIT established a legal relationship between Nigeria and the investor benefitting from its protection, and that this relationship was commercial ‘even though it does not arise out of or relate to a contract’, because it had a connection with commerce (noting, among other things, that the BIT itself was designed to promote commerce).^[20] On this basis, Nigeria was not immune from suit under the US Foreign Sovereign Immunities Act. The majority also disagreed with Nigeria’s argument that the New York Convention was not intended to apply to investment treaty disputes. Nigeria has since petitioned the US Supreme Court seeking a review of the Court of Appeal’s decision.^[21]

Further, it is relevant to note that the commercial nature of the relationship is to be determined under the law of the state making the reservation. Indian courts have interpreted the term ‘commercial’ in a variety of ways. There are dicta that consider investment treaty disputes not to be commercial. For example, in Union of India v Vodafone Group PLC United Kingdom CS(OS) 383/2017, the High Court of Delhi stated that investment arbitration disputes are ‘fundamentally different from commercial disputes … and are not commercial in nature’.^[22] This view was accepted in Union of India v Khaitan Holdings (Mauritius) Limited & Ors CS(OS) 46/2019, where the High Court of Delhi again stated that a dispute arising from a bilateral investment treaty could not be considered a commercial dispute.^[23]

It is interesting to note that in this case, neither India nor the investors adduced evidence on whether the award determined differences arising out of a legal relationship that is considered commercial under the law of India. In the absence of such evidence, the Full Federal Court invoked the Neilsen presumption that where there is no evidence to the contrary, foreign law is presumed to be the same as Australian law.^[24] Consequently, it did not apply the narrow approach taken by Indian courts, but rather considered what the scope of the commercial reservation was at Australian law.^[25]

Given Australia’s national arbitration legislation has largely incorporated the UNCITRAL Model Law on International Commercial Arbitration (Model Law), it is noteworthy that the Full Federal Court did not refer to the permissive definition of ‘commercial’ defined in the footnote to Article 1 of the Model Law, which defines ‘relationships of a commercial nature’ to include transactions involving ‘investment’.^[26]

Time will tell how the Full Federal Court’s approach to the implication of a foreign state immunity waiver under the New York Convention will impact the enforcement landscape in Australia.

^{[1]
Kingdom of Spain v Infrastructure Services Luxembourg S.a.r.l (2023) 275 CLR 292, 311 [25]; 313 [29] (‘Kingdom of Spain’).}

^{[2]
CCDM Holdings, LLC v Republic of India (No 3) [2023] FCA 1266 [43].}

^[3]
Ibid.

^{[4]
Ibid [58].}

^{[5]
Convention on the Recognition and Enforcement of Foreign Arbitral Awards, opened for signature 10 June 1958, 330 UNTS 3 (entered into force 7 June 1959).}

^{[6]
Agreement between the Government of the Republic of India and the Government of the Republic of Mauritius for the Promotion and Protection of Investments, signed 4 September 1998 (entered into force 20 June 2000).}

^{[7] Republic of India v CCDM Holdings, LLC [2025] FCAFC 2 [55] (‘Republic of India Appeal Judgment’).}

^{[8] Ibid [55].}

^{[9] Kingdom of Spain (n 3) 311 [26].}

^{[10] Kingdom of Spain (n 3) 313 [29].}

^{[11] Republic of India Appeal Judgment (n 7) [61].}

^{[12] Ibid [69].}

^{[13] Ibid [68], [73].}

^{[14] Ibid [71], [75].}

^{[15] Ibid [76].}

^{[16] Ibid [81].}

^{[17] Ibid.}

^{[18] 112 F.4th 1054 (D.C. Cir. 2024).}

^{[19] Belize Soc. Dev., Ltd. v. Government of Belize, 794 F.3d 99, 101 (D.C. Cir. 2015).}

^{[20] The decision was not unanimous. In his dissenting opinion, Judge Gregory Katsas argued that the term ‘persons’, as used in the New York Convention, did not extend to sovereign nations when it was drafted.}

^{[21] Nigeria’s argument before the US Supreme Court is that the New York Convention applies to awards ‘arising out of differences between persons, whether physical or legal’ and that the word ‘person’ in ordinary English does not include a sovereign acting in its sovereign capacity. It argues that its duty to protect the investment of Chinese investors under the BIT is solely a sovereign duty with no commercial element.}

^{[22] Union of India v Vodafone Group PLC United Kingdom CS(OS) 383/2017 [91].}

^{[23] Union of India v Khaitan Holdings (Mauritius) Limited & Ors. CS(OS) 46/2019 [29].}

^{[24] See Neilsen v Overseas Projects Corporation of Victoria Ltd (2005) 223 CLR 331 at [125] per Gummow and Hayne JJ, [248]-[249] per Callinan J, [267] per Heydon J.}

^{[25] Republic of India Appeal Judgment (n 7) [77].}

^{[26] United Nations Commission on International Trade Law: Model Law on International Commercial Arbitration, UN GAOR, 40^th sess, Supp No 17, UN Doc A/40/17 (1985), annex I art 1; International Arbitration Act 1974 (Cth) sch 2.}

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