Assignment of Arbitral Awards

Assignment of arbitral awards
Practical Law UK Practice Note w-034-2865
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Assignment of arbitral awards, Practical Law UK Practice Note w-034-2865
Assignment of arbitral awards

by Brianna Gorence, Olga Sendetska, Vasuda Sinha and Olivia Valner, Freshfields Bruckhaus Deringer
Practice notes | Maintained | International
A practice note considering the reasons an award creditor may wish to monetise an arbitral award
(whether arising from a commercial or investment treaty arbitration) and the different avenues available
to them for doing so, with a focus on assignment or sale of awards. It also addresses issues that may
arise in certain jurisdictions when enforcement of the award is sought by a third-party purchaser and
considerations that are relevant for the assignment agreement.
Scope of this note

Reasons for selling or assigning an award
Enforcement of awards
Settlement between parties to an arbitration
Use of an award as an asset
Sale or assignment
Market for assignment of awards

Typical issues or defences
Validity of assignment
Maintenance and champerty
Standing or authority of a non-party to arbitration to enforce an award
Repurchase of a disputed debt
Assignment methods and options

Outright assignment of the whole award
Sub-participation or partial assignment of the award
Entering into an assignment agreement

Formalities
Control and champerty
Proceeds of recovery
Risk of the award being set aside after assignment
Indemnities
Warranties
Co-operation
Onwards assignment
© 2024 Thomson Reuters. All rights reserved. 1

Assignment of investment treaty awards: additional considerations

Investment treaty award assignments
Factors affecting an award's value

Jurisdictional hurdles
Claimant's insolvency
EU-specific issues
Scope of this note

The trading of international arbitration awards has become more common and a market has developed for their
assignment (or sale) and purchase. The market is led by a number of industry players who position themselves as
better placed than the original award creditor to achieve successful enforcement of an arbitral award.
By selling or assigning an award, the award creditor relieves itself from the burden of the time and cost of
enforcement while obtaining cash in hand at the time of transfer (albeit usually at a significant discount to the
headline value of the award) and receives a clean exit.
This note considers assignment, or sale, of an international arbitration award as a method of monetising the award.
The terms "sale" and "assignment" are used synonymously and refer to the process by which an award of damages
following a commercial or investment treaty arbitration is sold on the secondary market or transferred for value
to a third party.
This note discusses what may motivate award creditors to assign or sell their awards, as well as the possible
mechanics of that assignment. It briefly deals with other options available to award creditors looking to monetise
their awards, namely post-award settlement, enforcement proceedings and securitisation of an award, and the
difficulties these approaches can present.
The note also addresses typical issues and defences that may arise in certain jurisdictions when enforcement of
the award is sought by a third-party purchaser and considerations that are relevant for the assignment agreement.
Finally, the note addresses issues that are particular to assignment of an investment treaty award compared to a
commercial arbitration award.
Reasons for selling or assigning an award

Once an award is rendered, there are various means by which the award creditor can monetise it in the event of
non-compliance by the award debtor.
The most common approach in this scenario is for the award creditor to commence recognition and enforcement
proceedings where the award debtor has (or is likely to have) assets. However, this is not always a straightforward
process. It may require the co-ordination of proceedings in various jurisdictions with additional cost implications.
It may also have to be done in conjunction with a defence to setting aside proceedings, should the award debtor
seek to challenge the award.

To avoid recognition and enforcement proceedings, the award creditor may seek to monetise the award through
other means such as:
• A negotiated settlement (which may involve accepting a reduced sum compared to the award value).
• The use of the award as a secured asset to obtain financing.
• The assignment or sale of the award to a third party for an amount lower than the award value, with
the expectation that the assignee ultimately pursues and obtains the benefit of eventual enforcement or
settlement efforts in relation to the award. Transfer of the award in this way is typically flexible and the
transaction may be moulded as needed. This option is also particularly attractive when an award creditor
has liquidity issues within its business, as it results in cash-in-hand on a relatively quick basis.
A report published in October 2023 provided an interesting analysis of how states have complied with investment
arbitration awards rendered against them. The report presents some themes and overarching conclusions that may
be drawn from the data analysed. The annexes to the report provide detailed analyses on a country-specific basis
(see Legal update, Second edition of report analysing compliance with investment arbitration awards published).
Enforcement of awards
Non-ICSID awards
Arbitration awards (commercial awards and investment awards) not rendered under the Convention on the
Settlement of Investment Disputes (ICSID Convention) are enforced under the New York Convention. Courts of
signatory states are required to grant recognition and enforcement of arbitral awards. The court may only refuse
enforcement of the award on limited grounds.
However, the enforcement process may take considerable time. It requires engagement of local counsel in the
enforcement jurisdiction. The enforcement may also be delayed by a challenge of the award in setting aside
proceedings that the losing party may initiate at the place of arbitration. For:
• Further discussion of enforcing awards under the New York Convention, see Practice note, Enforcing
arbitral awards under the New York Convention 1958: overview.
• Details of the status of the New York Convention by country, including declarations and reservations, see
Checklist, New York Convention enforcement table: status.
ICSID arbitration awards

Awards rendered under the ICSID Convention have the benefit of being binding on the parties and directly
enforceable in ICSID member states. If a party has not issued a stay of enforcement and the award has not been
annulled, the debtor state is obliged to comply with the award. If the award creditor is enforcing in one of the
ICSID member states, the relevant state must recognise the award as binding and enforce it "as if it were a final
judgment of a court in that State" (article 54, ICSID Convention). For:
• Further discussion of arbitrating under the ICSID Rules, see Practice notes, ICSID arbitration (2006
Rules): a step-by-step guide; and ICSID arbitration (2022 Rules): a step-by-step guide.

• An introduction to investment treaty arbitration, see Practice note, Investment treaty arbitration:
overview.
• Details of the status of the ICSID Convention by country, including declarations and reservations, see
Checklist, List of ICSID Convention contracting states and other signatories of the Convention.
If a stay of enforcement is issued, it prevents the award creditor from seeking to attach assets in satisfaction of
the award until the stay is lifted or annulment proceedings are resolved in favour of the award (during which time
interest on the award continues to accrue). An ad hoc annulment committee, once constituted, has discretion to
maintain or extend the provisional stay of enforcement, which automatically terminates within 30 days of that
committee's constitution if the state award debtor does not file for a continuance of the stay.
Should the ad hoc committee find that there is a risk that the state is not able to comply with the award, it can order
the stay to be conditional on a commitment letter from the state or security for the award. However, even if the
stay is lifted, once annulment proceedings are commenced, an enforcing court is likely to stay local enforcement
proceedings until the annulment proceedings are completed.
For further discussion of staying enforcement within the context of ICSID annulment proceedings, see Practice
note, Annulment of awards in ICSID arbitration.
Execution of an award
The costs of enforcing an award can be substantial. They include:
• Tracing assets.
• Determining attachable assets.
• Proceeding through the steps required in the national courts to obtain the necessary enforcement and
execution orders.
An award creditor is typically required to engage local lawyers and bailiffs (where applicable) to enforce the award
in the jurisdiction in which the assets are located. In cases in which assets are in multiple jurisdictions, multiple
enforcement proceedings may be necessary, therefore increasing the costs of enforcement.
In cases where the award debtor is a sovereign state, enforcement might entail a complex analysis of whether the
state's assets located in other jurisdictions are covered by sovereign immunity and may therefore not be seized.
The applicable sovereign immunity regime in any given case is determined by:
• The national laws of the place of enforcement, which vary from jurisdiction to jurisdiction.
• Any waivers that the relevant state may have provided.
Some jurisdictions adopt an absolute approach where (in the absence of appropriate waivers of immunity)
all state-owned assets are out of reach of attachment and execution. Others implement a restrictive approach
that differentiates between commercial and sovereign assets. For further discussion of sovereign immunity, see
Practice notes, State immunity and arbitration and Sovereign immunity: state immunity from adjudication and
enforcement and Waiver of sovereign immunity clauses toolkit.

Where the award debtor is not a state, enforcement may still be difficult if it is a shell company or otherwise part
of a complex corporate structure and without any assets of its own.
For these reasons, enforcement is sometimes not an attractive option to an award creditor. An award creditor
may be able to mitigate these difficulties by contracting a firm specialising in debt recovery. The firm may offer
the award creditor its services on a contingency basis with no fees upfront. Instead, a fee is ultimately due on
successful recovery services.
Settlement between parties to an arbitration
A settlement agreement may be entered into at any point before or during an arbitration, or after an award is issued.
Settlement could take the form of an agreement for the whole award amount to be paid without enforcement
proceedings, payment of a discounted amount, or, where the parties have an ongoing commercial relationship,
as a discount on future deliveries or a credit for future supplies of goods not requiring an immediate payment
of a lump sum.
Parties may opt to settle for several reasons. A settlement agreement can help maintain the confidentiality of the
dispute or the underlying evidence and preserve the parties’ business relations, which is particularly helpful in
the case of a long-standing relationship that the parties hope to maintain. If entered into after an award is issued,
a settlement can avoid the need for adversarial enforcement proceedings. Doing so may also eliminate some
uncertainty for both parties about the outcome of the enforcement process.
When settlement is reached during arbitral proceedings before a final award is issued, problems may arise
regarding the enforceability of the settlement agreement itself. To avoid these issues, parties may request an arbitral
tribunal to record their agreement in the form of a consent award (although that approach is not without its own
problems, including potential ambiguity about the treatment of consent awards under the New York Convention).
If the parties reached a settlement through mediation, the settlement agreement may also now be enforceable
under the Singapore Convention on Mediation (even though the Convention has only been ratified in a handful
of jurisdictions). For a detailed analysis of the Singapore Convention, see Practice note, International ADR
initiatives: Singapore Mediation Convention.
Parties may seek to settle after an award has been rendered to minimise the risks of enforcing and monetising the
award. For example, if the award debtor commits to pay an agreed amount after the award is issued, this may
relieve an award debtor of uncertainty regarding which assets may be subject to enforcement. Similarly, it brings
certainty to the award creditor regarding the timing and the amount that it may ultimately be able to recover by
allowing it to circumvent the potentially long, arduous and expensive enforcement process.
That said, even in the context of a settlement agreement, there is a risk that the award debtor will fail to make
good on the settlement. Parties therefore typically make settlement agreements conditional on payment within a
specific period. If the condition precedent is not satisfied, the settlement agreement does not become effective and
the award creditor is free to pursue enforcement of the award.
In the case of investment awards, an award debtor could also consider using diplomatic channels to encourage
or facilitate a settlement. For example, an award debtor could seek assistance from the trade representative of its
respective country so that it can apply diplomatic pressure.
For further discussion of settlement agreements, see Practice note, Settlements in cross-border disputes: overview.

Use of an award as an asset
The award creditor may also use an award as an asset. For instance, the award creditor may seek to obtain credit
using the award as security. These agreements may take bespoke forms; for example, an award creditor may
structure the sale of its rights under an arbitral award as a loan, similar to debt factoring in corporate finance (see
Practice note, Factoring and invoice discounting).
Sale or assignment
The methods by which an award creditor can seek to monetise an award all have potential costs and other pitfalls.
Therefore, if the award creditor is not prepared to take the enforcement risk, it could assign the award to a third
party.
There are many reasons why this may be preferable. The award creditor may not want to engage in lengthy
and costly defence proceedings against setting aside if the award is challenged, or pursue enforcement actions
in (potentially) multiple jurisdictions. These would require retaining legal counsel and potentially also specialist
asset tracing firms to assist with identifying various assets that could be seized for enforcement and monetisation.
Having invested time and money in an arbitration, the prospect of investing more resources in enforcement and
recovery may be daunting. The award creditor may prefer to receive the money as soon as possible for commercial
and business reasons to achieve short-term value rather than wait for a larger amount of return following a long
process.
Market for assignment of awards

Challenges to the enforcement of international arbitral awards have given rise to an international claims market.
Key industry players are positioning themselves as sophisticated market actors that are better placed as assignees
than the original award creditor to seek the enforcement of an arbitral award.
According to one study, already in 2008 almost one in five corporate counsel reported monetising their claims
and awards through sale or assignment (see 2008 Corporate Attitudes: Recognition and Enforcement of Foreign
Awards). The market for the assignment of arbitral awards has grown substantially in recent years. Institutional
assignees may include:
• Banks.
• Investment funds.
• Litigation funders and financial entities that invest in litigation and arbitration claims.
• Firms that specialise in debt recovery.
Professional investment funds typically aim to purchase an award at a discount. This is either to actively pursue
recovery or with the aim of reaching a more favourable settlement with the award debtor than would have the
award creditor.
Non-professional, “one-off” investors such as corporations, businesses or even individuals may also operate in
the market. This may be the case if purchasing an award would allow them to set off payment obligations that they
may themselves have towards the award debtor. Because of the context-specific nature, this kind of assignment

is rare, although the confidentiality of the arbitral process and the fact that most arbitral awards are voluntarily
complied with mean that it is not possible to assess their true frequency.
There are also firms that act as an intermediary with investors that can broker the sale of the award or organise
an auction. These firms may also offer their services on a contingency basis, additionally removing the risk of
a sale not going through. These firms may also assist the award creditor with estimating the value of the award
on the secondary market.
Awards are usually sold at a discount, meaning an amount less than the monetary sums due to be paid by the
losing party under the award. The amount of discount that a purchaser offers depends on several factors. The most
important of these is the likelihood of recovery under the award, that is, depending on whether the enforcement
process is straightforward and whether the award debtor has sufficient assets to satisfy the amount awarded. For
example, an award rendered in an investor-state dispute against a state in default or with few commercial assets
held abroad is likely to be sold at a higher discount than an award against a large, solvent corporate entity with
assets in multiple jurisdictions in which enforcement against those assets is likely to be straightforward.
The value of the award should also improve after it survives any setting aside proceedings and further improve
if it was recognised and enforced by national courts. If, on the other hand, the award was set aside or was
refused enforcement in one or more jurisdictions, it becomes a riskier investment. The fact that an award is set
aside provides the enforcing courts with a ground to refuse the application. If some courts have already refused
enforcement, this may indicate that there is a flaw in the award that may come up before the courts of other
jurisdictions as well.
Typical issues or defences

The sale or assignment of awards is, in principle, permitted in the same way as a transfer of any other asset. National
laws and international treaties generally do not restrict assignment (or even explicitly deal with it). Therefore, if
the assignment is valid under the applicable law, the assignee should not face any greater issues in enforcing the
award than those that the named party would face.
However, award debtors have in several cases to date sought to advance various arguments resisting enforcement
of assigned awards, for example, by arguing that:
• The assignment itself is not valid.
• A non-party to arbitration may not enforce an award.
• Assignment constitutes maintenance and champerty.
These arguments are generally unlikely to succeed in arbitration-friendly jurisdictions, but there may be pitfalls
elsewhere.
Therefore, the assignee should ensure that the transaction is structured in a way that complies with the law
under which the transfer is made, as well as where enforcement is likely to be sought. For further discussion of
assignment, see Practice note, Contracts: assignment.
Validity of assignment

Some award debtors may seek to argue that the assignment agreement by which the award has purportedly been
transferred from the original party to the arbitration to the purchaser is invalid.
This was the case in Belize Social Development Limited (BSDL) v. Government of Belize, 5 F.Supp.3d 25 (D.D.C.
2013) aff'd, 794 F.3d 99 (D.C. Cir. 2015) considered by the US District Court for the District of Columbia. The
respondent argued that enforcement should fail because the award had not been validly assigned under the terms of
the assignment agreement and under Belizean law, which governed the underlying agreement subject to dispute.
The court found that Belize's reliance on Belizean law was misplaced and that an assignment need only be valid
under the law applicable to the assignment agreement. (5 F. Supp. 3d at 36.)
Maintenance and champerty
Certain jurisdictions have rules against champerty and maintenance that are applicable to funding dispute
resolution proceedings. For example, English law in the past did not recognise agreements for a third party to
finance proceedings on behalf of the claimant, that is, "maintain" the proceedings for the claimant. The scope of
these rules has shrunk over time as English law has largely moved away from these doctrines. The doctrine may,
however, still apply in other jurisdictions. For example, it is still alive and affects dispute resolution funding in
Ireland. For further discussion of:
• Champerty and maintenance, see Practice note, Champerty, maintenance and funding.
• Third party funding, see Practice notes, Third party funding for international arbitration claims:
overview and Third-Party Litigation Financing in the US.
The concepts of champerty and maintenance may therefore be brought up by award debtors in an attempt to
resist enforcement. An example of this is the case of FG Hemisphere Associates LLC v Democratic Republic
of the Congo and Others [2008] HKCFI 1110. In that case, the award creditor sought and obtained an ex parte
enforcement order in Hong Kong. The order was then appealed by the award debtor arguing that assignment of the
award might constitute maintenance and champerty and should therefore have been mentioned to the court given
the applicant's obligation of full and frank disclosure when seeking an ex parte order. The court stated that it was
concerned that this point had not been raised but, given the weight of authority, found that it was arguable that the
assignment was not maintenance. In the meantime, the law in Hong Kong has also been clarified allowing for fee
agreements based on outcome. A risk of maintenance and champerty arguments in Hong Kong for assignments
therefore appears unlikely. For further discussion of third party funding in Asia and Hong Kong, see Practice
notes, Third party funding in Asia: overview and Third party funding in Hong Kong arbitration.
Standing or authority of a non-party to arbitration to enforce an award
In some jurisdictions, the assignee may face arguments from the award debtor that the only "party" that may
enforce the award is the award creditor.
To mitigate this risk, the parties could agree to assign the benefit of the award only. This means that the award
creditor remains the party of record for the purposes of enforcing the award, but any amounts collected through
enforcement proceedings go to the assignee. However, there may be downsides to this approach. For example,
the award creditor may not want its name to continuously appear on enforcement proceedings.
Ukraine

Ukrainian courts have historically been formalistic in their approach to the law. Unless a specific remedy or
process is expressly provided for in law, the courts are unlikely to allow for it. The situation is similar in relation
to enforcement of assigned awards.
In 2015, the Higher Specialized Court of Ukraine in Euler Hermes v Odessa Fat and Oil Plant (docket #
6-3583##15, 8 April 2015) ruled that only the claimant in the underlying arbitration may submit an application for
recognition and enforcement of an arbitral award. The assignee was therefore not allowed to initiate enforcement
proceedings. The Supreme Court of Ukraine subsequently refused leave to review the judgment.
If enforcement is to take place in a jurisdiction that has a similarly formalistic approach, this needs to be considered
when structuring the assignment.
Hong Kong
A similar argument was raised in Hong Kong in ############# v Wong Wai Tsang (###) 2012 HKEC 304. The
High Court of Hong Kong held that as long as a person had obtained the benefit of an award (including through
valid assignment), the award could be enforced. The court noted that "any contrary ruling would be contrary to
commercial sense. The rights under an award [are] a chose in action and hence assignable".
Repurchase of a disputed debt
Article 1699 of the French Civil Code provides that where a creditor assigns a debt to a third party, the debtor
may discharge the debt by paying the assignee the price of the assignment as well as fair expenses and costs. This
mechanism is referred to as retrait litigieux (repurchase of a disputed debt). If an offer under this provision is
made, it cannot be refused.
In 2018, the French Supreme Court (Cour de Cassation) considered the case FG Hemisphere v DRC (Cour de
cassation, civ. 1st, 28 February 2018, No. 16-22.112) relating to setting aside and enforcement of two awards
issued by International Chamber of Commerce (ICC) tribunals seated in Paris and Zurich in proceedings brought
by Energoinvest against DRC. Energoinvest assigned its rights to FG Hemisphere at a roughly 90% discount to
the value of the award. FG Hemisphere subsequently took enforcement and recovery forward as the assignee.
The French Supreme Court found that retrait litigieux applies to enforcement of arbitral awards, meaning that
DRC could buy back the award from the assignee for about 10% of its actual value.
The case came through the Paris Court of Appeal following the consideration by the French Supreme Court.
In 2021, the Paris Court of Appeal reaffirmed its position that an award could not be challenged in set aside
proceedings through the invocation of retrait litigieux (Paris Court of Appeal, 7 December. 2021, No.18/10217
and No. 18/10220). The situation was therefore left uncertain at that time even though the position of the French
Supreme Court might have had significant implications on enforcement proceedings in France.
The situation evolved in February 2024 when the French Supreme Court rendered a decision that followed the
approach adopted by the Paris Court of Appeal in 2021, ruling that an application for the exercise of retrait
litigieux is inadmissible in set aside proceedings. This was decided on the basis that the judge’s jurisdiction is
limited to the grounds for set-aside proceedings provided for in article 1520 of the French Code of Civil Procedure
(Cour de cassation, civ. 1st, 28 February 2024, No. 22-16.151), which do not include retrait litigieux. As a result,
the position in France now is that the judge presiding over set-aside proceedings can only assess the validity of
the award and its compliance with the French legal system, without considering disputes concerning the debt
obligation created by the underlying award.

The French Supreme Court has ruled that it falls within the powers of the enforcement judge to rule on retrait
litigieux and its effect on the debt obligation.
Assignment methods and options

There are various different structures that sellers and buyers may choose to use when assigning arbitral awards.
In principle, parties could use any arrangement for transfer of an asset that is typical in the transactional practice
in the relevant jurisdiction.
For example, assignment could take the form of a simple and straightforward full transfer of the whole award.
Alternatively, more creative structures could be used, such as distribution of rights under the award as dividends
in kind to the shareholders in lieu of cash distribution of dividends.
Assignment needs to operate within the confines of the law under which the transfer is completed. Therefore, if
the award creditor would like to, for example, structure the transfer in the form of dividends in kind, the corporate
law of the jurisdiction where the company is set up would need to permit for in-kind distributions of company
assets as dividends.
Assignment of the award may also take place at different points in time in the proceedings. Although many
assignments would be expected to take place after an award is rendered, that does not necessarily have to be
the case. While unusual, technically an assignment could be agreed and completed midway through arbitration
proceedings or before the initiation of the arbitration proceedings. However, the discount rate is likely to be higher
as the outcome of the dispute is still unclear at that point.
Even though relevant legal principles related to assignments are national law-specific, the most common
assignment options used across various jurisdictions are set out below.
Outright assignment of the whole award
In an outright assignment, the award creditor transfers all rights under the award, including the right of
enforcement. This provides a clean exit for the award creditor; it receives the monetary value of the award on
signing and disposes of the need for enforcement. The assignee in turn receives the full financial entitlement to
the award, stepping into the shoes of the award creditor.
An outright assignment typically occurs on a non-recourse basis (except for the normal representations and
warranties). This means that the award creditor benefits from balance sheet finality. It is therefore often the
preferrable option for the award creditor.
Sub-participation or partial assignment of the award
In a sub-participation or partial assignment scenario, the assignee pays an agreed amount on signing in return for
a share of the recovery amount following enforcement of the award. This arrangement may be helpful:
• If the award creditor requires additional resources to finance the enforcement efforts.
• As a short-term cash resource for any business needs the award creditor may have but it does not want to
completely absolve itself of the risks and rewards of enforcement.

Partial assignment typically means that the award creditor remains responsible for pursuing enforcement.
Alternatively, an assignee may:
• Pay a small portion of the award value upfront (for example, 5% to 10%).
• Take responsibility for recovering the award's value through enforcement or settlement.
• Share the amount recovered with the claimant pursuant to a contractually agreed scale.
In this situation, the assignee becomes a partner of the award creditor.
A sub-participation agreement may also contain an option for the investor to require a full assignment of the
award. The conditions for the exercise of the option may vary. For example, it may be connected to a specific
amount of time passing following the assignment or certain events taking place like completion of the setting
aside proceedings in favor of the award creditor. Once the award is certain and no longer subject to the threat of
being set aside, the assignee may feel more comfortable taking up a complete assignment. This converts a sub-
participation into a full assignment.
Entering into an assignment agreement

The process of running an assignment of the award and drafting an assignment agreement is generally similar to
other transactions involving sales of assets.
The sale can take place through a bespoke transaction or be arranged through an auction. Organising an auction
might be an effective way to maximise value. However, award creditors should be mindful that an auction may
result in higher transaction costs overall and some investors may be discouraged from participating in a public
bidding.
The seller usually prepares documents for potential purchasers including:
• An initial information mailer setting out the basic information on the award and the parties to the dispute
to gauge the interest of potential purchasers and allow them to run any conflict checks that may be
necessary.
• A non-disclosure agreement.
• A data room for due diligence. The documents shared depend on the scope of due diligence, but usually
include:
• the award being sold;
• procedural orders;
• the parties' submissions; and
• the hearing transcript.
Depending on the circumstances, additional information may also be shared, such as:

• the status of any setting aside and enforcement proceedings already undertaken and related
documents;
• analysis on enforcement options; or
• an asset tracing report from a specialist consultancy firm.
• A process letter and information memorandum.
The parties then proceed to negotiate an agreement, building in relevant provisions and mechanisms to reflect their
preferred structure. Several of the main points to consider for the purposes of the agreement are set out below.
However, it is worth noting that some of these considerations may not be relevant for an outright assignment. This
is because it is unlikely that the award creditor would be open to including any conditions, as they would defy the
balance sheet finality, which is what an award creditor is looking for in a complete assignment.
If the sale takes place via an auction process, the seller may produce a draft of the assignment agreement which
gives the buyer less scope to negotiate and to amend than would be the case for a direct non-auction sale.
Formalities
Where an assignment takes place, the assignee becomes the successor in interest to the original claimant holding
the award. The requirements for constituting a successor in interest vary from jurisdiction to jurisdiction. It is
therefore necessary to consider any formalities that may be required for a valid assignment under the applicable
law.
Control and champerty
In a situation of sub-participation, it may be argued that the sub-participation agreement is champertous (in
jurisdictions where this is relevant) and is therefore in breach of public policy. This point may arise because rather
than buying the award outright, the investor could be seen as funding and directing the ongoing enforcement
proceedings in exchange for a share of proceeds from the recovery.
While the argument is not likely to prevail in a situation where the underlying claim is already converted into an
award, the question of control over the claim within transactional documents should be considered.
Proceeds of recovery
Parties to a sub-participation arrangement may agree that proceeds from the recovery be placed into trust or
transferred to an escrow account managed by a third party. This protects the recovery monies in the interests of
both parties.
The investor in a sub-participation agreement may also request that the award creditor grants it a first priority
security over the investor's rights in the award.
Risk of the award being set aside after assignment

If the deadline for filing setting aside proceedings has not yet expired (or if these proceedings are pending at the
time of assignment), there is a risk that the award may be set aside and recovery efforts prejudiced because of
that. To allocate this risk, the future assignee is likely to require provisions within the agreement that deal with
that possibility.
For example, to mitigate the risk to the investor of the award being set aside, the investor may seek to structure
the transaction in stages: initially as a sub-participation with an option to require a full assignment of the award:
• Within a certain period (such as the expiration of any period during which an application for set aside
must be made).
• On occurrence of a specified event (such as the conclusion of any extant set aside proceedings).
The investor in a sub-participation could also ask for a clause in the agreement allowing it to recover the
consideration paid if the award is set aside or denied enforcement.
In an outright assignment, the award creditor is unlikely to be open to including many conditions and unwinding
options for the transaction, since this would mean giving up on the balance sheet finality that it seeks in a full-
fledged assignment. The risk of possible setting aside or non-enforcement is therefore more likely to be reflected
in the discount rate that the assignee is willing to offer.
Indemnities
In a sub-participation arrangement, the award creditor may ask the investor to indemnify it for any costs incurred
in connection with the enforcement of the award. The investor may, on the other hand, require that the award
creditor seek its consent for any enforcement actions.
For further discussion of indemnities, see Practice note, Warranties and indemnities: acquisitions.
Warranties
Depending on the circumstances, the assignee or investor in an arbitral award may require certain warranties, for
example, that:
• The award creditor warrants that it has disclosed complete and accurate information concerning the award
and the preceding arbitral proceedings.
• There are no undisclosed liabilities related to the award.
• The award creditor is not aware of any challenges to the award.
• The award creditor has not withdrawn its claim in arbitration proceedings.
• There have been no settlement discussions between the arbitration parties and no settlement agreement
has been made.
For further discussion of warranties, see Practice note, Warranties and indemnities: acquisitions.
Co-operation

If the parties must continue working together to achieve recovery of the award once they have entered into a sub-
participation agreement, it is advisable for them to define co-operation obligations. These obligations typically
require the parties to make best efforts or commercially reasonable efforts in enforcement of the award.
The parties also usually include obligations to provide information on the progress of the enforcement and recovery
milestones.
A sub-participation agreement also typically contains provisions on the process for settlement. These can require
the award creditor to ask for the investor's consent to any settlement and may require the investor not to withhold
unreasonably that consent.
Drafters should therefore be alive to any applicable laws concerning maintenance and champerty and ensure any
assignment agreement is structured to minimise risks arising in connection with those laws. In particular, the
parties should pay attention to the contractual provisions allowing the assignee to control enforcement proceedings
by, for example, consenting to bringing enforcement actions or settling them.
Onwards assignment
The parties may also agree on whether any onwards assignment of the rights is allowed. This typically involves a
general prohibition of further assignment, with an exclusion for the parties' affiliates or to lenders as security, but
the rights could also be fully tradeable, allowing for onward sales and assignments of rights.
Assignment of investment treaty awards: additional considerations

The sale of investment treaty awards to investors in the secondary market is novel, though not unprecedented.
While the preceding sections of this note contain relevant considerations for both commercial and investment
awards alike, there are issues that are particular to investment arbitration awards due to their nature.
Investment treaty award assignments
In OI European Group BV v Bolivarian Republic of Venezuela (ICSID Case No ARB/11/25), the DC District
Court found that OI European Group could seek to enforce the award despite having assigned its interest to a
third-party fund.
The claimant was awarded USD372 million in an ICSID award in 2015. In 2017, the claimant sold its right, title and
interest in the amounts due under the investment treaty award to an Ireland-domiciled investment fund for a cash
payment of USD115 million. The claimant’s agreement with the assignee provided that if the assignee received
compensation under the award from Venezuela as a result of settlement or collection efforts, the assignor was
entitled to receive a percentage of the recovery, the amount of which would reduce over time. During enforcement
efforts, OI European Group continued to seek to enforce the award. Venezuela argued that because the claimant
had transferred its interest in the award to a fund, it could not enforce it without joining the fund to the enforcement
action. The DC District Court rejected this argument (OI European Group BV v. Bolivarian Republic of Venezuela,
2019 WL 2185040, at *3 (D.D.C. May 21, 2019)). Efforts to enforce the award in the US courts are ongoing. (For
details of the underlying award, see Legal update, Venezuela fails in application to annul ICSID award.)
In Balkan Energy Ltd. v Republic of Ghana 302 F Supp 3d 144, 154 (D.D.C. 2018), the D.C. Court found that an
assignee seeking to enforce an arbitral award could do so where the assignment was valid under the law governing
the assignment agreement. Ghana had argued that both assignor and assignee lacked standing to enforce the award

since Balkan Energy, by assigning its rights and interest in the award, had "relinquished any rights to confirm the
award". However, the D.C. Court found that the assignment of the award was valid, as construed in accordance
with the applicable English law. Therefore, there was no basis for challenging the confirmation of the award or
the assignment to the parent company.
In CMS Gas Transmission Company v Argentina (ICSID Case No ARB/01/8), the District Court of the Southern
District of New York rejected Argentina's argument that, under article 54(2) of the ICSID Convention, only the
party to the underlying arbitration can seek to enforce the award. After an award in the underlying arbitration was
issued in May 2005, CMS assigned it to Blue Ridge Investments LLC, a distressed asset fund owned by Bank of
America. In 2008, Blue Ridge filed a petition to confirm the award in the Southern District of New York. Argentina
challenged Blue Ridge's standing, arguing that the plaintiff was not a "party" to the arbitration as required by
article 54(2) of the ICSID Convention, and that "only a party to the underlying arbitration can seek recognition or
enforcement of the award under Article 54(2); a transferee or assignee cannot" (902 F Supp 2d 367, 378 (S.D.N.Y.
2012)). (For details of the underlying award, see Legal update, Partial annulment of award in CMS v Argentina.)
The District Court held that the term "party" is not defined in the ICSID Convention and has different meanings.
Since neither the text of the ICSID Convention nor the US legislation implementing it precluded the assignment
of the award, it found that "party" can be understood to include any party seeking to enforce an award, including
an assignee. The court also looked to New York General Obligations Law, which allows for a "judgment for a sum
of money or directing the payment of a sum of money" to be "transferred" (section 13-109). Further relying on
Jugometal v Samincorp, Inc., 78 F.R.D. 504 (S.D.N.Y. 1978), which ruled that "[a]n assignee has the same standing
to enforce an arbitration award in this Court as its assignor would have", the court concluded that "nothing in the
ICSID Convention, in Congress's legislation implementing ICSID, or in New York law prevents an assignee from
seeking recognition and enforcement of an ICSID Convention award" (at paragraph 382).
Other publicly known cases of assignment of awards rendered against Argentina include:
• BG Group v Argentina (UNCITRAL), where BG Group received an award of approximately USD185

million, which was assigned to Gasa Investments in 2014.
• El Paso Energy International Company v Argentine Republic (ICSID Case No ARB/03/15), where El Paso
received an award of approximately USD43 million, which it assigned to Queen Avenue Investments.
• National Grid plc v Argentine Republic (UNCITRAL, Final Award, 3 November 2008), where National
Grid received an award of approximately USD53 million, which it assigned to Gramercy, a US fund, in
2013. (For details of the underlying award, see Legal update, UNCITRAL tribunal rejects Argentina's
necessity defence.)
• Continental Casualty Company v Argentine Republic (ICSID Case No ARB/03/9), in which Continental
Casualty received an award of approximately USD2.8 million, which it assigned to Gramercy. (For details
of the underlying award, see Legal update, Ad hoc committee finds Argentina's annulment application
was made in time and grants stay of enforcement without security.)
All of these awards were eventually settled by Argentina.
Additionally, in Teinver SA and others v Argentine Republic (ICSID Case No ARB/09/1), the third-party funder,
Burford Capital, sold its interest in 2018 in the over USD320 million award to Titan Consortium 1, LLC, for
more than USD94 million. Titan Consortium 1, LLC, is currently seeking enforcement of the award in the DC
District Court. (For details of the underlying award, see Legal update, Argentina fails in attempt to annul Teinver
award (ICSID).)

Factors affecting an award's value
Although awards are often assigned at a significant discount, monetisation may be facilitated by the fact that the
discount on sovereign debt may not be as high as the discount applied to commercial awards, since they arise from
international obligations where direct enforcement may be available. However, this depends on the solvency and
asset base of the relevant state as well as on the relevant treaties. Further, the trading level of sovereign bonds
may provide a benchmark for the market value of the award, to which a premium should arguably apply.
Many other factors may affect the value at which an investment award may be monetised. The value of investment
awards may increase once the award is recognised in domestic courts (although this does not apply to ICSID
awards). Similarly, once an annulment action is commenced, this may lower the market value of the award until
that action is rejected. Other factors, such as pending requests or appeals to stay the enforcement of an award,
pending challenges and vacatur proceedings in the courts at the “seat” of the arbitration, as well as other delay
tactics, may affect the award’s market value. For further discussion of:
• The seat of arbitration, see Practice note, How significant is the seat in international arbitration?.
• Annulment in ICSID arbitration, see Practice note, Annulment of awards in ICSID arbitration.
If a state has multiple pending awards against it, award creditors may also consider pooling several awards against
the same state and selling them to a single assignee, or assignees may pool awards against that state and attempt
to reach a cumulative settlement. This may allow assignees to better leverage the value of their awards against
the sovereign state.
Jurisdictional hurdles
Some courts have refused to enforce awards brought by assignees due to the fact that they lacked jurisdiction
over the award debtor. In the case of Gater Assets Ltd. v. AO Moldovagaz 2021 WL 2546410 (June 22, 2021),
the US Second Circuit Court found that an assignee could not enforce the award against Moldovagaz because
the court lacked personal and subject matter jurisdiction. The court found that the award debtor, Moldovagaz,
lacked minimum contacts with the US and that the district court lacked subject matter jurisdiction over the renewal
claim because an exception to sovereign immunity did not apply, as Moldova was not a party to the arbitration
agreement (see Legal update, Second Circuit Joins Sister Circuits, Holding That Minimum Contacts Analysis
Applies to Foreign Corporations That Are Not a Foreign Sovereign's Alter Ego).
To mitigate potential jurisdictional hurdles for assignees in enforcing the award, the award creditor could assign the
benefit of the award only. This assignment structure preserves the original claimant’s status as the award creditor
and avoids arguments that the beneficiary or assignee lacks standing to enforce the award. On the downside,
the assignee is dependent on and required to rely on the claimant as a party in enforcement proceedings. Given
the burdensome nature of this arrangement, the benefits have to outweigh the risks facing each party for this
assignment structure to be attractive.
Claimant's insolvency
In another case, enforcement was postponed on the basis of the claimant's insolvency. In the case of 9REN Holding
v Kingdom of Spain (ICSID Case No ARB/15/15), the investor had sold its right and interest in the award to a
New York-based hedge fund, King Street Capital Management. Here, the ad hoc annulment committee found that
the claimant's decision to monetise the award to remedy its own insolvency created a risk of non-recoupment of

the award. On this basis, the committee ordered the continuation of the stay of the enforcement process for the
award, precluding the claimant and the assignee from seeking enforcement while annulment proceedings were
pending. The committee highlighted the risk of non-recoupment, referring to the principle that "a State should not
be exposed, while exercising procedural rights open to it under the Convention, to the risk that payment made under
an award which is eventually annulled may [become] irrecoverable from an insolvent claimant". (For details of
the underlying award, see Legal update, ICSID tribunal finds Spain violated FET in intra-EU dispute under ECT.)
EU-specific issues
Assignees of awards involving EU-based parties should also be mindful that EU member state courts may follow
Slovak Republic v Achmea BV (Case C-284/16) EU:C:2018:158, and refuse to recognise awards on the basis that
the underlying arbitration agreement is incompatible with EU law (see Legal update, ECJ: Arbitration clause in
intra-EU BIT incompatible with EU law). Although it has not yet been addressed whether an assignee acquiring
an award rendered under an intra-EU bilateral investment treaty (BIT) could escape the difficulties under Achmea
in its enforcement efforts, it is unlikely that EU courts would overlook potential issues related to the underlying
BIT. To follow intra-EU investment treaty issues, see Intra-EU bilateral investment treaties: tracker.
Other EU-specific issues are likely to continue to affect award assignees, such as those related to the prohibition of
state aid under EU competition law. In the Spanish renewables award case, Infrastructure Services Luxembourg
Sàrl and others v Spain (ICSID Case No ARB/13/31), EU regulators have opened an investigation into the USD85.6
million arbitration award against Spain on the basis that payment of the award could constitute state aid, as it could
grant the award creditor an unfair advantage (see Legal update, Commission opens in-depth state aid investigation
arbitration award in favour of Antin to be paid by Spain, and for details of the underlying award, see Legal update,
Fourth award issued declaring Spain liable under ECT in renewable energy case).
If the assignee was a national or juridical entity with no connection to the EU, assignment may circumvent the
European Commission's state aid concerns that the payment of the award would undermine the legal remedies
foreseen for member states under EU law.
The assignment of the award would not avoid other nationality-based concerns, for example that an award could
lead to discrimination among investors because it precludes Spanish investors from seeking recourse against Spain
for similar measures.
END OF DOCUMENT
RESOURCE HISTORY
Contributor review (June 2024).
The contributors reviewed and updated this practice note in June 2024
Contributor review (April 2023).

The contributor reviewed and updated this practice note in April 2023.
Report analysing states' compliance with investment treaty arbitration awards.

We have updated Reasons for selling or assigning an award to refer to this Report.
ICSID Arbitration Rules 2022 (effective 1 July 2022).

We have updated section ICSID arbitration awards to refer to the ICSID Arbitration Rules 2022, effective
1 July 2022

Assignment of Arbitral Awards

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Assignment of Arbitral Awards

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Assignment of arbitral awards

Practical Law UK Practice Note w-034-2865

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Assignment of arbitral awards

Practice notes | Maintained | International

Scope of this note

Settlement between parties to an arbitration

Use of an award as an asset

Market for assignment of awards

Maintenance and champerty

Standing or authority of a non-party to arbitration to enforce an award

Repurchase of a disputed debt

Assignment methods and options

Sub-participation or partial assignment of the award

Entering into an assignment agreement

Control and champerty

Risk of the award being set aside after assignment

© 2024 Thomson Reuters. All rights reserved. 1

Assignment of investment treaty awards: additional considerations

Factors affecting an award's value

Scope of this note

Reasons for selling or assigning an award

© 2024 Thomson Reuters. All rights reserved. 2

• The use of the award as a secured asset to obtain financing.

ICSID arbitration awards

© 2024 Thomson Reuters. All rights reserved. 3

• Determining attachable assets.

• Any waivers that the relevant state may have provided.

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Settlement between parties to an arbitration

© 2024 Thomson Reuters. All rights reserved. 5

Use of an award as an asset

Market for assignment of awards

• Firms that specialise in debt recovery.

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Typical issues or defences

• The assignment itself is not valid.

• A non-party to arbitration may not enforce an award.

• Assignment constitutes maintenance and champerty.

© 2024 Thomson Reuters. All rights reserved. 7

Maintenance and champerty

Standing or authority of a non-party to arbitration to enforce an award

© 2024 Thomson Reuters. All rights reserved. 8

Repurchase of a disputed debt

© 2024 Thomson Reuters. All rights reserved. 9

Assignment methods and options

Outright assignment of the whole award

Sub-participation or partial assignment of the award

© 2024 Thomson Reuters. All rights reserved. 10

Alternatively, an assignee may:

In this situation, the assignee becomes a partner of the award creditor.

Entering into an assignment agreement

The seller usually prepares documents for potential purchasers including:

• the award being sold;

• the parties' submissions; and

• the hearing transcript.

© 2024 Thomson Reuters. All rights reserved. 11

• analysis on enforcement options; or

• an asset tracing report from a specialist consultancy firm.

• A process letter and information memorandum.

Control and champerty

Risk of the award being set aside after assignment

© 2024 Thomson Reuters. All rights reserved. 12

• There are no undisclosed liabilities related to the award.

• The award creditor is not aware of any challenges to the award.

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Assignment of investment treaty awards: additional considerations

Investment treaty award assignments

© 2024 Thomson Reuters. All rights reserved. 14

• BG Group v Argentina (UNCITRAL), where BG Group received an award of approximately USD185

All of these awards were eventually settled by Argentina.

© 2024 Thomson Reuters. All rights reserved. 15

Factors affecting an award's value

© 2024 Thomson Reuters. All rights reserved. 16

Contributor review (April 2023).

Report analysing states' compliance with investment treaty arbitration awards.