– State immunity is a principle of international law that allows states to claim that a court or tribunal does not have jurisdiction over them, or to prevent enforcement of an award or judgment against their assets.
– State immunity can create difficulties for parties looking to enforce their contractual rights against a state, and it is important to understand when and where it can be claimed.
– State immunity is based on the theory of the sovereign equality of states, and it protects entities by providing immunity from adjudication (immunity from suit) and immunity from enforcement and execution. 1. Some jurisdictions, such as China and Hong Kong, follow the absolute doctrine of state immunity, where foreign states can only be sued if they expressly waive immunity.
2. The restrictive doctrine of state immunity is more widely adopted, which distinguishes between acts of a sovereign nature and acts of a commercial nature, allowing immunity only for sovereign activities.
3. The scope of recognized exceptions to state immunity varies from state to state, making it important for parties to understand the laws that will apply in determining whether a state is entitled to claim immunity. 1. State immunity is applied in accordance with the law of the forum where the proceedings are taking place.
2. The law of the particular court or tribunal dealing with issues of immunity will be looked at, as well as the law of the seat if in arbitration.
3. The primary source of English law on state immunity is the State Immunity Act 1978 (SIA). 1. Does the state or state entity have immunity from jurisdiction and/or enforcement in the relevant jurisdiction?
2. Has the state or state entity contractually waived its immunity in the relevant contract?
3. If there is no waiver of immunity, what are the potential consequences and risks for the other party in the event of a dispute with the state or state entity? 1. State immunity can benefit states, governments, and separate entities acting in the exercise of sovereign authority.
2. State immunity applies to foreign or commonwealth states, including the sovereign/head of the state, the government, and any department of the government.
3. Separate entities qualify for immunity if they are distinct from the executive organs of the state and are capable of suing or being sued, as long as their actions relate to the exercise of sovereign authority.
4. Determining whether a state-owned entity is an organ of the state or a separate entity can be difficult, but generally, a separate legal entity formed by the state for commercial purposes qualifies as a separate entity.
5. It is preferable for commercial parties to transact with separate entities with limited immunity for acts of sovereign nature and to secure warranties stating that the entity is not acting in a sovereign capacity and is not entitled to immunity. – International organisations are not covered by the State Immunity Act and do not benefit from state immunity unless an express immunity is granted by statute.
– There are four main exceptions to immunity from adjudication under the State Immunity Act, including submission to the jurisdiction of the English courts.
– A state will not be immune from adjudication if it has either expressly agreed that the English courts have jurisdiction or the state itself starts proceedings in the English courts. 1. The restrictive doctrine of state immunity applies to contracts for the supply of goods or services, financing transactions, and associated guarantees or indemnities, considering them as commercial transactions.
2. The determination of the nature of a transaction depends on the facts and whether the state acted like a private person, rather than in the exercise of sovereign authority.
3. The parties can contract out of the exception regarding obligations of the state performed in the UK, so caution should be exercised in such circumstances. 1. Arbitration agreements in writing may allow English court proceedings in support of arbitration, but this is subject to any contrary agreement.
2. A state that agrees to arbitration is submitting itself to the jurisdiction of the appointed tribunal.
3. Just because a state cannot claim immunity from suit does not automatically mean that the English courts will have jurisdiction over that state.
4. Certain sovereign acts, such as sensitive diplomatic issues or controversial international law issues, may not be subject to English court jurisdiction.
5. A state may be able to claim immunity from enforcement/execution in respect of any judgment or award against it, unless one of the exceptions to immunity from enforcement/execution applies.
6. Written consent from a state can allow for the enforcement of decisions or awards, but this must not be constituted by a submission to the jurisdiction of the English courts and should cover pre-judgment as well as post-judgment execution. – Judgments or arbitral awards can be enforced against property used or intended for commercial purposes.
– State central banks and monetary authorities have immunity from enforcement, even for assets held for commercial purposes.
– Waiver of immunity clauses should be included in all transaction documents involving state parties, agreed upon by all relevant states or entities, and explicitly waive both immunity from suit and enforcement. – The waiver clause should cover all of the state’s assets or any separate entity’s assets and should be agreed upon by a person with the authority to waive immunity.
– The waiver provisions should include confirmation that the entity is not acting in a sovereign capacity.
– The enforceability of the waiver clause should be checked in all jurisdictions where enforcement of any judgment or award is likely.
– The 2012 Model Form Joint Operating Agreement of the Association of International Petroleum Negotiators includes a sample clause that waives sovereign immunity for any party and its assets to the fullest extent permitted by applicable laws. 1. The state’s immunity and the extent to which it can be waived should be carefully considered.
2. The chosen forum for arbitration should be in a country party to the New York Convention and should have a restrictive approach to sovereign immunity.
3. Consider structuring the transaction through a separate entity that is not subject to state immunity, such as a private incorporated body with its own legal personality.
4. Including a stabilisation clause in the agreement may provide additional investor protection. State immunity protects a state from being sued in the courts of another state. It is based on the principle of sovereign equality and mutual respect between states. State immunity can be granted for both sovereign and official acts of a state, and it is intended to prevent foreign courts from interfering in a state’s affairs. However, there are exceptions to state immunity, such as commercial activities and human rights violations. It is important for individuals and businesses to seek legal advice before pursuing claims against a state.
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