To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?
International Arbitration (2nd Edition)
As a general rule, the Chilean state and its entities are subject to immunity from execution. Nevertheless, the state and its entities may waive such immunity in some cases. Specifically, Decreto Ley No 2.349 which regulates the international contracts for the public sector, states in its Article 2 that the state and its organizations, institutions and companies, may renounce to its immunity from execution. It must be noted that this renounce has a restricted scope, since it will be limited to the execution of awards rendered in proceedings directly related to the international contracts that contains such renounce.
A state or state entity are entitled to raise a defence of state or sovereign immunity just according to the New York Conventions (or any other conventions in which Portugal is a member).
Luxembourg is party to the European Convention on State Immunity of 16 May 1972 (Basel), which states that ‘no measures of execution or preventive measures against the property of a contracting state may be taken in the territory of another contracting state except where and to the extent that the state has expressly consented thereto in writing in any particular case.’ (Article 23 of the Convention).
Luxembourg did not issue any recent law regarding State immunity, in respect of the Yukos case, contrary to France and Belgium. Furthermore, Luxembourg is not a party to the United Nations Convention on Jurisdictional Immunities of States and their Property but is party to the EU Convention.
As a matter of clarity, Luxembourgish courts have been recently questioned on this issue. Numbers of decisions are expected to be issued on the next months and years but as for the moment, it is safe to conclude that Luxembourg recognises the immunity of sovereign states against enforcement on their sovereign assets, i.e, used for the exercise of their sovereignty. This notion varies according to the specific circumstances and must be analysed on a case by case analysis.
No specific Swiss law has been adopted on the matter of sovereign immunity. Established case law in Switzerland, however, is based on the concept of limited immunity of states, according to which immunity from enforcement action is accorded for a state’s public acts (acta iure imperii), as opposed to a state’s private acts (acta iure gestionis), i.e. acts that concern an activity that a private party could have similarly engaged in. With regard to the latter, immunity may not apply.
In addition, assets dedicated to sovereign tasks are immune from enforcement unless the state or state entity in question has expressly waived such immunity.
Immunity may not apply if the counterparty can successfully demonstrate a sufficient nexus (e.g. Switzerland being the place of origin or place of performance of the obligation in question) between the state’s commercial (as opposed to public) act and Switzerland. The possibility of confiscation of a state’s assets acting under private law can therefore not be excluded provided that no treaty between the respective state and Switzerland determines the assets in question to be immune from enforcement.
As explained under question 21, where a state has agreed to arbitration, it cannot invoke state immunity during the arbitration proceedings or during the exequatur proceedings (i.e., about the declaration of enforceability of the award).
However, such waiver of immunity does not apply to the enforcement of the award as such. The immunity in execution proceedings follows different rules and may still be recognized even if the state has waived its immunity in relation to the arbitration proceedings. This is important with regard to state assets in Germany over which German courts have jurisdiction based on the principle of territoriality (section 23 ZPO). On the basis of the doctrine of limited sovereign immunity, the German Federal Constitutional Court (Bundesverfassungsgericht) distinguishes between sovereign and non-sovereign assets. State assets fulfilling a sovereign function are protected against enforcement measures. Conversely, awards against assets of foreign authorities located in Germany with a commercial purpose are enforceable.
As a general rule, Ukrainian law provides for absolute immunity of a foreign State from suit, enforcement and arrest of property, unless a different rule is established. The law does not distinguish between ordinary litigation proceedings and those pursuant to a request to recognize and enforce an arbitral award. Therefore it should be expected that a defense of State immunity will have high chances of success before Ukrainian courts. Nevertheless, to our knowledge has not yet been a reported court decision where this issue was directly analysed by the court.
The Panama Arbitration Law does not include any provision regarding the raising of a defence of state or sovereign immunity at the enforcement stage.
However, the Panama Arbitration Law expressly provides that a state or state entity cannot raise these defences to avoid its obligations under an arbitration clause.
Neither an Emirate of the UAE nor government bodies thereof have immunity. At the enforcement stage, barriers exist to the enforcement of awards against an Emirate or governmental body. For example, an award may not be satisfied by the seizure of public or private property owned by an Emirate or government body (Article 247 of the UAE CPC).
See question 21 above.
Section 2.2 of the SAA denies the possibility of a state or a state entity to oppose the prerogatives of its own law in order not to comply with obligations resulting from an arbitral agreement.
Nevertheless, a ruling issued by the Spanish Constitutional Court (TC 107/1992) confirmed its immunity from enforcement and that the premises and assets of diplomatic missions and consulates cannot be seized according to Section 21.2 of the Judicial Power Act, the Vienna Convention on Diplomatic Relations of 1961 and the Vienna Convention on Consular Relations of 1963.
Under Serbian enforcement law (which also applies to enforcement of arbitration awards), enforcement over property of a foreign state may only be performed with the written consent of a ministry competent for foreign affairs, or if the foreign state consents to enforcement over its property. In all other cases, foreign states enjoy immunity from enforcement.
As for enforcement over the property of the Republic of Serbia, such enforcement may be conducted, however, it is not possible to enforce claims over particular types of property – these include property such as real estate used by state authorities, property used for defense purposes, protected natural goods, cultural goods, etc.
State liability is not conceded by the mere fact that it has allowed itself to be sued. State funds and properties may not be enforced upon absent a corresponding appropriation under law since such enforcement may be considered as a disbursement of public funds. The Philippine Commission on Audit must first adjudicate the claim before execution may proceed.
There is no provision where a state or state entity to invoke state immunity.
In my opinion, the State or a state entity may successfully raise the above-mentioned defence, a) the arbitration agreement was not validly executed between the parties and in particular, in the case of international arbitration, when no authorization from the Attorney General of the State or the maximum authority of the relevant state entity has been secured; or, b) because the matter of the arbitration cannot be the subject of settlement or it affects the state sovereign rights.
State entities are not immune to enforcement in Egypt. A public official who intentionally refuses to implement a court order or judgment may face criminal prosecution.
As indicated in the answer to question 21 above, the Norwegian state and certain state-owned entities are generally reluctant to enter into arbitration agreements. However, if the state does enter into an arbitration agreement, the arbitration award will not be challenged at the enforcement stage based upon state or sovereign immunity.
Enforcement Act provides that enforcement on the assets of a foreign state in Croatia can be conducted only provided that: a) foreign country agrees to such enforcement, or b) the minister of justice gives consent to such enforcement, after obtaining of a prior opinion of the minister for foreign affairs.
Cyprus Courts have recognised the defence of state immunity but have clarified that it does not extend to the actions of foreign states which are of a financial and commercial nature that could also be conducted by a natural person (jure gestionis). In this respect, national Courts will generally recognise and enforce arbitral awards issued against another State.
French law recognizes state or sovereign immunity as a defence to enforcement, unless such immunity has been waived. The Court of Cassation has adopted different approaches to determining whether there has been waiver. In 2000, the Court of Cassation established that the state, by agreeing to an ICC arbitration, agrees to execute an award and that, consequently, such an agreement should be considered a waiver by the State of sovereign immunity (Court of Cassation, First Civil Chamber, 6 July 2000 (Bull. No. 207)). In 2013, the Court of Cassation held that the waiver can be recognized only if the waived assets were specifically and expressly presented in the contract (Court of Cassation, First Civil Chamber, 28 March 2013, Case 11-13.323). In 2015, the Court of Cassation changed its position and required that the waiver be express, without requiring other conditions (Court of Cassation, First Civil Chamber, 13 May 2015, Case 13-17.751).
A state or a state entity is allowed to raise a defense of state or sovereign immunity at the enforcement stage. Italian courts usually distinguish between sovereign and non-sovereign assets. An award is likely enforced only against non-sovereign assets, that is to say, assets that do not fulfill a sovereign function.
A state or state entity may successfully raise the defence of immunity at the enforcement stage only if the arbitral award was not published in a dispute emanating from commercial transactions. Nigerian courts recognize and enforce the doctrine of restricted immunity. See African Re-insurance Corporation v. AIM Consultants Ltd. (2004) 12 NWLR (Pt. 884) 223. Because arbitral awards that will be recognised and enforced must have been made in respect of disputes arising from commercial transactions, a state or state-entity may not be able to successfully raise the defence of immunity.
In practice, the issue of state immunity is largely governed by customary international law. Even where a state has waived immunity, the Austrian Supreme Court has held that only property designated to non-sovereign purposes is subject to enforcement.
The Foreign Sovereign Immunities Act, which prohibits courts from exercising personal jurisdiction over a foreign state, contains an exception for actions seeking to confirm and enforce arbitration awards governed by an international agreement in force in the United States — such as the New York Convention and the Washington Convention — where the plaintiff has effected proper service on the State. In general, to attach sovereign assets, the assets must be located in the United States and used for commercial activity in the United States. At its most basic level, the inquiry for determining whether an asset is used for ‘commercial activity’ asks whether a private person could have engaged in the same type of activity.
As noted above (see the answer under Question 21), according to legal literature and case law, a State which agrees to arbitration may not invoke its sovereign immunity in order to challenge and escape the jurisdiction of the arbitral tribunal. Such a defense is deemed waived. The issue however whether this waiver of immunity from jurisdiction is extended in order to encompass also a waiver of immunity from enforcement is disputed. There are commentators who answer this question in the affirmative on the basis that the conclusion of an arbitration agreement aims also to secure that its outcome i.e. the award will be of use to the parties. Other commentators argue, on the contrary, that the two notions are to be clearly distinguished and that a State still enjoys immunity from enforcement regardless of the fact that it entered into an arbitration agreement which resulted in the award which is sought to be enforced against it. In any event, the practical consequences of the controversy are somewhat limited, in light of the fact that State assets which serve a commercial or economic, in the broader sense, activity regulated by private law are not protected.
See answer to question 21 above.
Under s.9(1) of the 1978 Act, if a State has agreed in writing to submit a dispute to arbitration, it waives immunity from proceedings in the UK courts which relate to the arbitration. This does not apply to an arbitration agreement between States.