In what circumstances is it possible for a state or state entity to invoke state immunity in connection with the commencement of arbitration proceedings?
International Arbitration (3rd edition)
State immunity may not be invoked. However, for administrative contracts, the approval of the Minister in question is required to have a valid agreement to arbitrate.
While states may in principle benefit from immunity against any legal action before the court of another country or an arbitral tribunal (immunité de juridiction), it is possible for a state to waive such immunity. Under French case law, a state waives its immunity from arbitration proceedings by entering into an arbitration agreement (see Court of Cassation, First Civil Chamber, 18 November 1986, No. 85-11.404). Yet, a state could still challenge the jurisdiction of an arbitral tribunal by arguing that it did not consent to have recourse to arbitration (see Paris Court of Appeal, 12 July 1984, 1985 JDI 129).
State immunity can be invoked during arbitration proceedings by the respondent state and it is the Tribunal who will decide on the motion in question. However, state immunity does not apply in actions of foreign states which are of financial and commercial nature, and which could also be conducted by a natural person (jure gestionis).
According to section 7 (1) of the PIL Act the Czech courts have no jurisdiction over foreign states in respect of proceedings arising out of their actions taken in the performance of their state, government and other public powers and functions, including their property, which is used or intended for such performance (acta iure imperii). The same principle applies to arbitral proceedings.
However, in other circumstances these immunities do not apply.
Under the Romanian legislation, the possibility of a state or state entity to invoke immunity is not regulated. As far as the state has entered into an arbitration agreement, being duly authorized to do so, it is bound to respect the provisions thereof.
There are no specific provisions governing state immunity.
However, after the state gave consent to arbitration by way of concluding the arbitration agreement or by virtue of an international treaty there should be no legal ground for the state to invoke state immunity in connection with the commencement of arbitration proceedings.
Although China has not adopted any legislation with respect to state or sovereign immunity, its adherence to absolute immunity can be inferred from Chinese government’s statement to courts of other countries or notice to courts of HK SAR.
As for China’s position towards immunity of state entity, China has emphasized both in foreign courts and in its own laws and regulations that the legal status and responsibility of the government and SOEs should be distinguished. Recently in a 2017 case, TNB Fuel Services v. China National Coal Group Corporation, ruled by Hong Kong Court of First Instance, in its letter to the court Chinese government rejected China National Coal Group’s assertion of state immunity on the basis that its activities were of mere commercial nature. However, the letter also indicates that the activities of SOEs may fall into the scope of state immunity if the SOE is authorized by the government to act on its behalf, albeit not making it clear the corresponding standard.
a. If a state or state entity has entered an arbitration agreement, the state or state entity is considered to have revoked any possible claims of immunity.
Entering into an arbitration agreement itself is commonly treated as a waiver of any immunity from suit. However, this question has not yet been considered in the publicly available case law. It is worth noting that currently the Polish state and state entities are generally reluctant to concluding arbitration agreements.
In the first place, it is noted that there are very little statutory rules in Switzerland concerning state immunity. Also the question whether a state or state entity may invoke its immunity in connection with the commencement of arbitration proceedings is not expressly regulated.
As one of the very few rules, in terms of international arbitration art. 177 para. 2 PILA stipulates that a state, an enterprise held by a state, or an organization controlled by a state may not invoke its own law to contest its capacity to be party to an arbitration agreement or use its own laws as a defence against the arbitrability of the dispute. The legal doctrine, for the most part, agrees that it can be derived from the ratio legis of the aforementioned provision that it is not permissible for a state or a state entity to plead immunity from jurisdiction before an international arbitral tribunal seated in Switzerland.
The legislation on domestic arbitration does not contain a provision comparable to art. 177 para. 2 PILA. Thus, it remains uncertain whether immunity is a permissible defence in domestic arbitrations.
There is no concept of immunity for the state or state entity, in the UAE.
There is, however, a separate procedure for making such claims.
A claimant must first submit its claim to the Department of Legal Affairs of the Government of Dubai (“DLAD”).
The procedure for how the DLAD should deal with such claims is set out in Law No. (3) of 1996 (as amended).
The procedure requires that:
the claim should be submitted in writing to the DLAD;
the DLAD refer the claim submitted to the relevant entity within 1 week of receipt;
the relevant entity which receives the claim, shall reply to the DLAD within ‘fifteen days from the receipt of the letter…’
if a period of 2 months expires, from the date of the submission of the claim to the DLAD, without amicable settlement, the claimant may proceed with its claim through the normal channels.
The State Immunity Act 1978 (the 1978 Act) allows a state to be bound in arbitration proceedings if it has agreed to submit to arbitration a dispute that has arisen, or may arise (s.9(2)). Otherwise, it is able to claim immunity.
The regulations of the KSA generally prohibit the government and government bodies from resorting to arbitration.
Article 10(2) of the Law of Arbitration states that government bodies may not agree to enter into arbitration agreements except upon approval by the Prime Minister, unless allowed by a special provision of law.
Under the Foreign Sovereign Immunities Act, a sovereign state is immune from judicial proceedings, including proceedings under the FAA, unless certain exceptions apply. One such exception is where the state has waived its immunity by contract and entered into an agreement to arbitrate. However, the waiver of immunity from suit will not extend immunity to attachment of assets, as explained below.
If a state enters into an arbitration agreement, it may be deemed as a waiver of immunity in relation to sovereign acts (acta iure imperii). Austria is party to the European Convention on State Immunity, which provides that a state which is a party to an arbitration agreement may not invoke state immunity in relation to proceedings concerning the arbitration agreement. In general, the doctrine of restrictive immunity is recognised in Austria, according to which state immunity is applied only in relation to sovereign acts but not to activities of a commercial nature (acta iure gestionis).
Where an arbitration has been commenced in respect of disputes where the State has acted as a State and not as a commercial actor, state immunity may be successfully invoked. The restricted doctrine of immunity applies in Nigeria African Re-insurance Corporation v. AIM Consultants Ltd. (2004) 12 NWLR (Pt. 884) 223. State immunity can also be claimed where it is clearly granted by statute.
As a rule, Portuguese courts consider that a State can invoke immunity from jurisdiction from acts that are jus imperii as opposed to acts of juri gestionis.
Additionally, the limitations and extension of sovereign immunity are determined in accordance with the European Convention on State Immunity and its Additional Protocol and the United Nations Convention on Jurisdictional Immunities of States and Their Property.
In 2015, Russia adopted a federal law effectively implementing the 2004 United Nations Convention on Jurisdictional Immunities of States and Their Property. Jurisdictional immunity, which encompasses immunity of states and state entities from court (or arbitral) proceedings, interim measures, and enforcement, is extended on a reciprocal basis to acts performed in the exercise of sovereign state authority. A state generally cannot rely on state immunity in disputes arising out of its commercial activity, labour disputes, disputes concerning participation in companies, disputes concerning a state’s rights or interests in real estate and other property situated in Russia, tort disputes, intellectual property disputes, and disputes concerning commercial vessels. Further, a state is deemed have waived its immunity if, inter alia, it enters into an arbitration agreement.
The Arbitration Act, 2010 applies to arbitration agreements to which the Irish state is a party [ section 28 of the Arbitration Act, 2010].
In the event that the Norwegian state or a state entity has agreed to arbitration, it will not invoke state immunity in connection with the commencement of arbitration proceedings. However, it should be noted that the state, and indeed certain state entities, are generally reluctant to enter into arbitration agreements.
States or state entities cannot invoke immunity once they have validly concluded an arbitration agreement. The agreement on referring the dispute to arbitration is considered as waiver of any objection based on the grounds of state immunity. However, whether or not a waiver of immunity has been given will be assessed separately for the arbitration proceedings and the enforcement proceedings.
It is generally understood that the state may act not only as a state (actum iure imperii), but it may also act in a commercial capacity (actum iure gestionis). This means that the state may not invoke immunity in the arbitration proceedings that are of a private or commercial character.
Under the Chilean Constitution, the law must authorize all of the state acts as well of the acts of its entities (Principio de legalidad). This means that, if the state or one of its entities wants to participate in an arbitration proceeding, there must be a law that specifically allows them to enter into arbitration.
In foreign investment matters, Chile has signed several Free Trade Agreements as well as Agreements on Promotion and Protection of Investments, all of which provide for international arbitration as the dispute resolution system, whether it may be an institutional or ad hoc arbitral tribunal.
Chile also has a specific law that regulates the international contracts celebrated by the public sector (Decreto Ley No 2.349, dated October 1978). Under such statue, the Chilean state or one of its entities may agree on an arbitral clause in the international contracts executed between them and a foreign organization, institution or company. The international contract’s main purpose shall be the regulation of business relations or economical or financial matters between the parties.
Finally, the ICAL states in its Article 1(1) that such statue shall apply without prejudice of any multilateral of bilateral treaty in force in Chile, and its Article 1(5) states that it shall not affect any other law by virtue of which certain matters may only be submitted to arbitration under other statues different than the ICAL.
Consequently, and accordingly to all of the above mentioned laws and regulations, the Chilean state or one of its entities, may invoke state immunity for the commencement of an arbitration proceeding, when they have not specifically agreed on arbitration in an international contract or an international treaty celebrated with a foreign state or entity.