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 (4th edition)
As a general rule, foreign States enjoy immunity from jurisdiction (Art. 1 and 2(h) Law No. 24,488). However, they cannot invoke immunity when, having agreed to submit any commercial dispute to arbitration, intend to invoke immunity in a judicial proceedings related to the validity or interpretation of the arbitration agreement, the arbitration proceeding or the annulment of the award, unless the arbitration agreement provides otherwise.
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).
Only in case, where the respective state or state entity has been exercising acta jure imperii. Otherwise, where the state or state entity has been acting on equal footing in the commercial transaction, e.g. when exercising acta jure gestionis it is bound by the arbitration agreement.
This is generally assessed on a case-by-case basis. Canadian courts have previously accepted and denied claims of sovereign immunity depending on the circumstances.
Under the Foreign Sovereign Immunities Act, a state or state entity may invoke state immunity as a jurisdictional defense at the commencement of arbitration proceedings unless an exception to such immunity applies. The FSIA provides several such exceptions, including, for example, where the state “has waived its immunity either explicitly or by implication” or where the action is brought to “to enforce an agreement made by the foreign state with or for the benefit of a private party to submit to arbitration all or any differences which have arisen or which may arise between the parties with respect to a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration under the laws of the United States.” 28 U.S.C. § 1605(a)(1) and (6).
The New York Convention prescribes that a state is not entitled to plead immunity from jurisdiction once it has agreed to submit a dispute to arbitration. By agreeing to arbitrate a dispute, the state essentially waives the immunity from jurisdiction offence. However, it is not common in Cyprus for the Cyprus government to concede to arbitration clauses.
There is no case-law or majority opinion on this subject. On the one hand, if a state or state entity concludes an arbitration agreement, it should be held by this agreement, but on the other hand, the Czech courts have no jurisdiction over foreign states as regards the performance of their public powers, including as regards their property which is used or intended for such performance and some authors argue this should apply also for commencement of arbitration proceedings.
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) provides that a state may not invoke immunity in connection with the commencement of arbitration proceedings if it has agreed to submit the relevant dispute to arbitration (s.9(2)). Otherwise, it is able to claim immunity.
Singapore’s State Immunity Act (Cap. 313) provides at s 3(1) that ‘[a] State is immune from the jurisdiction of the courts of Singapore’, except in cases in which:
(1) the relevant State has submitted to the jurisdiction of the Singapore Courts (s 4(1));
(2) the proceedings relate to a commercial transaction of the relevant State or a contractual obligation of the State falls to be performed at least partly in Singapore, with some exceptions (s 5(1));
(3) the relevant State has either made a contract of employment with an individual in Singapore or such a contract is to be at least partially performed in Singapore, with some exceptions (s 6(1));
(4) the proceedings are in respect of death, personal injury, or damage to or loss of tangible property that has been caused by an act or omission in Singapore (s 7(1));
(5) the proceedings are in relation to immovable property or movable property where ‘an interest arises by way of succession, gift or bona vacantia’ (s 8(1-2));
(6) the proceedings involve certain intellectual property disputes (s 9(1));
(7) the proceedings involve certain types of membership of the relevant State in ‘a body corporate, an unincorporated body or a partnership’, with some exceptions (s 10(1));
(8) a State has agreed to submit a dispute to arbitration, where the proceedings relate to such arbitration (s 11(1));
(9) one or more of a set of limited circumstances exist involving the commercial use of ships (s 12(1)); or
(10) the proceedings relate to liability for ‘any customs duty or excise duty’, ‘any goods and services tax’, or ‘any tax in respect of premises occupied by [the State] for commercial purposes’ (s 13(1)).
Accordingly, a State may invoke state immunity in connection with the commencement of arbitral proceedings in Singapore where none of the above applies. The above regime for State immunity applies to entities separate from the State itself if and only if ‘the proceedings relate to anything done by [the entity] in the exercise of sovereign authority’ and ‘the circumstances are such that a State would have been so immune’ (s 16(2)).
The principle of state immunity is recognized under Korean jurisprudence, but with increasing provisos to its applicability. In the context of private acts of a state, the Supreme Court has ruled in an banc decision that Korean courts may exercise jurisdiction over a foreign state in relation to acts which took place within the territory of Korea, absent special circumstances where the exercise of jurisdiction might unreasonably interfere with the sovereign acts of the foreign state (Supreme Court Decision 97Da39216, 17 December 1998). There is no precedential authority that allows a state to invoke state immunity in connection with the commencement of arbitration proceedings.
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.
Sovereign immunity is not recognised as a good defence to enforcement of an arbitral award, arise as it does, in a commercial dispute. In Indian law, states and state entities do not enjoy sovereign immunity in commercial transactions. As a matter of fact, the Union of India, the various states and state-owned entities constitute a majority of party litigants in commercial disputes in India.
If the Indonesian state or state-owned entity has validly entered into an arbitration agreement, it cannot invoke state immunity to avoid commencement of the arbitration. The Arbitration Law recognises enforceability of any arbitration award against states or state-owned entities.
To the extent that a state or state entity has not acted in a sovereign capacity, it can in principle not invoke state immunity in the context of the commencement of arbitral proceedings.
Section 5 of the Arbitration Act provides that the Arbitration Act shall apply to any arbitration to which the Federal Government of Malaysia or the Government of any component state of Malaysia, is a party.
However, in respect to foreign state parties, it is worth noting that the Supreme Court in Commonwealth of Australia v Midford (Malaysia) Sdn Bhd  1 MLJ 475 held that Malaysia subscribes to the doctrine of restrictive state immunity. As such, governmental actions which are commercial or private in nature are not afforded with state immunity. However, state immunity is available for public and sovereign actions of a state.
Sovereign States and emanations of the State as a matter of principle enjoy immunity from jurisdiction in France. According to this principle, sovereign States and emanations of the State may not be sued before French courts with regard to acts made in their sovereign capacity (jure imperii). On the other hand, States are not immune from jurisdiction when the dispute relates to their acts of a private or commercial nature (jure gestionis).
A waiver of immunity from jurisdiction may be provided expressly, in terms that must be certain, express and unequivocal. A waiver may also be implied if the State or State-emanation agreed to submit disputes to arbitration or failed to raise an immunity defence at the outset of the proceedings before French domestic courts (UNESCO v. Boulois, Paris Court of Appeal, 19 June 1998, Rev. Arb. 343 (1999)). A State can, however, challenge the jurisdiction of an arbitral tribunal by arguing the absence of consent to the arbitration agreement.
Normally, the state immunity cannot be invoked, so long as the state or state entity has validly consented to the arbitration and that the matter in dispute is arbitrable. In this regard it is important to note that in administrative contracts, the arbitration agreement must be approved by the competent minister or whoever assumes his or her authority with respect to public entities, and that delegation of this power is prohibited. (article 1 of the arbitration law) This has been confirmed in a judgment of the State Council which ruled that the arbitration agreement is void when the competent minister, or whoever assumes his or her authority with respect to public entities, has not approved it, and that such requirement is a matter of public policy. (State Council, challenge no. 8256 of JY 56, hearing session dated 5 March 2016)
No, in Mexico the states and state´s entities are under an equal status with any other party in judicial proceedings.
Notwithstanding the above, there are specific circumstances (as mentioned in answer 11) in which arbitration is excluded.
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.
The Arbitration Act does not regulate questions related to state immunity. To what extent one party to the proceedings may rely upon state immunity must be assessed by the tribunal according to international law.
The State can invoke immunity from suit in relation to sovereign or governmental activities, but not to commercial, private and proprietary acts. [China National Machinery & Equipment Corp. (Group) v Santamaria (2012)]
There is no sovereign immunity under Saudi law for either Saudi governmental entities or Saudi companies owned by the government in the context of contractual engagements. Having said that, in general, government bodies may not agree to enter into arbitration agreements except upon the approval of the Chairman of the Council of Ministers, unless allowed by a special provision of law
Under Ecuadorian legislation there is no possibility for the state or a state entity to allege state immunity. If the state or a state entity agreed to arbitration, then it must appear in the arbitration.
Regarding enforcement of national or foreign awards against the state or state entities, there are certain legal provisions that would allow the state or state entity to invoke immunity, to safeguard public assets or to allow the proper functioning of the state.
There are not specific legal provisions restricting state immunity as a defence in favour or foreign states or foreign state entities in connection with the commencement of arbitration proceedings. The matter is governed by international customary law.
Regarding sovereign immunity, see answer N° 37 below.
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.
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.
Pursuant to the Turkish International Private Law No. 5718 (the “TPIL”), a state or a state entity cannot benefit from sovereign immunity in legal disputes arising out of private law relations between states and private legal persons. Accordingly, if a state agrees to arbitration, it is considered as a waiver of any objection based on the state immunity and the relevant state may not invoke its sovereign immunity to challenge the jurisdiction of the arbitral tribunal.