To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?
International Arbitration (4th edition)
Under Argentine law, the State and State entities are subject to immunity from execution (courts may only grant declaratory relief), so the award is subject to the State own procedures of compliance.
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). Moreover, if a state files an action for annulment or a motion under the Austrian Code of Civil Procedure Code, that action may be regarded as a waiver of immunity.
Such defense might be invoked on the bases of Art.V of the New York Convention which shall prevail in the proceedings of enforcement of foreign arbitral award in Bulgaria. The sources which govern the state immunity are both international and domestic. Among the former are the Vienna Convention on Diplomatic Relations (1961), the Vienna Convention on Consular Relations (1963), bilateral consular conventions to which Bulgaria is a party and general principles of international law. Bulgaria is not a signatory to the European Convention on State Immunity. The latter category comprises the relevant provisions of CPC, there are not specific statutes which deals with state immunity. The provision of Art.18, para.1 of CPC stipulates that the Bulgarian courts are competent on claims, a party to which is a foreign state, as well as and a person who has court immunity, in the following cases:
- in event of a waiver of court immunity;
- on claims, grounded on contractual relations, where the performance of the obligation shall be in the Republic of Bulgaria;
- on claims for damages from tort, done in the Republic of Bulgaria;
- on claims regarding rights to succession property and vacant succession in the Republic of Bulgaria; or
- on lawsuits, which are under the exclusive jurisdiction of the Bulgarian courts.
The FSIA, 28 U.S.C. § 1602, et seq., provides for two types of immunity: immunity from jurisdiction and immunity from attachment and execution. See 28 U.S.C. § 1605 and 28 U.S.C. §§ 1609–10, respectively. Therefore, a sovereign state’s assets are presumed to be immune from attachment and execution, and — in order to attach and execute against a sovereign state’s assets — the property at issue must fall within an exemption to the general immunity conferred by the FSIA on all property of a foreign sovereign.
Under 28 U.S.C. § 1610(a), an exception to the general immunity against attachment and execution is provided for a foreign State’s property located in the U.S. if the property is used for “commercial activity” in the United States and if one of the following is met:
(1) the foreign state has waived its immunity from attachment in aid of execution or from execution either explicitly or by implication, notwithstanding any withdrawal of the waiver the foreign state may purport to effect except in accordance with the terms of the waiver, or
(2) the property is or was used for the commercial activity upon which the claim is based, or
(3) the execution relates to a judgment establishing rights in property which has been taken in violation of international law or which has been exchanged for property taken in violation of international law, or
(4) the execution relates to a judgment establishing rights in property—
(A) which is acquired by succession or gift, or
(B) which is immovable and situated in the United States: Provided, That such property is not used for purposes of maintaining a diplomatic or consular mission or the residence of the Chief of such mission, or
(5) the property consists of any contractual obligation or any proceeds from such a contractual obligation to indemnify or hold harmless the foreign state or its employees under a policy of automobile or other liability or casualty insurance covering the claim which merged into the judgment, or
(6) the judgment is based on an order confirming an arbitral award rendered against the foreign state, provided that attachment in aid of execution, or execution, would not be inconsistent with any provision in the arbitral agreement, or
(7) the judgment relates to a claim for which the foreign state is not immune under section 1605A or section 1605(a)(7) (as such section was in effect on January 27, 2008), regardless of whether the property is or was involved with the act upon which the claim is based.
Section 1610(b) contains the standard with regards to “property in the United States of an agency or instrumentality of a foreign state engaged in commercial activity in the United States[.]” The property of a “foreign central bank or monetary authority held for its own account” and property that is, or is intended to be, used in connection with a military activity are exempt from the exemption. 28 U.S.C. § 1611.
Finally, as a threshold requirement, the FSIA requires that a “reasonable period of time” elapse following entry of judgment, before attachment or execution “shall be permitted” under either § 1610(a) or (b). 28 U.S.C. § 1610(c).
Canadian courts have accepted a defense of state immunity in certain circumstances. The court will generally rely on an express or implied waiver of immunity or, alternatively, the “commercial activity exception” where the state engages in commercial activity in Canada.
As a general rule, a state cannot plead state immunity once it has agreed to have a dispute be solved by arbitration. When a Party, after having lost the arbitration proceedings, raises a question of State immunity regarding the enforcement of the award, it is necessary to examine the national law of the State that sought enforcement.
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’s assets. For example, an award may not be satisfied by the seizure of public or private property owned by an Emirate or government body as set out in Article 247 of the UAE CPC.
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 English courts which relate to the arbitration, including enforcement proceedings. In accordance with s.9 of the State Immunity Act 1978, this rule applies to commercial arbitrations involving state entities as well as investor-state disputes (See Gold Reserve Inc. v The Bolivarian Republic of Venezuela  EWHC 153). This waiver extends only to immunity from the jurisdiction of the courts, and not immunity from execution against the sovereign’s property.
The restrictive scope of sovereign immunity in Singapore is discussed above at Question 22. With respect to the potential for a defence of state or sovereign immunity to be raised in the course of attempted enforcement of an arbitral award, s 15(2) of the State Immunity Act (Cap. 313) provides as follows:
‘Subject to subsections (3) and (4) —
(a) relief shall not be given against a State by way of injunction or order for specific performance or for the recovery of land or other property; and
(b) the property of a State shall not be subject to any process for the enforcement of a judgment or an arbitration award or, in an action in rem, for its arrest, detention or sale’.
Importantly, however, the exceptions allowed under this section include ‘the giving of any relief or the issue of any process with the written consent of the State concerned’ (subsection (3)) and the ‘issue of any process in respect of property which is for the time being in use or intended for use for commercial purposes’ (subsection (4)).
There is no statute or court law regarding whether a state or state entity may invoke state immunity in connection with the enforcement of arbitral award. In the context of a civil action, however, the Supreme Court of Korea has held that a Korean court may exercise jurisdiction over a foreign state in relation to the commercial acts of the state, which took place in the territory of Korea, absent special circumstances such as that the court’s exercise of jurisdiction may unreasonably interfere with the sovereign acts of the foreign state as the acts amount to or are closely related to an exercise of sovereign authority (Supreme Court 97Da39216, 17 December 1998).
If and where a state has agreed to arbitration, the defense of state or sovereign immunity can no longer be raised during the arbitration proceedings or the subsequent proceedings about the declaration of enforceability/recognition of an arbitration award.
However, the issue of state or sovereign immunity does come back into play in respect of the enforcement of an arbitral award. While the arbitration award against a state remains enforceable, such arbitration award cannot be enforced and executed into all state assets. Pursuant to a decision of the Federal Constitutional Court (Bundesverfassungsgericht) so-called sovereign and non-sovereign assets have to be distinguished. Sovereign assets, i.e. assets that fulfill a sovereign function are exempted from enforcement to measures. On the other hand, may be enforced and collected from non-sovereign assets.
In a recent judgment, Pam Developments (P) Ltd. vs State of West Bengal [(2019)8 SCC 112), the Supreme Court held that in arbitration, in view of section 18 of the Arbitration and Conciliation Act, 1996, the State being a party enjoys only equal treatment. No State immunity is available to State in case of enforcement.
As discussed in answer 22 above, the Indonesian state or a a state-owned entity should not be able to invoke sovereign immunity to avoid arbitration if it has entered into a valid arbitration agreement.
However, enforcement of arbitration awards against the State can be difficult, and are likely to be ineffective in light of Indonesia’s law on state finances, which prohibits the seizure of any assets belonging to the State. A separate analysis would be required in order to navigate an enforcement challenge over an asset located outside Indonesia.
On 22 April 2015 Liechtenstein acceded to the United Nations Convention on Jurisdictional Immunities of States and Their Property, which, however, has not yet entered into force. In general, a state or state entity may not raise sovereign immunity as a defense at the enforcement stage, unless the claim with respect to which enforcement is sought results from a sovereign act of the respective state or state entity.
As indicated above, 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.
Pursuant to Article L 111-1-2 of the Code of Civil Enforcement Procedures, assets belonging to a sovereign State are, as a matter of principle, immune from enforcement in France, unless:
(i) the State has expressly consented to the taking of interim and/or enforcement measures;
(ii) the State has earmarked or allocated assets for the satisfaction of the relevant claim; or
(iii) a judgment or an arbitral award has been rendered against the relevant State and the asset concerned (a) is in use or intended for use for purposes other than non-commercial purposes; and (b) has a connection with the entity against which the proceeding was brought.
Under Article L 111-1-1 of the Code of Civil Enforcement Proceedings a party must apply for prior judicial authorisation to carry out any interim or enforcement measures against the assets of a foreign State. Such application is brought ex parte and heard by the President of the Paris First Instance Court.
Under Article L 111-1-2 (1) of the Code of Civil Enforcement Proceedings, a State may waive its immunity from enforcement. Such waiver must be express. With respect to assets used or intended for use in the operation of the State’s diplomatic mission, an express and special waiver is required (Article L 111-1-3 of the French Code of Civil Enforcement Procedures).
A defence of state or sovereign immunity at the enforcement stage will not normally be successful, unless enforcement is sought against publicly owned assets that are not subject to enforcement.
This question is debatable.
For details, see answer 22.
There are not specific legal provisions restricting state immunity as a defence in favour of foreign states o state entities at the enforcement stage. The matter is in principle governed by international customary law. Nevertheless, under law-decree N° 2,349 on rules about international contracts for the state or state entities, such immunity may be also waived.
As stated before, under Mexican legislation, the states and state´s entities are under an equal status with any other party in judicial proceedings, therefore they cannot claim immunity in any stage of the arbitration.
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 principle, enforcement cannot be carried out against assets owned by a state, except if the assets are related to the state's regular commercial business.
The rule in the Philippines is that state immunity cannot be extended to commercial, private and proprietary acts. [China National Machinery & Equipment Corp. (Group) v Santamaria (2012)]
Where the State gives its consent to be sued by private parties, it may limit the claimant's action ‘only up to the completion of proceedings anterior to the stage of execution’ and that the power of the courts ends when the judgment is rendered, since government funds and properties may not be seized under writs or execution or garnishment to satisfy such judgments. Disbursements of public funds must be covered by the correspondent appropriation as required by law. [Republic v Villasor (1973)] However, the immunity of public funds from garnishment or levy does not apply where the funds sought to be levied are already allocated by law for the satisfaction of the money claim against the government. [City of Caloocan v Allarde (2003)]
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.
There is no language on this issue in the AL, and no such cases have been observed in practice.
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.
In a recent landmark decision, the Swiss Federal Tribunal held that the prerequisites established by case law for the enforceability of a claim against a foreign state, in particular the aforementioned establishment of a sufficient nexus to the territory of Switzerland, also apply in Swiss enforcement proceedings governed by the New York Convention.
As noted above (see Answer to Question 22) 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.
Please see above answer to question 22.