To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?

International Arbitration

Austria Small Flag Austria

Since no express provisions of statutory laws as to the extent of sovereign immunity exist, the local courts responsible for the enforcement proceedings apply public international law, and particularly customary international law. The question, whether a state may claim immunity at the enforcement stage depends on whether it has separately waived its immunity for these proceedings. If so, the Austrian Supreme Court rules that only such property of a state is subject to enforcement proceedings, which is destined for a business and not a sovereign purpose (res extra commercium). Under case law, eg the proof that a bank account is kept by a consular or diplomatic mission bars its funds from enforcement.

France Small Flag France

French law recognises 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).

Portugal Small Flag Portugal

There are no specific rules on such matter, beyond the ones contained on the international treaties in which Portugal is a part, such as New York and Washington Conventions.

Romania Small Flag Romania

With repsect to arbitral awards rendered in international arbitration proceedings, a state or state entity cannot raise such a defence.

However, there might be certain delays when enforcing the award due to the provisions of Government Ordinance No. 22/2002. In case the state entity is unable to pay the amounts due, such entity is obliged to initiate the proceedings to fulfil its obligation within six months. The creditor and the state entity are free to agree on another deadline for the fulfilment of the obligation. In the absence of such an agreement and in case the state entity fails to pay its debt within the 6 months, the creditor might request the enforcement of the writ of execution. Under this ordinance, any Romanian state entity may ask the court to order the suspension and/or the rescheduling of the obligation to pay the amounts the state entity was ordered to by means of any writ of execution, including arbitral awards. Such a claim needs to be grounded on the practical inability of the state entity to pay the amount due. The reasoning behind such a legal provision is that state entities have annual pre-approved budgets, and any debt that has not been included therein requires additional funds and additional approvals.

Sweden Small Flag Sweden

The state or a state entity enjoys immunity only with respect to sovereign activities, but not to activities of commercial nature.

New Zealand Small Flag New Zealand

New Zealand recognises the doctrine of restrictive sovereign immunity at common law, which generally reflects the approach taken in foreign codifications such as the UK Sovereign Immunity Act 1978. Thus, a defence of sovereign immunity can be raised at an enforcement stage and, in accordance with conventional principles, immunity to execution will not be deemed waived by a previous submission to arbitration.

Switzerland Small Flag Switzerland

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.

UAE Small Flag UAE

There is no concept of state immunity per se in the UAE. However, public or private property owned by the UAE or any individual Emirate are immune from seizure. Accordingly, no debt due from the governments in the UAE, their emanations or corporations may be recovered by a legal process by attaching state property– even if the judgment debtor has signed a sovereign immunity waiver, which the courts will likely not enforce on public policy grounds (see article 247 of the CPC).

Malaysia Small Flag Malaysia

It is possible to subject a state and state parties to arbitration who may not necessarily be able to rely on the defence of state immunity. Although Malaysian courts have not had the opportunity to consider the defence of state or sovereign immunity within the context of arbitration, there is judicial guidance on the general application of state or sovereign immunity.

In Commonwealth of Australia v Midford (Malaysia) Sdn Bhd [1990] 1 MLJ 475, a claim was filed against the Australian Tax Authority in the Malaysian courts in a criminal matter. The Supreme Court clarified that Malaysia subscribes to a restrictive version of the defence in which Malaysian courts will only afford state or sovereign immunity to actions by foreign states of a public nature.

The test applied by the Supreme Court was whether the impugned acts of a state were of a commercial and private nature. The court will contextually demarcate the breadth of governmental actions and will then see if the impugned state action fell outside of that scope which mirrors the analysis in the English case of The 'I Congreso del Partido' [1981] 2 All ER 1064.

It is submitted that a similar legal analysis of the defence would apply in an arbitration, including at the enforcement stage which would entail an inquiry into the nature of the assets of the party. An arbitral award may be enforced against the commercial assets of a state but not its diplomatic assets.

United States Small Flag United States

The Foreign Sovereign Immunity Act (FSIA) generally provides foreign states and their instrumentalities immunity from the jurisdiction of U.S. courts.

The FSIA provides that a court has personal jurisdiction over a foreign state only if an explicit exception to immunity applies and the plaintiff has effectuated service. In particular, the FSIA (Section 105(a) (6)) provides an exception for actions seeking to confirm and enforce awards governed by a treaty or other international agreement in force in the United States calling for recognition and enforcement of arbitral awards (e.g. the New York or Panama Conventions).

Singapore Small Flag Singapore

According to the Singapore State Immunity Act, a State is immune from the jurisdiction of the courts of Singapore or any arbitral tribunal or body exercising judicial functions. Singapore State Immunity Act, Section 3. However, a central exception to the doctrine of sovereign immunity is the so-called commercial activity exception according to which a State is not immune where the activity in issue is a commercial one. Singapore State Immunity Act, Section 5. Moreover, the Singapore State Immunity Act provides that a State will not be immune from an arbitration where it has agreed in writing to submit a dispute to arbitration. Singapore State Immunity Act, Section 11(1).

Under the Singapore State Immunity Act, a State is immune from an injunction or order for specific performance or for the recovery of land or other property. Singapore State Immunity Act, Section 15(2). Moreover, 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.

Brazil Small Flag Brazil

If the state authority decide to refer the examination of a particular dispute to an arbitral court, either through the inclusion of an arbitration clause in a public contract or through the signature of a compromissum, the state authority have chosen to be submitted to arbitration and to the jurisdiction of the arbitrators, and so may not subsequently claim any state of defense or sovereign immunity during the phase of enforcement of the award.

Canada Small Flag Canada

The state immunity defence is readily available to a state named as a defendant to a lawsuit, in an arbitration or in an action for recognition and enforcement of an arbitration. The federal State Immunity Act provides for limited exceptions to state immunity, such as if a state waives immunity, if a state submits to the court’s jurisdiction, and for scheduled states deemed to support terrorism. If the circumstances do not fall into one of the exceptions, a state’s defence will succeed. Additionally, under s. 5 of the State Immunity Act, a state is not immune from the jurisdiction of a court in any proceedings that relate to any commercial activity of the foreign state.

S. 11(1) of the State Immunity Act further provides that a state must consent in writing to relief by way of an injunction, specific performance or the recovery of land or other property. Under s. 12(1), property of a foreign state located in Canada is immune from execution unless: (a) the state waives the immunity; (b) the property is used or is intended to be used for commercial activity or support of terrorism; (c) “the execution relates to a judgment establishing rights in property that has been acquired by succession or gift or in immovable property located in Canada”; or (d) the foreign state is listed as a state for which there are reasonable grounds to believe it has supported terrorism and “the attachment or execution relates to a judgment rendered in an action brought against it for its support of terrorism or its terrorist activity and to property other than property that has cultural or historical value”.

Panama Small Flag Panama

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.

Spain Small Flag Spain

It may in the same terms than enforcing any other resolution. Spain is party to The United Nations Convention on Jurisdictional Immunities of States and Their Property and its Local Courts will distinguish between actions related to exercise of sovereignty (iuri imperii) and actions related to management and administration of private assets (iuri gestionis).

Turkey Small Flag Turkey

The Local Law allows that the Turkish state or the state entities to enter into arbitration agreements with other parties in case the matter is appropriate for arbitration. They become a party to an international arbitration. Although Turkish courts enforces the award against a state or state entity, only the commercial assets of the states can be enforced. The assets of the state cannot be seizure under Turkish Law.

Germany Small Flag Germany

Generally, states that accept and agree to arbitration waive their immunity. The purpose is the practicability of arbitral proceedings. But the immunity is waived only as far as the subject of the dispute is covered by the arbitration agreement.

The immunity in execution proceedings can still be recognized even if the state has waived its immunity on the purpose of the arbitration proceedings. This is important in the context of state assets in Germany. Following the doctrine of limited sovereign immunity state assets fulfilling a sovereign function are protected against enforcement measures pursuant to case law of the German Federal Constitutional Court. Awards against assets of foreign authorities located in Germany with a commercial purpose are enforceable instead.

Italy Small Flag Italy

There are no special rules that apply to the enforcement of an award against a state or state entity.

United Kingdom Small Flag United Kingdom

Generally, where the state or state entity in the UK submits to a valid arbitral agreement, it waives immunity (section 9(1) of the State Immunity Act 1978). By the enforcement stage the state or state entity will most likely be prohibited from raising such objection (section 73).

Ireland Small Flag Ireland

The Irish Courts have not yet addressed this issue in the context of enforcement of an arbitral award.

Poland Small Flag Poland

The immunity defense cannot be raised as a defense against recognition or enforcement but it may be successfully raised to exclude certain assets from enforcement. Immunity defense will not be upheld with respect to assets of the state or state entities that are used for commercial purposes.

Furthermore, Polish courts would allow execution if immunity from execution was waived by the state, for instance, in an arbitration agreement. Furthermore, the immunity defense will not be upheld if assets of the state or state entities are used for commercial purposes.

Cyprus Small Flag Cyprus

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). A state may invoke such immunity via its Defence to the proceedings, and the Tribunal shall decide accordingly.

Updated: October 17, 2017