Sovereign Immunity from Execution

1

• Sovereign Immunity from Execution
• with an emphasis on the enforcement of arbitral
  awards
• Koji Takahashi (Doshisha University Law School,
  Japan)(Authored in the spring of 2007)

2
Some important instruments

• European Convention on State Immunity 1972
• United Nations Convention on Jurisdictional
  Immunities of States and Their Property 2004
• United States Foreign Sovereign Immunities Act
  1976
• United Kingdom State Immunity Act 1978
• Canadian State Immunity Act 1985
• Australian Foreign States Immunities Act 1985
• General principles of international law
• The extent of immunity depends on the law of the
  country where the execution is sought.

3
Conflicting interests behind sovereign immunity
issues

• Interests of private litigants in obtaining
  recovery
• Interests of sovereign states in
• not being subjected to the sovereign power of
  another state
• avoiding excessive liability.
• Kalogeropoulou and others v. Greece and Germany
• The European Court of Human Rights rejected the
  contention that the refusal to take execution
  measures infringed Article 6(1) of the European
  Convention on Human Rights.
• Article 6(1)
• In the determination of his civil rights and
  obligations ... everyone is entitled to a fair
  ... hearing ... by an ... impartial tribunal...

4
Compliance by the defendant states with judgments
against them

• Opportunity of voluntary compliance
• U.S. Foreign Sovereign Immunities Act
• s. 1610 (c) No execution shall be permitted
  until the court has ordered such execution
  after having determined that a reasonable period
  of time has elapsed following the entry of
  judgment and the giving of any notice .
• UN Convention
• A proposal no measures of constraint shall be
  taken against the property of a state before that
  state has been given adequate opportunity to
  comply with the judgment.
• Obligation of compliance
• European Convention
• Article 20
• A Contracting State shall give effect to a
  judgment given against it by a court of another
  Contracting State
• Article 23
• 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.

5
Two types of immunity

• Immunity from jurisdiction
• immunity from execution
• cf. Switzerland, République Arabe d'Egypte v.
  Cinetel, Tribunal fédéral suisse (1979) 65 ILR
  425
• 'The Federal Court considers immunity from
  execution as simply the consequence of
  jurisdictional immunity'
• Article 20 of the UN Convention
• Where consent to the measures of constraint is
  required under articles 18 and 19, consent to the
  exercise of jurisdiction under article 7 shall
  not imply consent to the taking of measures of
  constraint.

6
Slower shift from absolute to restrictive theories

• Under the absolute theory of immunity, the
  immunity was inviolable absent the consent of the
  foreign state.
• U.S. Congress, House of Representatives, Report
  No. 94-1487 (The bill enacting the Foreign
  Sovereign Immunities Act 1976) would conform the
  execution immunity rules more closely to the
  jurisdiction immunity rules
• Greater potential to upset diplomatic relations
  or even hamper the functional capacity of the
  state.

7
More limited restrictions on immunity from
execution than immunity from jurisdiction

• "last bastion of state immunity
• U.S. Foreign Sovereign Immunities Act 1976
• s. 1609 the property in the United States of a
  foreign state shall be immune from execution
  except as provided in sections 1610 and 1611 of
  this chapter.
• s. 1610. (a) The property in the United States of
  a foreign state used for a commercial activity
  in the United States, shall not be immune from
  execution if
• s. 1611 (b) Notwithstanding the provisions of
  section 1610 of this chapter, the property of a
  foreign state shall be immune from execution,
  if--
• (1) the property is that of a foreign central
  bank held for its own account, unless such bank
  or its parent foreign government, has
  explicitly waived its immunity from execution
  or
• (2) the property is used in connection with a
  military activity and
• (A) is of a military character, or
• (B) is under the control of a military authority
  or defense agency.

8
Exceptions to immunity

• UN Convention Article 19
• No post-judgment measures of constraint
  against property of a State may be taken unless
  and except to the extent that
• (a) the State has expressly consented to the
  taking of such measures or
• (b) the State has allocated or earmarked property
  for the satisfaction of the claim or
• (c) the property is specifically in use by
  the State for other than government
  non-commercial purposes .

9
Waiver of immunity

• UN Convention Article 19
• No post-judgment measures of constraint
  against property of a State may be taken unless
  and except to the extent that
• (a) the State has expressly consented to the
  taking of such measures as indicated
• (i) by international agreement
• (ii) by an arbitration agreement or in a written
  contract or
• (iii) by a declaration before the court or by a
  written communication after a dispute between the
  parties has arisen
• US Foreign Sovereign Immunities Act Section 1610
  
• (a) the property in the United States of a
  foreign state ... used for commercial activity in
  the United States ... shall not be immune from
  execution ... if
• (1) the foreign state has waived its immunity
  from execution either explicitly or by
  implication

10
Property used for non-commercial activity
unaffected by a waiver of immunity

• US Foreign Sovereign Immunities Act section 1610
• (a) the property in the United States of a
  foreign state ... used for commercial activity in
  the United States ... shall not be immune from
  execution ... if
• (1) the foreign state has waived its immunity
  from execution either explicitly or by
  implication
• Af-Cap, Inc. v. Republic of Congo, D.D.C. (2004)
  326 F.Supp.2d 128.
• The Republic of Congo's embassy was immune from
  attachment
• (1) because it was not property used for a
  "commercial activity."
• (2) under the Vienna Convention on Diplomatic
  Relations.

11
Properties used for the function of diplomatic
missions unaffected by a waiver of immunity

• Premises of diplomatic missions and the residence
  of diplomatic agents
• Vienna Convention on Diplomatic Relations 1961
• Article 22
• 3. The premises of the mission, their
  furnishings and other property thereon and the
  means of transport of the mission shall be immune
  from execution.
• Article 30
• 1. The private residence of a diplomatic agent
  shall enjoy the same inviolability and protection
  as the premises of the mission.
• A Co. Ltd v. Republic of X 1990 2 Lloyds Rep.
  520
• (to be continued)

12
Properties used for the function of diplomatic
missions unaffected by a waiver of immunity

• Bank accounts of diplomatic missions
• Ambassade de la fédération de Russie en France
  v. Société NOGA, Cour d'Appel, Paris, 2001 128
  JDI 116.
• Vienna Convention on Diplomatic Relations 1961
  Article 25
• The receiving State shall accord full facilities
  for the performance of the functions of the
  mission.
• cf. UN Convention Article 21
• 1. (a) property, including any bank account,
  which is used in the performance of the
  functions of the diplomatic mission
• 2. Paragraph 1 is without prejudice to article
  19, subparagraphs (a) and (b).

13
Does an arbitration agreement constitute a waiver
of immunity from execution? UN Convention

• Article 19 State immunity from post-judgment
  measures of constraint
• No post-judgment measures of constraint
  against property of a State may be taken unless
  and except to the extent that
• (a) the State has expressly consented to the
  taking of such measures as indicated
• (ii) by an arbitration agreement or in a written
  contract or
• Article 17 Effect of an arbitration agreement
• If a State enters into an agreement in writing
  to submit to arbitration differences relating to
  a commercial transaction, that State cannot
  invoke immunity from jurisdiction before a court
  of another State which is otherwise competent in
  a proceeding which relates to
• (a) the validity, interpretation or application
  of the arbitration agreement
• (b) the arbitration procedure or
• (c) the confirmation or the setting aside of the
  award,
• unless the arbitration agreement otherwise
  provides.

14
Does an arbitration agreement constitute a waiver
of immunity from execution? France

• Société Eurodif v. République islamique d'Iran,
  Cour de Cassation 1984 R.C.D.I.P. 644
• An arbitration clause cannot itself imply a
  waiver of immunity from execution.
• Creighton Ltd. v. Qatar, Cour de cassation 2000
  Journal du Droit Internationale 1054
• By submitting the dispute to arbitration under
  the rules of the International Chamber of
  Commerce, the state has implicitly waived
  immunity from execution.
• Art. 24(2) of the ICC Rules of Conciliation and
  Arbitration (in force until 31 Dec 1997) 'the
  parties shall be deemed to have undertaken to
  carry out the resulting award without delay and
  to have waived their right to any form of appeal
  '.

15
Does an arbitration agreement constitute a waiver
of immunity from execution? UK

• UK State Immunity Act 1978 s. 9 Arbitrations
• (1) Where a State has agreed in writing to
  submit a dispute to arbitration, the State is
  not immune as respects proceedings in the courts
  of the United Kingdom which relate to the
  arbitration.
• Svenska Petroleum Exploration AB v. Lithuania
  (No.2) 2006 EWCA Civ 1529
• If a state had agreed to submit disputes to
  arbitration, it was amenable to "such processes
  as might be necessary to render the arbitration
  effective and this included enforcement
  proceedings".

16
Does an arbitration agreement constitute a waiver
of immunity from execution? US

• Ipitrade International SA v Federal Republic of
  Nigeria, 1978, 465 F Supp 824
• Birch Shipping Corp. v. Embassy of United
  Republic of Tanzania, United States District
  Court for the District of Columbia, 1980, 507 F.
  Supp. 311
• Foreign Sovereign Immunities Act 1976
• s. 1610. Exceptions to the immunity from
  attachment or execution
• (a) The property in the United States of a
  foreign state shall not be immune from
  execution, upon a judgment entered by a court of
  the United States or of a State if--
• (1) the foreign state has waived its immunity
  from execution either explicitly or by
  implication or
• (6) the judgment is based on an order confirming
  an arbitral award rendered against the foreign
  state, provided that execution, would not be
  inconsistent with any provision in the arbitral
  agreement, or

17
Does an arbitration agreement constitute a waiver
of immunity from execution? Australia

• Foreign States Immunities Act 1985 Section 17
  Arbitrations
• (2) Where
• (a) a foreign State would not be immune in a
  proceeding concerning a transaction or event and
  
• (b) the foreign State is a party to an agreement
  to submit to arbitration a dispute about the
  transaction or event
• then, subject to any inconsistent provision in
  the agreement, the foreign State is not immune in
  a proceeding concerning the recognition as
  binding for any purpose, or for the enforcement,
  of an award made pursuant to the arbitration,
  wherever the award was made.
• Australian Law Reform Commission, Foreign State
  Immunity, Report No. 24 (1984) para. 107
• This will allow the enforcement of awards
  arising out of commercial transactions, or of
  other transactions of the foreign state over
  which the courts would have had jurisdiction.

18
Property in use for commercial purposes another
category of exception to immunity

• Test Purpose of the property cf. nature of
  the act
• UK State Immunity Act 1978 s. 13
• (2) Subject to subsections (3) and (4) below--
• (b) the property of a State shall not be subject
  to any process for the enforcement of a judgment
  or arbitration award .
• (4) Subsection (2)(b) above does not prevent the
  issue of any process in respect of property which
  is for the time being in use or intended for use
  for commercial purposes
• UN Convention
• Article 19
• No post-judgment measures of constraint
  against property of a State may be taken unless
  and except to the extent that
• (c) it has been established that the property is
  specifically in use or intended for use by the
  State for other than government non-commercial
  purposes and is in the territory of the State of
  the forum, provided that post-judgment measures
  of constraint may only be taken against property
  that has a connection with the entity against
  which the proceeding was directed.

19
Requirement of nexus between the property and the
claim

• France Société Eurodif v. République islamique
  d'Iran
• Court of Cassation tacitly endorsed the
  requirement for a connection between the property
  to be attached and the subject matter of the
  claim.
• US Foreign Sovereign Immunities Act
• s. 1610 (a) The property of a foreign state
  used for a commercial activity in the United
  States, shall not be immune from execution
  if--
• (2) the property is or was used for the
  commercial activity upon which the claim is
  based,
• American Bar Association Working Group,
  Reforming the Foreign Sovereign Immunities Act
  (2002) "Only in rare instances would a foreign
  state have property in the United States, perhaps
  an office, warehouse, or goods awaiting export,
  "used" for the activity giving rise to the
  claim."
• UN Convention
• "connection with the claim which is the object
  of the proceeding" Draft Articles on the
  Jurisdictional Immunities of States and Their
  Property, U.N. Doc. A/46/10 (1991)
• Australian Law Reform Commission Report 24,
  Foreign State Immunity (1984) Summary of
  Recommendations, para. 34
• There should be no requirement of a nexus
  between the transaction and the property executed
  against.

20
Categorical exclusion of certain types of
property

• UN Convention
• Article 21 Specific categories of property
• 1. The following categories, in particular, of
  property of a State shall not be considered as
  property specifically in use or intended for use
  by the State for other than government
  non-commercial purposes under article 19,
  subparagraph (c)
• (a) property, including any bank account, which
  is used or intended for use in the performance of
  the functions of the diplomatic mission of the
  State or its consular posts, special missions,
  missions to international organizations or
  delegations to organs of international
  organizations or to international conferences
• (b) property of a military character or used or
  intended for use in the performance of military
  functions
• (c) property of the central bank or other
  monetary authority of the State
• (d) property forming part of the cultural
  heritage of the State or part of its archives and
  not placed or intended to be placed on sale
• (e) property forming part of an exhibition of
  objects of scientific, cultural or historical
  interest and not placed or intended to be placed
  on sale.

21
Embassy or consular accounts

• a mixed account
• an account used concurrently to satisfy
  commercial obligations and to fund sovereign
  diplomatic activities, such as purchasing goods
  or services like office supplies.
• UN Convention Article 21(1)(a)
• 'used or intended for use for the purposes of
  the diplomatic mission'
• Presumption in favour of non-commercial purpose
• The Philippine Embassy Bank Account Case,
  Bundesverfassungsgericht, 13 Dec. 1977, 46 BVerfG
  342 65 ILR 146
• ... for the executing authorities of the
  receiving State to require the sending State,
  without its consent, to provide details
  concerning the existence or the past, present or
  future purposes of funds in such an account would
  constitute interference, contrary to
  international law, in matters within the
  exclusive competence of the sending State.

22
Burden of proof on the purpose of property

• Presumption in favour of non-commercial purposes
  of state-owned property
• Société Eurodif v. République islamique d'Iran,
  Cour de cassation, Cour de cassation, 14 Mar.
  1984 1984 R.C.D.I.P. 644
• 'Assets belonging to a foreign State are
  presumed to be destined for a public activity. It
  is for the State's creditors to prove by any
  means that attached assets are destined for an
  economic or commercial activity under private
  law'.
• Certificates of the head of a States diplomatic
  mission
• UK State Immunity Act s. 13(5)
• for the purposes of subsection (4) above, a
  certificate of the head of a foreign state's
  diplomatic mission in the United Kingdom to the
  effect that any property is not in use for
  commercial purposes shall be accepted as
  sufficient evidence of that fact unless the
  contrary is proved.
• Property apparently not in use
• Australian Foreign States Immunities Act 1985
• s. 32(3) For the purposes of this section
• (b) property that is apparently vacant or
  apparently not in use shall be taken to be being
  used for commercial purposes unless the court is
  satisfied that it has been set aside otherwise
  than for commercial purposes.

23
Other requirements for enforcement

• Connection between the claim and the State of
  enforcement
• LIAMCO v. Libya, Swiss Federal Court, 19 June
  1980
• An expropriation dispute in Libya. The seat of
  arbitration in Switzerland.
• Executive authorisation for enforcement measures
• Criticism
• The authorisation requirement may be seen as an
  infringement of the right of access to justice.
• The decision to grant or deny immunity may become
  politicised.
• Condor and Filvem v. Ministry of Justice, 15 July
  1992
• The requirement of an authorisation by the
  Ministry of Justice was held by the Italian
  Constitutional Court to infringe the right to
  judicial protection enshrined in the Italian
  Constitution.

24
Pre-judgment Measures of Constraint

• to secure assets for the enforcement of a
  subsequent judgment
• e.g. pre-judgment attachment, Mareva injunction
• The same test as for post-judgment measures
• Société Eurodif v. République islamique d'Iran,
  French Cour de cassation, 14 Mar. 1984 1984
  R.C.D.I.P. 644
• Australian Foreign States Immunities Act 1985 s.
  30
• Except as provided by this Part, the property of
  a foreign State is not subject to any process or
  order (whether interim or final) of the courts of
  Australia for the satisfaction or enforcement of
  a judgment .

25
A broader immunity than for post-judgment
measures

• US Foreign Sovereign Immunities Act s. 1610
• (d) The property of a foreign state used for a
  commercial activity in the United States, shall
  not be immune from attachment prior to the entry
  of judgment if--
• (1) the foreign state has explicitly waived its
  immunity from attachment prior to judgment and
• (2) the purpose of the attachment is to secure
  satisfaction of a judgment that has been or may
  ultimately be entered against the foreign state,
  and not to obtain jurisdiction.
• UN Convention Art. 18
• No pre-judgement measures of constraint, such as
  attachment or arrest, against property of a State
  may be taken in connection with a proceeding
  before a court of another State unless and except
  to the extent that
• (a) the State has expressly consented to the
  taking of such measures as indicated
• (i) by international agreement
• (ii) by an arbitration agreement or in a written
  contract or
• (iii) by a declaration before the court or by a
  written communication after a dispute between the
  parties has arisen or
• (b) the State has allocated or earmarked
  property for the satisfaction of the claim which
  is the object of that proceeding.

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Further reading

• August Reinisch, European Court Practice
  Concerning State Immunity from Enforcement
  Measures (2006) 17 Eur. J. Int'l L. 803
• Jeremy Ostrander, The Last Bastion of Sovereign
  Immunity A Comparative Look at Immunity from
  Execution of Judgments (2004) 22 Berkeley J.
  Int'l L. 541