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Sovereign Immunity from Execution with an emphasis on the enforcement of arbitral awards

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). Some important instruments. European Convention on State Immunity 1972

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Sovereign Immunity from Execution with an emphasis on the enforcement of arbitral awards

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  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 State’s 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.

  26. 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

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