A foreign state's bank account used for commercial purposes will not be immune from enforcement action.

This was confirmed in Orascom Telecom Holdings SAE v Chad and others and Citibank NA (third party). Orascom held an arbitration award against the state of Chad and applied for a third party debt order in respect of money held by Citibank on Chad's behalf. Orascom argued that the money and property in the account in question was used or intended to be used for commercial purposes and not for sovereign purposes such as the repayment of Chad's debts to the World Bank. It therefore fell within the State Immunity Act 1978 Section 13(4) which permits enforcement of arbitral awards against such property of a state which would otherwise be immune from the jurisdiction of the UK courts.

The court agreed. Contracts or transactions for the supply of goods and services, a loan, or other transaction for the provision of finance, qualified as commercial transactions within s13(4), even if entered into by the state in the exercise of its sovereign authority. The account here operated to receive the proceeds of the supply of oil and for the repayment of loans by the World Bank and others and that was sufficient to fall within s13(4). There was no immunity from execution against the bank account and the third party debt order was made against Citibank.

Things to consider

Not all accounts held by a foreign state will be immune from enforcement action. The purpose of the funds in the account will need to be determined to ascertain whether a third party debt order is appropriate or not.