Energy companies frequently face disputes against states. If successful in such disputes, claimants have to enforce the award or judgment against the state's assets in case there is no voluntary compliance. States may, however, resist enforcement by claiming sovereign immunity.

In the absence of an international treaty in force that would govern sovereign immunity some principles derive from customary international law. Ultimately, national legal orders have developed their own sets of rules. Recent developments in certain jurisdictions may result in a more burdensome route towards execution against state assets.

One example is France. French rules on sovereign immunity from execution had so far essentially been developed through case law. In the context of controversies over attempts by former shareholders of Yukos to enforce an arbitral award issued under the Energy Charter Treaty against the Russian Federation, France has recently codified this regime.

The Law 2016-1691 of 16 December 2016 provides for three main exceptions to a state's immunity from execution:

— The state has expressly consented to the measures (waiver);

— The state has allocated or earmarked the property for the satisfaction of the claim; or

— The property is specifically in use or intended for other than non-commercial purposes and has a connection with the state entity against which the proceeding was directed (there is a list of assets considered as protected).

This law departs from previous case law in several key aspects, which may make enforcement against states more difficult. It introduces an obligation to obtain an ex parte prior authorisation from a judge before taking an enforcement measure against a state's property. Further, it creates a more protective regime by requiring that the state's waiver of immunity be both express and specific for diplomatic assets.

Certain other jurisdictions adopted sovereign immunities legislation a long time ago, for example the UK (State Immunity Act 1978) and the U.S. (Foreign Sovereign Immunities Act 1976). Both acts provide for two key exceptions to immunity from execution: consent or waiver and a commercial purposes/activity exception.

However, the scope of these exceptions differs in both jurisdictions:

— In the UK consent must be expressed in writing, while in the U.S. it may be explicit or implied. The U.S. regime leaves therefore more room for creditors to claim that the state waived its immunity from execution, especially where a written waiver is not in place.

— In the UK there is an exception for property which is for the time being in use or intended for use for commercial purposes. In the U.S. the exception applies if the property is or was used for the commercial activity upon which the claim is based. Again, it may be easier for creditors to show under the U.S. regime that the assets are not protected if they are or have been used for commercial activity than to rebut the state's possible defense under the UK regime that it intends to use the assets, such as money on account, for non-commercial purposes, to which declaration an English court may give deference.

Given the various approaches to sovereign immunity from execution across jurisdictions, strategic consideration should be given when seeking to enforce judicial decisions or arbitral awards against state assets, to the extent possible already at the time of drafting a contract with a state or an entity which may claim sovereign immunity.