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Background

Concept of sovereign immunity

What is the general approach to the concept of sovereign immunity in your state?

The concept of state immunity that applies in the United Kingdom is that of restrictive immunity. As further explained under question 2, the statute giving effect to the doctrine of restrictive immunity is the State Immunity Act 1978, which came into force on 22 November 1978. This means that the immunity of a foreign state is not absolute but restricted to acts of a governmental nature (acta jure imperii). Therefore, acts of a commercial nature (acta jure gestionis) do not enjoy immunity. As Lord Denning MR eloquently put it in Trendtex Trading v Central Bank of Nigeria [1977] QB 529, ‘[g]overnments everywhere engage in activities which although incidental in one way or another to the business of government are in themselves essentially commercial in their nature.’ It is, therefore, only in respect of its sovereign activities that a state may reasonably expect to be immune from proceedings in a foreign court.

The doctrine of state immunity only applies to foreign states. It does not, therefore, apply to the UK. Instead, the common law doctrine of Crown immunity applies to the UK itself and its state organs. The statute relating to the civil liabilities and rights of the Crown, and to civil proceedings by and against the Crown, is the Crown Proceedings Act 1947 (as amended).

Legal basis

What is the legal basis for the doctrine of sovereign immunity in your state?

The law of state immunity derives from international law, but the manner of its application in the UK is determined by the State Immunity Act 1978 (the Act). Specifically, section 1 of the Act establishes that the UK courts have no jurisdiction to adjudicate disputes against other states unless one of the exceptions described in the Act applies.

Multilateral treaties

Is your state a party to any multilateral treaties on sovereign immunity? Has the state made any reservations or declarations regarding the treaties?

The UK is party to the 1972 European Convention on State Immunity. Specifically, the 1972 Convention was signed on 16 May 1972, ratified on 3 July 1979 and entered into force in the UK on 4 October 1979. The Convention has been extended to the following territories: British Antarctic Territory, British Virgin Islands, Cayman Islands, Falkland Islands, Guernsey, Isle of Man, Jersey, Montserrat, Pitcairn Islands, Sovereign Base Areas of Akrotiri and Dhekelia in Cyprus, St Helena, and Turks and Caicos.

The UK signed the United Nations Convention on Jurisdictional Immunities of States and Their Property on 30 September 2005, but has not yet ratified it. This treaty has not yet entered into force.

Jurisdictional immunity

Domestic law

Describe domestic law governing the scope of jurisdictional immunity.

Jurisdictional immunity covers the state itself and its various organs, agencies and instrumentalities, and extends to all activities unless specifically excepted in the Act (see sections 2 to 11). Pursuant to section 14(1) of the Act, the term ‘state’ encapsulates the sovereign or other head of that state in his or her public capacity; the government of that state; and any department of that government, but does not include entities that are ‘distinct from the executive organs of the government of the State and capable of suing or being sued’ (ie, separate entities). According to section 14(2) of the Act, such separate entities are only immune if the proceedings relate to acts performed in the exercise of sovereign authority, and the circumstances are such that a state would have been so immune.

Whether a territory is a state is settled by a certificate from the Secretary of State for Foreign and Commonwealth Affairs.

A constituent territory of a federal state is only immune if an Order in Council so states. Therefore, absent an Order in Council, a constituent territory will be treated as a ‘separate entity’ (section 14(6) of the Act). For example, in Pocket Kings v Safenames, the English High Court held that the US state of Kentucky was a constituent territory of the sovereign federal state of the US and not entitled to immunity because it was not a sovereign state. Further, it was not entitled to immunity as a separate entity because it had not acted ‘in the exercise of sovereign authority’ (section 14(2) of the Act).

State waiver of immunity or consent

How can the state, or its various organs and instrumentalities, waive immunity or consent to the exercise of jurisdiction?

States may submit to the jurisdiction of the UK courts by prior written agreement; submitting to the jurisdiction of the courts of the UK after the dispute has arisen; and instituting or carrying out steps in relation to proceedings (other than for the purpose of claiming immunity). Once waiver or consent is effectuated, it is irrevocable.

Pursuant to section 9 of the Act, where a state ‘has agreed in writing to submit a dispute which has arisen, or may arise, to arbitration, the State is not immune as respects proceedings in the courts of the [UK, which] relate to the arbitration’.

In which types of transactions or proceedings do states not enjoy immunity from suit (even without the state’s consent or waiver)? How does the law of your country assess whether a transaction falls into one of these categories?

Apart from submission to arbitration or submission to the jurisdiction of the UK courts by a choice of courts agreement, sections 3 to 11 of the Act also establish the following exceptions to state immunity:

  • commercial activities;
  • contracts of employment;
  • personal injury and damage to property if they occur in the UK;
  • interests or obligations arising out of property rights;
  • patent, trademarks and similar industrial and intellectual property rights (such as designs, copyright, the right to use a trade or business name) ;
  • proceedings relating to a state’s membership of a body corporate, an unincorporated body or a partnership that has members other than states and is incorporated or constituted under the law of the UK, or is controlled from or has its principal place of business in the UK;
  • admiralty proceedings (or proceedings on any claim that could be made the subject of admiralty proceedings) concerning ships that were in use or were intended for use for commercial purposes; and
  • proceedings relating to a state’s liability for value added tax, any duty of customs or excise or any agricultural levy or rates in respect of premises occupied by it for commercial purposes.

All of these are exceptions to jurisdictional immunity and do not in themselves overcome enforcement immunity.

Section 3 of the Act draws a distinction between ‘commercial transactions’ and contractual obligations that are performed wholly or partly in the UK. A ‘commercial transaction’ means ‘any contract for the supply of goods or services’, ‘any loan or other transaction for the provision of finance and any guarantee or indemnity in respect of any such transaction or of any other financial obligation’ and ‘any other transaction or activity (whether of a commercial, industrial, financial, professional or other similar character) into which a State enters or in which it engages otherwise than in the exercise of sovereign authority’.

If one of the exceptions to sovereign immunity set out above applies, is there any related principle that could prevent a court having jurisdiction over the state?

In addition to sovereign immunity, the principle of non-justiciability and the act of state doctrine could also prevent a court in the UK from exercising jurisdiction over the state in question. The (foreign) act of state can be pleaded as a defence requiring a UK court to exercise restraint in disputes involving governmental or legislative acts of foreign states in their territory. Non-justiciability prevents a UK court from hearing matters involving a state’s conduct of international relations. Depending, therefore, on the circumstances, failing or winning on immunity grounds may not be the end of the matter, since the claim may still be rejected on one of these other grounds.

In Reliance Industries, the English High Court (per Popplewell J) held that the act of state doctrine applies to arbitration just as it applies to court litigation (Reliance Industries Ltd and another v Union of India [2018] EWHC 822 (Comm)).

Proceedings against a state enterprise

To what extent do proceedings against a state enterprise or similar entity affect the immunity enjoyed by the state? Is there precedent for piercing the corporate veil to subject the state itself to those proceedings?

As explained under question 4, section 14(1) of the Act provides that a separate entity is an entity that ‘is distinct from the executive organs of the government of the State and capable of suing or being sued’. Pursuant to section 14(2) of the Act, such entity enjoys jurisdictional immunity only if the proceedings relate to anything done by it in the exercise of sovereign authority and the circumstances are such that a state would have been so immune. For example, if entities such as a national airline or other state-owned company are acting in the exercise of sovereign authority, they enjoy jurisdictional immunity.

However, to determine whether such entities will enjoy immunity, it needs to be established that the entity in question is separate from the state; that the entity acted in the exercise of sovereign authority; and that, if such act were performed by a state, it would have been immune in the circumstances. This is a complex inquiry, which often leads to heated legal debates and legal battles, as is evidenced in the recent decision of the Supreme Court in Taurus (see Taurus Petroleum Ltd v State Oil Marketing Co of the Ministry of Oil, Iraq [2017] UKSC 64; see also La Generale des Carrieres et des Mines v FG Hemisphere Associates LLC [2012] UKPC 27, where Lord Mance called for ‘more nuanced principles governing immunity’).

In short, the question depends on all the circumstances and the fact that an entity is controlled by a state is not to be considered conclusive. Indeed, in Tsavliris Salvage (International) Ltd v The Grain Board of Iraq [2008] EWHC 612 (Comm), Gross J held that the fact that a salvage contract was intended to benefit the interests of a state (ie, Iraq), could not do away with the fact that such contracts represent typical and ordinary commercial transactions, and therefore do not involve the exercise of sovereign authority (see also Wilhelm Finance Inc v Ente Administrador Del Astillero Rio Santiago [2009] EWHC 1074, which held that an Argentine shipyard set up by government decree to build ships for the Argentine Navy as well as private ship owners was a separate entity).

Even if a separate entity is entitled to immunity, it may waive its jurisdictional immunity by submitting to the jurisdiction of the UK courts. Such waiver does not, however, bring about a waiver of enforcement immunity, which will continue to apply over the separate entity.

Standing

What is the nexus the plaintiff needs to have standing to bring a claim against a state?

The nexus that the plaintiff needs to have is determined by applicable law regarding personal and subject matter jurisdiction. If the proceeding involves the recognition of a foreign judgment or arbitral award, such instruments as the 1972 Convention, the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards or the 1965 Washington Convention may be applicable.

Nexus of forum court

What is the nexus the forum court requires to exercise jurisdiction over a state if the property or conduct that forms the subject of the claim is outside the forum state’s territory?

The required nexus is determined by the exceptions to immunity set out in sections 2 to 11 of the Act. For example, under section 5 of the Act, the damage to or loss of tangible property must be caused by an act or omission in the UK. On the other hand, under section 3(1)(a), a commercial transaction need not necessarily fall to be performed in the UK.

Interim or injunctive relief

When a state is subject to proceedings before a court or arbitral tribunal in your jurisdiction, what interim or injunctive relief is available?

Section 13(2) of the Act provides that:

(a) relief shall not be given against a State by way of injunction or order for specific performance or for the recovery of land or other property; and (b) the property of a State shall not be subject to any process for the enforcement of a judgment or arbitration award or, in an action in rem, for its arrest, detention or sale.

See Hazel Fox and Philippa Webb, The Law of State Immunity (Oxford University Press, Oxford 2015), pp. 504-5.

This provision is subject to sections 13(3) and 13(4) of the Act. Pursuant to section 13(3), a state may provide written consent to the grant of any relief against it. It follows that a state may consent to the grant of interim or injunctive relief against it; however, the mere submission to the jurisdiction of the UK courts does not constitute such consent. Further, pursuant to section 13(4), ‘the issue of any process in respect of property which is for the time being in use or intended for use for commercial purposes’ is not otherwise prevented.

In this context, English courts have issued temporary injunctions against foreign states, such as freezing orders or orders for security for costs, but have generally not issued permanent orders of specific performance.

Similarly, the English Arbitration Act 1996 provides in section 48(5) that an arbitral ‘tribunal has the same powers as the court . . . (b) to order specific performance of a contract (other than a contract relating to land)’ unless this is excluded by the parties’ agreement. It follows that whether an arbitral tribunal has the power to order interim or injunctive relief will be subject to the conditions discussed above and foremost a state party’s written consent.

Final relief

When a state is subject to proceedings before a court or arbitral tribunal in your jurisdiction, what type of final relief is available?

In principle, the final relief available against a state in the UK will be damages. Specific performance will be subject to the conditions of section 13 of the Act (see question 11). These limitations do not, however, apply in respect of ‘separate entities’.

Service of process

Identify the court or other entity that must be served with process before any proceeding against a state may be issued.

Process is served on a state under section 12 of the SIA and Rule 6.44 of the Civil Procedure Rules (CPR). Typically, proceedings will be issued before the High Court.

How is process served on a state?

Under section 12 of the Act and Rule 6.44 CPR, service must be effected on a state by the transmission of the document through the Foreign and Commonwealth Office to the Ministry of Foreign Affairs of the state, and service shall be deemed to have been effected when the writ or document is received at the Ministry. The period permitted for filing an acknowledgment of service or defence or for filing or serving an admission does not begin to run until two months after the date on which the state is served. In general, absent an agreement to the contrary, the service requirements under section 12 of the Act are mandatory and service cannot be effectuated without adhering to them. That said, in Certain Underwriters at Lloyd’s London v Syrian Arab Republic [2018] EWHC 385 (Comm), the English High Court adopted a more lenient approach, finding that an order dispensing service could be made (under CPR Rule 6.16(1)), in circumstances where the Syrian Foreign Ministry refused to accept a claim form. Further, section 12 only applies to writs or other documents ‘required to be served’ and therefore does not apply to service of an arbitration claim.

Judgment in absence of state participation

Under what conditions will a judgment be made against a state that does not participate in proceedings?

Proceedings may continue even when the defendant state does not participate in the proceedings. In this respect, article 1(2) of the Act provides that ‘[a] court shall give effect to the immunity conferred by this section even though the State does not appear in the proceedings in question.’ This means that, in ex parte or in absentia proceedings, a UK court might dismiss the suit for lack of jurisdiction if sovereign immunity applies.

Enforcement immunity

Domestic law

Describe domestic law governing the scope of enforcement immunity.

Pursuant to section 13 of the Act, state assets ‘shall not be subject to any process for the enforcement of a judgment or arbitration award or, in an action in rem, for [their] arrest, detention or sale’ unless the state has provided its written consent (see, for example, Gold Reserve Inc v Venezuela [2016] EWHC 153 (Comm), finding that Venezuela had submitted to arbitration in writing by entering into a bilateral investment treaty (BIT) with Canada) or the assets in question are ‘in use or intended for use for commercial purposes’ (section 13(2)-(4)). These provisions apply in respect to states alone as defined in section 14 of the Act, and do not therefore extend to separate entities (see question 8).

A party seeking to enforce the decision of an overseas court over a foreign state will also need to consider section 31 of the Civil Jurisdiction and Judgments Act 1982, which allows the UK courts to enforce a foreign judgment against a foreign state ‘if, and only if’ it would be so recognised and enforced if it had not been given against a state; and the court would have had jurisdiction in the matter if it had applied the jurisdictional immunity rules contained in sections 2 to 11 of the Act. In NML Capital Ltd v Republic of Argentina [2011] UKSC 31, the Supreme Court held by majority that Argentina could not invoke enforcement immunity in respect of proceedings to enforce a New York judgment because the requirements under section 31 were satisfied. That judgment had been rendered after NML had commenced proceedings in New York against Argentina under the fiscal agency agreement and the Argentinian sovereign bonds (which were both governed by the law of New York). It suffices to note that in that case, the ‘waiver and jurisdiction clause’ in the bonds provided that a judgment ‘shall be conclusive and binding upon [Argentina] and may be enforced in any Specified Court or in any other courts to the jurisdiction of which the Republic is or may be subject . . . by a suit upon such judgment’.

Application of civil procedure codes

When enforcing against a state, would debt collection statutes and the enforcement sections of civil procedure codes or similar codes also apply?

Yes, to the extent enforcement immunity would not be applicable. For example, in AIG Capital Partners Inc v Republic of Kazakhstan [2005] EWHC 2239 (Comm), the English High Court discussed in length third-party debt and charging orders but rejected them on the basis of the central bank or monetary authority exception (see question 21).

In Orascom Telecom v Chad [2008] EWHC 1841 (Comm), the English High Court granted a third-party debt order against a government bank account, in which proceeds of oil sales were held for the purpose of making repayments to the World Bank (in connection with an oil pipeline project that the World Bank had financed).

Consent for further enforcement proceedings

Does a prior submission to the jurisdiction of a court or tribunal constitute consent for any further enforcement proceedings against the property of the state?

A provision merely submitting to the jurisdiction of a court or tribunal does not constitute consent to further enforcement proceedings against state assets (see section 13(3) of the Act).

Where a state has expressly agreed to submit a dispute to arbitration, it will be treated as having waived jurisdictional immunity. In accordance with section 9 of the Act, a state would also not be immune ‘as respects proceedings in the courts of the United Kingdom which relate to the arbitration’. In this respect, seeking to have an arbitral award recognised in the UK is distinct from seeking to enforce by execution against state assets in order to collect under that award. The former relates to jurisdictional immunity whereas the latter to enforcement immunity.

Property or assets subject to enforcement or execution

Describe the property or assets that would typically be subject to enforcement or execution.

The property or assets that would typically be subject to enforcement and execution would be property used or intended for use for commercial purposes, including movable and immovable property and choses in action (such as debts owed to a state by third parties in relation to commercial transactions).

Assets covered by enforcement immunity

Describe the assets that would normally be covered by enforcement immunity and give examples of any restrictive or broader interpretations adopted by the courts.

The UK Supreme Court has determined that the original source of the funds in a state’s bank account is not conclusive. Rather, whether such funds are in use or intended for use for commercial purposes is considered at the time of the attempted execution. As explained above, in Orascom, the English High Court considered that proceeds of oil shares held in account, which were held for the purpose of making repayments to the World Bank, did not attract immunity. That said, under section 13(5) of the Act, the head of a state’s diplomatic mission in the UK may issue a certificate to the effect that any property is not ‘in use or intended for use by or on behalf of the state for commercial purposes’, which ‘shall be accepted as sufficient evidence of that fact unless the contrary is proved’.

In LR Avionics Technologies Ltd v The Federal Republic of Nigeria and another [2016] EWHC 1761 (Comm), premises used for the performance of consular activities (such as passport and visa applications) were found to be immune from enforcement by execution, even though the premises in question had been leased to a privately owned company that carried out the relevant consular activities on the state’s behalf (such as a liaison office). In Alcom v Republic of Colombia [1984] AC 580, the House of Lords held that enforcement action by execution could not be taken against a bank account that was used to make payments in relation to both commercial transactions and more general purposes (‘mixed’ embassy account) by Colombia’s diplomatic mission in the UK.

Explain whether the property or bank accounts of a central bank or other monetary authority would be covered by enforcement immunity even when such property is in use or is intended for use for commercial purposes.

Pursuant to section 14(4) of the Act, ‘[p]roperty of a State’s central bank or other monetary authority shall not be regarded . . . as in use or intended for use for commercial purposes’ and ‘where any such bank or authority is a separate entity . . . that section shall apply to it as if references to a State were references to the bank or authority’. This provision has been interpreted to mean that central banks enjoy absolute immunity from enforcement, regardless of whether their acts are in the exercise of sovereign authority, whether they are separate entities or whether assets are held for commercial purposes.

Test for enforcement

Explain whether domestic jurisprudence has developed any further test that must be satisfied before enforcement against a state is permitted.

No further test has been developed.

Service of arbitration award or judgment

How is a state served with process or otherwise notified before an arbitration award or judgment against it (or its organs and instrumentalities) may be enforced?

Service of process is effected in the same way as described above.

History of enforcement proceedings

Is there a history of enforcement proceedings against states in your jurisdiction? What part of these proceedings is based on arbitral awards?

Yes, there is a long and ever-increasing line of cases relating to proceedings against states or state entities in the UK. A significant number of these proceedings are for the enforcement and execution of both commercial and investor-state awards.

Public databases

Are there any public databases through which assets held by states may be identified?

Yes, assets held by states may be identified by undertaking a variety of searches of public information, including, inter alia, searches for real property through the land registry, the Companies House or the UK Register of Civil Aircraft.

Court competency

Would a court in your state be competent to assist with or otherwise intervene to help identify assets held by states in the territory?

In principle yes, but in Koo Golden East Mongolia v Bank of Nova Scotia and others [2007] EWCA Civ 1443, the Court of Appeal refused to grant a Norwich Pharmacal order for disclosure against the agent of the central bank of Mongolia holding that state immunity prevented the claimant from obtaining such relief.

Immunity of international organisations

Specific provisions

Does the state’s law make specific provision for immunity of international organisations?

The privileges and immunities of international organisations are governed by the International Organisations Act 1968 (the 1968 Act).

Domestic legal personality

Does the state consider international organisations headquartered or operating in its territory as enjoying domestic legal personality and could such organisations be subjected to proceedings before a court or arbitral tribunal?

Under section 1(2) of the 1968 Act, ‘legal capacities of a body corporate’ may be conferred on an international organisation of which the UK is a member or host state by an Order in Council. This means that an international organisation possessing international legal personality will not automatically be recognised as possessing domestic legal personality.

Enforcement immunity

Would international organisations in the state enjoy enforcement immunity? Are there any cases where debtors sought to enforce against a state by attaching or executing assets held by international organisations?

International organisations enjoy immunity from suit and legal process, and inviolability of official archives and premises (see Part I of Schedule 1 of the 1968 Act; see also Sindicato Unico de Pescadores del Municipio v International Oil Pollution Compensation Fund [2015] EWHC 2476 (QB), where the defendant (the IOPC Fund) succeeded in setting aside a registration order in respect of a Bolivian judgment on grounds of immunity).

Aside from sovereign immunity, non-justiciability will often also act as a bar to claims against international organisations. A famous example is the Tin Council case. The International Tin Council (ITC), an ill-fated and since dissolved international organisation that was accorded domestic legal personality by a series of Orders in Council, failed to meet substantial obligations to tin traders when its member states withdrew support for its activities (principally the sale and purchase of tin stocks to maintain world prices). The tin traders sought to hold the states that were members of the ITC liable. However, the House of Lords held that: ‘[m]unicipal courts have not and cannot have the competence to adjudicate upon or to enforce the rights arising out of transactions entered into by independent sovereign states between themselves on the plane of international law’ (JH Rayner (Mincing Lane) Ltd v Department of Trade and Industry [1990] 2 AC 418).

Updates & Trends

All questions

Updates and trends

Last year has seen the end of the Taurus litigation, one of the most heated debates on sovereign immunity, with the Supreme Court ultimately confirming the heightened degree of immunity that central banks or other monetary authorities enjoy under the Act (Taurus Petroleum Ltd v State Oil Marketing Co of the Ministry of Oil, Iraq [2017] UKSC 64). On other fronts, the judgment of the Court of Appeal in The Law Debenture Trust Corp Plc v Ukraine is expected later this year. This is an appeal from [2017] EWHC 655 (Comm), where the English High court considered the doctrine of foreign act of state and non-justiciability in connection with Ukraine’s default on its US$3 billion Eurodollar bonds.