Sovereign wealth funds invest across a range of asset classes and engage in capital markets and loan transactions. Their engagement in these activities is consistent with that of any other commercial actor. However, the connection between a sovereign wealth fund and the State by which it has been created raises the question of whether the fund will benefit from state immunity.

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English Court rejects Ukraine’s attempt to set aside enforcement order on grounds of state immunity

The English Court (the “Court“) has dismissed an application by Ukraine to set aside a court order permitting Russian investor, PAO Tatneft, to enforce an arbitral award against Ukraine.  Ukraine argued that it was immune from the Court’s jurisdiction by virtue of the State Immunity Act 1978. The Court found that Ukraine had not waived its right to rely on state immunity arguments, despite not having raising them in the arbitration. However, it found that Ukraine had agreed to submit the disputes in question to arbitration under the Russia-Ukraine Bilateral Investment Treaty (the “BIT“) and was therefore not immune from proceedings in connection with the arbitration by virtue of s9(1) of the State Immunity Act 1978 (“SIA“).

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State immunity: English court considers service of proceedings on a State in times of political unrest, and questions relating to enforcement of a foreign judgment against a State

In the recent decision of Certain Underwriters At Lloyds London v Syrian Arab Republic & Ors [2018] EWHC 385 (Comms) the English Commercial Court (the Court) considered the difficulties which may be encountered in trying to serve on a State. The Court also considered whether a state had submitted to the jurisdiction of a foreign court for the purposes of recognition and enforcement of the foreign judgment under the Civil Jurisdiction and Judgments Act 1982 (the CJJA).

This decision demonstrates the Court’s willingness to take a pragmatic approach when dealing with service of documents on a foreign State in situations where service through standard diplomatic channels may be difficult or inappropriate in the prevailing political climate. The decision also provides useful guidance regarding the requirements to be satisfied should a party wish to enforce a foreign judgment against a State in the English courts.

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UK Supreme Court confirms the limited scope of state and diplomatic immunity from employment claims: Benkharbouche and Reyes

In two judgments handed down on 18 October 2017, the Supreme Court (the “Court”) has allowed certain employment claims made by foreign nationals employed as domestic workers at the embassies of foreign states and a diplomat’s residence to proceed despite claims of immunity. The judgments consider important aspects of state and diplomatic immunity, the differences between the two, and wider considerations of the interplay between domestic, EU and international law.

In Benkharbouche (Respondent) v Secretary of State for Foreign and Commonwealth Affairs (Appellant) and Secretary of State for Foreign and Commonwealth Affairs and Libya (Appellants) v Janah (Respondent) [2017] UKSC 62, the Court held that certain provisions of the State Immunity Act 1978 (“SIA”) barring the claims were not justified by any rule of customary international law and were therefore incompatible with both Article 6 (right to a fair trial) of the European Convention on Human Rights (“ECHR”) and Article 47 (right to an effective remedy and to a fair trial) of the EU Charter of Fundamental Rights (the “Charter”). The Court affirmed the Court of Appeal’s decision to (i) disapply these provisions of the SIA to the extent that they conflicted with EU law (Article 47 of the Charter), thereby allowing the employment claims that derive from EU law (discrimination, harassment and holiday pay) to proceed, and (ii) to make a declaration of incompatibility in respect of the SIA provisions under Article 6 of the ECHR – this being the only remedy available in respect of the domestic claims not derived from EU law (including unpaid wages and unfair dismissal), which therefore remained barred.

In Reyes (Appellant/Cross Respondent) v Al-Malki and another (Respondents/Cross-Appellants) [2017] UKSC 61, the Court found that a diplomat’s immunity after leaving his or her post is limited by Article 39 of the Vienna Convention on Diplomatic Relations 1961 (the “Vienna Convention”) to acts performed in the exercise of their diplomatic functions, regardless of whether the diplomat was otherwise entitled to immunity at the time the relevant acts took place. The Court held that the employment and mistreatment of domestic staff does not fall under the category of acts performed in the exercise of diplomatic functions and allowed Ms Reyes’ appeal.

Please see here for our previous blog post on both Court of Appeal decisions.
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A law on immunity from enforcement in France

The 'Law on Transparency, Anti-corruption Measures and the Modernisation of the Economy' presented by Michel Sapin, Minister for the Economy and Finance, to the Council of Ministers on 30 March 2016, known as the « Sapin II » law, has finally been approved by the French National Assembly on 8 November 2016, after undergoing two examinations by each of the French Parliament's chambers. The law is currently being reviewed by the Conseil Constitutionel to confirm its constitutionality (from which it is unlikely to emerge unscathed), and is expected to enter into force by the end of 2017.

Besides making other important reforms in a number of areas, this law will affect the enforcement of foreign decisions and arbitral awards rendered against States. The intervention of the legislator has been considered necessary especially with regard to the recent variations of French case law on this issue, which have been considered by the Government as a potential risk for French diplomatic relations. Thus, the « Sapin II » law seeks to clarify the protection of the property of foreign States situated in France. 

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The immunity of states and their assets from the reach of national courts is an area of law with considerable practical implications for both private and state owned entities entering into international energy contracts.

In this panel discussion, the speakers will address the issue of immunity from a number of perspectives, considering key principles of the UK and international law on state immunity, in the light of recent developments. The panel will draw on their experience to highlight how immunity may apply to states, state-owned entities and other international actors involved in the energy sector. The speakers will also consider the practicalities of negotiating waivers of immunity, as well as their key features and implications.

Please find further details below.

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High Court rules that the principle of non-justiciability, unlike state immunity, cannot be waived

In a recent judgment of 21 June 2016 on a number of summary judgment applications in the case of High Commissioner for Pakistan in the United Kingdom ("Pakistan") v National Westminster Bank (the "Bank"), the English High Court considered the doctrines of act of state and non-justiciability, concluding that these doctrines, unlike state immunity, cannot be waived. The High Court dismissed the summary judgment application brought by India against Pakistan's arguments that the act of state and/or non-justiciability doctrines applied, and clarified their practical application.  

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Immunity: US Court of Appeals reverses lower court decision that had denied enforcement of foreign arbitral award

In a recent decision handed down on 31 May 2016, the majority in a United States Court of Appeals sitting in Washington DC reversed a decision by the US District Court that had denied enforcement of an arbitral award against the Czech Republic. In Diag Human Se v Czech Republic, the US District Court for the District of Columbia had dismissed Dian Human's enforcement petition on the grounds of lack of subject matter jurisdiction, finding that the Czech Republic had not waived its immunity under the Foreign Sovereign Immunities Act (FSIA). Upon appeal, by majority, the Court of Appeals held that arbitration exception to the FSIA applied, so that lower court had subject matter jurisdiction. The lower court's decision was reversed and remanded for further proceedings.

A question mark still hangs over the enforcement of the 2008 award (the Award) in the US, as there remains a dispute between the parties as to whether the Award is final.

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The German Federal Supreme Court dismisses claim by bondholders against Greece, denying jurisdiction on grounds of state immunity

The German Federal Supreme Court (Bundesgerichtshof) recently held that creditors cannot bring claims against the Hellenic Republic before the German courts in the context of Greece's debt restructuring in 2012 , finding that Greece enjoys immunity from jurisdiction before the German courts (decision of 8 March 2016; docket number VI ZR 516/14).

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