We are pleased to present the first edition of Getting the Deal Through – Sovereign Immunity. This is the first volume in the series to attempt to critically and comparatively assess the state of play of the law of sovereign immunity across key jurisdictions. This volume constitutes a systematic and user-friendly collection of the information that investors, awards- and judgment creditors should consider when contemplating litigation against sovereigns, state entities and international organisations, and assessing the enforceability and recoverability of any resulting award or judgment against sovereign states or state entities, including state-owned enterprises.
The contents of this volume will be important to sovereigns and state entities (the natural defendants in such proceedings), local and international counsel, funders and clients alike. We hope it will be the definitive point of reference for stakeholders looking for up-to-date, comprehensive and accurate analysis, presented in an accessible and concise manner, regarding issues of sovereign immunity.
Controversy in sovereign immunity
The need for this book arose as the result of significant sovereign litigation across key jurisdictions, owing to the ever-growing role of international arbitration, diversification of sovereign investment (eg, through sovereign wealth funds), and intensifying efforts to collect against states and other state entities through the enforcement of international arbitration awards or judgments. Further, the absence of a global framework governing sovereign immunity has made a jurisdiction-specific study on sovereign immunity even more pertinent.
The 1972 European Convention on State Immunity has only been ratified by a handful of states; the 2004 United Nations Convention on Jurisdictional Immunities of States and Their Property has not yet entered into force; and multilateral international treaties governing arbitration such as the 1958 New York Convention or the 1965 Washington Convention do not deal with issues of sovereign immunity. At the same time, a great part of transnational litigation and international arbitration (whether commercial or investment treaty) revolves around enforcement, execution and attachment proceedings against sovereign assets or assets held by state entities. With the proliferation of investment arbitration and investor-state arbitration awards, such proceedings have intensified, leading to the creation of a whole new corpus of jurisprudence on sovereign immunity.
However, issues of sovereign immunity remain complex and, to a certain extent, uncharted. This relates to the fluidity of this field of law, which is constantly undergoing change, moving from the absolute immunity test to the commercially oriented test of restrictive immunity. Moreover, sovereigns and sovereign-backed investment takes many forms and is channelled through multiple vehicles, making it difficult for the law of sovereign immunity to adapt to these new structures. There is also resistance from states themselves, which often tests the boundaries of the law of sovereign immunity and, in the process, helps explain aspects of this field of law that would have otherwise remained uncharted. In fact, litigating against sovereigns (whether before courts or arbitral tribunals) is part of the story. What is far more agonising and, at times, time-consuming, is enforcement, execution and attachment proceedings against sovereigns. This is the realm of sovereign immunity.
Indeed, one need only look at the saga of Sedelmayer v Russia, which epitomises the intricacies and idiosyncrasies of the law of sovereign immunity. In 1998, Mr Franz Sedelmayer secured a €2.3 million investment treaty award against Russia for the expropriation of his police supply and training company. Yet he spent almost two decades trying to enforce and collect that award, going as far as to attempt to seize payments by Lufthansa to Russia for flights over Russian airspace, and attach Russian assets displayed in events such as the International Aviation and Aerospace Exhibition in Berlin in 2006. Eventually, Mr Sedelmayer was successful in recovering the amount due through the attachment (and subsequent auction) of Russian assets in Sweden and Germany, but his story is a telling reminder of the importance of sovereign immunity.
Of similar importance is the more recent saga of FG Hemisphere, which involved FG Hemisphere’s attempts to enforce two International Chamber of Commerce awards worth more than US$104 million against the Democratic Republic of the Congo. One such attempt was FG Hemisphere’s effort to attach funds owed to the DRC by China Railways. This was blocked after the Hong Kong Court of Final Appeal determined that the doctrine of absolute sovereign immunity applies in Hong Kong (a decision later confirmed by the Standing Committee of the National People’s Congress of China).
It is apparent that as transnational litigation and arbitration continue to grow, so will the law of sovereign immunity. The objective of this volume is to shed more light on the law of sovereign immunity, which often becomes a key battleground of sovereign litigation.
The contents of this volume
The chapters in this volume are organised by jurisdiction and contain responses to a set of 29 questions that we formulated based on our own extensive experience as advisers and counsel to both investors and sovereigns regarding litigation and arbitration. These questions were put to a select group of prominent practitioners and law firms, each based in one of the 13 jurisdictions around the world that this volume covers. The chapters of this volume cover major, common and civil law, and North and South American, European and Asian jurisdictions (in particular, Brazil, Canada, Cyprus, Egypt, France, Germany, Hong Kong, Italy, Malaysia, Russia, Switzerland, the United Kingdom and the United States) that are at the forefront of sovereign litigation.
The courts in these jurisdictions are also among those that administer the greatest volume of enforcement proceedings against sovereigns, state entities and international organisations. We trust that readers will find this guide both useful and enlightening.