SOVEREIGN IMMUNITY AND TRANSNATIONAL ARBITRATION BY OKEZIE CHUKWUMERIJE LL.B. B.L. (Hons.) U n i v e r s i t y o f Benin, 1987 N i g e r i a n Law School, 1988 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE DEGREE OF MASTER OF LAWS IN THE FACULTY OF GRADUATE STUDIES (FACULTY OF LAW) We accept t h i s t h e s i s as conforming t o t h e r e q u i r e d standard THE UNIVERSITY OF BRITISH COLUMBIA JULY 1989J © Okezie Chukwumerije In presenting degree freely at this the available copying of department publication of in partial fulfilment University of British Columbia, for reference this or thesis thesis by this for his her of |_ /VLAJ The University of British Columbia Vancouver, Canada DE-6 (2/88) I I further the gain shall requirements agree that agree purposes may representatives. for financial permission. Department study. scholarly or thesis and of be It not that the be advanced Library shall make it permission for extensive granted is for an by understood allowed the head that without of copying my my or written THESIS ABSTRACT State participation commercial that disputes arbitration constitute one arbitration. cases i s steadily of state quarter Where arbitration, i n the a r b i t r a t i o n of a exempts increasing. contract the state the sovereign foreign disputes states to involved ICC in an d o c t r i n e - which i n some from the c o u r t s - may have adverse e f f e c t process. The explores presently submitted party . i s immunity I t i s estimated disputes municipal thesis of transnational the jurisdiction of on t h e a r b i t r a t i o n impact of the immunity d o c t r i n e on t h e a r b i t r a t i o n o f s t a t e c o n t r a c t d i s p u t e s . State illustrate practice i n selected t h e methods adopted jurisdictions i n an e f f o r t i s used to t o mitigate the impact o f t h e immunity d o c t r i n e on commercial a r b i t r a t i o n . In t h i s respect, and focus immunity from The thesis unnecessary arbitration on both j u r i s d i c t i o n a l immunity execution. concludes litigation e x p r e s s l y waive enforcement i s placed that by the p r i v a t e requiring the i t s immunity both d u r i n g stages. The agreement. waiver should party may avoid state party to t h e r e c o g n i t i o n and be included i n the iii CONTENTS THESIS ABSTRACT l l ACKNOWLEDGMENTS iv 1. I n t r o d u c t i o n 1 2. T h e s o v e r e i g n immunity d o c t r i n e 6 Footnotes 4. 17 Applicability of international tribunals sovereign Footnotes 5. immunity before 20 •••••••••• Arbitration c l a u s e s and j u r i s d i c t i o n a l states before municipal courts 28 immunity of 30 Footnotes 6. S t a t e 46 immunity Footnotes from e x e c u t i o n ........ 7. I n t e r i m m e a s u r e s . . . • . • • • • • 48 » © . © . . . . . o o . . . . . . . . . . 58 . of protection 60 Footnotes 8. M e a s u r e 74 o f execution 76 Footnotes 9. I n t e r n a t i o n a l C e n t r e Disputes Footnotes 95 f o r t h e Settlement o f Investment '°° 9 7 118 10. C o n c l u s i o n 1 2 1 11. B i b l i o g r a p h y 1 2 5 iv ACKNOWLEDGEMENTS I wish t o acknowledge my debt o f g r a t i t u d e t o P r o f e s s o r s R. Paterson, and H. A l v a r e z encouragement need hardly and M. MacCrimmon f o r t h e i r during add t h a t the preparation I am solely of this responsible guidance thesis- I f o r whatever mistakes t h e t h e s i s c o n t a i n s . The award Law Foundation o f B r i t i s h o f thanks. p o s s i b l e without Finally, I My study Columbia a t U.B.C. would i t s generous f i n a n c i a l remain deserves special n o t have been support. e t e r n a l l y g r a t e f u l t o my f r i e n d s f o r t h e i r undying l o v e and a f f e c t i o n , f a m i l y and 1 INTRODUCTION 1. STATEMENT OF THE PROBLEM The and level o f commercial a c t i v i t i e s between t h e developed the developing countries increase. In relations the is o f t h e w o r l d i s s t e a d i l y on the great" majority between of foreign private governments o f d e v e l o p i n g c o u n t r i e s . mostly dependent importation of development. countries on foreign capital and Additionally, o f t h e world, machinery i n many state of their state and its transactions relations evident agencies national with between of the state i n developed sometimes engage life. concerns needed the f o r the for national and developing of foreign t r a d e and In t h i s parties other and countries and i s c o n s i d e r e d an i n e v i t a b l e become nationals commercial parties socialist monopoly economic agencies the Developing c o u n t r i e s a r e business r e g u l a t i o n o f investment c o n t r a c t s part cases foreign the to commercial countries. Commercial private where respect, parties governments experts are and in also their domestic projects. Providing a such commercial suitable conflict resolution agreements may pose c o n s i d e r a b l e machinery problems. I t i s obvious t h a t t h e n a t u r e o f p o l i c y c o n s i d e r a t i o n s by transnational contracts involving state to engendered parties a r e not conterminous w i t h those i n v o l v i n g o n l y p r i v a t e p a r t i e s . First, 2 in the former s t a t e may foreign Again, case, well ability of This to foreign the j u s t i c e i n the and refuse national the to considerations submit the the dispute municipal national municipal may courts not court led a national a of commentator t o another state "arbitration a another state. confidence in party state that where a are imposes parties itself Contract Business' Lawyer Disputes" to of between i t and state [Park, result a the acceptable a l t e r n a t i v e " . willingness i n and of have of creep the to do case. has , agreement, political the The submit such of a for " A r b i t r a t i o n of disputes suitability to state commercial lack of International (1984), 39] The to , a r b i t r a t i o n i s arbitration for an the as needs a of i n t e r n a t i o n a l commerce. As one w r i t e r comments: "In the context of international trade,. the d i s c o r d a n t p a r t i e s w i l l be from d i f f e r e n t p a r t s o f the world, w i t h c o r r e s p o n d i n g d i f f e r e n t w o r l d views, culture and legal systems. Ideally arbitration p r o v i d e s a f l e x i b l e m u t u a l l y a c c e p t a b l e means o f conflict resolution because the process is consensual': one p a r t y i s not dragged u n w i l l i n g l y . i n t o c o u r t by another." [McLaughlin, " A r b i t r a t i o n and Developing C o u n t r i e s " 13 I n t e r n a t i o n a l Lawyer 211, 212 (1979)] Today, a r b i t r a t i o n o f s t a t e c o n t r a c t d i s p u t e s one quater of Participation rise to effect which the process states in of wide. may They immunity ICC operation areas interim execution. such arbitration. arbitration and a r b i t r a l process. include of to international a f f e c t the application s t a t e immunity from submitted sovereign e f f i c a c y o f the concept are disputes problem the jurisdiction, and of the on the constitutes of as measures its The the possible areas in arbitral immunity of gives from protection 3 An arbitration assistance may be resorted the be entirely from t h e m u n i c i p a l c o u r t arbitrators, and cannot to f o r matters control setting arbitration of system. such as o f the~ a r b i t r a l aside state of awards. contract conducted Municipal the jurisdiction pertinent question i n A disputes is the effect amount immunity from e x e c u t i o n ? I t seems obvious t h a t the an arbitration cannot obtain may court be of jurisdictional rendered assistance of Does such immunity and objectives nugatory if a i n the conduct both of tribunal's consent of waiver courts appointment consent t o a r b i t r a t i o n on the p r i n c i p l e o f immunity. to without claimant of the a r b i t r a t i o n and i n e n f o r c i n g any ensuing award. The goal of the t h e s i s shall r e l a t i o n s h i p between i n t e r n a t i o n a l t h e s o v e r e i g n immunity principle. i n which t h e l a t t e r may be to explore the commercial It shall inter- arbitration also and suggest ways be made amenable t o t h e o b j e c t i v e s o f t h e former. \ \ 2. SCOPE OF STUDY State immunity jurisdictional thesis shall immunity court can which auxiliary to is twin immunity and immunity whether the examine be raised seeks the to faceted. ~ I t party. o f Investment The from plea arbitrator assume jurisdiction arbitration. It shall International Disputes s h a l l down execution. of b e f o r e an p e r m i s s i b l e e x t e n t t o which an award may state breaks into The jurisdictional or also a municipal for purposes examine the be e n f o r c e d a g a i n s t a Convention f o r t h e Settlement f u r t h e r be examined because part 4 of i t s objective i s to~~mitigate a r b i t r a t i o n of state contract In some i n s t a n c e s itself by e n a c t i n g entering into legislation arbitrate t h e r i g o r s attendant disputes. a s t a t e may seek t o g r a n t legislation precluding a r b i t r a t i o n agreements. with the state immunity t o i t s agencies The obj e c t i v e i s t o make . i t i m p o s s i b l e any d i s p u t e i n the for ;third from o f such parties to agencies concerned. The t h e s i s s h a l l n o t c o n s i d e r t h e e f f e c t o f such l e g i s l a t i o n s . The immunity sought t o be r e l a t e t o the doctrine claimed of sovereign l a w . • • ' 3. i n Jsuch instances immunity does not i n international ' METHOD OF STUDY V " Etymologically, connotative of a i n t e r n a t i o n a l commercial transaction which transaction i s transcends .- m u n i iP l c a boundaries. I t f o l l o w s t h a t any meaningful study o f t h e law i n t h i s area must be comparative i n c h a r a c t e r . goal, the thesis shall make a In l i n e with comparative survey this of l e g i s l a t i v e and j u d i c i a l p r a c t i c e i n s e l e c t e d common and c i v i l law jurisdictions. The practical thesis confront problem both t h e s i s s h a l l analyze state p r a c t i c e i n s e l e c t e d countries with the with practical of discovering needs of perspectives. from the objective theoretical each Practically, the and shall which method society. t h e o r e t i c a l e v a l u a t i o n of the present c a r r i e d out. best Where accords appropriate, a s t a t e o f t h e law w i l l be 5 4. PLAN OF STUDY The The thesis first part immunity on shall be shall structured into deal with international the three impact of broad parts. jurisdictional commercial a r b i t r a t i o n . Can a state p l e a d j u r i s d i c t i o n a l immunity b e f o r e m u n i c i p a l c o u r t s ? Enforcement o f an ensuing award i s the u l t i m a t e o b j e c t i v e of a claimant awards be i n an arbitral proceeding. To enforced against a s t a t e party? enforceable against a state, can they what e x t e n t I f such be awards enforced can are in a l l j u r i s d i c t i o n s where the s t a t e has a s s e t s ? What n a t u r e of s t a t e property i s susceptible to answers t o these .questions measures shall of execution? be "the task part. of Providing the second The legal regime under the I n t e r n a t i o n a l Convention for t h e Settlement o f Investment D i s p u t e s s h a l l be examined i n the third The part. institutional in centre response is, t o the transnational arbitration successfully so? to a certain extent, problems o f sovereign relating investment? to an immunity Is it 6 CHAPTER ONE THE SOVEREIGN IMMUNITY DOCTRINE A. THE GENEROUS DOCTRINE Sovereign immunity is a under which domestic c o u r t s , !jurisdiction sovereign over a doctrine i n approaching c a s e s , ; r e l i n q u i s h foreign state. state, except in cases The from international maxim: "The King considered a i s based state no "on t h e l o g i c a l could sovereign, and the and p r a c t i c a l r i g h t s as a g a i n s t derives concept of law, formed personified part not l o g i c a l l y over state the authority that 2 No proceeding, the sovereign i n being him. the state; exercise a that against of the central i t ground t h e r i g h t s depend". jurisdiction t h e King which immunity I n t h e words o f Mr J u s t i c e Holmes, f o r , i t was s a i d , t h e c o u r t s , speaking, courts comity o r c r i m i n a l , was m a i n t a i n a b l e have to c o n s t i t u t i o n a l i m p o s s i b i l i t y t o implead makes t h e law on which could attorns The d o c t r i n e was l a r g e l y a l e g a c y o f t h e can be no l e g a l person, courts of can do no wrong". Under t h e common domestic s o v e r e i g n . immunity a - national sovereignty. civil i t Anglo-American concept o f s o v e r e i g n roots there the doctrine, where jurisdiction. was Under 1 s t a t e cannot be impleaded i n t h e m u n i c i p a l another its o f i n t e r n a t i o n a l law t h e King's own, Constitutionally therefore, government jurisdiction i n whose name and i n whose name o n l y , of the over they the the could act. Before J 1947 i n England, one of the methods by which r e d r e s s c o u l d be sought a g a i n s t t h e crown i n the c o u r t s was way of petition transposed of into rights. This 4 international principle law, of thereby making s t a t e s immune from the j u r i s d i c t i o n o f m u n i c i p a l The doctrine is also i n t e r n a t i o n a l comity. I t was on the principle erosion before of of justified sovereign courts. on In equality the foreign The of state Prins was foreign courts. basis f e l t t h a t i t would be i t s dignity; for a municipal immunity by an a f f r o n t nations to of be and an impleaded Fredrik . the 5 court d e c l i n e d j u r i s d i c t i o n on the ground t h a t the f o r e i g n s t a t e , as personified and by the independent and d i g n i t y " . Lord The Queen o f foreign s o v e r e i g n , _was equally sovereign t h a t t o implead him would i n s u l t h i s Campbell C.J. was "real o f a s i m i l a r view i n Haber v. Portugal : 6 "To c i t e a f o r e i g n p o t e n t a t e i n a m u n i c i p a l for any complaint against him in his c a p a c i t y , i s c o n t r a r y t o the law o f n a t i o n s , i n s u l t which he i s e n t i t l e d t o r e s e n t . " court, public and an 7 The U.S. principle. owned by In a government When a citizen was the The Schooner United and storm States remodeled forced commenced government. first The M a r s h a l l , C.J., the an court to apply Exchange citizen in sovereign McFadden , seized a U.S. action immunity by public immunity a vessel the French 8 as into a admiralty granted v. was France ship the armed harbour, ship. the U.S. against the to government. the French said: "One sovereign being i n no respect amenable t o another, and being bound by o b l i g a t i o n s of the h i g h e s t c h a r a c t e r not t o degrade the d i g n i t y o f h i s 8 n w t l b t i a i o i e h m t i o n t h i n e n t c e n s l o n g o u g h p l i c T h e , b y t h e p l a c i n g h i m s j u r i s d i c t i o n r a f o r e i g n t e r r , o r i n t h e c o n n g t o h i s i n d e n o t e x p r e s s l y s t i o n , a n d w i l l b e e e i a P a r l e m e n t B e i g e 1 e l f o r i t s s o v e r e i g n r i g h t s o f a n o t h e r , c a n b e s u p p o s e d i t o r y o n l y u n d e r a n e x p r e s s f i d e n c e t h a t t h e i m m u n i t i e s p e n d e n t s o v e r e i g n s t a t i o n , t i p u l a t e d , a r e r e s e r v e d b y e x t e n d e d t o h i m . " 9 o f f e r e d 0 s t a t e m e n t o f • t h e p r i n c i p l e i m m u n i t y t o a p a c k e t o p e r a t e d b y " a e c r o e t s d T s v o e t h e e m s h r i p e x e e r r o v e e s t a P e r a s o b y 1 B e l g i a n p r i n c i p l e c o n s e q u e n s o v e r e i g y w h i c h c t t h e i s t a t e , c i s e b y t o r i a l j e i g n o r n e d t o p u y t e r r i r i T h e m a i l U . S . h o l d i n g o w n e d a u t h o r i t a t i v e E n g l a n d .T h e b y t h e c o u r t B e l g i a n g r a n t e m o n a r c h a n d p e r s o n n e l : 1 C o u r t t h e t h a t i n f i r s t t o b e d e d u c e d f r o m t h e c a s e s i s t h a t , c e o f t h e a b s o l u t e i n d e p e n d e n c e o f n a u t h o r i t y , a n d o f t h e i n t e r n a t i o n a l i n d u c e s e v e r y s o v e r e i g n s t a t e t o n d e p e n d e n c e a n d t h e d i g n i t y o f e v e r y e a c h a n d e v e r y o n e d e c l i n e s t o m e a n s o f i t s c o u r t s: a n y o f i t s u r i s d i c t i o n o v e r t h e p e r s o n o f a n y a m b a s s a d o r o f a n y s t a t e w h i c h i s b l i c u s e . . . " S u p r e m e f o l l o w e d 2 n a v y t h e i n B e r i z z i E n g l i s h p u b l i c 1 d e c i s i o n p r o p e r t y B r o s v . T h e S t e a m s h i p i n t h e P a r l e m e n t d e s t i n e d f o r p u b l i c B e i g e u s e w a s v i m m u n e a n f r o m t h e e x p a n s i v e a c t i v i t i e s T " b p t b h A y r h e d e f i n i t i o n o f o f 1 t h r u s t w a s i n o f c o u r t s . p u r p o s e " i n T h e y a l l o w e d r e l a t i o n t o t h e t h e i r m e d i n o t b e p e r s o n p r o p e r t e r s n o t n T h e i m p l e , o r y a n d h o w P o r t o a d e d i n d t h a t t h e p A l e x a n d e r d i r e c t l y o i r e c t l y b i n a p p l y i n r o p e r t y w a " : r y g s 4 t h i s g r a n t e d b y m u n i c i p a l s o v e r e i g n s . d o c t r i n e w a s r e - a f f s o v e r e i g n s t a t e c a n b e i n g s e r v e d i n o c e e d i n g a g a i n s t i t s a t p r i n c i p l e i t m a t t i n g e m p l o y e d . " i m m u n i t y o f " p u b l i c e T h e e n g a g e d j u r i s d i c t i o n g e n e r o u s i r r e s p e c t i v e s o v e r e i g n . T h e t h e o r y o f o f n a t u r e t h e c o u r t s i m m u n i t y g r a n t e d o f w a s t h a t t r a n s a c t i o n a v e r y b r o a d 9 interpretation property. t o t h e concept The practically effect impossible of this to implead municipal court o f another As a matter immunity equality, non imperium Assumption of considered a affront decline important subjugation state i n the The maxim from this ..a over of doctrine of her sovereign p a r i n parem consideration. foreign sovereign state status was and an THEORY factor of contracts economic of and monopoly world In countries trade immunity an Rachimtoola absolute inevitable the individual context v. Nizam immunity judges of doctrine the part of commercial 1 6 . and Lord on t h e nature state investment unconscionable without having place. opposition activities. Denning suggested many the national o f t h e market expressed In world, of activities realities of Hyderabad depend e s s e n t i a l l y increased i t would be i n commercial gradual i s the activities. of a doctrine. regulation I t was b e l i e v e d t h a t w i t h t h e everyday i n and been immunity development developing England, has of the absolute i n this i s considered contend there i n commercial foreign life. war, states states t o partake should i t was o f t h e independence, t h e of states. i n the application socialist the that sovereign follows directly t h e second participation to was governmental t o her dignity. Since for a the absolute jurisdiction B. THE R E S T R I C T I V E An doctrine on t h e p r i n c i p l e and t h e d i g n i t y habet use of country. of policy, i s grounded of public 1 5 to In challenged that of the dispute: immunity 10 " I f the d i s p u t e b r i n g s i n t o q u e s t i o n , f o r i n s t a n c e , the l e g i s l a t i o n or i n t e r n a t i o n a l t r a n s a c t i o n s o f a f o r e i g n government, o r the p o l i c y o f i t s e x e c u t i v e , the c o u r t should grant immunity i f asked t o do so, because i t does o f f e n d the d i g n i t y o f a f o r e i g n sovereign to have the merits of such disputes canvassed i n the domestic c o u r t s of another country; but i f the d i s p u t e concerns, f o r instance, the commercial transactions of a f o r e i g n government (whether c a r r i e d on by i t s own department or a g e n c i e s or by s e t t i n g up separate l e g a l e n t i t i e s ) , and i t :arises properly - within the territorial j u r i s d i c t i o n o f our c o u r t s , t h e r e i s no ground f o r granting immunity." 17 An with opportunity the adopted issue the was i n The afforded to the immunity Trendtex Nigeria^" immunity Trading held, by was no transactions, and a that Council registering i t s The E n g l i s h Court o f Appeal Ltd. v. The to restrictive immunity Central decision, applicable the that Bank ordinary doctrine of of trading immunity those rem. The public restrictive acts immunity Under of to this theory states their theory, a In the U.S. the absolute the hardships used of treaties the of immunity" g r a n t s acts state jure i m p e r i i ) , but ( i . e . acta loses immunity to denies jure gestionis). i t s immunity whenever i t been a d e c l i n e i n the adherence t o activities. t h e r e has immunity of ( i . e . acta private engages i n commercial U.S. to sovereign s h o u l d be a p p l i e d t o both a c t i o n s i n personam as w e l l \ a s in deal sovereign majority longer The 1 8 by to of 1 9 Corporation Council Case . doctrine application "ordinary trading t r a n s a c t i o n s " . in Privy P h i l i p p i n e Admiral restrictive opposition the doctrine since the 1940's. To doctrine i n commercial mitigate activities, f r i e n d s h i p , commerce and navigation the to 11 regulate example, the application Article and N a v i g a t i o n of the immunity XVIII o f t h e T r e a t y between t h e U.S. doctrine; of Friendship, and Denmark 21 For Commerce provides: "3. No enterprise of either Party, including c o r p o r a t i o n s , a s s o c i a t i o n s , and government agencies and i n s t r u m e n t a l i t i e s , which i s p u b l i c l y owned or c o n t r o l l e d s h a l l , i f i t engages i n commercial activities within the t e r r i t o r i e s of the other P a r t y , c l a i m o r enjoy, e i t h e r f o r i t s e l f o r f o r i t s p r o p e r t y , immunity from t a x a t i o n , s u i t , e x e c u t i o n o f judgment o r o t h e r l i a b i l i t y t o which p r i v a t e l y owned and c o n t r o l l e d e n t e r p r i s e s a r e s u b j e c t t h e r e i n . " .In 1952, t h e Tate L e t t e r Department s 1 officially 2 2 abandonment o f t h e a b s o l u t e declared immunity i t s a d o p t i o n o f t h e r e s t r i c t i v e t h e o r y . Immunity be g r a n t e d where t h e s o v e r e i g n the State theory was and only t o s t a t e engaged i n non-commercial activities. This r e s t r i c t i v e t h e o r y o f immunity has been accepted by a majority of c o u n t r i e s . of sovereign 2 3 The modern r a t i o n a l e f o r t h e t h e o r y immunity was s t a t e d by Monroe L e i g h as b e i n g : "to promote t h e f u n c t i o n i n g o f a l l governments by p r o t e c t i n g a s t a t e from t h e burden o f defending law s u i t s abroad which a r e based on i t s p u b l i c a c t s . However, when t h e f o r e i g n s t a t e e n t e r s t h e market p l a c e o r when i t a c t s as a p r i v a t e p a r t y , t h e r e . would be no justification in the modern i n t e r n a t i o n a l law o f s o v e r e i g n immunity - f o r a l l o w i n g the f o r e i g n s t a t e t o a v o i d t h e economic c o s t s of t h e agreement i t breaches o r t h e a c c i d e n t s i t c r e a t e s ; the law should not p e r m i t t h e f o r e i g n s t a t e t o s h i f t t h e s e everyday burdens o f t h e market p l a c e unto t h e shoulders of p r i v a t e p a r t i e s . " 2 4 The position then i s t h a t jurisdiction i n respect subj e c t the sovereign to states of criticism was a state i t s public that the not due t o t h e i r r a t h e r as a r e s u l t o f t h e i r c h a r a c t e r i s only acts. This immunity public immune ' from theory i s granted to activities, but as s o v e r e i g n s t a t e s , and 12 the need t o promote international comity. Furthermore, the d i s t i n c t i o n between p u b l i c and p r i v a t e a c t s i s as a r b i t r a r y as it i s u n r e a l . The primary o b j e c t i v e o f s t a t e s i s t h e promotion of the welfare o f i t s people. T h i s o b j e c t i v e i s i n t r i n s i c a l l y of a p u b l i c nature. Consequently, t h e means by which a s t a t e seeks this to actualize reason t o c a t e g o r i z e state does objective i t sactivities n o t cease t o e x e r c i s e when i t e n t e r s should n o t be used as p r i v a t e sovereign as a i n nature. public A functions i n t o commercial a c t i v i t i e s i n order t o meet the needs o f i t s c i t i z e n s . The theoretical diluted by commercial the fair that realization partners jurisdiction where where attraction ' of a that by e x e r c i s i n g disputes state a the above state engages may i t s absolute a r i s e between argument injure i t s immunity I t i s only i n commercial activities, redress t h e need a r i s e . I t was t h e e x t e n s i v e trading activities, and engagement o f s t a t e s i n i n d u s t r y and the increasing acceptance concept o f " t h e r u l e o f law" by a m a j o r i t y countries theory. cover from them. those d e a l i n g w i t h i t should have an avenue o f seeking should is 2 5 that hastened The a b s o l u t e the p o l i t i c a l entity; i t is thus t h e acceptance immunity activities o f t h e developed of the p r i n c i p l e was of the state ill-suited f o r an o f the restrictive designed t o as a era sovereign where state p a r t i c i p a t i o n i n commercial a c t i v i t i e s i s t h e r u l e r a t h e r than the e x c e p t i o n . When government a c t i v i t i e s were l i m i t e d l a r g e l y t o m i l i t a r y a f f a i r s , p o l i c e matters, a d m i n i s t r a t i o n and providing the f i n a n c i a l means o f such of justice operations, there 13 was little need participation horizon. states for in The review commercial arena o f review jurisdiction attempts a increasing i n the a for of of to of the orthodox activities contact has between commercial the private activities the courts. The .absolute theory. State transformed parties states and in need from restrictive theory the argued the d o c t r i n e ^exempting foreign modify _ line the theory with the contemporary r o l e of s t a t e s i n s o c i e t y . ; The d o c t r i n e o f the the shift law "was to sue Kingdom, p e t i t i o n of law and the also instrumental of in states before immunity. r i g h t s and municipal courts. suit in the crown liability ordinary J u s t i c e F r a n f u r t e r observed i n 1939 of 1947 liable in courts. that "the disfavour". Congress In 1949 2 6 has the U.S. increasingly m a i n t a i n e d a g a i n s t the scope t o t h a t This trend". development proceedings against absolute that the As indicated U.S., climate Supreme Court s t a t e d t h a t "The and we such " s u i t s should give to be hospitable 2 7 which the enabled crown i n the in do no a citizens large to bring number of o f the p r i n c i p l e t o earlier immunity d o c t r i n e was crown c o u l d the a into c l e a r e d the p a t h f o r the e x t e n s i o n states. to from s u i t permitted sovereign the private present o f o p i n i o n . . . h a s brought governmental immunity of In and, In of abolished to tort to rule the " r i g h t made the including The upholding Crown Proceedings A c t liabilities, extent, helpful their the large r e s t r i c t i v e theory .particularly citizens United t o the r u l e o f law was part of this p a r t l y an adjunct wrong and could legal cases, foreign paper, o f the therefore the theory not be 14 sued i n domestic courts. With the decline a p p l i c a t i o n of that municipal doctrine, adjust i n t h e scope and t h e r e was t h e need t o t h e a b s o l u t e immunity g r a n t e d t o f o r e i g n s t a t e s . I n t h e words o f L a u t e r p a c h t : "The d i g n i t y jof f o r e i g n s t a t e s i s no more impaired by t h e i r b e i n g s u b j e c t e d t o t h e law, i m p a r t i a l l y applied, of a foreign country, than i t i s by submission t o t h e i r own l a w " . 2 8 The restrictive universal theory of .acceptance. / -.Soviet immunity does international not enjoy legal theory r e j e c t s the a p p l i c a t i o n of the r e s t r i c t i v e theory t o acts of a socialist state, on t h e b a s i s made between a c t s that of a socialist a d i s t i n c t i o n cannot be s t a t e which a r e o f a p u b l i c n a t u r e and a c t s which a r e o f a p r i v a t e ^nature. The p r e v a i l i n g S o v i e t p o l i t i c a l t h e o r y i n s i s t s t h a t a s t a t e does n o t cease t o be a sovereign functions that merely because the state are t r a d i t i o n a l l y reserved in a non-socialist legal system. is performing f o rprivate persons 2 9 C. WAIVER OF IMMUNITY UNDER THE COMMON LAW There i s no fundamental p r i n c i p l e p r o h i b i t i n g t h e waiver of jurisdictional immunity. A municipal court may assume j u r i s d i c t i o n over a f o r e i g n s o v e r e i g n i f t h e l a t t e r waives i t s jurisdictional action as immunity. a plaintiff If a or foreign appears state without commences protest an as a defendant i n an a c t i o n , he i s deemed t o a t t o r n t o j u r i s d i c t i o n with respect English submission t o those p r o c e e d i n g s . courts to the required a jurisdiction genuine and of court. the unequivocal In Duff Development Co. clause to v. K e l e n t a n . the House o f Lords h e l d that a J i n a c o n t r a c t whereby the the provisions attempted to take a r b i t r a t i o n , was courts view, constituting of the respondent Arbitration advantage of sovereign Act, the 1889, clause agreed and by itself going to not s u f f i c i e n t waiver o f i t s immunity. In the for the a waiver to be waiver must be effective, the made t o the undertaking court itself and not t o a t h i r d p a r t y . Lord Sumner s a i d : "The S u l t a n ' s c o n t r a c t t o a r b i t r a t e i n .accordance w i t h the A r b i t r a t i o n A c t i s n o t , ' e i t h e r i n i t s e l f or i n combination w i t h a n y t h i n g e l s e i n t h i s case, a submission t o the j u r i s d i c t i o n o f the High Court. I t i s not an u n d e r t a k i n g g i v e n t o the c o u r t i t s e l f . I t is an agreement i n t e r p a r t e s , and no more ... Sovereigns, however, are not amenable a t a l l , except by t h e i r own consent, and t h e r e i s no p r i n c i p l e upon which such consent can be deemed t o have been g i v e n s h o r t o f a c t i o n taken towards the c o u r t i t s e l f , such as is commonly called a submission to jurisdiction." 3 1 Lord Carson, arbitration lordship have in a clause contended sought to dissenting opinion, constituted that enforce since the a the award waiver posited of Kelentan that immunity. Government i f i t were the the His vould successful p a r t y , i t would be u n j u s t not t o e n f o r c e the award a g a i n s t the government when i t i s the u n s u c c e s s f u l The English Federation 3 3 Court refused of to hold Appeal that party. in 3 2 Kahan a clause v. Pakistan expressly stating t h a t the P a k i s t a n i Government "agree t o submit f o r the purpose of was this agreement t o the j u r i s d i c t i o n of an e f f e c t i v e waiver. J e n k i n s L . J . the English court" said: "... no mere agreement i n t e r p a r t e s t o the e f f e c t that a f o r e i g n sovereign should submit to the j u r i s d i c t i o n o f the c o u r t can s u f f i c e t o g i v e the 16 c o u r t j u r i s d i c t i o n . i n t h e event o f sovereign choosing to resile from submission b e f o r e the court itself, short of that i s r e q u i r e d . " the foreign i t . Actual and n o t h i n g 3 4 It waiver could be deduced t o be sovereign effective must waive court form under t h e above t h e common i t s -immunity itself. cases Nothing by an for a law, t h e f o r e i g n action the suffice. T h i s p o i n t i s f u r t h e r i l l u s t r a t e d by t h e d e c i s i o n i n 3 5 than directed towards Micrhell v . S u l t a n o f J o h o r e : ' ; less that that would - "What i s t h e time a t which he can be s a i d t o e l e c t t o whether he w i l l submit. t o t h e j u r i s d i c t i o n ? O b v i o u s l y , as i t appears t o me, i t i s when t h e c o u r t i s about o r i s b e i n g asked t o e x e r c i s e j u r i s d i c t i o n over him, and not any p r e v i o u s time. Although up t o t h a t time he had p e r f e c t l y concealed t h e f a c t t h a t he i s a sovereign, and has a c t e d as a p r i v a t e i n d i v i d u a l , y e t i t i s o n l y when t h e time comes t h a t the c o u r t i s asked t o e x e r c i s e j u r i s d i c t i o n over him t h a t he can e l e c t whether he w i l l submit t o t h e j u r i s d i c t i o n . I f i t i s then shown t h a t he i s an independent s o v e r e i g n and does n o t submit t o t h e j u r i s d i c t i o n , t h e c o u r t has no j u r i s d i c t i o n over him. I t f o l l o w s from t h i s t h a t t h e r e can be no i n q u i r y by t h e c o u r t i n t o h i s conduct p r i o r t o t h a t date." 3 6 I t may be concluded t h a t under t h e common law, a f o r e i g n sovereign can o n l y attorn t o the j u r i s d i c t i o n c o u r t by an a c t o f submission b e f o r e words o f Lopez, L . J . , 3 7 itself. In the i s by a submission i n t h e face o f I t should be noted t h a t , as we s h a l l see i n t h e following discussion, this S t a t e Immunity municipal "the o n l y mode i n which a s o v e r e i g n can submit t o t h e j u r i s d i c t i o n the c o u r t " . the court of a Act. 3 8 r u l e has been changed by t h e U.K. 17 FOOTNOTES 1 U.S. H.R. Rep. No. 94-1487, 94 Cong., 2d Sess. 8 (1976). 2 See Kawananakoa v. P o l y b l a n k (1907) 205 U.S. Sucharitkul, 3 State I n t e r n a t i o n a l Law Immunities and Trading 349,-353. Activities in (Steven & Sons, London, 1959), 4. H a l s b u r v ' s Laws o f England. V o l . 11, Para. 1411. 4 5 (1820) 2 Dods. 451. 6 (1851) 17 Q.B. 7 I d . a t 207. 8 7 Cranch 116 9 id. • 1 0 171. ; (1812). • ; (1880) 5 P.D. 197. 1 1 Per B r e t t L . J . 1 2 271 U.S. 1 3 1 4 1 5 562 — ' I d . a t 214-215. (1926). [1920] P. 30. I d . a t 31. See Baccus S.R.L. v. S e r v i c i o d e l T r i g o [1958] 1 Q.B. 438 (per S i n g l e t o n L . J . ) ; Rachimtoola v . Nizam o f Hyderabad [1958] A.C. 379 a t 415-24 (per Lord Denning). 1 6 [1958] A.C. 1 7 The 379. majority o f the House o f Lords d i d not endorse t h i s approach. 1 8 [1976] 2 W.L.R. 214. I d . a t 232-3. 20 ^ 7 7 ] Q.B. 529. 1 9 2 1 421 U.N.T.S. 105. 2 2 26 Dept. S t a t e B u l l . 984 (1952). The S t a t e Department gave its reason f o r adopting the r e s t r i c t i v e theory as follows: 18 "The Department f e e l s t h a t the widespread and i n c r e a s i n g p r a c t i c e on the p a r t of governments of engaging in commercial a c t i v i t i e s makes necessary a p r a c t i c e which w i l l enable persons doing b u s i n e s s w i t h them t o have t h e i r r i g h t s determined i n the c o u r t s . For these reasons i t w i l l h e r e a f t e r be the Department's p o l i c y t o f o l l o w the r e s t r i c t i v e t h e o r y o f s o v e r e i g n immunity i n the c o n s i d e r a t i o n o f r e q u e s t s o f f o r e i g n governments f o r a g r a n t o f immunity." See 26 Dept. S t a t e B u l l . 985 2 3 n. 13. On I t a l i a n Law, see Borga v. R u s s i a n Trade Delegation 22 I.L.R. (1955) 235; f o r Egypt, see F. P. R. of Y u g o s l a v i a v. K a f r E l - Z a v a t Cotton L t d . 18 I.L.R. (1951) 54: f o r N e t h e r l a n d s , see K r o l v. Bank of Indonesia 26 I.L.R. (1958, 11) 180; f o r Canada, see Venne v. D.R. of Congo [1969] 5 D.L.R. (3d) 128. 4 Testimony b e f o r e the Subcomm. on A d m i n i s t r a t i v e Law and Government R e l a t i o n s , U.S. House J u d i c i a r y Conm. (1976); r e p r i n t e d i n 70 Am. J . I n t ' l L. 13, 14 (1983). 2 5 See l a u t e r p a c h t , "The Problem o f J u r i s d i c t i o n a l Immunities o f F o r e i g n S t a t e s " 28 B r i t . Y.B.I.L. 220 (1951). A K e i f e r & K e i f e r v. R e c o n s t r u c t i o n Finance Corporation U.S. 381 (1939). 2 2 7 Larson v. Domestic and F o r e i g n Commerce Corp. 337 U.S. 703. 2 8 L a u t e r p a c h t , supra note 25, 2 9 30 See Osakwe, "A Immunity : Law 14 (1983) [1924] A.C. 797. 32 I d . a t 834-35. [1951] 2 K.B. 1003. 34 I d . a t 1016. 35 [1894] 1 Q.B. 36 I d . a t 159. 37 I d . a t 160. 682, 231. S o v i e t P e r s p e c t i v e on Foreign Sovereign and P r a c t i c e " 23 V i r g i n i a J . I n t ' l L. 13, 31 I d . a t 829. 33 306 149. 19 S. 9 o f t h e A c t p r o v i d e d : "(1) Where a s t a t e ' has agreed i n w r i t i n g t o submit a d i s p u t e which has a r i s e n , o r may a r i s e , t o a r b i t r a t i o n , t h e s t a t e i s n o t immune as r e s p e c t s p r o c e e d i n g s i n t h e courts of the United Kingdom which relate t o the arbitration." S. 2 o f t h e A c t p r o v i d e s : "(1) A s t a t e i s n o t immune as r e s p e c t s p r o c e e d i n g s i n r e s p e c t o f which i t has submitted t o t h e j u r i s d i c t i o n o f t h e U n i t e d Kingdom. (2) A s t a t e may submit a f t e r t h e d i s p u t e g i v i n g r i s e t o the proceedings has a r i s e n o r by a p r i o r w r i t t e n agreement; b u t a p r o v i s i o n i n any agreement t h a t i t i s t o governed by t h e law o f t h e U n i t e d Kingdom i s n o t t o be regarded as a submission." CHAPTER TWO APPLICABILITY OF SOVEREIGN INTERNATIONAL TRIBUNALS. Arbitration arises out of the IMMUNITY V consent of BEFORE the disputing p a r t i e s . U n l i k e l i t i g a t i o n w i t h i n a m u n i c i p a l l e g a l system, no person an can be arbitration compelled agreement. against Indeed his will one of to enter the most advantages o f a r b i t r a t i o n i s p a r t y autonomy r e s u l t i n g fact the that arbitration parties. lacks Without an 1 jurisdiction. confers creation of a is on the the arbitration arbitrator. Apart immunity principle was, as we state c o r e of the its will. of of uncommon states international that, as cannot be an The consent, jurisdiction for the to of proceeding. 2 bar Firstly, of plead that it a the has an have in a the be foreign subjected state. seen, foreign p r i n c i p l e was cannot It that in to the is not j u r i s d i c t i o n a l immunity Such p l e a s are defendants i n an jurisdictional state courts tribunals. incident a It'seems apparent t h a t a arbitrator from from b e i n g impleaded absence the between agreement aimed a t p r e v e n t i n g a s t a t e the from no power t o render a b i n d i n g award. sovereign against obvious contract a r b i t r a t i o n agreement, the It jurisdiction a r b i t r a t o r has The i s the into based on sovereign status of the before argument states, they arbitration. the p l e a of little s o v e r e i g n immunity relevance arbitration in proceeding an has as arbitral nothing 21 to do with arbitrator municipal is founded ' •*;"•. courts. on the The jurisdiction agreement of of the the disputing p a r t i e s . A l t h o u g h t h e agreement i s accorded l e g i t i m a c y by the municipal the legal parties, there arbitration. contacts regard can no be enforcement law the valid the a r b i t r a l municipal the w i t h i n the absent Although with to system, legal applicable mutual commercial p r o c e e d i n g s may have some (for procedure, o f awards) , an a r b i t r a t i o n framework o f the system example, with recognition i s basically and conducted c r e a t e d o r adopted p a r t i e s . T h e r e f o r e , a s o v e r e i g n cannot c l a i m t h a t impleaded of international systems to consent by the i t i s being i n a municipal court against i t s w i l l . : Secondly, an arbitration can only consent o f t h e p a r t i e s . T h i s element the v a l i d i t y of an valid arbitration. 3 arbitration. take place with of consent Without i s crucial i t there can be the to no As Redfern and Hunter p o i n t out: "The a r b i t r a l proceedings are seen as an e x p r e s s i o n o f t h e w i l l o f the, p a r t i e s and, on t h e b a s i s of party autonomy it is sometimes argued that i n t e r n a t i o n a l commercial a r b i t r a t i o n s h o u l d be f r e e d from the r e s t r a i n t s o f n a t i o n a l law and t r e a t e d as denationalised or d e l o c a l i s e d " . If a state but not a r b i t r a t i o n proceeds cannot plead conceding, from the consent immunity that before the t h e o r y of o f the arbitrators. parties, Assuming, s o v e r e i g n immunity 1 is a p p l i c a b l e t o a r b i t r a l proceedings, i t ought t o be h e l d t h a t a s t a t e by c o n s e n t i n g t o a r b i t r a t i o n waives i t s immunity b e f o r e t h e a r b i t r a l t r i b u n a l . Even w i t h i n t h e m u n i c i p a l c o u r t a s t a t e may waive i t s j u r i s d i c t i o n a l the j u r i s d i c t i o n o f the c o u r t . 5 system, immunity by a t t o r n i n g t o I t should, however, be p o i n t e d out t h a t t h e onus t o prove the existence of the arbitration agreement lies on the c l a i m a n t . I f the e x i s t e n c e o f such an agreement i s e s t a b l i s h e d i n evidence, from the s t a t e p a r t y cannot be heard t o p l e a d jurisdiction. In the words of the (Middle East) L t d . v. Arab R e p u b l i c o f immunity arbitrators in SPP Egypt ; 6 "In approaching this general question of j u r i s d i c t i o n , one must b e g i n b y . n o t i n g t h a t t h e onus o f •proving an agreement t o submit a particular d i s p u t e o r d i s p u t e s t o a r b i t r a t i o n r e s t s upon the c l a i m a n t . A t l e a s t i n the normal .case, s p e c i a l c a r e is r e q u i r e d where an independent sovereign is a l l e g e d t o have made a submission f o r i t would amount t o a waiver of any immunity t h a t i t would otherwise p o s s e s s . " _ : 7 There i s an overwhelming consensus among a r b i t r a t o r s t h a t a plea arbitral of sovereign immunity proceedings. does Although not the have application conclusion arrived in by a r b i t r a t o r s i s b a s i c a l l y the same, the approaches adopted have been d i s s i m i l a r . A review o f some a r b i t r a l awards w i l l r e v e a l this fact. I n ICC in a Case 2321 , the a r b i t r a t o r was 8 dispute defendants, between a two e n t e r p r i s e s as foreign state and a c l a i m a g a i n s t the s t a t e was it a entered in into contract by the guaranteed claimants public l a t t e r . The had sitting a and, a u t h o r i t y of as the based on t h e f a c t t h a t commercial p u b l i c a u t h o r i t y . Before m e r i t s o f t h e case, the a r b i t r a t o r was i n Sweden transaction going into the c a l l e d upon t o decide, i n t e r a l i a , the i s s u e of h i s j u r i s d i c t i o n . The defendant because i t was the claimed proper immunity based on law on the o t h e r hand, submitted o f the i t s n a t i o n a l law c o n t r a c t . The t h a t Swedish law claimant, s h o u l d apply as 23 the arbitration Swedish law as the was proceedings s a i d not were t o grant taking place in Sweden. immunity i n s i t u a t i o n s such present. The a r b i t r a t o r refused t o ~ apply any set of national laws: "I myself do not see the need f o r r e f e r r i n g t o any p a r t i c u l a r s e t o f n a t i o n a l law r u l e s o r the c o u r t p r a c t i c e o f any p a r t i c u l a r country i n t h i s r e s p e c t . Whichever the proper law of the c o n t r a c t may be, t h i s has n o t h i n g t o do w i t h the defense o f s o v e r e i g n immunity. ..;„•'. ...V 1,9 He not ; went ahead t o s t r e s s the conduct the municipal f a c t t h a t an a r b i t r a l proceeding a r b i t r a t o r does w i t h i n the framework o f a l e g a l system: "As a r b i t r a t o r I am myself no " r e p r e s e n t a t i v e or organ o f any s t a t e . My a u t h o r i t y as a r b i t r a t o r r e s t s upon an agreement between the p a r t i e s t o the d i s p u t e and by my a c t i v i t i e s I do not, as s t a t e judges o r other state representatives do, engage the r e s p o n s i b i l i t y o f the s t a t e o f Sweden. Furthermore, the c o u r t s and o t h e r a u t h o r i t i e s o f Sweden can i n no way i n t e r f e r e w i t h my a c t i v i t i e s as arbitrator, n e i t h e r d i r e c t me t o do anything which I t h i n k I s h o u l d not do nor t o d i r e c t me t o a b s t a i n from d o i n g a n y t h i n g which I t h i n k I s h o u l d d o . " 1 0 \ He further stated application in arbitral that the doctrine of immunity has no proceedings: "As I do not c o n s i d e r the d o c t r i n e o f "immunity t o have any a p p l i c a t i o n whatsoever in arbitration p r o c e e d i n g s which are, as i n Sweden, conducted independently from the l o c a l c o u r t s , i t would not be n e c e s s a r y t o e n t e r upon the q u e s t i o n o f waiver o f immunity and the view a p p a r e n t l y held by some E n g l i s h , judges t h a t any waiver must be i n f a c i e curiae. He immunity concluded is or pointing out irrelevant in arbitral o f whether the gestionis by that proceedings, s u b j e c t matter o f the d i s p u t e jure i m p e r i i . The the distinction, question of irrespective i s a matter j u r e he pointed out , 24 is not relevant arbitration. In Egypt 1 3 f doctrine SPP the of proceedings, once the parties have agreed upon 1 2 (Middle East) arbitrators sovereign although Ltd. appear immunity they held amounted t o a waiver o f such v. to The be of Arab the Republic view i s applicable to that consent to that of the arbitration arbitration immunity: "The i s s u e i s whether submission t o i n t e r n a t i o n a l a r b i t r a t i o n by s t a t e s and p u b l i c e n t i t i e s s h o u l d be regarded as an i m p l i c i t waiver o f immunity thus preventing - c o n c u r r e n t >. a p p l i c a t i o n of other i n t e r n a t i o n a l or municipal rules granting sovereign immunity. I n f i n d i n g upon t h e governing law, we i m p l i c i t l y answered i n the a f f i r m a t i v e . I t would indeed be f r u s t r a t i n g t o r e c o g n i z e f u l l f o r c e and e f f e c t of general p r i n c i p l e s of i n t e r n a t i o n a l law aimed a t p r o t e c t i n g f o r e i g n i n v e s t o r s and then admit t h a t a s t a t e may, b e f o r e an a r b i t r a l t r i b u n a l , r e l y upon domestic o r i n t e r n a t i o n a l p r i n c i p l e s g r a n t i n g s o v e r e i g n immunity as an excuse f o r a c t s amounting to c o n t r a c t u a l b r e a c h e s . " 1 4 In ICC arbitri Case 1 8 0 3 . the 15 should determine the arbitrator p o s i t e d t h a t the applicability of the lex sovereign immunity d o c t r i n e t o t h e a r b i t r a t i o n . He h e l d t h a t under Swiss law (the l e x a r b i t r i ) the defendant c o u l d not p l e a d immunity: "...I f i n d as a matter o f law t h a t , a c c o r d i n g t o the case law o f t h e Swiss F e d e r a l Court, the p r i n c i p l e of t h e immunity o f f o r e i g n s t a t e s from l e g a l p r o c e s s i s not an a b s o l u t e r u l e o f g e n e r a l a p p l i c a t i o n . The Federal Court draws a distinction between the f o r e i g n s t a t e as a s o v e r e i g n ( j u r e i m p e r i i ) o r as a s u b j e c t o f a p r i v a t e r i g h t ( j u r e g e s t i o n i s ) . Only i n the f i r s t case can i t invoke the p r i n c i p l e of immunity from p r o c e s s . In the •second case the f o r e i g n s t a t e can be sued b e f o r e the Swiss C o u r t s ; even e x e c u t i o n can be l e v i e d a g a i n s t i t . .. I t i s p l a i n , i n my o p i n i o n , t h a t i n h o l d i n g t h e a s s e t s acquired from the Bangladesh Corporation, the People's Republic o f Bangladesh i s acting jure gestionis..." 1 6 It may arbitrator be can asked assume if the circumstances jurisdiction over a in foreign which an sovereign 25 a r e conterminous withTthose do so? The arbitrator a f f i r m a t i v e . That arbitrator immunity in has arbitrators. the no Case 2321 , not municipal court framework created question of the doctrine whatsoever conducted under The the of the the arbitrator parties arbitrators sovereign before auspices works of of the within the As concerned, impleaded the agreement themselves. are state party being of i n proceedings a product by would answer i n the 1 7 being process. before the 18 application is Case 1 8 0 3 will i s i n a c c u r a t e . As p o i n t e d out by Arbitration parties, proceedings i n ICC result ICC where the c o u r t s o f t h e forum far as is no there i n the municipal c o u r t s of another country a g a i n s t i t s w i l l . An ICC even s t r o n g e r o p p o s i t i o n t o the Case 1803 determine party, the the is is arbitri often rather confidence of arbitration the in such or no indeed national an arbitrator should be applicable? for the lex a r b i t r i . connection the a of chosen i n the has arbitration law a t a l l if jurisdiction lex arbitration why, approach adopted i n over reason either i t should be seat the law of of seat parties c o n t r a c t . I f any t h e proper state convenience s h o u l d determine t h e j u r i s d i c t i o n o f an cases, a The of should In most cases ithe with underlying law to national arbitrator the contract, t h a t i s t h e law which has the c l o s e s t and t h e most s u b s t a n t i a l connection that with resolution the of contract. the 1 9 problem Even then, does not we must invite reiterate reference to any system o f n a t i o n a l law. In LIAMCO v. L i b y a a state waives 2 0 , the a r b i t r a t o r was i t s sovereign rights by o f t h e view t h a t consenting to an arbitration agreement. In the instant case he found f o r t i f i c a t i o n f o r t h i s view i n I s l a m i c law and p r a c t i c e : "...a s t a t e may always waive i t s s o - c a l l e d s o v e r e i g n r i g h t s by s i g n i n g an a r b i t r a t i o n agreement and then by s t a y i n g bound by i t . Moreover, t h a t r u l i n g i s i n harmony w i t h I s l a m i c Law and P r a c t i c e , which i s o f f i c i a l l y adopted by L i b y a . T h i s i s evidenced by many h i s t o r i c a l p r e c e d e n t s . F o r i n s t a n c e , Prophet Muhammed was appointed as an a r b i t r a t o r b e f o r e Islam by t h e Meccans, and a f t e r Islam by t h e T r e a t y o f Medina... He h i m s e l f r e s o r t e d t o a r b i t r a t i o n i n h i s c o n f l i c t w i t h t h e t r i b e o f Banu Qurayza. Muslim rulers followed this practice in many instances..." .f . . • "> .-. 2 1 The : arbitration applied Islamic law and p r a c t i c e as t h e a p p l i c a b l e law s i n c e i t was p a r t and p a r c e l o f t h e L i b y a n law which was contract. provided chosen 2 2 A by t h e p a r t i e s clause i n the as t h e p r o p e r LIAMCO law o f t h e concession agreement t h a t t h e a p p l i c a b l e law was "the p r i n c i p l e s o f law o f L i b y a common t o t h e p r i n c i p l e s o f i n t e r n a t i o n a l law . . . a r b i t r a t o r considered It should determining party designed Since t o cover pointed out that into a the doctrine of sovereign arbitration, contract , is a state i s not immunity was not the provisions o f t h e proper of obligations i t cannot a f f o r d t h e b a s i s f o r a immunity b e f o r e because c o n s i d e r a t i o n s of the parties to and t h e substance 2 4 2 5 of sovereign of cannot a l t e r t h e p o s i t i o n . Although t h e a r i s i n g from such c o n t r a c t , plea approach law o f t h e c o n t r a c t p r o p e r law may be r e l e v a n t t o t h e c a p a c i t y enter this o f an a r b i t r a t o r over t o the proper of the contract The t h i s c h o i c e o f law v a l i d . the j u r i s d i c t i o n by r e f e r e n c e appropriate. law be l | 2 3 an a r b i t r a l of sovereign i n proceedings before a r b i t r a t o r s . tribunal. immunity This do n o t a r i s e 27 T h i s view i s supported by t h e authors of Arbitration i n Sweden (1984). They a r e o f t h e view t h a t : "State immunity i s based on t h e concept of s o v e r e i g n t y , i n t h e sense t h a t a s o v e r e i g n may n o t be subjected without i t s approval t o the j u r i s d i c t i o n and e x e r c i s e o f power o f t h e c o u r t s and authorities., o f another sovereign. In Sweden, however, t h e a r b i t r a t o r s a r e regarded as d e r i v i n g t h e i r a u t h o r i t y from t h e a r b i t r a t i o n agreement. They a r e n o t c o n s i d e r e d t o be engaged i n any e x e r c i s e o f s o v e r e i g n power, and they do n o t r e p r e s e n t t h e Swedish s t a t e . The g e n e r a l l y accepted view i n Sweden i s t h a t a s o v e r e i g n s t a t e may n o t c l a i m immunity from t h e j u r i s d i c t i o n o f . a r b i t r a t o r s s i t t i n g i n Sweden." •". v . '• • 26 Even though application state the doctrine o f sovereign before parties arbitrators, that their immunity has no i t i s sometimes contended by consent to arbitration should be c o n s t r u e d r e s t r i c t i v e l y because i t c o n s t i t u t e s a l i m i t a t i o n on the s t a t e ' s s o v e r e i g n t y . The a r b i t r a l t r i b u n a l i n Amco A s i a e t al v. The Republic of Indonesia , 2 7 was faced with argument. The t r i b u n a l h e l d t h a t an agreement t o a r b i t r a t e s " . . . i s n o t t o be c o n s t r u e d r e s t r i c t i v e l y , n o r as a matter o f f a c t , b r o a d l y o r l i b e r a l l y . I t i s t o be c o n s t r u e d i n a way which l e a d s t o f i n d o u t and t o r e s p e c t t h e common w i l l o f t h e p a r t i e s : such a method o f i n t e r p r e t a t i o n i s b u t t h e a p p l i c a t i o n o f the fundamental p r i n c i p l e p a c t a sunt servanda, a p r i n c i p l e common, indeed, t o a l l systems o f i n t e r n a l law and t o i n t e r n a t i o n a l l a w . l | 2 & this 28 FOOTNOTES McClendon and Goodman, I n t e r n a t i o n a l i n New York. 3 (1986). 1 2 . See Fox, "Sovereign Contemporary Problems (1986) . • I d - - . : . Immunity and i n International Redfern and Hunter, I n t e r n a t i o n a l (1986) . 4 Commercial Arbitration . Arbitration" Arbitration Commercial . in 323 Arbitration 4 ' • ' See, f o r i n s t a n c e , S. 2 o f t h e U.K. S t a t e Immunity A c t . 5 22 I.L.M. 752 (1983). A l t h o u g h t h e c o u r t o f c a s s a t i o n o f France s e t a s i d e t h e award (see 26 I.L.M. 1004), t h a t d e c i s i o n does not a f f e c t t h e p o i n t b e i n g i l l u s t r a t e d . 6 I d . a t 762. I t should, however, be r e i t e r a t e d t h a t , as noted i n t h e body o f t h e essay, t h e i s s u e o f s o v e r e i g n immunity does n o t a r i s e a t a l l i n p r o c e e d i n g s b e f o r e a r b i t r a t o r s . That d o c t r i n e o n l y has r e l e v a n c e w i t h i n m u n i c i p a l l e g a l systems. 8 1 Yearbook Comm. Arb. 133 (1976). 9 I d . a t 134. 10 I d . Id. 1 1 1 2 I d . a t 135. 1 3 supra, note 6. 1 4 I d . a t 772. 1 5 V Yearbook Comm. Arb.. 179 (1980). 1 6 I d . a t 185. 1 7 supra, note 15. T ft 1 9 supra, note 8. see V i t a Foods I n c . v . Unus S h i p p i n g Co. L t d . [1939] A.C. 277; Amin Rasheed S h i p p i n g Corpn. v . Kuwait Insurance Co. [1984] A.C. 50. For a d i s c u s s i o n o f t h e t o p i c , see Mann 3 I.L.O. 60 (1950), r e p l i e d t o by M o r r i s 3 I.L.O. 197 (1950) . 29 VI Yearbook Comm. Arb. 89 (1981). The U.S. c o u r t r e f u s e d t o e n f o r c e t h e award based on t h e a c t o f s t a t e d o c t r i n e . The j u r i s p r u d e n c e o f t h e award r e l a t i n g t o j u r i s d i c t i o n a l immunity was n o t d i s c r e d i t e d i n t h e judgment. See 482 F. Supp. 1175 (1980). 2 0 2 1 I d . a t 96. 2 2 I d . a t 92. 2 3 Id. 2 4 see Charron v . Montreal T r u s t Co. [1958] 15 D.L.R. (2d) 240; Bodlev Head L t d . v . F l e g o n [1972] 1 W.L.R. 680. 2 5 Montreal T r u s t Co. v . Stanrock Uranium Mines L t d . [1966] 1 O.R. 258. 2 6 A r b i t r a t i o n i n Sweden. 14 (1984). 2 7 23 I.L.M. 351 (1984). 2 8 Id. ' CHAPTER THREE ARBITRATION CLAUSES AND JURISDICTIONAL STATES BEFORE MUNICIPAL COURTS. IMMUNITY OF INTRODUCTION Arbitration i s conducted w i t h i n t h e framework c r e a t e d o r adopted by t h e p a r t i e s . The proceedings the municipal arbitration legal system. One i s the opportunity a r e conducted of the outside advantages of i t affords the i n t e r n a t i o n a l b u s i n e s s community t o r e s o l v e i t s d i s p u t e s without s u b s t a n t i a l i n t e r f e r e n c e by m u n i c i p a l c o u r t s . Be entirely that as i t may, conducted an a r b i t r a t i o n without any proceeding contact with one cannot be municipal l e g a l system o r t h e o t h e r . To i l l u s t r a t e , t h e p a r t i e s may have to court seek the assistance arbitrators or in of' a connection municipal with the i n appointing recognition and enforcement o f t h e award. A r b i t r a t i o n can o n l y be e f f e c t i v e i f it receives support and assistance from municipal legal systems: "Arbitral tribunals have no sovereign powers e q u i v a l e n t t o those o f t h e s t a t e s w i t h which t o enforce their awards; n o r do they always have adequate powers t o ensure t h e proper and e f f i c i e n t conduct of arbitration proceedings. For t h i s reason, i t has l o n g been recognized that the e f f e c t i v e n e s s o f t h e a r b i t r a l p r o c e s s i s dependent upon a d e f i n e d r e l a t i o n s h i p , o f t e n d e s c r i b e d as a • p a r t n e r s h i p , between a r b i t r a t i o n and t h e courts"1 1 31 Articles 5 International and 6 Commercial of the UNCITRAL Arbitration p r o v i s i o n s on t h e fundamental s u b j e c t supervision. Article 6 calls upon Model Law are innovative 2 of court each - on general a s s i s t a n c e and state adopting the Model Law t o e n t r u s t a p a r t i c u l a r " c o u r t " w i t h t h e performance of certain supervision, 11), relating of control arbitration t o appointment decision i n termination 13,14), 16) functions of a r b i t r a l assistance of arbitrators and (article o f a r b i t r a t o r ' s mandate (articles tribunal's jurisdiction (article and s e t t i n g a s i d e o f award ( a r t i c l e 34). With regards t o a r b i t r a t i o n between states and p r i v a t e p a r t i e s , when some o f t h e above matters come b e f o r e courts, the state party judicial proceedings question then construed municipal as may before i s whether a waiver courts. seek This municipal an of part to rely on immunity courts. A a r b i t r a t i o n clause jurisdictional of the thesis municipal pertinent should immunity shall from be before analyze the p r o v i s i o n s o f some n a t i o n a l laws and i n t e r n a t i o n a l conventions on t h e i s s u e . 1. UNITED STATES. (A) HISTORICAL OVERVIEW The U.S. Foreign Sovereign Immunities Act of 1976 (FSIA) , d i d n o t s p e c i f i c a l l y address t h e i s s u e o f a r b i t r a t i o n clauses as waiver 3 laid of j u r i s d i c t i o n a l down t h e g e n e r a l rule that immunity. foreign states Section were 1604 immune _ 32 from the jurisdiction of U.S. g e n e r a l r u l e were p r o v i d e d by Section courts. Sections Exceptions to the 1605-1607. A c c o r d i n g to 1605(a)(1): "(a) A ^ f o r e i g n s t a t e s h a l l not be immune from the j u r i s d i c t i o n of c o u r t s of the U n i t e d S t a t e s o r of the S t a t e s i n any c a s e (1) i n which the f o r e i g n s t a t e has waived i t s immunity either 'explicitly or by implication, n o t w i t h s t a n d i n g any withdrawal of the waiver which the f o r e i g n s t a t e may p u r p o r t t o e f f e c t except i n accordance w i t h the terms o f the waiver." The to provision arbitration meaning o f the the clarify constituted s e c t i o n . An provision regarding d i d not was an the issue implicit waiver i n s i g h t i n t o the afforded by whether within the i n t e r p r e t a t i o n of the^ legislative i m p l i c i t waivers o f j u r i s d i c t i o n a l consent history immunity: "With r e s p e c t t o i m p l i c i t waivers, the c o u r t s have found such waivers i n cases where a f o r e i g n s t a t e has agreed t o a r b i t r a t i o n i n another c o u n t r y or where a f o r e i g n s t a t e has agreed t h a t the law o f a p a r t i c u l a r c o u n t r y should govern the c o n t r a c t . " 4 The implications o f the f r e e from doubt. There was whether by legislative so long of the an implicit the as r e f e r r i n g to state seat submission immunity. passage would suggest t h a t agreed to world. The divergence of U.S., a r b i t r a t i o n was involved, from j u r i s d i c t i o n any i n mind the of waiver of considerable "another country", the h i s t o r y had the phrase "another c o u n t r y " was of the arbitrate in U.S. 5 to A courts "another the l e g i s l a t i v e h i s t o r y does not that territory constituted interpretation i s a waiver o f country" the considered arbitration if a opinion authors o f outside literal there or not foreign immunity state anywhere i n d i c a t e the j u r i s d i c t i o n a l nexus between the a r b i t r a t i o n and of has in the need for the U.S. 33 Such literal interpretation of the passage i n c o n s i s t e n t w i t h the p o s i t i o n o f the law before the enactment o f the FSIA. A review o f the pre-FSIA case law r e v e a l s t h a t arbitration U.S. clause before must i t could directly or constitute a indirectly waiver of was connect an the jurisdictional immunity. In Victory Transport. Inc. the denied Abastecimientos . 6 sovereign immunity court because v. the i t s acts c o u r t then went on t o s t a t e t h a t by in the U.S., the appellant had Cosisaria General appellant's were j u r e consenting consented plea imperii. to to de of The arbitration in personam jurisdiction: "We h o l d t h a t the d i s t r i c t c o u r t had i n personam jurisdiction to enter the order compelling a r b i t r a t i o n . By a g r e e i n g t o a r b i t r a t e i n New York, where the U n i t e d S t a t e s A r b i t r a t i o n Act makes such agreements s p e c i f i c a l l y e n f o r c e a b l e , the Comisaria General must be deemed t o have consented t o the j u r i s d i c t i o n o f the c o u r t t h a t could compel the arbitration proceeding i n New York." (emphasis supplied) 7 The Greece 8 court was in Petrol Shipping Corp. v. The Kingdom o f the o p i n i o n t h a t i f a p a r t y agrees t o of arbitrate i n a c e r t a i n s t a t e , he makes h i m s e l f as amenable t o s u i t as i f he were physically arbitration agreement present did a r b i t r a t i o n , but p r o v i d e d forum s e l e c t e d was there. not In specify cases a seat where the for the the mechanism f o r i t s s e l e c t i o n , regarded as the c h o i c e of the p a r t i e s : "The c o n t r a c t between the p a r t i e s , "smile p r o v i d i n g f o r a r b i t r a t i o n , does not f i x the place t h e r e o f . The r u l e s o f the American A r b i t r a t i o n A s s o c i a t i o n a r e by r e f e r e n c e made a p a r t o f the c o n t r a c t . Under these r u l e s the a s s o c i a t i o n has the power to f i x the p l a c e the 34_ of a r b i t r a t i o n . p a r t i e s contracted i n New York. It to can thus be said that the f i x the p l a c e o f a r b i t r a t i o n 11 The preceding pre-FSIA case U.S. only cases law consent t o presumed arbitration illustrate i n the in U.S. the fact that under i n personam j u r i s d i c t i o n cases ___where I t was parties therefore wrong the in the consent to to read the l e g i s l a t i v e h i s t o r y as i m p l y i n g t h a t consent t o a r b i t r a t i o n i n any country the U.S. amounted t o waiver The of jurisdictional l e g i s l a t i v e h i s t o r y should be l i g h t o f pre-FSIA case law. immunity in i n t e r p r e t e d i n the In the words o f Bruno R i s t a u : "It should a l s o be s t r e s s e d t h a t the long-arm f e a t u r e o f the b i l l w i l l ensure t h a t o n l y those d i s p u t e s which' have r e l a t i o n t o the U n i t e d S t a t e s a r e l i t i g a t e d i n the c o u r t s o f the U n i t e d S t a t e s , and t h a t our c o u r t s are not t u r n e d i n t o small " i n t e r n a t i o n a l c o u r t s o f c l a i m s " . The b i l l i s not designed t o open up our c o u r t s t o a l l comers t o l i t i g a t e any d i s p u t e t h a t any p r i v a t e p a r t y may have w i t h a f o r e i g n s t a t e anywhere i n the w o r l d . " 1 0 The o n l y case t h a t p l a c e d a l i t e r a l legislative Federal and history Republic Nigeria agreement to International arose, Ipitrade of N i g e r i a . included a arbitrate Chamber Ipitrade proceedings was Swiss of place contract the in Paris. Nigeria enforce had the waived award i n the 1605(a)(1) o f the under the r u l e s . The ICC v. When of a an the dispute agreement refusing and to immunity. I p i t r a d e then U.S. FSIA by court r e l i e d and auspices Nigeria i t s jurisdictional meaning o f S. clause arbitration France, S. S. the between \ I p i t r a d e law the p a r t i c i p a t e on the ground o f s o v e r e i g n sought t o of under Commerce in International. choice disputes invoked took The 1 1 i n t e r p r e t a t i o n on The court immunity agreeing entirely held within to that the arbitrate on the literal 35 meaning o f t h e l e g i s l a t i v e h i s t o r y o f t h e s e c t i o n . A restrictive in Verlinden stated, arbitrate that with tribunal seating implicit waiver disagreed i n t e r p r e t a t i o n o f S. 1605(a)(1) was o f f e r e d v. Central obiter, Bank an another of on N i g e r i a ' agreement country i t s sovereign the by non-American i n another with 2 1 3 a the court foreign private does state party to in not c o n s t i t u t e immunity interpretation There given a an i n t h e U.S. I t to the FSIA's l e g i s l a t i v e history i n Ipitrade: " I t may be reasonable t o suggest t h a t a s o v e r e i g n s t a t e which agrees t o be governed by t h e laws o f t h e U n i t e d S t a t e s - which i n both "another c o u n t r y " and "a p a r t i c u l a r c o u n t r y " - has i m p l i c i t l y waived i t s a b i l i t y t o a s s e r t t h e defense o f s o v e r e i g n immunity when sued i n an American c o u r t . But i t i s q u i t e another matter t o suggest, as d i d t h e c o u r t i n I p i t r a d e . t h a t a s o v e r e i g n s t a t e which agrees t o be governed by t h e laws of a t h i r d - p a r t y country such as t h e Netherlands - i s thereby p r e c l u d e d from a s s e r t i n g i t s immunity i n an American c o u r t . " 1 4 The court further Ipitrade will expose stated the that t h e approach courts to adopted i n "matters involving s e n s i t i v e f o r e i g n r e l a t i o n s " by throwing open t h e doors o f the court t o c l a i m a n t s i r r e s p e c t i v e o f t h e c o n n e c t i o n between t h e s u i t and t h e U.S. In Iran , 1 5 basis Chicago Bridge the court & rejected of. j u r i s d i c t i o n Iron CO. some because v. Islamic Republic a r b i t r a t i o n clauses they d i d not contain as t h e either U.S. c h o i c e o f law o r a U.S. c h o i c e o f forum p r o v i s i o n : "We agree w i t h Judge W e i n f e l d s p r e c i s e h o l d i n g i n Verlinden v. Central Bank o f N i g e r i a that the presence o f t h i r d - p a r t y n a t i o n c h o i c e o f law and forum c l a u s e s does n o t i n any sense implicitly consent t o U n i t e d S t a t e s j u r i s d i c t i o n . " 1 of a 36 Libyan American O i l Co. Jamahirva .provides a different 17 addressed the v. question of Socialist dimension waiver People's Libyan to the issue. I t where the arbitration agreement does n o t p r o v i d e a s e a t f o r t h e a r b i t r a t i o n , b u t the outside the U . S o a r b i t r a t i o n a c t u a l l y takes p l a c e i n a country The a r b i t r a t i o n agreement i n t h e i n s t a n t case d i d n o t s p e c i f y the seat of arbitration. When a u n d e r l y i n g c o n t r a c t , LIAMCO invoked a sole arbitrator was dispute arose under the t h e a r b i t r a t i o n c l a u s e and appointed. The arbitrator selected Geneva as t h e s e a t o f a r b i t r a t i o n . I n an a c t i o n t o e n f o r c e t h e arbitrator's waived the court i t s sovereign arbitration. seat award, of held, immunity The c o u r t centered arbitration was by inter agreeing on t h e f a c t left alia, open in that to submit to t h a t because t h e the arbitration agreement, t h e p a r t i e s a n t i c i p a t e d t h a t proceedings occurred Libya c o u l d have i n t h e U.S. "Although t h e U n i t e d S t a t e s was n o t named, consent t o have a d i s p u t e a r b i t r a t e d where t h e a r b i t r a t o r s might determine was c e r t a i n l y consent t o have i t a r b i t r a t e d i n the United S t a t e s . " 1 8 This d e c i s i o n i s d i f f i c u l t t o r e c o n c i l e with the p r e - F S I A case law. By h o l d i n g constitutes accords waiver both with i n the U . S o t h a t agreement t o a r b i t r a t e of immunity in that jurisdiction, i t pre-FSIA case law and t h e preponderance o f post-FSIA d e c i s i o n s . The h o l d i n g that there i s submission to j u r i s d i c t i o n where t h e p a r t i e s consent t o a r b i t r a t e where the arbitrators the U.S. authority. which determine, and t h e l a t t e r i s , however, The c o u r t indicates that against chooses a s e a t the d i d not consider an a r b i t r a t i o n current outside of judicial the e x i s t i n g case law clause which l e a v e s the 37 designation of the locale of arbitration to a t h i r d party tantamount t o a c l a u s e p r o v i d i n g f o r a r b i t r a t i o n actually to d e s i g n a t e d by assume the that by arbitration to the contemplate proceedings arbitrators and, f a c t t h a t the the seat situs any relating to parties not above require the reaching seat to to than seat of of justified obligation to at the least enforce the breach foreign that cases cases rendered U.S. awards which York Convention. of arbitrators only by the residence. to determine outside jurisdiction the in matters cases where the parties the i n the conflicting nexus or between the where may the in come w i t h i n U.S. and commercial lead• to dispute U.S. has Strict Verlinden obligations 1605. far- has interpretation where the 20 S. the underlying viewpoint award. of I p i t r a d e case does However, such an in of in offered r e c o g n i z e such an interpretation involves U.S. places legislative history of in chosen of arbitration. arbitration consequences own seat parties actually underscores the the make c o u n t r i e s assume jurisdictional Acceptance connection with New does not survey given any transaction. the mandate the of disputing situs in their expansive i n t e r p r e t a t i o n either be the the locale I t seems reasonable 1 9 designation the arbitration themselves s e l e c t e d The in justified the interpretation the arbitrators, arbitration more The leaving probably, The of third party. i n the is and to the a to progeny recognize purview may treaty adherence its no of and the 38 (B) AMENDMENTS TO THE U.S. FSIA In May 1985 Senator Charles Mathias introduced l e g i s l a t i o n i n t h e U.S. Congress t o c l a r i f y and s t r e n g t h e n t h e FSIA. The amendments were t o p e r f e c t t h e j u r i s d i c t i o n court and p r o v i d e f o r better judgments once they a r e rendered The amendments were enforcement and e x e c u t i o n by t h e c o u r t . adopted in o f the of 2 1 November 1988. 22 .Paragraph (6) was added t o S. 1605. I t p r o v i d e s : "(a) A f o r e i g n s t a t e s h a l l n o t be immune from j u r i s d i c t i o n of courts of the United States or of the S t a t e s i n any case (6) i n which t h e a c t i o n i s brought, e i t h e r t o e n f o r c e an agreement made by t h e f o r e i g n s t a t e w i t h o r f o r t h e b e n e f i t o f a p r i v a t e p a r t y t o submit t o a r b i t r a t i o n a l l o r any d i f f e r e n c e s which have a r i s e n o r which may a r i s e between t h e p a r t i e s w i t h r e s p e c t t o a d e f i n e d l e g a l r e l a t i o n s h i p , whether c o n t r a c t u a l or not, concerning a s u b j e c t matter capable o f s e t t l e m e n t by a r b i t r a t i o n under t h e laws o f t h e U n i t e d S t a t e s , o r t o c o n f i r m an award made pursuant t o such an agreement t o a r b i t r a t e , i f (a) t h e a r b i t r a t i o n takes p l a c e take p l a c e i n t h e U n i t e d S t a t e s o r i s intended to (b) t h e agreement o r award i s o r may be governed by a t r e a t y o r o t h e r i n t e r n a t i o n a l agreement i n f o r c e for the United States c a l l i n g f o r the recognition and enforcement o f a r b i t r a l awards (c) t h e u n d e r l y i n g c l a i m , save f o r t h e agreement t o a r b i t r a t e , c o u l d have been brought i n an U n i t e d S t a t e s c o u r t under, t h i s s e c t i o n o r s e c t i o n 1607; o r (d) paragraph applicable" Clause (1) o f t h i s subsection is otherwise (a) i s c o n s i s t e n t w i t h t h e V e r l i n d e n l i n e o f cases i n t h a t i t r e q u i r e s a r b i t r a t i o n i n t h e U.S. o r i n t e n t i o n t o do so before a U.S. c o u r t matters r e l a t i n g can assume p e r s o n a l t o an a r b i t r a t i o n . jurisdiction in I t i s n o t c l e a r what t h e 39 p o s i t i o n may be i n cases where although t h e p a r t i e s t o a r b i t r a t e i n the U.S., in another country. arbitration Convention U.S. takes the a r b i t r a t i o n a c t u a l l y takes p l a c e Clearly place f o r the awards, t h e U.S. is o f Clause i n Clause U.S. the New enforcement assume j u r i s d i c t i o n is in i s constituted. compel U.S. An of arbitral under may Refusal the courts under assume agreement the an before would be inconsistent with by U.S. intention takes the convention i n force a r b i t r a t i o n took contemplated an obligation award i n the a In party such if conduct case) a the the by the s e c t i o n i n c l u d e , cases U.S. (a may be international enforce certain (b) ensures t h a t by an irrespective and in i n the under governed U.S., place. Treaties except Verlinden k i n d s o f f o r e i g n a r b i t r a l awards. Clause recognize where to place conventions which r e q u i r e i t t o r e c o g n i z e and will arbitral U.S. actually suggested arbitrate jurisdiction t o assume p e r s o n a l j u r i s d i c t i o n proposition purview an agreement. personal reflects arbitration Clause f o r cases where p e r s o n a l example arbitration courts York Reference t o i n t e n t i o n t o a r b i t r a t e t o be designed sought the i f i n f a c t t h e a r b i t r a t i o n does a r b i t r a t i o n proceedings i n the courts which agreement or award i s o u t s i d e the (a) appears arbitration where to in o t h e r agreement i n f o r c e f o r the would not s u f f i c e jurisdiction case signatory r e c o g n i t i o n and not take p l a c e i n the U.S. to country (b) , i t would seem t h a t mere i n t e n t i o n t o i n the U.S. seeks a c o u r t s may (b) . But where the tribunal i f the o r a p a r t y t o any calling intended international of international inter alia, U.S., where the agreements the New York 40 Convention and t h e Convention on t h e Settlement o f Investment Disputes between S t a t e s and N a t i o n a l s o f Other S t a t e s . 2 3 Clauses an (c) and (d) make c l e a r t h a t an a c t i o n t o e n f o r c e arbitration agreement o r t o c o n f i r m an award may a l s o be brought i f t h e u n d e r l y i n g c l a i m c o u l d have been brought i n t h e U.S., thereby ensuring that a sufficient connection U.S. e x i s t s and t h a t immunity may a l s o be denied exception is found to be otherwise jurisdiction over the underlying jurisdiction over enforcement between t h e p a r t i e s r e l a t i n g i f t h e waiver applicable. conflict of with the any would arbitral t o the dispute, Thus 2 4 ensure agreement or confirmation of any r e s u l t a n t award. The amendments have streamlined t h e U.S. law r e g a r d i n g a r b i t r a t i o n agreements and assumption o f p e r s o n a l in U.S. courts. agreement or personal I t i s only award falls jurisdiction i n cases within could be where jurisdiction the arbitration Clauses (a) t o assumed in a (d) that proceeding involving a state party. 2. THE UNITED KINGDOM. S. 1(1) o f t h e U.K. general the rule courts State Immunity Act 2 5 l a y s down t h e t h a t a s t a t e i s immune from t h e j u r i s d i c t i o n o f of the United Kingdom except as p r o v i d e d i n the statute. S. 9 specifically addresses the issue of consent a r b i t r a t i o n as waiver o f j u r i s d i c t i o n a l immunity. I t reads: to 41 "(1) Where a S t a t e has agreed i n w r i t i n g t o submit a dispute which has a r i s e n , o r may arise, to a r b i t r a t i o n , t h e S t a t e i s n o t immune as r e s p e c t s proceedings i n t h e c o u r t s o f t h e U n i t e d Kingdom which r e l a t e s t o t h e a r b i t r a t i o n . — (2) T h i s s e c t i o n has e f f e c t s u b j e c t t o any c o n t r a r y p r o v i s i o n i n t h e a r b i t r a t i o n agreement and does n o t apply to any arbitration agreement between States." , "~ 2 6 The language o f t h e s e c t i o n does n o t seem t o r e q u i r e any jurisdictional nexus w i t h U.K. The s e c t i o n , l i t e r a r i l y read, suggests t h a t waiver e x i s t s even where t h e a r b i t r a t i o n takes p l a c e o u t s i d e t h e U.K. As one w r i t e r has suggested t h a t : "Before immunity o r i t s absence falls t o be c o n s i d e r e d , an E n g l i s h c o u r t must have [ t e r r i t o r i a l ] j u r i s d i c t i o n and t h i s w i l l f r e q u e n t l y be a s e r i o u s hurdle f o r the p l a i n t i f f . " 2 7 The preponderance be of juridical section should respect o f agreements t o a r b i t r a t e opinion i n t e r p r e t e d as removing i s that immunity i n t h e U.K. only i n This 28 the would appear t o f o l l o w from t h e l e g i s l a t i v e h i s t o r y o f t h e A c t which s t a t e s t h a t where t h e d i s p u t e has no c o n n e c t i o n "the courts question of will claiming interpretation contravention normally not e n t e r t a i n proceedings immunity would, not a r i s e " . render o f i t s o b l i g a t i o n under both Such 2 9 the and t h e x U.K. t h e New an in York and 30 CANADA. S.3 o f t h e Canadian the will however, the Washington C o n v e n t i o n s . 3. t o t h e U.K., general jurisdiction rule that o f Canadian State foreign courts. Immunity states Act, 1982, a r e immune Sections 4 - 8 31 states from t h e provide f o r 42 e x c e p t i o n s t o the r u l e . U n l i k e the B r i t i s h A c t , no r e f e r e n c e i s made t o consent t o a r b i t r a t i o n as waiver o f immunity. Section situations 4 provides f o r waiver of immunity. The envisaged by t h i s waiver p r o v i s i o n a r e three (1) express submission t o j u r i s d i c t i o n by w r i t t e n agreement o r otherwise, (2) i n i t i a t i o n o f p r o c e e d i n g s , and (3) i n t e r v e n t i o n o r taking any s t e p i n p r o c e e d i n g s b e f o r e the c o u r t . The s e c t i o n does not contemplate implicit waiver by consent to arbitration. In Canada, t h e r e f o r e , i t i s not c l e a r whether a r b i t r a t i o n c l a u s e s c o n s t i t u t e waiver o f immunity. However, because most arising from commercial qualify as (S.5). a There Canadian activity waiver under i s , to the judicial arbitrations the commercial on to , an a r b i t r a t i o n 3 2 writer's decision relate clause may a c t i v i t y exception knowledge, the disputes effect at present of no arbitration c l a u s e s on s o v e r e i g n immunity. 4. INTERNATIONAL CONVENTIONS. (A) INTERNATIONAL LAW COMMISSION DRAFT ARTICLES ON JURISDICTIONAL IMMUNITIES OF STATES AND THEIR PROPERTY.— The draft I.L.C. articles at on i t s 1986 session jurisdictional completed immunities and of t h e i r p r o p e r t y . The a r t i c l e s d e a l w i t h the g e n e r a l of immunity jurisdictional and its adopted states limitations, and principles and immunity o f s t a t e p r o p e r t y from measures o f c o n s t r a i n t < > the 43 Under A r t i c l e is inapplicable disputes, courts 19, t h e j u r i s d i c t i o n a l immunity to arbitrations and o n l y which i n relation i s otherwise o f states concerning c i v i l o r commercial t o proceedings i n municipal competent t o hear t h e case. I t reads: " I f a s t a t e e n t e r s i n t o an agreement i n w r i t i n g w i t h a f o r e i g n n a t u r a l o r j u r i d i c a l person t o submit t o a r b i t r a t i o n differences r e l a t i n g t o a [commercial c o n t r a c t ] [ c i v i l o r commercial m a t t e r ] , t h a t s t a t e cannot invoke immunity from j u r i s d i c t i o n b e f o r e a c o u r t o f another s t a t e which i s otherwise competent i n a proceedings which r e l a t e s t o : (a) the validity or a r b i t r a t i o n agreement, (b) the arbitration interpretation of the procedure, (c) t h e s e t t i n g a s i d e o f t h e award, unless the a r b i t r a t i o n (Emphasis s u p p l i e d . ) The between articles a forum agreement otherwise p r o v i d e s " therefore and c l a u s e can c o n s t i t u t e an require arbitration a jurisdictional before an nexus arbitration waiver o f j u r i s d i c t i o n a l immunity. \ (B) THE EUROPEAN IMMUNITY CONVENTION. Under arbitration t h e European clause Convention can o n l y constitute on State waiver Immunity, an o f immunity i n the c o u n t r y where t h e a r b i t r a t i o n takes p l a c e . However, u n l i k e the I.L.C. d r a f t to establish A r t i c l e 12: a r t i c l e s , a c h o i c e - o f - l a w law c l a u s e suffices a waiver o f immunity. The r e l e v a n t p r o v i s i o n i s 44 "1. Where a c o n t r a c t i n g S t a t e has agreed i n w r i t i n g t o submit t o a r b i t r a t i o n a d i s p u t e which has a r i s e n o r may a r i s e out of a c i v i l o r commercial matter, that State may not claim immunity from the j u r i s d i c t i o n o f a c o u r t of another c o n t r a c t i n g S t a t e i n the t e r r i t o r y or a c c o r d i n g t o the law o f which the a r b i t r a t i o n has taken o r w i l l take p l a c e , i n r e s p e c t o f any proceedings r e l a t i n g t o : (a) the validity or a r b i t r a t i o n agreement; interpretation of the (b) the a r b i t r a t i o n procedure: (c) the s e t t i n g a s i d e o f the award, unless the provides." arbitration agreement otherwise CONCLUSION. The preponderance o f s t a t e p r a c t i c e , indicates, clauses would seem to support the as the view above that arbitration c o n s t i t u t e a waiver o f j u r i s d i c t i o n a l immunity municipal sense. courts. This position A state anticipated that accords that consents where necessary to with l o g i c and arbitration court survey before common must assistance have would be sought t o ensure the e f f i c a c y o f the a r b i t r a l p r o c e s s . An should interesting be a arbitration issue requirement and the in of forum this respect jurisdictional whose the amendments judicial into the to decisions statute. the as The to U.S. FSIA, we there whether t h i s amendments court tendency engage i n j u r i s d i c t i o n j o c k e y i n g . As is the being f o r the p a r t i e s have seen, were the before conflicting requirement clarify there nexus between municipal r e s o r t e d t o . T h i s would c u r t a i l any to i s whether was built position by setting out the jurisdiction. agreement situations It or where seems clear that is governed by award U.S. courts where either may the the assume arbitration New York or Washington c o n v e n t i o n , m u n i c i p a l c o u r t s i n c o u n t r i e s t h a t are signatories to provisions. the The conventions Washington should be convention guided prevents by municipal c o u r t s from i n t e r v e n i n g , i n an ICSID p r o c e e d i n g , a t l e a s t the r e c o g n i t i o n and York and enforcement s t a g e . the Washington to recognize obligated requirements o f the conventions, and enforce 3 4 Under both state awards r e s p e c t i v e conventions, their until the New signatories are that meet irrespective the of t h e c o u n t r y where they were o b t a i n e d . A p a r t y t o e i t h e r of the conventions would be requiring jurisdictional breaching i t s treaty obligations by l i n k s between t h e a r b i t r a t i o n and i t s c o u n t r y b e f o r e i t can e n f o r c e such awards. : 46 FOOTNOTES Redfern and Hunter, (1986), 231. 1 Adopted 2 International by t h e U n i t e d Nations Commercial Commission on Arbitration International Trade Law on June 21, 1985. 3 28 U.S.C. S.1330; S.1602 e t s e q . 4 H.R.Rep. No. 1487, 94th Cond., 2d Sess. a t 18. 5 Delaume, " F o r e i g n S o v e r e i g n Immunity: Impact on A r b i t r a t i o n " 38 Arb. J . 34, 36 (1983). 6 336 F. 2d 354 (1964). 7 I d a t 363. : 8 360 F 2D 103 (1966) . . •' . B r a d f o r d Woolen Corp. v . Freedman 71 N.Y.S. 2d 257,259 (1947) . The c o u r t found t h a t t h e r e was consent t o i n personam j u r i s d i c t i o n i n New York because t h e American Aa r b i t rr aa tt ii oo nn • A s s o c i a t i o n chose New York as t h e s e a t o f 9 10 94th . Cong., 2d Sess. 31, 31 11 465 F. Supp. 824 (1978). 12 I d . a t 826. 13 488 F. Supp. 1284 (1980). 14 Id. a t 1301. 15 506 F « Supp. 981 (1980). 16 I d . a t 987. 17 482 F. Supp. 1175 (1980). 18 Id. a t 1178. 19 See Kahale, "Arbitration & P o l . 29, 54 (1981). See a l s o t h e d e c i s i o n i n B r a d f o r d Woolen Corp. v . Freedman 71 N.Y.S. 2d 257 (1947). An example w i l l be under t h e Convention on t h e R e c o g n i t i o n and Enforcement o f . F o r e i g n A r b i t r a l Award 21 U.S.T. S.2517; 330 U.N.T.S. S.3 s i g n e d a t New York on June 10, 1958. ( H e r e i n a f t e r c a l l e d t h e New York Convention) 47 21 S. 1071, 99th Cong., 1st Sess., 131" Cong. Rec. S. 5370. See Feldman, "Waiver o f F o r e i g n Sovereign Immunity by Agreement t o A r b i t r a t e : L e g i s l a t i o n Proposed by the American Bar A s s o c i a t i o n " 40 Arb. J . 24; Rothstein, " R e c o g n i t i o n and E n f o r c i n g A r b i t r a l Agreements and Awards a g a i n s t F o r e i g n S t a t e s : The Mathias Amendments t o the F o r e i g n Sovereign Immunities A c t and T i t l e 9" 1 Emory J . I n t ' l Dispute Reso. 101 (1986). 22 See 23 102 S t a t . 3969. 17 U.S.T. S.1270; 575 U.N.T.S. S.159 D.C., March 18, 1965. signed a t Washington, Kahale, "New L e g i s l a t i o n i n the U n i t e d S t a t e s F a c i l i t a t e s Enforcement o f A r b i t r a l Agreements and Awards A g a i n s t F o r e i g n S t a t e s " 6 J . I n t ' l Arb. V o l . 2. 57, 62 (1989). 2 5 1978, 2 6 For s i m i l a r p r o v i s i o n s i n n a t i o n a l laws, see S. 10 P a k i s t a n S t a t e Immunity Ordinance, 1981; S. 10 South A f r i c a n F o r e i g n S t a t e s Immunities A c t , 1981; S. 11 Singapore S o v e r e i g n Immunity A c t , 1979. " 2 7 Mann, "The S t a t e Immunity A c t 43 (1979). 2 8 Ch. 33. 1976" 50 Brit. 949 P a r i . Deb. See the FSIA. 3 1 Int'l. L. Fox, " S t a t e s and Undertaking t o A r b i t r a t e " 37 I.C.L.O. i (1988); T r i g g s , "An I n t e r n a t i o n a l Convention on Sovereign Immunity: Some problems i n A p p l i c a t i o n o f the R e s t r i c t i v e Rule" 9 Monash U.L.R. 75 (1982). For a d i f f e r e n t view, see Delaume, "The S t a t e Immunity A c t o f the U.K." 73 Am. J . I n t ' l . L. 185. * - 2 9 Y. i 409. d i s c u s s i o n above w i t h regard t o the amended U.S. For a d i s c u s s i o n of the s t a t u t e , see Molot and Jewett, "The S t a t e Immunity A c t o f Canada" 20 Canadian Y. I n t ' l L. 79 (1982). 3 2 S. 2 o f t h e Canadian S t a t e Immunity A c t d e f i n e s commercial a c t i v i t y as any p a r t i c u l a r t r a n s a c t i o n , a c t o r conduct or any r e g u l a r course of conduct t h a t by reason of i t s nature i s o f a commercial c h a r a c t e r . 3 3 26 I.L.M. 625 3 4 See A r t i c l e 26 o f the convention. The a r t i c l e i s d i s c u s s e d i n g r e a t e r d e t a i l i n S e c t i o n Two, Chapter t h r e e . (1987). 48 SECTION TWO CHAPTER ONE STATE IMMUNITY FROM EXECUTION The term jurisdiction i n two ways. F i r s t , determine a suit nomine. Again, as i t concerns i t r e f e r s t o t h e competence o f a c o u r t t o i n a proceedings i t contemplates taken o r proceedings Legal proceedings state itself s t a t e s can be used instituted may, where a s t a t e i s sued eo situations where measures a r e i n respect of s t a t e property. t h e r e f o r e , be d i r e c t e d o r i t may e n t a i l either measures o f a r r e s t , attachment or execution against i t s property. The have conventional seen, grants \ doctrine of sovereign absolute a t the immunity from immunity, suits to as we states. Under t h i s d o c t r i n e , a s t a t e c o u l d n o t be sued except w i t h i t s consent. As a concomitant of this rule, the courts a b s o l u t e immunity from e x e c u t i o n t o s t a t e s . i n c o n s i s t e n t w i t h t h e comity accorded I t was c o n s i d e r e d o f n a t i o n s and t h e smooth conduct o f governmental a f f a i r s t o i s s u e e x e c u t i o n on t h e p r o p e r t y o f a s t a t e . In Porto Alexander 1 t h e c o u r t r e s t a t e d t h e law: "A s o v e r e i g n s t a t e cannot be impleaded d i r e c t l y o r by being served i n person, or indirectly by proceeding against i t s property, and t h a t i n 49 a p p l y i n g t h a t p r i n c i p l e i t matters p r o p e r t y was b e i n g employed." n o t how the 2 The belonging i s s u e i n The Parlement t o Belgium Beige the subject of l i t i g a t i o n Britain. After was whether and used by t h a t government m a i l and i n t r a n s p o r t i n g passengers be 3 i n carrying and f r e i g h t f o r h i r e c o u l d i n t h e A d m i r a l t y "Court r e v i e w i n g many cases a vessel bearing i n Great on t h e q u e s t i o n , the c o u r t s a i d : "The p r i n c i p l e t o be deduced from these cases i s t h a t , as a consequence o f t h e a b s o l u t e independence of every sovereign authority, and of the international comity which induces every other s t a t e , each and every one d e c l i n e s t o e x e r c i s e by means of i t s courts any o f i t s t e r r i t o r i a l j u r i s d i c t i o n over t h e person o f any s o v e r e i g n o r ambassador o f any o t h e r s t a t e , o r over t h e p r o p e r t y of any ambassador. though •-•-such sovereign, ambassador, o r p r o p e r t y be w i t h i n i t s j u r i s d i c t i o n , and t h e r e f o r e , but. f o r t h e common agreement, s u b j e c t to i t s j u r i s d i c t i o n . " (emphasis s u p p l i e d ) 4 The twin aspects o f s t a t e immunity was w e l l illustrated by Lord A t k i n i n Compania N a v i e r a Vascongado v . S.S. C r i s t i n a In an o f t e n c i t e d dictum, he r e f e r r e d t o : "...two p r o p o s i t i o n s o f i n t e r n a t i o n a l law e n g r a f t e d i n t o our domestic law which seems t o me t o be w e l l e s t a b l i s h e d and t o be beyond d i s p u t e . The f i r s t i s t h a t t h e c o u r t s o f a country w i l l n o t implead a f o r e i g n s o v e r e i g n , t h a t i s , they w i l l n o t by t h e i r p r o c e s s make him a g a i n s t h i s w i l l a p a r t y t o l e g a l p r o c e e d i n g s whether t h e proceedings i n v o l v e p r o c e s s a g a i n s t h i s person o r seek t o r e c o v e r from him s p e c i f i c p r o p e r t y o r damages. The second i s t h a t they will n o t by t h e i r process, whether t h e s o v e r e i g n i s a p a r t y t o t h e proceedings or not, s e i z e o r d e t a i n p r o p e r t y which i s h i s o r o f which he i s i n p o s s e s s i o n o r c o n t r o l . There has been some d i f f e r e n c e i n t h e p r a c t i c e o f n a t i o n s as t o p o s s i b l e l i m i t a t i o n o f t h i s second p r i n c i p l e as t o whether i t extends t o p r o p e r t y o n l y used f o r t h e commercial purposes o f t h e s o v e r e i g n o r t o p e r s o n a l p r i v a t e p r o p e r t y . I n t h i s country i t i s i n my o p i n i o n w e l l settled that i t applies to both." 6 5 50 Contemporary doctrine entrance of absolute of activities, from international states i s now sovereign into of states trading a consequences suit. other from does immunity countries. restricted o f commercial acceptance suit As we 8 t h e o r y o f immunity, is repudiates from and general a c t i v i t i e s of sovereign s t a t e s . many theory commercial transactions. the doctrine of n o t extend t o t h e t r a d i n g seen , 9 t h e immunity to suits immunity This p r i n c i p l e i s accepted i n 7 have that the With t h e i t was thought unreasonable t o g r a n t them t h e everyday There immunity law under of foreign involving their the r e s t r i c t i v e states public from acts suit (jure I m p e r i i ) and does n o t extend t o s u i t s based on i t s commercial or p r i v a t e acts (jure g e s t i o n i s ) . As we s h a l l suit t o only translate into cases where due see, t h i s r e s t r i c t i o n on s t a t e immunity the public a removal states of states o f immunity engage t o the d i s t i n c t i o n immunity acts from i n commercial drawn between does not entirely execution i n activities. immunity from all This i s from \suit and from e x e c u t i o n . DISTINCTION BETWEEN IMMUNITY FROM SUIT AND FROM EXECUTION Immunity from s u i t r e f e r s t o exemption IMMUNITY from t h e j u d i c i a l competence o f t h e c o u r t h a v i n g power t o a d j u d i c a t e or settle d i s p u t e s by a d j u d i c a t i o n . I n t h i s sense a s t a t e i s immune from court proceedings r e s u l t i n g immunity state from property i n judgment. execution i s connotative from pre-judgment On t h e o t h e r hand, o f t h e immunity attachment and a r r e s t , of and also from execution d i s t i n c t i o n was and of the attendant acknowledged even judgment. i n countries This such as Italy Belgium where the r e s t r i c t i v e d o c t r i n e o f immunity had ancient roots. The its 1 0 d i s t i n c t i o n has i t s r a t i o n a l e i n the fact that while p r o c e e d i n g s a g a i n s t a f o r e i g n s t a t e l e a d i n g t o judgment i s not a c l o g on state the continued property activities. impair Execution force against it may operation of the the conduct o f judgment may a s t a t e by seizure s t a t e , execution of execution Also, may from result an in i t s assets. economic foreign Execution is then point as i n t e r f e r e n c e w i t h the r i g h t s o f a s t a t e " . In Duff Development held that execution award although by v. statute award judgment. T h i s was i n s p i t e of the Kelantan a had in previous U.S. case o f Dexter refraining from "more House on had intensive of Lords an a r b i t r a t o r ' s the effect of proceeding submitted the Kungliq , the merits. & Capenter v. t h e Swedish S t a t e Railways, r e g a r d l e s s p r e v i o u s l y submitted t o 1 3 of the of f a c t t h a t Sweden jurisdiction: "But c o n s e n t i n g t o be sued does not g i v e consent t o s e i z u r e o r attachment of the p r o p e r t y of a s o v e r e i g n government" 14 a to C i r c u i t Court o f Appeals r e f u s e d attachment o f the p r o p e r t y had to f a c t t h a t the Government of j u r i s d i c t i o n of the E n g l i s h c o u r t s on the In the such the taken out that view, 1 1 1 2 be action, i s susceptible a Kelantan , c o u l d not of states seen Such of d i f f e r e n c e s between investment i n c o u n t r i e s where t h e i r p r o p e r t y execution. governmental a l s o i n v o l v e the use i s b e l i e v e d , would engender p o l i t i c a l governments. of on 52 This position Yugoslavia obtained assets v. S E E . SEE 1 5 an ordonnance i n the argued t h a t the p o l i c y by was hands recognized by secured award a g a i n s t an d exequatur and 1 of the world the French court in Yugoslavia, seized Yugoslavian bank i n P a r i s . Yugoslavia ordonnance d exequatur v i o l a t e d French p u b l i c 1 i g n o r i n g the former's immunity from e x e c u t i o n . The court s a i d : "... in accepting an arbitration clause, the Yugoslavian s t a t e accepted t o , waive i t s immunity w i t h r e s p e c t t o the a r b i t r a t o r s and t h e i r award up to and including the . procedure of exequatur necessary t o g i v e the award f u l l f o r c e ... waiver o f j u r i s d i c t i o n a l immunity i n no way r e s u l t s i n w a i v e r of immunity from execution...the ordonnance d' exequatur... i s not an a c t i o n o f e x e c u t i o n . . . " l c > T h i s p r i n c i p l e was the International Jurisdictional was also accepted Law by t h e " S p e c i a l Rapporteur t o Commission's Immunities recognized by of States the committee and French their Court of on Property. the 1 7 It Cassation in I s l a m i c R e p u b l i c of I r a n v. S o c i e t e E u r o d i f : 1 8 "On this point both legal literature and j u r i s p r u d e n c e ... combine i n t a k i n g the view t h a t waiver o f immunity from j u r i s d i c t i o n does not i n any way imply the waiver o f immunity from e x e c u t i o n and t h a t the o b j e c t o f an a r b i t r a t i o n c l a u s e i s l i m i t e d t o e n t r u s t i n g the s e t t l e m e n t o f the d i s p u t e s t o the a r b i t r a l t r i b u n a l and s u b m i t t i n g the p a r t i e s t o i t s jurisdiction." 1 9 The S t a t e Immunity A c t of Great distinction. 2 0 The Act draws adjudicative jurisdiction and courts United of law in the a distinction the with 13(2) to enforcement (6) and 14(3) jurisdiction. between Kingdom. The (4) Under of adjudicative i n S e c t i o n s 2 t o 11, and the the enforcement j u r i s d i c t i o n j u r i s d i c t i o n of court i s d e a l t with Sections B r i t a i n a l s o adopted deal in the U.S. while particular foreign 53 Sovereign Immunities jurisdiction Act immunity from i s not conterminous w i t h waiver o f immunity from e x e c u t i o n . S e c t i o n s 1330 jurisdiction, property of 1976 , foreign of and 1604-1607 d e a l w i t h immunity w h i l e immunity of a waiver 21 from attachment state i s dealt with and from e x e c u t i o n of i n Sections 1607- 1611. The Canadian S t a t e Immunity A c t i s modeled on t h a t o f the U.K. Like between the latter, immunity Sections 3-8 Immunity and Disputes between immunity of the immunity suit with such recognizes the and immunity immunity as the from States Nationals the acknowledge jurisdiction does e x e c u t i o n . While from . e x e c u t i o n . jurisdiction EuropeanConvention on and distinction while from e x e c u t i o n . Convention Convention) from former d e a l w i t h immunity Conventions Washington from deal S e c t i o n s 10-12 the on Settlement o f of the not eo Articles other fact State Investment States that (the waiver of i p s o amount t o waiver 1-14 of Convention p r o v i d e e x c e p t i o n s t o the immunity the European of states from s u i t , A r t i c l e 23 makes i t c l e a r t h a t : "No measures o f e x e c u t i o n a g a i n s t the p r o p e r t y o f a c o n t r a c t i n g s t a t e may be taken i n the t e r r i t o r y o f another c o n t r a c t i n g s t a t e except where and t o the extent that the state has expressly consented t h e r e t o i n w r i t i n g i n any p a r t i c u l a r c a s e . " 2 2 Article 54 of the Washington Convention c o n t r a c t i n g s t a t e p a r t y t o a d i s p u t e from r a i s i n g of immunity from j u r i s d i c t i o n to recognize an award rendered a t h e defense a t t h e time o f r e c o g n i t i o n enforcement o f an ICSID award. The a r t i c l e o b l i g e s states prevents and contracting pursuant to the Convention as b i n d i n g and t o e n f o r c e the p e c u n i a r y o b l i g a t i o n s 54 imposed court by that i n that preclusion The state. of recognition award Article stage does not of considered the u l t i m a t e contracting sum, stage, depending jurisdiction execution. of Liberia execution immunity its arbitration, the be state from execution the execution. to domestic states. Within recognition stage principles relied immunity court on waiver to is from stated the applicable in at that stage. consent to of waiver of illustrated , where although A d i f f e r e n t view has some recognize civil immunity from LETCO L i b e r i a was by that i t s bank ICSID from by suit consenting been advocated by jurisdictions. Swiss other. I t maintain^ that 2 4 In Swiss F e d e r a l T r i b u n a l Kingdom o f the one Greece v. In immunity v. held po to ICSID accounts were • - the jurisprudence law a dichotomy between immunity from s u i t from e x e c u t i o n . from the law is to immune from attachment under the F.S.I.A. of the stage i s posterior concerned, amount 2 3 at to principle waived the constituting not This Government have may of the i s deemed t o waive i t s immunity up the while immunity a that immunity i n contracting s t a t e s may on stresses of a the contracting arbitration sovereign judgment stage o f the a r b i t r a t i o n p r o c e s s and Because the recognition of Convention, state party phase. various the final however, measures immunity o b t a i n i n g a 55, extend t o surrenders framework that i f i t were considerations Convention r u l e s of as refuses and follows to immunity inexorably Julius Bar , 2 5 said: "As soon as one admits t h a t i n c e r t a i n cases a f o r e i g n s t a t e may be a p a r t y b e f o r e Swiss c o u r t s t o an a c t i o n designed t o determine i t s r i g h t s and the 55 o b l i g a t i o n s under a l e g a l r e l a t i o n s h i p i n which i t had become concerned, one must admit a l s o t h a t t h a t f o r e i g n s t a t e may i n S w i t z e r l a n d be s u b j e c t e d to measures intended t o ensure the f o r c e d e x e c u t i o n o f a judgment a g a i n s t i t . I f t h a t were not so, the judgment would l a c k i t s most e s s e n t i a l a t t r i b u t e , namely t h a t i t w i l l be executed even a g a i n s t the w i l l o f the p a r t y a g a i n s t which i t i s rendered ... There i s thus no reason t o modify the case law o f the F e d e r a l T r i b u n a l i n so f a r as i t t r e a t s immunity from j u r i s d i c t i o n and immunity from e x e c u t i o n on a similar footing." 2 6 This view practice. In equally finds LIAMCO v. support Libya , the 2 7 in Swedish Swedish judicial Court of Appeal h e l d t h a t L i b y a waived i t s r i g h t t o invoke immunity from by accepting an a r b i t r a t i o n clause. In the view o f the a waiver o f immunity from e x e c u t i o n suit court, i s i m p l i c i t i n a waiver of immunity from j u r i s d i c t i o n . Some l e g a l writers share the view between immunity from j u r i s d i c t i o n and is impractical. arbitration it consequences, In such award, that They 2 8 must believe be i t s assets a should if a state to have accepted private state be as person. does This should be pointed attempting t o equate the a state nature with of assumption enforcement analytical that state that of of private activity. the to gloss is to this persons, in an execution as to be an view, by actions of latter that social same i n both the award. with said ignores and over to all its comply consequences o f t h e Implicit the consents sunt servanda. that political awards are error out legal not rule execution unfavorable susceptible a p p l i c a t i o n o f the p r i n c i p l e of p a c t a It distinction that deemed if a the immunity from i n c l u d i n g compliance w i t h an circumstances, of that fact the peculiar view is the consequences of cases. an that It is unrestricted 56 e x e c u t i o n on s t a t e p r o p e r t y may u l t i m a t e l y g r i n d the machinery o f government t o a h a l t . T h i s may result i n states refraining from i n v e s t i n g where i t s a s s e t s are subject i n those c o u n t r i e s to execution. More ~~ i m p o r t a n t l y ,• reputation of no state neglecting to can afford fulfill to its have The political and economic consequences an are too to ignore. great Not s t a t e d r i v e away p o t e n t i a l i n v e s t o r s , of political channels of isolation. resolving There only i t also equally a international obligations. attitude easily of will such such stands the exists a risk diplomatic disputes arising from such financial does suggest that state relations. While s h o u l d be only be the the writer totally state not immune from e x e c u t i o n , property u t i l i z e d i n commercial conduct o f commercial a c t i v i t y , why such a fund activities suggest that that should the a l l state international Switzerland 2 9 between , the courts accepted . t h a t a c t i v i t i e s may levy should parties commerce. Even i n c o u n t r i e s where be refuse execution on state settle 3 0 be open But to to such draw and states in as Sweden and a distinction immunity from e x e c u t i o n , only attached. to of i s t o c a r r y beyond a c c e p t a b l e private between immunity from s u i t and generally attached property _ analogy be reasons s t a t e s commercial a c t i v i t i e s . e x e c u t i o n , as some w r i t e r s d o limits t h e r e e x i s t no cannot o b l i g a t i o n s a r i s i n g from the to i t i s submitted open t o e x e c u t i o n . I f a s t a t e s e t s out p a r t i c u l a r funds f o r policy to property The funds used rationale property not for commercial for this i s used for i t is that commercial activity will constitute an intense interference conduct o f the p u b l i c a c t i v i t i e s o f the s t a t e i n We little shall see practical countries where j u r i s d i c t i o n and such a immunity i n the difference a discussion between distinction the suit, In both that there is practice in i s made between ^immunity cases, i t s assets are n o r m a l l y open t o e x e c u t i o n . once used for . ./ a the question. state immunity from e x e c u t i o n and distinction. from following with those that state from reject waives i t s commercial activity 58 FOOTNOTES [1920] P. 30. 1 I d . a t 31. 2 (1880) 5 P.D. 197. 3 I d . a t 214. 4 [1938] A.C. 485. 5 I d . a t 490. 6 See Victory Transport I n c . v. C o m i s a r i a General de Abasteciementos 25 I.L.R. 110; A l f r e d D u n h i l l v . R e p u b l i c of Cuba 15 I.L.M. 735; P h i l i p p i n e A d m i r a l Case [1976] 2 W.l.R. 214; Trendtex T r a d i n g Corp L t d v . C e n t r a l Bank o f N i g e r i a [1977] 2 W.L.R. 356. o On I t a l i a n law, see Borga v . R u s s i a n Trade D e l e g a t i o n 22 I.L.R. 235 (1955); f o r Egypt, see F.P.R. o f Y u g o s l a v i a v. K a f r E l - Z a v a t C o t t e n L t d 18 I.L.R. 18 (1955); f o r N e t h e r l a n d s , see K r o l v . Bank o f I n d o n e s i a 26 I.L.R. 180 (1958); f o r Canada , see Venne v . P.R. o f Congo ((1969) 5 D.L.R. (3d) 128. See Chapter One o f S e c t i o n One. 9 1 0 1 1 1 2 See C o n d o r e l l i and S b o l c i , "Measures o f E x e c u t i o n a g a i n s t the P r o p e r t y o f F o r e i g n S t a t e s : The Law and P r a c t i c e i n I t a l y " 10 Neth. Y. B. I n t ' l . L. 197.(1979). B o c k s t i e g e l , A r b i t r a t i o n and S t a t e E n t e r p r i s e s 50 (1984). v [1924] A.C. 797. 1 3 43 F. (2d) 705 (1931). 1 I d . a t 708. 4 1 5 (1971) J . DU Dr. I n t ' l . 131. 1 6 I d . a t 132-3. 1 See Crawford, 7 " E x e c u t i o n o f Judgment and F o r e i g n Sovereign Immunity" 75 Am. J . I n t ' l . 1 8 1 9 2 0 77 I.L.R. 513. I d . a tCh. 524. 1978, 33. L. 820 861 (1981). 59 21 28 U,S.C. S.1330; S.1602 e t seg. 22 _ Note, however, t h a t A r t i c l e 24 o f the Convention allows contracting p a r t i e s , when s i g n i n g or ratifying the Convention, t o make the r e s e r v a t i o n t h a t : " I t s c o u r t s s h a l l be e n t i t l e d t o e n t e r t a i n proceedings a g a i n s t another c o n t r a c t i n g s t a t e t o the e x t e n t t h a t i t s ^ c o u r t s are e n t i t l e d to e n t e r t a i n proceedings against s t a t e s not p a r t y t o the p r e s e n t Convention." The 23 U n i t e d Kingdom and Belgium have made t h i s d e c l a r a t i o n . In those c o u n t r i e s , t h e r e f o r e , i t i s p o s s i b l e t o apply t h e i r r e s t r i c t i v e p r i n c i p l e s o f immunity from e x e c u t i o n to contracting parties. 659 F Supp. 606. 24 See L a l i v e , "Swiss Law and P r a c t i c e i n R e l a t i o n t o Measures o f E x e c u t i o n a g a i n s t the P r o p e r t y of a F o r e i g n S t a t e " 10 Neth. Y. B. I n t ' l L . 1 5 3 . 154 Y1979). 25 23 I.L.R. 195. 26 I d . a t 198-199. 27 28 29 6 Y. Comm. Arb. 359 (1982). See A l b e r t van den Berg, "Some Recent Problems i n the P r a c t i c e o f Enforcement under the New York and ICSID Conventions" 2 ICSID Review 439, 449 (1987); Delaume, " J u d i c i a l D e c i s i o n s R e l a t e d t o Sovereign Immunity and T r a n s n a t i o n a l - A r b i t r a t i o n " 2 ICSID Review 403 (1987) ; Bernini and Jan van den Berg, "The Enforcement of A r b i t r a l Awards a g a i n s t a S t a t e : The Problem of\Immunity From Execution" in Lew, Contemporary problems in International Arbitration 359 (1986); McGovan, "Arbitration Clauses as Waivers of Immunity from J u r i s d i c t i o n and E x e c u t i o n under the F o r e i g n Sovereign Immunities A c t of 1976" 5 N.Y. Sch. J . I n t ' l . & Comp. L. 409,425 (1984). For example, B e r n i n i and Jan van den Berg, I d a t 366, suggest t h a t apart from state property which enjoy immunity under i n t e r n a t i o n a l t r e a t i e s , such as the Vienna Convention on D i p l o m a t i c and Consular R e l a t i o n s , other s t a t e p r o p e r t y should be open t o e x e c u t i o n . 30 See L a l i v e , "Swiss Law and P r a c t i c e i n R e l a t i o n t o Measures o f E x e c u t i o n a g a i n s t the P r o p e r t y o f a F o r e i g n S t a t e " supra, note 23. 60 CHAPTER TWO INTERIM MEASURES OF PROTECTION I t may be necessary arbitration preserve agreement : t o the status f r u s t r a t e the may require quo d i s p u t e . T h i s need may He i n some s i t u a t i o n s f o r p a r t i e s t o pending provisional the a r i s e where one enforcement of the measures determination of to the o f t h e p a r t i e s seeks t o award by seek t o r e l o c a t e h i s funds an so as hiding i t s assets. to place i t outside the r e a c h o f the c l a i m a n t should t h e r e be need f o r compulsory enforcement. The aim o f p r o v i s i o n a l measures o f p r o t e c t i o n i s t o a v o i d a s i t u a t i o n where a c l a i m a n t i s denied the f r u i t s of his is victory by factors which t r a n s p i r e before the rendered. \ The need for i n t e r i m measures before the a r b i t r a t i o n c o u r t s may Barring be the is initiated. of with Convention. whether t h e New provisional p r o t e c t i o n may In such immunity, a i s a s i g n a t o r y t o the New o n l y assume j u r i s d i c t i o n consistent of r e s o r t e d t o f o r the grant question country which the award the i n such treaty York Convention germane municipal o f i n t e r i m measures. municipal court York C o n v e n t i o n i f t o do o b l i g a t i o n s of Particularly relief. a case a case arise here the a may 1 do would i t s country is in be under question l i m i t s c o u r t s ' power t o order THE NEW YORK PROTECTION Article CONVENTION AND INTERIM 11(3) o f t h e New York the subject of considerable the ability"of i n d i s p u t e s submitted Convention controversy courts to"grant MEASURES OF has a f f o r d e d i n t h e U.S. r e g a r d i n g i n t e r i m measures o f p r o t e c t i o n t o a r b i t r a t i o n . The a r t i c l e provides: "The c o u r t o f a c o n t r a c t i n g s t a t e , when s e i z e d o f an a c t i o n i n a matter i n r e s p e c t o f which t h e p a r t i e s have made an agreement w i t h i n t h e meaning o f t h i s article, shall, a t the request o f one o f t h e p a r t i e s , r e f e r the p a r t i e s t o a r b i t r a t i o n , unless i t f i n d s t h a t t h e s a i d agreement i s n u l l and v o i d , i n o p e r a t i v e o r i n c a p a b l e o f b e i n g performed." The U.S. Court & Rubber Co. v . o f Appeal, T h i r d C i r c u i t , CEAT 2 held that Article s t r i p p e d t h e c o u r t s o f t h e power t o o r d e r protection. precluded The c o u r t i n McCreary T i r e 11(3) completely i n t e r i m measures o f found t h a t t h e language o f t h e a r t i c l e t h e c o u r t from o r d e r i n g any p r o v i s i o n a l r e l i e f : "The Convention f o r b i d s t h e c o u r t s o f a c o n t r a c t i n g s t a t e from e n t e r t a i n i n g a s u i t which v i o l a t e s an agreement t o a r b i t r a t e . Thus t h e c o n t e n t i o n that a r b i t r a t i o n i s merely another method o f t r i a l , t o which s t a t e p r o v i s i o n a l remedies should equally apply, i s u n a v a i l a b l e . " 3 The c o u r t anchored i t s h o l d i n g on two grounds. F i r s t , t h e c o u r t w i l l be bypassing their disputes t h e p a r t i e s ' agreed method o f s e t t l i n g i f i t awarded provisional relief interference will vary frustrate Convention was designed the Fourth discharged attachment Circuit a was from state t o achieve. to to Second, since state, court o f laws that the T h i s view was endorsed by v. attachment "contrary relief. the uniformity i n I.T.A.D. pre-award the the Podar on Bros . 4 t h e ground parties' The court that the agreement to 62 a r b i t r a t e and In the Convention". Cooper v. a f f i r m e d the Ateliers principle summarized the de l a Motobecane S.A. , the i n McCreary and rationale court 6 of the i t s progeny. The court principle: "The__essence of a r b i t r a t i o n i s r e s o l v i n g disputes w i t h o u t the i n t e r f e r e n c e of the j u d i c i a l p r o c e s s and its strictures. When international trade is i n v o l v e d , t h i s essence i s enhanced by the d e s i r e t o a v o i d u n f a m i l i a r f o r e i g n law. The UN Convention has c o n s i d e r e d the problems and c r e a t e d a s o l u t i o n , one that does not contemplate significant judicial i n t e r v e n t i o n u n t i l a f t e r an a r b i t r a l award i s made. The purpose and p o l i c y o f the UN Convention w i l l be best carried out ,by " r e s t r i c t i n g prearbitration j u d i c i a l a c t i o n t o d e t e r m i n i n g whether a r b i t r a t i o n s h o u l d be c o m p e l l e d . " . 7 Some courts reasoning in Convention in the McCreary does not and relief. District California Uranex 8 was remedies of the The in . agreements t o indication Convention . arbitrate. in either that powers Carolin rather the resort . refused contended District view t h a t encourages have have l i m i t the provisional of U.S. the to that of the Court & New York court to grant the Northern Light Company a v a i l a b i l i t y of than the the for Power follow obstructs v. provisional the use of s . It further text to or the stated t h e r e was no apparent p o l i c i e s of the pre-award that attachment was to be precluded. T h i s l a t t e r view has cases. 9 These availability of decisions measures as process. reject provisional Convention's purposes by proceedings. been approved Rather they the remedies obstructing view in a the court couple of contention would disserve other that the course of arbitration awarded provisional a necessary support mechanism f o r the arbitration 63 There i s n o t h i n g in Article 11(3) of the Convention that makes c o u r t awarded p r o v i s i o n a l measures i n c o m p a t i b l e w i t h framework o f preclude arbitration. courts The purport from determining of A r t i c l e the m e r i t s i s the s u b j e c t o f an a r b i t r a t i o n a g r e e m e n t . with the process spirit of of the Convention arbitration of It is 10 such i s to dispute f o r courts provided 11(3) the which compatible to assist the does not assistance i n t e r f e r e w i t h t h e competence o f the a r b i t r a t o r s t o determine t h e m e r i t s o f t h e d i s p u t e . A r t i c l e 6 o f the UNCITRAL Model on International s t a t e adopting with the Commercial t h e Model Law performance assistance and arbitrators award of (article certain 11) , functions of appointment of decisions in termination of 13, (article process. jurisdiction of measures in may objectives of Far 14), 16), from arbitrators, appropriate arbitration 'court' to c o n t r o l of and setting ( a r t i c l e 34). These p r o v i s i o n s i l l u s t r a t e arbitral each arbitration cases in fact ordered help cases in where with of that conduct interfering court arbitral aside the court a s s i s t a n c e i s indispensable t o the e f f i c i e n t the upon relating ( articles jurisdiction calls 1 1 to entrust a p a r t i c u l a r supervision, a r b i t r a t o r ' s mandate tribunal's Arbitration Law of the provisional fulfilling time the is of the of Article United States. essence o f the safeguard measure. The 11(3) controversy i s absent Judicial regarding in jurisdictions interpretation outside the a u t h o r i t i e s i n o t h e r c o u n t r i e s support c o u r t awarded p r o v i s i o n a l r e l i e f New the York Convention. i s not In The Rena K 1 2 the view t h a t incompatible with the the E n g l i s h Queen's Bench 64 Division held attachment that the court pending satisfaction was arbitration competent where o f an award. The I t a l i a n t o maintain necessary to the court Eurodif v. I r a n possibility had power t o o r d e r 1 4 secure C o r t e d i Cassazione i n Sherk E n t e r p r i s e s A. G. v . S o c i e t e des Grandes M a e q u e s that an pre-award ruled 13 attachment. In t h e French Court o f C a s s a t i o n r e c o g n i z e d the o f pre-award attachment o f commercial a s s e t s o f a state party. It may provisional York therefore relief Convention. be concluded i s consistent with The contrary view that court the s p i r i t expressed awarded o f t h e New i n some U.S. d e c i s i o n s i s an u n j u s t i f i a b l e e x t e n s i o n o f t h e p r e - a r b i t r a t i o n bias o f U.S. that recourse courts. to I t i s appropriate courts t o enter f o r provisional relief t h e caveat should be r e s t r i c t e d t o cases where i t i s i n c o n v e n i e n t o r i m p o s s i b l e t o obtain the r e l i e f tribunal will from a r b i t r a t o r s e i t h e r because t h e a r b i t r a l has n o t been c o n s t i t u t e d o r t h a t i r r e p a r a b l e be o c c a s i o n e d meeting Rules by t h e d e l a y of arbitrators. f o r t h e ICC Court This associated with i s t h e approach convening adopted of Arbitration. A r t i c l e injury a by the 8 ( 5 ) provides in part: "Before t h e f i l e i s t r a n s m i t t e d t o t h e a r b i t r a t o r s , and i n e x c e p t i o n a l circumstances even t h e r e a f t e r , the p a r t i e s s h a l l be a t l i b e r t y t o a p p l y t o any competent judicial authority f o r interim or c o n s e r v a t o r y measures,and they s h a l l n o t by so doing be h e l d t o i n f r i n g e t h e agreement t o a r b i t r a t e o r t o affect the relevant powers reserved t o the arbitrator." The provision recognizes the fact that recourse to n a t i o n a l c o u r t s may be t h e o n l y means o f o b t a i n i n g p r o v i s i o n a l relief i n an emergency s i t u a t i o n . Before the c o n s t i t u t i o n of 65 the no arbitral tribunal a party seeking o p t i o n than r e c o u r s e constituted i t i s only provisional relief has t o c o u r t s . But when t h e t r i b u n a l i n "exceptional circumstances" to courts for provisional is that a p a r t y may have r e c o u r s e relief. It envisages s i t u a t i o n s where i t w i l l be d i f f i c u l t t o convene the t r i b u n a l where t h e remedy i s sought u r g e n t l y . STATE PRACTICE IN RELATION TO PROVISIONAL MEASURES 1. UNITED STATES S e c t i o n 1610(d) o f t h e U.S. Act prohibits state before its of judgment state. attachment judgment immunity purpose the from the unless t h a t has been Where a of the property t h a t s t a t e has attachment attachment Foreign Sovereign prior i s to o r may s t a t e waives t o the secure be e n t e r e d Immunities of may foreign expressly judgment waived and satisfaction the of a against the f o r e i g n i t s immunity from pre-judgment attachment, o n l y i t s p r o p e r t y used f o r a commercial i n t h e U.S. a activities be a t t a c h e d : S. 1609 p r o v i d e s f o r s t a t e immunity from attachment: " S u b j e c t t o e x i s t i n g i n t e r n a t i o n a l agreements to which t h e U n i t e d S t a t e s i s a p a r t y a t t h e time o f Enactment o f t h i s A c t , t h e p r o p e r t y i n t h e U n i t e d S t a t e s o f a f o r e i g n s t a t e s h a l l be immune from attachment, a r r e s t and e x e c u t i o n except as p r o v i d e d i n s e c t i o n s 1610 and 1611 o f t h i s c h a p t e r . " The exceptions to this general attachment i s p r o v i d e d i n S. 1610(d): rule of immunity from 66 "(d) The p r o p e r t y o f a f o r e i g n s t a t e , as d e f i n e d i n section 1603(a) of this chapter, used for a commercial a c t i v i t i e s i n t h e U n i t e d S t a t e s , shall not be immune from attachment p r i o r t o t h e e n t r y o f judgment i n any a c t i o n brought i n a c o u r t o f t h e U n i t e d S t a t e s o r o f a state^ ... i f (1) t h e f o r e i g n s t a t e has e x p r e s s l y waived i t s immunity from attachment prior to judgment, n o t w i t h s t a n d i n g any withdrawal o f t h e waiver t h e foreign state may p u r p o r t t o e f f e c t except i n accordance w i t h t h e terms o f t h e waiver, and (2) t h e purpose o f t h e attachment i s t o secure s a t i s f a c t i o n o f a judgment t h a t has been o r may u l t i m a t e l y be e n t e r e d a g a i n s t t h e f o r e i g n s t a t e and not t o o b t a i n j u r i s d i c t i o n . " A variety o f cases have arisen i n t h e U.S. over t h e meaning o f " e x p l i c i t waiver" i n S. 1610(d)(1). The c o u r t s come t o r e q u i r e immunity from have c l e a r evidence o f t h e i n t e n t i o n t o waive t h e pre-judgment attachment, although that actual phrase need n o t be used. I n L i b r e Bank L t d . v . Banco N a c i o n a l de Costa Rica 1 5 , the court considered the following waiver c o n t a i n e d i n some promissory notes: "The Borrower hereby i r r e v o c a b l y and u n c o n d i t i o n a l l y waives any r i g h t o r immunity from l e g a l p r o c e e d i n g s i n c l u d i n g s u i t judgment and e x e c u t i o n on grounds o f sovereignty which i t or i t s property now o r t h e r e a f t e r enjoys" The issue waiver w i t h i n that whether the provision was an "explicit" t h e meaning o f S. 1610(d)(1). The c o u r t the section "pre-judgment that was does not require attachment" the instant r e c i t a t i o n o f t h e words as an o p e r a t i v e provision stated constituted formula. "explicit" I t found waiver o f immunity: "The p r o v i s i o n i n t h e promissory notes quoted above e v i n c e s a c l e a r and unambiguous i n t e n t t o waive a l l c l a i m s o f immunity i n a l l l e g a l p r o c e e d i n g s . " S u i t judgment" and " e x e c u t i o n " a r e r e f e r r e d t o o n l y by way of examples of legal proceedings. This 67 enumeration clearly is not intended to be exhaustive. I f a n y t h i n g , i t suggests t h a t prejudgment attachment is a form of "legal p r o c e e d i n g s " . The waiver i s " e x p l i c i t " i n t h e sense t h a t i t i s c l e a r and unambiguous. Banco N a t i o n a l i n t e n d e d t o r e s e r v e no r i g h t s o f immunity i n any legal proceedings." 1 6 In S & S Machinery Co. v. Masinexport i m p o r t p l a i n t i f f c l a i m e d t h a t an e x p l i c i t waiver o f immunity the 1 7 c o u l d be found i n t h e f o l l o w i n g c l a u s e : "Nationals, firms, companies and economic o r g a n i z a t i o n s o f e i t h e r p a r t y s h a l l be afforded access t o a l courts, and, when a p p l i c a b l e , to a d m i n i s t r a t i v e b o d i e s as p l a i n t i f f s and defendants, or o t h e r w i s e , i n accordance w i t h t h e laws i n f o r c e i n t h e t e r r i t o r y o f such o t h e r P a r t y . They s h a l l not c l a i m o r enjoy immunities from s u i t o r e x e c u t i o n o f judgment o r o t h e r l i a b i l i t y i n t h e t e r r i t o r y o f t h e o t h e r P a r t y w i t h r e s p e c t t o commercial o r f i n a n c i a l t r a n s a c t i o n s except as may be ~ p r o v i d e d i n o t h e r b i l a t e r a l agreements." The c o u r t i n d i c a t e d t h a t w a i v e r s o f immunity from e x e c u t i o n o f judgment of immunity that construed as language a waiver waiver o f immunity the i n t h e above p r o v i s i o n o f immunity I t held "other l i a b i l i t y " attachment. I t was that because that phrase attachments. The fact waiver the an asserted foreign state s judgment instant attachment ground t h a t must of i n the from that U.S., and i n the was immunity was court reiterated the i n t h e l a t t e r case t h e language from to the from p r e - i t distinguished Bank of unambiguously i t s immunity Libra be from p r e - ill-suited demonstrate i n t e n t i o n t o waive 1 provision t h a t might i n the t e r r i t o r y t h e waiver encompass pre-judgment that o f t h e view does not e x p l i c i t l y waive immunity attachment question from pre-judgment from " o t h e r l i a b i l i t y other party". judgment have no b e a r i n g upon t h e from pre-judgment the only from s u i t or case o f the on the the agreement 68 was virtually a l l - i n c l u s i v e by w a i v i n g "any right or immunity from l e g a l p r o c e e d i n g s " . The issue Security of Pacific pre-judgment National Bank v. i s s u e f o r d e t e r m i n a t i o n was o f Amity between the U.S. o f immunity. attachment also Government of arose Iran 1 8 . in The whether a p r o v i s i o n o f the T r e a t y and I r a n c o n s t i t u t e d e x p l i c i t waiver The T r e a t y p r o v i d e d i n p a r t : "No e n t e r p r i s e o f e i t h e r [the U.S. o r I r a n ] . . . s h a l l , i f i t engages i n commercial... a c t i v i t i e s w i t h i n t h e t e r r i t o r y o f the o t h e r [ c o u n t r y ] , c l a i m o r enjoy , e i t h e r f o r i t s e l f or f o r i t s property, immunity t h e r e i n from t a x a t i o n , s u i t , e x e c u t i o n o f judgment o r o t h e r l i a b i l i t y t o which p r i v a t e l y owned and c o n t r o l l e d e n t e r p r i s e s are subject t h e r e i n . " Judge Kelleher presumption held that noted against that pre-judgment t h e above-quoted e x p l i c i t l y waived the provision distinction from execution of i n U.S. judgment strong H i s Honor then Amity from e x e c u t i o n o f judgment, from pre-judgment exists a of the Treaty of attachments. The p r e c e d i n g survey o f American a creates attachments. I r a n ' s immunity but not i t s immunity FSIA decisions jurisprudence and immunity suggests t h a t between \ immunity from pre-judgment attachment. A waiver o f the one does not imply a waiver o f the other. To constitute attachment in consistent with the not be words need the a waiver U.S., fact used, of the of words waiver and a e x e c u t i o n w i l l not s u f f i c e i n t h i s The approach impede t h e party. adopted realization There i s no by o f an immunity must from be although waiver of pre-judgment unambiguously the particular immunity from respect. U.S. award statute and case obtained against c o m p e l l i n g reason why immunity law may a state from pre- _ 69 j u d g m e n t f o r a t t a c h m e n t c o m m e r c i a l j u d g m e n t c o g e n t s h u f f l e i t s d i f f i c u l t a n d h i m w i l l i n t e r f e r e d a p p e a r s t o b y e n s u r e I n s t e a d o f l a w s h o u l d r e a l i z e t h a t t h e U n d e r a t t a c h m e n t i n v o l v e d . i s S . " ( 2 ) U . K . o n l y t o i s o f a n w h i c h S u c h g i v i n g o f ( 3 ) s u c h f r o m e x e c u t i o n f o r c o m m e r c i a l 1 3 ( 2 ) ( a ) . I t p r o v i s i o n a l i n i s m a r e v a i n j u n c t i o n w i t h i n t h e p r o c e e d i n g , 2 0 m e a s u r e . s e c t i o n 1 9 ( 3 ) t h a t u n l e s s t h e a m a k e i t b u r d e n u n n e c e s s a r i l y a r b i t r a t i o n . U . S . t o l a w s t a t e T h i s s e e k s t o p r o p e r t y . A c t , p r e - j u d g m e n t t h e c o n s e n t a n d ( 4 ) s t a t e r e l i e f . 1 3 ( 4 ) n o t p e n d i n g s t a t e T h e o f t h e s t a t e b e l o w - m a y d e a l s d o e s n o t t h a t t h e w i t h t h e a s s e t s o u t c o m e o f t o ' w a y o r t o t h e i m m u n i t y p r o p e r t y a p p l y i n p a r t y c o n s e n t e x c e p t i o n w h i c h p o s s i b l e o r d e r i n g j u r i s d i c t i o n t o p a r t : t r a n s a c t i o n s t h e r e f o r e s e e k s K I N G D O M w i t h s u b s e c t i o n s p r o v i d e s a a ( a ) r e l i e f s h a l l n o t b e g i v e n a g a i n s t a s t a t e b y o f i n j u n c t i o n o r o r d e r f o r s p e c i f i c p e r f o r m a n c e f o r t h e r e c o v e r y o f l a n d o r o t h e r p r o p e r t y . . . " S u b s e c t i o n p r e - f r o m w i l l n o t u s e d o f s t a t e a w a r d . I m m u n i t y i n a t h a t p r o p e r t y S t a t e p r o v i d e s S u b j e c t m a n n e r U N I T E D w a i v e r d e m a n d e d t h a t i m m u n i t y p e r m i s s i b l e 1 3 ( 2 ) a p r o p e r t y a h a v e o b j e c t i v e p r e - j u d g m e n t t h e r e q u i r i n g p e n d e n c y 2 . s t a t e e n s u i n g s t a t e s a m e g r a n t i n g i n a n y t h e t o e v i d e n c e a s s e t s d u r i n g b e g r a n t e d c o m p e l l i n g t o w i t h b e U . S . c o m m e r c i a l f o r p r o o f u p h o l d p u r p o s e s . i m m u n i t y , c l a i m a n t o f s h o u l d t o s e c t i o n U . K . t o a s t a t e o f c o n s e n t e d a n u s e d o b t a i n a r e m a i n a r b i t r a t i o n t o s u c h a 70 L i k e the U.S. court i s not FSIA, submission regarded as consent would a l s o seem t h a t consent imply consent them as two t o the j u r i s d i c t i o n o f the to relief. t o e x e c u t i o n does not to provisional r e l i e f , distinct provisional It necessarily because s e c t i o n 13 treats stages. 3. CANADA The S t a t e Immunity A c t o f Canada, 1982, provisions to i t s B r i t i s h attachment. injunction, S.10 o t h e r p r o p e r t y may the state provides that performance be consents that c o u n t e r p a r t as r e g a r d s provides specific granted in where a relief or the so to 10(2) makes by recovery such i t clear that the way of an of land or state unless It further relief granted relief. consents, similar pre-judgment against a foreign writing state no s h a l l not be g r e a t e r than t h a t consented S. contains t o by t h e submission state. by a foreign \ s t a t e t o t h e j u r i s d i c t i o n o f c o u r t does not amount t o consent f o r t h e purposes o f the s e c t i o n . F o r consent t o be v a l i d as a waiver must r e l a t e d i r e c t l y under S. provisional The 10(1), such consent relief. provisions o f S. 11 e n t i t l e d t o post-judgment measures. Reference that section, judgment i t i s submitted, attachment contemplates to measures measures. posterior Pre-judgment attachment i s not 'execution' r e l a t e t o the term attachment i n relates This to is an o f the judgment e x e c u t i o n . I t i s submitted only exclusively because award or same nature the a to post- section judgment. with post- t h a t the e x c e p t i o n i n S . l l 71 making s t a t e p r o p e r t y to attachment attachment. used f o r commercial a c t i v i t y relates A only different t o post-award or interpretation w i l l susceptible post-judgment render nugatory the p r o v i s i o n s o f S. 10. 4.FRANCE In France t h e r e that states i s j u d i c i a l authority for the proposition a r e n o t immune commercial a s s e t s from are attachable pre-award attachment. and such a s s e t s l i n k w i t h t h e t r a n s a c t i o n out o f which t h e c l a i m Islamic support Republic for this entities of construction Iran of Iran v. Societe proposition. four European Eurodif states into Co-operation government f o r t h e c o n s t r u c t i o n arises. to agreement affords 2 1 established facilitate and e x p l o i t a t i o n o f an uranium entered must have a Eurodif was Only plant with by the i n Iran. the french o f an atomic p l a n t . Under t h e v agreement Eurodif. under the Iranian government t h e I r a n i a n government d e f a u l t e d the agreement. Eurodif a r b i t r a t i o n and g a r n i s h e d Court agreed o f Appeal, t o make on v a r i o u s submitted commercial Cassation, the purposes. On further Iran's from infringed i t s immunity held immunity could attached had been appeal rejected attachment that t o ICC funds due t o I r a n . On appeal t o t h e t h e attachment was s e t a s i d e court to payments i t s claim on t h e ground t h a t t h e r e was no evidence t h a t t h e funds a t t a c h e d for loans allocated be t o t h e Court o f argument execution. s e t aside were i n use where f o r a commercial that The the activity the court assets of a 72 p r i v a t e n a t u r e upon which the c l a i m i s based. The of effect of t h i s commercial provided assets the assets judgment of a i s t h a t pre-award state are a l l o c a t e d is attachment possible in France, t o t h e commercial activity upon which t h e c l a i m i s based. CONCLUSION The above approaches survey to countries the require reveals issue a that of waiver there are provisional of immunity basically measures: from two some pre-judgment attachment b e f o r e such a measure c o u l d be g r a n t e d , whereas the rest grant such measures in respect of property used for commercial purposes. I t i s apparent t h a t i n d i s c r i m i n a t e use o f such measures the against state a t t e n d a n t adverse p r o p e r t y may consequences on lead the t o abuse operation with of the government concerned. What is not so clear i s whether p r o t e c t i n g s t a t e p r o p e r t y from such abuse immunity the only method of i s by g r a n t i n g them from pre-award attachment. S i t u a t i o n s may a r i s e where a s t a t e seeks t o r e l o c a t e i t s a s s e t s i n such a manner t h a t the c l a i m a n t would not be a b l e t o get t o them s h o u l d he o b t a i n a favorable award. To require judgment award in such a a waiver of situation immunity is to from inflict prean unnecessary burden on t h e c l a i m a n t . I t i s c o n s i s t e n t w i t h the ends o f e q u i t y t h a t a s t a t e s h o u l d be p r e v e n t e d from a c t i n g i n such a manner t h a t p r o c e s s . No would harm would negate t h e essence o f t h e be done t o t h e i n t e r e s t s arbitral of the state 73 by requiring i t t o guarantee t h a t i t would n o t f r u s t r a t e the a r b i t r a l process. Such provisional situations where measures the should claimant only clearly n o t g r a n t e d . The c o u r t that the the state involved should r e q u i r e should attachment assets only of the state In against summary, a state practice be that i f the injunction unambiguous evidence beyond t h e r e a c h o f the successful. be ordered Even i n respect then, such o f commercial party. the a v a i l a b i l i t y party differs. indispensable i t s assets h i s claim should in seeks t o f r u s t r a t e t h e o b j e c t i v e s of a r b i t r a t i o n by p l a c i n g claimant granted establishes i r r e p a r a b l e i n j u r y w i l l be done t o h i s c l a i m is be measures t o a r b i t r a t i o n i s an a r e a where The view adjunct of provisional that provisional of the a r b i t r a l state measures i s an appears t o be process the b e t t e r view. To r e q u i r e a waiver o f immunity i n such cases w i l l enable s t a t e s t o s h u f f l e t h e i r a s s e t s so as t o p l a c e beyond t h e r e a c h There i s no reason of successful claimants. them why t h e r e s t r i c t i v e t h e o r y o f immunity s h o u l d n o t be extended t o pre-judgment measures o f attachment. Some l e v e l of caution i s advocated. The p r i v a t e must e s t a b l i s h an attempt by t h e s t a t e p a r t y realization or taken o f t h e impending during Unrestricted award o f such of the a r b i t r a l relief f o r u r g e n t government a f f a i r s . t o f r u s t r a t e the award by an a c t i o n t h e pendency party contemplated proceedings. may t i e down funds needed 74 FOOTNOTES U n i t e d N a t i o n s Convention on t h e R e c o g n i t i o n and Enforcement 1 of F o r e i g n A r b i t r a l Awards 330 U.N.T.S. 38. 2 501 F. 2d 1032 (1974). 3 I d . a t 1038. 4 636 F. 2d 75 (1981). 5 I d . a t 77. 456 N.Y.S. 2d 728. 6 7 I d v •• -.. • -. 451 F. Supp. 1044 (.1977) . 8 Andros Compania M a r i t i m a v . Andre & C i e . 430 F. Supp. 88 (1977) ; Compania de N a v i q a c i o n y F i n a n c i e r a Bosnia v. N a t i o n a l U n i t y Marine Salvage Corp. 457 F. Supp. 1013 (1978) . 9 1 0 1 1 See J a n v a n den Berg, "Some Recent Problems i n t h e P r a c t i c e o f Enforcement under t h e New York and ICSID Conventions" 2 ICSID Review 439, 452 (1987). Adopted by t h e U n i t e d N a t i o n s Commission on I n t e r n a t i o n a l Trade Law on June 21, 1985. 1 2 [1978] 3 W.L.R. 431.- 1 3 4 Y. B. Comm. A r b . 286 (1979). 1 4 23 I.L.M. 1062. 1 5 676 F. 2d 47 (1982). 1 6 I d . a t 49. 1 7 706 F. 2d 411 (1983). 1 8 513 F. Supp. 864 (1981). The i n j u n c t i o n i s named a f t e r t h e case o f Mareva Compania N a v i e r a v . I n t e r n a t i o n a l B u l k c a r r i e r s [1975] 2 LL.R. 509. The injunction restrains defendants from selling, disposing, o r otherwise removing assets from t h e jurisdiction. 1 9 2 0 See Crawford, " E x e c u t i o n o f Judgment and F o r e i g n Sovereign Immunity" 75 Am. J . I n t ' l L. 820, 869 (1981). 75 77 I.L.R. 513 (1988). In Guinea v. A t l a n t i c T r i t o n Company 26 I.L.M. 373 (1987),the French Court of Cassation confirmed pre-award attachment on the p r o p e r t y o f Guinea. The c o u r t was o f the o p i n i o n t h a t the ICSID Convention does not exclude the power o f a s t a t e c o u r t t o order conservatory measures in connection with ICSID a r b i t r a t i o n s , u n l e s s the p a r t i e s e x p r e s s l y exclude such interference. 76 CHAPTER THREE M E A S U R E S OF E X E C U T I O N : 1. D I F F E R E N C E BETWEEN R E C O G N I T I O N AND Execution o f an award the award by t h e courts may take t h e form proceedings. and in ensue a f t e r o f t h e country concerned. o f confirmation, 7 an Recognition accords recognition of the country t h e award a seal state. stage, by execution I t i s this Recognition the on the other o f t h e award latter approval court judgment hand, against act that o f an award arbitration distinction involves i s made i s considered process between execution. i n those immunity from immunity c o n s t i t u t e d i n an a r b i t r a t i o n recognition of distinction i s of I n such t h e award, recognized 54 o f t h e C o n v e n t i o n , sovereign immunity but not to by the of countries legal phase where clause extends of to the i t s execution. ICSID a and t h e waiver Convention. a s t a t e cannot r a i s e a t t h e time another. jurisdiction systems of the use of the ultimate from the the property necessitates immunity Article similar of c o e r c i v e powers o f one s t a t e a g a i n s t t h e p r o p e r t y of or concerned. execution enforcement Recognition exequatur a s s i m i l a t e s i tt o t h e status o f a municipal The a can only EXECUTION This Under t h e defense o f r e c o g n i t i o n o f an ICSID 77 award. A r t i c l e 55, however, l e a v e s the issue of execution to the immunity r u l e o b t a i n a b l e i n p a r t i c u l a r c o n t r a c t i n g s t a t e s . Judicial "this authorities distinction. in In Benvuti France and & Bonfant the U.S. recognize v. Congo , B e n v u t i 1 was s u c c e s s f u l i n an ICSID a r b i t r a t i o n a g a i n s t Congo._It sought t o enforce the award i n France. The President of the Court of F i r s t I n s t a n c e o f P a r i s , granted r e c o g n i t i o n o f t h e award. He, however, added a caveat t h a t "no measure o f e x e c u t i o n , or even a conservatory award on measure, any assets authorization". Benvuti On and held to that the and that an order constitute an act caveat located t h a t the o f the exequatur, must be lower in to of by execution Liberia the caveat of impeded of any two an execution. arbitral It said our Appeal c o u r t confused enforce prior Paris, possible stages: The that court award does not further ruled that the lower court exceeded i t s proceedings. Timber the Corp. by New based on ICSID Convention, the Court judgment by in prayed District o t h e r t a x e s due judgment Court without the v. Liberia concerned 2 by LETCO t o e n f o r c e an ICSID award a g a i n s t L i b e r i a of Liberia the France to i n t e r f e r i n g w i t h t h e e x e c u t i o n stage\ which i s Eastern t h U.S. entered in pursuant t h a t of the execution proper. subsequent t o the exequatur proceedings taken d e l e t e d because the j u r i s d i c t i o n by Liberia be appeal contended execution can on court to vacate on Liberian shippowners and York. the The award the because judgment award o r t o v a c a t e registration l e v i e d by court the agents refused as a to fees the and appointed vacate signatory to the the L i b e r i a waived i t s s o v e r e i g n immunity i n the _ U.S. w i t h r e s p e c t t o enforcement o f a r b i t r a t i o n the Convention. the o f t h e c o u r t s o f t h e U.S. i n enforcing the pecuniary award. The c o u r t , however, execution to order Liberia, awards under T h i s i s because L i b e r i a must have involvement state] 78 contemplated [as a c o n t r a c t i n g o b l i g a t i o n s o f t h e ICSID granted the prayer on t h e r e g i s t r a t i o n t o vacate the f e e s and o t h e r taxes due as t h e y were n o t commercial p r o p e r t y and thus were immune from e x e c u t i o n under t h e FSIA. . Although grant the the court execution L i b e r i a s waiver on t h e award, non-commercial i t refused to assets of Liberia. o f immunity a t t h e r e c o g n i t i o n stage d i d not 1 extend recognized t o i t s immunity from execution.^It i s clear above d e c i s i o n t h a t t h e r e c o g n i t i o n and e x e c u t i o n different. While the waiver of arbitration extends t o t h e former, immunity by the l a t t e r from t h e stages a r e consent remains to intact except where i t i s d i s t i n c t l y waived. \ 2. PROPERTY SUBJECT TO EXECUTION State state practice property i n relation reflects t h e need t o execution t o balance o f awards two on conflicting i n t e r e s t s : t o a f f o r d a remedy t o t h e p r i v a t e p a r t y and a l s o t o prevent likely political t h a t a s t a t e may be embarrassed arbitral its award which d i r e c t l y sovereign nature embarrassment o f t h e s t a t e p a r t y . rights. I f no o f state property judgment d e b t o r may have I t seems by enforcement o f an i n t e r f e r e s with the exercise of restriction i s placed s u s c e p t i b l e t o execution, execution levied on t h e the state on i t s funds that are a l l o c a t e d f o r s o v e r e i g n and d i p l o m a t i c a c t i v i t i e s . On t h e other hand, party without have a i t will t o leave expectation i t s legal.obligations. that the state The immunity i n v a r i o u s s t a t e s attempt t o r e c o n c i l e t h i s It the private an e f f e c t i v e remedy i n law. He s h o u l d be a b l e t o reasonable fulfill be unconscionable i s g e n e r a l l y recognized that party will rules applicable conflict. foreign state property i n d i s p e n s a b l e i n t h e e x e r c i s e o f s o v e r e i g n a c t s by t h e f o r e i g n s t a t e s i s exempt from enforcement measures i n t h e forum where e x e c u t i o n i s sought. I n i s s u e here i s t h e c r i t e r i a t o be used i n d e l i m i t i n g s t a t e p r o p e r t y immune from e x e c u t i o n . The first one i s based on t h e n a t u r e which has g i v e n r i s e t o t h e p r o c e e d i n g s . to immunity which are from execution comparable jurisdiction is to excluded, being This c r i t e r i o n s e t aside those in where of the a c t i v i t y i n circumstances which private leads immunity from activities are involved. Another c r i t e r i o n assets of execution i s directed. Here a d i s t i n c t i o n i s made between p u b l i c funds, a g a i n s t which no against which i s based on t h e n a t u r e o f the,funds o r t h e measure measure o f e x e c u t i o n may be l e v i e d , and o t h e r funds of a p r i v a t e nature, which may be subj e c t t o attachment and a r e not p r o t e c t e d by immunity from e x e c u t i o n . Most account burden systems adopt the second test. It takes o f t h e i n c r e a s i n g i n t e r v e n t i o n o f t h e s t a t e and agencies test, legal i n t h e economic sphere. however, lies lies t o prove its One o f t h e problems w i t h t h e i n determining t h e commercial t h e person nature on whom t h e o f t h e funds i n 80 question. This protection of state requiring state problem secrets a private funds. As i s compounded party we by t h e need and t h e d i f f i c u l t y attendant i n t o prove t h e commercial shall see, l e g a l f o r the systems nature o f give varying s o l u t i o n s t o t h i s problem. A. UNITED STATES Prior from t o t h e FSIA, execution. immunity ' 3 foreign The FSIA states modified were g e n e r a l l y the r u l e so as t o make from e x e c u t i o n conform c l o s e l y w i t h t h e p r o v i s i o n s on jurisdictional immunity. S. 1609 p r o v i d e s t h a t t h e p r o p e r t y o f f o r e i g n immune immune from attachment, arrest and execution p r o v i d e d i n t h e FSIA and i n t e r n a t i o n a l agreements U.S. i s a p a r t y reference a t t h e time to international t h e FSIA agreements states are except t o which t h e came i n t o alludes as e f f e c t . The to bi-national i \ and multi-lateral immunity treaties which from e x e c u t i o n by t h e c o n t r a c t i n g E x c e p t i o n s t o t h e immunity S.1610. I t p r o v i d e s t h a t for a commercial execution immunity or provide where, from execution the property upon which parties. from e x e c u t i o n i s contained i n i n t h e U.S. alia, either i s based. a r e n o t immune the foreign explicitly i s o r was used the claim of t h e p r o p e r t y o f a f o r e i g n s t a t e used activity inter f o r waivers state o r by from waives i t s implication, f o r t h e commercial activity S. 1610(a) (6) makes i t c l e a r t h a t t h e commercial a s s e t s o f a s t a t e s h a l l n o t be immune from attachment i n a i d of execution or from execution upon a 81 judgment e n t e r e d by an order foreign confirming state, would not be agreement. courts, state a U.S. arbitral provided that Therefore i t may be party once this award any an enforced judgment i s based rendered attachment i n c o n s i s t e n t with involved. In state an c o u r t i f the agaisnt is it from Shipping Corp. v. to arbitral by assets U.S. of arbitration claiming the execution recognised commercial consent precludes i n a i d of p r o v i s i o n i n the award sense, against on any by immunity a from execution. In Birch parties submission . agreement Embassy of Tanzania . the 4 contained the -following provision: "We f u r t h e r agree t h a t we w i l l f a i t h f u l l y observe t h i s agreement and the Rules and t h a t we w i l l abide by and perform any Award rendered pursuant t o t h i s agreement and t h a t judgment o f t h e c o u r t h a v i n g j u r i s d i c t i o n may be e n t e r e d upon the Award." The c o u r t h e l d t h a t the p r o v i s i o n was of immunity by an agreement t o agreement to Tanzania. entry The of arbitrate, i m p l i c i t l y waive immunity. It should step a n a l y s i s . immunity and, be the second, implicit waiver court further stated that judgment r e i n f o r c e s any standing alone, is while waiver, an sufficient to 5 remembered First, an t h a t the s t a t u t e adopts a two- f o r e i g n s t a t e must have waived i t s the property must be used for a commercial purpose. I t f o l l o w s t h a t even when a s t a t e i s h e l d t o waive i t s immunity by consenting to arbitration, only i t s commercial a s s e t s can be l e v i e d f o r e x e c u t i o n . I t was that held execution in Liberia could not be E a s t e r n Timber Corp. v. levied on agents of Liberia Liberia 6 to 82 collect tonnage Liberia government tax fees, registration from fees shippowners, and because revenues, t h e e x e c u t i o n upon which was FSIA. The respect court to activities stated that any and within due those fees were p r o h i b i t e d by the LETCO c o u l d issue execution with which used properties fall other taxes one are for commercial of the exceptions t o section 1610. The FSIA does not s t a t e on whom t h e burden l i e s t o prove the commercial n a t u r e o f t h e funds i n q u e s t i o n . T h i s i s s u e has not been addressed i n any U.S. d e c i s i o n w i t h i n t h e knowledge * of the w r i t e r . Given t h a t t h a t o f immunity is on the in commercial use discharging s h o u l d be the to S.1610. of such He the a f i t his should funds. burden, c o n s i d e r a b l y low. private general . . rule . - under S.1610 i s from e x e c u t i o n , i t would seem t h a t t h e burden claimant exceptions the . party gives case be Due the within able to to the standard of one of the establish the difficulty proof required I t s h o u l d be t h e case t h a t p r o b a b l e evidence o f t h e of where commercial use o f t h e fund's, t h e burden reverts party to disprove then, p r o p e r r e g a r d ^ s h o u l d be such s u g g e s t i o n . Even t o the state g i v e n t o t h e need t o p r o t e c t s t a t e s e c r e t s . Another problem of mixed t h a t has use embassy such i s that funds. I t i s sometimes t h e case t h a t s t a t e funds are used f o r b o t h commercial may a r i s e n out o f t h e FSIA and non-commercial purposes. A i t s f o r e i g n bank account t o s e r v i c e t h e needs and funds exception? other be consequential attached under commercial the state of i t s activities. commercial Can activity 83 Birch Shipping Corp. v. Embassy of Tanzania was 7 the f i r s t case t o address t h e i s s u e . The p l a i n t i f f got an a r b i t r a l award against Tanzania. District o f New plaintiff then upon American York The District Court of the confirmed and r e g i s t e r e d obtained a w r i t Security Southern t h e award. The o f garnishment and s e r v e d i t Bank where t h e defendant m a i n t a i n e d a c h e c k i n g account. The defendant moved t o quash t h e w r i t on t h e ground that t h e funds were immune from attachment under the FSIA. I t submitted an a f f i d a v i t t h a t t h e funds were s o l e l y f o r t h e purpose its o f t h e maintenance p e r s o n n e l . The were used and support o f t h e embassy and affidavit further t o "pay t h e s a l a r i e s stated that the o f t h e . embassy o f f i c i a l s , funds pay f o r i n c i d e n t a l purchases and s e r v i c e s n e c e s s a r y and i n c i d e n t a l t o t h e o p e r a t i o n o f t h e Embassy..." The proper issue that f e l l to attach f o r d e t e r m i n a t i o n was whether i t was an account n o t used solely f o r commercial a c t i v i t i e s . The c o u r t h e l d t h a t mixed accounts were not immune from e x e c u t i o n because t h e FSIA d i d not exempt such funds e x e c u t i o n . To h o l d otherwise, t h e c o u r t from s t a t e d , would operate t o d e f e a t the'^express i n t e n t i o n o f Congress t o p r o v i d e p a r t i e s a remedy i n s u i t s a g a i n s t f o r e i g n states. T h i s d e c i s i o n i m p l i e s t h a t commercial be enforced out o f their funds (other C e n t r a l Bank: S.1611) l o c a t e d f o r whatever jurisdiction. purposes regarded If embassy funds consequential to the as giving the funds debts o f s t a t e s can than inits purposes w i t h i n t h e utilized operation of a monies for commercial the embassy i s commercial taint, then v i r t u a l l y a l l s t a t e funds w i l l be a t t a c h a b l e . There w i l l be no 84 need f o r a general used f o r predominantly commercial activities sovereign sovereign acts incidental to may even are the also state will of such no doubt lead remove t h e i r funds. assets from jurisdictions that Timber to Corp. an v. ICSID deny Liberia award in refused 9 favor of to in Liberia follow LETCO, Birch. writs / . . . were . i s s u e d a t t a c h i n g L i b e r i a ' s bank account a t Riggs N a t i o n a l and a t F i r s t American Bank. These accounts were used f u n c t i o n i n g o f t h e L i b e r i a n Embassy and I t was the Convention a l s o because no once commercial stated any that the commercial a The c o u r t bank activities i n question, account to concept of because sovereign cautious of applied immunity of 196l under and 1 0 to deprive the r e j e c t e d the view account is used which are for a ' i n c i d e n t a l ' or not d e n o t i n g the e s s e n t i a l c h a r a c t e r funds exception, i n the FSIA the FSIA. portion Relations Bank. a c t i v i t y , t h e e n t i r e account l o s e s i t s immunity. I t •auxiliary', of Diplomatic exception funds o f immunity under that on Bank f o r the f o r i t s Central h e l d t h a t t h e account enjoyed d i p l o m a t i c Vienna and 8 The D i s t r i c t Court o f the D i s t r i c t o f Columbia Pursuant for p o l i t i c a l misunderstandings between s t a t e s immunity t o t h e i r Eastern funds utilized execution a c t s . Such measures o f e x e c u t i o n to considerable states r u l e o f immunity because loose i t s immunity. commercial and when would activity immunity f o r the should remains areas cause I t further the f u r t h e r reason addressing f o r e i g n governments. 11 not that be rule the o f the entire stated defined rather that courts affect the use bank that the narrowly than the should be affairs of 85 This i s the better approach to funds. Where t h e commercial a c t i v i t y the sovereign activity, the the problem of mixed i s merely i n c i d e n t a l funds should be immune. to I f the s o v e r e i g n a c t i v i t y i s used f o r t h e s i n g u l a r purpose o f masking the commercial use o f t h e funds, i t would seem c o n s i s t e n t w i t h the notions funds. The of f a i r p l a y test should and e q u i t y be whether t o deny immunity t o such the commercial use o f the funds i s e s s e n t i a l t o t h e conduct o f governmental a c t i v i t y and . the effect the attachment of the funds will have on the conduct o f t h e s o v e r e i g n a c t i v i t i e s o f t h e s t a t e i n q u e s t i o n . B. UNITED KINGDOM S. ' 13(2) (b) o f t h e U.K. State Immunity A c t p r o v i d e s f o r the immunity o f s t a t e p r o p e r t y from measures o f e x e c u t i o n . I t states, inter alia, t h a t t h e p r o p e r t y o f a s t a t e s h a l l not be subject t o any p r o c e s s f o r t h e enforcement o f a judgment or \ a r b i t r a t i o n award. A state may under c o n s e n t i n g t o measures be c o n t a i n e d to a S. 13(3) of execution. i n a p r i o r agreement, limited extent waive or i t s immunity by Such consent, which may may generally. be expressed t o apply The d i s t i n g u i s h e s between waiver o f immunity of immunity from e x e c u t i o n . jurisdiction immunity of the I t states courts does not subsection from s u i t that clearly and waiver submission t o t h e constitute waiver of from e x e c u t i o n . The consent envisaged by t h e s e c t i o n i s one t h a t unambiguously contemplates waiver o f immunity from execution. I t would seem t h a t an a r b i t r a t i o n clause standing 86 _ alone does not c o n s t i t u t e a waiver under the State property commercial S.13(4). which purposes This is not provision e x c e p t i o n under S. 1610 The problem i s i n use of or immune i s akin to subsection. intended from the f o r use execution - o f the FSIA mixed funds is not addressed issue confronted the House o f Lords Republic Colombia . plaintiff court accounts The 1 2 judgment held against to succeeded in accounts. Colombia under commercial activity s t a t u t e . The of for Colombia the credit obtaining a moved by of court to London order to nisi the i n Alcorn v. enforce garnishing its garnishee the sought in its a bank embassy. It against the discharge the orders, c l a i m i n g immunity from e x e c u t i o n under the S t a t e Immunity A c t . The Colombian accounts Ambassador were purposes but not used The or t o meet the t h e day-to-day running certified intended expenditure that for funds use for in the commercial necessarily incurred i n of the d i p l o m a t i c court of f i r s t the mission. i n s t a n c e s e t a s i d e the g a r n i s h e e order on the ground t h a t the primary purpose o f the funds were f o r a non-commercial purpose, t o w i t , consequently plaintiff, the were w h o l l y and, as without On immune under running the State c o u r t s t a t e d , d i d not o r predominantly i n use the garnishee distinction, appeal to were r e s t o r e d . The account c o u l d not orders the embassy, Court court be to of The e s t a b l i s h t h a t the f o r commercial attached Appeal, to the the funds activities whole account 1 3 garnishee orders s t a t e d t h a t the purpose of the "run an was Immunity . A c t . i t ought t o be s e t a s i d e . the and embassy , 1 but bank r a t h e r was to 87 pay f o r goods and s e r v i c e s That purpose, the court purposes as d e f i n e d not immune from t o enable t h e embassy t o be run. held, House of Lords d e c i s i o n . Lord Diplock, unless This within decision funds a t t a c h a b l e . of t h i s approach i s no doubt The fell the commercial i n s e c t i o n 17 o f t h e A c t and was t h e r e f o r e execution. make a l l embassy - i s wide The p o l i t i c a l enough t o implication considerable. reversed reading the Court of Appeal's t h e l e a d judgment, s t a t e d that i t can be shown by t h e p l a i n t i f f t h a t t h e bank account was earmarked by t h e f o r e i g n s t a t e s o l e l y (save f o r de minimis exceptions) liabilities in f o r b e i n g drawn on t o s e t t l e commercial transactions, words o f t h e e x c e p t i o n that attachment running head provided o f mixed of the diplomatic provisions of i t cannot a state's w i t h i n the i n S.13(4). He f u r t h e r funds may mission. o f S. 13(5) which be brought incurred hamper diplomatic t h e day-to-day The c o u r t provided that mission restated evidence as stated to the by t h e t h e use o f p a r t i c u l a r s t a t e fund s h a l l be accepted as s u f f i c i e n t . e v i d e n c e of that f a c t unless The i s proved. House o f Lords d e c i s i o n acknowledges t h e need f o r t h e protection also the contrary o f funds h e l d by s t a t e s affirms the fact f o r sovereign purposes. I t that i n c i d e n t a l use o f such does not s t r i p commercial activities execution. The d e c i s i o n does n o t address t h e s i t u a t i o n s where the sovereign such p r o p e r t y . them funds f o r o f immunity use i s aimed a t masking t h e commercial I t i s submitted funds s h o u l d n o t be immune from that i n such execution. from use o f s i t u a t i o n s , the 88 L o r d D i p l o c k f u r t h e r s t a t e d t h a t t h e onus o f p r o v i n g t h e commercial use of judgment c r e d i t o r . the property The judgment i n question creditor lies on t h e a l s o has t h e burden o f d i s p r o v i n g t h e c o r r e c t n e s s o f " t h e ambassador's certificate under S. 13(5) . C. FRANCE In France sovereign property of a foreign property i s used immunity state bars unless i t i s proved f o r t h e commercial claim i s based. The requirement funds i n dispute purpose section provides activity i s n o t immune from e x e c u t i o n on t h e that the which t h e between t h e commercial f o l l o w s t h e p r o v i s i o n o f S. 1610 (a) (20) state upon f o r a connection and t h e u n d e r l y i n g that execution transaction o f t h e U.S. FSIA. The property used f o r commercial i f the property i s used f o r t h e commercial a c t i v i t y upon which t h e c l a i m i s based. The although French Court of Cassation f o r e i g n s t a t e s enjoyed i n Eurodif immunity from held that execution as a 1 4 matter o f p r i n c i p l e , t h e immunity c o u l d be s e t a s i d e where t h e assets attached had been a l l o c a t e d f o r a commercial activity o f a p r i v a t e law nature upon which t h e c l a i m was based. T h i s r e s t r i c t i o n on t h e a v a i l a b i l i t y o f commercial of states particular f o r execution fund for i s unwarranted. commercial If a activities state there assets uses is a no j u s t i f i a b l e reason why i t s f i n a n c i a l o b l i g a t i o n s s h o u l d n o t be met from t h a t fund i r r e s p e c t i v e of the connection funds and t h e t r a n s a c t i o n i n q u e s t i o n . To h o l d between t h e otherwise may 89 .imply t h a t a p r i v a t e p a r t y may n o t have a remedy where a s t a t e closes t h e account business. from I t should be which i t transacts t h e case that once the particular the underlying f i n a n c i a l agreement has a c o n n e c t i o n w i t h t h e forum, a p r i v a t e party should be able to levy execution on the commercial assets of the state party. D. CANADA The Canadian State Immunity Act commences with the general r u l e that the property of a f o r e i g n state located i n Canada immune is detention, from seizure execution, or forfeiture. "attachment, This 1 5 arrest, provision is compatible w i t h t h e g e n e r a l r u l e o f immunity c o n t a i n e d i n both t h e American and t h e B r i t i s h The immunity expressly issue from execution o r by i m p l i c a t i o n i s whether an legislations. could be waived under S . 1 1 ( 1 ) ( a ) . implicit waiver An can be either interesting interpreted to extend t o non-commercial a s s e t s o f t h e s t a t e . The s e c t i o n does not address principle states to this of according require immunity accorded on issue. non-commercial express and consistent with t o non-commercial unambiguous of the can be l e v i e d most s t a t e s would be r e l u c t a n t t o a t t a c h e s p e c i a l l y where such property activities. S t a t e p r o p e r t y used o r i n t e n d e d f o r a commercial is the assets of waiver assets before process state property, i s used f o r s o v e r e i g n appears immunity t o such them. Even then, It s u b j e c t t o measures o f e x e c u t i o n under S.11(b). activity Commercial 90 i n S.2 a c t i v i t y i s defined or any measures of the question i s used standard should of i t seems t o creditor to or is proof and the establish that intended for required difficulty proving the proving commercial use commercial i t s commercial 3. NEED FOR the the burden i s property commercial be use attendant of state litigation and jurisdiction activity„ modest. The court require in the party difficulty of s h u f f l e around i t s funds to a l i n k between the suit. Where dispute t h e i r courts measures of can under assume execution are a s t a t e pursuant t o an a r b i t r a t i o n award, these arguments requirement private use. connected t o t h e i r entertain state o f p a r t i c u l a r funds becomes c l e a r when c o u n t r i e s r e q u i r e t h a t the u n d e r l y i n g be a funds. The t h e i r t e r r i t o r y before sought a g a i n s t in in JURISDICTIONAL LINK Some c o u n t r i e s should a should i s remembered t h a t a s t a t e may conceal follow that from attempt t o balance the need f o r the p r o t e c t i o n o f secrets it reason o f i t s nature r u l e o f immunity o f s t a t e p r o p e r t y execution, judgment act, character. Given the g e n e r a l The particular transaction, r e g u l a r course of conduct t h a t by i s o f a commercial on as any is often on contractual relationship country before the grounded local merits of the on economic courts case. and can This political c o n s i d e r a t i o n s . Most c o u n t r i e s are r e l u c t a n t t o l e v y execution on in domestic countries in and, particularly, enforcement of foreign awards investments arising from their contracts which have no particularly that holds connection true a of considerable d e p o s i t o r s may funds other "jurisdictional which have the amount of has This a fact banking monetary i n d i v i d u a l s . The where execution. jockeying" deposits It greater is may 1 6 connection allow possibility with execution of the on to remove is that diplomatic country. underlying and these thought state properly, retaliations from protection also lead is sector fear i s that which c o u l d embarrass the h o s t no relationship which countries against, repercussions forum. be compelled t o c l o s e t h e i r accounts and to afforded the Switzerland f o r e i g n o r g a n i z a t i o n s and their with I f fora contractual there „strained arises diplomatic r e l a t i o n s between the c o u n t r i e s i n v o l v e d . Swiss law commercial territory. requires activities of a clear the connection state T h i s i s known as the in question concept o f In Kingdom o f Greece v. B a r , between and Swiss 'Binnenziehung „ 0 a Swedish company loaned 1 8 the 17 money t o the Greek s t a t e . When the l a t t e r d e f a u l t e d i n i t s repayment obligations, the court of first instance i n s t a n c e o f the Swedish company, a t t a c h e d in the Greece name o f challenged Tribunal. assume state the The the these over acts state had inter the before alia, some money at Genevese banks. Swiss Federal the acts connection the standing t h a t Swiss c o u r t commercial some Geneva, i n various attachment court held, jurisdiction if Greek of of with a could foreign the territory: "Not every p r i v a t e law r e l a t i o n s h i p e n t e r e d i n t o by a f o r e i g n s t a t e can g i v e r i s e t o proceedings in S w i t z e r l a n d . That r e l a t i o n s h i p must a t l e a s t have Swiss 92 some l i n k s w i t h Swiss t e r r i t o r y ... In o r d e r t h a t a l e g a l r e l a t i o n s h i p t o which a f o r e i g n s t a t e i s p a r t y may be considered to be connected with Swiss territory, i t must e i t h e r have i t s origin in S w i t z e r l a n d or f a l l t o be performed i n S w i t z e r l a n d , o r the debtor must have a t l e a s t taken c e r t a i n steps which make S w i t z e r l a n d a p l a c e o f p e r f o r m a n c e " 19 Under Swiss law, state engaged in a t h e r e f o r e , the mere f a c t t h a t a f o r e i g n commercial arbitration award against proceedings against the commercial a c t i v i t y , a sufficient Switzerland. it does foreign which not resulted i n permit state. In an enforcement addition to the the l e g a l r e l a t i o n s h i p i n v o l v e d must have domestic Where activity connection this domestic to link the is territory lacking, no of Swiss c o u r t i s competent t o e x e r c i s e j u r i s d i c t i o n even where a s t a t e has waived i t s immunity from T h i s p r i n c i p l e was Court in Libya v. execution. a f f i r m e d by Libyan American agreement between L i b y a and in connection arbitration. the with The the the other party to I n t e r n a t i o n a l Court who shall choose decision in agreement, the Libya O i l Coy. . where clause appoint an so, seat dispute. refused of to concession to be provided resolved that by i f one of a r b i t r a t o r when requested by the Presiding arbitration When Supreme that a l l disputes of J u s t i c e s h a l l appoint the A 2 0 concession do Swiss F e d e r a l LIAMCO p r o v i d e d arbitration p a r t i e s does not the a dispute appoint an Judge of the a sole arbitrator and make arose a final under arbitrator the and, pursuant t o the the a r b i t r a t i o n agreement, the P r e s i d i n g Judge of the seat of LIAMCO. ICJ appointed arbitration. an arbitrator The award who was choose Geneva as rendered in favor the of 93 The attached appeal Zurich District Court, at the request of LIAMCO, f i n a n c i a l a s s e t s of L i b y a a t c e r t a i n Z u r i c h banks. t o the F e d e r a l T r i b u n a l , the attachment was vacated On on the ground t h a t the l e g a l r e l a t i o n s h i p between the p a r t i e s had no connection with d i d not connect Switzerland. The s u b j e c t matter o f dispute Switzerland: "Circumstances [must] e x i s t which t i e the legal r e l a t i o n s h i p t o such an e x t e n t w i t h S w i t z e r l a n d t h a t i t i s j u s t i f i e d t o b r i n g the f o r e i g n s t a t e b e f o r e Swiss a u t h o r i t i e s , as t h e r e i s no reason, and does not s u b s t a n t i a l l y make any sense, t o permit legal actions against foreign states if a somewhat intensive domestic relationship i s lacking. The i n t e r e s t s of Switzerland do not r e q u i r e such a procedure; they c o u l d , on the c o n t r a r y , e a s i l y cause p o l i t i c a l and o t h e r d i f f i c u l t i e s . " 2 1 A sufficient domestic court's opinion, i f the settled i n Switzerland, relationship debt was existed, contracted o r a f o r e i g n debtor or in was s t a t e had the to engaged i n a c t i o n s s u i t e d t o e s t a b l i s h the venue i n S w i t z e r l a n d . a r e l a t i o n s h i p cannot be c r e a t e d by The court concluded a r b i t r a t o r l o c a t e d the that the Such the mere l o c a t i o n o f a s s e t s of t h e f o r e i g n s t a t e i n S w i t z e r l a n d . mere the 2 2 fact seat of a r b i t r a t i o n be that the sole i n Switzerland was too tenuous t o found j u r i s d i c t i o n : " I f the s e a t o f the A r b i t r a t i o n Board i s s e l e c t e d by t h i r d p a r t i e s o r by the A r b i t r a t i o n Board i t s e l f , this does not create a sufficient domestic r e l a t i o n s h i p t o S w i t z e r l a n d ; i n any case not i f the A r b i t r a t i o n Board i s r u l i n g on a d i s p u t e arising from a l e g a l r e l a t i o n s h i p which, per se, has no c o n t a c t p o i n t s with S w i t z e r l a n d . " 2 It is sufficient mutually not clear connection chosen whether with Geneva q u e s t i o n whether or not as the the court Switzerland the seat arbitration if of would the have found parties arbitration. had The agreement c o n s t i t u t e d 94 a waiver of immunity by Libya was considered immaterial because the e x i s t e n c e o f a j u r i s d i c t i o n a l l i n k was precedent t o the d e t e r m i n a t i o n a condition of the m e r i t s o f the T h i s approach i s noteworthy because i n proceedings the LIAMCO award i n the U.S., i t was held that i t s immunity from j u r i s d i c t i o n by s u b m i t t i n g t o The U.S. court contended was left open i n the that s i n c e the arbitration seat to waived arbitration. of 2 4 enforce Libya agreement, the have a n t i c i p a t e d t h a t proceedings dispute. 2 5 arbitration p a r t i e s must c o u l d have o c c u r r e d in the U.S. I t s h o u l d be p o i n t e d out t h a t a s t a t e s i g n a t o r y t o e i t h e r the New York difficult to or the Washington justify insistence between an a r b i t r a t i o n and validity test signatories irrespective are under on will find jurisdictional it links i t s forum. Once the award meets the either required Conventions to of the recognise o f the country where i t was conventions, and enforce obtained. the state award 95 FOOTNOTES 20 I.L.M. 878 (1981). 1 2 650 F. Supp. 73 (1986). 3 Goldman, "Enforcement o f F o r e i g n A r b i t r a t i o n Awards a g a i n s t P r i v a t e P a r t i e s and F o r e i g n S t a t e s " i n Aksen & von Mehren, I n t e r n a t i o n a l A r b i t r a t i o n Between P r i v a t e P a r t i e s and Governments 397, 409 (1982). 4 507 F. Supp. 311 (1980). 5 I d . a t 312. The c o u r t found support f o r t h i s view i n t h e l e g i s l a t i v e h i s t o r y o f t h e s t a t u t e : H. Rep. No. 94-1487, 94th Cong., 2d Sess., r e p r i n t e d i n [1976] U.S. Code Cong. & Ad. News 6604 a t 6617, 6627; and t h e d e c i s i o n i n I p i t r a d e v. F. R. N i g e r i a 465 F. Supp. 824, 826 (1978). 6 650 F.Supp. 73 (1986). 7 Supra, note 4. 8 When t h e E n g l i s h Court o f Appeal h e l d i n Alcorn v . R e p u b l i c o f Columbia [1983] 3 W.L.R. 906, t h a t mixed funds were a t t a c h a b l e , some d i p l o m a t i c m i s s i o n s i n t h e U.K. moved o r t h r e a t e n e d t o move t h e i r accounts t o t h e Channel I s l a n d s and o t h e r s made r e p r e s e n t a t i o n s t o t h e F o r e i g n O f f i c e t h a t on t h e grounds o f r e c i p r o c i t y , U.K. m i s s i o n s abroad might f i n d t h e i r p r o p e r t y l i a b l e t o attachment. See, Fox„ "Enforcement Jurisdiction, F o r e i g n S t a t e P r o p e r t y and D i p l o m a t i c Immunity" 34 I.C.L.O. 115, 121 (1985). 659 F. Supp. 606 (1987). 9 10 500 U.N.T.S. 95. 11 659 F. Supp. 606, 610, 12 [1984] 2 A l l E.R. 6. 13 [1983] 2 W.L.R. 750. 14 77 I.L.R. 513 (1988) . 15 S. 11(1). 1 6 See Delaume, "Judicial Decisions Related t o Sovereign Immunity and T r a n s n a t i o n a l A r b i t r a t i o n " 2 ICSID Review 403, 418 (1987). 96 For a d i s c u s s i o n of t h i s r u l e , see L a l i v e , "Swiss Law P r a c t i c e i n R e l a t i o n t o Measures o f E x e c u t i o n a g a i n s t P r o p e r t y of a F o r e i g n S t a t e " 10 Neth. Y. B. I n t ' l . L. (1979). 1 8 23 I.L.R. 195 1 9 I d . a t 196-97. 2 0 20 I.L.M. 151 2 1 Id. at 158. 2 2 Id. at 159. 2 4 2 5 and the 153 (1956). (1981). Id. See L i b y a n American O i l Coy v. L i b y a 482 F. Supp. 1175 (1980). The c o u r t f o l l o w e d the d e c i s i o n i n I p i t r a d e I n t e r n a t i o n a l S.A. v. N i g e r i a 465 F. Supp. 824 (1976)= I t s h o u l d be noted t h a t the c o u r t r e f u s e d t o e n f o r c e the award on the b a s i s o f the a c t o f s t a t e d o c t r i n e . Pending appeal t o the Court o f Appeal of the District of Columbia, the p a r t i e s s e t t l e d out o f c o u r t , and the c o u r t v a c a t e d the o r d e r of the D i s t r i c t Court. SECTION THREE THE INTERNATIONAL CENTRE FOR THE SETTLEMENT OF INVESTMENT ••• DISPUTES 1. INTRODUCTION International cardinal parts investment is widely recognized as a f a c t o r i n t h e economic development o f t h e d e v e l o p i n g o f t h e world. I f properly utilized, such investment would l e a d t o t h e economic growth o f t h e r e c i p i e n t countries« The substantial developed to part o f t h e investment the developing which countries flows are of from t h e a private n a t u r e . Such p r i v a t e investment may be i n t h e n a t u r e o f j o i n t ventures, management contracts, turn-key contracts, i n t e r n a t i o n a l l e a s i n g agreements o r agreement f o r t h e t r a n s f e r o f know-how and technology. Incidentally investing in expropriation, investment fortified most the developing government contract by foreign by the f a c t investors countries interference the host that investment and the e x i s t i n g This dispute The r e s u l t was t h a t to fear breach investor t h e s t a t e where t h e l a t e r contract. f o r the government. machinery d i d n o t guarantee t h e p r i v a t e remedy a g a i n s t are apathetic of of the fear was resolution an e f f e c t i v e i s i n b r e a c h o f the private not moving i n s u f f i c i e n t volume t o t h e d e v e l o p i n g c a p i t a l was countries. 98 The International resolved that dismantled by the the by on arbitration obstacles dislodging creation available Bank f o r R e c o n s t r u c t i o n of a an the private Development investment unfavourable could investment be climate i n t e r n a t i o n a l machinery which would voluntary of to and basis investment for disputes. the The be conciliation creation of and such an i n t e r n a t i o n a l machinery would be a g i a n t s t e p toward promoting an atmosphere of mutual confidence and thus stimulating a l a r g e r flow o f p r i v a t e c a p i t a l i n t o those c o u n t r i e s which wish to a t t r a c t i t . By 1 a r e s o l u t i o n adopted on mandated i t s Executive establishing on investment disputes of other States voluntary on the basis for Settlement of o f Other states only Convention arising from arbitration sovereign state. Contracting Convention As States which of and had not June a yet Investment institution. The Disputes purpose as a of the be settlement of and nationals and formulated Disputes private 1988, 8 ratified an would dealing Convention e s t a b l i s h e s the I n t e r n a t i o n a l of Convention October 14, 30, further bank a between 3 specifically between the conciliation Investment Convention came i n t o f o r c e on the the Directors States. a which through Executive 1964, "formulate procedures states The 2 to between c o n t r a c t i n g and N a t i o n a l s The is a and contracting arbitration". Convention Directors facilities available September 10, 1966. with party there signatories the This issues and a were 89 of the Convention. The Centre f o r Settlement autonomous Centre international is to provide 99 facilities for conciliation disputes. The ultimate 4 depoliticize investment and arbitration objective disputes of and the to of Centre promote investments c o n t r i b u t i n g t o economic development. 2. JURISDICTION OF THE Three conditions sub the dispute the is to flow of 5 CENTRE must can be a v a i l a b l e i n any 1) investment exist before the ICSID machinery proceeding: must be between d i v i s i o n o r agency d e s i g n a t e d a by Contracting State (or a C o n t r a c t i n g State) and a n a t i o n a l o f another c o n t r a c t i n g s t a t e . , 2) the p a r t i e s must have consented i n writing to submit t h e d i s p u t e t o ICSID. 3) the investment. dispute a legal dispute arising from an of the 6 Consent Centre. must be is Consent the cornerstone results of the e i t h e r from an jurisdiction arbitration clause or from an agreement t o submit t o ICSID an e x i s t i n g d i s p u t e . Such consent must be unilaterally. To i n w r i t i n g and cannot be withdrawn 7 ensure arising once g i v e n out the of reciprocal the performance application of the of obligations Convention, the f a c i l i t i e s o f the Centre i s a v a i l a b l e o n l y i n d i s p u t e s between a Contracting state. 8 The involving state. 9 a State Centre and can a therefore non-Contracting I t should be national State not or of another entertain a national noted t h a t a j u r i d i c a l contracting any of dispute such person which a has 100 the nationality eligible to of be a agreed t o t r e a t the state party party to the foreign c o n t r o l . take account insists that through a Morocco company behalf of tribunal a a U.S. their i f the where investors claim a channel company. filed corporation subsidiary declined treat would State State on government their investment Holiday own incorporated jurisdiction no as it Inns Morocco by their a behalf in and the agreement by v. Swiss Morocco. concerned explicit to host 11 against be had T h i s p r o v i s i o n i s intended 1 0 situation s u b s i d i a r y because t h e r e was to dispute proceedings incorporated involved and the foreign locally 12 the i t as a n a t i o n a l o f another C o n t r a c t i n g because o f into to on The local Morocco i t as b e i n g under f o r e i g n c o n t r o l w i t h i n the meaning o f the ICSID Convention. The dispute comes w i t h i n the must also be of a legal j u r i s d i c t i o n of the nature Centre. The before it d i s p u t e must concern the e x i s t e n c e o r scope of a l e g a l r i g h t o r o b l i g a t i o n , o r the nature breach o f disputes or extent legal raise questions which concern c o n f l i c t of the Nowhere in Several reasons fashion out feared that the a r e p a r a t i o n t o be o b l i g a t i o n . The which Finally, o f the Convention Centre can handle o n l y those of opposed those must is the for this satisfactory any law be definition occasioned as relate by to tendered an investment. investment fact. definition the to term I t was of may contemplate the p o s s i b l e changes i n the which may the interests. dispute account made f o r the be nature defined„ difficult term. too of It narrow to was to investments passage of time. T h i s lack of 101 definition has traditional enabled types contributions, investment states of joint resulting and the foreign Convention investment as from forms of such as new well There was 1 3 accommodate in ventures, investors, management c o n t r a c t s . to form as the of f r u s t r a t e or the dispute was consent was felt delay the by kinds association the profit-sharing and the parties should be questioning definition. left to a opportunity whether Since 1 4 c a r d i n a l t o the j u r i s d i c t i o n o f the Centre, i t that of between f u r t h e r danger t h a t proceedings by encompassed capital modern d e f i n i t i o n might p r o v i d e a r e l u c t a n t p a r t y w i t h an to both characterize was the nature of t h e i r contract. 3. ICSID AND The JURISDICTIONAL IMMUNITY municipal mechanism for effectiveness assistance recognizes Model Law of of of and acts arbitration as a a r b i t r a t i o n p r o c e s s i s guaranteed by the courts. calling The UNCITRAL upon each s t a t e a p a r t i c u l a r 'court' w i t h the functions r e l a t i n g to of arbitration appointment of Model adopting assistance arbitrators o f a r b i t r a t o r ' s mandate s e t t i n g a s i d e o f award ( A r t i c l e i s exclusive ICSID regime, however, Law the performance c o n t r o l of a r b i t r a l t r i b u n a l ' s j u r i s d i c t i o n Under the support The municipal to entrust usually proceedings. decision i n termination & 14), 16), system conduct t h i s f a c t by supervision, 13 o f the certain 11), the court and (Article (Articles (Article 34). consent to a r b i t r a t i o n of a l l o t h e r types of remedies. ICSID a r b i t r a t i o n 102 is to a considerable municipal court arbitration country extent system. clause If freed a from dispute i s brought b e f o r e i s a s i g n a t o r y t o the must d e c l i n e j u r i s d i c t i o n . contacts subject to a municipal ICSID Convention, This flows with from the the an ICSID court whose such a court provisions of A r t i c l e 26 o f the Convention: "Consent o f the p a r t i e s t o a r b i t r a t i o n under t h i s Convention s h a l l , u n l e s s otherwise s t a t e d , be deemed consent t o such a r b i t r a t i o n t o the e x c l u s i o n o f any other remedy." 15 The practical i m p l i c a t i o n of the Article is that the ICSID machinery i s s e l f - c o n t a i n e d . Once p a r t i e s consent t o ICSID a r b i t r a t i o n evident, they content must, u n l e s s themselves w i t h a the contrary remedies an intention i s and procedures adopted under the Convention. Absent a c o n t r a r y i n t e n t i o n , no municipal intervene relation court to of a Contracting appointment of State arbitrators, can regulation in of the t r i b u n a l ' s j u r i s d i c t i o n o r i n s e t t i n g a s i d e o f an ICSID award. The Convention c o n t a i n s in-house procedure f o r appointment arbitrators (Articles 37-40), regulation jurisdiction ( A r t i c l e s 36 & 41), and of the r e v i s i o n and of tribunal's annulment of awards ( A r t i c l e s 51 & 52). It should be noted that Article 26 i n t e r p r e t a t i o n r a t h e r than of substance. The party free recourse to to stipulate courts that of a r b i t r a t i o n clause. A r t i c l e any i t reserves law 26 express s t i p u l a t i o n t o the It contrary is clear from i n t e n t i o n by the the is a rule of s e c t i o n leaves the right notwithstanding to the o n l y a p p l i e s i n the a have ICSID absence of contrary. above discussion Contracting that P a r t i e s , no absent a municipal 103 c o u r t can i n t e r v e n e i n an ICSID proceeding, recognition whether and enforcement consent jurisdictional t o ICSID stage. a t l e a s t u n t i l the Therefore, proceeding the issue c o n s t i t u t e s waiver immunity b e f o r e m u n i c i p a l of c o u r t s may n o t a r i s e u n t i l t h e r e c o g n i t i o n and enforcement stage. In MINE v . G u i n e a for the establishment transport Guinean agreement they between them disputed. 1 6 the p a r t i e s entered into a contract and p r o v i s i o n o f s h i p p i n g bauxite to e x p r e s s l y agreed t o ICSID By Guinea's f o r e i g n markets. By a t o submit any d i s p u t e arbitration. account, services to What took MINE agreed place to f i l e later arising next i s a formal a r b i t r a t i o n r e q u e s t w i t h ICSID. MINE took no such s t e p , r a t h e r three years District the later, under both court t h e U.S. Court f o r the o f Columbia t o compel a r b i t r a t i o n under s e c t i o n 4 o f Federal (FSIA). i t petitioned Arbitration (FAA), asserting t h e FAA and t h e F o r e i g n Guinea ordered Association Act declined Sovereign t o attend arbitration before jurisdiction Immunities A c t the proceedings t h e American and t h e Arbitration (AAA). Guinea d i d n o t appear b e f o r e t h e a r b i t r a t o r s who rendered an award i n f a v o u r o f MINE. On an a p p l i c a t i o n by MINE t o t h e District Guinea Court t o confirm contended arbitration that rested on and e n t e r the court's an judgment earlier incorrect on t h e award, order premise to compel because ICSID a r b i t r a t i o n had indeed been a v a i l a b l e . The c o u r t confirmed t h e award and e n t e r e d judgment on t h e ground, i n t e r a l i a , a g r e e i n g t o ICSID a r b i t r a t i o n , submit to arbitration t h a t by Guinea had i m p l i e d l y agreed t o i n the United States, since ICSID 104 headquarters are located arbitration In i n the United t h e U.S., States and t h a t constituted a consent to waiver of Guinea's immunity from s u i t under S. 1605(a)(1) o f t h e FSIA. The the court ignored the f a c t t h a t by v i r t u e FSIA, t h e A c t a p p l i e s " s u b j e c t t o e x i s t i n g agreements t o which t h e U n i t e d States agreement i s t h e ICSID Convention arbitration to have refuse on A r t i c l e t o order i s a party". t o confirm t h e AAA. an t o ICSID The AAA arbitration, t h e subsequent but also i n award. MINE breached the agreement by a r b i t r a t i n g under t h e a u s p i c e s District Court should have affirmed U.S. Convention down t h e award. As i n d i c a t e d above, where t h e r e i s ICSID immunity such not only to t r e a t y o b l i g a t i o n s by u s i n g A r t i c l e 26 o f t h e ICSID to s t r i k e One under which consent 26 o f t h e Convention the i n i t i a l ICSID a r b i t r a t i o n of international i s e x c l u s i v e o f any o t h e r remedy. The c o u r t ought relied refusing o f S. 1604 o f arbitration before recognition agreement, municipal courts and enforcement stage, the does issue of not a r i s e unless sovereign until the p a r t i e s the agree otherwise. On appeal Columbia, t o t h e Court t h e lower court's o f Appeal decision ground t h a t Guinea had not waived of the D i s t r i c t was reversed i t s immunity from of on t h e suit i n t h e c o n t e x t o f t h e FSIA: "A key reason why pre-FSIA cases found t h a t an agreement t o a r b i t r a t e i n t h e U n i t e d S t a t e s waived immunity from s u i t was t h a t such agreement c o u l d o n l y be e f f e c t i v e i f deemed t o contemplate a r o l e f o r United States courts i n compelling a r b i t r a t i o n t h a t s t a l l e d a l o n g t h e way ... As t h i s p a r t i c u l a r ICSID agreement concededly d i d n o t f o r e s e e such a r o l e f o r U n i t e d S t a t e s Courts, we h o l d t h a t i t d i d 105 not waive Guinea's s o v e r e i g n immunity even though the agreed-to a r b i t r a t i o n would probably take p l a c e on U n i t e d S t a t e s s o i l . " 1 7 A better based on approach the would have exclusive character been of to decide the case ICSID a r b i t r a t i o n . This would have been c o n s i s t e n t w i t h the t r e a t y o b l i g a t i o n s , of the U.S. the to More existing •I importantly, i n t e r n a t i o n a l agreements i t was A O to applies which subject the U.S. incumbent on the c o u r t t o e n f o r c e abstention contained The only ICSID a the r u l e of a t which the arbitration can issue of sovereign arise is at the not courts. o r i n s i t u a t i o n s where, pursuant t o preclude Where an properly before jurisdictional Article rendered them issue from remedies relating a municipal to court, obtainable an ICSID can the and Article arbitration in domestic arbitration state party is plead immunity? 54 obligates states to recognize an pursuant t o the Convention as b i n d i n g and pecuniary immunity recognition the p a r t i e s agree t h a t t h e i r consent t o ICSID does is i n A r t i c l e 26 o f the ICSID Convention. stage enforcement stage, 26, FSIA Q party , and since obligations t e r r i t o r i e s as imposed by i f i t were a f i n a l that award award enforce within the its judgment o f a c o u r t i n t h a t s t a t e . Each C o n t r a c t i n g S t a t e i s thus o b l i g e d t o a s s i m i l a t e an ICSID award court. This arbitration to the status implies must that of a final every contemplate judgment state the party attendant an against can not i s sought t o be t h e r e f o r e be enforced heard t o i t s local to an involvement C o n t r a c t i n g S t a t e s i n e n f o r c i n g any award of plead a of ICSID fellow award. When such state party, i t jurisdictional immunity. 106 In Liberia Eastern Timber Corp. c h a l l e n g e d t h e j u r i s d i c t i o n o f U.S. award on the jurisdiction ground that because the Liberia v. Liberia to that FSIA had enforce since A r t i c l e ICSID awards, 54 . .Liberia c o u r t s t o e n f o r c e an ICSID deprived not the waived requires Liberia court agreement. as pecuniary a signatory obligations clearly contemplated L i b e r i a waived t o the Convention, o f the award. The including court concluded r u l e s i n the s t a t e c o n c e r n e d . are Provisions the outside i s s u e whether t h e s t a t e p a r t y the i n accordance w i t h t h e T h i s i s because 20 scope o f the c o n v e n t i o n a r e validity of domestic immunity w i t h r e s p e c t t o t h e domestic remedies has t o be determined remedies that o f the ICSID a r b i t r a l award. a t t h e same time, t h e can p l e a d j u r i s d i c t i o n a l the courts with Where t h e p a r t i e s e l e c t t o pursue both ICSID and remedies the i n enforcing i t s s o v e r e i g n immunity b e f o r e U.S. r e s p e c t t o the enforcement The Contracting States involvement o f the c o u r t s o f any C o n t r a c t i n g S t a t e s , the U.S. of i t s sovereign immunity by e n t e r i n g i n t o an ICSID a r b i t r a t i o n court held 1 9 pleas of of the jurisdictional such domestic ICSID inapplicable immunity Convention. i n determining immunity in such circumstances. Finally, plead i t s h o u l d be jurisdictional cardinal consent essence of the o noted immunity the parties. that before jurisdiction Absent cannot assume j u r i s d i c t i o n . 2 1 such a an of state ICSID party cannot tribunal. the Centre consent the is A the tribunal But once consent i s g i v e n none 22 of the parties may unilaterally withdraw its consent , n e i t h e r can i t s t a l l the a r b i t r a t i o n proceedings by r e f u s a l t o 107 participate. the issue W i t h i n the o f immunity system" of the from suit Convention, does not arise therefore, once a state p a r t y has g i v e n i t s consent t o a r b i t r a t i o n . Indeed, reference to jurisdictional immunity i n a p p r o p r i a t e i n proceedings b e f o r e ICSID a r b i t r a t o r s the concept courts. J states from was designed A t no time was arbitral for application t h e r e ever an proceedings before immunity t o which they is because municipal granted had to hitherto consented. 4. THE ICSID AND We have INTERIM MEASURES OF PROTECTION seen that the exclusive character of the competence o f ICSID t r i b u n a l i s guaranteed by A r t i c l e 26 which p r o v i d e s t h a t consent of the p a r t i e s t o a r b i t r a t i o n under the Convention shall, u n l e s s otherwise stated, be t o such a r b i t r a t i o n t o the e x c l u s i o n of any question whether relates to this exclusivity of deemed consent o t h e r remedy. ICSID i n t e r i m measures of p r o t e c t i o n has The jurisdiction been a s u b j e c t of heated c o n t r o v e r s y . The provisions of the Convention dealing measures does not i n d i c a t e whether the t r i b u n a l with has interim exclusive j u r i s d i c t i o n i n such matters. I t p r o v i d e s : "Except as the p a r t i e s otherwise agree, the t r i b u n a l may, i f i t c o n s i d e r s t h a t the c i r c u m s t a n c e s so r e q u i r e , recommend any p r o v i s i o n a l measures which should be taken t o p r e s e r v e the r e s p e c t i v e r i g h t s of the p a r t i e s . " 2 4 One s c h o o l of thought ICSID t r i b u n a l contends t h a t the competence o f an t o g r a n t i n t e r i m measures i s both g e n e r a l and 108 e x c l u s i v e . I n o t h e r words, by c o n s e n t i n g the parties waive protection, before their right t o ICSID a r b i t r a t i o n , t o seek interim measures o f i n c l u d i n g attachment, i n domestic c o u r t s , o r a f t e r t h e i n s t i t u t i o n o f ICSID p r o c e e d i n g s . For t h e proponents of the extensive theory, from domestic c o u r t s may be sought o n l y i n t h r e e whether 2 5 assistance cases: - I f t h e p a r t i e s so p r o v i d e ; -If ICSID the Secretary-General ICSID declines tribunal jurisdiction following a r e f u s a l by t o r e g i s t e r a request holds that an issue o r when an i s not within i t s competence; and -when an award executed. The i s rendered, second school o f thought ICSID t r i b u n a l t o grant by no means they theory. exclusive. contend, They subject court the contends t h a t interpret t h e power o f not r e a l l y t h e word o f t h e Convention i n support 'remedy* can c o n s i d e r the may n o t a s s i s t of the merits an ICSID a r b i t r a t i o n . Article 26 has no extensive i n Article 26 as o f a case which t o an ICSID a r b i t r a t i o n , b u t n o t t h a t provisions i t is i n t e r i m measures o f p r o t e c t i o n i s The p r o v i s i o n s do meaning t h a t no c o u r t is that 2 6 an point, t o .ensure 2 7 a municipal In t h e i r bearing on view interim measures o f p r o t e c t i o n because t h e l e g i s l a t i v e h i s t o r y o f t h e section discloses that and meaning o f consent i t s o b j e c t i v e was t o s p e c i f y t h e scope t o ICSID a r b i t r a t i o n . No mention i s made o f t h e s u b j e c t o f p r o v i s i o n a l measures. ° The school preponderance o f j u d i c i a l a u t h o r i t y support t h e f i r s t of thought. In A t l a n t i c Triton Company Limited v. 109 Guinea 2 9 the Court of Appeal o f Rennes, France, r u l e d t h a t ICSID tribunal had exclusive jurisdiction to grant an interim measure: "The ICSID Rules s p e c i f y t h a t unless otherwise agreed by the p a r t i e s , consent t o a r b i t r a t i o n by ICSID i s e x c l u s i v e o f o t h e r remedy, and therefore the p a r t i e s cannot apply t o l o c a l a d m i n i s t r a t i v e o r j u d i c i a l a u t h o r i t i e s , t o o b t a i n p r o v i s i o n a l measures, but must have recourse t o the a r b i t r a l t r i b u n a l ... The t r i b u n a l has the g e n e r a l and e x c l u s i v e power t o r u l e not o n l y on the m e r i t s o f the d i s p u t e but a l s o on a l l p r o v i s i o n a l measures." On that f u r t h e r appeal t o the the recourse to text of that municipal only 26 did t o a judge t o request guaranty the held Article Court o f C a s s a t i o n , execution the Convention courts judicial of t o order decision not does not May and against June known t o 1985, MINE Guinea i n B e l g i a n attachments was Arbitration Association not appear. an The the writer after a in to a r b i t r a t i o n proceedings Court ground of that Appeal representation Guinea for did favours that award, but the District waive by the had its 26. for the In the American ordered i t was of number Guinea Guinea had under the not a proceeding basis i n which Court to U.S. 1980 hearing District confirmed which Swiss c o u r t s . The MINE'S later the attachment on same c o u r t i s about Guinea l e d t o an arbitration consent of 26. initiated rendered court power i n t e r p r e t a t i o n of A r t i c l e and award U.S. the i n t e r i m measures. T h i s d e c i s i o n s on the prohibit measures designed preempt a r b i t r a t i o n between MINE and of j u d i c i a l to held a n t i c i p a t e d award. The r e s t r i c t i v e i n t e r p r e t a t i o n of A r t i c l e The intend conservatory an i t was did AAA refused ICSID. The reversed by Columbia on the jurisdictional n o immunity. In 30 May 1984, MINE initiated an arbitration p r o c e e d i n g a g a i n s t Guinea w i t h the ICSID. With court regard held because to that the the attachment i t had jurisdiction competent and Belgian the dispute the i n t e r v e n t i o n o f m u n i c i p a l c o u r t s o f a s t a t e which r a t i f i e d the The i s exclusively over the excludes Convention. ICSID no proceedings, 3 1 Court o f f i r s t Instance o f the Canton o f Geneva h e l d t h a t r e c o u r s e t o ICSID a r b i t r a t i o n c o n s t i t u t e d o f a l l o t h e r means of s e t t l e m e n t . to the Surveillance Authority authority dealing, inter a l i a , On 3 2 in a renunciation a subsequent Geneva (a request quasi-judicial w i t h attachments), i t was held t h a t i n r e s o r t i n g t o ICSID a r b i t r a t i o n p r o c e e d i n g , MINE waived its ability to request municipal c o u r t s . The Article merely urgently, may be of the i s t h a t i t may illusory. i t may living measures of protection from 3 3 disadvantage 26 interim expansive interpretation make t h e g r a n t o f i n t e r i m measures In s i t u a t i o n s where such measures are be difficult t o convene the of sought arbitrators who i n d i f f e r e n t c o u n t r i e s . I t t a k e s even more time f o r such awards t o be e n f o r c e d through d e l a y o c c a s i o n e d by these f a c t o r s may whom the measure i s sought to a municipal court. The enable t h e p a r t y a g a i n s t safeguard h i s a s s e t s from the A d m i n i s t r a t i v e C o u n c i l of the ICSID on September 26, attachment. The 1984, amended Paragraph the ICSID Arbitration Rules F i v e t o Rule 36. I t p r o v i d e s t h a t : by adding a new Ill "Nothing i n t h i s Rule s h a l l prevent the p a r t i e s , provided that they have so stipulated in the agreement r e c o r d i n g t h e i r consent, from r e q u e s t i n g any j u d i c i a l o r o t h e r a u t h o r i t y t o o r d e r p r o v i s i o n a l measures, prior to the institution of the proceedings, o r d u r i n g the proceedings, f o r the preservation of their respective rights and interests." The express implication of agreement on the the new rule jurisdiction i n t e r i m measures of p r o t e c t i o n , no grant such advised to include conservatory a an before absent court ICSID a r b i t r a t i o n each municipal an courts municipal provision allowing measures that, of municipal grant remedy. P a r t i e s t o is can are well to seek party courts. to The ICSID recommends the f o l l o w i n g Model C l a u s e : "The consent t o a r b i t r a t i o n r e c o r d e d i n [the b a s i c c l a u s e ] s h a l l not p r e c l u d e any p a r t y h e r e t o from taking, or requesting any judicial or other a u t h o r i t y t o order, any p r o v i s i o n a l or c o n s e r v a t o r y measure, including attachment, prior to the institution of the proceeding or during the p r o c e e d i n g , f o r the p r e s e r v a t i o n o f i t s r i g h t s and interests. 1 1 3 4 5. ICSID AND One was STATE IMMUNITY FROM EXECUTION of the to afford settling believed that private the will to objectives for setting up disputes guarantee help the investors promote with of host functional the flow developing nations viewpoint, the of of most a g a i n s t the means f o r It means dispute of capital the world. satisfactory s t a t e p a r t y . Without ICSID nations. r e s o l u t i o n p r o c e s s must guarantee t h e r e a l i z a t i o n obtained the foreign private investors a r e l i a b l e investment resolution developed primary this was from From the a dispute o f an award guarantee the 112 hope f o r o b t a i n i n g r e d r e s s a g a i n s t a r e c a l c i t r a n t may be illusory. The to s t a t e party t a s k b e f o r e the d r a f t e r s o f t h e ICSID Convention balance the awards w i t h laws on need the f o r guarantee insistence s t a t e immunity t h e Convention of of enforcement foreign states should not be of that was ICSID domestic tampered w i t h . How does r e a l i z e t h i s objective? I t makes a c l e a r d i s t i n c t i o n between the r e c o g n i t i o n and execution State stages. to recognize Convention imposed Article as by an binding the award 54(1) empowers award and rendered enforce within each the Contracting pursuant to the pecuniary o b l i g a t i o n s i t s territory as i f i t were a f i n a l judgment of a c o u r t i n t h a t s t a t e . Thus the s t a t e p a r t y cannot raise o b j e c t i o n , whether based nature o f t h e award or p u b l i c p o l i c y , enforcement of more e a s i l y enforceable under the New The the award. In than an York C o n v e n t i o n . ICSID Convention this on the execution immunity, t o t h e r e c o g n i t i o n and sense, award an ICSID award sought t o be enforced t r e a t s t h e r e c o g n i t i o n stage stage. is \ 35 u l t i m a t e phase o f the a r b i t r a l p r o c e s s . to sovereign Execution as Different rules of an ICSID the apply award is governed by t h e laws c o n c e r n i n g e x e c u t i o n o f judgment i n f o r c e 36 i n t h e s t a t e i n whose t e r r i t o r i e s Thus while Article 54(1) e n f o r c e a b i l i t y , A r t i c l e 54(3) such establishes in instance Benvuti of & Bonfanti P a r i s granted i s sought. recognition d e a l s w i t h the e x e c u t i o n The d i s t i n c t i o n between the two out execution v. and stage. stages i s c l e a r l y brought Congo . 37 The r e c o g n i t i o n and Court of enforcement first of an 113 ICSID award w i t h a caveat that "no measure o f execution, even a c o n s e r v a t o r y measure, can be taken pursuant award or any assets authorization". On the located in France, t o the without our said prior 3 8 appeal, i t was recognition and argued t h a t the enforcement lower stage c o u r t mixed with the up execution stage, which a r e separated by the ICSID Convention. o f Appeal or The Court stated: "But c o n s i d e r i n g t h a t the o r d e r g r a n t i n g r e c o g n i t i o n and enforcement t o an arbitral award does not constitute a measure o f execution but only a d e c i s i o n p r e c e d i n g p o s s i b l e measures of e x e c u t i o n . . . the lower judge could not, therefore, without exceeding h i s a u t h o r i t y , d e a l w i t h the second s t e p , t h a t o f e x e c u t i o n , t o which r e l a t e s t h e q u e s t i o n of the immunity from e x e c u t i o n o f f o r e i g n s t a t e s . " 3 9 In SEE decision limited v. was to Yugoslavia , only a i t was 4 0 the necessary confirmation of held sequel of that an an award i t s validity. It exequatur and was no way in impugned on a s t a t e s ' s immunity from e x e c u t i o n . The ensures distinction, in t h a t although the context of ICSID arbitration, a s t a t e cannot p l e a d s o v e r e i g n a t t h e r e c o g n i t i o n and enforcement stage, i t may immunity rely on t h a t p l e a a t t h e e x e c u t i o n stage i f such a p l e a i s a v a i l a b l e under the laws of Contracting the State circumstances, uphold award that state admits Article defense against a where 55 immunity from a l l o w s the i n the state. execution As case of indicated E x e c u t i v e D i r e c t o r s o f the World Bank: is sought. execution If in a other courts of that s t a t e to enforcement by the of Report an ICSID of the 114 " A r t i c l e 54 r e q u i r e s C o n t r a c t i n g S t a t e s t o equate an award rendered pursuant t o the Convention w i t h a final judgment o f i t s own c o u r t s . I t does not r e q u i r e them t o go beyond t h a t and t o undertake f o r c e d e x e c u t i o n o f awards rendered pursuant to. the Convention i n cases i n which f i n a l judgments c o u l d not be e x e c u t e d . " 4 1 The ICSID Convention immunity from awards can private does not execution. be It recognized investor who e l i m i n a t e the merely and guarantees enforced wishes to question with execute that relative an ICSID ease. award of on p r o p e r t y o f a s t a t e p a r t y must contend w i t h t h e immunity A the rules a p p l i c a b l e a t t h e forum where he seeks t h e e x e c u t i o n . The issue was C o r p o r a t i o n v. Liberia Liberia. The tonnage fees, Liberian government vacate the under award judgment the arbitration, Convention U.S. in The Liberian plaintiff enforced fees U.S. court ground Liberia other because on the such The execution taxes prayed the award or, court in to the on i t s \ immunity the motion by of c o u r t granted and to to consenting Article respect the were based 54 of such the to ICSID the ICSID awards registration any vacate against the motion t o a s s e t s were immune from "with due on i t s property t h e FSIA. I t , however, s t a t e d t h a t LETCO was issuing ordered on denied tonnage against judgment which r e q u i r e s enforcement 4 3 Timber award and that invoked an execution the that Eastern and enforcing of got Liberia Both p r a y e r s the execution Liberia was i n the Contracting S t a t e s . the The execution FSIA. on . registration i n the the 4 2 judgment alternative, located considered fees vacate due execution to under not e n j o i n e d from p r o p e r t i e s which are used f o r commercial a c t i v i t i e s and t h a t f a l l w i t h i n one o f the 115 exceptions later d e l i n e a t e d i n S e c t i o n 1619 attached several Liberian [of the Embassy FSIA]". bank LETCO 4 4 accounts in s a t i s f a c t i o n o f the award. On a p p l i c a t i o n by L i b e r i a , the District Court f o r the D i s t r i c t o f Columbia quashed the o f attachment because the accounts enjoyed d i p l o m a t i c under the no 1961 exception Vienna Convention on of the FSIA a p p l i e d t o t h e i r grant of sovereign The Diplomatic above cases immunity. illustrate deprive the the fact that immunity the drafters rules of of States the ICSID immunity because an property Convention from of representatives, support the views overwhelming o f the r e t e n t i o n of the While execution, c a p i t u l a t i n g to the of did execution the not of derogate expressed majority existing rules prevent state party. obtaining rules. Convention p r o v i d e s and 45 a on immunity accounts i s sought may execution writs Relations, a p p l i c a b l e i n the p l a c e where e x e c u t i o n forced U.S. The from the in Contracting by government of whom were of immunity in 4 6 rules sanctions from f o r defiance of ICSID awards. Where a d i s p u t e i s s u b j e c t t o ICSID a r b i t r a t i o n , no Contracting State can.give diplomatic p r o t e c t i o n or bring an i n t e r n a t i o n a l c l a i m on b e h a l f o f i t s n a t i o n a l i n r e s p e c t of such a d i s p u t e . to comply with protection I f the the s t a t e p a r t y t o the ICSID is restored. 4 7 award, the Furthermore, dispute right i f the to refuses diplomatic non-compliance d e r i v e s from a d i s p u t e as t o the i n t e r p r e t a t i o n o r a p p l i c a t i o n o f the the Convention, any International method o f s e t t l e m e n t o f the p a r t i e s may Court of Justice, i s agreed u p o n . 4 8 r e f e r the matter t o unless an alternative 116 Agreeably, forcible execution objective remedy were of for claimants reluctant on a other any an to is to party. hearing before nations. their voluntary them c o n f i d e n c e award. There i s then compliance w i t h seeks t o r e l y that the with the on of that emergence o f the most c o u n t r i e s where c o n s i d e r a b l e commercial assets satisfaction of of their arbitrators, c o u r t systems of i n the little f a i r n e s s of motivation from e x e c u t i o n , immunity i n those assets states debts. the level part of on of state Second, even i f a s t a t e p a r t y 4 9 has restrictive (especially guarantees the awards. Indeed the i t s immunity efficacy very from short-coming as i t ICSID awards on parties i s quite encouraging. governments immunity independent gives the effective Convention This t h e i r p a r t not t o comply w i t h an dispute, the than Although guarantee such a t e r r i b l e First, effective undue i n t e r f e r e n c e from the m u n i c i p a l ensuing world state investment look. fair less relinquish not be first state parties a without in are the Convention T h i s may seem sanctions against the quite execution. may these 5 0 eroded theory of financial o f most are i t will A considerably immunity. capitals s t a t e s are liable realize to successful of In the located), attachment in claimant can always a t t a c h such commercial a s s e t s . The Convention arbitrations The from i s largely successful i n t e r f e r e n c e from in immuning municipal legal systems. r u l e o f a b s t e n t i o n ensures t h a t a l l d i s p u t e s s u b j e c t t o ICSID a r b i t r a t i o n c l a u s e are handled under the is ICSID also because a modest improvement i t eliminates the on grounds the on New which an Convention. I t York Convention recognition and 117 enforcement o f an award may the ICSID Convention, be refused. Within the scheme of once an award i s not a n n u l l e d , t h e r e i s no ground f o r r e f u s i n g t o r e c o g n i z e and e n f o r c e t h e award, not even p u b l i c p o l i c y c o n s i d e r a t i o n s . Although from rules execution of on immunity state ensure t h a t compliance as i t may from execution property, the may factors the non-derogation impede indicated w i t h ICSID awards i s not as appear on the s u r f a c e . forcible above problematic 118 FOOTNOTES 1 Report o f t h e E x e c u t i v e D i r e c t o r s on t h e Convention on t h e Settlement o f Investment Disputes between S t a t e s and N a t i o n a l s o f Other S t a t e s , 1965 I.L.M. 524, 525. 2 I d . a t 524. 3 17 UST 1270, TIAS No. 6090; 575 UNTS 159. 4 Article 1(2). S h i h a t a , "Towards a G r e a t e r D e p o l i t i c i z a t i o n o f Investment D i s p u t e s : The Role o f ICSID and MIGA" 1 ICSID Review (1986) 1. 5 6 See A r t i c l e s 25-27. 7 Article 25(1). Id. 8 F o r a d e t a i l e d d i s c u s s i o n on t h e j u r i s d i c t i o n o f t h e Centre, see Amerasinghe, "The J u r i s d i c t i o n o f t h e I n t e r n a t i o n a l Centre f o r t h e Settlement o f Investment D i s p u t e s " 19 I n d i a n J . I n t ' l L. (1979) 166. 9 1 0 Article 1 Delaume, T r a n s n a t i o n a l C o n t r a c t s 1 1 2 1 3 25(2)(b). (1986) I I , XV, 18. L a l i v e , "The F i r s t 'World Bank' A r b i t r a t i o n ( H o l i d a y Inns v. Morocco) - Some L e g a l Problems" 51 B r i t . Y. B. I n t ' l L. (1980) 123. \ Delaume, T r a n s n a t i o n a l C o n t r a c t s (Law and P r a c t i c e ) , 353. 1 4 Comment by Broches i n Convention on t h e Settlement o f Investment Disputes between S t a t e s and N a t i o n a l s o f Other S t a t e s , H i s t o r y of. the Convention (1968) Volume I I , 54. 1 5 The A r t i c l e f u r t h e r p r o v i d e s t h a t a C o n t r a c t i n g S t a t e may require t h e exhaustion of local administrative or judicial remedies as a c o n d i t i o n o f i t s consent t o a r b i t r a t i o n under t h e Convention. 1 6 693 F. 2d. 1094 (1982). 1 7 I d . a t 1103. 1 8 S. 1604 o f t h e FSIA. 1 9 650 F. Supp. 73 (1986). 119 00 See g e n e r a l l y t h e d i s c u s s i o n i n Chapter Four, S e c t i o n One. 2 See A r t i c l e 25. 1 Id. See note 20. A r t i c l e 47. 2 2 2 3 2 4 ~ Delaume, T r a n s n a t i o n a l 2 5 . ' C o n t r a c t s (1986) 11, XV, 48. 2 6 Marchais, "ICSID T r i b u n a l and P r o v i s i o n a l Measures Introductory Note t o D e c i s i o n s of the Tribunal of Antwerp, and Geneva i n MINE v . Guinea" 1 ICSID Review (1986) 372, 378. , 2 7 van den Berg, "Some Recent Problems i n t h e P r a c t i c e o f Enforcement under t h e New York and ICSID Conventions" 2 ICSID Review (1987) 439, 454. 2 8 See g e n e r a l l y , H i s t o r y o f t h e Convention, supra note 8. 2 9 26 I.L.M. (1986) 373. 3 0 693 F. 2d. 1094 (1982). 3 1 Guinea V. MINE 24 I.L.M. (1985) 1639. 3 2 X I I Y. Comm. A r b . (1987) 514, 521. 3 3 26 I.L.M. (1987) 382. 3 4 C l a u s e XVI, ICSID Model Arb. (1984) 173. 3 5 See A r t i c l e V o f t h e New York Convention f o r t h e v a r i o u s grounds on which r e c o g n i t i o n and enforcement o f a f o r e i g n a r b i t r a l award may be denied. These i n c l u d e p u b l i c p o l i c y and excess o f j u r i s d i c t i o n . 3 6 See A r t i c l e s 3 7 20 I.L.M. (1981) 878. 3 8 I d . a t 879. 3 9 I d . a t 881. 4 0 98 J o u r n a l du D r o i t I n t e r n a t i o n a l 4 1 Report o f E x e c u t i v e D i r e c t o r s , supra note 1, a t 530. 4 2 650 F. Supp. Clause, reprinted i n 9 Y. Comm. 54(3) and 55 o f t h e ICSID Convention. (1986) 73. (1971) 131. 120 4 3 I d . a t 76. 4 4 I d . a t 78. 4 5 659 F. Supp. 4 6 (1987) 606. See Broches, c1nven?ion: Enforcement, e t seq. "Awards Rendered Pursuant t o . t h e ICSID Binding Force, Finality Recognit! n Execution" 2 TCSID Review (1987) 287, 329 4 7 Article 27. 4 8 Article 64. 4 9 Delaume, "ICSID A r b i t r a t i o n P r o c e e d i n g s : P r a c t i c a l 5 Pace L. R. (1985) 563, 589. 5 0 see our d i s c u s s i o n i n S e c t i o n I I , Chapter Three. Aspects" 121 CONCLUSION The p a r t i c i p a t i o n o f s t a t e s i n commercial a r b i t r a t i o n has w i t n e s s e d a steady i n c r e a s e i n r e c e n t y e a r s . T h i s i s t h e case both in the arbitrations. context of ICSID and other institutional S t a t e s appear n o t o n l y as defendants but also, i n some cases, as c l a i m a n t s . It i s instructive immunity, both as t o note regards arisen i n a significantly cases the arbitration state process that the issue jurisdiction and of sovereign execution, has few number o f c a s e s . I n most o f t h e parties actually and, where participate they loose, in fulfill the their o b l i g a t i o n s under t h e award. Thus, t h e r e c o r d o f compliance by governments with international arbitral encouraging. Many reasons account f o r t h i s First, the arbitration process awards private arena, with very ensures minimal that role trust and good i n the a r b i t r a t i o n proceedings within incentive arbitration f o r distrust Both process i s guaranteed which faith. disputes i n a friendly interference c o u r t s o f another s t a t e . A r b i t r a t i o n i s conducted of mutual parties so d e s i r e . i s normally and consequent p l a y an a c t i v e This conducted refusal by t h e i n a climate and c o n f i d e n t i a l i t y i f they very fact. between a s t a t e and a p r i v a t e p a r t y a r e s e t t l e d and is o f the atmosphere offers no to satisfy an award. Again, some cases states as do n o t o n l y claimants appear or as defendants counter-claimants. but i n This 122 demonstrates t h e l e v e l o f c o n f i d e n c e which most s t a t e s have i n the a r b i t r a t i o n process. the arbitration, i t s active i s a contributory Should the state be u n s u c c e s s f u l in p a r t i c i p a t i o n i n t h e proceedings factor to i t s willingness t o comply w i t h t h e award. The i n t e r n a t i o n a l business sector i s a c l o s e l y k n i t one. No s t a t e can a f f o r d t h e stigma o f b e i n g u n r e l i a b l e i n b u s i n e s s affairs. Foreign investors will be l e s s l i k e l y t o do b u s i n e s s w i t h such a s t a t e . I n t h i s e r a when most c o u n t r i e s foreign private investors with sundry a r e wooing incentives, i t is d i f f i c u l t t o imagine t h a t any s t a t e can a f f o r d t o p a i n t as an u n r e l i a b l e b u s i n e s s There practice are s t i l l i n relation constituted i n s i s t that elements of discrepancy t o t h e scope i n an a r b i t r a t i o n o f waiver of such waiver extends t o t h e e x e c u t i o n stage, others process. The While immunity states stage agreement. i n state some arbitration as t h e u l t i m a t e practical phase o f t h e significance of this i n approach i s v e r y minimal. I n both cases once an award a g a i n s t state, partner. some view t h e t h e r e c o g n i t i o n difference itself a state t h e commercial i s recognized assets by t h e c o u r t s of the state party o f another a r e normally l i a b l e t o measures o f e x e c u t i o n . The position could be p u t beyond doubt i f the parties supplemented t h e a r b i t r a t i o n agreement w i t h an express waiver o f immunity. Much o f t h e time and money expended i n l i t i g a t i n g the impact of sovereign immunity on the e f f i c a c y o f the a r b i t r a t i o n p r o c e s s would be saved i f o n l y the p a r t i e s at i s drafted, the time the arbitration agreement could, make 123 provisions for recognition, the waiver enforcement of and immunity both execution during stages in the those j u r i s d i c t i o n s where i t i s most l i k e l y t h a t enforcement w i l l sought. This is International normally loan the case agreements with in lending always waivers of be operations. contain immunity. detailed provisions dealing Drafters arbitration agreements i n v o l v i n g s t a t e p a r t i e s s h o u l d of emulate this practice. The state extension immunity o f the from r e s t r i c t i v e doctrine of execution ensures that immunity only the non- commercial a s s e t s of s t a t e s are p r o t e c t e d . A p r i v a t e p a r t y always attach immunity those the from commercial execution jurisdictions, assets i s available like the i s on the a state (with Soviet embraced t h e r e s t r i c t i v e t h e o r y the burden of the Union, even o f immunity). As we claimant has use of such financial the burden may property assets exceedingly are difficult can have seen, t o prove t h a t p a r t i c u l a r state be readily prove ascertained. But p r i v a t e p a r t y may that commercial purposes. A s t a t e may they easily are being where find i t used may from the claimant. The only l i e i n lowering p o s i t i o n of permissible activity upon on which U.S. the the and the standard French property claim law used is for shuffle i t s financial a s s e t s i n such a manner as t o c l o u d i t s commercial usage. solution are be e a s i l y d i s c h a r g e d because the i n v o l v e d , the to of not a s s e t s a r e used f o r commercial purposes. Where such a s s e t s r e a l property, can where exception which to of proof that for based required execution the The is commercial constitutes an 124 unnecessary against a interference state. The with effect t h e enforcement of t h i s of requirement an award i s that a p r i v a t e p a r t y cannot r e a l i z e an award i f t h e commercial a s s e t s of the state longer utilized i n existence. i n the underlying transaction I f a state uses a particular i s no asset f o r commercial a c t i v i t i e s , t h e r e i s no j u s t i f i a b l e reasons why i t s financial obligations irrespective of should not the connection be met between the from that funds fund and the transaction i n question. The b e s t means principle provisions on of l i m i t i n g the a r b i t r a t i o n in the contract immunity. I t i s i l l - a d v i s e d t h e impact process i s by waiving, the o f t h e immunity making express state party's f o r a private party t o leave h i s f a i t h t o l o c a l r u l e s on immunity whose r a m i f i c a t i o n o f t e n v a r y from one c o u n t r y t o another. One c l a u s e d e a l i n g w i t h waiver o f immunity may well be the l i t i g a t i o n and easy enforcement difference o f an award. between expensive 125 BIBLIOGRAPHY 1. BOOKS G Aksen, & R.B. von Mehren, I n t e r n a t i o n a l between Private Parties and ( P r a c t i c i n g Law I n s t i t u t e , 1982). and State Arbitration Governments K.H. Bockstiegel, Arbitration (Deventer, 1984). Enterprises L.W. Craig, W.W. Park, & J . Paulsson, International Chamber o f Commerce Arbitration (Oceana P u b l i c a t i o n s I n c . , N.Y., 1986). G.R. Delaume, Transnational Contracts (Oceana P u b l i c a t i o n s Inc., N.Y., Release; 1986). ICC Congress S e r i e s , Comparative A r b i t r a t i o n P r a c t i c e and Public Policy i n Arbitration Ed. P i e t e r Sanders (Hague: Kluwer, 1987). J.D. " Lew, A. Law i n I n t e r n a t i o n a l Commercial (Oceana P u b l i c a t i o n s I n c . , N.Y., , Contemporary Problems i n I n t e r n a t i o n a l A r b i t r a t i o n (London, 1986). McCledon M.J. Applicable Arbitration 1978). & Goodman, I n t e r n a t i o n a l i n New York ( Mustill & S.C. Boyd, (Butterworths, London, Commercial A r b i t r a t i o n , 1986). Commercial 1982). Arbitration Redfern & M. • Hunter, International Commercial Arbitration (Sweet & Maxwell, 1986). H. Smit, I n t e r n a t i o n a l 1981). Contracts (Mattew Bender, N.Y., 126 Sucharitkul, S t a t e Immunities and T r a d i n g A c t i v i t i e s i n I n t e r n a t i o n a l Lav (Stevens & Sons, London, 1959). 2. ARTICLES F. Amerasinghe, "The J u r i s d i c t i o n o f t h e I n t e r n a t i o n a l Centre for the Settlement of Investment Disputes" 19 I n d i a n J . I n t ' l L. (1979), 166. Bernini St A. Van den Berg, "The Enforcement of A r b i t r a l Awards a g a i n s t a S t a t e : The Problem of Immunity from E x e c u t i o n " i n J . Lew Contemporary Problems i n I n t e r n a t i o n a l A r b i t r a t i o n (London, 1986), 359.3 Broches, "Awards Rendered Pursuant t o the ICSID Convention: B i n d i n g -~ Force, Finality, R e c o g n i t i o n , Enforcement, E x e c u t i o n " 2 ICSID Review (1987), 287. C o n d o r e l l i & L. S b o l c i , "Measures o f E x e c u t i o n a g a i n s t t h e P r o p e r t y o f F o r e i g n S t a t e s : The Law and Practice i n Italy" 10 Neth. Y. B. I n t ' l L . (1979), 197. Crawford, "Execution of Judgments and \ F o r e i g n S o v e r e i g n Immunity" 75 Am. J . I n t ' l L. (1981), 820. R. Delaume, " F o r e i g n Sovereign Immunity: Arbitration" 38 Arb. J . (1983), 34. , "ICSID A r b i t r a t i o n Proceedings: A s p e c t s " 5 Pace L.R. (1985), 563. Impact on Practical , "ICSID and t h e T r a n s n a t i o n a l F i n a n c i a l Community" 1 ICSID Review (1986), 237. , " J u d i c i a l D e c i s i o n s R e l a t e d t o Sovereign Immunity and Transnational A r b i t r a t i o n " 2 ICSID Review (1987), 403. 127 , "The S t a t e Immunity A c t o f t h e U.K." Am. J . I n t ' l L. (1979), 185. M. M.B. H. 73 Domke, "Government Immunity i n Foreign Trade A r b i t r a t i o n - A Comparative Survey o f Recent Practice" . i n L i b e r Amicorum F. Eisemann, 45. Feldman, "Waiver o f F o r e i g n Sovereign Immunity by Agreement t o A r b i t r a t e : L e g i s l a t i o n Proposed by the American Bar A s s o c i a t i o n " 40 A r b . J . (1985), 24. Fox, "Enforcement Jurisdiction, Foreign States P r o p e r t y and D i p l o m a t i c Immunity" 34 I.C.L.Q. (1985), 115. , "Sovereign Immunity and A r b i t r a t i o n " i n J . Lew, Contemporary Problems in International Arbitration (london, 1986), 323. , " S t a t e s and Undertaking I.C.L.Q. (1988), 1. to Arbitrate" 37 G. Goldman, "Enforcement of Foreign Awards against P r i v a t e P a r t i e s and F o r e i g n S t a t e s " i n G. Aksen & R.B. von Mehren, International Arbitration between Private Parties and Government (1982), 397. P. Lalive, "Swiss Law and P r a c t i c e i n R e l a t i o n t o Measures o f E x e c u t i o n a g a i n s t t h e P r o p e r t y o f a Foreign State" 10 Neth. Y.B. I n t ' l L. (1979), 153. , "The F i r s t 'World Bank' A r b i t r a t i o n (Holiday Inns v. Morocco) - Some L e g a l Problems" 51 B r i t . Y.B. I n t ' l L. (1980), 123. H. Lauterpacht, "The Problem o f J u r i s d i c t i o n a l Immunities of Foreign States" 28 B r i t . Y.B. I n t ' l L. (1951), 220. 128 G. Kahale, " A r b i t r a t i o n and Choice-of-Law Clauses Waivers of Jurisdictional Immunity" N.Y.U.J. I n t ' l L. & P o l . (1981), 29. as 14 , "New L e g i s l a t i o n i n t h e U n i t e d S t a t e s F a c i l i t a t e s Enforcement o f A r b i t r a l Agreements and Awards Against Foreign States" 6 J . I n t ' l Arb. v o l . 2, 57 (1989) . G. Kahale & M. Vega, "Immunity and J u r i s d i c t i o n : Towards a Uniform Law i n Actions against Foreign States" 18 Columbia J . Trans. L. (1979), 211. N. K r i s h n a m u r t h i , " I n d i a " 11 Y. Comm. Arb. F.A. Mann, "The S t a t e Immunity A c t o f 1976" I n t ' l L. (1979), 43. (1971), 31. 50 B r i t . Y. B.P. Marchais, "ICSID T r i b u n a l and P r o v i s i o n a l Measures I n t r o d u c t o r y Note t o D e c i s i o n s o f t h e T r i b u n a l o f Antwerp and Geneva i n MINE and GUINEA" 1 ICSID Review (1986), 372. P.M. McGovan, " A r b i t r a t i o n CLauses as Waivers o f Immunity from Jurisdiction and E x e c u t i o n under the F o r e i g n S o v e r e i g n Immunities A c t o f 1976" 5 N.Y. Sch. J . I n t ' l & Comp. L. (1984), 409. J . McLaughlin, " A r b i t r a t i o n and Developing C o u n t r i e s " I n t e r n a t i o n a l Lawyer (1979), 211. H. Molot 13 & M. Jewett, "The S t a t e Immunity A c t o f Canada 20 Canadian Y. I n t ' l L. (1982), 79. R.J. O p a r i l , "Waiver o f S o v e r e i g n Immunity i n t h e U n i t e d S t a t e s and Great B r i t a i n by an A r b i t r a t i o n Agreement" 3 J . I n t ' l Arb. (1986), 61. C. Osakwe, "A S o v i e t P e r s p e c t i v e on F o r e i g n Sovereign Immunity: Law and P r a c t i c e " 23 V i r g i n i a J j . I n t ' l L. (1983), 13. W. Park, " A r b i t r a t i o n of International Contract Disputes" 39 Business Lawyer (1984), 1783. 129 A. Rothstein, "Recognition and Enforcing Arbitral Agreements and Awards a g a i n s t F o r e i g n S t a t e s : The Mathias Amendments t o t h e F o r e i g n Sovereign A c t s and T i t l e 9" 1 Emory J . I n t ' l Dispute Reso. (1986), 101. G. Triggs, "An I n t e r n a t i o n a l Convention on Sovereign Immunity? Some Problems i n A p p l i c a t i o n o f the R e s t r i c t i v e Rule" 9 Monash U.L.R. (1982), 75. I.F. G. S c h i h a t a , "Towards a G r e a t e r D e p o l i t i c i z a t i o n o f Investment D i s p u t e s : The R o l e o f ICSID and MIGA" 1 ICSID Review (1986), 1. S u l l i v a n , " I m p l i c i t Waiver o f S o v e r e i g n Immunity by Consent t o A r b i t r a t i o n , T e r r i t o r i a l Scope and P r o c e d u r a l Limits", 18 Texas I n t ' 1 L.J. (1983), 329. A. Van den Berg, "Some Recent Problems i n t h e P r a c t i c e o f Enforcement under t h e New York and ICSID Conventions" 2 ICSID Review (1987), 439. 3. CASES Alcorn v. R e p u b l i c o f Colombia [1984] 2 A l l E.R. 6 A l f r e d D u n h i l l v. R e p u b l i c o f Cuba 15 I.L.M. 735 Amin Rasheed S h i p p i n g Corp. [1984] A.C. 50 v. Kuwait Insurance Co. Andros Compania Maritima v. Andrea & C i e 430 F. Supp. 88 (1977) Baccus S.R.L. v. S e r v i c i o d e l T r i g o [1958] 1 Q.B. B e n v u t i S Bonfant v. Congo 20 I.L.M. 878 438 (1981) B e r i z z i Bros v. The Steamship Peraso 271 U.S. 562 (1926) 130 B i r c h S h i p p i n g Cora, v. Embassy o f Tanzania 311 (1980) Bodlev Head L t d . v . Flegon 507 F. [1972] 1 W.L.R. 680 Borqa v . R u s s i a n Trade Development 22 I.L.R. Carol i n Power & L i g h t (1977) SUDD. (1955) 235 coy, v . Uranex 451 F. Supp. 1044 Charron v . Montreal T r u s t Cov {1958] 15 D.L.R. (2d) 240 Chicago B r i d g e & I r o n Co v . I s l a m i c R e p u b l i c 506 F. Supp. 981 (1980) Compania de N a v i g a c i o n y F i n a n c i e r a B o s n i a v . N a t i o n a l U n i t y Marine Salvage Corp. 457 F. Supp. 1013 (1978) Compania N a v i e r a Vascongado v. S.S. C r i s t i n a 485 Cooper v. A t e l i e r s de l a Matobecane S.A. 728 of [1938] A.C. 456 N.Y.S. ( 2 d ) Dexter & Capenter v. K i n g l i g 43 F. (2d) 705 (1931) Duff Development Co v. K e l e n t a n 797 F.R.P. o f Yugoslavia v. Kafr I.L.R. (1951) 54 [1924] A.C. El-Zayat Cotton L t d . 18 Guinea v . A t l a n t i c T r i t o n Company 26 I.L. 373 (1987) Haber v. The Queen o f P o r t u g a l (1851) 17 Q.B. 171 Ipitrade International (1980) v. Nigeria 465 Iran F. Supp. 1284 1 3 1 _ I s l a m i c R e p u b l i c 5 1 3 o f F . 2 d K a h a n P a k i s t a n F e d e r a t i o n K e i f e r 3 0 6 U . S . v . R e c o n s t r u c t i o n 3 8 1 ( 1 9 3 9 ) & K i n g d o m o f K r o l B a n k v . L a r s o n v . G r e e c e o f v . 6 3 6 S o c i e t e v . K e i f e r B r o s v . I . T . A . D . v . P o d a r I r a n I n d o n e s i a D o m e s t i c 6 8 2 a n d G o v e r n m e n t o f 7 5 B a r 2 6 2 3 L E T C O v . L i b r e B a n k L t d . v . B a n c o 2 d 4 7 ( 1 9 8 2 ) 2 K . B . I . L . R . 6 5 9 N a t i o n a l C o r p o r a t i o n 1 9 5 ( 1 9 5 8 , C o m m e r c e L i b e r i a 1 1 ) 1 8 0 C o r p . 3 3 7 F . 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Nizam Ras A l Kaimah Sherk 2 Dods. 451 o f Hyderabad v . McFadden [1958] A.C. 379 7 C r a n c h 116 (1812) Pacific National Bank 513 F. Supp. 8 6 4 (1981) E n t e r p r i s e s A.G. V. S o c i e t e Y. Comm. A r b . 2 8 6 ( 1 9 7 9 ) Southern S [ 1 9 7 6 ] 2 W.L.R. 2 1 4 [ 1 9 8 7 ] 2 A l l E.R. 7 6 9 Schooner Exchange Security (1820) o f G r e e c e 360 F. 2 d v . Government des Crandes Pacific P r o p e r t i e s v . Egypt ( 1 9 8 4 ) ; 26 I.L.M. 1004 (1987) & S Machinery (1983) Trendtex 23 Co. v . M a s i n e x p o r t i m p o r t Trading Corp. v . The C e n t r a l [ 1 9 7 7 ] Q.B. 5 2 9 V e n n e v . P.R. o f C o n g o (1969) I.L.M. Bank (3d) 128 Transport Inc. v. Comisaria General A b a s t e c i m e t o s 3 3 6 F. ( 2 d ) 354 ( 1 9 6 4 ) Yugoslavia 1048 of Nigeria Victory Shipping 4 7 0 6 F. 2 d 4 1 1 v. Central (1980) Foods I n c . v . Unus 227 of Nigeria Iran Maegues Ver l i n d e n Vita Bank 5 D.L.R. of 488 F. Supp. 1294 Co. L t d . v . SEE (1971) J . P u . D r . 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Sovereign immunity and transnational arbitration Chukwumerije, Okezie 1985
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Title | Sovereign immunity and transnational arbitration |
Creator |
Chukwumerije, Okezie |
Publisher | University of British Columbia |
Date Issued | 1985 |
Description | State participation in the arbitration of transnational commercial disputes is steadily increasing. It is estimated that arbitration of state contract disputes presently constitute one quarter of the disputes submitted to ICC arbitration. Where a state party is involved in an arbitration, the sovereign immunity doctrine - which in some cases exempts foreign states from the jurisdiction of municipal courts - may have adverse effect on the arbitration process. The thesis explores the impact of the immunity doctrine on the arbitration of state contract disputes. State practice in selected jurisdictions is used to illustrate the methods adopted in an effort to mitigate the impact of the immunity doctrine on commercial arbitration. In this respect, focus is placed on both jurisdictional immunity and immunity from execution. The thesis concludes that the private party may avoid unnecessary litigation by requiring the state party to expressly waive its immunity both during the recognition and enforcement stages. The waiver should be included in the arbitration agreement. |
Genre |
Thesis/Dissertation |
Type |
Text |
Language | eng |
Date Available | 2010-08-13 |
Provider | Vancouver : University of British Columbia Library |
Rights | For non-commercial purposes only, such as research, private study and education. Additional conditions apply, see Terms of Use https://open.library.ubc.ca/terms_of_use. |
DOI | 10.14288/1.0103884 |
URI | http://hdl.handle.net/2429/27350 |
Degree |
Master of Laws - LLM |
Program |
Law |
Affiliation |
Law, Peter A. Allard School of |
Degree Grantor | University of British Columbia |
Campus |
UBCV |
Scholarly Level | Graduate |
Aggregated Source Repository | DSpace |
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