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Sovereign immunity and transnational arbitration Chukwumerije, Okezie 1985

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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. 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