A Primer on Foreign Sovereign Immunity

The immunity of states from the jurisdiction of foreign domestic courts is a long-standing and mostly uncontroversial principle of customary international law. The International Court of Justice has described foreign sovereign immunity as a procedural doctrine of international law, one that “derives from the principle of sovereign equality of the States.” As a practical matter, the implementation and content of foreign sovereign immunity are closely intertwined with domestic law and procedure.

Some countries, including Australia, Canada, Japan, Pakistan, the United Kingdom, the United States, and others, have adopted comprehensive legislation on the immunity of foreign states and their property. The U.S. statute is called the Foreign Sovereign Immunities Act (FSIA).  In other countries (including Egypt, Germany, Sweden, and South Korea) courts apply customary international law directly to make immunity determinations. This primer canvasses the history and modern scope of foreign sovereign immunity under customary international law, with a focus on the practice of the United States.

Note that foreign sovereign immunity is distinct from foreign official immunity (including head of state immunity), diplomatic and consular immunities, and the immunity of international organizations. Foreign sovereign immunity limits domestic judicial power, as distinguished from the power of international courts and tribunals. Note also that in both international and domestic law, immunity bars not only the adjudication of disputes against foreign sovereigns but also measures of attachment and execution against foreign sovereign property, and that these two areas of immunity law are distinct.

History

Foreign sovereign immunity is often traced back to The Schooner Exchange v. McFaddon, a U.S. Supreme Court case from 1812 holding that a French warship, although physically located in the United States, was nonetheless immune from process. Chief Justice Marshall invoked the “perfect equality and absolute independence of sovereigns” in support of the decision. Other countries adopted the doctrine – which was very similar to the immunity of domestic government entities before domestic courts.

Throughout the 19^th and early 20^th centuries, cases against foreign sovereigns were almost always brought as in rem actions against foreign maritime vessels or their cargos. Immunity functioned as a limitation on the courts’ jurisdiction over the property. Courts applied absolute immunity during this period, with no exceptions for private or commercial activity. Over time, however, especially as nation-states began themselves to engage in more commercial maritime activity, immunity determinations became more complicated and more controversial.

More complicated because foreign states sometimes owned vessels that they did not operate, or operated vessels that they did not own, or formed state-owned commercial enterprises that owned and/or operated vessels – all of which generated thorny questions about what counted as a foreign sovereign and its property. More contested because it seemed increasingly inequitable for private creditors and other private parties who wished to sue foreign sovereigns to be barred by immunity when those sovereigns were not acting as sovereigns, but instead as commercial entities.

Belgium and Italy led the way in adopting the restrictive approach to immunity – meaning that they denied immunity in cases arising out of commercial activities by foreign states. By the 1950’s several states had adopted the restrictive theory, including the United States, which announced its new position in a letter by Department of State Acting Legal Advisor Jack Tate. U.S. courts had also begun to defer to the State Department’s “suggestions of immunity,” a practice that lacked a constitutional foundation, that led to confusion and inconsistencies, and that was abandoned with the adoption of the Foreign Sovereign Immunities Act of 1976 (FSIA).

Codification by Treaty & Statute

With the FSIA, the United States was the first country to codify the law of foreign sovereign immunity through a comprehensive statute that addressed immunity from enforcement measures, immunity from adjudication, exceptions to both forms of immunity, and various ancillary issues. The United Kingdom, South Africa, Australia, Canada, and other countries quickly followed suit.

Efforts to conclude a treaty governing foreign sovereign immunity have been met with mixed success. The 1926 Brussels Convention on the Immunity of State-Owned Vessels entered into force in 1934, but is limited in subject matter and has not been widely ratified. The European Convention on State Immunity, which opened for signature in 1972, is a complex treaty that has garnered only a handful of signatories. In 1972, the International Law Commission began work on a treaty and provided a set of draft articles in 1991. It took thirteen years for the U.N. General Assembly to adopt the resulting treaty, the United Nations Convention on Jurisdictional Immunities of States and Their Properties (U.N. Convention) which takes the restrictive approach. Especially contentious issues included the scope of the exception for commercial conduct, the immunity of state-owned enterprises, immunity from measures of execution and enforcement, and the treatment of labor and employment contracts. Many of the same issues remain at least somewhat contested today.

Opened for signature in 2004, the U.N. Convention has twenty-three state parties. The United States has neither signed nor ratified it. Although the Convention is not in force – thirty ratifications are necessary – it nonetheless has had a significant influence on the development and application of customary international law. The International Court of Justice has referred to the U.N. Convention to determine the content of customary international law, national courts have done the same, Japan enacted a comprehensive immunity statute based upon the U.N. Convention, the European Court of Human Rights has relied upon its terms as principles of customary international law – to name but a few examples.

That foreign states are entitled to immunity from the jurisdiction of foreign domestic courts is not controversial. No state denies that it has a duty to provide such immunity.  Historically, there has been significant disagreement over the scope of immunity protections, however. Some states held that immunity is absolute, while others adopted the restrictive approach. But today even China (long a stalwart supporter of the absolute view) appears poised to accept the restrictive view. Today, few, if any, states clearly support the absolute approach to immunity.

The Foreign Sovereign Immunities Act

The Foreign Sovereign Immunities Act, like the law in other nations, begins by defining “foreign state” and by stating that foreign states are presumptively immune from suit in state and federal courts. The FSIA then sets out exceptions to immunity from jurisdiction to adjudicate, exceptions to immunity from enforcement measures against foreign sovereign property, and a set of ancillary provisions governing venue, service, and the like. The statute serves as “one-stop shopping” for suing foreign sovereigns in the United States; cases against foreign sovereigns may only go forward under the terms of the statute, which confers personal and subject matter jurisdiction in federal courts. The FSIA does not, however, provide a substantive cause of action (except for certain terrorism cases), nor does it displace generally applicable discovery rules, nor does it displace generally applicable choice of law rules.

Most U.S. litigation focuses on the exceptions to immunity. Putting aside admiralty, the FSIA provides exceptions for waiver, for claims based upon commercial activity with an adequate nexus to the United States, for tortious injury in the United States, for certain property claims, and to enforce an arbitration agreement or an arbitral award.  It also provides a complex set of exceptions for suits brought against states that are designated as “state sponsors of terrorism.”

The most important of these exceptions – and the one that generates the most litigation – is the exception for commercial activity. The FSIA defines commercial activity with reference to the nature of the conduct, not its purpose. So, for example, a foreign state that contracts to buy boots may be sued by the seller based upon that contract, even if the purchase of the boots serves a sovereign purpose such as outfitting the military. The exceptions to the FSIA also function as a federal long-arm statute, meaning that if an exception is satisfied the court has personal jurisdiction over the defendant. The commercial activity exception thus requires some kind of connection between the foreign sovereign’s commercial activity and the United States. Harm inflicted abroad on a U.S. national who then returns to the United States and sues is not sufficient.

All countries that accept the restrictive approach accept (by definition) some exception to immunity for commercial activity. All countries also recognize an exception to immunity through waiver by the foreign sovereign, whether explicit (through the terms of a contract for example), or implicit (defending a suit without raising the defense of immunity). Most states accept a forum tort exception, although its scope varies. The United States is an outlier, however, when it comes to its exceptions to immunity property expropriated in violation of international law and for certain terrorism-related suits. Few states have comparable limitations on immunity, although Russia has adopted and China has proposed a principle of reciprocity, meaning that these states may deny to the United States immunity on the same terms that the U.S. would deny immunity to them.

As mentioned at the outset of this post, the immunity of foreign-state property from measures of execution is treated in a separate part of the FSIA and is governed by separate rules of international law. In other words, even if an exception to immunity from jurisdiction to adjudicate applies and a judgment is awarded, separate rules protect the assets of the foreign sovereign from enforcement measures. In the United States, as in other countries, the exceptions for enforcement measures are narrower than the exceptions that allow suits to go forward in the first place. It is not uncommon to have a valid judgment against a foreign sovereign but no way to enforce it. There are exceptions in the FSIA for property used for a commercial activity in the United States and for the property of state-owned enterprise that is engaged in commercial activity in the United States. Certain property receives even higher levels of protection – namely the property of foreign central banks and property used for military purposes.

Contested Issues & Conclusion

Immunity is both well-established and under pressure to change and develop. There are, accordingly, significant areas of debate and uncertainty in the contemporary law of immunity. These include long-standing questions about the immunity to which foreign states are entitled when they are sued pursuant to employment contracts (see Restatement (Fourth) of the Foreign Relations Law of the United States § 454, reporters’ note 2) and the desirability of an exception to immunity for violations of jus cogens norms (such an exception does not currently exist). New issues continue to arise around the world, including:

• whether sovereign wealth funds administered by central banks are entitled to the special immunity protections from enforcement to which central bank assets are generally entitled;
• whether the generally accepted territorial tort exception lifts immunity for cyber torts launched from outside the territory of the forum state;
• whether the doctrine of countermeasures can preclude the wrongfulness of actions that would otherwise violate the customary international law of immunity (an issue of current importance with respect to the treatment of Russian central bank assets);
• the application of foreign sovereign immunity to criminal actions against state-owned enterprises;
• and the extent to which terrorism-related litigation in the United States violates the immunity to which Iran, Afghanistan, and other countries are entitled.

Immunity is a fascinating topic that illustrates how rules of procedure have enormous consequences for a wide variety of global actors.