Risky Business | Series 2, Episode 5 | Commercial contracts – pitfalls reminders – will sovereign immunity be a problem?

In this episode, Associates Léonor d’Albiousse and Khaled Abdelhaq delve into the concept of sovereign immunity, a legal doctrine that protects sovereign states from being sued in foreign courts without their express consent.

The discussion highlights how sovereign immunity can pose significant challenges for businesses engaging in international contracts with state entities. Léonor and Khaled explain the historical context of the doctrine and how it has evolved in modern international law. They emphasize that while sovereign immunity is a strong procedural defence, it doesn’t necessarily absolve states of responsibility under international law.

The second part of the episode focuses on the complexities of enforcing judgments against sovereign states. Khaled and Léonor clarify the difference between immunity of jurisdiction, which prevents courts from hearing cases against states, and immunity of enforcement, which protects state assets from seizure. They discuss exceptions to enforcement immunity, notably for commercial assets, and strategies for overcoming these barriers, including explicit waivers in contracts. The discussion also touches on the distinction between absolute and restrictive immunity of enforcement, with countries like the UK adopting a restrictive approach, allowing enforcement against commercial assets. Practical advice is offered on identifying state assets at the contracting phase to facilitate future enforcement efforts, illustrated by cases such as the Yukos shareholders targeting Russian state-owned assets.

Relevant case and state citations

• State Immunity Act 1978; Trendtex Trading Corporation v Central Bank of Nigeria [1977] QB 529
• The UN Convention on Jurisdictional Immunities of States and Their Property (2004)
• Fedax N.V. v. Venezuela (ICSID Case No. ARB/96/3)
• NML Capital Ltd v Argentina (2011) UKSC 31
• Hulley Enterprises Ltd v Russia [2023] EWHC 2704 (Comm); Letelier v. Republic of Chile, 488 F. Supp. 665 (D.D.C. 1980)