limitation of sovereign immunity

LIMITATION OF SOVEREIGN IMMUNITYSource: Section of International and Comparative Law Bulletin, Vol. 5, No. 1 (DECEMBER 1960),pp. 28-32Published by: American Bar AssociationStable URL: http://www.jstor.org/stable/25743257 .

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LIMITATION OF SOVEREIGN IMMUNITY

The International Bar Association at its annual meeting held in Salzburg, Austria, in July 1960, adopted an important resolution embodying a state ment of principle on the immunity of sovereigns engaged in commercial activ ity. The resolution was proposed by a committee of the Association appointed to consider the subject. William Harvey Reeves of New York was Chairman of the Committee and its members were Sven Arntzen of Norway, W. O.

Carter, and R. O. Wilberforce, of England, Dr. Cur? of France, Roberto

Reyes Morales of Spain, Otfried Sander of Germany and Mehmet Taplamaci of Turkey. A dissenting report was presented by committee member Robert

N. Anderson, of U.S.A.

The resolution offered was as follows:

1. A State may be made a party to an action or proceeding respecting any sea-going vessel, or the cargo of any sea-going vessel, owned, chartered or operated by that State or by any agency thereof, whether such agency be in corporate form or otherwise, and shall not be entitled to immunities by reason of its sovereignty and any judicial process brought against the State, or against such sea-going vessel, or the cargo thereof, in con nection with such proceeding shall have the same force and effect as against any private corporation or the property of such corporation similarly situated, and no State, in whose Courts the proceeding has been instituted, will grant any immunity by reason of the fact that the said sea-going vessel is owned, chartered or operated by the State or any agency thereof, or that the State or any agency thereof has any financial interest therein or in the cargo thereof.

The provisions herein shall not apply in any instance to warships, state yachts, coast

guard vessels or other vessels employed exclusively in a non-commercial government service. 2. A State, by instituting a proceeding in a Court of another State, submits to the jurisdiction of that Court in respect of all counterclaims which are permitted in civil actions by the laws of the State wherein the action has been commenced, but no judg ment on counterclaim may be enforced beyond the amount of recovery of the State in the action unless the counterclaim states a cause of action in which a State may be made a respondent in the Court of another State as hereinafter provided.

3. A State may be made a respondent in a proceeding in a Court of another State: (a) When it gives express consent before or at the time the proceeding is insti

tuted ; or

(b) When, after notification of the proceeding, it takes any steps relating to the merits in that proceeding before asserting its immunity ; or

(c) When, by the contract upon which the proceeding is based, it has previously consented to the institution of the proceeding; or

(d) When, by treaty with the State in whose Court the proceeding is brought, it has previously consented to the institution of such a proceeding; or

(e) When it has previously, by law or regulation or declaration in force when the claim of the complainant arose, indicated that it would consent to the institution of such a proceeding ; or

(f) When the proceeding relates to rights or interests in, or to the use of, immov able property other than diplomatic or consular premises which is within the territory of such other State and which the respondent State owns or possesses or in which it has or claims an interest; or

(g) When the proceeding relates to its acquisition by will, succession or gift of property subject to the jurisdiction of such other State ; or

(h) When, in the territory of such other State, it engages in any industrial, com

mercial, financial or other business enterprise or activity in which private persons

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may there engage, and the proceeding is based upon the conduct of such enterprise or

upon an act performed in the conduct of such enterprise or other commercial activity. The foregoing provision shall not be construed to allow a State to be made a respondent

in a proceeding relating to its public debt.

(i) When the proceeding relates to its title, rights or obligations as the owner of

shares in a corporation or other association for profit organized under the laws of

such other State, provided that nothing in this sub-paragraph shall enable any

process of execution to issue against any such shares.

4. A State which is a party to a proceeding in a Court of another State shall not be

required: (a) to produce documents concerning which it deems a disclosure incompatible

with its general national interests;

(b) to produce evidence as to matters concerning which it deems a disclosure in

compatible with its general national interests ;

(c) to produce as a witness a person having diplomatic immunity.

Nevertheless, if a State declines to produce documents or evidence, the proceeding may be stayed or dismissed in the interests of justice.

5. A State may permit orders or judgments of its courts to be enforced against the

property of another State not used for diplomatic or consular purposes:

(a) When the property is immovable property; or

(b) When the property is used in connection with the conduct of an enterprise or

activity such as is described in the preceding Article 3, subdivision (h) ; or

(c) When the property has been specifically pledged, hypothecated or where any

representation has been made by any agreement, treaty or contract, that certain

specified property is or will be available for the satisfaction of any judgment or

award in like manner as non-governmental property. In no case, however, shall a State permit any order or judgment of a punitive nature

to be enforced against the property of another State. 6. A State need not accord the privileges and immunities incident to sovereignty to such

juristic persons as corporations or associations for profit separately organized by or under the authority of another State, regardless of the nature and extent of governmental in terest therein or control thereof. Whether or not a juristic person as herein defined was

separately organized for profit or solely to carry on governmental functions shall be de termined on the evidence in the Court in which the action is brought.

Several changes were proposed by the minority report which, however, did not alter the basic principles stated in the Resolution.

The supporting arguments for the Resolution as set forth in the Committee's

report merit extended reference and excerpts from the report follow:

BRIEF HISTORICAL VIEW OF THE IMMUNITY OF SOVEREIGNS

Every free and independent country is supreme within its own domain. Many govern ments in the distant past have exercised sovereign power so completely that a citizen had no rights which could be legally determined or enforced against his own government ; he had only those privileges which might be accorded to him. Now, however, for over a

hundred years, all democratic countries of the world have limited their immunity not only by granting to their citizens rights, but by permitting the enforcements of these rights in their own courts of law against the government itself. In one respect it is inaccurate,

within the democratic countries to speak of rights being "granted" to citizens, for a

democratic government by its existence derives its power to govern from the people them selves. In whatever form, however, the rights are established and made enforceable, the

governments of many democratic countries have so far waived immunity that the govern ment is as responsible, both in contract and in tort, as any natural person or as any do mestic corporation.

Generally, this principle of holding a domestic government responsible by recognized

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judicial procedures, has been extended to foreigners; frequently, however, only on a recip rocal basis, i.e. that the foreigner's government within its territory grant the same privi leges to those who are not its own nationals.

Sovereigns outside of their own jurisdiction came under a very different rule until about the middle of the 19th century. Till that time sovereign governments appearing in other countries by their agents were universally granted absolute immunity. The reasons for this absolute immunity were obvious: official intercourse between nations was solely on a diplomatic level and, too, governments at home engaged in but little economic activity, and outside, practically none at all.

Diplomatic immunity is still recognized throughout the world and your Committee has no concern with this feature of sovereign immunity.

Up to the middle of the last century, the main problem was the relationship of govern ment to governed ; the form which government should take and the manner by which it could be peaceably changed, its policies revised, its citizens' rights recognized and assured ; and, in general, the proper limits and functions of its agencies defined.

Progression as to the Function of Government within the Last Hundred Years

By the mid-nineteenth century, however, economic, social and scientific changes, one

correlating with the other, had created new demands on the government, that it be more

intimately concerned, and even responsible for, the prosperity of the governed. In partic ular, what economic activities should be assumed by the government ? What services should it perform for the citizen? The change from a "laissez-faire" theory of the functions of government, generally accepted at that time, to one of government participation in economic activities for the benefit of the citizen is of comparatively recent origin. If these economic activities of a government are fully contained within the area of its own domain, no problem as considered in this report arises, since persons dealing with the government would be governed by the laws under Werrich they live. The problem does arise, however, when any government, seeking to satisfy the demands of its citizens for services, carries on outside of its own domain, some part of this economic activity, or "State Trading."

The increasing volume of business done by foreign sovereigns within one particular country led that country, less than ten years ago, to change its policy towards this privi lege of immunity. Previously the Executive Department had requested the courts of the country to decline jurisdiction on the ground of sovereign immunity when a pending case involved a foreign sovereign. In making the change of policy or procedure, it announced it w7ould thereafter refuse to send to a court this executive pronouncement or "suggestion."

Thus, a foreign sovereign, in court in a controversy with one of the nationals of this country, would not thereafter have the benefit of this executive recommendation which had generally been accepted by all courts. One cogent reason given for this change from the Absolute to the Restrictive Theory of sovereign immunity was:

"The widespread and increasing practice on the part of governments in engaging in commercial activities makes necessary a practice which wrill enable persons doing busi ness with them to have their rights determined in court."

This is the fundamental thesis upon which the Oslo Resolution is based.

THE CIVIL LAW AND COMMON LAW CONCEPT OF THE IMMUNITY OF GOVERNMENTS

Your Committee has found that there is a somewhat different approach to this prob lem within the democratic countries, depending upon whether the concept of sovereignty is taken from the civil law or the common law. Of course, all legal systems in the world can trace certain common ancestry. All systems, too, have borrowed each from the other, over the course of history, and will continue to do so Nevertheless, the Committee believes a distinction o? approach or concept may validly be made. Those systems which take their concepts from Roman law, at a fairly early period accepted the concept of the state as a corporation, divided the functions of the state between the governing of the country as distinct from that same corporation engaged in business. In the one case, ius imperii, in

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the other ius gestionis. Recognition of this dual personality, depending upon the function

being carried on at the moment, prevails in many countries. It was thus easy for the countries having these concepts to lead the way in recognizing that a government which

was engaging in activities properly iure gestionis, whether at home or abroad, should not be entitled to immunity. It is not surprising, therefore, that some of the earliest cases in which a country held a visiting sovereign liable for a commercial contract with one of its

citizens, should have been within the Continent of Europe. The test, therefore, in much of continental Europe as to whether a sovereign should have immunity or not, may be considered the objective test?in what capacity did the government act?

The common law approach is somewhat different. Sovereigns, wherever they exist and wherever they may be legally functioning have immunity as an inherent right of sovereign ty. Lacking a "consent" to be sued, they have immunity each in its own country and are

granted immunity, by comity, in other common law countries and in other countries which are willing to grant immunity when demanded. The consent to waive immunity in a

particular case, however, may always be given and this consent need not always be ex

pressed but can be implied. Within the common law countries, domestically, the history of the remission of sovereign immunity has been that, by various acts of legislature, the

sovereign has laid aside its immunity. This may be called the enumerative method.

Waiving of sovereign immunity depends on the sum total of the legislative acts in each of which the sovereign, in one particular situation or another, by an act of its legislature or other authoritative body, has "waived" immunity. However, as foreign sovereigns doing business in other countries frequently did not "consent," immunity continued to be granted to them except where the courts could find that their actions were of such a nature that "consent" could be implied. Here the two theories?civil law and common

law?coalesce, at least to some extent, for, if the implied consent could be based, and most

frequently is based, upon a determination of the nature of the act, then if the act is iure gestionis, a business act, one which a private person could perform outside his own country, "consent" of the sovereign is implied.

The Oslo Resolution has endeavored to combine, as far as may be necessary, the ap proach both of the civil law and of the common law. On the one side its provisions indi cate that a government has "consented" to lay aside its sovereign immunity in circum stances which are therein defined; and, on the other hand, by these very definitions or criteria, the Resolution has endeavored to give certain simple tests under which the government can be determined in a particular instance to be acting not iure imperii, but iure gestionis.

The Committee is mindful, in offering its suggestions, that, in the past, difficulty has been found in determining whether a particular act outside of the territory of the sovereign committing the act was iure imperii rather than iure gestionis. The basis on which this determination has frequently been made was whether or not the act itself was an act of "sovereignty," that is to say, an act which a sovereign would be obligated to do in its capacity as a sovereign. The Committee believes that this is not the correct criterion for determination of the problem and has led, and will continue to lead, to confusion. The Committee believes that any act of a sovereign, whether within or without its own terri tory, if approved or directed by its own legislative authority, is a sovereign act; it is performed by the sovereign for the benefit of the governed. The true criterion is, there fore, in the opinion of your Committee, whether or not the sovereign which entered into the contract has sovereign authority over the person with whom it is dealing, or in some instances the territory in which the act is performed or the subject matter of the contract. If the sovereign has such authority, it should be considered a domestic act and should be governed by the laws of the sovereign itself, which also governs its own national. If the government, however, has no sovereign jurisdiction over the other party to the contract or the territory or property involved, then the sovereign has no immunity. This makes unnecessary the determination, frequently futile, as to whether the act is properly one of "sovereignty" and thus relieves any government of the necessity of evaluating the propri ety of any act of a fellow sovereign. With this test, a contract by one country for a large supply of bullets for the Army with a national of another who agreed to furnish the

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bullets, and in a further instance, for purchase of leather to be made into army boots, were both considered iure gestionis, even though in both instances the maintenance of an

army is clearly a primary function of government. In both instances, the contract was

considered a commercial contract of purchase and sale and the foreign government was

held civilly liable.

WHAT THE COMMITTEE HAS NOT ATTEMPTED TO DO

As this subject is fraught with many misconceptions, the Committee will here set forth

briefly a few matters which it has not attempted to do and its reasons.

Treaties. This Committee is not concerned with treaties. Since every country is supreme within its own territory and as such must be recognized by every other, each country can

determine for itself the terms on which foreigners, whether they are individuals, corpora tions or governments, can do business within that country. The Committee, however, believes that treaties of Commerce, Friendship and Navigation which contain provisions

whereby each high contracting party specifically waives its right to sovereign immunity in the territory of the other when it is there engaged through its agents or agencies in

commercial enterprise may frequently avoid misunderstanding and for this purpose they are useful, though not necessary, as conditions for denying immunity, and should be

encouraged.

Status of Forces Agreements. The Committee is not concerned with "Status of Forces

Agreements." The Committee recognizes that military personnel may be introduced into

the territory of another country only as an act of war or under agreement. A status of

forces agreement or treaty is such an agreement entered into between two countries for

their mutual advantage under which armed forces of one country are stationed in, or per mitted to pass through, another. The incidental problems which arise in such an instance,

particularly those of a criminal nature, should be, as the Committee believes, settled be tween the two high contracting parties. Also the method of furnishing supplies can be

properly included in such agreement.

Jurisdiction. The Committee has made no provision as to the manner in which a

sovereign may be summoned to court or otherwise brought under judicial authority, with in any country. The Committee admits that this is a serious problem and its omission may be considered by some a deficiency in this report and in the Oslo Resolution. After careful

deliberation, however, the Committee has decided that it is more important at this time to secure recognition of general principles and that it may safely be left to each particular country to determine the method under which a foreign sovereign may be made a respond ent in its courts. The Committee does, however, recommend to each bar association that it consider this matter and, if the association feels so inclined, make its own recommenda tion to its own particular government.

Contract and Tort. The Committee has concentrated particularly on contract rather

than on tort. There is one exception, however, which is within the first proposition. In

shipping, liability is frequently occasioned by a tort, that is, ship collision. But here there is such a large body of law among the democratic countries that your Committee has considered that Proposition 1 merely defines a situation which should be universal. In other respects, the emphasis was placed upon contract and the Committee respectfully suggests that, for large and important contracts in the relatively recent past, sovereigns have specifically agreed to waive immunity and that businessmen can frequently grant to themselves some assistance in this matter by appropriate provisions in contracts.

The Committee placed considerable reliance on the views of the U.S.A. as stated in the State Department letter, generally called the Tate Letter, of

June 23, 1952, which is fully set forth in an appendix to the report.

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limitation of sovereign immunity

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