State Immunity In International Commercial Arbitration

As an important system in international law, State Immunity has its historical resources and developing process, and is now controversial on its scope in international community. In the recent global market, States have become more involved in international business transaction. Hence, various international investment contracts have been concluded between States and foreign investors either directly or through their State entities. In order to encourage foreign investment, the State can waive its immunity by a concession agreement or by an arbitration clause. The extent of the State’s or State entity’s commitment to arbitration clauses drafted within these investment contracts and the fact that States seek immunity from jurisdiction and execution of arbitral awards has been a major issue before arbitral tribunals and courts. The Congo case attracts great concern for the practice in this respect. All research of the thesis bases on the Congo Case.The thesis proceeds as follows:The Congo case is discussed for a background study, the judgments and key issues are also illustrated. The Congo case is significant because it is concerned with (a) the relationship between the Hong Kong Special Administrative Region (HKSAR) and the Central People’s Government (CPG) since the handover and (b) the nature and scope of state immunity which the courts of the HKSAR should recognize and apply to foreign states which are sued in HKSAR. More emphases are given on the issues of the waiver in the international commercial arbitration and the trend of the state immunity.In Chapter Ⅱ, the thesis illustrates, first and separately, the doctrine of absolute state immunity and restrictive state immunity. The thesis cites United Nations Convention on Jurisdictional Immunities of States and Their Property and European Convention on State Immunity as examples to further argue the development of the doctrine of restrictive immunity. From the point of view of development, the doctrine of restrictive immunity has become the dominant trend of state immunity, however, it does not mean that the doctrine of absolute immunity has been replaced and the doctrine of restrictive immunity has become the customary international law.In Chapter III, the thesis focuses on the issues in the area of the state immunity in investor-state arbitration and highlights the relations between arbitration agreement and jurisdiction and state immunity. The waiver on jurisdiction and execution shall be made separately. The agreement of submitting disputes to arbitration could be recognized as an implied waiver by a state for immunity from jurisdiction and the effectiveness could not be extended to the enforcement of an arbitral award. The investor has to demonstrate that the property is used for commercial activity if investor has the intention to execute the award. The thesis then examines the law that governs the enforcement and execution of international arbitration awards and the domestic law of sovereign immunity. Case studies from a number of jurisdictions are presented in order to demonstrate the problems that investors face when a state claims sovereign immunity to avoid paying an award. Finally, the thesis illustrates a number of ways including changing the investors’ expectations, stipulating waiver clauses and reinterpreting the domestic law of state immunity. Thus the problems with sovereign immunity might be mitigated.In Chapter IV, the thesis focuses on the practice of state immunity in China. There is no special statute on immunities. of states and their property in China, in several laws concerning other matters. a few stipulations can be found relating to state immunity. China adheres to the doctrine of absolute immunity and has been acting as a persistent objector to the restrictive immunity, which equals that the HKSAR shall adopt the absolute immunity whatever the customary international law is. The thesis then examines the possible implications of the judgment of the Congo case. More scholars and lawyers are worried about the Hong Kong’ status as an internantional trade dispute center. It is necessary for China to adopt the restrictive immunity and to make its own special statute on immunities of states and their property. Possible measures that China and investors can adopt to avoid potential risks are brought up given the situation that HKSAR should follow the CPG’s rule of applying the absolute immunity.The last part sums up the thesis. State immunity is still in its development process. It is rather difficult and complicated for the applicant to seek enforcement of arbitration agreement once the state is involved in international commercial arbitration. China should adopt the restrictive immunity and legislate immunity law to safeguard the interests of the state and investors, thus enhancing the certainty and predictability of law in mainland and special administrative regions.