Immunities of States and Their Property
2.1 The Evolution of the Doctrine
As noted above,the doctrine of immunities of states and their property straddle the boundaries between public international law and private international law.The preamble to the United Nations Convention on Jurisdictional Immunities of States and Their Property adopted by the General Assembly of the United Nations on December 2,2004 announces that “the jurisdictional immunities of States and their property are generally accepted as a principle of customary international law.” In accordance with this principle,with some exceptions,a foreign State enjoys immunity from the jurisdiction of courts of another State.That is to say,courts of a forum State are precluded from either subjecting a foreign State to its jurisdiction or taking pre-judgment or post-judgment measures of constraint such as attachment,arrest or execution against property of the foreign State.
In the 19th century and for most of the 20th century,the “absolute” rule of immunity prevailed,whereby foreign sovereign states are accorded immunity for all activities,whether governmental or commercial.But the increase in state trading in the 20th century led to a number of states to develop a distinction,generally known as the “restrictive” theory,between acts of government,acta jure imperii,and the acts of a commercial nature,acta jure gestionis.Under the restrictive theory,states are immune in the respect of government but not in the respect of commercial acts.
From the beginning of the last century until recently,the tendency towards the absolute principle has been gradually encroached upon and finally replaced by the ever stronger tendency towards the restrictive principle of state immunity through judicial and governmental practices of individual states,international legislation efforts,including bilateral and multilateral treaties,and domestic legislations.4
For instance,the Supreme Court of Austria in 1950,in a comprehensive survey of practice,concluded that in the light of the increased activity of states in the commercial field the classic doctrine of absolute immunity had lost its meaning and was no longer a rule of international law.5
The United States moved to the restrictive theory in the early 1950s,in 1952,in the Tate Letter,the United States Department of State declared that the increasing involvement of governments in commercial activities coupled with the changing views of foreign states to absolute immunity rendered a change necessary and that thereafter “the Department [will] follow the restrictive theory of sovereign immunity.”6 This approach was adopted by statute in 1976,i.e.,the Foreign Sovereign Immunities Act (FSIA).Since then,the FSIA governs all litigations in both state and federal courts against foreign states and governments,including their “agencies and instrumentalities.” It provides the exclusive basis for obtaining jurisdiction over these entities in U.S.courts (including special rules for service of process) and contains “a comprehensive set of legal standards governing claims of immunity in every civil action against a foreign state or its political subdivisions,agencies,or instrumentalities.” The FSIA recognizes immunity for “public acts,that is to say,acts of a governmental nature typically performed by a foreign state,but not for acts of a private nature even though undertaken by a foreign state.” The FSIA creates nine distinct and independent categories of exceptions to immunity from jurisdiction: (1) waiver; (2) commercial activity; (3) expropriations; (4) rights in certain kinds of property in the United States; (5) noncommercial torts; (6) enforcement of arbitral agreements and awards; (7) certain acts of state-sponsored terrorism; (8) maritime liens and preferred mortgages and (9) Counterclaims.7
Amid devastating human and economic losses from COVID-19 in 2020,a number of American citizens,organizations and a few of federal states of the U.S.filed lawsuits in the U.S.courts against China for damages suffered as the result of the pandemic.Though those actions differ in the specific causes of action,they share one significant similarity,i.e.,all of them name China,its relevant government departments,entities and officials as the defendants.From a legal perspective,these lawsuits have to survive the very first jurisdictional hurdle before they can go any further insofar as a foreign sovereignty,in principle,cannot be sued in an American court under the FSIA subject to the above nine exceptions.
As far as the UK was concerned,the adoption of the restrictive approach occurred rather later.In 1975,the Privy Council held that a foreign government was not entitled to immunity in an action in rem,against a ship used for trading purposes,8 and in 1977 the Court of Appeal held,by majority,that a state was not entitled to immunity in respect of commercial transactions.9 The judgment of Lord Denning M.R.in that case “marked the definitive absorption by the common law of the restrictive theory of sovereign immunity.”10 In 1978,the UK adopted the State Immunity Act,which formally established the restrictive theory of sovereign immunity.
In 2004,the United Nations adopted the Convention on Jurisdictional Immunities of States and Their Property,which also endorses the restrictive theory of sovereign immunity,as its Article 10 (1) provides as follows:11
If a State engages in a commercial transaction with a foreign natural or juridical person and,by virtue of the applicable rules of private international law,differences relating to the commercial transaction fall within the jurisdiction of a court of another State,the State cannot invoke immunity from that jurisdiction in a proceeding arising out of that commercial transaction.
What is worth of mentioning is that owing to the adoption of the UN Convention,the strength of the absolute doctrine—a number of Asian,African,Latin American and East European countries have been strenuously relied upon in the last century—has been consequentially weakened.12
2.2 China’s Position and Practice
China consistently upholds the established principle that states and their property enjoy immunity.13 As there are differences and conflicts among nations in relation to the issues of state immunity,China advocates that states should conduct full and direct consultations and reach international agreements under the principle of mutual respect and benefit in order to iron out the differences.
At present,there are several Chinese domestic laws where a few provisions that are related to state immunity can be found.Promulgated on April 9,1991 and latest revised on June 27,2017,the Civil Procedure Law of the People’s Republic of China (hereinafter referred to as “CPL”) is the major law for the People’s Courts to follow in the process of the adjudication of civil cases.Among the provisions of the CPL,there is one article related to state immunity,i.e.,Article 260.Contained in Part Four—“Special Provisions of Civil Procedures for Cases Involving Foreign Elements.” This article provides that:
Civil actions brought against a foreign national,a foreign organization or an international organization that enjoys diplomatic privileges and immunities shall be dealt with in accordance with the relevant law of the People’s Republic of China and the provisions of the international treaties concluded or acceded to by the People’s Republic of China.
Though this article does not deal with the immunities of states and their property categorically,it does have considerable bearing on this issue.First,“a foreign organization” which enjoys diplomatic privileges and immunities referred to by this article is understood to cover,inter alia,a national institution or other entity of a foreign state which acts in the name and on behalf of the foreign state itself.14 Second,this article states unambiguously that when dealing with the cases in which a foreign national or a foreign organization enjoying diplomatic privileges and immunities is sued,the People’s Courts will follow the relevant Chinese domestic law and the international treaties concluded or acceded to by China.Furthermore,under Article 236,if an international treaty concluded or acceded to by China contains provisions that differ from provisions of Chinese domestic law,the provisions of the international treaty shall apply,except those on which China has made reservations.
In addition to the CPL,China has put into effect only a few stipulations concerning the immunities of states and their property up to now.For example,on October 25,2005,the 18th Session of the 10th National People’s Congress adopted the “Law of the People’s Republic of China on Judicial Immunity from Compulsory Measures concerning the Assets of Foreign Central Banks” which addresses a specific issue in relation to one aspect of state immunity: the exemption of the assets of foreign central banks from measures of constraint in China.15 The Statute contains only four articles,[1]providing that subject to the principle of reciprocity,China will,within its jurisdiction,grant immunity from measures of constraint—both attachment or injunction prior to judgment and execution after judgment—to the assets of a foreign central bank,unless the immunity is waived in written form by the foreign central bank or its government.16 Besides this statute,“Regulations on Diplomatic Privileges and Immunities of People’s Republic of China” and “Regulations on Consular Privileges and Immunities of People’s Republic of China” are also relevant.17 According to these two statutes,foreign diplomatic and consular missions to China enjoy vast immunities and privileges compatible with those under the 1961 Vienna Convention on Diplomatic Relations and the 1963 Vienna Convention on Consular Relations.Though the questions of state immunity and diplomatic immunity are two different questions in international law,they share the same origin and their tracks may cross with each other at some points such as immunity of Heads of States or real estate of diplomatic missions,and more importantly,these statutes show China’s intention to affirm the principle of international law on immunity in domestic legislation.
So far,China has concluded or acceded to a number of bilateral and multilateral conventions which concern the issue of state immunity.[2]For instance,in 1980,China became a contracting party of the International Convention on Civil Liability for Oil Pollution Damage.[3]Article 9 of this Convention provides that the courts of the contracting states where an accident has caused pollution damages possess the necessary jurisdiction to entertain such actions for compensation.In connection with this article,Paragraph 1 of Article 11 of the Convention goes on to stipulate that “[T]he provisions of this Convention shall not apply to warships or other ships owned or operated by a State and used,for the time being,only on government non-commercial service.” This means that such stated-owned ships,when used in public and non-commercial service,are immune from the jurisdictions of the courts of the contracting states.18 On the other hand,Paragraph 2 of Article 11 provides that “[W]ith respect to ships owned by a Contracting State and used for commercial purposes,each State shall be subject to suit in the jurisdictions set forth in Article IX and shall waive all defences based on its status as a sovereign State.” That is to say,each contracting state shall waive its immunity from the jurisdiction of foreign courts in lawsuits against state-owned ships if they are engaged in commercial activities.As a contracting party to this Convention,China,undoubtedly,has waived,under the treaty regime,its immunity from jurisdiction of foreign courts in lawsuits against its state-owned vessels in relation to the commercial activities the state-owned vessels are engaged in.19
As Chinese courts have not handled any case involving the immunities of foreign states and their property,it is difficult to study the practice of People’s Courts in this respect.Nevertheless,since the establishment of the People’s Republic of China in 1949,China,as a sovereign state,has more than once met with lawsuits against itself or its property in the courts of foreign jurisdictions.The Chinese government has on those occasions clearly stated its position and attitude on the issue of the immunities of states and their property.20 It is no easy task to list and analyze these cases exhaustively; all that can be done,therefore,is to enumerate several typical cases where the Chinese government has fully demonstrated its arguments.
In 1957,in the case of Beckman v.Chinese People’s Republic heard by the Supreme Court of Sweden,the Chinese government clarified its position on the issue of the immunities of states and their property.In that case,the plaintiffs,Carin Beckman and Ake Beckman applied to the City Court of Stockholm for a summons against the People’s Republic of China.They argued that on October 4,1954,certain real estate situated in Stockholm and belonging to their deceased father was sold to the People’s Republic of China by the administrators of the estate of their late father without their consent.They further submitted that the sale had not been required for the administration of the estate and that it had been disadvantageous to them.On that ground,they claimed that the sale should be declared invalid.During inquiries by the Swedish Ministry of Foreign Affairs,the Chinese Embassy declared that it enjoyed diplomatic immunity and it was not willing to enter a defence.The City Court of Stockholm thereupon held that the application of a summons against China should be rejected insofar as China,as a sovereign state,was entitled to immunity.The Court of Appeal upheld the ruling of the City Court of Stockholm.On further appeal to the Swedish Supreme Court,the Court held that “[A]s the property in this case is used by the Republic for its embassy in this country,and the Republic for this reason,must be regarded as entitled to plead immunity from the action brought by Carin and Ake Beckman,the Court upholds the ruling of the Court of Appeal.”21
In the well-known case of Russell Jackson et al.v.The People’s Republic of China,22 the plaintiffs instituted an action in November 1979,the year when the Sino-US diplomatic relationship was just normalized,seeking payment for certain bearer bonds,allegedly in default,which were issued by the government of Qing Dynasty in 1911 for the express purpose of financing the construction of the Huguang Railroad.The jurisdiction of the U.S.District Court for the Northern District of Alabama was invoked under the Foreign Sovereign Immunities Act of 1976 (FSIA).23 A default judgment was entered against the defendant,the People’s Republic of China,in October 1981,owing to China’s failure to appear.Damages were subsequently awarded in 1982.24
The Chinese government reacted to the judgment strongly.On November 9,1982,the Chinese Embassy in the United States delivered a statement to the U.S.District Court for the Northern District of Alabama transmitted by the U.S.State Department,which stated that:
“...In accordance with the principle of equality of all countries as stipulated in international law,the People’s Republic of China,as a sovereign state,is entitled to enjoy judicial immunity.It will accept no suit against it by any person at a foreign court,nor will it accept judgment against it by any foreign court...The Chinese government requests the U.S.government to take effective measures immediately to prevent the development of situation and revoke the above unreasonable judgment.Should the U.S.court execute the judgment forcibly and attach China’s properties in the United States,the Chinese government will reserve its right to take corresponding measures.The U.S.side must be held for all the consequences arising therefrom.”25(https://www.daowen.com)
On February 2,1983,when the then U.S.State Secretary George P.Shultz visited China,Chinese Foreign Minister Wu Xueqian submitted an aide memoire to him in which the Chinese government reiterated its position as follows:26
Sovereign immunity is an important principle of international law.It is based on the principle of sovereign equality of all states as confirmed by the Charter of the United Nations.As a sovereign state,China incontestably enjoys judicial immunity.It is in utter violation of the principle of international law of sovereign equality of all states and the U.N.Charter that a district court of the United States should exercise jurisdiction over a suit against a sovereign state as a defendant,make a judgment by default and even threaten to execute the judgment.The Chinese government firmly rejects this practice of imposing U.S.domestic law on China to the detriment of China’s sovereignty and national dignity.Should the U.S.side,in defiance of international law,execute the above-mentioned judgment and attach China’s property in the United States,the Chinese government reserves the right to take measures accordingly.
As a matter of fact,the Jackson case was a legal event of political significance during the normalization period of Sino-American relationship in the 1980s.Given the strong reactions from the Chinese government,and the extreme importance of the Sino-American relations under the background of Cold War,the U.S.State Department submitted amicus briefs to the U.S.District Court for the Northern District of Alabama which suggested that the interest of the United States was at stake by the judgment.
In August 1983,the Chinese government appointed a private American counsel to enter a special appearance at the U.S.Court to move for relief of the default judgment and to oppose the Court’s jurisdiction over China.On February 27,1984,the U.S.District Court for the Northern District of Alabama ultimately revoked its default judgment.The plaintiffs then appealed to the U.S.Court of Appeals for the Eleventh Judicial Circuit for “a writ of Certiorari,” but failed.On March 9,1987,Supreme Court of the United States also dismissed the appeal,thus finally bringing the case to an end.27
This case has been proved to be very influential in China,which not only provided an opportunity to see how the Chinese government elaborated its official position on the principle of state immunity in a comprehensive way but also propelled a wave of study on state immunity by Chinese international law scholars in the 1980s.
The landmark case of Democratic Republic of the Congo and Others v FG Hemisphere Associates LLC(“Congo Case”) is worthy of particular notice.The background of this case can be summarised as follows: A Yugoslavian company,Energoinvest,entered into agreements with the Democratic Republic of Congo (“the DRC”) for the construction of hydro-electric projects in the DRC.In order to finance those projects,they entered into credit agreements,each of which contained an International Chamber of Commerce (“ICC”) arbitration clause.
The DRC defaulted on its repayment obligation under the credit agreements.Two sets of arbitration commenced between the DRC and Energoinvest in France and Switzerland in 2001.The DRC signed terms of reference by which they agreed to arbitration being conducted in accordance with the 1998 version of the ICC’s Rules of Arbitration.Rule 28.6 provided that by submitting to arbitration,the parties “shall be deemed to have waived their right to any form of recourse insofar as such waiver can validly be made.” Arbitral awards (“the Awards”) were made in favour of Energoinvest in 2003,which then assigned the benefits of the Awards to FG Hemisphere Associated LLC (“FG”).
On the other hand,in 2001,the Chinese government and the DRC entered into a cooperation agreement under which China would finance and construct extensive infrastructure projects in the DRC in return for the right to exploit mineral resources.This was followed by a cooperation agreement (“the Agreement”) between the DRC and China Railway Group Ltd and its subsidiaries (“the CR Companies”).Under the Agreement,in return for participation in certain mining projects in the DRC,the CR Companies undertook the construction of roads,railways,hospitals and electric facilities,etc.The CR Companies would pay “Entry Fees” to the DRC in obtaining the mining rights.
Upon knowing of the Agreement,FG commenced proceedings in Hong Kong to enforce the Awards.After an ex parte hearing,FG obtained leave to enforce the Awards as judgments of the Hong Kong courts.An interim injunction was also obtained against the CR Companies to prevent payment of the Entry Fees to the DRC.
The DRC and the CR Companies applied to set aside the leave to enforce the Awards.They disputed the jurisdiction of Hong Kong courts on the basis that the DRC enjoyed state immunity.The DRC,the CR Companies,and the Secretary for Justice (who joined in the proceedings as an intervener) argued that,after the handover to China in 1997,Hong Kong should follow Chinese practice in adopting an absolute approach to state immunity (“the absolute approach”).This meant that a foreign state was immune from suit before the Hong Kong courts,whether or not it was exercising its sovereign power or was only engaging in commercial activities.Thus,the DRC would enjoy state immunity.
FG contended that after 1997,Hong Kong continued to follow the common law and adopt a restrictive approach to state immunity (“the restrictive approach”).This meant that a foreign state was only immune from suit in Hong Kong when it was exercising its sovereign power,but not when it was engaging in commercial activities.
By a majority of 3:2,the Court of Final Appeal of Hong Kong (“CFA”) decided that before deciding on the issue of state immunity,a reference had to be made to the Standing Committee of the National People’s Congress of China (NPCSC) pursuant to Article 158 of the Basic Law.The majority was of the view that state immunity,a principle based on the mutual acknowledgment of equality among sovereign states,was a matter in the realm of foreign affairs.Which branch of the government was competent to decide this issue depended on the constitutional arrangements of each jurisdiction.Under the constitutional arrangements of Hong Kong,the Chinese government was responsible for the conduct of foreign affairs in Hong Kong.Thus,the issue of state immunity would have to be referred to the NPCSC for a decision under Article 158 of the Basic Law.
The NPCSC promulgated its decision on August 26,2011.It reasoned that “state immunity concerns whether the courts of a state have jurisdiction over foreign states and their properties”,and “directly relates to the state’s foreign relations and international rights and obligations”.Thus,as the issue of sovereign immunity falls within the realm of foreign affairs,the Chinese government has the power to decide on this issue,and Hong Kong courts are bound to follow the PRC’s practice in adopting the absolute approach.Consequently,the CFA formally disposed of the case by allowing the appeal by the DRC and the CR companies on September 8,2011.
From the above three cases and other important cases,28 we can summarise China’s position and practice on the immunities of states and their property in foreign states as follows:
First,the immunities of state and their property is a principle of international law based on the principle of sovereign equality of all states as confirmed by the Charter of the United Nations,and China opposes the doctrine of “restrictive immunities” or even that of “abolishing immunities”.
Second,China insists that all acts of a state per se or conducted on its behalf should be absolutely immune from foreign jurisdictions,unless the state voluntarily and explicitly consents to waive its immunity and subject itself to a foreign jurisdiction.
Third,China distinguishes the activities of a state per se from those of a state-owned enterprise,and believes that a state-owned enterprise possesses an independent legal personality and should not enjoy immunities for its activities; this shows that the doctrine of absolute immunity which China adheres to is actually a modified one different from its original form.
Fourth,China advocates that differences among nations in relation to the issues of state immunity should be resolved through negotiating and concluding international agreements and treaties.
Fifth,if a foreign state,in violation of international law,infringes upon sovereign immunities enjoyed by China and its property,China will reserve its right to take countermeasures accordingly.
Last but not least,a special appearance entered by China in a foreign court for the purpose of objecting its jurisdiction should not be deemed as an acceptance of its jurisdiction.
As a concluding remark of this section,it is worth mentioning that on September 14,2005,at the UN headquarters in New York,the then Chinese Foreign Minister Li Zhaoxing signed the 2004 United Nations Convention on Jurisdictional Immunities of States and Their Property,which is understood by some observers to be a signal that China is switching to endorsing the restrictive approach in relation to the application of the principle of state immunity.29
This might be true in some respect,since China has acknowledged that the strength of absolute doctrine is weakening while the doctrine of restrict immunity has becoming more and more popular in the contemporary world; nonetheless,it is still too early to conclude that China has formally abandoned the absolute doctrine,and has chosen to embrace the restrictive doctrine,insofar as the Standing Committee of the National People’s Congress of China has not ratified the United Nations Convention on Jurisdictional Immunities of States and Their Property so far,and there is no signal to suggest the NPC should do so in the foreseeable future.