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Immunities of States from the Jurisdiction of Municipal Courts
Sovereign states are immune from the jurisdiction of foreign courts (1) when they engage in
activities anywhere in the world that are unique to sovereigns and (2) when they act officially
within their own territory.
Sovereign or State Immunity – The doctrine of sovereign or state immunity says that domestic
courts must decline to hear cases against foreign sovereigns out of deference to their role as
sovereigns.
The rule of absolute sovereign immunity, in effect until the 1950s, held that a state is absolutely
immune and cannot be brought before a foreign court no matter what it does or what injuries it
may cause. This made sense in the days when states were involved in little more than tax
collection, law enforcement, and national defense, but it does not make sense now that so many
states are engaged in extensive commercial activities. Absolute sovereign immunity would mean
that individuals and businesses that contracted to buy from or sell goods or services to a foreign
state would be unable to sue that state if a state-owned entity in that state breached its contract.
Besides being unfair, this is bad business.
The theory of restrictive sovereign immunity says that a state is immune from suit in cases
involving injuries that are the result of its governmental actions (jure imperii) but is not immune
when the injuries result from a purely commercial or nongovernmental activity (jure gestionis).
Many states have enacted statutes adopting the restrictive sovereign immunity doctrine. Two
widely emulated examples are the 1976 U.S. Foreign Sovereign Immunities Act and the 1978
U.K. State Immunity Act.
The principal exception described by both acts is, of course, governmental participation in
commercial activity, and both acts undertake to define such activity. In addition to commercial
activities, both acts deny states immunity from claims for death or personal injury, for damage to
or loss of tangible property, for claims relating to real property, and for actions based on
intellectual property rights. However, the exceptions to immunity granted by both acts apply only
if some connection exists between the activity and the forum state.
In addition to the several exceptions already mentioned, immunity is not available when it is
waived by the state. It can be waived expressly at the time the suit is brought or in advance in a
contract clause or implicitly by bringing or participating in a suit. But waivers can be contentious,
and agreements to arbitrate do not necessarily create the necessary waiver of sovereign immunity
in the view of all states.
If there is a judgment against a foreign sovereign, problems of “executing on the judgment” (or
collecting monies due) frequently arise.
Case 3-5: Abbott v. Republic of South Africa
Facts: The plaintiff, Abbott, a foreign national who had been fired from her job at the South
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Issue: Can a court enforce a judgment against property belonging to a foreign state?
Holding: Yes, if it is property held for commercial purposes and not in a local bank account.
Law: The Vienna Convention on Diplomatic Relations and the Vienna Convention on Consular
Explanation: As a practical matter, a court may not order an embassy to disclose which of the
Holding: Case to be reopened so that plaintiff can enforce the judgment as to any property that is
not immune.
Act of State Doctrine – The act of state doctrine is a rule that restrains municipal courts in some
countries from exercising jurisdiction over foreign states. This rule is most developed in the
United States, where it is based on the U.S. constitutional requirement of separation of powers.
Not all actions of public officials amount to “sovereign acts” that require respect from U.S.
judiciary.
Case 3-6: W.S. Kirkpatrick Co., Inc. v. Environmental Tectonics Co.
Facts: The promised commission paid by Kirkpatrick to the appointed Panamanian entities was
Issue: While applying the act of state doctrine, are public acts and acts of public officials treated
similarly?
Holding: No.
Law: Not all acts of foreign public officials will be recognized as “public acts” for purposes of
Explanation: For the act of state doctrine to apply, the act of a public official must somehow be
Order: The judgment of the Court for the Third Circuit is affirmed.
Choosing the Governing Law
It would be simplest if courts applied the law of the forum state in all cases. To later have a court
in another state apply different laws would discourage international exchanges of all kinds. The
idea that municipal courts should apply foreign laws in these kinds of cases was originally based
on the idea of comity (i.e., respect for the interests of a foreign sovereign) because each state has
an interest in protecting the rights of its subjects, and only by respecting the interests of foreign
subjects can a state expect similar treatment for its subjects in other states.
Courts use what are called choice of law rules to determine if they should apply their own law or
the law of another state in settling civil disputes. This involves a two-step procedure. First, if the
parties to a dispute have agreed to the application of the laws of a particular country, the court
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should apply those laws. Second, if the parties have not agreed as to which laws should apply
(either expressly or impliedly), then the court should determine for itself which laws it should
apply by:
a) Following statutory dictates.
b) Determining which state has the most significant relationship with the dispute.
c) In a few jurisdictions: Determining which state has the greatest interest in the outcome of the
case.
Agreement of the Parties – By the use of a choice of law clause, the parties agree in advance as
to what law should apply. So long as the parties made the agreement freely, even if they have no
factual connection with the country whose legal system they have adopted, their choice will
generally be enforced.
The agreement of the parties can also be made in statements to a court. In theory, in contract or
other cases where the parties have not agreed to the applicable law, their intention that the law of
a particular country should apply can sometimes be inferred. In practice, courts seldom infer the
parties’ intention. Instead, they go on to their second set of choice of law rules and apply the law
specified in a statutory directive, the law with the most significant relationship, or the law of the
state with most interest in the outcome.
Statutory Choice of Law Provisions – In civil law countries, the law that courts will apply in a
dispute when the parties themselves have not made a choice is found in statutory codes or,
sometimes, in international treaties. Traditionally, these provisions are based on a concept known
as the vesting of rights, and this approach to choosing the applicable law is, therefore, often called
the vested rights doctrine. According to this doctrine, a court is to apply the law of the state where
the rights of the parties to a suit vested (i.e., where they legally became effective).
To determine where particular rights vest, the codes provide fairly simple and straightforward
guidelines. Usually a provision can be found that covers the general case. Beyond this, the courts
look to the subject matter of the suit—such as delicts (legal offenses), contracts, or real property
—and then choose the appropriate choice of law rule for that subject matter.
The codes also always contain a general limitation on the application of foreign law. That is,
foreign law will not be followed if doing so would violate the public policy of the forum state.
In recent years, many civil law countries have modified their choice of law rules (most significant
relationship doctrine, governmental interests doctrine) in response to objections that the vested
rights doctrine is too rigid and fails to reflect the true interests of the states whose law may or
may not be applied.
Most Significant Relationship – The most significant relationship doctrine has a court apply the
law of the state that has the most contacts with the parties and their transaction. The courts will
consider the following general factors in all cases: (1) Which state’s law best promotes the needs
of the international system? (2) Which state’s law will be furthered the most by applying it to the
case at hand? and (3) Which state’s law will best promote the underlying policies of the legal
subject-matter area involved?
In addition, a court will consider specific factors depending on the kind of case that is before it.
For tort cases, the specific factors are (1) the place of injury, (2) the place of the act, (3) the
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nationality, domicile, residence, or place of incorporation of the parties, and (4) the place where
the relationship between the parties was centered.
For personal property cases, they are (1) the location of the property and (2) the nationality,
domicile, residence, or place of incorporation of the parties.
For real property cases, the specific factor is the location of the property. And the specific factors
in contract cases are (1) the place of contracting, (2) the place of negotiation, (3) the place of
performance, (4) the location of the subject matter, and (5) the nationality, domicile, residence, or
place of incorporation of the parties.
Case 3-7: Bank of India v. Gobindram Naraindas Sadhwani and Others
Facts: Mr. & Mrs. Gobindram Sadhwani (G), residents of Hong Kong, had acted as guarantors of
Issue: What law governs the guarantee contract?
Holding: Japanese law.
Law: To determine the governing law, courts will consider: (1) the law the parties expressly
Explanation: (1) The parties had not expressly designated the governing law. (2) There is nothing
Order: Because Japanese law applies, the case is dismissed.
Governmental Interest – Courts that apply the governmental interest doctrine will make no
choice of law unless asked to do so by the parties. If they are not asked, they will apply the law of
their own state. If asked, they will then look to see which state has a legitimate interest in
determining the outcome of the dispute.
If only the forum state has an interest (a false conflicts case), they will, of course, apply the forum
state’s law. If both the forum state and another state or states have some legitimate interest (a true
conflicts case), then the forum state’s laws should be applied because the court obviously
understands those interests better.
If two states other than the forum state have legitimate interests (also a true conflicts case), then
the court should dismiss the case if the state in which the court is located follows the doctrine of
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forum non conveniens. Otherwise, the court has the choice of applying whichever law it feels is
the most appropriate or the law that is most like that of the forum state.
Refusal to Exercise Jurisdiction
The doctrine used by common law courts to refuse jurisdiction is called forum non conveniens.
The court would apply forum non conveniens to nonadmiralty cases (cases in law or equity) and
reaffirm the notion that plaintiffs could not resist forum non conveniens on the basis of
unfavorable substantive law in alternative forums.
The basic four-part test for the application of forum non conveniens is that the defendant will
prevail if there is an alternative forum that is (1) available and (2) adequate, and if (3) private
interest factors and (4) public interest factors point toward the alternative forum and away from
the U.S. courts.
Case 3-8: Jorge Luis Machuca Gonzalez et al. v. Chrysler Corporation et al.
Facts: Mr. Gonzalez bought a Chrysler LHS in Mexico, after seeing the car at Houston, Texas car
Issues: (1) Does Mexican law’s cap on tort damages make Mexico an inadequate forum for
adjudicating a tort suit by a Mexican citizen against a U.S. car company and a U.S. air bag
designer? (2) Did the district court commit reversible error in deciding that Mexico, not Texas,
was the proper forum for this case?
Holdings: (1) No. (2) No.
Law: An alternative forum must be available and adequate. An adequate forum will provide the
Explanation: Even though Mexican law does not provide for strict liability in tort and caps
Order: The district court’s dismissal on the ground of forum non conveniens is affirmed.
Opposition to the Exercise of Jurisdiction
When a litigant brings suit in a foreign court, it sometimes happens that the litigant’s home
country is opposed to his doing so. The foreign court may dismiss the case using the doctrine of
forum non coveniens; but if it does not, a court in the litigant’s home country may intervene to
prevent the litigant from proceeding with the case. The device the home country court uses is
known as an anti-suit injunction. The anti-suit injunction is directed at the litigant, ordering him
or her not to proceed with the case. Two different standards are used by courts to determine
whether to issue an anti-suit injunction. The first requires a court to consider comity and to grant
the injunction to protect its own jurisdiction or to prevent evasion of its public policies. The
second allows a court to grant the injunction if the foreign proceedings are vexatious or
oppressive or if they will otherwise cause inequitable hardship.
Proving Foreign Law
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Courts are held to know their own state’s law, and the same assumption is made for international
law—the court is assumed to know the rules of international law. Courts, however, are assumed
not to know the law of foreign states.
Recognition of Foreign Judgments
When asked to convert a foreign judgment into an enforceable local judgment, a court will hold a
hearing and, if it believes the request is justified, issue an appropriate order. What it will consider
in making this determination varies from state to state. The only universal consideration is that
the foreign court must have had jurisdiction before handing down its judgment.
Arbitral awards are treated quite differently. In states that are signatories to the United Nations
Convention on the Recognition and Enforcement of Foreign Arbitral Awards, a foreign arbitral
award is recognized and enforced in the same way as a domestic award. In other states, foreign
arbitral awards can be enforced only if they are first converted into a judicial judgment in the
state where the arbitration was heard.
II. Chapter Questions
Self-judging Clause
1. Students’ answers may vary. Some may argue that the provision contained in the declaration is
International Court of Justice: Compliance
2. Students’ answers may vary. There is no way to force a state to comply with a judgment. The
ICSID Arbitration
3. Students’ answers may vary. Some may argue that the tribunal has jurisdiction to proceed since
Foreign Sovereign Immunities
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4. Students’ answers may vary. Some may argue that State D is not immune from the jurisdiction
of the court. The preamble to the 1976 U.S. Foreign Sovereign Immunities Act states: “The
Jurisdiction over Criminal Acts
5. Students’ answers may vary. Some may argue that the court has jurisdiction to try President N.
Forum Selection Clause
6. Students’ answers may vary. Some may argue that the court may have jurisdiction as a juridical
person’s consent to the jurisdiction of a foreign court may be given expressly or it may be
Consent will be implied if there are enough contacts between the juridical person and the foreign
state. In determining if there are enough contacts, courts have to consider (1) whether the
Restrictive Sovereign Immunity
7. Students’ answers may vary. The theory of restrictive sovereign immunity states that a state is
Act of State Doctrine
8. Students’ answers may vary. The act of state doctrine is a rule that restrains municipal courts in
some countries from exercising jurisdiction over foreign states. Not all actions of public officials
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Forum Non Conveniens
9. Students’ answers may vary. Some students may argue that the Texas court may use the
III. Key Terms
Absolute sovereign immunity—Rule that a foreign state is immune from all types of suits.
Act of state doctrine—Doctrine that the act of a government within the boundaries of its own
territory is not subject to judicial scrutiny in a foreign municipal court. A municipal court will
decline to hear a dispute based on such acts if to do so would interfere with the conduct of the
forum state’s foreign policy.
Advisory jurisdiction—The power of the ICJ to give opinions about issues of international
law at the request of the United Nations or one of its specialized agencies.
Anti-suit injunction—Court order directing a person not to proceed with litigation in a foreign
court.
Arbitration—(From Latin arbitrari: “to give a decision.”) The process by which parties to a
dispute submit their differences to the binding judgment of an impartial third person or group
selected by mutual consent.
Choice of law—Rules used by municipal courts to determine which state’s law they should
apply in hearing a civil dispute.
Choice of law clause—A provision in a contract designating the state whose law will govern
disputes relating to the contract.
Collusive action—(From Latin cullosio: “a secret understanding.”) A suit in which the parties
are not at odds but instead cooperate to obtain a judgment.
Conciliation—(From Latin conciliare: “to call or bring together.”) The process by which an
impartial third party makes an independent investigation and suggests a solution to a dispute.
Contentious jurisdiction—The power of a court to hear a matter that involves a dispute
between two or more parties.
Delict—(From Latin delictum: “a fault.”) In civil law countries, any private wrong or injury,
or a minor public wrong or injury.
Diplomacy—A form of international dispute settlement that attempts to reconcile parties to a
disagreement by use of negotiation, mediation, or inquiry.
Forum non conveniens—(From Latin: “inconvenient forum.”) Doctrine that a municipal court
will decline to hear a dispute when it can be better or more conveniently heard in a foreign
court.
Forum selection clause—A provision in a contract designating a particular court or tribunal to
resolve any dispute that may arise concerning the contract.
Forum state—(Forum, from Latin: "an open square" or "market-place"; in Roman times,
citizens met here to conduct business.) Forum-state: the nation-state in which the court, or
forum, conducts its business.
Good offices—A third party who provides the means by which two disputing parties may
communicate with each other.
Governmental interest doctrine—Doctrine that holds that courts should apply the law of the
state that has the most interest in determining the outcome of the dispute.
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Immunity—(From Latin immunitas: “freedom from public service.”) Freedom or exemption
from a burden or duty, such as from the obligation to appear before a court.
In personam jurisdiction—The power of a court or tribunal to determine the rights of a party
who appears before it.
In rem jurisdiction—The power of a court to determine the ownership rights of persons as to
property located within the forum state.
Inquiry—(From Latin inquirere: “to seek after” or “to search for.”) The process by which an
impartial third party makes an investigation to determine the facts underlying a dispute
without resolving the dispute itself.
Investment—A commitment of money or capital in order to earn a financial return.
Juridical person—A legal entity created by national or international law.
Jurisdiction—(From Latin jurisdictio: “administration of the law.”) The authority or power of
a court or tribunal to hear a particular case or dispute.
Legal dispute—A disagreement as to the existence of a legal right or obligation, or as to the
nature and extent of the compensation due for the breach of such a right or obligation.
Mediation—(From Latin mediates: “to be in the middle.”) Bringing about a peaceful
settlement or compromise between parties to a dispute through the benevolent intervention of
an impartial third party.
Most significant relationship doctrine—Doctrine that courts should apply the law of the state
that has the closest and most real connection with the dispute.
Nationality nexus—Criteria that allow a court to assume criminal jurisdiction when the
defendant is a national of the forum state.
Natural person—A human being.
Negotiation—(From Latin negotiari: “to carry on business.”) The process of reaching an
agreement by conferring or discussing.
Optional Clause jurisdiction—A unilateral grant of jurisdiction by a state to the ICJ that
allows the Court to resolve disputes involving that state.
Personal jurisdiction—The requirement that a tribunal must have power over the parties
before it may hear a dispute.
Protective nexus—Criteria that allow a court to assume criminal jurisdiction in cases in which
a national interest of the forum state was injured.
Restrictive sovereign immunity—Theory that a foreign state is not immune when the cause of
action for a suit is based on conduct unrelated to the state’s governmental activities.
Rule of reciprocity—A state has to respond to a suit brought against it before the ICJ only to
the extent to which the state bringing the suit has also accepted the jurisdiction of this court.
Self-judging reservation—A reservation that allows a state to exclude from the jurisdiction of
the ICJ any dispute that it determines is a domestic matter.
Sovereign or state immunity—Doctrine that municipal courts must decline to hear suits
against foreign sovereigns.
Territoriality nexus—Criteria that allow a court to assume criminal jurisdiction over an
offense that was committed within the forum state.
Universality nexus—Criteria that allow a court to assume criminal jurisdiction if the offense
is one recognized by the international community as being of universal concern.
Vested rights doctrine—Doctrine that courts should apply the law of the state where the rights
of the parties legally became effective.
World Trade Organization (WTO)—International intergovernmental organization responsible
for implementing and enforcing international rules regulating trade between nations.
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