Originally from Enforcement of Arbitral Awards Against Sovereigns

Because most nations afford some form of immunity from attachment and execution to the assets of foreign sovereigns located in their jurisdictions, enforcing an arbitral award against a sovereign who refuses to pay can pose significant challenges, even when that award has been recognized as a judgment. In most nations, the concept of sovereign immunity generally protects most sovereign assets from execution and attachment. An exception to general principles of sovereign immunity, however, often exists with regard to sovereign assets that are used (or intended to be used) for commercial activity or for commercial purposes. Thus, although a party seeking to enforce an arbitral award against a recalcitrant sovereign may lack the full panoply of execution and lien options usually available to the victor in arbitration against a nongovernmental party, under the “commercial activity” exception to sovereign immunity, the party seeking enforcement may be able to reach the sovereign’s commercial assets in satisfaction of the award.

This chapter will examine the “commercial activity” exception to sovereign immunity, which is codified in the statutes of some nations and recognized by reference to general principles of customary international law in others. Because the United States and the United Kingdom have sovereign immunity statutes explicitly recognizing the “commercial activity” exception and well-developed case law setting forth the criteria for reaching sovereign assets under that exception, much of the following discussion will focus on those countries. Execution against sovereign assets in general is a relatively recent development, and most states have followed the lead of the United States and the United Kingdom in applying a sovereign immunity doctrine that permits execution in aid of arbitral awards against commercial assets.