Originially from: World Arbitration and Mediation Review (WAMR)

Executing Arbitral Awards Against Russian Entities
Part III: State Immunity
By Kaj Hobér, a partner at White & Case in Stockholm,
[Editor’s note: This is the last installment of Mr. Hobér’s in-depth
analysis of the enforcement of foreign arbitration awards in Russia. Part I
(see 4 WAMR 82) explored the basic framework governing enforcement;
Part II (see 4 WAMR 122) examined the assets available for execution
and issues of piercing the corporate veil.
The article is based on a presentation given by Mr. Hober on October
19, 1992 on the occasion of the 75th Anniversary of the Arbitration
Institute of the Stockholm Chamber of Commerce. Mr. Hober’s
contribution will be published in the Institute’s 1993 Yearbook. Mr. Hober
is also the author of Joint Ventures in the Soviet Union, published by
Transnational Juris Publications.]
The last hurdle that a Western businessman may have to overcome to
execute an arbitral award against a Russian entity is state immunity. The
defense of state immunity may typically be used by arguing that a foreign
trade organization (FTO), or an FTO that has been transformed into a joint
stock company, is a state organization, and that the property it has in its
possession is state property and thus entitled to immunity. Immunity
issues may also arise if the Western party has been successful in piercing
the corporate veil of the FTO and thus has, as a matter of principle, access
to (all) property of the state.
The Soviet Union always adhered to the theory of absolute immunity, as
opposed to the theory of general, or restrictive, immunity. Generally
speaking, absolute immunity requires the consent of the state in question
before jurisdiction and/or execution may be had against it or its property.
Consequently, the traditional Soviet position with respect to state
immunity has the potential of being a source of aggravation in foreign
trade.
However, in practice this has not been the case, at least not since the
Second World War. Indeed, the question of immunity in Soviet foreign
trade typically has been considered an academic exercise. Even though
Soviet lawyers have never conceded on a theoretical level that FTOs are
precluded from pleading immunity, in practice immunity has frequently
been waived by bilateral agreements or contractual provisions.