Originally from State Entities in International Arbitration

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United States courts frequently entertain lawsuits seeking enforcement of arbitral awards against foreign States, so there is a substantial body of law addressing efforts to enforce State liability against State instrumentalities. The central principle is the presumption that “government entities established as juridical entities distinct and independent from their sovereign should normally be treated as such.” This presumption applies in determining U.S. jurisdiction over a foreign State and its instrumentalities, in evaluating their respective liability for claims asserted against them, and in satisfying awards by executing against their assets. The presumption of separateness may be overcome by showing that the instrumentality “is so extensively controlled by its owner that a relationship of principal and agent is created,” or where recognition of a separate legal identity “would work fraud or injustice.”

Different principles of U.S. law govern the liabilities of the United States. Generally speaking, U.S. law provides that the liabilities of the United States and its instrumentalities are all liabilities of the United States itself, and enforcement of any liability is governed by statutory procedures for waiving sovereign immunity and earmarking appropriated funds that may be used to pay judgments.