Sovereignty Immunity on International Arbitral Awards in Asia:
Based on New York Convention and Domestic Law in Asia on Sovereign Immunity
ALSA National Chapter: Japan
As the world is slowly moving into an integrated economy, the number of disputes regarding international commercial transaction has been increasing. Solving these disputes within the domestic courts has many challenges, such as jurisdiction problems, implementation of laws and enforcement of foreign judgement, due to the fact that most countries have sovereignty aspect in order to uphold their national law. On the other hand, international commercial arbitration has features such as neutrality aspect or flexibility of legal procedure. Also, Convention on the Recognition and Enforcement of Foreign Arbitral awards (hereinafter referred to the New York Convention realizes that enforcement of international arbitration awards enough about disputes between private actors. However, can disputes between sovereignty and private actor be solved with international commercial arbitration the same way as it is between private actors? Although international commercial arbitration has the authority to make judgement, it is questionable whether that judgement can be enforced or not. The purpose of this article is to answer the question from the viewpoint of international and domestic law on sovereignty immunity around Asia.
A) What is Sovereign immunity?
The main actor of international law has been sovereign state. The term “Sovereignty” has two meanings. Firstly, the internal supreme power. Secondly, the dependence from other countries. Its corollary is the principle of sovereignty equality. Based on the legal proverb “par in parem non habet imperium”, any sovereignty states cannot control each other and don’t yield to any other sovereignty. This is called “Sovereign immunity”. The term includes immunity from jurisdiction and immunity from execution.
Present discussion tends to limit the extent of sovereign immunity, in particular immunity from jurisdiction. Moreover, doctrine of absolute immunity was mainstream. The doctrine means that all act by sovereign states can enjoy the immunity. However, the doctrine of absolute immunity prevents opposite party of states’ commercial activities from being relieved when disputes occur. It does not secure the international transactions. To solve the problem, doctrine of restrictive immunity is becoming favorable. However, the discussion on immunity from jurisdiction is separated from discussion on immunity from execution. If the doctrine of restrictive immunity is favorable to immunity from jurisdiction, it doesn’t mean that the doctrine is favorable on immunity from execution
What kind of problems do disputes between a sovereignty state and a private actor cause? It is natural to wonder if a sovereign state which has the obligation to claim immunity from execution in accordance with theory because the enforcement of international arbitration depends on sovereign states. This article discusses whether sovereign states can really be able to claim immunity from execution about the enforcement of international arbitration between a sovereignty state and a private actor through international law and domestic law on sovereign immunity in Asian countries
B) Before the adoption of New York Convention (Geneva Protocol/ Geneva Convention)
It is said that international commercial arbitration historically developed from the urgency to solve disputes between merchants in the Middle Age Europe. This idea was originally opposed, due to the fact that country felt that their sovereignty is being violated by private power. After that, following the expansion and increasing complexities of commercial transactions, the arbitration system whose binding force had been secured based on relationships of trust in a merchant society without involvement by a country. Therefore, conclusion was that it was difficult to achieve the enforcement of arbitral awards without the intervention of national courts. At the same time, countries could not reconcile their views on the importance of the development of trade. At the result, the arbitral system which had been developing amongst them was largely integrated in their respective national judicial systems, instead of integrating. Thus, after Arbitration process has been developed, they started to be listed under three divisions such as the arbitration procedural rules, international conventions setting common criteria for enforcing the arbitral award made in other countries, and arbitral laws in each country.
With increasing international commercial transaction disputes due to the expansion of trade volume after WW1, the League of Nations and International Chamber of Commerce (ICC) took initiatives to codify international rules about private law. As a result, the Geneva Protocol on Arbitration Clauses was concluded in 1923 and the Geneva Convention on the Execution of Foreign Arbitral Awards in 1927. The Protocol dealt with the recognition of arbitration agreements; each of the Contracting States undertaking to recognize the validity of such agreements between parties subject to the jurisdiction of different Contracting States. The Convention consisted in the enforcement of only those awards being strictly in accordance with the rules of procedure laid down in the law of the country where the arbitration took place – consequently, The New York Convention was established as a result of dissatisfaction with the Geneva Protocol on Arbitration Clauses of 1923 and the Geneva Convention on the Execution of Foreign Arbitral Awards of 1927.
C) New York Convention
The region regulated in New York Convention is enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal, or was arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought (Article 1). The convention imposes obligation that parties to the convention should enforce foreign arbitral awards in accordance with the rules of procedures of the territory where the awards is relied upon in own countries (Article 3).
The issue on sovereign immunity in New York Convention is about refusal reasons. Article 5 of the New York Convention regulates being able to refuse the enforcement of foreign arbitral awards about the request of the party and the finding of the component authority in the country where arbitration awards should be enforced. Does it correspond really this Article 5?
In this point, Yang Ye analyzes that immunity from execution is not included in refusal reason because of the term “only” in the article 5. Kazuo Iwasaki has the similar opinion with Yang Ye. He said that the immunity is not specified in Article 5 (1 and 2), and there are no theories which regard the immunity as refusal reason. Akihiro Matsui mentions that the article 5 lists all refusal reasons and tries to limit the extent of the refusal.
Although there is a case which mention the article 5, the case didn’t decide that sovereign immunity is refusal reason in general. The obligor was Libya, and the creditor was Libyan American Oil Co. (LIAMCO). The arbitration was held in Switzerland. LIAMCO demanded enforcement to Libyan national property in United States. Then, Libya claim sovereign immunity as defense. The court refused the enforcement based on the article 5 paragraph 2 (a) because the issue that is nationalization of LIAMCO’s property by Libya was sovereignty activity. Sovereign activity cannot be solved by arbitration pursuant to U.S federal law.
As discussing above, a lot of theories don’t regard the immunity as refusal reason because New York Convention doesn’t list it. Even a case that mention sovereign immunity and the article 5 didn’t regard the immunity as refusal reason in general. Hence, it doesn’t correspond to the reason to refuse in New York Convention Article 5.
- Domestic law on the immunity from execution
Former chapter show sovereignty immunity is not the refusal reason in New York Convention. Although New York Convention gives each member state the obligation to enforce the arbitration awards, it is still necessary to look at domestic law because if the state where their recognition and enforcement are sought present immunity from execution to the state of obligor, it is not regarded as breach of New York Convention. As a result, the situation of domestic law affect the reliability of the enforcement. This chapter will consider what stand countries in Asia take about the immunity from execution.
Singapore has State Immunity Act (Cap.313) which regulate sovereignty immunity inclusively. As for immunity from execution against a state’s property, the general immunity is set out in section 15(2) of the Singapore State Immunity Act. However, there is a commercial exception to this immunity: a state’s immunity from execution against its property does not apply to property “which is for the time being in use or intended for use for commercial purposes” (s. 15(4)). Hong Kong is also common law area. Although Hong Kong doesn’t have any act on immunity from execution, the cases of The Cristina  AC 485 showed that principle of sovereignty immunity in common law can spread to which is in the possession of, and which has been requisitioned, except for property for related to commercial transactions. In Malaysia, there is no laws, precedents and theories about the immunity of enforcement. However, Raja, Darry & Loh law firm showed its opinion that the court in Malaysia admit enforcement against properties of foreign countries for commercial purpose referring to the immunity of Common Law in England.
Japan, whose law system contains is civil law, has Act on the Civil Jurisdiction of Japan with respect to a Foreign State. While article 4 establishes the principle that foreign state enjoy not only immunity from jurisdiction but also immunity from execution, the section 3 of chapter 2 (Article 17 – 19) defines cases of non-immunity from proceedings of execution of temporary restraining orders and civil execution procedures against property of a foreign state. Under the provision of article 18 paragraph 1, A Foreign State, etc. shall not be immune from jurisdiction with respect to proceedings of a civil execution procedures against the property held by said Foreign State, etc. that is in use or intended for use by said Foreign State, etc. exclusively for other than government non-commercial purposes. According to the same article paragraph 2, property for diplomatic mission, military property and cultural property, etc is out of the property on the paragraph 1. This seems to use the doctrine of restrictive immunity. However, lots of cases whose issues are immunity from execution is about diplomatic property. As a result, Japan will give immunity from execution to foreign countries in many cases. About Republic of Korea, according to theories, although there is no laws or judicial precedents about the immunity of enforcement in Korea, the enforcement can be done if only it is not used for commercial purpose. And recognition for enforcement is necessary even if foreign states have already declared waiver of immunity from jurisdiction.
In China, when based on PRC Regulation on Diplomatic Privileges and Immunities 1986, since it is not admitted clearly that properties of foreign countries have privilege or immunity not serving enforcement procedure, properties of government authorities of foreign countries can be seized based on the law in China related to a civil procedure. Allens Arthur Robinson reported that Vietnam’s court has jurisdiction and execution to foreign states. On the other hands, he also tells that Vietnam will not start enforcement easily due to consideration about diplomacy.
As looking above, this chapter introduced the states belonging to common law, civil law and law in socialism. All of three common law states, Singapore, Hong Kong and Malaysia take the doctrine of restrictive immunity. The difference among these states is that Singapore and Malaysia define commercial act based on the purpose while Hong Kong does it based on whether action is related to commerce. Civil law states, Japan and Republic of Korea, use the doctrine of restrictive in general. However, there are some points which make enforcement difficult. Socialism states, China and Vietnam, don’t show the commercial exception. Therefore, while it can be said that common law and civil law states use and will use the doctrine of restrictive, socialism states don’t state the doctrine clearly.
International commercial arbitration has lots of merit such as flexibleness, and New York Convention makes sure the enforcement enough about disputes between private actors. About disputes between a sovereignty state and private actors, atmosphere that it is not easy for sovereignty states to claim sovereign immunity is being made because sovereignty immunity is not refusal reasons and domestic law tend to adopt restrictive immunity. However, New York Convention still contains problems, and only a few states write restrictive immunity clearly in domestic law and some states don’t have even precedents or doctrines. Discussing the issues on immunity from execution as soon as possible will contribute to developing international transaction more and more.
 For example, a sovereign state took sales contract to buy computers used in embassy with a maker in a receiving country, which caused disputes between the sovereign state and the maker. (Supreme Court, July 21st, 2006, 60 Minshu, 6-2542 (Japan).
 Miwa Yamada, ‘The international harmony of arbitration law in globalization and developing country’, 2007, Globalization and economic law reform in developing countries, 559, kenkyu so-sho/ Institute of Developing Economies- Japan External Trade Organization (IDE-JETRO), 210.
 Yang Ye, ‘An Analysis of Important Documents Related to the Refusal of Recognition and the Enforcement of International Commercial Arbitral Awards’, (2017), 64, Kobe College Studies, Kobe College Research institute, 155.
 Kazuo Iwasaki, ‘The enforcement of foreign arbitral awards and the sovereign immunity’, (1993), 147, Nagoya University journal of law and politics, Nagoya University Graduate School of law, 316.
 Akihiro Matsui, ‘Immunity from execution on international law in the process of arbitration awards enforcement’, (2005), 303, The quarterly of the Ritsumeikan University Law Association, Ritsumeikan University, 96.
 Libyan Am. Oil Co. v. Socialist People’s, ETC., 482 F.Supp 1175 (D.D.C. 1980).
 Kazuo Iwasaki (n 4) 319-320.
 Akihiro Matsui (n 5) 97.
 Bank of Japan, Satoshi Moriguchi, Reiko Suga, The legislation of sovereignty immunity (2009) 7.
 Azim Hussain, Matthew Kirtland, etc “State Immunity and International Arbitration” (2017), 8, International arbitration report, NORTON ROSE FULBRIGHT, 44.
 Bank of Japan (n 9) 30.
 The Ra Rung Do  HKC 621.
 Bank of Japan (n 9).
 Akihiro Matsui, ‘A belief of the restrictive immunity from execution under the United Nations Convention on Jurisdictional Immunities of States and Their Property’, (2010), 2010(5/6), The quarterly of the Ritsumeikan University Law Association, Ritsumeikan University, 2799.
 ibid 2800.
 Bank of Japan (n 9) 4.
 Bank of Japan (n 9) 26.
 Bank of Japan 32-34.