La Revue Squire

Immunity from enforcement: When national law supplements customary international law


Rédigé par Carole Sportes - Stéphanie Simon le 7 Juillet 2016

It is increasingly common for companies who have won a claim against a State to try and enforce their awards (arbitral or otherwise) against that State's assets in France. As a result, France and its judges find themselves caught between creditors and debtor States.



As Mr Drai, former First President of the Cour de Cassation (the French Supreme Court for civil matters) declared before the French Arbitration Committee, French judges "should be responsible people [...] and do whatever they can to protect their government from the serious difficulties that may arise from a refusal to release a foreign State's property from attachment" (Works of the French Private International Law Committee, at p. 153).

Such difficulties explain in part the early implementation of State immunity from enforcement under French law (article L. 111-1 of the Code of Civil Enforcement Procedures). Case law (1) and international law (2) subsequently put that concept to the test.
 

1. Judicial treatment of State immunity from enforcement in France

Since the Eurodif case, the courts have recognized a foreign State's immunity from enforcement as a principle and set out exceptions where the use of the attached property is connected, not to the exercise of the State's sovereign powers but instead, to an economic transaction governed by private commercial or civil law (Cour de Cassation, 1st civ., 14 March 1984, appeal No. 82-12642).

Conversely, there are cases where the State has demonstrated unequivocally that it waived its immunity from enforcement (Cour de Cassation, 1st civ., 6 February 2007, appeal No. 04-13108).
Attachment of a State's property is a thorny issue and it is therefore essential that any waiver be identified and defined against strict and concrete criteria. The courts have long been divided in relation to what constitutes a waiver of a State's immunity from enforcement:

  • The courts initially considered that a State's agreement to be a party to an arbitration agreement was an implied waiver of its immunity from enforcement in general (Cour de Cassation, 1st civ, 6 July 2000, No. 98-19068);
 
  • The Court of Appeal of Paris subsequently stated that such a waiver should be "express" and not merely "implied" (CA Paris, 26 September 2001, Docket No. 2001/12633);
 
  • In the NLM Capital cases (Cour de Cassation, 1st civ, 28 September 2011, appeal No. 09-72057; Cass 1st civ, 28 March 2013, appeals Nos. 11-10450 and 11-13323), the Cour de Cassation went further and stated that a State's waiver of immunity from enforcement should not only be "express" but also "property-specific" by indicating which property of the State the waiver applied to.
 
  • On 13 May 2015, the Cour de Cassation however abandoned the requirement of a "property-specific" waiver, retaining only the requirement that this waiver be "express", thus overruling the lower court's decision which had canceled the attachment of bank accounts of a diplomatic mission of a foreign state on the grounds of the absence of an express and property-specific waiver and stating that "customary international law only requires a waiver of immunity from execution to be express" (appeal No. 13-17751). This decision caused a stir among experts and became a source of concern for those States against whom bold (if not extravagant) arbitral awards had been granted.

International law on State's immunity from enforcement evolved alongside the above case law, through the United Nations Convention.

2. The evolution of international law

The United Nations Convention on Jurisdictional Immunities of States and Their Property was adopted on 2 December 2004 (the Convention). It is not yet in force but nevertheless reflects the current state of international law on the criteria for State immunity waivers.

The Cour de Cassation makes regular references to the Convention. A recent example of this can be found in a decision of the Cour de Cassation dated 13 May 2015.

Article 19 of the Convention sets out the following three situations where a State's property may be subject to post-judgment measures of constraint when:

  1. the State has expressly consented to the taking of such measures; or
  2. the State has allocated or earmarked property for the satisfaction of the claim which is the object of that proceeding; or
  3. it has been established that the property is specifically in use or intended for use by the State for [a purpose] other than government non-commercial purposes and is in the territory of the State of the forum, provided that post judgment measures of constraint may only be taken against property that has a connection with the entity against which the proceeding was directed.

The Convention thus provides an exhaustive list of situations in which a State may not rely on its immunity from enforcement thus protecting the sovereignty of foreign states while avoiding absolute immunity.

The courts' reliance on a convention that is not yet in force was so controversial that Parliament intervened.

3. Parliament's intervention

It is against this backdrop that Article 24 of the "Sapin 2" bill makes an attempt at providing legal and diplomatic certainty, by setting out the following provisions:

"Art. L. 111-1-1 – Interim measures or enforcement measures against property of a foreign State may only be taken if one of the following conditions is met:
1° The State has expressly consented to the taking of such measures;
2° The State has allocated or earmarked property for the satisfaction of the claim which is the object of that proceeding;
3° When a judgment or arbitral award was made against the State and the State's property is specifically in use or intended for use by that State for [a purpose] other than government non-commercial purposes provided that such property has a connection with the entity against which the proceeding was directed.

This provision is almost an exact replica of Article 19 of the Convention. It shows Parliament's undeniable intention to consider the Convention as being an integral part of the current law on State immunity from enforcement.

It was right for Parliament to take the lead with its proposed codification of Article 19 of the Convention in the Code of Civil Enforcement Procedures in view of the delayed entry into force of the Convention (on the grounds that the number of ratifications, acceptances, approvals or accessions has not yet reached 30).

This proactive approach should be welcomed as it allows the effective implementation of an international instrument adhered to by many States, including France, where a delayed entry into force is independent of the will of those States.

Article 24 of the Sapin 2 bill also proposes that the following provision be included in the Code of Civil Enforcement Procedures as Article L. 111-1-2:

"Interim measures or enforcement measures against property of a foreign State, including bank accounts, in use or intended for use by diplomatic missions of foreign States, consular posts, special missions or missions to international organisations in the exercise of their functions, may only be taken following express and property-specific waiver of that State".

This provision draws on, and supports, the courts' position as follows:

  • The inclusion of "bank accounts, in use or intended for use by diplomatic missions of foreign States" refers to the position of the Cour de Cassation following the first of the NLM Capital cases of 28 September 2011 (appeal No. 09-72057);
  • The requirement of an "express and property-specific waiver" refers to the judgments of 28 March 2013 (appeals No. 11-10450 and 11-13323).

Hence Parliament took a stance against the judgment of the Cour de Cassation of 13 May 2015 which only required an express waiver by the foreign State to allow the attachment of bank accounts of a diplomatic mission of that State.

"Disavowing" the Cour de Cassation's position as set out in the 13 May 2015 judgment, the proposed Article L. 111-1-2 would however confirm the Court's position resulting from the 28 March 2013 cases.

Finally, a new Article L. 111-1-3 is created, providing that:

"In situations described in the two paragraphs above, interim measures or enforcement measures may only be taken with the prior authorization of an enforcement judge in the conditions set out by decree of the Conseil d'Etat"

This provision is reminiscent of Article L. 153-1 of the Monetary and Financial Code, which states that:

"Assets of whatever kind, including foreign exchange reserve assets, which foreign central banks or foreign monetary authorities hold or manage for their own account or on behalf of the State or foreign State(s) that govern them cannot be attached.
As an exception to the provisions of the first paragraph, a creditor holding a writ of execution establishing a certain and payable debt may request the enforcement judge to authorise enforcement as provided for in Act No. 91-650 of 9 July 1991 (reforming the civil enforcement procedures) if he can establish that the assets held or managed by a foreign central bank or a foreign monetary authority for its own account form part of resources allocated to a primary activity governed by private law.

Two main observations may now be made in this regard.

Firstly, while it is appropriate for an enforcement judge to act as a filter for projected attachments of property by creditors who are determined to recover their claim by any means, it is also hoped that, in the event that the enforcement judge does give his permission, he may be allowed to change his position in view of arguments that may be advanced by the debtor (now subject to the constraint measure) during a challenge procedure, and order the release of the attachment he had initially granted. This seems to be a real possibility as permission would have initially been granted in a non-adversarial context; and debtors often shed new light on matters set out by a creditor unilaterally.

Secondly, bailiffs who might be tempted to attach property without first checking that the relevant authorisation has been obtained should be warned that, not only such attachment would be void but the bailiff would also be personally liable.

In conclusion

The reform of immunity from enforcement as set out in Article 24 the Sapin 2 bill shows France's strong ambition to respect its international commitments including the Convention. It is quite a remarkable stance in that, by requiring permission to be obtained (Article L. 111-1-3), it aims to prevent inopportune attachments and grant the enforcing judge a role as a preliminary controller of constraint measures; the question as to how the adversarial challenge of the attachment will be addressed when heard before the same judge who had initially given authorisation remains to be seen.
 
The French version of this article was published in La Revue earlier this year. It was translated into English by Julie Gervais de Lafond and Juliet Anderson.
 






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