New Rules on Jurisdictional Immunities of States in Russian Courts

The new law on Jurisdictional Immunities of Foreign States was signed by the Russian President on 3 November 2015. The law aims at discouraging foreign states from diminishing the immunity of Russian property abroad.

The State Duma has drafted it in response to the arrests and freezing of Russian property in France, Belgium and Austria. After the notorious YUKOS case with a USD 50 billion-award, the shareholders of the former company YUKOS tried to enforce this decision against Russian assets abroad, and are going to proceed in other jurisdictions.

The Federal law has introduced the principle of reciprocity in issues regarding the application of jurisdictional immunities. If a foreign state limits the immunity of Russian state property abroad, a Russian court may accordingly limit the immunity of the corresponding foreign state.

The provisions of the law primarily address “foreign states”, but also refer to private entities, provided they are authorised to perform and are actually performing actions for the purposes of exercise of sovereign power of the state. Although it is not new to some jurisdictions, this principle is novel to Russian legislation.

Three Models of State Immunity

The principle of state immunity can follow one of three models. First is the absolute immunity doctrine, where the plea of State immunity absolutely bars one state from considering claims against another state. This principle was followed in the Russian Code of Civil Procedure. According to the restrictive doctrine or doctrine of functionality, one should distinguish between public and private law acts of the State, with immunity confined to public acts.

The Russian Commercial Procedure Code took a step forward and granted immunity from adjudication and immunity from interim measures on the basis of this doctrine. However, under the Russian Commercial Procedure Code the immunity from enforcement remained within the realm of the absolute immunity doctrine.

The new law establishes the doctrine of functionality and distinguishes between immunity from adjudication, immunity from interim measures and immunity from enforcement.

Immunity from Adjudication

The law grants immunity from adjudication for acts performed in the exercise of sovereign power, but not in respect of commercial acts. The difference between the former and the latter is to be found on the basis of the “nature and the purpose” of a transaction. The “nature” approach presupposes that when a state carries out commercial or private activity, it then enjoys no immunity, even if its act might have served some sovereign or public law purpose (this approach is dominant in Belgium, Austria, Germany and Switzerland). The “purpose” approach, on the opposite, implies that an act should be classified as a “sovereign” act if it serves a sovereign purpose (Canada, Italy and Argentina follow this approach).

Under the new law, foreign states cannot invoke immunity in disputes arising out of civil transactions and/or involvement of a foreign state in entrepreneurial or other economic activity, claims to property, for compensation of harm or labour disputes (with the foreign state acting as an employer). In disputes related to foreign states’ ownership interests in legal entities and other entities without separate legal identity, to intellectual property issues and to vessel operation, foreign states also cannot refer to their immunity.

Immunity from Interim Measures vs Immunity from Enforcement

Article 16 of the law provides a closed list of property that enjoys immunity from enforcement. However, the way a foreign state makes use of these assets can lead to deprivation of immunity.

The Russian legislator distinguishes between (1) consent of a foreign state to adjudication and (2) waiver from immunity from enforcement. Such approach is in line with international practice. As the ICJ pointed out in the Jurisdictional Immunities case, “the immunity from enforcement enjoyed by States in regard to their property situated in foreign territory goes further than the jurisdictional immunity enjoyed by those same States before foreign courts“. A waiver from immunity from adjudication does not automatically entail waiving immunity from enforcement.

A state can give its consent in an international treaty, an agreement in writing or a notification to court. A foreign state waives its immunity irrevocably when it has itself instituted the proceeding, intervened in the proceeding, taken any other step relating to the merits or concluded an arbitration agreement. The rules of the UN Convention on Jurisdictional Immunities regarding of waiver of immunity in respect of counterclaims and principal claims are echoed in the law.

Amendments to Russian Legislation

In its explanatory note, the new Federal law provides for relevant amendments to the procedural codes and the Law on Enforcement Proceedings. According to the draft law (the “Draft“) published by the Ministry of Justice on 9 November 2015 for public debate, the Code of Civil Procedure and Code of Commercial Procedure will include new Chapters on Proceedings on Cases with Foreign States involved. The courts will consider the issue of immunity in preliminary court hearings.

The Draft also clarifies that the court can apply the principle of reciprocity by its own motion or by application of a Party. The Ministry of Foreign Affairs of the Russian Federation can by its own motion or by order of a court provide its opinion concerning the status of a foreign state with regard to the immunity in place and immunity granted to Russian Federation and its property in the foreign state.

Under the Draft, foreign states enjoy some privileges during the proceeding, namely, no court fines during the trial or no preliminary legal costs payment. The Draft, once adopted by State Duma, would enter into force at the same date the provisions of the new Federal Law on Jurisdictional Immunities of Foreign States will be effective, ie on 1 January 2016.

There is no threshold to what extent the Russian courts could limit foreign states’ immunity. However, this law does not seem to be a retaliation to the actions of foreign states regarding YUKOS case. The principle of reciprocity exists also in some other jurisdictions (for example, in Canada), and it does not have the retaliation connotation. Rather, the Law brings the Russian legislation on jurisdictional immunities in line with the international standards. The detailed provisions of the new law, complemented with the amendments to Russian procedural legislation, provide more legal certainty, and advance the doctrine of restrictive (functional) immunity in Russian courts.

Anastasia Rogozina

DAAD scholarship holder, Kiel, Germany