Conditions for Foreign States’ Immunity from Execution

First Civil Chamber, 28 March 2013, n°10-25-938, 11-10450 and 11-13.323, NML Capital Ltd. v. the Argentine Republic and others 

In three decisions of 28 March 2013, the French Supreme Court has clarified the conditions to seize assets belonging to a foreign State.

The facts were the following: Argentina had concluded a contract for financial services with an American bank for the issuance of obligations, to which a model issuance agreement providing for an arbitration agreement containing a clause whereby the State renounced to its immunity from execution.  The Argentinean economic crisis from 1998 led the State to subscribe, in accordance with the contract for financial services, several issuance of obligations contracts.  Argentina, however, copied only partially the waiver clause initially provided.

Afterwards, NML Capital Ltd acquired obligations from issuance series resulting from these contracts on the New York Stock Exchange.

On 18 December 2006, the United States Court for Southern Disctrict of New York ordered Argentina to pay NML Capital the obligations the latter had acquired.  On the basis of this judgment, NML Capital then obtained in France an order to attach assets in the hands of Total Austral, Air France and BNP Paribas which originated in amounts which the Argentinean branches or subsidiairies of these companies owed to Argentina on the basis of taxes, social and fiscal contributions, taxes, etc.

In three decisions dated 9 September 2010, 9 December 2010 and 27 January 2011, Argentina and Total Austral, Air France and BNP Paribas had obtained release of these attachments by the French judge, on the ground of foreign States’ immunity from execution.

NML Capital having brought these decisions before the French Supreme Court, the latter explains in a particularly didactic way the rules of foreign States’ immunity from execution;

  • pursuant to customary international law as reflected by the United Nations Convention of 2 December 2004 on State immunities, States may waive their immunity from execution on property or designated categories of property in writing;
  • such a waiver must be express and special, specifying the property of categories of property concerned;
  • limitation of access to justice by the rules on foreign States’ immunity from execution is not contrary to Article 6 of the European Convention on Human Rights since such limitation is (i) recognised by international law and (ii) does not exceed rules of international law generally recognised on the matter.

In the present matter, the assets on which the attachments had been ordered were of fiscal, parafiscal and social natures, they were necessarily linked to the exercise by Argentina of its sovereign prerogatives.  In the absence of an express and specific mention of these assets in the waiver clause, the Supreme Court thus confirmed the release of the attachments by NML Capital on the basis of Argentina’s immunity from execution.

The decisions are available here.

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