P&K Insights: Sovereign Immunity in Australian Courts

Hard and Fast Limits on Enforcement of Arbitral Awards

Enforcement of arbitral awards against foreign state assets requires consideration of issues relating to sovereign immunity. When faced with an adverse arbitral award, states and state-owned entities might invoke sovereign immunity to resist jurisdiction and enforcement.

In Australia, sovereign immunity is governed by the Foreign State Immunities Act 1985 (Cth). This provides that a foreign state is immune from the jurisdiction of Australian courts, but that immunity may be waived by agreement or submitting to proceedings.

Arbitral awards are often enforced against states pursuant to the ICSID Convention or the New York Convention (depending on the type of arbitration). In recent decisions, the High Court of Australia has confirmed that a foreign state’s ratification of the ICSID Convention constitutes a waiver of sovereign immunity from enforcement proceedings before Australian courts, but ratification of the New York Convention does not.

This distinction is vital when devising enforcement strategies against sovereign counterparties. It also highlights the importance of pre-empting sovereign immunity issues both when contracting with states and state-owned entities and deciding whether to pursue claims against them.

This article by Cameron Sim, James Morrison, Alexis Schoeb and Deborah Tomkinson reviews the current position, an important reminder that dispute resolution clauses in a suite of contractual documents should always be carefully assessed to identify potential sovereign immunity issues – see further our Guide to Arbitration Agreements.