Syed Rahman details a case that illustrates the potential for foreign states to be granted immunity in arbitration proceedings
When a plaintiff sues a foreign state in a US court, the Foreign Sovereign Immunities Act 1976 (FSIA) generally grants the defendant state immunity from the court’s jurisdiction. The FSIA contains a framework for determining when foreign governments are immune from jurisdiction - and when exceptions to that immunity apply.
Similarly, with the UK’s State Immunities Act 1978 (SIA), the general rule is that a state is immune from adjudication and enforcement by the UK courts. Under section 1 of the Act, the UK courts have no jurisdiction to hear or determine disputes with nations, unless an exception applies.
This article focuses on the arbitration exception and a case that has, arguably, brought some clarity to what states can do to argue successfully that they are not subject to it.
The FSIA’s exceptions
The FSIA was amended in 1988 to add an explicit arbitration exception to foreign state immunity. Under this, a foreign state is not immune to jurisdiction in the US if:
- a private party sues under a contract containing an agreement to arbitrate, or
- seeks recognition and enforcement of an arbitration award rendered under the arbitration agreement
The exception also contains further conditions that must exist for it to apply:
- The US must be the place or intended place of the arbitration, or
- the arbitration or awards are subject to an international treaty calling for the recognition and enforcement of arbitral awards.
The SIA’s exceptions
Section 9 of the SIA provides an exception to state immunity, where a state agrees in writing to submit a dispute in arbitration.
However, even where a state has waived its immunity from suit, it does not automatically follow that it has waived its immunity from enforcement of any resulting arbitral award. The UK courts will not enforce a judgment or award against the property of a state (section 13(2)(b)) or grant interim or final relief against a state, such as an injunction or an order for specific performance (section 13(2)(a)). But again, these restrictions are subject to certain narrow exceptions, for example where the state has given “written consent” to enforcement (section 13(3)).
Case update
A very recent case has illustrated where the bar is set regarding foreign states’ ability to argue that awards against them should not be enforced.
On 30 June 2025, in a US case heard in the District of Columbia Federal Court, CEF Energia B.V. v. Italian Republic (1:19-cv-03443), three companies attempted to enforce $23 million in arbitral awards. These had been secured through the Arbitration Institute of the Stockholm Chamber of Commerce against Italy, in relation to revoked renewable energy incentives.
Italy argued that it had not waived sovereign immunity as the arbitration exception to the FSIA did not apply due to the underlying awards having been set aside in Sweden. But was this was not accepted by the three companies, who cited the case of Nigeria v. Process & Industrial Developments Limited (P&ID) and argued that the circuit's jurisdiction exists under the FSIA’s arbitration exception as there was an arbitration agreement, an arbitration award and a treaty potentially governing award enforcement. They said Italy was wrong to argue that the fact the awards had been vacated meant that the last of these factors did not exist.
Judge Kollar-Kotelly recognised Italy’s argument for sovereign immunity as “colourable” and cited several definitions as to what a “colourable” argument for sovereign immunity means under the FSIA. On this basis, the judge held that district courts must resolve colourable sovereign immunity assertions before requiring foreign sovereigns to address the merits of litigation. According to the judge, Italy had cleared the low bar of having a colourable sovereign immunity defence as something that is “not obviously meritless”.
Conclusion
This case is significant when it comes to understanding how US courts - and in all likelihood, for the same reasons, UK courts - will approach sovereign immunity when it is argued. It is an indicator of the fairly low threshold that foreign states must meet in order to be given the chance to argue that awards against them should not be enforced.
Even when there are specific arbitration exceptions to immunity, these come with strict criteria. This means that - as this case illustrates - when parties are successful in obtaining an arbitral award, they must be fully prepared to address jurisdiction arguments at all stages when applying for enforcement or recognition of it, in order to prevent delays.
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