Sovereign Immunity

• Author: International Law Group
• Pages: 233-235

Page 233

Svenska Petroleum Exploration AB (Claimant) is a Swedish company engaged in exploring for and extracting Lithuanian oil. It entered into a joint venture agreement (the JVA) with the Republic of Lithuania (Def. X) and with AB Geonafta (Def. Y). Until it was privatized on June 16, 2000, the latter was an organization owned and controlled by the state of Lithuania but which enjoyed a separate legal personality. Article 9 of the JVA set forth an arbitration clause and Art 35 of the JVA declared that both defendants waived their rights to sovereign immunity.

A dispute between the parties came up as to the right to exploit particular fi elds and the matter went to arbitration in Denmark. At the arbitration, Def. X argued that it was not a party to the Article 9 arbitration agreement. The arbitrators rejected that argument in an interim award. The panel also ruled in favor of the Claimant on the substantive issue, awarding it US$12,579,000 in a fi nal award. Later on, the Claimant obtained permission to enforce the award in the English courts under § 101 of the Arbitration Act of 1966. Def. X conceded service of the claim form seeking to enforce the award. It applied, however, to have it and the enforcement order set aside, arguing that the claim raised issues of state immunity. The English court dismissed the Claimant's motion to strike Def. X's application.

At the hearing of Def. X's application, inter alia, the following issues arose: (1) whether Def. X had waived its immunity in Art. 35 of the JVA, and whether this was a freestanding waiver so as to amount to submission to the jurisdiction of the English court pursuant to § 2a of the State Immunity Act of 1978, if there was no agreement to arbitrate under Art. 9 of the JVA; (2) whether the enforcement proceedings in relation to the arbitration agreement were 'proceedings relating to a commercial transaction' so as to come within the exception to immunity in § 3b of the 1978 Act; and, fi nally (3) whether § 9c of the 1978 Act (which provided that immunity did not apply to proceedings in the courts of the U. K. where a state had agreed in writing to submit a dispute to arbitration), applied (a) to enforcement proceedings generally, and (b) specifically to the enforcement of a foreign arbitral award.

The Commercial Court judge below rejected the Art. 35 argument. She held (1) that, although the agreement itself did involve a "commercial transaction" within the meaning of § 3 and one to...