Restrictive Foreign Service Immunity in the United Kingdom (UK): A Welcome Development in International Commercial Transactions

The doctrine of absolute foreign State immunity to a great degree, appeared to stifle commercial transactions between contracting State parties and the private sector. Statute and earlier case law both attest to the absolute immunity of foreign States from the English courts’ jurisdiction. However, latter dicta of the English courts under the UK State Immunity Act 1978 (SIA 1978), successfully made a distinction between instances where a State’s actions were wholly of governmental character and some actions of the government that appeared commercial in nature, with basically features, similar to normal commercial transactions entered into by private individuals and companies. This paper, after a careful and painstaking overview of recent cases, concludes that the drift towards restrictive foreign State immunity by the English courts with respect to commercial transactions entered into by States, is a healthy development that carries the advantage of creating greater transparency, which in turn gives assurance to private individuals and companies that the State could be held liable for a breach of its commercial contractual obligations. Without this development, governments such as the Chinese government, which is basically operating as a “commercial/business conglomerate”, can argue State immunity in disputes involving commercial transactions entered into between the Chinese government and the private sector. This research, would in no small way, encourage private individuals and companies to enter into commercial transactions with sovereign States without hesitation, safe in the knowledge that the UK courts, are ready and willing to hold contracting State parties in commercial transactions, accountable.