France has never legislated on State immunity to the same extent as the US, UK and other countries. Instead, sovereign immunity under customary international law has been mainly governed by case law, save for two little known provisions: Article 111-1 of the civil enforcement procedures code providing for the principle of immunity of domestic and foreign public entities, and Article 153-1 of the monetary and financial code providing for the immunity of foreign central banks and monetary authorities. Even though France ratified the United Nations Convention on Jurisdictional Immunities of State and their Property of 2004 (UNCSI) with Law No. 2011-734 of June 28, 2011, contrary to Japan, Spain and Sweden, France did not incorporate the Convention into domestic law. The recent decision to incorporate only Articles 18, 19 and 21 of UNCSI on immunity from execution was rather motivated by the fact that, first, the jurisprudence of the Cour de cassation had become unpredictable and, second, the French government was embroiled in diplomatic complications with foreign States. With two Articles of Law No. 2016-1691 of 9 December 2016 on transparency, the fight against corruption and modernising economic activity of December 9, 2016, France has, on the one hand, purported to codify customary law on State immunity from execution, as reflected in UNCSI, (Article 59), a provision portrayed by its opponents as the “Putin amendment” made specifically to respond to the Russian law of 2015 which threatens to deprive foreign states of their immunity if they ignore Russia’s immunity, in particular with regard to seizures made following the aftermath of the Yukos award. On the other hand, it has enacted specific rules on execution proceedings against foreign States undertaken by so-called “vulture funds” as had been the case with the famous NML capital Ltd. v. Argentina litigation (Article 60).
This post will focus on the first of these two provisions, Article 59. Its new requirement on judicial prior authorisation for post-judgment measures of constraint, under which a creditor can no longer go directly to a bailiff to perform a seizure, has been the main bone of contention for the Bill’s opponents due to the fact that there is no mention of it in UNCSI.
The Bill was suppressed twice during the legislative process because members of Parliament expressed their concerns, inter alia, about the real possibility for the creditor to obtain an effective execution as well as the creation of a situation of impunity for foreign States. Emmanuel Gaillard declared in June 2016 in the economic newspaper Les Echos that this provision would render any attachments against foreign States quasi-impossible. Despite its eventful journey, the provision was reintroduced by the government and ultimately adopted by both houses of the Parlement. Article 24, which became Article 59, introduced three new articles into the civil enforcement procedures code.
Has France, which adopted the restrictive doctrine of State immunity from execution in 1984 and ratified in 2011 UNCSI, in fact returned to an absolute doctrine of State immunity from execution? No. But if France is positioning itself to strengthen the means of protection for foreign States, one must ask whether it is in compliance with the right to a fair trial, including the right to judicial execution, guaranteed by the ECHR? Among other things, Article 59 also modifies conditions relating to execution itself and attempts to clarify the law on State immunity waivers following two revisions of the jurisprudence made by the Cour de cassation within two years.
Generalising prior judicial authorisation
First, “[p]rovisional measures or enforcement measures cannot be carried out with regard to property belonging to a foreign State except with the prior authorisation of a judge issued via an order made on request by the creditor” (Art. L. 111-1-1).
The Government contended that customary international law, as reflected in Articles 18 and 19 of UNCSI, provides an immunity from pre-judgment and post-judgment measures of constraint with few exceptions. In recent years, France has appeared to offer less protection to property of foreign States, which risked France incurring international responsibility and facing significant diplomatic consequences. Yet, France, under customary international law, is bound by an obligation of result and cannot perform this obligation if it gives creditors the possibility to seize foreign State property, including immune property, before a judge can supervise the validity of such a measure. A prior judicial authorisation, which already existed for provisional measures, would solve this issue according to the government. During the parliamentary debates, Michel Sapin, the Minister of Economy and Finances, acknowledged that this requirement was nowhere in the 2004 Convention but at the same time, that it was not in contradiction to it either. Belgium too resorts to prior judicial authorisation. Moreover, a prior authorisation does not remove the creditor’s right to an enforcement. To seek an order made on request in French law is a swift and ex parte procedure. Thus, the foreign State becomes aware of the procedure when the authorisation is granted (or denied) and consequently cannot move available property abroad to avoid attachment. The Government rejected the option to have an adversarial process for it would negate any element of surprise at the expense of the creditor. Quoting the ECHR in the 2001 Al-Adsani case, the French government asserted that the limitation reflects rules of international law on immunities and constitutes as such a proportionate limitation to the right to a judicial execution.
Before the law came into force, 60 senators requested the Conseil Constitutionnel, the highest court on constitutional matters, to assess whether Article 59 conformed to the right to a judicial execution and to an effective remedy guaranteed in Article 16 of the Declaration of Human and Civil Rights of 1789, “Any society in which no provision is made for guaranteeing rights or for the separation of powers, has no Constitution”, to which express reference is made in the preamble of the French Constitution. The Government argued that Article 59 needed no modification in order to comply with the Constitution.
On December 8, 2016, the Conseil gave its decision No. 2016-741 DC, holding that Article 59 was in compliance with the French Constitution. According to an established jurisprudence, the decision was limited to domestic law and did not mention customary international law, UNCSI or even the ECHR. But, the reasoning of the Conseil was similar to that of the ECHR on limitations to the right to a fair trial: a legitimate purpose and a proportionality test. Indeed, for the Conseil, the legislative branch has jurisdiction to determine the fundamental principles under which the rights of creditors and debtors should be articulated (§ 67). Here, the legislative branch sought to protect property of foreign public persons and, in particular, to ensure greater judicial supervision of property belonging to foreign States which benefits from immunity from execution (§ 69). It is without prejudice that measures of constraint remain available when a foreign State consents or when the property sought is used or destined to be used for other than government non-commercial purposes (§ 70). Besides, the way the prior authorisation is granted, as explained by the Government, prevents any removal of property abroad (§ 72). To conclude, the judge whose mission is to authorise a measure of constraint only makes sure the legal requirements surrounding this measure are fulfilled (§ 73).
Overturning the classical Eurodif jurisprudence
Second, Article 59 means French law not only says goodbye to pre-judgment measures of constraint on commercial property, but also to its classic Eurodif line of jurisprudence:
“[p]rovisional measures or enforcement measures with regard to a property belonging to a foreign State cannot be authorised by a judge except to the extent that one of the following conditions is met : 1° The State concerned has expressly consented to the taking of such a measure as indicated ; 2° The State concerned has allocated or earmarked this property for the satisfaction of the claim which is the object of that proceeding ; 3° Where a judgment or an arbitral award has been decided against the State concerned and the property in question is specifically in use or intended for use by the State for other than government non-commercial purposes and has a connection with the entity against which the proceeding was directed. For the purposes of applying the 3°, the following categories, in particular, of property of a State shall be considered as property specifically in use or intended for use by the State for government non-commercial purposes : a) property, including any bank account, which is used or intended for use in the performance of the functions of the diplomatic mission of the State or its consular posts, special missions, missions to international organizations or delegations to organs of international organizations or to international conferences ; b) property of a military character or used or intended for use in the performance of military functions ; c) property forming part of the cultural heritage of the State or part of its archives and not placed or intended to be placed on sale ; d) property forming part of an exhibition of objects of scientific, cultural or historical interest and not placed or intended to be placed on sale ; e) tax and social claims of the State.” (Art. L. 111-1-2).
As in the US or in the UK, provisional measures cannot be adopted before a judgment or an arbitral award has been decided except if the defendant State has expressly consented to the measure. After a judicial decision has been delivered, in Eurodif, the Cour de cassation declared that no immunity was granted for property that “was connected to a private law economic or commercial activity which was the subject-matter of the proceeding before the court”. Article 59 certainly saves the criteria the ICJ acknowledged in 2012 as customary being that property is only immune when used for purposes falling within a foreign State’s sovereign functions. And to examples drawn from the non-exhaustive list of Article 21 of the UNSCI, the provision adds, as a legacy of the fierce litigation involving NML capital Ltd. and French companies, Total and Air France, a new category of immune property: tax and social claims owed to the foreign State. However, a connection between the property and the claim is not required to implement a post-judgment measure of constraint. The only required connection is with the “entity against which the proceeding was directed”. Though, it is unfortunate that the legislator did not incorporate the definition of the foreign State under Article 2 of UNCSI as well as the understanding with respect to Article 19 which gives a definition of what amounts to an entity under the new connection requirement. UNCSI defines an “entity” as “the State as an independent legal personality, a constituent unit of a federal State, a subdivision of a State, an agency or instrumentality of a State or other entity, which enjoys independent legal personality.” This greatly reduces chances of enforcement or the range of property available against a State. It must be borne in mind that foreign States often exercise commercial activities via separate entities i.e. State-owned enterprises. In the absence of clarification, would Article 59 mean execution against a foreign State vested with municipal legal personality or international legal personality and therefore embrace property belonging to separated entities?
Limiting waivers with respect to diplomatic property
Third, Article 59 provides that “[p]rovisional measures or enforcement measures cannot be carried out with regard to property, including any bank account, which is used or intended for use in the performance of the functions of the diplomatic mission of foreign States or their consular posts, special missions or their missions to international organizations except where the States concerned have expressly and specifically consented to the taking of such measures as indicated” (Art. L. 111-1-3, emphasis added).
A waiver with regard to State immunity from execution can be express (“The State concerned has expressly consented to the taking of such a measure as indicated”) or tacit (“The State concerned has allocated or earmarked this property for the satisfaction of the claim which is the object of that proceeding”) as long as it does not involve diplomatic property. A waiver on diplomatic property must be express and specific meaning a State must list this category of property in the waiver clause. The condition of specificity had been introduced into French law in 2011 by the Cour de cassation with respect to diplomatic bank accounts and extended in 2013 to all State immune property i.e. property used for purposes falling within a foreign State’s sovereign functions. However, in 2015, in the Commisimpex case, the same judge gave a different interpretation of customary international law and removed this condition. With Article 59, France returns to the 2011 position. Michel Sapin, made clear during the parliamentary debate that property strictly used for diplomatic purposes should absolutely be protected. According to the French government, there is a specific immunity, under Article 22 of the Vienna Convention on Diplomatic Relations of 1961, customary law and Article 21 of UNCSI which applies to diplomatic property including bank accounts. An express and specific waiver for diplomatic property is, according to the government, supported by State practice in Germany, Belgium, Australia and the US and respects the creditor’s right to an effective remedy under the ECHR.
On the face of it, the aforesaid legislative modifications would probably prevent future diplomatic difficulties with foreign States in default and in the Yukos case reduce tensions with Russia. Still, if the French Government aimed at both clarifying the rules concerning the protection granted to State property as well as protecting the possibility for victims to execute on State property not covered by immunity, for various reasons, Article 59 does not settle the controversial matter of immunity from execution. Thus, in light of creditors’ difficulty in France to meet the burden of proof in absence of any discovery measures that property is not immune, it remains to be seen what the Cour de cassation will decide on prior judicial authorisation in specific cases, one of its duties being to control the compliance of legislative provisions with international law, and if its interpretation would be sanctioned by the European court. In this respect, it is worth noting that on 1 October 2015, a French court of appeal in a civil case already held that prior judicial authorisation regarding a measure of constraint on property of the Iraqi central bank did not infringe either the law as reflected in UNCSI or Article 6, § 1, of the ECHR. Likewise, about the issue of an express and specific waiver on diplomatic property, will the Cour de cassation yield to the legislature or refuse to espouse the government’s view on customary international law? What will the Strasbourg court eventually decide on the French position? Here are some questions to think about.
I would like to specifically thank Dr Philippa Webb for her ongoing support and the helpful suggestions and revisions she made to my work.