Sovereign immunity is divided into immunity from jurisdiction and immunity from execution.
The conditions under which these immunities apply are of particular importance in the field of arbitration.
According to the French Supreme Court, sovereignty and independence of States prevent one of them from pursuing another. In other words, national judges must refrain from ruling on any matter of interest to foreign States.
That principle was the subject of a codification project that was adopted in 2004 by the United Nations (which has not yet entered into force). Pursuant to Article 5 of the convention, “A State enjoys immunity, in respect of itself and its property from the jurisdiction of the courts of another State”.
However, immunity from jurisdiction is not absolute. For instance, if a State acts as claimant in a case, its waiver of immunity from jurisdiction is obvious. Conversely, when a State acts as respondent, it immunity from jurisdiction can be more problematic.
Waiver of Jurisdictional Immunity
The nature of activities undertaken by States
States engage in two types of activities, namely those of jus imperii and jus gestionis.
If the activity to which the contract relates is of a commercial nature, the State may not invoke its immunity from jurisdiction to avoid arbitral proceedings. Conversely, if the act in question contributes, by its nature or purpose, to the exercise of State sovereignty, the State can invoke its immunity from jurisdiction.
This principle is well established under international law.
For instance, pursuant to Article 10 of the United Nations Convention on Jurisdictional Immunities, “If a State engages in a commercial transaction with a foreign natural or juridical person and, by virtue of the applicable rules of private international law, differences relating to the commercial transaction fall within the jurisdiction of a court of another State, the State cannot invoke immunity from that jurisdiction in a proceeding arising out of that commercial transaction.”
This rule is regularly relied upon. In an ICC arbitration, for instance, opposing Société des Grands Travaux de Marseille (France) and East Pakistan Industrial Development Corp., the sole arbitrator relied on the law of the seat (Swiss law) and public international law to consider that the company that was wholly owned by the Pakistani State was not entitled to invoke immunity from jurisdiction, in particular because the case related to commercial activities in which the State company was engaged.
Domestic legislation also applies the commercial exception rule. For example, in the United States, Section 1605(a)(2) of the Foreign Sovereign Immunities Act (FSIA) provides that a foreign State may not invoke its immunity from jurisdiction before American courts if the dispute relies on commercial activities carried on by that foreign State in the United States or carried on abroad but which has effects in the United States.
The signature of an arbitration clause
When a State agrees to submit a dispute to arbitration, its immunity from jurisdiction is automatically waived. This implicit waiver of immunity from jurisdiction is widely recognized under international and domestic Law.
Indeed, Article 17 of the United Nations Convention on Jurisdictional Immunities provides that:
“If a State enters into an agreement in writing with a foreign natural or juridical person to submit to arbitration differences relating to a commercial transaction, that State cannot invoke immunity from jurisdiction before a court of another State which is otherwise competent in a proceeding which relates to:
(a) the validity, interpretation or application of the arbitration agreement;
(b) the arbitration procedure; or
(c) the confirmation or the setting aside of the award, unless the arbitration agreement otherwise provides.”
Under Article II(1) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, “Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration”.
Section 1605(a)(1) of the U.S. FSIA similarly states, “A foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case: (1) in which the foreign state has waived its immunity either explicitly or by implication, notwithstanding any withdrawal of the waiver which the foreign state may purport to effect except in accordance with the terms of the waiver”.
French law goes further and admits that the waiver of immunity from jurisdiction also covers proceedings in exequatur because these proceedings result directly from the choice to submit to arbitration.
 Jurisdictional Immunities of the State (Germany v. Italy: Greece intervening), Judgment, I.C.J. Reports 2012, p. 99, p. 147, para. 113: “The rules of customary international law governing immunity from enforcement and those governing jurisdictional immunity (understood stricto sensu as the right of a State not to be the subject of judicial proceedings in the courts of another State) are distinct, and must be applied separately“.
 Responsibility of States for Internationally Wrongful Acts, 2001, Article 5.
 Responsibility of States for Internationally Wrongful Acts, 2001, Article 8.
 Cass. civ., 22 January 1849.
 Jurisdictional Immunities of the State (Germany v. Italy: Greece intervening), Judgment, I.C.J. Reports 2012, p. 99.
 For example, see Ch. mixte, n°4, pourvois n°00-45.629 et 00-45.630 ; 1ère civ 2008, I, n°266, pourvoi n°07-10570
 The United Nations Convention on Jurisdictional Immunities, Article 10.
 Sentence CCI n°1083 (12 Dec. 1972), V Y.B. Comm. Arb. 177, 185 (1980)
 Foreign Sovereign Immunities Act, § 1605 (a)(2) : ” A foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case (…)in which the action is based upon a commercial activity carried on in the United States by the foreign state; or upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States”
 The United Nations Convention on Jurisdictional Immunities, Article 17.
 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958, Article II(1).
 Foreign Sovereign Immunities Act, Section 1605(a)(1).