The doctrine of sovereign immunity can be traced back to early international law theories. Traditionally, sovereign immunity was considered absolute, meaning that states could not be sued under any circumstances. However, as international relations and state involvement in commerce expanded, many countries, including Switzerland, adopted a restrictive approach. This distinction allows legal actions against states in specific circumstances.
Principle of Sovereign Immunity
Sovereign immunity is a fundamental principle of international law that shields states and their entities from legal proceedings in foreign courts. Rooted in state sovereignty, it prevents one state from being subjected to another’s jurisdiction without consent, ensuring governments operate without constant litigation threats.
Sovereign immunity consists of:
- Immunity from jurisdiction, which enables a state to avoid being prosecuted in a foreign court.
- Immunity from execution, which allows a state to prevent enforcement actions against its assets and property.
According to the Swiss Federal Supreme Court, a state may invoke immunity from legal jurisdiction exclusively for actions performed while exercising state authority. On the other hand, the Supreme Court defined certain conditions under which compulsory measures against a foreign state can be imposed (execution immunity).[1]
Furthermore, a state may opt to waive its immunity regarding both jurisdiction and execution. For the waiver of immunity to be considered valid, the state must explicitly permit Swiss courts to exercise jurisdiction over the dispute or to seize property or assets for official purposes.[2]
Switzerland’s Approach to Sovereign Immunity
Switzerland follows the restrictive theory of sovereign immunity, distinguishing between acts performed in the exercise of sovereign authority (acta jure imperii) and those conducted in a private or commercial capacity (acta jure gestionis). This means that while states remain immune from lawsuits concerning sovereign acts, they may be held accountable for commercial transactions and other private-law activities.[3]
Therefore, to bring a claim against a state, the plaintiff must show that the state acted in a private capacity and that the transaction is sufficiently connected to Switzerland. When distinguishing between acts of iure imperii and acts of iure gestionis, the judge shall focus on the nature of such acts rather than on the basis of their purpose. Therefore, it is essential to determine if the act comes within the competence of public power or resembles an act that any individual might perform.[4]
Legal Framework
There is no specific legislation concerning sovereign immunity in Switzerland. However, Switzerland’s stance on sovereign immunity is primarily governed by:
- International Conventions: Switzerland is a party to international agreements that influence its approach to sovereign immunity, including the 1972 European Convention on State Immunity, the 1972 Additional Protocol, and the 2004 UN Convention on Jurisdictional Immunities of States and Their Property (not yet in force). It should be noted that Switzerland intends to denounce the 1972 European Convention once the UN Convention enters into force.
- Case law: Swiss courts, especially the Swiss Federal Supreme Court, have played a significant role in shaping the interpretation of sovereign immunity through case law. One of the landmark cases involving sovereign immunity in Switzerland was Kingdom of Greece v. Julius Bär & Co. In its decision, the Federal Tribunal rejected the claim that a foreign sovereign’s immunity from execution should be absolute, thus reaffirming Switzerland’s approach to sovereign immunity.[5]
Enforcement
Courts generally interpret entering into an arbitration agreement as a waiver of a state’s immunity from jurisdiction. Nevertheless, opinions are more divided on whether it also constitutes a waiver of immunity from enforcement. The more likely view is that it does not unless additional conclusive actions demonstrate otherwise.
However, Swiss courts have established three criteria for determining the absence of immunity from enforcement:[6]
- The foreign state must have acted in a private capacity (de iure gestionis);
- A sufficient connection must exist between the underlying transaction giving rise to the claim and Switzerland. Merely holding assets in Switzerland or seating the arbitral tribunal there does not, by itself, establish such a connection;[7] and
- The assets subject to enforcement must serve functions outside the foreign state’s public authority duties, as Article 92(1) of the Debt Collection and Bankruptcy Act protects such assets from enforcement.[8]
16 January 2025 Decision
In a landmark decision, delivered on 16 January 2025, the Swiss Federal Tribunal ruled that a state can rely on sovereign immunity to defend against a request for the appointment of an arbitrator in an ad hoc arbitration seated outside Switzerland.[9]
The ruling appears to be linked to longstanding disputes stemming from 1970s oil agreements between Israel and Iran. Through a Swiss-based entity, POOL, Israel had secured oil supplies from Iran’s state-owned NIOC. However, the 1979 Iranian Revolution disrupted these dealings, leading to multiple arbitrations over unpaid invoices and ownership stakes in joint ventures.[10]
Appointment of an Arbitrator Issue
The latest case appears to involve NIOC’s attempt to bring Israel into an arbitration initiated by POOL in 2019. NIOC sought to have Swiss courts confirm an arbitrator’s appointment on behalf of both POOL and Israel. A lower Swiss court initially ruled against Israel’s claim of sovereign immunity, allowing the arbitration to proceed. However, Israel appealed to the Swiss Federal Tribunal, which overturned the decision.
While decisions to appoint arbitrators are generally not appealable, the court allowed Israel’s appeal due to the unique circumstances — particularly, the arbitration’s foreign seat and the state’s sovereign immunity claim. Consequently, the court found that Israel had not waived its immunity and that the lower court should have addressed this defence before proceeding. The exception to sovereign immunity in arbitral proceedings did not apply, as Israel had never signed the arbitration agreement.[11]
Implications of the Decision
This ruling reinforces the principle that sovereign states cannot be forced into arbitration without explicit consent. In addition, it underscores the challenges of enforcing arbitration agreements against states, particularly in politically sensitive disputes.
Conclusion
Switzerland’s approach to sovereign immunity reflects a balanced perspective, protecting the sovereignty of states while ensuring accountability in commercial and employment matters. By adopting the restrictive theory, Swiss law provides legal recourse in cases where foreign states engage in non-sovereign activities.
[1] State immunity, available at: https://www.eda.admin.ch/eda/en/home/foreign-policy/international-law/privileges-and-immunities/state-immunity.html.
[2] State immunity, available at: https://www.eda.admin.ch/eda/en/home/foreign-policy/international-law/privileges-and-immunities/state-immunity.html.
[3] S. Giroud, Sovereign Immunity in Switzerland (20 March 2019), available at: https://www.lexology.com/library/detail.aspx?g=fb57b391-85c1-41b6-83d1-34b4a26bcca7.
[4] Immunity of a foreign State, available at: https://www.eda.admin.ch/missions/mission-onu-geneve/en/home/manual-regime-privileges-and-immunities/introduction/manual-immunity/immunity-state.html.
[5] A. Reinisch, European Court Practice Concerning State Immunity from Enforcement Measures, The European Journal of International Law Vol. 17 (2006).
[6] ATF 134 III 122.
[7] ATF 5A_261/2009; ATF 5A_469/2022.
[8] ATF 5A_681/2011.
[9] 4A_163/2023, 4A_490/2023.
[10] D. Charlotin, Swiss Federal Tribunal finds that state can rely on its sovereign immunity to resist request to appoint arbitrator on its behalf (20 February 2025), available at: https://www.iareporter.com/articles/swiss-federal-tribunal-finds-that-state-can-rely-on-its-sovereign-immunity-to-resist-request-to-appoint-arbitrator-on-its-behalf/.
[11] D. Charlotin, Swiss Federal Tribunal finds that state can rely on its sovereign immunity to resist request to appoint arbitrator on its behalf (20 February 2025), available at: https://www.iareporter.com/articles/swiss-federal-tribunal-finds-that-state-can-rely-on-its-sovereign-immunity-to-resist-request-to-appoint-arbitrator-on-its-behalf/.