- BVerfGE 64, 1 2 BvR 678, 679, 680, 681, 683/81 National Iranian Oil company
- 12 April 1983
- Zeidler, Rinck, Wand, Dr. Rottmann, Dr.Dr.h.c.Niebler, Steinberger, Träger, Mahrenholz
- © Nomos Verlagsgesellschaft
There is no general rule of international law requiring that a foreign State be treated as owner of receivables on accounts maintained with banks in the forum State kept in the name of an enterprise of the foreign State having legal capacity.
The forum State is not prevented from treating the enterprise concerned as entitled to receive claims and, on the basis of a title of enforcement given against that enterprise, issued in prior proceedings for protection of rights in relation to non-sovereign action by the enterprise, to distrain the receivables concerned in order to secure the claim in the title.
This applies irrespective of whether the credits on these accounts are freely available to the enterprise or are according to foreign law intended for transfer to an account of the foreign State with its central bank.
Order of the Second Senate of 12 April 1983 - 2 Bvr 678, 679, 680, 681, 683/81 -
in the proceedings on the constitutional complaint of the National Iranian Oil Company against 1.a) the Order of the Regional Appeals Court of Frankfurt am Main of 11 May 1981 - 20 W 422/80-, b) the Order of the Frankfurt am Main Regional Court of 25 June 1980 - 3/14 O 7/80-, c) the Order of Attachment and Distraint of the Frankfurt am Main Regional Court of 26 February 1980 and the Distraint Order of the Frankfurt am Main Regional Court of 10 March 1980 - 3/14 O 7/80-2 BvR 678/81-, 2.a) the Order of the Frankfurt am Main Regional Appeals Court of 11 May 1981 - 20 W 423/80-, b) the Order of the Frankfurt am Main Regional Court of 25 June 1980 - 3/14 O 8/80-, c) the Attachment and Distraint Order of the Frankfurt am Main Regional Court of 27 February 1980 and the Distraint Order of the Frankfurt am Main Regional Court of 10 March 1980 - 3/14 O 8/80 - 2 BvR 679/81-, 3.a) the Order of the Frankfurt am Main Regional Appeals Court of 11 May 1981 - 20 W 424/80-, b) the Order of the Frankfurt am Main Regional Court of 25 June 1980 - 3/14 O 9/80-, c) the Attachment and Distraint Order of the Frankfurt am Main Regional Court of 27 February 1980 and the Distraint Order of the Frankfurt am Main Regional Court 0 f 10 March 1980 - 3/14 O 9/80-, 2 BvR 680/81-, 4.a) the Order of the Frankfurt am Main Regional Appeals Court of 11 May 1981 - 20 W 425/80-, b) the Order of the Frankfurt am Main Regional Court of 25 June 1980 - 3/14 O 10/80-, c) the Attachment and Distraint Order of the Frankfurt am Main Regional Court of 27 February 1980 and the Distraint Order of the Frankfurt am Main Regional Court of 10 March 1980 - 3/14 O 10/80 - 2 BvR 681/81-, 5.a) the Order of the Frankfurt am Main Regional Appeals Court of 11 May 1981 - 20 W 427/80-, b) the Order of the Frankfurt am Main Regional Court of 25 June 1980 - 3/14 O 14/80-, c) the Attachment and Distraint Order of the Frankfurt am Main Regional Court of 24 March 1980 - 3/14 O 14/80 - 2 BvR 683/81-.
The constitutional complaints are dismissed.
EXTRACT FROM GROUNDS:
The complainant, the National Iranian Oil Company (NIOC), is a joint stock company under Iranian law and is owned by the Islamic Republic of Iran. It has been entrusted by the Iranian Petroleum Act with the exploration and exploitation of Iranian petroleum and natural gas deposits and the transportation and distribution of the petroleum and natural gas. In the context of its business activity it maintains accounts with banks in the Federal Republic of Germany.
On petitions by several British and American firms, the Frankfurt am Main Regional Court ordered... attachment in rem of the complainant's assets. In execution of the Attachment Orders, the Court... distrained receivables amounting to US $199,729,309.88 on accounts maintained with banks in the Federal Republic of Germany and kept in the name of the complainant....
Against the Distraint Orders the complainant lodged an objection. In justification, it asserted:
The things distrained served sovereign purposes and were therefore not subject to seizure by German courts. The receivables distrained were primarily receivables from petroleum sales that it had undertaken on behalf of the Islamic Republic of Iran, and partly also receivables that had arisen in connection with petroleum production. By Iranian law the proceeds from the sale of petroleum and petroleum products were to be transferred to the public treasury at the Central Bank of the Iranian State. The complainant had only the legal status of a trustee....
The Regional Court dismissed the objections... as unjustified:
The complainant could not claim immunity according to general rules of international law. Certainly, enforcement could not be done on things of a State located within the sovereign territory of the forum State without the assent of that State, insofar as the things at the time of commencement of the enforcement measures served sovereign purposes of the foreign State. In the present case the enforcement acts challenged had not however been taken against a State but against a State enterprise. What had been distrained was receivables on accounts kept in the name of the complainant. But legally autonomous organizations of a foreign State enjoyed no immunity....
Against the decisions of the Regional Court, the complainant lodged an immediate appeal with the Regional Appeal Court. The Regional Appeal Court dismissed the appeals... as unjustified....
1. In its constitutional complaint the complainant opposes the distraints ordered by the Regional Court and the decisions affirming them.
It objects to infringement of Article 103(1) and Article 101(1), second sentence, taken together with Article 100(2) and Article 25 Basic Law....
a) In the Federal Government's view the procedure does not, having regard to the ruling in BVerGE 46, 342, raise fundamental constitutional questions....
d) The attaching plaintiffs and distrainors in the initial proceedings stated the following in a joint opinion:
.... The complainant could not claim personal immunity. As evidenced by its statutes it could engage in commercial activities. Article 3(1) of the Iranian Petroleum Act talked not of "sovereign power" but only of "property rights of the Iranian nation" in oil deposits. Apart from that, to describe the complainant's status it was not the Iranian legal view that counted but rules of international law....
The constitutional complaints concern the same constitutional questions. They shall be joined for joint decision.
The constitutional complaints are admissible, but not justified....
The complainant's objection that its rights under Article 101(1), second sentence, Basic Law have been infringed does not hold up....
There is no general rule of international law requiring that a foreign State be treated as the owner of receivables on accounts kept with banks in the forum State in the name of an enterprise having legal capacity of the foreign State. The forum State is not prevented from regarding the enterprise concerned as rightful claimant and, on the basis of a title of enforcement issued against that enterprise in provisional legal protection proceedings upon non-sovereign action of the enterprise, to distrain the receivables concerned to secure the claim in the title. This is so irrespective of whether the credits on these accounts are at the free disposal of the enterprise or, according to foreign law, intended for transfer to an account of the foreign State with its central bank.
a) For the ownership and power of disposition in the case of bank accounts, according to German law decisive importance in principle attaches to the denomination of the account. If an account is opened in one's own name, the opener is in relation to the credit balance a creditor of the bank, unless the special circumstances of the individual case show that a third party is to become the owner of receivables on the account. A fiduciary account is to be treated in enforcement and bankruptcy as an asset of the trustor only if the denomination of the account or other circumstances make the fiduciary nature of the account manifest. This provision of German law does not lack a proper jurisdictional basis in terms of international law. The distraint of receivables on accounts kept with banks in the forum State in the name of that enterprise serving to secure a claim against an enterprise having legal capacity of a foreign State accordingly does not come up against a prohibition in international law of improper jurisdictional basis.
b) The seizure of receivables on credit balances that lie with banks in the forum State on accounts of a foreign State's enterprise having legal capacity and that are intended for further transfer to another account maintained by the foreign State with its central bank to cover its budget expenditure might, to be sure, be barred for the forum State in virtue of a general rule of the law of general State immunity. Whether a foreign State's enterprises, having legal capacity, may be bearers of a claim in customary international law to exemption from national jurisdiction or be equated with their "mother State" in that respect, entirely or in particular respects, under international law need not be gone into here. For distraint would not be opposed here by any prohibition in general international law even if foreign States' enterprises having legal capacity were to be granted immunity to the same extent as those States themselves. For the forum State would not in cases of the present nature be prevented by international law from seizing receivables on credit balances on accounts with banks in the forum State which according to foreign law are intended for further transfer to an account maintained by the foreign State with its central bank to cover its budget expenditure if the seizure served to secure a claim directed against the foreign State and the foreign State were itself the owner of the receivables located in the forum State.
In its Order of 13 December 1977 the Federal Constitutional Court found that, according to general international law then in force, enforcement against a foreign State was not absolutely inadmissible (BVerfGE 46, 342 [388f.; 392]). This finding is confirmed by practice of States that has since become known.
aa) Great Britain kept, like the United States of America, to in principle unrestricted immunity of foreign States until only a few years ago, yet now grants them exemption from its jurisdiction in both trial and enforcement proceedings only to a limited extent. Following the ruling of the Court of Appeal in re Trendtex Trading Corp. Ltd. v. Central Bank of Nigeria ( 2 Weekly Law Reports [W.L.R.] 356), the United Kingdom adopted an Act on State immunity (State Immunity Act  - StIA Elis. 2, c. 33, International Legal Materials [ILM] 17 (1978), p.1123ff.; in force since 22 November 1978), which provides in Section 13 (2)-(4):
(2) Subject to subsections (3) and (4) below
(a) relief shall not be given against a State by way of injunction or by order for specific performance or for the recovery of land or other property; and
(b) the property of a State shall not be subject to any process for the enforcement of a judgement or arbitration award or, in an action in rem, for its arrest, detention or sale.
(3) Subsection (2) above does not prevent the giving of any relief or the issue of any process with the written consent of the State concerned...
(4) Subsection (2) above does not prevent the issue of any process in respect of property which is for the time being in use, or intended for use, for commercial purposes...
The Republic of Singapore, the Islamic Republic of Pakistan and the Republic of South Africa have similarly adopted immunity Acts. In content they largely correspond with the United Kingdom's Immunity Act. Thus, the provisions concerning the question of immunity against enforcement measures largely resemble, in the relevant Section 13 (2)-(4), the British State Immunity Act.
Cf. Section 15 (2)-(4) of the State Immunity Act 1979 of the Republic of Singapore of 26 October 1979 (Gazette of the Republic of Singapore no.19/1979, p.193ff., 201; reproduced in Materials on Jurisdictional Immunities of States and Their Property, UN Legislative Series, UN Doc. ST/LEG/SER.B/20, p.28ff.); Section 14 (2), (3) State Immunity Ordinance 1981 of the Islamic Republic of Pakistan of 11 March 1981 (The Gazette of Pakistan 1981, p.29ff., 34f., in force since 11 March 1981); Section 14 (1)-(3) of the Foreign States Immunities Act 1981 of the Republic of South Africa of 28 October 1981 (Republic of South Africa Government Gazette, vol.196, No.7849, p.1ff., 10, in force since 6 October 1981 (cf. Materials on Jurisdictional Immunities of States and Their Property, UN Doc. ST/LEG/SER.B/20, p.34).
On 3 June 1982 Canada adopted an Immunity Act (reproduced in ILM 21 , p.798ff., in force since 15 July 1982), Section 11 of which provides:
(1) Subject to subsections (2) and (3), property of a foreign state that is located in Canada is immune from attachment and execution and, in the case of an action in rem, from arrest, detention, seizure and forfeiture except where:
(a) the state has either explicitly or by implication, waived its immunity from attachment, execution, arrest, detention, seizure or forfeiture, unless the foreign state has withdrawn the waiver of immunity in accordance with any term thereof that permits such withdrawal;
(b) the property is used or is intended for commercial activity;
(c) the execution relates to a judgment establishing rights in property that has been acquired by succession or gift or in immovable property located in Canada.
(2) Subject to subsection (3), property of an agency of a foreign state is not immune from attachment and execution and, in the case of an action in rem, from arrest, detention, seizure and forfeiture, for the purpose of satisfying a judgment of a court in any proceedings in respect of which the agency is not immune from the jurisdiction of the court by reason of any provision of this Act.
(3) Property of a foreign state
(a) that is used or is intended to be used in connection with a military activity, and
(b) that is military in nature or is under the control of a military authority or defence agency
is immune from attachment and execution and, in the case of an action in rem, from arrest, detention, seizure and forfeiture.
(4) Subject to subsection (5), property of a foreign central bank or monetary authority that is held for its own account and is not used or intended for a commercial activity is immune from attachment and execution.
(5) The immunity conferred on property of a foreign central bank or monetary authority by subsection (4) does not apply where the bank or its parent foreign government has explicitly waived the immunity unless the bank, authority or government has withdrawn the waiver of immunity in accordance with any term thereof that permits such withdrawal.
Other States in the Anglo-American area of law thereby accept the legal view of functionally restricted immunity.
bb) The Swiss Federal Court has in several decisions confirmed and developed its case law on the immunity of foreign States against enforcement measures mentioned in the Federal Constitutional Court's decision of 13 December 1977 (BVerfGE 46, 342 [370ff.]).
In re République italienne, Ministère italien des transports et Chemins de fer d'Etat italiens v. Beta Holding S.A. et Autorité de séquestre de Bâle-Ville, the court had to decide on the admissibility of the sequestration of shares of the Société européenne pour le financement de matériel ferroviaire (Eurofima), as well as dividends due to the Italian State railways. Eurofima is a joint stock company with its headquarters in Basel, founded in 1955 on the basis of an agreement among 14 European railway administrations (cf. BGBl. 1956 II p.907). By Article 3(1) of its Statutes (BGBl. 1956 II p.920, BGBl. 1970 II p.1047), it has the task of procuring for the railway administrations that are the company's shareholders railway equipment on the best possible terms. According to paragraph 5 of the Preamble to the Convention setting up Eurofima, it serves by its purpose a public interest and constitutes an entity of an international character. Before the Swiss Federal Court, the Italian State Railways asserted that they were an administrative subdivision of the Italian State. The sequestration therefore affected the Italian State. Since it was administrative assets of the Italian Republic that were involved in its dealings with Eurofima, the sequestration was inadmissible in international law. The Federal Court allowed the complaint. It pointed to provisions of Swiss law whereby the pursuit of claims against communes and other cantonal institutions of public law could lead to seizure only of "biens patrimoniaux" but not of "biens administratifs". The same applies, on the Federal Court's view, to enforcement measures against foreign States. Assets assigned to the carrying out of sovereign tasks ("affectés à des ta_ ches publiques") were said to be exempt. In the case of the Italian State Railways shares, which according to the statutes of Eurofima could be transferred only with the agreement of the Eurofima general meeting and only to one of the railway administrations involved, these were such assets. The same was true of the dividends that served to meet the settlement of commitments by the Italian State Railways to Eurofima, thereby serving public purposes (Decision of 22 June 1966, SchwJbIntR XXXI , p.219ff., 221ff.).
In its decision of 27 April 1977 the Swiss Federal Court confirmed the sequestration of bank credits of the Democratic People's Republic of Algeria, on the justification that these were assets that the Algerian Republic held as "biens patrimoniaux..., de sa fortune privée et aliénable", but not as "biens affectés à l'exercice de l'activité gouvernementale" (BGE 103 III 1 ; SchwJbIntR XXXIV , p.119ff., 121).
With the judgment in re Banque Centrale de la République de Turquie v. Weston Compagnie de Finance et d'Investissement S.A., the Federal Court confirmed its existing case law on enforcement upon assets of foreign States. On the basis of two attachment orders of the Zurich District Court, credits of the Turkish Central Issuing Bank with big Swiss banks and the debtor's assets on the premises of its representation in Zurich were attached. The Federal Court rejected the debtor's complaint with the following justification: as had already been stated in the Federal Court's existing case law, "there was no reason to restrict enforcement measures and in particular attachment against foreign States to any further extent than Swiss civil jurisdiction as such". Whether the debtor (a joint stock company with legal capacity of its own) could at all claim immunity (on this question see the opinion of the Direction du Droit international public du Département politique fédérale of 9 June 1976, reproduced in SCHwJbIntR XXXIII , p.163ff.) need not be gone into. For the legal relationship on the basis of which a claim was made against it, a "time deposit", was a private economic transaction that could not be converted into one of ius imperii even by Turkey's currency provisions (BGE, 104 I a 367).
In re Socialist Libyan Arabic People's Jamahiriya v. Libyan American Oil Company (LIAMCO), the Federal Court continued its existing case law. LIAMCO had secured an arbitral award assigning it compensation for expropriation measures by the Libyan State. On a petition by LIAMCO, the Zurich District Court issued an attachment order, on the basis of which the Zurich 1 Operation Office attached assets of various institutions of the Libyan State with various banks resident in Zurich.
On appeal by the Libyan State and its institutions, the measures were suspended. The Federal Court pointed out that in its case law to date it had granted foreign States immunity only to a limited extent, though at the same time requiring that the legal relationship in question show an internal connection. The fact that assets of the Republic of Libya were located in Switzerland did not create such an internal connection any more than the circumstance that the seat of the Arbitration Tribunal had been in Geneva (judgment of 19 June 1980, BGE 106 I a 142).
The French Court of Cassation continued, in its decision in re Caisse d'assurance vieillesse des non-salariés v. Caisse nationale des barreaux français of 7 December 1977, its case law that had started in rebus Englander v. Statni Banka Ceskoslovenska (Clunet, 96 , p.923f.) and Clerget v. Représentation commerciale de la République démocratique du Viet-Nam (Clunet, 99 , p.267f.) (cf. BVerfGE 46, 342 ) (see also the survey of French case law on the question of immunity against enforcement in Paulsson, Int. Lawyer 11 , p.673-679).
The Court of Cassation approved the distraint of receivables of the Algerian old-age insurance for the self-employed, an institution set up by the Algerian State with legal capacity of its own (établissement public), with the following justification: the legal relationship on which the legal dispute was based was of a purely private nature. Accordingly, the Caisse d'assurance vieillesse des non-salariés (C.A.V.N.O.S.) could not claim any immunity in the trial proceedings. The Appeals Court had however also rightly not granted immunity in relation to the enforcement proceedings. The Court of Cassation based itself on the consideration that "l'immunité d'exécution est fondée sur la nature de biens publics des biens, objets de l'acte d'exécution, laquelle dépend non de leur appartenance au patrimoine propre de l'Etat, mais de leur affectation à une activité de puissance publique telle l'exercice d'un service public". The Appeals Court had not infringed this rule in concluding that the fact that C.A.V.N.O.S. assets were separated from the assets of the Algerian State that the garnishment was admissible (Rev.crit.dr.int. pr67 , p.532ff. with note by Bourel; AFDI 1978, p.1070f.).
On 12 September 1978 the Tribunal de grand instance de Paris temporarily suspended the distraint of assets of the Republic of Nigeria secured by the Société Ipitrade International S.A. for the purpose of securing a claim. The prosecution had asserted that the diplomatic representation of the Republic of Nigeria would by the enforcement measures be deprived of the resources needed to carry out the task of its diplomatic representation.
By decision of 5 March 1979, the same court suspended distraint measures against institutions of the People's Republic of Libya, and the People's Republic of Libya itself, secured by LIAMCO, with the proviso that an expert committee should consider what purpose the assets of the institutions of the People's Republic of Libya seized served.
(Clunet, 106 , p.859ff., with note by B.Oppetit. Cf. also Rambaud, Les suites d'un différent pétrolier: l'affaire LIAMCO devant le juge français, AFDI 1979, p.820ff.; Riedinger, Staatenimmunität gegenüber Zwangsgewalt, in RabelsZ 45 , p.448ff., 453ff.).
In re République islamique d'Iran, Organisation pour les investissements et les aides économiques et techniques de l'Iran (O.I.A.E.T.I.) et Organisation de l'énergie atomique de l'Iran (O.E.A.I.) v. Sociétés Eurodif et Sofidif et Commissariat à l'énergie atomique, the Paris Court of Appeal, in a decision of 21 April 1982 (Clunet, 110 , p.145ff., with note by B.Oppetit) set aside the attachment of the receivables of the Islamic Republic of Iran and Iranian government institutions (O.I.A.E.T.I.; O.E.A.I.) given for security purposes against the French Nuclear Energy Commissariat and the French State, with a justification that these receivables had so far not had any purpose determined and were subject to the Iranian government's sovereign decision as to how they were to be used. At the same time, however, the court confirmed the position developed in recent decisions of the French courts that "l'immunité d'exécution n'est pas absolue et qu'elle peut être exceptionellement écartée lorsque le bien saisi se trouve affecté par la volonté de l'Etat étranger, à la réalisation d'une opération purement commerciale poursuivie par luimême ou par un organisme qu'il a créé à cet effet" (op.cit. p.148f.). The decision contains no elaborations as to whether the forum State is barred by international law from treating receivables of a foreign State which at the time of attachment are not yet earmarked as non-sovereign assets.
In an unpublished decision of 6 August 1958 (reported in Seidl-Hohenveldern, Festschrift Beitzke, , p.1080ff., 1098; NYbIL 10 ; p.107f.) the Supreme Court of Justice of the Republic of Austria found that in the case of an account maintained by the legation of a foreign State in a bank in Austria this was not necessarily an asset exclusively serving the exercise of sovereign purposes of the foreign State. Further consideration was instead required of whether there might not be "assets that also served private-law purposes".
The Belgian practice on immunity of foreign States in enforcement proceedings is set out in an article by Verhoevens (NYbIL 10 , p.73-84). This lists inter alia, along with the decision of the Brussels Civil Court in re Socobelge v. Etat hellénique (cf. BVerfGE 46, 342 ): the decision of the Brussels Court of Appeal of 14 July 1955 in which the Court upheld the view that foreign States acting as private persons are not exempt from enforcement measures to secure claims (Szczesniak v. Backer et Consorts, Pas. 1957 II 38); the decision of the Brussels Debtors Court of 27 July 1971 in N.V. Film-partners (Pas. 1971 III 80), in which the answer to the question of the admissibility of sequestration of film material was made dependent on "the use to which the property in question is put, or is intended to be put by the state against which seizure is ordered".
In re Kingdom of Morocco v. Stichting Revalidatie Centrum "de Trappenberg", the Amsterdam District Court, in a decision of 18 May 1978, set aside the distraint of bank credit balances of the Kingdom of Morocco because it had not been shown that Morocco would evade a possible payment obligation. By contrast, Morocco's objection that the credit balances distrained were intended for official purposes was not, in the court's view, a compelling reason for setting aside the distraint (NYbIL 10 ; p.444f.).
In a decision of 18 November 1980, a US district court confirmed, in re Birch Shipping Corp. v. Embassy of the United Republic of Tanzania, the distraint of receivables on a bank account maintained by the diplomatic representation of the United Republic of Tanzania with an American commercial bank. The creditor, an American transport firm, had secured an arbitral award obliging Tanzania to pay $89,168.56, declared enforceable by the United States District Court for the Southern District of New York. Tanzania had undertaken in an agreement with the creditor to comply with the arbitral award and assented to the issuing of a court decision based on the arbitral award. The district court saw this agreement as a waiver of immunity within the meaning of Section 1610(a) (1) FSIA (text in BVerfGE 46, 342 ). At the same time it assessed the receivables on the bank account, which was intended to cover the embassy's current expenditure and costs, as "property used for a commercial activity". The court upheld the view that distraint was not admissible on the ground that part of the credit balance was to be termed as serving sovereign ends (for governmental purposes) (507 F. Supp. 311 ; International Law Reports [ILR] 63 , 524).
In the Federal Republic of Germany too, decisions have been issued in the recent past in which the courts declared the distraint of assets of foreign States to be admissible. Thus, the Hamburg local court, in an order of 7 January 1981, rejected the objection to an order of the Judicial Officer whereby the receivables on the bank account of a legally independent institute of a foreign State that was at the same time acting as the commercial section of the General Consulate of that State located in Hamburg were distrained. The court justified the decision with the finding that the institute's activity was of an exclusively economic nature. With the same justification, the Hamburg District Court rejected the immediate complaint lodged against the decision of the local court (RIW/AWD 1981, p.712f.). Reference should finally be made to an order by the Essen local court providing for distraint of the Islamic Republic of Iran's shares in Friedrich Krupp GmbH (cf. Schumann, ZZP 93 , p.415, note 19).
cc) The increasing tendency to restrict the immunity of foreign States is reflected in the Montreal Draft Articles for a Convention on State Immunity, adopted by the International Law Association at its Conference in Montreal in 1982. Articles VII and VIII of the draft, concerning the question of immunity "from attachment and execution", are as follows:
A foreign State's property in the forum State shall be immune from attachment, arrest and execution, except as provided in Article VIII.
A. A foreign State's property in the forum State, shall not be immune from any measure for the enforcement of a judgment or an arbitration award if:
1. The foreign State has waived its immunity either expressly or by implication from such measures. A waiver may not be withdrawn except in accordance with its terms; or
2. The property is in use for the purposes of commercial activity or was in use for the commercial activity upon which the claim is based; or
3. Execution is against property which has been taken in violation of international law, or which has been exchanged for property taken in violation of international law and is pursuant to a judgment or an arbitral award establishing rights in such property.
B. In the case of mixed financial accounts that proportion duly identified of the account used for noncommercial activity shall be entitled to immunity.
C. Attachment or execution shall not be permitted, if:
1. The property against which execution is sought to be had is used for diplomatic or consular purposes; or
2. The property is of a military character or is used or intended for use for military purposes; or
3. The property is that of a State central bank held by it for central banking purposes; or
4. The property is that of a State monetary authority held by it for monetary purposes;
unless the foreign State has made an explicit waiver with respect to such property.
D. In exceptional circumstances, a tribunal of the forum State may order interim measures against the property of a foreign State, available under this convention for attachment, arrest, or execution, including prejudgment attachment of assets and injunctive relief, if a party presents a prima facie case that such assets within the territorial limits of the forum State may be removed, dissipated or otherwise dealt with by the foreign State before the tribunal renders judgment and there is a reasonable probability that such action will frustrate execution of any such judgment". (Cf. ILA, Report of the Sixtieth Conference held at Montreal 1982, p.6ff.).
That the forum State is not by general international law absolutely barred from seizing assets of foreign States is also the view of many authors of recently published scholarly works in international law.
(By contrast, the following hold firm to the doctrine of unrestricted immunity against enforcement for foreign States in enforcement proceedings: Nguyen Quoc Dinh, Droit international public, 2nd ed., Paris 1980, p.391 and Rousseau, Droit international public, vol. IV, 1980, p.16ff.).
Sinclair, "The Law of Sovereign Immunity. Recent Developments" (Receuil des Cours [RdC] 167 [1980 II], p.113ff.), summarizes his view on the question on the immunity of foreign States in enforcement proceedings as follows:
"...it does not follow automatically from the fact that a court may be entitled to exercise jurisdiction in respect of the non-sovereign activities of a foreign State that it or any other court can authorise measures of execution against any property of the foreign State situate in the territory of the State of the forum. One has to look at the nature of the property against which measures of execution are sought to be levied. If that property is devoted to the sovereign or public purposes of the foreign State, execution cannot be levied, notwithstanding that the original claim may have been based on the iure gestionis activities of the State" (op.cit. p.242).
Crawford, "Execution of Judgments and Foreign Sovereign Immunity" (American Journal of International Law [AJIL] 75 , p.820ff.) arrives at the finding that only "property protected by diplomatic or consular immunity", "warships, and other public ships" and "State property used for 'public purposes'" are beyond seizure by the forum State. "This restriction on execution...can be regarded as established".
(Op.cit. p.860ff., 863. On the question of the admissibility of security measures, Crawford states that it would be remarkable were international law to bar the operation of security measures on assets on which there might later be enforcement. "If particular State property is liable to final execution in a matter, then, unless some positive rule to the contrary can be established, it would seem to follow that the property should be liable to prejudgment attachment in aid of execution" [op.cit. p.868].)
According to Bouchez, "The Nature and Scope of State Immunity from Jurisdiction and Execution" (NYbIL 10 , p.3-33), execution upon assets of foreign States is in principle admissible. Immunity need be granted only in respect of things declared exempt from execution in international agreements, or used "exclusively for the purpose of carrying out sovereign acts" (op.cit. p.33).
Schreuer, "Some Recent Developments in the Law of State Immunity" (CompLYb 2 , p.215-236), takes the view that only things "directly" serving sovereign functions of foreign States ought to remain beyond seizure by the forum State. In respect of fungible things, in particular money, no immunity against enforcement ought normally to be granted (op.cit.p.216).
According to Gramlich, "Staatliche Immunität für Zentralbanken?" (RabelsZ 45 , p.545ff.), assets in the forum State are protected against enforcement measures "insofar as they serve de facto sovereign purposes of a foreign State" (op.cit. p.592).
c) An analysis of the practice of States on the question of the immunity of foreign States shows not only that general international law does not simply bar the forum State from execution upon things of foreign States on the basis of decisions in a main case. It also allows the conclusion that no general rule of international law exists whereby the forum State would be unreservedly prevented on the basis of a title issued in proceedings for temporary protection of rights to secure a claim asserted by the creditor from applying enforcement measures upon assets of a foreign State (cf. also BVerfGE 46, 342 ).
To be sure, Section 1610 (d) of the Foreign Sovereign Immunities Act (FSIA) of the United States of America allows attachment serving the securing of a claim (attachment prior to the entry of judgment to secure satisfaction of a judgment) of assets of a foreign State only where the latter has given the corresponding waiver declaration. Section 13 (2) (a) (3) of the British State Immunity Act (StIA) similarly grants temporary legal protection only with the written consent of the State concerned. These provisions do not however express the conviction that the forum State is in principle barred in virtue of general international law from taking recourse to the securing of a claim on assets of a foreign State. Nor can the like be derived from corresponding provisions of the immunities acts of Pakistan, South Africa, Singapore or Canada.
The restriction of the powers of American courts to attach assets before the rendering of judgment in a main case by Section 1610 (d) FSIA is connected with abolition of the possibility of attaching assets of foreign States to establish the place of jurisdiction (pre-judgment attachment to obtain jurisdiction) by the FSIA. As follows from the materials on Section 1609 FSIA, the American legislator was, in removing this type of attachment procedure, pursuing the goal of avoiding in future annoyances such as had arisen in the past in relations with foreign States affected by attachment of their assets to establish the place of jurisdiction.
(Cf. Section-by Section Analysis, Sec.1609, Annex to the communication from the Justice Department and the State Department to the Speakers of the Senate and House of Representatives of Congress of 31 October 1975, ILM 15 , p.88ff., 113; United States Congress, House of Representatives, 94th Congress, 2nd session, Report no.94-1487 [Legal Affairs Committee], ILM 15 , p.1398ff., 1412.)
For the decision to allow security measures only in a sharply delimited sphere, it was evidently the same political considerations oriented towards considerations of expediency that were decisive.
(Cf. the opinion of the Committee on International Law of the Association of the Bar of the City of New York [by Mehren et al.] on the revised draft of the FSIA: "...attachment for security purposes has been eliminated as a troublesome and embarrassing friction causing factor in diplomatic relations" (reproduced in: "Jurisdiction of U.S. Courts in suits against Foreign States" - Hearings before the Subcommittee on Administrative Law and Governmental Relations on H.R. 11315, 2 and 4 June 1976, 94th Congress, 2nd Session, Washington 1976, p.76.)
It cannot at any rate be derived from the genesis of the FSIA that there is anything to support the view that the American legislator had a conviction that general international law allowed the taking of security measures only if the State affected had given a corresponding waiver declaration.
(Cf. further the opinion of the Committee on International Law of the Association of the Bar of the City of New York, op.cit.; Olmstead, ibid., p.81; Richard, Harv.Int'l L.J. 15 , p.157ff., 164; Smit, Proceedings of the ASIL 1980, p.49ff., 67ff.; Monroe Leigh, ibid., p.70ff., 73; Atkeson/Perkins/Wyatt; AJIL 70 , p.298ff., 308; Delaume, ibid., p.529ff., 536.)
Also in favour of this view is the fact that the FSIA does not rule out the possibility of barring the foreign State by temporary order (injunction) from transferring assets.
(See Report of the Legal Affairs Committee, ILM 15 , p.1410. - An interlocutory injunction preventing Iran from withdrawing credit balances from the USA was given inter alia in re American International Group, Inc. v. Islamic Republic of Iran, 493 F. Supp.522 .)
In the course of debate on the British Immunity Act in the House of Lords, Lord Wilberforce, supported by Lord Denning, suggested amending Section 13 of the StIA bill in order to put British courts in a position to issue temporary orders (injunctions) in relation to the assets of foreign States and their institutions too.
("The essential object of my amendment is to enable injunctions to be given against State property used for commercial purposes" (Hansard, Parliamentary Debates, Official Reports, 5th Series, vol.389, House of Lords, 1977-78, Sp.1526f.)
On Lord McCluskey's objection that the enforcement of an interlocutory injunction by punishment for contempt of court was not appropriate against a foreign State, Lord Wilberforce withdrew his motion on the grounds that Britain ought not to become involved in diplomatic complications (op.cit. Sp.1527f.). It may be concluded that the British legislator restricted the possibility of giving injunctions, for political reasons but not ones of international law, to cases in which the foreign State had given the corresponding declaration of waiver.
Admittedly, the Attorney General stated on the second reading of the Act before the House of Commons: "Clause 13 removes immunity from execution to the full extent to which we believe it possible to do so under current international law and practice" (Hansard, Parliamentary Debates, House of Commons, 5th Series vol.949, Sp.410f.). This did not however apply to security measures - in the literature, Section 13(2) (a) (3) StIA met with the same criticisms as Section 1610 (d) FSIA (cf. Brower/Bistline/Loomis, AJIL 73 , p.200ff., 211; O'Connel, ILA-Proceedings 1978, p.16; Ress, ZaöRV 40 , p.217ff., 250; Mann, BYbIL 50 , p.43ff., 59f.).
It is further noteworthy in this connection that the Court of Appeal regarded it as admissibile in international law in rebus Trendtex Trading Corp. Ltd. v. Central Bank of Nigeria ( 2 W.L.R. 356) and Hispano Americana Mercantil S.A. v. Central Bank of Nigeria ( 2 Lloyd's Rep. 277, C.A.; BYbIL 50 , p.221ff.), to which the provisions of the StIA did not yet apply, to prohibit the Central Bank of Nigeria from disposition over certain monies by way of so-called Mareva injunctions (see Clausius, RIW/AWD 1979, p.868ff.).
d) If the forum State is accordingly not absolutely prevented by international law from applying enforcement measures to assets of foreign States on the basis of a title to secure the claim asserted by the creditor in proceedings for temporary legal protection, limits are none the less set to this power by international law. According to an established, general practice of States, supported by the opinio iuris, assets of a foreign State occupied or located in the forum State may not without the assent of the foreign State be subjected to either enforcement or security measures insofar as they serve sovereign purposes of the foreign State. The fact that individual courts have, in decisions on the admissibility of security measures, disregarded this rule with particular formulations does not call its validity in question.
aa) A material connection between the claim in the title to be secured and the asset attached is not a precondition for the admissibility of security measures required by international law. To be sure, Section 1610 (a) (2) FSIA makes the admissibility of a measure of execution on assets of a foreign State additionally dependent on a requirement for connection: only assets that are or were used for a commercial purpose of a foreign State which are connected with the substantive claim asserted are subject to execution. With this provision the American legislator wished to prevent an asset that should be allocated to a particular sector of a foreign State's economic activity from being subjected to execution if the claim asserted in the suit concerned another sector of the foreign State's economic activity. Failure to observe this separation of areas of State activity would, it was feared, expose American firms to the danger of being treated in similar fashion abroad.
(Section-by-Section Analysis of Section 1610 of the 1973 Bill [Annex to the communication by the Justice Department and State Department to the Speaker of Senate of 22 January 1973, ILM 12 , p.118ff., 152] and the statement by Ristau and Brower in a hearing before a Congressional Subcommittee ["Immunities of Foreign States" - Hearing before the Subcommittee on Claims and Governmental Relations on H.R. 3493, 7 June 1973, 93rd Congress, 1st Session, Washington 1973, p.24f.].)
The view that the restriction of executory seizure to assets that are or were used for a commercial activity of the foreign State connected with the claim asserted is required by international law was not, as far as can be seen, represented in the debates over the FSIA drafts. A principle of customary international law barring the forum State from measures of execution or security upon assets of a foreign State unrelated to the substantive claim asserted cannot at present be demonstrated.
(Cf. Schaumann, BerDGVR 8 , p.1ff.; see also Note, N.Y.U.J. of Int'l Law and Pol. 6 , p.473ff., 493. Conversely, but without substantiation for his view: Martin, Harv. Int'l L.J. 18 , p.429f., 448.)
The requirement for connectedness in Section 1610 (a) (2) FSIA was not incorporated in immunity Acts adopted following the entry into force of the FSIA.
bb) The type of receivables at issue here, on accounts with banks in the forum State intended for transfer to an account of a foreign State with its central bank serving to cover that State's budget expenditure, cannot be termed assets serving sovereign purposes. The description of the legal relationship between the bank and its creditor is just as little decisive for the description of the earmarking of such a credit balance as the description of the activity that led to the creation of such a credit. (The French Court of Cassation focuses on the puropose and origin of the asset upon which security and enforcement measures are to be made [cf. BVerfGE 46, 342 ).
(1) For the trial proceedings, the Federal Constitutional Court has stated that the description of a State's action must in principle be made according to the applicable national law in each case, since international law as a rule supplies no criteria for demarcating the sphere of sovereign from that of non-sovereign action (cf. BVerfGE 16, 27 [62f.]). Without recourse to domestic law, by contrast, the Federal Constitutional Court was able to answer the question of the admissibility of enforcement measures on receivables from a current, general account of the embassy of a foreign State (cf. BVerfGE 46, 342 [394ff.]).
(2) It it not necessary to adduce national law in the description required in the present proceedings either. Credit balances on accounts with banks in the forum State intended for transfer to an account of a foreign State with its central bank serving the coverage of that State's budget receive decisive earmarking in accordance with the foreign State's will only once they have reached the central bank's power of disposition. The instruction to transfer the credit balance to the central bank pursues at most mediately sovereign purposes. The forum State would not be bound by international law to treat the credit balances as serving sovereign purposes even if, after their entry into the foreign State's account with its central bank, they were to be allocated to purposes that were to be termed sovereign. The practice of States in the sphere of immunity law cannot be taken to show that such treatment would at the time decisive here be required by international law.
It is accordingly not decisive whether the credit balances are to be regarded as serving sovereign purposes according to the law of the foreign State. If the forum State treats the designated purpose differently from the foreign State, there is no infringement of the ban in international law on intervention therein either. For a judicial measure based on a different description is as a general rule, and particularly in the present case, not a means of pressure whereby the forum State pursues the objective of influencing the pattern of the political or economic structure of the foreign State.
Moreover, the description of the designated purpose of an asset located or occupied in the forum State is not an exclusive matter for the foreign State.
Nor does Section 13 (5) StIA prevent British courts from treating the designated purpose of an asset differently from the foreign State, even though according to this provision a thing is in the general case to be treated as serving sovereign purposes when the head of the foreign State's diplomatic mission in the United Kingdom has given an affidavit to the effect that the relevant thing is "not in use or intended for use by or on behalf of the State for commercial purposes".
According to German law, the credit balances whose description is at issue in the present case would be regarded as part of the national financial assets. Financial assets are not public things; they are subject to private law. On the general view, the exemption from execution under para.882 a (2) ZPO - apart from the fact that there only "things", i.e. physical objects (cf. para.90 BGB) essential for the carrying out of public tasks are exempt from seizure - does not apply to financial assets.
e) It is accordingly the case that the law of general State immunity does not bar the forum State from ordering security measures in relation to receivables on credit balances on accounts with banks in the forum State intended for further transfer to an account that a foreign State maintains with its central bank to cover its national budget, since these credit balances may be treated by the forum State as assets that at the time of commencement of the security measure (cf. BVerfGE 46 m 342 ) did not serve sovereign purposes of the foreign State.
This finding is also in harmony with a decision arrived at by the Appeal Court of The Hague. The court had to decide as to the admissibility of the distraint of claims of the National Iranian Oil Company against four oil companies with headquarters in The Hague. The National Iranian Oil Company asserted that the distraint was incompatible with international law. According to Iranian law, all proceeds from oil transactions were owed to the Iranian State. In respect of the claims against the Nederlands-Iraanse Aardolie Handel-Maatschappij N.V. (Netherlands Iranian Oil Trading Company), one of the garnishees, the National Iranian Oil Company, adduced an assurance given by affidavit in the name of the Iranian Finance Minister: the garnishee had to make so-called "fixed payments", deducting income tax. The money flowed to the Finance Ministry, the legitimate beneficiary. The ultimate beneficiary was said to be the Iranian State. The amounts paid were said to be used for the carrying out of sovereign tasks ("for the benefit of the public service").
The court found first of all that only claims of the National Iranian Oil Company but not claims of the Iranian State had been distrained. Since income tax was to be transferred to the Iranian State and not to the National Iranian Oil Company, the entitlement to payment of tax was not covered by the distraint. The "fixed payments" were to be made to the National Iranian Oil Company. Accordingly, the corresponding receivables could not be regarded as assets devoted to the accomplishment of sovereign tasks of Iran. This also held when account was taken of the fact that it was the practice of the National Iranian Oil Company to transfer the relevant amounts to the Finance Ministry. There was no proof that the distraint covered any sort of asset serving the accomplishment of sovereign purposes (ILM 9 , p.152ff.; ILR 47 , p.138ff., 141ff.).
f) There is no need for any decision here as to how credit balances maintained by a foreign State for monetary policy objectives with banks in the forum State might be to be treated (cf. Montreal Draft Articles for a Convention on State Immunity Art. VIII C 3, 4 [see B III 2 b) cc) above]); here a destination to a sovereign purpose would as a rule be given directly. However, such a case did not underlie the initial proceedings.
3. Since accordingly a general rule of international law barring the forum State from seizure of things of the nature of the receivables distrained in the initial case does not exist, the decisions on objection and complaint of the Regional Court and Regional Appeals Court ought not to have been arrived at differently if the question of the existence of such a rule had pursuant to Article 100(2) Basic Law been laid before the Federal Constitutional Court.
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