Differing Perceptions? Market Practice and the Evolution of Foreign Sovereign Immunity

76 Pages Posted: 2 Mar 2016 Last revised: 27 Apr 2016

See all articles by Mark C. Weidemaier

Mark C. Weidemaier

University of North Carolina School of Law

Mitu Gulati

University of Virginia School of Law

Date Written: February 28, 2016

Abstract

The 20th century witnessed a transformative, “tectonic” shift in international law, from “absolute” to “restrictive” theories of sovereign immunity. As conventionally understood, however, this dramatic transformation represented only a shift in the default rule. Under absolute immunity, national courts could not hear lawsuits and enforce judgments against a foreign sovereign without its consent. Under restrictive immunity, foreign sovereigns were presumptively not immune when they engaged in commercial acts. We demonstrate that market practices undermine this conventional understanding. Using an extensive, two-century data set of contracts between foreign governments and private creditors, we show that contracting parties have long treated absolute immunity as akin to a mandatory rule, which they could not reliably change by contract. By contrast, we show that the Foreign Sovereign Immunities Act in the U.S. and the State Immunities Act 1978 in the U.K. — two statutes largely overlooked by international law scholarship — fundamentally reordered a global market for contracts. We explore why the conventional narrative, which relies on analysis of traditional legal materials, is at such odds with the “law on the ground.”

Keywords: soveriegn immunity, sovereign debt, international law

JEL Classification: F34, K12, K33

Suggested Citation

Weidemaier, Mark C. and Gulati, Mitu, Differing Perceptions? Market Practice and the Evolution of Foreign Sovereign Immunity (February 28, 2016). UNC Legal Studies Research Paper No. 2739423, Duke Law School Public Law & Legal Theory Series No. 2016-21, Available at SSRN: https://ssrn.com/abstract=2739423 or http://dx.doi.org/10.2139/ssrn.2739423

Mark C. Weidemaier

University of North Carolina School of Law ( email )

Van Hecke-Wettach Hall, 160 Ridge Road
CB #3380
Chapel Hill, NC 27599-3380
United States
919.843.4373 (Phone)

Mitu Gulati (Contact Author)

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
169
Abstract Views
2,079
rank
216,625
PlumX Metrics