China’s enactment of the Foreign State Immunity Law, which came into effect on January 1, 2024, marks the country’s formal transition from affording foreign states “absolute immunity” in Chinese courts to restricting the immunity to certain types of lawsuits.  This transition to “restrictive immunity” is in line with the approaches used in many other countries, including that in the United States, as codified in the Foreign Sovereign Immunities Act (“FSIA”) of 1976.  However, a comparison between China’s Foreign State Immunity Law and the FSIA and related U.S. jurisprudence reveals key differences between the two countries’ approaches.

The United States’s Foreign Sovereign Immunities Act

In an article titled The United States Approach to Foreign Sovereign Immunity, which was just published by SINOTALKS^®,  Judge John M. Walker Jr., a senior judge on the United States Court of Appeals for the Second Circuit, explains that the United States’s transition from absolute immunity to restrictive immunity occurred in 1952.  The transition was due to, among other reasons, governments’ growing practice of engaging in commercial activities.  Once restrictive immunity was in place, persons doing business with governments could begin having their rights determined in the courts.

Traditionally, with respect to issues concerning whether foreign states should be immune from lawsuits in the United States, U.S. courts showed deference to the U.S. State Department, based on the consideration, as explained by Judge Walker, that “foreign sovereign immunity was a matter of ‘grace and comity’ on the part of the United States”.  Unfortunately, the State Department’s application of the restrictive approach to foreign sovereign immunity was inconsistent.  To address the chaotic situation, Congress enacted the FSIA in 1976 to, as discussed by Judge Walker, “codif[y] legal standards for foreign sovereign immunity claims and transfer[] the responsibility for resolving such claims from the executive branch to the judicial branch”.

“Essentially, the [Foreign Sovereign Immunities Act] allows a “foreign state” to be immune from the jurisdiction of U.S. courts, subject to a few exceptions, […].”

Essentially, the FSIA allows a “foreign state” to be immune from the jurisdiction of U.S. courts, subject to a few exceptions, such as cases involving a foreign state’s waiver of immunity, or cases involving commercial activities or non-commercial tortious acts so long as a foreign state’s conduct has some connection to the United States.

In his article, Judge Walker shares these concluding remarks:

Nearly 50 years have passed since Congress enacted the FSIA.  U.S. courts have performed well, surpassing Congress’s expectation, and have consequently assured litigants that FSIA cases are being decided on purely legal grounds.  As our courts hear new cases involving questions under the statute, our approach to foreign sovereign immunity will continue to evolve.  What is certain, however, is that newly evolved legal standards will be supported by jurisprudence rooted in a wealth of precedents, instead of the arbitrary decisions made by the executive branch that Congress sought to avoid.

[emphasis added]

China’s Foreign State Immunity Law

Similar to the FSIA, China’s Foreign State Immunity Law specifies in Article 3 that a foreign state is immune from the jurisdiction of courts in China, subject to exceptions stated in Articles 4 to 12.  A few exceptions are quite similar to those in the FSIA, including, for example, cases involving immunity waived by a foreign state or based on non-commercial tortious acts.  Yet, two key differences stand out.

• Commercial Activity Exception

Like the FSIA, Article 7 of China’s Foreign State Immunity Law denies a foreign state’s immunity in a lawsuit arising out of a “commercial activity” that has some connection to China.  Article 7 ends with this sentence: “In determining whether an act is a commercial activity, the courts of the People’s Republic of China should comprehensively consider the nature and purpose of the act [emphasis added].”

What is interesting is that the FSIA explicitly requires the commercial character of an activity to be determined by reference to its “nature”, rather than its “purpose”.  In his article, Judge Walker summarizes related U.S. jurisprudence as follows:

Courts have explained that the “nature” of an activity is “the outward form of the conduct that the foreign state performs”, while its “purpose” refers to “the reason why the foreign state engages in the activity”.  Accordingly, when determining whether a foreign state’s actions are “commercial”, the “presence or absence of a profit motive is not dispositive”.  Instead, courts ask whether such actions, “whatever the motive behind them”, are “the type of actions by which a private party engages in […] commerce”.

As Chinese courts are required to consider both the nature and purpose of an act when determining whether the act is a commercial activity, their interpretations of the words “nature” and “purpose” as well as their explanations of how these two attributes contribute to the determination may help enrich the understanding of this important legal issue.

• Role of the Executive Branch

As mentioned above, Congress enacted the FSIA to address the chaotic situation resulting from the State Department’s inconsistent application of restrictive immunity by transferring the responsibility to make immunity determinations to the judicial branch.  As observed by Judge Walker, the judicial branch has “performed well, surpassing Congress’s expectation”.

Unlike the FSIA, China’s Foreign State Immunity Law designates the executive branch, specifically, the Ministry of Foreign Affairs of the country, to play a significant role.   Such role is reflected in Article 19 of the law, which provides:

The courts of the People’s Republic of China should accept the certifying documents issued by the Ministry of Foreign Affairs of the People’s Republic of China on the following questions of fact concerning acts of state:

(1) whether the state at issue in a case constitutes a foreign sovereign state as stated in Article 2 Item 1 of this Law;

(2) […]; and

(3) other questions of fact concerning acts of state.

With respect to issues other than those mentioned in the preceding paragraph but involve major national interests such as foreign affairs, the Ministry of Foreign Affairs of the People’s Republic of China may provide an opinion to the courts of the People’s Republic of China.

According to the Legislative Affairs Commission of the Standing Committee of the National People’s Congress, China’s national legislature, these provisions are “conducive to safeguarding national interests” and reflect the fact that a foreign state immunity system has both “judicial and diplomatic attributes”.

“The challenge facing China is how to avoid problems that led to U.S. State Department’s inconsistent application of restrictive immunity. ”

This approach taken by China is quite understandable as, prior to the enactment of the FSIA, the executive branch of the United States also played a significant role in immunity determinations, to the extent that the U.S. judiciary deferred to the executive branch (see above).  The challenge facing China is how to avoid problems that led to U.S. State Department’s inconsistent application of restrictive immunity.  As pointed out by Judge Walker, the problems included:

In some cases, diplomatic pressure from foreign nations and other “political considerations” led the State Department to support immunity for foreign sovereigns “when a straightforward reading of the restrictive theory would have led it to oppose”.

Will China’s executive and judicial branches be able to jointly develop a set of legal principles allowing the country to overcome the above challenge while ensuring the consistent application of restrictive immunity?  The task is likely to be formidable, but, if China succeeds, the resulting jurisprudence will be of high referential value.

---

• The citation of this article is: Dr. Mei Gechlik, China’s NEW Law on Foreign State Immunity and Related U.S. Experiences, SINOTALKS.COM^®, In Brief No. 41, Feb. 28, 2024, https://sinotalks.com/inbrief/202402-english-foreign-state-immunity.
  The original, English version of this article was edited by Nathan Harpainter.  The information and views set out in this article are the responsibility of the author and do not necessarily reflect the work or views of SINOTALKS^®. ↩︎

Related Articles