India: Suing A Foreign State In India: Piercing The Veil Of Sovereign Immunity

Last Updated: 29 June 2016

With the increase in significance and promotion of foreign investment in India and the setting up of various agencies for this very purpose, multifarious moves towards deregulation and liberalization of the Indian economy have come to the fore. The government is taking various routes to facilitate and broaden Foreign Direct Investment inflows into India.

As far as foreign investors are concerned, India is definitely emerging as an attractive destination. However, a growing concern among the host country recipients is the recourse they might have against these investors.

The concern becomes graver, when the investors are foreign-state controlled investors and a thick veil of sovereign immunity protects them.

Sovereign Immunity in India

India, like all other countries in the world recognizes the maxim, "par in parem non habet imperium", which translates to, "one sovereign state is not subject to jurisdiction of another state".

India has signed the United Nations Convention on Jurisdictional Immunities of States and their Property on 12th January 2007. However, India has neither ratified nor accepted, approved or acceded to the said treaty. Hence, unlike other countries, such as UK and US, India has no separate legislation in this respect.

In India, the sovereignty of foreign states is generally recognized, but an exception is carved out under Section 86 of the Code of Civil Procedure, 1908 where any person may sue a foreign state in any court with the consent of the Central Government. The provision starts with the general rule, that no foreign state may be sued in any court, and then carves out the exception of the consent of Central Government by a Certificate in writing by the Secretary of the State.

Another exception carved out is that a tenant of an immovable property may sue the foreign state from which he holds the property.

The section further goes on to discuss the conditions under which the Central Government may give permission, which are as follows:-

  • If the foreign state has instituted a suit in the court against the applicant.
  • If the foreign state, by itself or another, trades within the local limits of the Indian court.
  • If the foreign state's immovable property, in respect of which the applicant want to sue is situated in India.
  • If the foreign state has waived privilege of Section 86.

The bar in the section is not only against suing, but also against execution of any decree against the property of a foreign state.

The section further expands the scope of application of the immunity to ruler of a foreign state, an ambassador or envoy, High Commissioner of a Commonwealth Country, any such other member of staff of the previous category, as the Central Government may specify.

The section further bars the arrest of the aforementioned category of persons.

Further, following the principles of natural justice, the provision provides for giving a reasonable opportunity of being heard, in case a request is rejected under this Section.

To clarify the meaning of foreign state in the aforesaid section, Section 87A provides that a "foreign state" means any state outside India recognized by the Central Government.

Jurisprudence on Section 86

One of the first cases to touch upon the law in Section 86 was the case of Mirza Ali Akbar Kashani vs. United Arab Republic and Anr.1 In this case, a suit was filed against the United Arab Republic and the Ministry of Economy, Supplies, Importation Department of Republic of Egypt at Cairo, for recovery of damages for a breach of contract.

The court first and foremost discussed whether India recognizes the State or not and having answered the question in affirmative, moved forward to discuss the law.

The question discussed was whether the consent under Section 86 was required in this case or not. Having discussed the recognition of sovereign immunity of foreign states by the Indian Legislature, the court went on to hold that the provision of Section 86 indeed was required to be followed in this case.

As regards the nature of order to be passed by the Central Government in response to an Application under Section 86, it has been held that if a refusal is accorded, then the refusal should state cogently the reasons for such refusal. Merely citing vague reasons such as "unable to give permission on political grounds" will not suffice.2 The Apex Court has further recognized that although an Order under Section 86 is in the nature of an administrative order, the order is required to follow the principles of natural justice because they decide the rights of the parties.3 Such reasons are required to be clear and explicit.

In another case, where a government instrumentality of a foreign state was sued for recourse, without seeking permission under Section 86, the issue of the stage at which such objection should be decided was dealt by the Court. It was held that "the question whether a suit should be entertained, cannot be deferred till the stage of the final disposal of the suit .... the object of Section 86 is to save foreign states from being harassed ... if the foreign state is required to file a Written Statement and to contest the said suit ... the very object and purpose of Section 86 shall be frustrated." The bar of Section 86 can be taken at the earliest opportunity and court concerned is expected to examine the same.4

Waiver of Privilege: When not to seek consent

In various cases, the Indian courts have recognized waiver of privilege by foreign state owned entities. This waiver may be express or implied.

The question of the applicability of Section 86 to the Ethiopian Airlines lay before the Hon'ble Supreme Court of India in case of Ethiopian Airlines vs. Ganesh Narain Saboo5. The proceedings had been filed under Consumer Protection Act, 1986 and the contentious issue was whether permission under Section 86 was required.

It was observed that the Consumer Protection Act, 1986 and the Carriage by Air Act, 1972 were specific statutes which would prevail over the general statute of Code of Civil Procedure, 1908. It was further observed that Carriage by Air Act, 1972 was passed to give effect to the Warsaw Convention, 1929, to which Ethiopia is also a party. In effect a reading of the Warsaw Convention, 1929 and the Carriage by Air Act, 1972 make it evident that these provisions apply to Airlines of any nationality.

From the above reading, the Apex Court had made it clear that the implication of the Convention and the Act were twofold:-

  1. The Central government had already given consent under Section 86 by having enacted the Carriage by Air Act, 1972.
  2. The Foreign State of Ethiopia had impliedly waived privilege by signing the Warsaw Convention, 1929.

The effect was that these acts being special provisions, no permission was required under Section 86 to sue the Ethiopian Airlines.

Interestingly enough, even though the statute does not deal with the commerciality of the transaction as being a factor for determining the Applicability of the provision, the Apex Court had gone a step further and said that the commercial nature of the transaction would itself make sovereign immunity inapplicable.

Similarly, the Bombay High Court6 recognized a delay of 16 years in raising the plea of immunity under Section 86, as an implied waiver of the privilege.

Conclusion

To conclude, it may be said that with the increase in foreign investment, the interaction between foreign state immunity and the rights of citizens to enforce their remedies against the foreign state sponsored investors would gain much more importance, in which scenario, the jurisprudence on the subject is expected to develop and gain momentum.


1. (1966) 1 SCR 319

2. Veb Deautfracht Seereederei Rostock (D.S.P. Lines) vs. New Central Jute Mills Co. Ltd. and another AIR 1994 SC.

3. Shanti Prasad Agarwalla & Others vs. Union of India and Others AIR 1991 SC 814.

4. Harbhajan Singh Dhalla vs. Union of India AIR 1987 SC 9

5. AIR 2011 SC 3495

6. Kenya Airways vs. Jinibai B. Kheshwala AIR 1998 Bom 287

This document is not intended to create an attorney-client relationship. You should not act or rely on any information in this document without first seeking legal advice. This material is intended for general information purposes only and does not constitute legal advice. If you have any specific questions on any legal matter, you should consult a professional legal services provider.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Contact the Author?
Click here to email the Author
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Other India Advice Centers
Insolvency and Restructuring
Trademarks
More Advice Centers
Useful Resources
Legal updates from Singhania & Partners
Based in New Delhi, the main objective of ICA is to promote amicable, quick and inexpensive settlement of commercial disputes by means of arbitration, conciliation, regardless of location.
The Chartered Institute of Arbitrators (CIArb) is a leading professional membership organisation representing the interests of alternative dispute practitioners worldwide.
Upcoming Events
The firm regularly participates in or hosts a number of legal events.
Tools
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions