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Legality Of Waiver Of Sovereign Immunity Clauses In International Contracts

By Sebastian Hon, SAN
So much frenzy and hysteria has gripped the intellectual and political space of Nigeria, and possibly beyond, over the clause waiving Nigeria’s sovereign immunity in the 2018 rail construction contract executed between the Federal Government of Nigeria and the Export-Import Bank of China. This piece seeks to clarify the issues surrounding the controversy.

The concept or doctrine of sovereign immunity, according to the US Supreme Court in Nevada vs. Hall, 440 U.S. 410, 414 (1979), is an amalgam of two quite distinct concepts. The Court reasoned thus: The doctrine of sovereign immunity is an amalgam of two quite different concepts, one applicable to suits in the sovereign’s own courts and the other suits in the courts of another sovereign.

One of the earliest judicial pronouncements on the subject matter is the US decision of Cohens vs. Virginia, 19 U.S. (6 Wheat.) 264, 411-2 (1821), where it was pronounced thus: The universally received opinion is that no suit can be commenced or prosecuted against the United States; the Judiciary Act does not authorize such suits.

In 1846, the US Supreme Court, in the case of United States vs. McLemore, 45 U.S. (4 How.) 286, 288 (1846), held affirmatively that the United States was only subject to a suit if it gave consent to it via legislation.

From the definition in Nevada vs. Hall, supra and the dictum in United States vs. McLemore, supra, therefore, sovereign immunity implies a sovereign State either invoking its sovereignty in order to escape from its legal obligations; or deciding to waive such immunity as an indication of its willingness to permit breach of such legal obligations to be tested in the law courts for judicial determination.

Even though the US Supreme Court overruled Nevada vs. Hall, supra, in Franchise Tax Board of California vs. Hyatt, 587 U.S. (2019), the definition in Nevada, supra, still stands. Indeed, that Court, in Hyatt’s case, did a deep historical incursion into the doctrine of sovereign immunity. Justice Thomas, who delivered the lead opinion of that Court, opined as follows: After independence, the States considered themselves fully sovereign nations. As the Colonies proclaimed in 1776, they were “Free and Independent States” with “full power to levy war, conclude peace, contract alliances, establish commerce, and do all other acts and things which Independent States may of right do”…. “An integral component” of the states’ sovereignty was “their immunity from private suits. Federal Maritime Comm’n v. South Carolina Ports Authority, 535 U.S. 743, 751-752 (2002).

After discussing other judicial decisions and legal and historical texts, Justice Thomas then held as follows: The Founders believed that both “common law sovereign immunity” and “law-of-nations sovereign immunity” prevented States from being amenable to process in any court without their consent…. The common law rule was that “no suit or action can be brought against the King, even in civil matters, because no court can have jurisdiction over him.” 1 W. Blackstone, commentaries on the Laws of England 235 (1765) (Black-stone). The law-of-nations rule followed from “the perfect equality and absolute independence of sovereigns” under that body of international law…. According to the founding era’s foremost experts on the law of nations,“ [i]t does not… belong to any foreign power to take cognizance of the administration of [another] sovereign, to set himself up for a judge of his conduct, and to oblige him to alter it”…. The founding generation thus took as given that States could not be haled involuntarily before each other’s courts.

Lex Community
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