OVERCOMING PLEA OF RESTRICTIVE SOVEREIGN IMMUNITY
In the current scenario of the Global Market, different states are becoming more involved in the
transactions of International Business. Therefore, different contracts for international
investments are being concluded between foreign investors and the State. The state tends to seek
immunity from the execution and jurisdiction of the arbitral award to the extent that of State’s or
its entity’s commitment to the arbitration clause drafted within the limits of the investment
contracts which is often has been considered as one of the major issues for the courts and the
arbitral tribunal. It is often considered suspicious by the Investors to agree to arbitration with the
states which are considered as a costly exercise if there is a situation of dispute arising out of the
concerned transaction relating to the unenforceability or enforceability of an award. This may
even cause a threat to International investments if it is not subjected to be checked.
With the passage of time, there were different ways devised by many transactional entities and
investors who were dealing with the state or state like entities in order to avoid the plea of
immunity from the state to the arbitration awards. In many cases the efficiency of this
mechanism can be considered as doubtful as it has failed many times to achieve a desired result
and there is also a possibility that it can be a time consuming process which may reduce the
effectiveness of the plea of Immunity by the state. This in terms can increase the successful
enforcement of arbitral awards against a state. In recent times “express wavier” clauses are
included in the arbitration agreement which tends to indicate the submission made by the state
party to the tribunal. This is considered one of the most prominent methods that are developed to
evade the plea for Immunity.
Including express waivers of immunity clauses in different international agreements and
contracts containing arbitration agreement has become a habitual widespread practice in which
the jurisdiction of the arbitral tribunal in the event of dispute has been defined. Clauses like
including waiver against the state from the very act of signing the arbitration contract must be
regarded as controversial in order to adopt restrictive immunity. It comes to the relevance of such
clause to the jurisdictions that helps in adoption of the theory of immunity. These clauses have a
remarkable significance which helps to ensure that the state party only submits to the jurisdiction
the Arbitral tribunal.
