Restrictive State Immunity in International Law and India: A Comparative Study of Global Practice and Section 86 of the Code of Civil Procedure

Introduction

The doctrine of state immunity occupies a central position in public international law by defining the extent to which one sovereign State may exercise judicial authority over another. It is founded upon the principle of sovereign equality, in the Latin maxim “par in parem non habet imperium”, meaning that an equal has no authority over an equal.[i] The doctrine ensures that the judicial organs of one State do not interfere with the sovereign independence of another, thereby preserving international comity and diplomatic relations. Historically, state immunity developed during a period when governments rarely engaged in commercial or private transactions. Foreign States primarily exercised governmental functions, making absolute immunity a practical and widely accepted doctrine. Under this approach, foreign States were immune from the jurisdiction of domestic courts regardless of whether the dispute arose from governmental activities or commercial dealings.[ii]

However, the rapid expansion of international trade after the Second World War significantly altered the relationship between States and private actors. Governments increasingly participated in commercial enterprises, entered into contractual relationships, operated state-owned corporations, borrowed from private financial institutions, and invested in foreign markets. Applying absolute immunity to these activities often left private parties without effective legal remedies when disputes arose. As a consequence, many jurisdictions gradually shifted towards the doctrine of restrictive state immunity, distinguishing between sovereign acts (acta jure imperii), which remain immune, and commercial or private acts (acta jure gestionis), which do not.[iii]

The United States adopted the Foreign Sovereign Immunities Act, 1976, followed by the United Kingdom’s State Immunity Act, 1978, while Canada, Australia, Singapore and several European States enacted comparable legislation. Although the United Nations Convention on Jurisdictional Immunities of States and Their Property, 2004, has not yet entered into force, it reflects the prevailing direction of customary international law.[iv]

India presents a distinct legal position. Rather than adopting comprehensive legislation based upon restrictive immunity, the principal statutory framework continues to be Section 86 of the Code of Civil Procedure, 1908. The provision prohibits suits against foreign States without the prior consent of the Central Government, irrespective of whether the dispute concerns sovereign functions or commercial transactions. Although Indian courts have occasionally interpreted sovereign immunity in accordance with evolving international principles, the statutory framework itself has undergone little substantive reform since its enactment during the colonial era.[v]

Keywords: Restrictive State Immunity, Section 86 CPC, Sovereign Immunity, Foreign State Jurisdiction, Commercial Exceptions

Evolution of State Immunity in International Law

Early international legal scholars such as Hugo Grotius regarded sovereign independence as an essential attribute of international order, implying that no State could exercise authority over another through its domestic judicial institutions.[vi] The principle was reinforced through diplomatic practice, judicial precedent, and customary norms that sought to prevent political friction between nations.The classical formulation of absolute immunity received judicial recognition in the United States Supreme Court’s landmark decision in The Schooner Exchange v McFaddon.[vii]Chief Justice Marshall observed that sovereign equality and mutual respect required domestic courts to decline jurisdiction over foreign sovereigns unless immunity had been expressly waived. Although the decision concerned a foreign warship located within American territorial waters, its reasoning became the foundation for the doctrine of absolute immunity across numerous jurisdictions. Economic globalisation transformed the functions of governments, with States establishing public corporations, operating airlines and shipping companies, entering construction contracts, purchasing goods and services, issuing sovereign bonds, and participating in international investment projects. These activities allowed foreign States to invoke immunity in every commercial dispute and create an uneven legal landscape by permitting governments to enjoy contractual benefits while avoiding corresponding legal obligations. Commercial conduct ceased to attract immunity merely because it was undertaken by a sovereign government.[viii] A landmark development occurred in the English Court of Appeal’s decision in Trendtex Trading Corporation Ltd v Central Bank of Nigeria.[ix] The Court acknowledged that customary international law had evolved towards restrictive immunity and recognised that foreign States engaging in ordinary commercial transactions should ordinarily be subject to domestic jurisdiction.

continuing evolution of restrictive immunity within customary international law.Today, restrictive immunity represents the dominant international approach. Most legal systems distinguish between sovereign authority, which remains immune from foreign jurisdiction, and commercial participation, where governments are generally treated similarly to private entities. This evolution reflects the broader objective of balancing sovereign equality with fairness, legal certainty and effective access to justice in an increasingly interconnected global economy.

Restrictive State Immunity in Comparative International Practice

The transition from absolute to restrictive state immunity did not occur uniformly across jurisdictions. The United Kingdom was among the earliest common law jurisdictions to formally abandon the doctrine of absolute immunity. Prior to legislative reform, English courts largely followed the traditional position established in The Parlement Belge, which afforded foreign States broad immunity from judicial proceedings.[x] However, post-war commercial expansion prompted courts to reconsider whether such immunity remained compatible with modern economic realities.The turning point came with Trendtex Trading Corporation Ltd v Central Bank of Nigeria, where the Court of Appeal held that customary international law had evolved towards restrictive immunity.[xi] Lord Denning rejected the notion that domestic courts were bound by outdated principles merely because they had once formed part of customary international law. This judicial shift was codified through the State Immunity Act 1978. Rather than granting blanket protection, the Act identifies specific circumstances in which immunity is unavailable. Section 3 excludes immunity for proceedings arising out of commercial transactions, including contracts for the supply of goods or services, loans, financial arrangements, and other business dealings.[xii] In I Congreso del Partido, the House of Lords held that the commercial carriage of sugar by Cuban State-owned vessels did not constitute an inherently sovereign activity despite serving governmental policy.[xiii] Lord Wilberforce emphasised that immunity depends upon the legal character of the transaction rather than the political motivations underlying it.

In the United States similarly before 1952, American courts generally deferred to immunity determinations made by the Executive Branch. This practice changed following the Tate Letter, issued by the U.S. Department of State, which formally adopted the restrictive doctrine by distinguishing sovereign acts from commercial activities. [xiv]To eliminate inconsistencies arising from executive discretion, Congress enacted the Foreign Sovereign Immunities Act (FSIA), 1976, establishing a comprehensive statutory regime governing suits against foreign States. Among the most significant is the commercial activity exception, contained in Section 1605(a)(2), which permits proceedings where the action is based upon commercial conduct having a sufficient nexus with the United States.[xv]The United States Supreme Court clarified this principle in Republic of Argentina v Weltover Inc. The dispute arose from Argentina’s default on sovereign bonds issued as part of an economic stabilisation programme. Argentina argued that the issuance of bonds was a sovereign act undertaken to address a national financial crisis. Rejecting this contention, the Court held that borrowing money through financial instruments constituted conduct that private market participants routinely undertake. Consequently, the transaction was commercial for the purposes of the FSIA.[xvi]The American framework also recognises additional exceptions concerning expropriation, waiver, arbitration agreements, maritime liens, and certain tortious conduct occurring within the United States.

Canada adopted act preserves immunity as the general rule but removes protection in disputes involving commercial activities, contractual obligations, personal injury, property damage, and arbitration agreements.[xvii]Canadian courts have consistently interpreted commercial activity broadly to promote fairness in private commercial relationships. The Canadian legislation further illustrates an important feature of restrictive immunity: immunity from jurisdiction is distinct from immunity from execution.

Australia codified restrictive immunity through the Foreign States Immunities Act 1985, one of the most comprehensive statutory schemes within the Commonwealth. Like comparable legislation elsewhere, the Act begins with a presumption of immunity before identifying specific exceptions applicable to commercial transactions, employment contracts, arbitration agreements, ownership of immovable property, intellectual property disputes, and certain tortious claims.[xviii] An important characteristic of the Australian statute is its detailed treatment of procedural matters, including service of process, execution against State property, and recognition of arbitral awards. By clearly regulating these procedural issues, the legislation enhances predictability for both foreign governments and private litigants.

The United Nations Convention on Jurisdictional Immunities of States and Their Property, 2004

The most comprehensive international instrument on state immunity is the United Nations Convention on Jurisdictional Immunities of States and Their Property (UNCSI), 2004. Although the Convention has not yet entered into force due to the absence of the required number of ratifications, it remains highly persuasive as evidence of contemporary international practice.[xix]The Convention affirms immunity as the general rule while recognising carefully defined exceptions. Article 10 excludes immunity in disputes arising from commercial transactions, whereas subsequent provisions address employment contracts, personal injury, intellectual property, ownership of movable and immovable property, participation in companies, and arbitration agreements. Even where jurisdiction exists, enforcement measures against State property remain subject to stricter conditions, particularly where assets are used for diplomatic, military or other sovereign purposes. Although India has signed neither comprehensive domestic legislation modelled on the Convention nor enacted equivalent statutory reforms, the Convention nonetheless provides an important benchmark against which the adequacy of Section 86 of the Code of Civil Procedure may be evaluated.

State Immunity under Indian Law: Section 86 of the Code of Civil Procedure, 1908

India continues to regulate civil proceedings against foreign States primarily through Section 86 of the Code of Civil Procedure, 1908 (CPC). The provision reflects a colonial legislative framework designed to protect diplomatic relations by preventing private litigants from instituting proceedings against foreign sovereigns without governmental approval. While the doctrine has evolved considerably under international law, Section 86 has remained substantially unchanged, resulting in a legal framework that differs significantly from prevailing international practice.

Section 86(1) CPC provides that no foreign State may be sued in any Indian court except with the prior consent of the Central Government certified in writing by the Secretary to that Government.[xx] This requirement applies irrespective of the nature of the dispute unless the foreign State falls within one of the statutory exceptions contained in the provision. Consequently, the Central Government performs a gatekeeping function by determining whether proceedings against a foreign sovereign should be permitted.The legislative objective underlying Section 86 is to prevent judicial proceedings from adversely affecting India’s diplomatic relations with other States.

Although Section 86 establishes a broad prohibition on suits against foreign States, it is not absolute. The provision recognises limited circumstances in which the Central Government may grant consent, including where the foreign State has instituted proceedings in India, where the dispute arises from commercial transactions undertaken within Indian territory, or where the State has expressly or impliedly waived immunity.[xxi] They merely empower the Central Government to permit litigation if it considers such permission appropriate. And considerable uncertainty remains regarding the precise circumstances in which consent should be granted.

The Supreme Court first examined the scope of Section 86 in Mirza Ali Akbar Kashani v United Arab Republic.[xxii] The dispute concerned commercial transactions involving the United Arab Republic, raising questions regarding the necessity of obtaining governmental consent before instituting proceedings.The Court observed that Section 86 represents a statutory recognition of the doctrine of sovereign immunity while simultaneously acknowledging that immunity is not without limitations. It emphasised that the requirement of prior governmental consent reflects legislative policy intended to preserve friendly international relations rather than to provide unconditional protection to foreign States. At the same time, the Court recognised that changing international practice increasingly distinguished between sovereign functions and commercial activities.

Indian constitutional jurisprudence has consistently recognised that customary international law may be considered where it does not conflict with municipal legislation. Article 51(c) of the Constitution directs the State to foster respect for international law and treaty obligations, although it does not automatically incorporate international conventions into domestic law.[xxiii] Accordingly, Indian courts have frequently relied upon international legal developments when interpreting statutes concerning sovereign immunity. A notable illustration is Ethiopian Airlines v Ganesh Narain Saboo, where the Supreme Court considered whether a foreign State-owned airline could claim immunity from proceedings initiated under the Consumer Protection Act, 1986.[xxiv] Ethiopian Airlines argued that, as an instrumentality of a foreign State, it enjoyed sovereign immunity and could not be subjected to consumer proceedings.Rejecting this contention, the Supreme Court held that operating an international airline constitutes a commercial activity rather than an exercise of sovereign authority. Consequently, the airline could not invoke sovereign immunity to defeat consumer claims arising from commercial services. The significance of Ethiopian Airlines extends beyond consumer law. It demonstrates the judiciary’s willingness to distinguish between governmental authority and commercial participation, thereby moving Indian jurisprudence closer to international practice despite the continued existence of Section 86 CPC.

Similarly, in Harbhajan Singh Dhalla v Union of India, the Supreme Court reiterated that the grant of consent under Section 86 involves considerations of public interest and foreign policy.[xxv] While the executive retains discretion, that discretion is not unfettered and must be exercised reasonably, taking into account the facts of each case.

A critical examination of Section 86 reveals that the provision does not expressly endorse either absolute or restrictive immunity. Instead, it establishes a procedural mechanism requiring executive permission before proceedings may commence. Consequently, the substantive doctrine of immunity largely depends upon judicial interpretation and governmental policy rather than legislative definition.This differs fundamentally from modern immunity statutes, which expressly distinguish between sovereign functions and commercial conduct. In India, however, that determination may never arise if governmental consent is refused at the threshold.Questions concerning jurisdiction traditionally fall within the competence of courts. Vesting primary authority in the executive may create perceptions of political influence, particularly where disputes involve significant diplomatic or economic interests.

Comparative Analysis

When viewed alongside contemporary international practice, India’s approach appears considerably more conservative. Jurisdictions such as the United Kingdom, the United States, Canada, Australia and Singapore have largely replaced executive discretion with detailed statutory frameworks that clearly identify circumstances in which immunity is unavailable. Judicial determination, rather than governmental permission, forms the foundation of those systems.Indian courts have increasingly embraced the principles underlying restrictive immunity, legislative reform has not kept pace with judicial developments. The result is a dual system in which modern judicial reasoning coexists with an outdated statutory framework.

Recommendations & Strategies

India’s approach to state immunity requires legislative modernisation rather than complete abandonment of sovereign protections. The objective should not be to eliminate immunity but to redefine its scope in accordance with contemporary international law.

• Parliament should consider enacting a comprehensive State Immunity Act replacing the procedural framework contained in Section 86 CPC. Such legislation should expressly adopt the doctrine of restrictive state immunity by distinguishing sovereign functions from commercial activities. Codification would provide greater certainty to courts while reducing reliance on executive discretion.
• Legislation should enumerate recognised exceptions similar to those found in the United Kingdom, Australia and Canada. These may include disputes arising from commercial contracts, employment relationships, arbitration agreements and more as clearly defined statutory exceptions would promote consistency and reduce unnecessary litigation concerning jurisdiction.
• Judicial training and specialised commercial benches dealing with transnational disputes could contribute to greater consistency in the application of state immunity principles. Given the growing complexity of international commerce, a specialised and predictable approach would strengthen India’s credibility as a venue for international dispute resolution.

Conclusion

The doctrine of state immunity has evolved from an era in which governments exercised predominantly sovereign functions to one in which States actively participate in global commerce. This transformation has fundamentally altered the balance between sovereign equality and private legal rights. While absolute immunity once reflected prevailing international practice, contemporary customary international law overwhelmingly favours the doctrine of restrictive state immunity, limiting immunity to genuinely sovereign acts while permitting judicial scrutiny of commercial conduct.India’s legal position presents a notable contrast. Section 86 of the Code of Civil Procedure, 1908, continues to require prior consent of the Central Government before suits may be instituted against foreign States. While the provision serves legitimate diplomatic objectives, it reflects an approach developed during a period when absolute immunity remained dominant.

As India expands its role in international trade, investment and commercial arbitration, legal certainty assumes greater significance. Such reform would not diminish the principle of sovereign equality but would reaffirm that when States voluntarily participate in commercial markets, they should ordinarily be subject to the same legal obligations that govern all market participants.

Frequently Asked Questions (FAQs)

1. What is state immunity in international law?

State immunity is a principle of international law that prevents one sovereign State from being sued before the courts of another State without its consent. It is based on the doctrine of sovereign equality among nations.

2.What is the difference between absolute and restrictive state immunity?

Absolute immunity protects a foreign State from all legal proceedings regardless of the nature of the dispute. Restrictive immunity limits protection to sovereign or governmental acts (acta jure imperii), while permitting suits arising from commercial or private activities (acta jure gestionis).

3.What is Section 86 of the Code of Civil Procedure, 1908?

Section 86 CPC requires prior written consent of the Central Government before a foreign State can be sued in an Indian court, subject to certain statutory exceptions.

4.Why is Section 86 CPC criticised?

Critics argue that the provision places excessive reliance on executive discretion, creates procedural delays, lacks clear statutory guidance on commercial exceptions and does not fully reflect the internationally accepted doctrine of restrictive state immunity.

5.Does India recognise restrictive state immunity?

Although Section 86 CPC has not been comprehensively amended, Indian courts have increasingly recognised restrictive immunity through judicial interpretation, particularly in cases involving commercial activities.

6.Which countries have adopted restrictive state immunity through legislation?

The United Kingdom, the United States, Canada, Australia and Singapore have enacted specialised legislation codifying restrictive state immunity and defining recognised exceptions.

7.What are acta jure imperii and acta jure gestionis?

Acta jure imperii refers to sovereign governmental functions such as defence, diplomacy and legislation, whereas acta jure gestionis refers to commercial or private law activities undertaken by a State.

8.What role does the United Nations Convention on Jurisdictional Immunities of States and Their Property, 2004 play?

Although the Convention has not entered into force, it represents the most comprehensive international attempt to codify customary principles governing restrictive state immunity and is widely regarded as an influential statement of contemporary international law.

9.Can a foreign State-owned company claim sovereign immunity in India?

Not necessarily. Indian courts have held that where a State-owned entity engages in commercial activities, it may not automatically enjoy sovereign immunity, as illustrated by Ethiopian Airlines v Ganesh Narain Saboo.

10.Should India replace Section 86 CPC?

Many scholars advocate replacing or substantially reforming Section 86 through a dedicated State Immunity Act that incorporates the doctrine of restrictive immunity while preserving safeguards for diplomatic and sovereign functions.

[i] James Crawford,Brownlie’s Principles of Public International Law (9th edn, OUP 2019) 446.

[ii] Hersch Lauterpacht, The Problem of Jurisdictional Immunities of Foreign States (1951) 28 BYIL 220.

[iii] Hazel Fox CMG KC and Philippa Webb, The Law of State Immunity (3rd edn, OUP 2015) 164–180.

[iv] United Nations Convention on Jurisdictional Immunities of States and Their Property (adopted 2 December 2004, not yet in force).

[v] Mirza Ali Akbar Kashani v United Arab Republic AIR 1966 SC 230.

[vi] Hugo Grotius, De Jure Belli ac Pacis (1625).

[vii] The Schooner Exchange v McFaddon 11 US (7 Cranch) 116 (1812).

[viii] Hazel Fox and Philippa Webb (n 3) 216–225.

[ix] Trendtex Trading Corporation Ltd v Central Bank of Nigeria [1977] QB 529 (CA).

[x] The Parlement Belge (1880) 5 PD 197.

[xi] Trendtex Trading Corporation Ltd v Central Bank of Nigeria [1977] QB 529 (CA).

[xii] State Immunity Act 1978 (UK), ss 3–11.

[xiii] I Congreso del Partido [1983] 1 AC 244 (HL)

[xiv] Jack B Tate, ‘Letter from Acting Legal Adviser to the Attorney General’ (19 May 1952) 26 Department of State Bulletin 984.

[xv] Foreign Sovereign Immunities Act 1976, 28 USC §§ 1602–1611.

[xvi] Republic of Argentina v Weltover Inc 504 US 607 (1992).

[xvii] State Immunity Act, RSC 1985, c S-18 (Canada).

[xviii] Foreign States Immunities Act 1985 (Australia).

[xix] United Nations Convention on Jurisdictional Immunities of States and Their Property (adopted 2 December 2004, not yet in force).

[xx] Code of Civil Procedure, 1908, s 86.

[xxi] Code of Civil Procedure, 1908, s 86(2).

[xxii] Mirza Ali Akbar Kashani v United Arab Republic AIR 1966 SC 230.

[xxiii] Constitution of India, art 51(c); Gramophone Company of India Ltd v Birendra Bahadur Pandey (1984) 2 SCC 534.

[xxiv] Ethiopian Airlines v Ganesh Narain Saboo (2011) 8 SCC 539.

[xxv] Harbhajan Singh Dhalla v Union of India (2012) 3 SCC 608.