EU International Civil Procedure and the Law of State Immunities

I. Introduction

According to Article 81 of the Treaty on the Functioning of the European Union (TFEU), ¹ the European Union (EU) is called to develop judicial cooperation by adopting acts that, amongst others, ensure (i) common rules on jurisdiction; (ii) free movement of decisions between Member States; (ii) cross-border service; and (iii) compatibility of conflict of laws. Despite the practical relevance that EU-derived conflict of laws provisions have acquired, Article 81 TFEU appears vague inasmuch as the concept of civil matters is not defined. ² This definition is however fundamental: legal relationships that are not civil in nature fall outside of the scope of application of Article 81 and the Union has no competence to adopt conflict of laws rules. The Court of Justice of the European Union (CJEU) has supplemented this lack of clarity with its case law. The approach followed by the CJEU is strongly functionalist in nature: ³ civil matters are an autonomous legal concept of EU law that do not depend on national qualifications ⁴ but rely on substantive aspects, rather than on formal elements. ⁵ The Court has interpreted the definition at hand to ensure the full realisation of goals and objectives of the relevant instruments. For example, in the context of the Brussels I bis Regulation ⁶ on jurisdiction and free movement of decisions in civil and commercial matters, such definition has not been considered to depend on the personal qualities of the parties, but on the legal nature of the relationship to be decided. If sovereign powers are the ground for legal actions, such actions are generally understood to fall outside of the scope of the definition of civil and commercial matters, leading to the non-applicability of EU rules on jurisdiction. ⁷

This, however, calls for a fundamental clarification as European continental systems usually distinguish between jurisdiction and competence. ⁸ The first (jurisdiction; Gerichtsbarkeit; giurisdizione) identifies the outer limits of a State's adjudicatory powers, whilst the second (competence, internationale Zuständigkeit; competenza giurisdizionale) determines which court may effectively exercise competence in a given case. Even though they are conceptually different and operate on separate levels, jurisdiction and competence are clearly interrelated: ⁹ only after questions of jurisdiction are solved may a court dwell on competence. ¹⁰ Public international law poses very few limits on jurisdiction, namely in the field of State immunity. ¹¹ The Brussels I bis Regulation does not directly address matters of jurisdiction, but rather purports to allocate competence between EU Member States. ¹² As noted by scholars, the Regulation does not seek to change public international law approaches on jurisdiction and immunities. ¹³ This would not be possible since the Brussels I bis Regulation operates in its own field of (distribution of) competence and the EU has no power to rule on State immunities under Article 81 TFEU.

The aim of the present work is to investigate how recent decisions by the CJEU can indirectly affect the law of State immunities due to the nexus between EU law and customary international law. ¹⁴ As it will be argued, under public international law immunities are granted and become a negative rule on jurisdiction if the legal relationship to be decided is non-commercial in nature. The notion of civil and commercial matters that is relevant for competence rules under the Brussels I bis Regulation also rests upon a distinction between sovereign and non-sovereign relationships. ¹⁵ What will be addressed is the tendency of domestic courts to extend EU law qualifications on competence to the different field of immunities since national courts would have little incentive to qualify the same relationship as being acta iure imperii under the Brussels I bis Regulation and as acta iure gestionis under domestic law.

II. Acta iure imperii and the Brussels I bis Regulation

Amongst the different instruments adopted by the European Union in the field of judicial cooperation in civil matters, the Brussels I bis Regulation acquires a particularly relevant role as this is the lex generalis on jurisdiction and the free movement of decisions. Current Article 1 of the Brussels I bis Regulation determines when the instrument is applicable and, by exclusion, cases when a Member State must address jurisdiction and competence under the lex fori. According to the provision at hand, the Regulation is applicable to civil and commercial matters, but does not extend to ‘revenue, customs or administrative matters or to the liability of the State for acts and omissions in the exercise of State authority (acta iure imperii)’. An explicit reference to acta iure imperii is recent, but only formally so. Even if texts pre-dating ¹⁶ the Brussels I bis Regulation did not contain such a specification, ¹⁷ the CJEU has long addressed the issue. According to the Court, relationships where a public body exercises powers that are outside the ordinary scope of private law prerogatives are not to be included in the autonomous definition of civil matters. ¹⁸ What emerges from an analysis of the case law of the CJEU is that, traditionally, the interpretation of civil and commercial matters was coherent with parallel approaches in the public international law of State immunities. ¹⁹ Elements such as the personal quality of the parties have no decisive role in the qualification of a relationship for the purposes of the definition of civil and commercial matters: both actions against a State and against private persons must be scrutinised in light of the nature of the relationship itself. Only where one of the parties to the proceedings has exercised authoritative powers not available through ordinary means of private law, and only if the cause of action is grounded on or relates to such a power, is the action excluded from the scope of application of the Brussels rules. ²⁰

The approach followed by the CJEU is not distant from solutions developed by State practice in the field of State immunity. Absolute State immunity has generally ²¹ been abandoned ²² in public international law: the recognition of State immunity mainly rests on the acta iure imperii – acta iure privatorum dichotomy. ²³ As a consequence, for example, States usually do not enjoy immunity for their commercial activities. ²⁴

This coherence is, of course, of no surprise: public international law on immunities has indirectly shaped private international law. ²⁵ EU international civil procedure has ‘followed’ such solutions as well, even though, as mentioned, the consequences of the qualification process are different: if a legal relationship is not ‘civil’ in nature, EU law is simply not applicable and domestic courts have to further explore whether they may declare jurisdiction and ground their competence under domestic law.

In the framework of this conceptual consistency, some recent decisions by the CJEU show how the interpretation of the scope of application of the Brussels I bis Regulation can influence national approaches on immunities. That is to say, the case law of the CJEU indirectly influences State practice that might promote new solutions at the international law level as well.

III. The contribution of the Court of Justice’s case law to the law of immunities: Substantive and methodological aspects

The decisions interpreting the EU definition of ‘civil and commercial matters’ are likely to indirectly contribute to the development of immunities under international law inasmuch as the EU notion influences national approaches to acta iure imperii for the purposes of the recognition of immunities as well. ⁵³ This emerges from a study of the Austrian case law rendered after the Fahnenbrock decision by the CJEU. At first, Austrian courts assumed that actions for breaches of State bonds were contractual in nature and only the proper place of performance had to be more clearly determined. After the Fahnenbrock Case Austrian courts changed their original qualification of the legal relationship ⁵⁴ to argue that it was acta iure imperii, thus entitling Greece to State immunity under international law. ⁵⁵ Italian courts in the RINA saga have also ‘taken’ the definition of ‘civil and commercial matters’ offered by the CJEU and ‘applied’ it to the parallel question of immunities. ⁵⁶ Of course, this should come with little surprise: if a legal relationship is acta iure imperii for the purposes of Article 1 Brussels I bis Regulation, national courts applying domestic (even exorbitant) heads of jurisdiction ⁵⁷ will hardly argue that the same relationship is acta iure gestionis under domestic law.

If one agrees with this reconstruction on the indirect influence of the CJEU's case law on immunities, one can also note a reversed influence sort of axiom: whereas in the past public international law shaped international civil procedure, changes in solutions in the latter field will influence substantive concepts of public international law, thus establishing a symbiotic circle of cross-influence. Given that the criterion used under EU law to determine the applicability of European rules on competence shares its roots with the public international law acta iure imperii criterion, it appears only natural that their combined influence is mutual and bidirectional. Such cross-influence assumes even greater value in those fields where national approaches to immunities are still fluid. It is in these areas that the CJEU's rulings appear more likely to (indirectly) influence national approaches to international law. Regarding the RINA case, authors convincingly ⁵⁸ argued that, taking stock of international law, Italian courts still had enough elements to conclude that RINA was a foreign State's agent immune from jurisdiction. Nevertheless, this was not the final outcome based on the transposition of EU law concepts to the law of State immunity.

However, the case law of the CJEU is interesting not only because of its indirect influence over substantive public international law concepts. Two further elements may acquire general methodological relevance. A first methodological contribution concerns the qualification of ‘commercial’ activities. In some jurisdictions, the qualification of a relationship as being acta iure imperii or acta iure gestionis solely rests upon the ‘nature’ of the title, a contract freely entered into by the parties. The ‘public purpose’ of the contract generally bears little relevance. ⁵⁹ The reason not to give relevance to the ‘purpose’ of the contract rests on the idea that almost all contracts concluded by a State may be deemed to be for public utility. This would again excessively expand immunities beyond the protection of the foreign State acting as a sovereign. In other jurisdictions, the public aim of the contract acquires relevance in the qualification of the relevant foreign legal relationship. The 2004 UN Convention reaches a compromise solution ⁶⁰ inasmuch as ‘in determining whether a contract or transaction is a “commercial transaction” … reference should be made primarily to the nature of the contract or transaction, but its purpose should also be taken into account if the parties to the contract … have so agreed, or if, in the practice of the State of the forum, that purpose is relevant to determining the non-commercial character of the contract or transaction’. ⁶¹ In this context, the case law of the CJEU seems to reinforce the relevance of ‘public aims’; in the Leo Kuhn Case ⁶² the Court stressed the reason why Greece unilaterally changed the lex causae: avoiding State default. Still, such reasoning was not necessary as the Court had already concluded that unilateral and retroactive changes of the lex causae were exceeding ‘ordinary’ powers. Reference to the public utility does not merely seem to be an ex abundatia cautela argument, but rather gains more relevant traits if it is understood as implying that the ‘purpose’ of a conduct may play a greater subsidiary role in the general qualification of the ‘sovereign power’. If so, the case law of the CJEU would reinforce those methodological approaches which do not exclude a priori any relevance of ‘why’ a certain conduct, an economic activity, has been held by a foreign State.

A second methodological contribution by the CJEU to the law of immunities relates to a ‘traditional’ ⁶³ dogmatic question, namely if a court should determine whether the foreign conduct is ‘covered’ by immunity first or should rather determine jurisdiction and only subsequently rule on immunity. ⁶⁴ Some authors convincingly argue that the latter approach should be followed, ⁶⁵ even though the matter seems to be addressed incoherently in the domestic case law. ⁶⁶ The idea that immunities come second in the legal reasoning seems to find support in both the fact that immunities can be waived by the interested State, and in the circumstance that immunities do not limit jurisdiction if the foreign State itself starts proceedings in the forum. ⁶⁷ Nonetheless, international courts have at times addressed the question of immunities before that of jurisdiction, solving the most diriment question first. ⁶⁸ The International Court of Justice (ICJ), in the Arrest Warrant Case, ⁶⁹ admits that matters of immunity ‘should be addressed only once there has been a determination in respect of [jurisdiction], since it is only where a State has jurisdiction under international law in relation to a particular matter that there can be any question of immunities in regard to the exercise of that jurisdiction’. ⁷⁰ Still, the ICJ did address ‘first the question whether, assuming that it had jurisdiction under international law to issue and circulate the arrest warrant of 11 April 2000, Belgium in so doing violated the immunities’ of Congo. ⁷¹ Some domestic courts have followed similar approaches, adopting the idea that jurisdiction depends on (a lack of) immunity as underlying concept in the decision-making process. ⁷²

Against this background, the most recent case law of the CJEU acquires a new methodological relevance. In both the Greek debt Saga and in the RINA case, the Court now ⁷³ clearly distinguishes the two matters, and how they operate on different conceptual levels. ⁷⁴ The CJEU has admitted that the first step for the national court is to determine if the Brussels I bis Regulation is applicable ratione materiae, ⁷⁵ and only then, as a subsequent and autonomous step, to explore if the corresponding relationships are an expression of sovereign powers for which EU law does not apply. ⁷⁶ This means that the legal concept of EU law on ‘civil and commercial matters’ is not necessarily equivalent – or ‘overlapping’ – with the concept of State immunities, ⁷⁷ making it theoretically possible for domestic courts either to ground and exercise jurisdiction based on domestic exorbitant grounds even if EU rules are not applicable, ⁷⁸ or to still declare lack of jurisdiction if uniform rules are applicable. ⁷⁹ Mutatis mutandis, the approach followed by the CJEU, seems to reinforce the general understanding that jurisdiction does not depend on immunities, but only that its exercise may be affected by them.

IV. Two further questions as conclusions

If one agrees with the reconstruction above, the main point is that if a relationship is characterised by the CJEU as being acta iure imperii for the purposes of Article 1 Brussels I bis Regulation, national courts will likely transpose that qualification to the different field of immunities. Still, other questions arise. In conclusion, two of them may be mentioned to observe how potentially far-reaching the contribution of EU civil procedure to international practice can be.

First, taking into account the solution developed by the CJEU in the Greek debt Saga, so considering that a subsequent unilateral intervention by the State can be considered as being the expression of sovereign powers, and recalling how domestic courts have subsequently granted State immunity to Greece, the question is whether the same final solution, the granting of immunity, should be extended to all foreign sovereign debtors. State practice is not necessarily clear in this sense, and the case law shows possible inconsistencies in treatment. When some German courts were already advocating for the immunity of Greece, ⁸⁰ in proceedings against Argentina the matter of immunity was not newly addressed. ⁸¹ Possibly, the reason for the non-reassessment of jurisdiction lies in the procedural stage, rather than in an intent to limit the immunity for sovereign debts only to EU Member States. Still, when ‘justifying’ the immunity of Greece, the German Constitutional Court invoked the Italian case law supporting immunity for Argentina, de-constructed US case law ⁸² denying immunity to Argentina as not being expressive of approaches of the majority of States, ⁸³ and ‘ignored’ a consistent body of German case law ⁸⁴ that was coherent with US decisions. In other words, that comparative study could have been an apt occasion for the Court to also argue that the German case law denying immunity to Argentina was equally not based on a sufficiently wide-spread State practice.

To some extent, this diversity in approach seems to be reflected in the case law of the CJEU. Whereas in the Greek debt Saga the Court did in no way explore the role of human rights, in the RINA case (in which the relevant sovereignty was that of Panama), the Court argued that ‘a national court implementing EU law … must comply with the requirements flowing from Article 47 of the Charter [of Fundamental Rights of the European Union]. Consequently, … the referring court must satisfy itself that, if it upheld the plea relating to immunity from jurisdiction, [plaintiffs] would not be deprived of their right of access to the courts’. ⁸⁵

Second, a question remains for other immunities: international law knows other prerogatives that do not necessarily rest on the acta iure imperii – acta iure privatorum dichotomy. Functional immunity rests on the ‘delegation’ of activities to State agents regardless of the exercise of public powers; ⁸⁶ personal immunities of some State agents are even applicable to private acts, so long as the person holds office. Practice in this regard may still have significant elements to clarify. Yet, if the above is true and national courts must first determine the applicability of EU law so as to evaluate immunities under international law (that are also binding for the EU ⁸⁷ ) at a second stage, national courts could still grant said immunities.