The recovery of debts against a foreign state is a procedure fraught with pitfalls, where the assistance of a lawyer with expertise in international debt recovery is crucial. Far from traditional enforcement procedures, the pursuit of a debt held by a sovereign entity comes up against a fundamental principle of international law: immunity from enforcement. This mechanism protects the assets of one state against any enforcement action on the territory of another. However, this principle is not absolute. French law, particularly since the introduction of the Sapin 2 Act, has developed a complex legal framework that attempts to reconcile respect for state sovereignty with the right of creditors to obtain enforcement of court rulings, using an appropriate civil procedure. Understanding the contours of this regime is essential for any creditor, whether an individual or a legal entity, considering taking action against a state debtor.
I. The general system of immunity from execution of foreign States
Immunity from execution is a notable exception to the general law of debt recovery. Although immunity from execution is a notable exception, it forms part of the broader framework of the general regime for precautionary measuresThis principle, which is deeply rooted in international law, has been the subject of specific legislation in France. This principle, which is deeply rooted in international law, has been the subject of a precise legislative framework in France, designed to clarify the conditions for its implementation and its exceptions.
A. Definition and basis of immunity from execution
Immunity from execution is the corollary of State sovereignty. It prohibits a State from being subjected to measures of constraint on its property by the courts of another State. This principle is based on customary international law, which postulates the equality and independence of nations. In practice, this means that a creditor, even with a final court decision, cannot, as a matter of principle, have a seizure carried out on the property of a foreign State located in France.
This protective regime has been the subject of criticism from academic writers. Authors such as R. Bismuth (see in particular his note under Cass. 1re civ., JDI 2018. 446), S. Bollée (Rev. crit. DIP 2015. 652) and J. Heymann have highlighted the tensions it creates with the right to enforcement, which is a component of the right of access to the courts. It is in response to these tensions that the legislature has intervened to adjust this principle without denying it.
B. Framework for measures against foreign states under the Sapin 2 Act (art. L. 111-1-1 and L. 111-1-2 CPCE)
Law 2016-1691 of 9 December 2016, known as "Sapin 2", profoundly reformed immunity law in France by enshrining it in the Code of Civil Enforcement Procedures (CPCE), via art. L. 111-1-1 et seq. It introduced a strict prior judicial review mechanism for any enforcement or protective measures against a foreign state.
Article L. 111-1-1 of the CPCE now requires prior authorisation to be obtained from the enforcement judge, on application. This requirement puts an end to the possibility of a creditor, even one holding an enforcement order, proceeding directly to a seizure. The judge may only grant such authorisation if one of the three alternative conditions set out in this provision is met:
- The State has expressly consented to the enforcement measure.
- The State has specifically allocated or reserved the property in question to satisfy the claim.
- A title - a court decision or arbitration award - has been issued, and the asset in question is used for purposes other than non-commercial public service, while still having a link with the debtor entity.
The notion of "non-commercial public service purposes" is central. The law itself sets out a non-exhaustive list of assets presumed to serve such purposes, such as military property or cultural heritage. Case law clarifies this distinction on a case-by-case basis, and it remains a major point of contention, with practice becoming increasingly clearer every day.
II. Scope of precautionary measures and forced execution on the property of foreign States
The possibility of seizing property belonging to a foreign State depends fundamentally on its nature and use. The legislator has established a clear hierarchy, granting almost absolute protection to certain assets while allowing measures to be taken against others, subject to certain conditions. The distinction between diplomatic property and other assets is crucial in this respect.
A. Distinction between property: diplomatic property and property for non-commercial purposes
Art. L. 111-1-3 of the CPCE reinforces the protection of assets linked to sovereignty. It stipulates that property, including bank accounts, used or intended to be used for diplomatic or consular missions or with international organisations cannot be seized. The only exception is a waiver by the State, which must be not only "express" but also "special", i.e. it must relate specifically to these specific assets.
For other goods, the distinction between goods used for non-commercial public service purposes and others is crucial, with particularly complex applications for certain assets such as state-owned ships. An asset used for an economic or commercial activity could potentially be subject to seizure if the conditions of article L. 111-1-2 of the CPCE are met. On the other hand, an asset assigned to a sovereign mission (security, public health, education) will be protected by immunity, unless waived.
B. Specific features of seizures from foreign bank accounts
La seizure of bank accounts of foreign states is subject to particularly strict rules, which depart from the ordinary law procedure often implemented by surprise, via a bailiff, for traditional debtors. Diplomatic mission accounts are presumed to be used for public service purposes. A creditor wishing to rebut this presumption would have to provide proof that the funds are in fact used for commercial activities, a very difficult demonstration in practice, which would require the provision of documentary evidence of the financial flows of the company or entity concerned.
Recent case law has also had to deal with the technicalities of banking transactions. For example, a 2022 decision highlighted the distinction to be made between funds already credited to an account and transfers being processed at the time of seizure. This case law highlights the fact that the application of seizure rules may vary depending on the payment instrument, adding a layer of complexity to procedures that are already highly regulated and illustrating a distortion of treatment between different financial flows.
III. The role of case law and the development of the law on immunities
Since the adoption of the Sapin 2 Act, the courts, and in particular the Cour de cassation, have played a key role in interpreting and applying this new legal framework. Their decisions are gradually shaping the practical contours of immunity from execution and the powers of the judge with jurisdiction in this area, the Juge de l'Exécution (JEX).
A. Analysis of key case law decisions following the Sapin 2 Act
Case law since 2016 has confirmed the legislator's desire to strengthen the protection of States. A ruling by the Court of Cassation on 10 January 2018 (Cass. 1re civ., 10 Jan. 2018, no. 16-22.494, Rev. crit. DIP 2018. 315) marked a significant turnaround by immediately applying the new requirements of the Sapin 2 Act, in particular the need for an "express and special" waiver for diplomatic property, including to situations predating the Act.
More recently, a decision of 13 March 2024 clarified the distinction between the functions of a diplomatic mission and the activity of a Head of State. The Court ruled that an aircraft assigned to the Presidency of the Republic of a State, not being directly used for a diplomatic mission in the strict sense, did not require a "special" waiver. An "express" waiver was sufficient. These decisions show a strict but pragmatic interpretation of the new version of the texts, where every word counts and the purpose for which the property is used is analysed precisely.
B. The jurisdiction of the enforcement judge (JEX) and the time limits for contesting claims following the Sapin 2 law
La jurisdiction of the JEX is central here, as it is the judge who authorises measures and settles disputes raised by foreign states, a role that is in addition to his general powers in the area of forced execution. Since the Sapin 2 Act, the enforcement judge of the Paris court of first instance (the judicial court) has had exclusive jurisdiction to authorise enforcement measures against the assets of foreign states located in France.
Once a measure has been authorised, the debtor State has the right to appeal against it. Initially, the proceedings are conducted on the basis of a petition, i.e. in a non-adversarial manner, and failure to comply with the prescribed formalities is punishable by nullity in order to preserve the element of surprise. Once the measure has been implemented and notified, the State can lodge a challenge and then an appeal. The time limit for taking action is generally one month from notification of the seizure - not to be confused with the eight-day time limit for notifying certain measures to the seized debtor under ordinary law - a short time limit that requires a high level of responsiveness. The arguments put forward by States are almost always based on the nature of the assets seized, citing their assignment to a non-commercial public service or their link with a diplomatic mission.
IV. Alternative strategies and remedies for creditors faced with immunity from execution
Faced with the obstacle of immunity, creditors must consider collection strategies The law itself has provided for specific measures, in particular to counter certain speculative practices. The legislator has itself provided for specific measures, in particular to counter certain speculative practices, and case law has opened up a way, albeit a narrow one, for the French State to be held liable in the event of a denial of justice.
A. Anti-vulture funds legislation (Sapin 2 Act, Article 60) and its impact
The Sapin 2 Act introduced an innovative provision to combat "vulture funds". These speculative funds buy up the debt of countries in financial difficulty at low prices and then take legal action to obtain repayment of the full face value of the debt. Article 60 of the Act aims to curb these practices.
This mechanism prohibits a creditor from obtaining a compulsory enforcement measure in France, or in other words a seizure, if it meets several cumulative conditions: the debt was acquired when the State was in default or had proposed restructuring, the acquisition was made at a price that was clearly disproportionate, and the creditor refused to participate in efforts to restructure the debt. In practice, this text makes it very difficult, if not impossible, to enforce claims held by such funds in France, thereby protecting countries undergoing restructuring from aggressive legal action. For ordinary creditors, this measure has no direct impact, but it illustrates the French government's determination to regulate the sovereign debt market.
B. The liability of the French State in the event of failure to recover debts
When a creditor who has received a final court judgment finds it absolutely impossible to enforce it in France, for example by forced sale, because of a foreign state's immunity from enforcement, there is one last remedy available: to hold the French state liable. This remedy is based on the breach of equality before public burdens.
Administrative case law accepts that if the application of an international custom (such as immunity from execution) causes "serious and special" harm to an individual, that person may obtain compensation from the French State. The conditions are strict. The loss must exceed the risks that any creditor would normally have to bear. French law in this area, particularly since the decisions of the Conseil d'Etat in 2011, has shown greater openness to compensation, but each case is examined on its own merits. This complex liability action is a strategy of last resort for creditors faced with an effective denial of justice.
Navigating the labyrinth of foreign states' immunities from execution requires specialist expertise and a strategic analysis of each situation, whether it's obtaining an authorisation order, managing the relationship with a garnishee, or contesting a discharge application. To assess your options and maximise your chances of recovery, our law firm offers you its expertise in international enforcement.
Sources
- Code of civil enforcement procedures (in particular articles L. 111-1-1 to L. 111-1-3)
- Law 2016-1691 of 9 December 2016 on transparency, the fight against corruption and the modernisation of economic life (known as the "Sapin 2 Law").
- Vienna Convention on Diplomatic Relations of 18 April 1961
- United Nations Convention on Jurisdictional Immunities of States and Their Property of 2 December 2004
- Civil Code (provisions relating to the performance of obligations)
- Penal Code (penalties for misappropriation of seized objects, art. 314-6)
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