Abstract
This article discusses sovereign immunity rules and the future of climate change litigations in foreign courts against central banks and sovereign wealth funds managed by central banks. It argues that expansions of central banks’ responsibilities and activities in financial markets over the past decades, including that of managing sovereign wealth funds, increase the risk of climate lawsuits against central banks, and in particular, the risk of their assets being exempted from absolute immunity from enforcement measures.
While the doctrine of sovereign immunity has evolved from an absolute to a restrictive approach across a number of jurisdictions, central banks, and in particular, their assets, have continued to enjoy close to absolute protection under international and domestic law. The article discusses whether this may be changing: Taking a Swedish Supreme Court judgment from 2021 as a starting point, it argues that there is no clear rule in international customary law providing absolute immunity for central banks’ assets that are unrelated to its exercise of monetary policy. Far-reaching immunity is not only unreasonable when taking into consideration the original justification for central banks’ immunity but it may also prompt a backlash against the immunity protecting the property related to the core functions of central banks, namely the monetary policy mandates. Equally important, this may weaken states’ commitments to comply with international and domestic environmental obligations.
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Notes
- 1.
Lastra (2006), ch 2.
- 2.
The report considers ‘climate change litigation’ to include cases that raise material issues of law or fact relating to climate change mitigation, adaptation or the science of climate change. The cases are brought before a range of administrative, judicial and other adjudicatory bodies. See Burger and Metzger (2020), p. 6.
- 3.
Ibid, p. 13.
- 4.
- 5.
There is no generally accepted definition of a sovereign wealth fund, but in a broad sense, it is a type of investment fund that the state owns or controls, which is typically financed by state revenues derived from the exploitation of natural resources, from surpluses of the state’s foreign exchange reserve or from income from privatisation of state property. See, for example, Ö 3828-20, Ascom Group SA and Terra Raf Trans Trading Ltd. v The Republic of Kazakhstan and The National Bank of Kazakhstan, para 31.
- 6.
For a general discussion of rules on sovereign immunity, see Fox and Webb (2015). This article examines the extent to which SWF are covered by the sovereign immunity rules protecting central banks specifically, but also the extent to which ordinary immunity rules protects SWF from enforcement measures in foreign courts.
- 7.
Immunity from enforcement measures is also referred to as immunity from execution.
- 8.
Lastra (2006), pp. 44–46.
- 9.
Ibid, p. 44. The obvious example would be the interwar period in Germany.
- 10.
Ibid.
- 11.
Ibid. The literature uses empirical studies and creates a legal index (based on selected legal provisions and indicators) for the purpose of developing economic and statistical tests that show a negative correlation between central bank independence and inflation. See, overview of literature in Lastra (2006), p. 44, note 33. However, the support for independent central banks is not unanimous. Policymakers and scholars have raised debates about the need for better coordination with parliaments and governments in times of economic crisis. Debates about the accountability and legitimacy of central banking tools have also led to debates about central banks’ independence. Lately, distributional effects of both conventional and unconventional monetary policy tools have created new debates about the need for increased political awareness and involvement in monetary policy design. The effect of monetary policies on inequality has been analysed by many researchers. For example, the empirical effects of monetary policies on inequality were investigated by Carpenter and Rodgers III (2004); Coibion et al. (2017); Bartscher et al. (2021).
- 12.
There are also arguments in favour of central banks, as financial supervisors, having at least operational independence, but this relies on a slightly different justification. See, for example, Khan (2018).
- 13.
Lastra (2006), p. 44.
- 14.
Ibid, p. 41.
- 15.
Khan (2018), p. 6.
- 16.
Lastra (2006), p. 41.
- 17.
Some claim that central banks over-stretched the limits of their monetary policy mandate. See for example Peter Gauweiler and Others v Deutscher Bundestag [2014] ECLI:EU:C:2015:400 and Heinrich Weiss and Others v European Central Bank [2018] ECLI:EU:2018:1000. Both cases concerned lawsuits against the European Central Bank before the European Court of Justice, where the claimants, unsuccessfully, alleged that the bank acted ultra vires when implementing asset purchase programmes.
- 18.
Potter and Smets (2019).
- 19.
Ibid.
- 20.
See Tooze (2018), ch 18.
- 21.
Andenas and Chiu (2013), pp. 415 ff.
- 22.
Botswana, Chile, China, Japan, Kazakhstan and Norway are some examples. See Wuerth (2019).
- 23.
See for example Kyriakopoulou (2019).
- 24.
Bloomberg (2021).
- 25.
Khan (2018), p. 6.
- 26.
Ibid, p. 10.
- 27.
In a European context, the lawsuits against the ECB before the ECJ are well known, in particular Peter Gauweiler and Others v Deutscher Bundestag [2014] ECLI:EU:C:2015:400 and Heinrich Weiss and Others v European Central Bank [2018] ECLI:EU:2018:1000.
- 28.
Bloomberg (2021)
- 29.
Ibid.
- 30.
Ibid.
- 31.
Wuerth (2019), p. 267.
- 32.
Wuerth (2019), p. 266.
- 33.
Khan (2018), p. 10.
- 34.
For a discussion of the rules on sovereign immunity, see Fox and Webb (2015).
- 35.
In Jurisdictional Immunities of the State (Germany v Italy: Greece Intervening) (Judgment) (2012) ICJ Rep 99, para 57, the ICJ stated that: “The Court considers that the rule of State immunity occupies an important place in international law and international relations. It derives from the principle of sovereign equality of States, which, as Art. 2, paragraph 1, of the Charter of the United Nations makes clear, is one of the fundamental principles of the international legal order”.
- 36.
Alvik (2006), p. 16.
- 37.
Wood (2007), p. 557.
- 38.
Blackman and Mukhi (2010), p. 48.
- 39.
Harvard Law Review (2010).
- 40.
Wood (2007), p. 557.
- 41.
Ibid, pp. 557 and 560–570; Fox and Webb (2015), pp. 399 ff. See, for example, Lord Dennings’ formulation in Trendtex Trading Corporation v Central Bank of Nigeria QB 529 (EWCA Civ) (1977), 132: “If a government department goes into the market place of the world and buys boots or cement—as a commercial transaction—that government department should be subject to all the rules of the marketplace.”
- 42.
By the 1960s, German courts had adopted the nature of the acts test: BVerfGE 16, 27 (1963) (Empire of Iran case). The US FSIA §1603(d) expressly provides that “the commercial character of an activity shall be determined by reference to the nature of the course of conduct of particular transaction, or act, rather than by reference to its purpose”. This was also evident in the ruling of the Republic of Argentina v Weltover, Inc. 504 US 607 (1992). The UK SIA avoids any express reference to the purpose or nature of the transaction, but it follows from case law that the nature test is decisive. See, for example, Owners of Cargo Lately Laden on Board The Marble Islands v Owners of The I Congreso del Partido 1 AC 244 (1983). See, in general, Fox and Webb (2015), pp. 411–412; Wood (2007), pp. 560–561.
- 43.
Republic of Argentina v Weltover, Inc 504 US 607 (1992).
- 44.
The Continental European view is different from that of England due to historical developments. See Fox and Webb (2015), p. 402.
- 45.
In addition to the “purpose” test, many jurisdictions, as well as the UNCSI, apply a nexus requirement between property seized and the relevant commercial activity.
- 46.
See, in general, Fox and Webb (2015), pp. 2–3.
- 47.
Alvik (2006), p. 19. The changes happened in the cases: Administration des chemins de fer du gouvernement iranien v Société Levant Express Transport Cass Civ 1ère, 25 February 1969, Bull civ I no. 86 (France); Alfred Dunhill of London, Inc. v Republic of Cuba 425 US 682 (US) (1976); Trendtex Trading Corporation v Central Bank of Nigeria QB 529 (EWCA Civ) (UK) (1977). See Fox and Webb (2008), p. 3. See also Wood (2007), p. 560, operating with slightly different years.
- 48.
Fox and Webb (2008), p. 3.
- 49.
Ibid.
- 50.
See Alvik (2006), p. 19.
- 51.
Jurisdictional Immunities of the State (Germany v Italy: Greece Intervening) (Judgment) (2012) ICJ Rep 99.
- 52.
Ibid, para 60.
- 53.
International courts would also, necessarily, continue to rely upon domestic law in their rulings concerning sovereign immunity. See, in general, Fox and Webb (2015), p. 402.
- 54.
Ibid, p. 399. The Continental European view is different from that of England due to historical developments. See ibid, p. 402. See also Iversen (2023), ch 2.
- 55.
For instance, the National Bank of Belgium, the Bank of Greece and the US Federal Reserve System allow some kind of participation by private investors in their ownership and/or governance system. See the discussion in Spolaore (2020).
- 56.
Harvard Law Review (2010), pp. 263–265.
- 57.
According to litra c), it is also a requirement that post-judgment measures of constraint “may only be taken against property that has a connection with the entity against which the proceeding was directed”. UNCSI Article 19 also provides that no post-judgment measures of constraint against the property of a state may be taken in connection with a proceeding before a court of another state unless and except to the extent that (a) the state has expressly consented to the taking of such measures, or (b) the state has allocated or earmarked property for the satisfaction of the claim that is the object of that proceeding.
- 58.
See United Kingdom, High Court of Justice, AIC Ltd. v Federal Government of Nigeria, case nos. S/03/0056 and S/03/005, 13 June 2003, EWHC 1357 (QB), 129 ILR 571.
- 59.
United States, Court of Appeals, NML Capital Ltd. v Banco Central de la República Argentina, 5 July 2011, 652. F.3d 172 (2d Cir. 2011), pp. 193–194.
- 60.
Wuerth (2019), pp. 266 and 281. The legislations of the UK, USA and UNCSI have included a waiver exception of the immunity of central banks’ assets.
- 61.
Ibid, p. 266.
- 62.
Ibid.
- 63.
Ibid, p. 284.
- 64.
Ö 3828-20, Ascom Group SA and Terra Raf Trans Trading Ltd. v The Republic of Kazakhstan and The National Bank of Kazakhstan, para 3.
- 65.
Ibid, para 30.
- 66.
Ibid, para 34.
- 67.
Ibid, ss 34–35.
- 68.
Ibid, paras 4 and 7.
- 69.
Ibid, para 14.
- 70.
Jurisdictional Immunities of the State (Germany v Italy: Greece Intervening) (Judgment) (2012) ICJ Rep 99, para 66.
- 71.
Sweden ratified the Convention in the Swedish Treaty Series 2009:32 and incorporated it into Swedish law in the Jurisdictional Immunities and Their Property Act (2009: 1514). As is the case for the Convention, the Act has not entered into force.
- 72.
Ö 3828-20, Ascom Group SA and Terra Raf Trans Trading Ltd. v The Republic of Kazakhstan and The National Bank of Kazakhstan, paras 14, 16 and 24.
- 73.
Ibid, para 22.
- 74.
Ibid, para 24.
- 75.
Ibid, para 23.
- 76.
Ibid.
- 77.
Ibid, para 24.
- 78.
Ibid.
- 79.
Ibid, para 26.
- 80.
Ibid, para 25.
- 81.
Ibid.
- 82.
Ibid, para 28.
- 83.
Ibid.
- 84.
Ibid, paras 28–29.
- 85.
The use of ‘nature’ in this context can be confusing. I do, however, interpret this to solely describe the ‘purpose’ of the property and not to the requirement related to sovereign immunity from jurisdiction under the restrictive doctrine.
- 86.
Ö 3828-20, Ascom Group SA and Terra Raf Trans Trading Ltd. v The Republic of Kazakhstan and The National Bank of Kazakhstan, para 28.
- 87.
Ibid.
- 88.
Ibid, para 29.
- 89.
For example, at the first reading of the draft articles, Germany, supported by Australia, Qatar and the five Nordic countries, opposed the proposition that all property of a central bank should be classified as not in use or intended for use for commercial purposes. Instead, they proposed that only property serving monetary purposes should be deemed inherently uncommercial, and therefore, immune. See O’Keefe et al. (2013), p. 337, referring to Preliminary Report Ogiso 119, para 239.
- 90.
O’Keefe et al. propose another line of argument in favour of excluding central banks’ property related to commercial activities if it is held by independent central banks given the scope of immunity protection under Articles 19 and 21. The argument is that independent central banks engaging in ‘purely commercial conduct’ are not ‘states’ for the purposes of the UNCSI Article 2(1)(b)(iii). Yet, the Swedish Court did not make any reference to this latter provision in the reasoning for its judgment. Ibid, p. 343.
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Iversen, A. (2023). Removing Barriers to Climate Change Litigation: The Progressive Erosion of Central Banks’ Immunity. In: Bäumler, J., et al. European Yearbook of International Economic Law 2022. European Yearbook of International Economic Law, vol 13. Springer, Cham. https://doi.org/10.1007/8165_2022_98
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