ENGLAND has had the state immunity act since 1978. 

A year later in 1979, Singapore enacted a similar law.

Malaysia, on the other hand, will only table a state immunity act in parliament later this year. This was announced by Law and Institutional Reforms Minister in the Prime Minister’s Department Azalina Othman Said.

“In the near future, the Madani government will legislate a state immunity act 

“This law would reflect the general principles of international law on sovereign immunity, including effective service on foreign states, to uphold the rights and interest of parties concerned, safeguard the sovereignty of states and to preserve and promote friendly relations with other states,” she said when speaking at the International Arbitration Colloquium 2023 on Tuesday.

Azalina had earlier said that the purpose of the proposed legislation was to codify the principle of state immunity as part of Malaysian law to protect the sovereignty of foreign states against vexatious lawsuits filed in the country.

With that, it was hoped that reciprocal treatment would be accorded to Malaysia in the event Malaysia was brought to the courts of a foreign state in the future.

Why the need for the act?

The need for the English Act was explained on its 40th anniversary by Lord Lloyd-Jones, justice of the United Kingdom Supreme Court as follows: “The need for legislation in the UK to reform the law of state immunity was obvious and urgent.

“The common law … had proceeded on the basis that foreign sovereigns enjoyed a near absolute immunity from actions in personam … and it also adhered to an absolute immunity in admiralty actions in rem. No distinction was drawn between sovereign and non-sovereign activities of states.

“In the years following the Second World War, however, the trend of the decisions of courts in many other jurisdictions and of academic writings was, as a result of the massively increased involvement of state trading enterprises in international trade, moving towards a more restrictive theory which limited immunity to cases where the subject matter of the dispute was a sovereign activity.

“In (the UK), in the 1970s, the judges showed themselves willing to adapt to these changed conditions.” (See “Forty Years On: State Immunity and the State Immunity Act 1978”, a lecture delivered at the British Institute of International and Comparative Law Grotius Lecture, London on October 18, 2018)

It was English judge Lord Denning who carried the torch of judicial reform of the law. In a 1977 case of Trendtex v Central Bank of Nigeria, he considered that there was no international consensus on the scope of state immunity. It was therefore open to the courts in the country to define the rule as best they could, seeking guidance from the decisions of courts of other countries, from jurists, from conventions and by defining the rule in terms which are consonant with justice rather than adverse to it.

The reform of the law is best captured in the words of English judge Lord Wilberforce, who said that “whether state immunity should be granted or not, the court must consider the whole context in which the claim against the state is made.”

The court must consider “whether the relevant act(s) upon which the claim is based should be considered as … trading or commercial or otherwise of a private law character, in which the state has chosen to engage, or whether the relevant act(s) should be considered as having been done … within the sphere of governmental or sovereign activity.”

State immunity had shifted from being absolute or near absolute to restrictive.

By 1978, it had become clear that legislation was essential. There was an urgent need to bring the domestic law in the UK into line with the new international reality.

“There was a need to establish certainty in what is predominantly an area of commercial law. There was a real danger that if the UK continued to apply an absolute theory of immunity or if the position remained unclear while the precise limits of a new restricted immunity were worked out in the cases, the adjudication and arbitration of commercial disputes would move away from London,” said Lloyd-Jones.

“The United States had already … given clear effect to a restricted theory of immunity in their Foreign Sovereign Immunities Act of 1976. There was a need for detailed, comprehensive law reform of a sort which can only be achieved by legislation.

“The proper limits of immunity of foreign states from adjudicative jurisdiction needed to be set and defined in detail, not simply in commercial disputes, but also in areas such as employment, tort and intellectual property.

“There was the question of what or who qualified as a state for the purpose of claiming immunity. There was the issue of waiver of immunity, whether by agreement or by conduct.

“There was the matter of state property and the vexed question of indirect impleader where proceedings related to property in the ownership, possession or control of a foreign state. There was a need for provision in the case of arbitrations.

“There was a need for new procedural rules. There was the whole question of immunity of a state from enforcement jurisdiction.”

There was another “international reality” that the UK had to contend with. In May 1972, the European Convention on State Immunity, which was drawn up within the Council of Europe by a committee of governmental experts under the authority of the European Committee on Legal Cooperation, was opened to signature by state members.

The UK had expressed its wish to sign the convention.

All of the above could only be implemented by legislation in the UK. And so was enacted the state immunity act 1978.

Forty-five years on, the above remains relevant to the need for a Malaysian state immunity act except that Malaysia, not being a signatory or party to any international convention on state immunity, the obligation to enact such an act does not fall on the country.

It is therefore hoped that Azalina will engage with the relevant stakeholders towards drafting the state immunity bill before it is tabled in parliament.

* Hafiz Hassan reads The Malaysian Insight.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.