Belgian Constitutional Court Rules on State Immunity From Execution - international litigation blog
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Belgian Constitutional Court Rules on State Immunity From Execution

Belgian Constitutional Court Rules on State Immunity From Execution

In a judgment dated 27 April 2017, the Belgian Constitutional Court (the Constitutional Court) largely confirmed the validity of the Belgian legal provision on State immunity from execution (Article 1412quinquies of the Belgian Judicial Code).

As a general rule, Article 1412quinquies of the Belgian Judicial Code provides that assets located in Belgium that belong to a foreign State are immune from execution and cannot be subject to enforcement proceedings by creditors. As mentioned before, France recently adopted a similar provision which largely mirrors Article 1412quinquies of the Belgian Judicial Code.

Exceptions to that rule are, however, possible if very strict conditions are met: a party wishing to seize the assets belonging to a State needs to obtain a prior authorisation from a judge (juge des saisies). This judge will only authorise the seizure if (i) the foreign State has “expressively” and “specifically” consented to the seizure of the assets; (ii) the foreign State has specifically allocated those assets to the enforcement of the claim which gives rise to the seizure; and (iii) the assets are located in Belgium and are allocated to an economic or commercial activity.

Given the difficulty of meeting those requirements, two entities (NML Capital Limited (NML), an American hedge fund which holds debts securities against Argentina, and Yukos Universal Limited (YUL), an entity that had been granted a multi-billion arbitral award against Russia) initiated legal proceedings before the Constitutional Court seeking the annulment of Article 1412quinquies of the Belgian Judicial Code.

Their claims were essentially* two-fold.

1. Does Article 1412quinquies of the Belgian Judicial Code violate the principle of equality and non-discrimination?

At the outset, both NML and YUL essentially argued that Article 1412quinquies of the Belgian Judicial Code violated Articles 10 and 11 of the Belgian Constitution (i.e. the provisions of the Belgian Constitution on equality and non-discrimination) since it effectively prohibited a creditor of a foreign State from seizing the assets belonging to that State while such a prohibition did not apply to a creditor of any other person or entity.

In order to reply to this claim, the Constitutional Court relied on its long established case-law, according to which the principle of equality and non-discrimination does not preclude a difference in treatment, as long as this difference is based on objective criteria, is legitimate and is proportionate.

In applying those principles to the case at hand, the Constitutional Court first found that the distinction at hand relied on objective criteria (i.e. the nature of the debtor – a foreign State).

Second, the Constitutional Court also found that the distinction was legitimate since it aimed at fostering international comity and good relationships between foreign States and avoiding diplomatic incidents.

Third, with respect to the proportionality requirement, both NML and YUL argued that the requirements, laid down in Article 1412quinquies of the Belgian Judicial Code, to seize the assets of a foreign State were disproportionate and violated the European Convention of Human Rights since it precluded a creditor from effectively enforcing a judgment or an award rendered against the foreign State. The Constitutional Court dismissed, however, this argument and considered instead that the case-law of the European Court of Human Rights, the United Nations Convention on Jurisdictional Immunities of States and Their Property (which still needs to be ratified by Belgium) and customary international law allowed for limitations to the right to the effective execution of court judgments and arbitral awards.

In light of those requirements, the Constitutional Court found that Article 1412quinquies did not violate the principle of equality and non-discrimination.

2. Are the requirements allowing a seizure legal?

The Constitutional Court then moved to examine the three conditions that need to be fulfilled under Article 1412quinquies of the Belgian Judicial Code in order to allow a seizure of a foreign State’s assets (see above).

The Constitutional Court was particularly critical of the first requirement according to which the foreign State must have “expressively” and “specifically” consented to the seizure of the assets.

In particular, the reference to the word “specifically” proved to be problematic since this word did not appear in the United Nations Convention on Jurisdictional Immunities of States and Their Property. The Constitutional Court also noted that the International Court of Justice never referred to this word in this context. On this basis, the Constitutional Court ruled that the word “specifically” in Article 1412quinquies of the Belgian Judicial Code had to be annulled.

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At the end of the day, the Constitutional Court largely confirmed the validity of Article 1412quinquies of the Belgian Judicial Code (although this provision was also partially annulled with respect to the word “specifically“). It seems that those findings strike a fatal blow to the possibility to enforce judgments and arbitral awards taken against sovereign States in Belgium.

* For the sake of completeness, it is worth noting that the parties have also made other claims relating to, among other things, the scope of application of Article 1412quinquies of the Belgian Judicial Code or to a violation of the Brussels Recast Regulation (EU Regulation No 1215/2012 of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters). Since those claims did not appear crucial to the resolution of this case or to the reasoning of the Constitutional Court, they were not mentioned in this case note.

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