China’s Foreign State Immunity Law: some comments

On September 1, 2023, China’s National People’s Congress Standing Committee passed the Foreign State Immunity Law, to take effect on Jan. 1, 2024. This post is divided into three parts: (1) resources, (2) big picture issues, and (3) technical issues. The latter are somewhat inside baseball for lawyers, so feel free to skip if that’s not your thing.


Big picture issues

The main big picture issue that I have discovered needs clearing up is that the Law doesn’t do as much as some people think it will—particularly with respect to the United States. All China is doing is adopting a policy toward sovereign immunity that is the one already adopted by most other states.

What is that policy? It’s that foreign states are generally immune in domestic courts from suits based on their governmental acts, but not from suits based on their non-governmental acts—typically, when they (or their agency or instrumentality) are acting in a commercial fashion, but also including certain torts. This is called the theory of restrictive immunity. (That’s not, incidentally, a precise statement of U.S. sovereign immunity law, but that’s the dominant principle. Prof. Dodge’s blog posts explain it all.)

Until now, China has persisted on its relatively lonely path of upholding the theory of absolute immunity: you can’t hale a foreign state into court for any reason; courts of Country A simply don’t have jurisdiction over any Country B and its assets. It is inconsistent with the dignity of states.

But this of course has meant that while foreigners could sue China in their courts when a business deal with China (or an agency or instrumentality of the Chinese state) went sour, Chinese parties couldn’t sue foreign states in Chinese court when a business deal with them went sour. China finally decided that there was no point in maintaining the doctrine of absolute sovereignty, since other states weren’t respecting it in their courts and the only people it was hurting were Chinese plaintiffs.

There has been some talk that this will give China some power it didn’t have before to fight sanctions, or will allow Tik Tok or Huawei to bring suit for damages caused by adverse actions brought against them by the U.S. government. Unlikely (but see the comment on reciprocity below). None of these involve commercial activities by the foreign states in question. The core of China’s complaints about sanctions and the actions against Tik Tok and Huawei is that they are politically motivated; it’s precisely this political motivation that brings them under the default rule of sovereign immunity. They aren’t commercial activities.

It’s therefore hard to see the Law as having much effect on the United States, since the U.S. does not have a lot of state-owned enterprises period, let alone SOEs engaging in business with China. The one way it could affect the U.S. is via its reciprocity clause. As Prof. Dodge explains:

The law also contains a reciprocity clause in Article 20 [Article 21 in the final version], under which Chinese courts may decline to recognize the immunity of a foreign state if the foreign state would not recognize China’s immunity in the same circumstances. Chinese courts could hear expropriation or terrorism claims against the United States, for example, because the U.S. Foreign Sovereign Immunities Act (FSIA) has exceptions for expropriation and terrorism.

As a political matter, however, it’s very hard for me to see China going down that road unless there are successful cases brought against it in the U.S. first, since it would invite retaliation. The U.S. may end up restricting Tik Tok; China has banned Twitter and Facebook outright. At present, while U.S. courts have accepted clearly commercial cases against Chinese SOEs, they upheld Chinese sovereign immunity in the Hukuang Railway Bonds case (finding that while sovereign bond issuance was a commercial activity, the U.S. had not moved from absolute to restrictive immunity until the passage of the 1976 Foreign Sovereign Immunities Act, and that the FSIA should not be applied retroactively to bonds issued in 1911). Given U.S. courts’ general concern about provoking foreign relations problems and frequent deference to China, I think they are not likely to adopt an expansive reading of the conditions under which immunity is removed.

Technical issues

Professor Dodge’s blog posts about the draft (linked above) raise some questions that are answered in the final version.

First, he writes of the draft: “The English translation of the draft law does not make clear whether it is the tortious act, the injury, or both that must occur within the territory of China.” The law as passed (Art. 9), unless it’s using a word order that would be strange in Chinese, now does make this clear in Chinese: the act must take place within the territory of the PRC. It does not, however, specifically say that the consequences of the act must take place within PRC territory.

Second, in Part II of his blog post, Prof. Dodge expresses a concern that possibly through a drafting oversight, while Chinese judgments against a foreign state could be enforced in China, Chinese judgments (technically called “rulings” (caiding 裁定) enforcing foreign judgments against foreign states (e.g., a Chinese judgment enforcing in China a judgment from Country X against Country Y) could not. This problem has been fixed in the final version (Art. 14(3)). The old version spoke only of “judgments” (panjue 判决); it now also speaks of “rulings”. It looks like someone at the NPC Standing Committee was reading Prof. Dodge’s blog posts.

Third, again in Part II of his blog post, Prof. Dodge expresses a concern that individual government officials acting for the foreign state as well as the states themselves could lose immunity in various circumstances. (Read the blog post for the details.) This problem has been partially fixed. Para. 2 of Art. 20 (Art. 19 in the draft) adds “international custom” to PRC laws and treaties as grounds for immunity. But Para. 2 applies only to heads of state, heads of government, foreign ministers, and persons of equivalent rank. It doesn’t cover the ordinary lower-ranking officials, who are covered by Para. 1. And Para. 1 stands as is; there is no mention of international custom.


Posted in: Law