In a recent session of the Standing Committee of China’s top legislature, the National People’s Congress (NPC), a significant legal draft was reviewed and adopted—the Law on Foreign State Immunity. This law is set to come into force on January 1, 2024, and marks a notable shift in China’s stance on sovereign immunity and foreign policy. It joins a series of foreign policy-related legal changes introduced at the NPC, such as the Foreign Relations Law enacted in June.
The recent legislation is of particular interest due to China’s historical adherence to the absolute model of sovereign immunity, which means that Chinese courts did not exercise jurisdiction over other states, nor did China accept the jurisdiction of foreign states’ courts and tribunals.
Under the new Foreign State Immunity Law, China has outlined several exceptions where foreign states will lose their immunity and become subject to Chinese court jurisdiction. Notably, these exceptions include:
Commercial Activities: Immunity is waived automatically when foreign states engage in commercial activities within China’s territory or if their activities have a direct impact on China, even if conducted outside China. However, there are exceptions, such as diplomatic and special missions’ property or property of a military character.
Territorial Torts: When a foreign state’s actions cause personal injury, death, or damage to property within China’s territory, immunity is waived.
Express Waiver: Foreign states can expressly waive immunity in specific cases.
Defense or Counterclaim: If a foreign state and its natural/legal persons submit a defense or counterclaim in a case before Chinese courts, immunity can be waived.
Intellectual Property Rights: Chinese courts may have jurisdiction over cases related to intellectual property rights, where immunity can be waived.
The legislation introduces a distinction between the “nature” and “purpose” of commercial activities, aligning with the U.N. International Law Commission’s 1991 Draft Articles on Jurisdictional Immunities of States and Their Property. This distinction allows Chinese courts to consider both aspects when determining immunity, recognizing that the purpose of an activity may indicate its non-commercial nature.
Article 21 of the Chinese law includes a reciprocity clause, ensuring that if another country does not grant China the same immunity status, China can waive immunity solely based on the “nature” of the transactional activity. This clause has implications for cases involving military transactions.
China’s new law has significant implications for countries like India. India, lacking individual legislation on foreign state immunity, relies on provisions in its civil law similar to those in the Chinese law. This means that India may be subject to suits related to Chinese “commercial activities” within the country.
For example, if India restricts domestic investment opportunities for Chinese state-owned enterprises, it may face civil suits filed in Chinese courts. Additionally, commercial transactions involving military equipment between India and the United States, aimed at countering Chinese aggression, may be viewed as non-immune transactions impacting Chinese national security.
The enactment of China’s new Foreign State Immunity Law aims to safeguard Chinese national sovereignty and the interests of its citizens and legal entities. It has the potential to be used as a tool to challenge foreign state immunity, particularly in commercial transactions and intellectual property rights cases. This legislation reflects a shift in China’s approach to foreign state immunity and has broader implications for international relations, especially concerning rival states like India and the United States.