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Sweden: Supreme Court Rejects State Immunity Claim Against Enforcement Measures

(Oct. 19, 2011) In a July 1, 2011, decision, the Swedish Supreme Court rejected a state immunity claim as grounds for refusing the enforcement of an arbitral award. (Högsta Domstolens Beslut [Supreme Court Decision] Ö170-10 [hereinafter Decision Ö 170-10], Supreme Court website (last visited Oct. 5, 2011).) The case reached the Supreme Court via an appeal from the Svea Court of Appeals by the Russian Federation. In its appeal, the Russian Federation had claimed state immunity against the attachment of real property that had been used mainly to house non-diplomats, but also to store diplomatic documents as well as a few diplomatic cars. (Id. ¶¶ 2, 19.) The Russian Federation claimed that since the property was used for “official purposes,” it could not be repossessed by the Swedish Enforcement Agency. (Id. ¶ 4.) The Supreme Court decided to hear the case to determine when property of a foreign state which is held in Sweden can be used to satisfy a monetary judgment. In this case, the issue was whether either the Russian real property itself or the rental payments which it received from the tenants of the property were attachable to satisfy a monetary award not connected to the property. (Id. at ¶ 5.)

The background to the case was that an arbitral award for monetary compensation had been awarded against the Russian Federation in 1998. Because Russia did not voluntarily satisfy the award, the party in whose favor the arbitral panel had ruled sought enforcement in Sweden by attaching real property held in Lidingö, Stockholm. (Id. ¶¶ 1-3.) The real property was not connected to the award, but should, according to the claimant, be used to satisfy his award, the enforceability of which was no longer in question. The Russian Federation moved to stop the enforcement measures against the real property and the rental payments by arguing that both were protected by state immunity. The Russian Federation also claimed diplomatic immunity, because the property served as housing for employees at their trade mission as well as for diplomats. (Id. ¶ 19.) In 2003, the Swedish Enforcement Agency (Kronofodgemyndigheten) found that enforcement against the property was possible, but in 2005, it decided that enforcement against the rental payments on the property was not. (Id. ¶ 3.) The District Court of Nacka upheld the enforcement Agency’s determination. (Id.) The claimant appealed the case to the Svea Court of Appeals. The Court of Appeals found that neither the real property nor the rental payments were covered by state immunity or diplomatic protection, because the property was used for commercial rather than state purposes. (Dagens Juridik, HD prövar utmätning av rysk fastighet, [Swedish Supreme Court to Hear Case on Execution of Russian Property] (Mar. 15, 2010).)

This was the first time since 1942 that the Supreme Court had heard a case on a state immunity defense against enforcement measures. (Decision Ö 170-10.) The Court found that there was an insufficient connection between state activity and the property the state claimed was covered by state immunity. The decision makes it easier to enforce judgments by attaching property that is owned by a foreign state but held in Sweden. (Id.)

The Supreme Court ruling upheld the Svea Court of Appeals decision, as it found that the use of the property in question, which included some storage of diplomatic documents and cars but was mainly housing for non-diplomatic personnel, was not sufficient to qualify for immunity under either the Vienna Convention on Diplomatic Protection or the United Nations Convention on Jurisdictional Immunities of States and Their Property. (Id. ¶¶ 14-16, 23.) The property was not listed as the Russian “trade mission’s official premises” and the totality of the circumstances meant that the property “was not, to a substantial degree, used for the Russian Federations official purposes.” (Id. ¶¶ 20 & 23.) The Supreme Court thus came to a different conclusion than both the Swedish Enforcement Agency (Kronofogdemyndigheten) and the lower district court (Nacka Tingsrätt). (Id.)

The Supreme Court made it clear that only sovereign or official acts by the government are covered by state immunity. (Id. ¶¶ 7-8.) Commercial acts and acts that are covered by private law, even if done by a state organ, are not covered. (Id. ¶ 8.) The Court explained that although real property that is used to carry out official acts (such as an embassy) generally is covered by immunity, the mere ownership of the property does not in itself render the property immune. (Id. ¶ 14.) In this specific case, the property was mainly used to house non-diplomats of Russian nationality, although there was some official use of the property.

The Court also addressed the issue of the difficulty of assessing the legal status of property that has both official and unofficial uses, but found that limited diplomatic use is not alone enough to guarantee state immunity. (Id. ¶ 15.) The Court also specified the relevant time period of the usage to be examined, by declaring that it is the use of the property at the time of the application for attachment that is determinative. Potential future uses are not to be considered when determining if there is an official use of the property. (Id.¶ 20.) In the case at hand, this means that the intended future use of the property by the Russian Federation does not save the property from attachment, and it is therefore attachable despite the country’s plans to house only Russian diplomats on the property. (See id.)