Report No. 176
2.40.10 State immunity: To be dealt with under separate law.
A question of state immunity was raised. It is stated that sec. 86, 87A C.P.C. deal with state immunity. Justice V.A. Mohta, in his Commentary on the Act (see pp 46 to p 53) has dealt with State immunity and also immunity of the instrumentalities of the State. The author has referred to the UK Act of 1978 (i.e. the State Immunity Act, 1978), the US Foreign Immunities Act 1976 and to the Draft Articles on State Immunity prepared by the International Law Commission.
Reference is also made to the principles of waiver contained in Art.14 of the New York Convention and to the judgments of the High Courts in Far East Steamship USSR vs. Union of India: AIR 1973 Mad. 169: UOI vs. Owners of Vessel Hoegh Orchid and Their Agents of 1983 Guj. 34; and to sections 86, 87A CPC and to the Judgment of the Supreme Court in Veb Deutracht Seevederei Rostok (D.S.R. Lines), a Dept. of German Democratic Republic vs. New Central Jute Mills Ltd. 1994(1) SCC 282 and to Kenya Airways vs. Junibai B. Kheshwole AIR 1998 Bom 287.
The author says that it is necessary to declare as to when and to what extent an arbitration clause to which a State or its instrumentality is a party, can give rise to an inference of waiver of State immunity in international commerce. Question is whether is there an arbitration clause in a contract by the State or its instrumentality; it is to be deemed that it has waived its immunity. The author pleads for separate statutory provisions in this behalf. The author concludes:
"India needs an independent and exhaustive Act on State immunity specially in the content of act a jure gestionis, not only in the interests of certainty of law but also its expanding horizons of international trade and commerce. Even the Civil Procedure Code can be suitably amended. In fact, as far as international commercial arbitration is concerned, necessary provisions could have been made even in the new Arbitration Act. It is better late than never."
Having regard to the importance of the topic and the fact that other countries have enacted separate statutes, the Commission is of the view that a separate statute has to be made on State immunity in all its aspects rather than one relating only to the subject of arbitration.