Sovereign Immunity: Considerations For Lenders

Sovereign immunity is a legal doctrine by which the sovereign or state cannot commit a legal wrong and is immune from civil proceedings or criminal prosecution. The doctrine stems from the ancient English principle that the monarch can do no wrong. In this article, we look at the key considerations for lenders when dealing with a sovereign or state in a transaction. 

In general terms, lenders should consider the principle of sovereign immunity if a borrower or a subordinated creditor is either a foreign state (acting through its relevant administrative or public body) or a so-called quasi-public entity whose assets may be protected by sovereign immunity of the state they are originating from or a foreign head of state and his or her close relatives. Such entities or individuals may be allowed immunity from adjudication, enforcement and execution and the courts may be prevented from considering any claims or enforcing judgments against them. The property of such