United Arab Republic v Mrs X

Date10 février 1960
CourtFederal Tribunal (Switzerland)
Switzerland, Federal Tribunal.
United Arab Republic
Mrs X

Sovereign immunity Foreign States and their property Lease of building for use as diplomatic premises Action for breach of lease Whether foreign State entitled to jurisdictional immunity Requirement of close connection between case and forum Acts iure imperii and iure gestionis Whether distinction to be made according to nature or purpose of act Attachment of bank deposits Immunity from attachment Whether power of enforcement automatically follows from power to exercise jurisdiction Whether attachment requires proof of the existence of a debt Relevance of purpose for which attached funds allocated by State Whether lack of allocation of State funds for specific purpose renders them liable to attachment The law of Switzerland

Summary: The facts:Mrs X, domiciled in Switzerland, leased premises to Egypt for the use of its diplomatic mission in Vienna. The agreement provided for payments under the lease to be made at a Swiss bank and for any disputes which might arise to be litigated in a Swiss court. Claiming that her tenant had failed to comply with its obligations, Mrs X repudiated the lease and brought an action for damages. As security for her claim she obtained a pre-judgment attachment order against funds of the Egyptian State held in a Swiss bank. The funds were present in Switzerland for attachment because a credit had earlier been opened by the Egyptian authorities at the Swiss bank involved to provide for payment under contracts for the supply of war materials. The supplier company had subsequently been wound up without performing the contracts and, although there were outstanding claims relating to part of the credit, the balance of the credit was sufficient to cover the amount attached. The attachment order, together with a formal notice to pay, were transmitted for service through diplomatic channels but the Egyptian Ministry of Foreign Affairs refused to accept them, claiming that Egypt was entitled to immunity from jurisdiction and attachment. No objection was lodged by Egypt to the notice to pay and the attachment was made final. The United Arab Republic (of which Egypt had become a part) subsequently brought a public law appeal (recours de droit public) before the Federal Tribunal, seeking the vacation of the attachment and the annulment of the proceedings brought against Egypt to obtain payment.

Held:The appeal was dismissed and the attachment was held to be valid.

(1) A foreign State enjoyed immunity from jurisdiction for sovereign acts (iure imperii) but not for acts performed in exercise of a private right (iure gestionis) (ground 2).

(2) In respect of acts iure gestionis an action could be brought against the foreign State in the Swiss courts, provided there was a sufficiently close connection between the legal relationship entered into and Switzerland. Such connection was established if the legal relation entered into by the foreign State had its origin in Switzerland, fell to be performed there, or the debtor had taken steps which made Switzerland a place of performance (ground 2).

(3) The distinction between acts iure imperii and iure gestionis was to be made according to their nature and not according to their purpose. The question to be examined was whether the act related to the exercise of public power or whether it was similar to an act which any private individual could perform (ground 2).

(4) The fact that a foreign State had entered into a legal relationship with a private individual on the territory of another State outside the framework of its diplomatic relations with that State was a serious indication that the State concerned had acted iure gestionis (ground 2).

(5) Where the whole tenor of a contract of lease concluded between a private individual and a foreign State showed that it had been entered into by two parties acting on an equal footing the agreement was to be considered as an act iure gestionis (ground 3).

(6) If the Swiss courts had the power to exercise jurisdiction then they automatically had the power to take measures of execution. Reservations had been expressed in other countries over granting to the authorities of one State a power of enforcement over another State as extensive as the power to exercise jurisdiction but the Swiss requirement of a close connection between the case and Swiss territory allayed such fears (ground 4).

(7) It waa not necessary to establish the existence of a debt in order to obtain the attachment of assets since this was only a safeguarding measure (ground 4).

(8) Where funds of a foreign State were allocated for the use of its diplomatic service or for another activity incumbent upon it as the holder of public power, such funds were designated for the performance of a sovereign activity and therefore immune from attachment. On the other hand where, at the time when attachment was sought, the funds in question were not allocated for any specific purpose (even if they had originally been allocated for a purpose related to national defence) such funds were not immune from attachment (ground 5).

The following is the text of the judgment of the Court:

A. On 22 and 23 January 1951 Mrs X, who was domiciled in Zurich, leased a villa owned by her in Vienna to the Minister of Egypt in Austria, acting in the name of the diplomatic mission in Austria of the Kingdom of Egypt. The property was to be used for the services of the Egyptian diplomatic mission and as the minister's residence. In particular it was agreed that the rent was to be payable at the Banque cantonale de Schwyz (Art. IV) and that the competent court was to be the ordinary...

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