No immunity: Overview, definition, and example
What is no immunity?
No immunity is a contractual provision stating that a party cannot claim immunity from legal proceedings, enforcement actions, or financial obligations under the agreement. It ensures that the party waives any sovereign, diplomatic, or jurisdictional immunity that might otherwise protect them from lawsuits, arbitration, or asset seizure.
For example, if a foreign government enters into a commercial contract, a no immunity clause prevents it from avoiding legal action by claiming sovereign immunity. This means it can be sued and held accountable like any other contracting party.
Why is no immunity important?
A no immunity provision is crucial in international contracts, particularly when dealing with governments, state-owned entities, or international organizations. Without this clause, a party could avoid legal accountability by invoking immunity, making it difficult to enforce contracts or recover damages.
For businesses, this clause provides assurance that they can pursue legal remedies if the other party fails to meet its obligations. It is often included in financing agreements, investment treaties, and cross-border contracts to ensure enforceability.
Understanding no immunity through an example
Imagine a construction company signs a contract with a government agency in another country to build a highway. Without a no immunity clause, the government could later claim sovereign immunity and refuse to pay, preventing the company from suing in local courts. However, with a no immunity clause, the government waives that defense, allowing the company to enforce the contract legally.
In another example, an international lender provides a loan to a state-owned airline. The loan agreement includes a no immunity provision, ensuring that if the airline defaults, the lender can take legal action to recover the debt, even if the airline tries to claim immunity as a state entity.
An example of a no immunity clause
Here’s how a no immunity clause might appear in a contract:
“The Party hereby irrevocably waives any immunity (including sovereign and diplomatic immunity) from suit, jurisdiction, enforcement, or execution of judgment in any proceedings arising under this Agreement.”
Conclusion
A no immunity provision ensures that all parties to a contract, including governments and state-owned entities, can be held legally accountable. It is essential in international agreements to prevent one party from using immunity as a defense to avoid legal obligations. Businesses and investors should ensure that contracts with foreign governments or public entities include a no immunity clause to protect their rights and enforceability.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.