As highlighted in Section 8.2.1, one of the key negotiation points for a Contracting Authority to consider is whether and to what extent the dispute resolution clause in a PPP Contract should include a waiver of any privileges and sovereign immunities which the Contracting Authority enjoys before local and foreign courts (such as immunity from any suits by the Private Partner).65 The Contracting Authority should seek advice on the nature and extent of any immunities early in the process. Generally speaking, a PPP Contract is expected to be fully enforceable and Private Partners and Lenders are therefore likely to have a policy of seeking a "clean" and wide-ranging waiver of sovereign immunity clause in commercial contracts with sovereigns or quasi sovereigns. The Contracting Authority will then need to assess whether it is bankable to resist a waiver entirely or whether negotiating limitations is an acceptable compromise.
Immunity is a complex legal area but, in short, a wide ranging waiver would usually cover both a waiver from any court proceedings connected to the resolution of the dispute (if an arbitration clause is used this relates to any court orders needed to assist the arbitration) and recognition of any award/judgment. It would also include an agreement by the sovereign entity to execution/enforcement against its assets (or certain of them) and an agreement to certain forms of relief e.g. asset freezes. The precise ambit of any waiver in a PPP Contract is likely to depend on relevant laws and the Parties' bargaining power in the relevant real life contractual negotiations. An illustration of the scope of a wide ranging waiver is set out in Section 8.3, Sample Drafting 8, Clause (22).
The Parties should also make sure they understand whether or not it is legally possible for the Contracting Authority to waive its privileges and immunities as a matter of local law (whether under constitutional arrangements, public policy or otherwise). In this regard it should be noted that under some laws an agreement to arbitrate is deemed to be a waiver of immunity from suit and a sovereign is not immune from suit where a dispute relates to both commercial activities and is not a sovereign act. Ultimately, a Contracting Authority may find it has more scope to resist or negotiate limits to any waiver in respect of recognition or enforcement of judgments or awards.
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65 This does not apply to ICSID arbitration as a State or Contracting Authority that consents in writing to ICSID arbitration is already waiving its immunity from being sued by the Private Partner and must therefore recognize an ICSID award and enforce the pecuniary obligations under it as if it were a final judgment of a local court. However, the same does not apply to "immunity from execution". The concrete measures taken to execute the pecuniary obligations of an ICSID award will be governed by law of the State in which execution is sought, which includes that State's rules on sovereign immunity.