1. Introduction

Obtaining an arbitral award against a State is not always the end of the dispute. When dealing with a State that refused to comply with the award, the decisive question is whether that award can actually be enforced and against which assets. This issue has become increasingly important following decisions at the EU level, which have limited intra-EU investment arbitration and shifted attention to enforcement in third-country jurisdictions, particularly England and Wales.

2. State immunity: two distinct concepts

State immunity is based on the sovereign equality of states and follows a restrictive approach: sovereign acts are protected, while commercial acts are generally not.

Importantly, two forms of immunity must be distinguished:

• Adjudicative (jurisdictional) immunity determines whether a court may hear claims against a State at all.
• Enforcement (execution) immunity applies after an award has been recognised and asks whether and which specific assets may be attached / executed against.

Recognition of an award does not automatically permit execution against State assets.

3. Enforcement immunity: which assets are reachable?

The critical question is whether an asset serves a sovereign purpose.

Germany

German courts currently apply two approaches:

(a) Nature-of-the-act test

In commercial disputes, courts focus on the legal nature of the transaction. In a recent military procurement case (BayObLG, 101 Sch 61/24e), the court held that purchasing tactical communication systems through a commercial contract remained a commercial activity, even if the underlying purpose was military. The appeal, which is pending before the BGH (I ZB 107/25), may affect future enforcement against states.

(b) Functional test

In other contexts, especially real estate, courts ask whether the asset is connected to sovereign functions. In a decision of the BGH (V ZB 16/25), the court held that immunity extends beyond diplomatic premises protected under the Vienna Convention. Property intended for sovereign functions, including economic diplomacy, may also be immune. A Libyan property intended for an economic cooperation office therefore enjoyed protection. This broadens the range of assets that may be shielded from enforcement.

England and Wales

In England and Wales, section 13 of the State Immunity Act 1978 provides the framework. State property is generally immune unless:

• the State expressly consents to execution; or
• the property is used, or intended to be used, for commercial purposes.

English courts focus on the actual use of the asset. For instance:

• Embassy accounts with mixed diplomatic and commercial use remain immune (Alcom v Colombia).
• Commercial assets, such as oil-sale proceeds earmarked for repayments, may be attachable (Orascom v Chad).

4. ICSID and immunity

A major recent issue has been whether joining the ICSID Convention (see our previous post on ICSID) amounts to waiving State immunity. The UK Supreme Court answered this question (Kingdom of Spain v Infrastructure Services Luxembourg S.A.R.L and Republic of Zimbabwe v Border Timbers Ltd [2026] UKSC 9), by holding that:

• By acceding to the ICSID Convention and Article 54(1), states agree that ICSID awards are to be recognised and enforced as final domestic judgments.
• This constitutes a waiver of adjudicative immunity for recognition and registration proceedings.

However, Article 55 ICSID expressly preserves enforcement immunity. Accordingly, the real dispute again here concerns the enforcement against particular assets.

5. Practical lessons for investors

For investors dealing with States that have a history of non-compliance with awards, enforcement strategy should begin before an award is rendered.

Asset mapping is critical. Investors should identify:

• commercial real estate;
• receivables under commercial contracts;
• shares in state-owned commercial enterprises;
• bank accounts used for commercial activities; and
• assets located in jurisdictions with creditor-friendly immunity rules.

By contrast, the following assets are often effectively untouchable:

• diplomatic premises;
• embassy bank accounts;
• central bank reserves; and
• assets clearly dedicated to sovereign functions.

In addition, forum selection matters. England offers comparatively textured case law on the commercial-use exception and may provide more predictable outcomes than Germany in some circumstances, considering Germany’s different approaches.

Third-country jurisdictions where the debtor State holds significant commercial assets may offer still more favourable frameworks. This is why sophisticated claimants should pursue coordinated enforcement strategies across several jurisdictions simultaneously.