Author: Qi Zhang*
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The Global Context of State Immunity Reform
The global legal landscape has undergone a significant transformation in recent decades, with a majority of states adopting restrictive immunity principles to distinguish between sovereign acts (acta jure imperii) and commercial acts (acta jure gestionis). This shift reflects the increasing participation of states in global commerce and the need to protect private entities from sovereign overreach. China’s enactment of the Foreign State Immunity Law (FSIL) in 2023,[i] coupled with the Supreme People’s Court’s (SPC) procedural guidelines released on March 26, 2025 (2025 SPC Guidelines),[ii] positions China within this global trend. These reforms are particularly responsive to the surge in cross-border disputes arising from initiatives such as the Belt and Road Initiative (BRI), where Chinese enterprises frequently interact with foreign governments. By codifying exceptions to sovereign immunity and establishing clear procedural rules, China aims to harmonize its legal framework with international norms while safeguarding its sovereign interests. The FSIL’s emphasis on balancing state sovereignty with private rights underscores China’s commitment to modernizing its legal system in alignment with global governance standards.
From Policy Ambiguity to Legal Codification
China’s state immunity regime has evolved through three distinct phases. From 1949 to 2005, China adhered to absolute immunity, a policy rooted in historical sensitivities to foreign interference and a desire to protect state sovereignty. This approach began to shift in 2005 with the Foreign Central Bank Property Judicial Immunity Act, which introduced limited immunity for foreign central bank assets—a cautious step toward recognizing restrictive immunity principles. The 2011 interpretation by the National People’s Congress Standing Committee further clarified that immunity policies fall under central authority, though procedural gaps remained unresolved.
The FSIL, enacted in 2023 after 12 years of deliberation and three rounds of public consultation, represents a systemic codification of China’s restrictive immunity framework. Article 3 of the FSIL reaffirms jurisdictional immunity as the default principle, while Articles 4 to 14 enumerate eight exceptions, including commercial activities, tort claims, labor contracts, and arbitration-related disputes. A notable innovation is Article 21’s reciprocity clause, which allows China to impose countermeasures against states that restrict Chinese entities’ immunity abroad. This provision reflects China’s strategic autonomy while aligning with international law’s emphasis on mutual respect among sovereign states.
The 2025 SPC Guidelines operationalizes the FSIL by centralizing jurisdiction in specialized courts, standardizing service procedures, and mandating judicial review of immunity claims. Drawing on comparative practices from jurisdictions such as the United States and Singapore, the Notice incorporates insights from pilot programs conducted in select Chinese courts, ensuring procedural coherence and adaptability.
Core Principles and Legislative Framework
The FSIL establishes six explicit scenarios where Chinese courts may exercise jurisdiction over foreign states:
- Express Consent: When a foreign state waives immunity through express consent, such as through international treaties, written agreements, or diplomatic channels.
- Active Participation: When a foreign state initiates litigation or participates as a defendant/third party in Chinese courts.
- Commercial Activities: In disputes arising from commercial acts occurring within China or directly impacting Chinese territory (Article 7). This territorial nexus requirement, articulated in Article 7, contrasts with the U.S. Foreign Sovereign Immunities Act’s (FSIA) broader “minimum contacts” standard, which permits jurisdiction over acts with indirect effects.
- Labor Contracts: In cases involving contracts for labor/services performed partially or wholly in China (Article 8).
- Tort Claims: In claims based on acts occurring within China that cause personal injury, death, or property damage (Article 9).
- Intellectual Property: In cases involving IP rights protected under Chinese law (Article 11).
Article 12 further removes immunity for arbitration-related proceedings, enabling Chinese courts to review arbitration agreements and enforce awards arising from commercial or investment treaty disputes. This provision aligns China’s approach with global arbitration norms, though challenges persist in enforcing non-ICSID awards against foreign state assets deemed sovereign.
Procedural Innovations Under the 2025 SPC Guidelines
The 2025 SPC Guidelines introduces rigorous procedural rules to ensure consistent application of the FSIL. Courts are required to verify that complaints explicitly cite FSIL exemption grounds, with insufficiently specified claims subject to dismissal after judicial clarification. This requirement aims to reduce frivolous lawsuits and enhance procedural transparency.
Jurisdiction is centralized in provincial-level intermediate courts and specialized tribunals, such as maritime and financial courts, to consolidate expertise and minimize forum shopping. For example, the Shanghai Maritime Court has developed streamlined procedures for BRI-related disputes, significantly reducing adjudication timelines. Service mechanisms prioritize international treaties like the Hague Service Convention, while diplomatic channels via the Ministry of Foreign Affairs (MFA) serve as a secondary option. In cases where traditional methods fail, diplomatic notes (note verbale) may be employed, though this process often extends timelines due to diplomatic protocols.
Judicial review under the 2025 SPC Guidelines mandates ex officio assessment of immunity claims, even if unraised by foreign states. This hybrid model blends civil law inquisitorial traditions with common law judicial autonomy, as demonstrated in cases where courts independently dismiss jurisdiction over disputes lacking territorial nexus.
Diplomatic-Judicial Coordination and Operational Challenges
The MFA plays a critical role in certifying “acts of state,” such as sovereign status in military procurement or strategic resource management. These certifications provide courts with authoritative guidance on sensitive issues, enhancing procedural legitimacy. However, the MFA’s involvement introduces complexities, particularly in cases involving politically charged disputes. For instance, certifications related to defense agreements or intergovernmental projects may delay proceedings.
The FSIL’s reciprocity clause, while a strategic tool, risks escalating diplomatic tensions if applied indiscriminately. For example, freezing foreign state assets in retaliation for restrictive practices abroad could provoke reciprocal measures, undermining the law’s objective of fostering predictable commercial relations.
Comparative Distinctiveness and Global Implications
China’s framework diverges from Western models by prioritizing strict territoriality and judicial-diplomatic hybridity. Unlike the U.S. FSIA, which asserts jurisdiction over acts with “direct effects” abroad, the FSIL limits exceptions to acts physically occurring or directly impacting China. This approach mirrors Canada’s State Immunity Act but contrasts with the EU’s focus on the nature of acts over territorial links, as seen in Republic of Austria v. Altmann (2004).[1]
In terms of arbitration, Article 12 of the FSIL explicitly removes immunity in arbitration-related proceedings, allowing Chinese courts to review arbitration agreements and enforce arbitral awards from commercial or investment treaty disputes. Practically, the enforcement of non-ICSID awards involving foreign sovereign assets requires meticulous judicial interpretation, particularly distinguishing between commercial assets eligible for attachment and strictly sovereign assets exempt from execution. For example, when enforcing a foreign arbitral award against a foreign state-owned enterprise operating commercially in China, Chinese courts will likely evaluate whether the assets targeted for enforcement, such as bank accounts or commercial revenue, qualify as commercial usage. This practical determination mirrors similar jurisprudential practices in jurisdictions like Singapore, thereby integrating Chinese arbitration practice within a global comparative framework.
Furthermore, China’s FSIL integrated a reciprocity mechanism and centralized courts offer a “third way” for Global South states seeking to resist extraterritorial jurisdiction while engaging in global commerce. Some commentators have noted that China’s codification efforts under the FSIL may serve as a reference model for emerging economies, particularly in balancing sovereign immunity with commercial interests. By codifying exceptions and integrating diplomatic oversight, China’s model redefines state immunity governance in an era of geopolitical flux.
Implementation Challenges and Future Pathways
Key challenges in implementing the FSIL include ambiguities in defining “commercial acts” and inefficiencies in diplomatic service. Article 7’s requirement to weigh both the “nature and purpose” of acts invites inconsistent interpretations, necessitating further clarification through SPC judicial interpretations or guiding cases. Diplomatic service delays, exacerbated by limited bilateral judicial assistance treaties, hinder timely dispute resolution. Innovations in bilateral cooperation, such as the possible use of electronic service and designated agents in cases involving BRI partners, may offer potential solutions.
China’s non-ratification of the UN Convention on Jurisdictional Immunities of States and Their Property creates a legal divergence, particularly regarding implied waivers. While the Convention permits implied waiver through conduct, the FSIL mandates explicit written consent. Ongoing regional cooperation, including legal frameworks between China and ASEAN countries, may bridge this gap.
Enforcement of international investment arbitration awards remains contingent on interpreting “commercial use” in relation to state assets. Assets used for diplomatic or sovereign purposes, such as embassy properties, are expressly protected from enforcement under Article 15 of the FSIL. This underscores the limits of arbitral recovery against foreign states in China.
Conclusion
The FSIL and the 2025 SPC Guidelines mark a transformative shift in China’s state immunity governance, codifying exceptions to sovereign immunity while integrating diplomatic oversight. By centralizing jurisdiction, standardizing procedures, and emphasizing territorial sovereignty, China navigates the tension between legal autonomy and globalization. Persistent challenges in interpretation and international harmonization demand ongoing judicial practice, scholarly analysis, and diplomatic engagement.
China’s state immunity framework offers a model for emerging economies seeking to resist extraterritorial jurisdiction while engaging in global commerce. By prioritizing strict territoriality and judicial-diplomatic hybridity, China distinguishes its approach from the U.S. FSIA’s expansive jurisdiction and the EU’s focus on the nature of acts. China’s codification efforts under the FSIL may serve as a reference for emerging economies seeking to balance sovereign immunity with commercial interests.
*Qi Zhang is an international arbitration practitioner and LL.M. graduate at Columbia Law School. With prior experience as a senior associate at a leading Chinese law firm, Qi specializes in international commercial arbitration and international investment arbitration. Her recent work examines the evolving role of sovereign immunity in international arbitration, with a focus on China’s Foreign State Immunity Law and its implications for the enforcement of awards involving state actors.
[1] Republic of Austria v. Altman, 541 U.S. 677 (2004).
[i] Foreign State Immunity Law of the People’s Republic of China (2023) (English translation), available at https://ga.hainan.gov.cn/sgat/zmgzyw/202410/7b18bda61060491b87a2d5fc11e3396e.shtml?ddtab=true.
[ii] Supreme People’s Court, Notice on Procedural Issues Concerning Foreign State Immunity Cases (2025) (original text in Chinese), available at https://ipc.court.gov.cn/zh-cn/news/view-4094.html (in Chinese).