Sovereign Immunity in Spanish Law: Jurisdiction vs Enforcement

Under Spanish law, foreign states generally enjoy sovereign immunity, but a crucial distinction is drawn between jurisdictional immunity and enforcement immunity.

Jurisdictional immunity means a foreign state cannot be sued in Spanish courts for its sovereign (public) acts (ius imperii) without consent.

Spain follows the modern restrictive theory of immunity – a state is not immune for commercial or private-law acts (ius gestionis). For example, entering a commercial contract or an arbitration agreement by a state is usually deemed a waiver of jurisdictional immunity for disputes arising from that contract.

In practice, Spanish courts must notify the Ministry of Foreign Affairs of any lawsuit against a foreign state so that the government can weigh in on immunity issues, but the final decision rests with the courts.

Enforcement immunity is separate and often more stringent.

Even if a state is subject to jurisdiction and an award or judgment is rendered, attaching state-owned assets is difficult unless specific exceptions apply. Spanish law (partly codified in Organic Law 16/2015) provides that no enforcement measures can be taken against a foreign state’s property unless certain conditions are met.

Key exceptions include: (1) an express waiver of immunity from enforcement by the state; (2) the state earmarking specific property to satisfy the claim; or (3) the asset is in Spain and used for purposes other than sovereign government functions (i.e., used for commercial activities).

Spanish law mirrors international norms by exempting certain categories of state property from attachment – for instance, diplomatic and consular property, military property, central bank assets, cultural heritage items, and government vessels or aircraft used for non-commercial purposes are absolutely immune.

Piercing the Sovereign Veil (Alter Ego Doctrine) in Spain

What happens when a creditor holds a judgment or arbitral award against a foreign state, but the state’s assets are hard to find, while its government-owned companies hold valuable assets?

In such scenarios, practitioners consider the “alter ego” doctrine, also known as sovereign veil-piercing. This doctrine allows creditors to target assets of state-owned entities by arguing that the entity is not truly independent of the state, but rather an alter ego used to shield the state’s assets.

Spanish jurisprudence does not enumerate a formal test with a checklist of factors (unlike, for example, U.S. courts under the Bancec framework). Instead, Spanish law requires a “connection” between the asset and the debtor state.

Traditionally, courts in Spain have interpreted this “connection” broadly, looking beyond mere legal ownership.

In practice, this means if a state’s instrumentalities or companies hold assets that are effectively used for the state’s benefit or under its control, a Spanish court may deem those assets connected to the state for enforcement purposes.

Spanish courts are willing, in appropriate cases, to pierce the corporate veil of state-owned entities.

If a creditor can show that a state-owned company is deliberately being used to hide assets or evade obligations, or that recognizing its separate legal personality would frustrate justice, the courts may allow attachment of that entity’s assets.

Notably, the drafting history of the UN Convention on State Immunities (to which Spain is a party, although not yet in force) confirms that “connection” is broader than formal ownership and does not preclude veil-piercing in cases of fraud or abuse.

The Equatorial Guinea Airplane Case: A Leading Precedent

Spain’s leading precedent on sovereign veil-piercing came out of a high-profile dispute involving Equatorial Guinea.

In 2016, the High Court of Madrid (Tribunal Superior de Justicia de Madrid) faced an effort to enforce an arbitral award against the Republic of Equatorial Guinea by seizing a Boeing 777 aircraft used by Equatorial Guinea’s national airline. The case stemmed from an OHADA arbitration award in favor of a Cameroonian investor (Yves-Michel Fotso) against Equatorial Guinea for over €70 million.

This scenario raised two thorny issues:

Could the Spanish court assert jurisdiction given sovereign immunity? and

Could it attach an asset technically owned by a state-owned company that wasn’t a party to the arbitration?

The court first recognized the OHADA arbitral award under the New York Convention, marking the first such recognition in Spain.

Regarding immunity, it treated Equatorial Guinea’s agreement to arbitrate as an implicit waiver of jurisdictional immunity.

The remaining battle was over enforcement immunity and the status of the airplane.

In its reasoning, the court drew the classic distinction between sovereign public acts and commercial acts.

Operating a national airline was deemed a commercial activity (ius gestionis), not an exercise of governmental authority.

The court noted the trend in international jurisprudence restricting immunity for states acting as market participants.

Crucially, it “mixed company and state,” effectively holding that the airline’s separate corporate personality did not shield the asset from enforcement.

The outcome of this precedent was significant. The court’s order, issued in November 2016, was final (no appeal was possible), and it sent a clear signal: Spanish courts can and will pierce the sovereign veil when a state funnels commercial assets into an entity to avoid creditors.

Practically, Equatorial Guinea reacted by keeping its aircraft out of Spain to avoid seizure.

But the legal principle was established – a claimant with an award or judgment against a foreign state can reach assets of state-owned companies in Spain, if those assets are used for commercial purposes and the company is essentially an arm of the state.

Practical Takeaways for Enforcement Against States or SOEs in Spain

• Distinguish Jurisdiction and Execution: Overcoming jurisdictional immunity is only the first step. A state’s agreement to arbitrate or a contractual waiver will usually handle jurisdiction. The real battle in Spain is over enforcement immunity.
• Identify Commercial Assets in Spain: Investigate what assets the state or its entities hold in Spain and determine how they are used. Assets used in commercial activities (aircraft used by a state airline, bank accounts for state-run businesses, etc.) are the most viable for attachment.
• Leverage the Alter Ego Doctrine with Evidence: If the assets are held by an SOE, gather evidence of the state’s control and the entity’s role. Any proof of the state shifting assets to the entity to avoid creditors will strongly support a veil-piercing argument.
• Expect Government Involvement: The Spanish Foreign Ministry may submit opinions on immunity in sensitive cases. These are not binding, but counsel should be ready to address them.
• Case-by-Case Outcomes: The Equatorial Guinea case remains the key precedent, but enforcement success depends on strong facts and strategic litigation.

Conclusion

In conclusion, Spanish courts have shown an openness to piercing the sovereign veil in the right circumstances.

A foreign state cannot simply park assets in a government-owned company and assume they are untouchable if creditors come to Spain.

By understanding the nuances of Spanish sovereign immunity law and gathering strong evidence of state control or commercial use, creditors increase their chances of enforcement.

This balanced approach – respecting genuine sovereign functions while not allowing abuse of the corporate form – makes Spain an interesting (and sometimes favorable) jurisdiction for enforcing awards and judgments against states and their enterprises. International lawyers and arbitration practitioners should take note of Spain’s evolving case law in this area, as it provides both a roadmap and a cautionary tale for enforcement strategies worldwide.

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