China Adopts Restrictive Theory of Foreign State Immunity

Written by Bill Dodge, the John D. Ayer Chair in Business Law and Martin Luther King Jr. Professor of Law at UC Davis School of Law.

On September 1, 2023, the Standing Committee of the National People’s Congress promulgated the Foreign State Immunity Law of the People’s Republic of China (FSIL) (English translation here). When the law enters into force on January 1, 2024, China will join those countries—a clear majority—that have adopted the restrictive theory of foreign state immunity. For the law of state immunity, this move is particularly significant because China had been the most important adherent to the rival, absolute theory of foreign state immunity.

In two prior posts (here and here), I discussed a draft of the FSIL (English translation here). In this post I analyze the final version of the law, noting some of its key provision and identifying changes from the draft, some of which address issues that I had identified. I also explain why analysts who see China’s new law as a form of “Wolf Warrior Diplomacy” are mistaken. Contrary to some suggestions, the FSIL will not allow China to sue the United States over U.S. export controls on computer chips or potential restrictions on Tiktok. Rather, the FSIL is properly viewed as a step towards joining the international community on an important question of international law.

The Restrictive Theory of Foreign State Immunity

Under the restrictive theory of foreign state immunity, foreign states are immune from suits based on their governmental acts (acta jure imperii) but not from suits based on their non-governmental acts (acta jure gestionis). During the twentieth century many countries moved from an absolute theory of foreign state immunity, under which countries could never be sued in another country’s courts, to the restrictive theory. Russia and China long adhered to the absolute theory. But Russia joined the restrictive immunity camp in 2016, when its law on the jurisdictional immunity of foreign states went into effect.

In 2005, China signed the U.N. Convention on Jurisdictional Immunities of States and Their Property, which follows the restrictive theory. But China has not ratified the U.N. Convention, and the Convention has not gained enough signatories to enter into force. As I noted in a prior post, China stated in 2009 that, despite signing the U.N. Convention, its position on foreign state immunity had not changed and that it still followed the absolute theory.

China’s new FSIL therefore marks a significant shift in China’s position on an important question of international law. As I explained in my earlier posts and discuss further below, the FSIL follows the U.N. Convention in many respects. By adopting this law, however, China has extended these rules not only to other countries that may join the Convention but to all countries, even those like the United States that are unlikely ever to sign this treaty.

Significant Provisions of the State Immunity Law

China’s FSIL begins, as most such laws do, with a general presumption that foreign states and their property are immune from jurisdiction. Article 3 says: “Foreign states and their property enjoy immunity from the jurisdiction of PRC courts, except as otherwise provided by this Law.” Article 2 defines “foreign states” to include “foreign sovereign states,” “state organs or constituent parts of foreign sovereign states,” and “organizations or individuals who are authorized by foreign sovereign states to exercise sovereign authority and who engage in activities on the basis of such authorization.” These provisions generally track Articles 1 and 2(1)(b) of the U.N. Convention.

Waiver Exception

Articles 4-6 of the FSIL law provide that a foreign state is not immune from jurisdiction when it has consented to the jurisdiction of Chinese courts. Article 4 sets forth means by which a foreign state may expressly consent to jurisdiction. Article 5 provides that a foreign state is deemed to consent if it files suit as a plaintiff, participates as a defendant and files “an answer or a counterclaim on the merits of the case,” or participates as a third party in Chinese courts. Article 5 further provides that a foreign state participating as a plaintiff or third party waives immunity from counterclaims arising from the same legal relationship or facts. Article 6, on the other hand, says that a foreign state shall not be deemed to have consented to jurisdiction by appearing in Chinese court to assert immunity, by having its representatives testify, or by choosing Chinese law to govern a particular matter. These provisions track Articles 7-9 of the U.N. Convention.

Commercial Activities Exception

The FSIL also contains a commercial activities exception. Article 7 provides that a foreign state shall not be immune from proceedings arising from commercial activities when those activities “took place in PRC territory, or have had a direct effect in PRC territory even though they took place outside PRC territory.” Article 7 defines “commercial activity” as “transactions of goods or services, investments, borrowing and lending, and other acts of a commercial nature that do not constitute an exercise of sovereign authority.” To determine whether an act is commercial, “a PRC court shall undertake an overall consideration of the act’s nature and purpose.” Like the U.N. Convention, the FSIL deals separately with employment contracts (Article 8) and intellectual property cases (Article 11).

Article 7’s reference to both “nature and purpose” is significant. U.N. Convention Article 2(2) allows consideration of both. But considering “purpose” is likely to result in a narrower exception—and thus in broader immunity for foreign states—than considering “nature” alone. Under the U.S. Foreign Sovereign Immunities Act (FSIA), the commercial character of an act is determined only by reference to its nature and not by reference to its purpose. Applying this definition, the U.S. Supreme Court has held that issuing foreign government bonds is a commercial activity, even if done for a sovereign purpose. It is unclear if Chinese courts applying the FSIL will reach the same conclusion.

Territorial Tort Exception

Article 9 of the FSIL creates an exception to immunity for claims “arising from personal injury or death or damage to movable or immovable property caused by the relevant act of the foreign state in PRC territory.” This generally tracks Article 12 of the U.N. Convention.

Property Exception

Article 10 of the FSIL creates an exception to immunity for claims involving immoveable property in China, interests in moveable or immoveable property arising from gifts, bequests, or inheritance, and interests in trust property and bankruptcy estates. This provision closely follows Article 13 of the U.N. Convention.

Arbitration Exception

Article 12 provides that a foreign state that has agreed to arbitrate disputes is not immune from jurisdiction with respect to certain matters requiring review by a court. These include “the validity of the arbitration agreement,” “the confirmation or enforcement of the arbitral award,” and “the setting aside of the arbitral award.” This provision corresponds to Article 17 of the U.N. Convention.

Reciprocity Clause

China’s FSIL also contains a reciprocity clause. Article 21 provides: “Where foreign states accord the PRC and its property narrower immunity that is provided by this Law, the PRC will apply the principle of reciprocity.” This means, for example, that Chinese courts could hear claims against the United States for expropriations in violation of international law or for international terrorism, because the U.S. FSIA has exceptions for suchclaims, even though China’s FSIL does not.

The U.N. Convention does not have a reciprocity provision. Nor do most other states that have codified the law of state immunity. But Russia’s 2016 law on the jurisdictional immunities of foreign states does contain such a clause in Article 4(1), and Argentina’s state immunity law contains a reciprocity clause specifically for the immunity of central bank assets, reportedly adopted at China’s request.

The FSIL’s reciprocity clause is consistent with the emphasis on reciprocity that one finds in other provisions of Chinese law. For example, Article 289 of China’s Civil Procedure Law (numbered Article 282 in this translation, prior to the law’s 2022 amendment of other provisions), provides for the recognition and enforcement of foreign judgments “pursuant to international treaties concluded or acceded to by the People’s Republic of China or in accordance with the principle of reciprocity.”

The example of foreign judgments also shows that reciprocity may be interpreted narrowly or broadly. China used to insist on “de facto” reciprocity for foreign judgments—proof that the foreign country had previously recognized Chinese judgments. Last year, however, China shifted to a more liberal “de jure” approach, under which reciprocity is satisfied if the foreign country would recognize Chinese judgments even if it has not already done so. Time will tell how Chinese courts interpret reciprocity under the FSIL.


Article 17 of the FSIL provides that Chinese courts may serve process on a foreign state as provided in treaties between China and the foreign state or by “other means accepted by the foreign state and not prohibited by PRC law.” (The United States and China are both parties to the Hague Service Convention, which provides for service through the receiving state’s Central Authority.) If neither of these means is possible, then service may be made by sending a diplomatic note. A foreign state may not object to improper service after it has made a pleading on the merits. This provision also follows the U.N. Convention closely, specifically Article 22.

Default Judgments

If the foreign state does not appear, Article 18 of China’s draft law requires a Chinese court to “sua sponte ascertain whether the foreign state enjoys immunity from its jurisdiction.” The court may not enter a default judgment until at least six months after the foreign state has been served. The judgment must then be served on the foreign state, which will have six months to appeal. Article 23 of the U.N. Convention is similar but with four-month time periods.

Immunity of Property from Execution

Under customary international law, the immunity of a foreign state’s property from compulsory measures like execution of a judgment is separate from—and generally broader than—a foreign state’s immunity from suit. Articles 13-15 of the FSIL address the immunity of a foreign state’s property from compulsory measures.

Article 13 states the general rule that “[t]he property of a foreign state enjoys immunity from the judicial compulsory measures of PRC courts” and further provides that a foreign state’s waiver of immunity from suit is not a waiver of immunity from compulsory measures. Article 14 creates three exceptions to immunity: (1) when the foreign state has expressly waived such immunity; (2) when the foreign state has specifically earmarked property for the enforcement of such measures; and (3) “to implement the effective judgments and rulings of PRC courts” when the property is used for commercial activities, relates to the proceedings, and is located in China. Article 15 goes on to identify types of property that shall not be regarded as used for commercial activities for the purpose of Article 14(3), including the bank accounts of diplomatic missions, property of a military character, central bank assets, and property of scientific, cultural, or historical value.

As discussed further below, the addition of “rulings” (??) to Article 14(3) is significant because Chinese court decisions that recognize foreign judgments are considered “rulings.” This change means that the exception may be used to enforce foreign court judgments against the property of a foreign state located in China by obtaining a Chinese court ruling recognizing the foreign judgment. This change brings the FSIL into greater alignment with Articles 19-21 of the U.N. Convention, which similarly permit execution of domestic and foreign judgments against the property of foreign states.

Foreign Officials

As noted above, Article 2 of the FSIL defines “foreign state” to include “individuals who are authorized by foreign sovereign states to exercise sovereign authority and who engage in activities on the basis of such authorization.” The impact of the FSIL on foreign official immunity is limited by Article 20, which says that the FSIL shall not affect diplomatic immunity, consular immunity, special-missions immunity, or head of state immunity. But Article 20 makes no mention of conduct-based immunity—that is, the immunity that foreign officials enjoy under customary international law for acts taken in their official capacities.

Thus, foreign officials not mentioned in Article 20 will be subject to suit in Chinese courts, even for acts taken in their official capacities, if one of the exceptions discussed above applies. If, for example, a foreign official makes misrepresentations in connection with a foreign state’s issuance of bonds, the FSIL’s commercial activities exception would seem to allow claims for fraud not just against the foreign state but also against the foreign official.

The FSIL’s treatment of foreign officials generally tracks the U.N. Convention, both in defining “foreign state” to include foreign officials (Art. 2(1)(b)(iv)) and in exempting diplomats, consuls, and heads of state (Art. 3). But, as I noted in an earlier post, there is no reason China had to follow the U.N. Convention’s odd treatment of conduct-based immunity. Doing so in the absence of a treaty, moreover, appears to violate international law by affording some foreign officials less immunity than customary international law requires.

Some Changes from the Draft Law

The NPC Standing Committee made small but potentially significant changes to the draft law in promulgating the FSIL. The NPC Observer has a helpful chart comparing the Chinese text of the final version to the draft law.

One change that others have noted is the explicit mention of “borrowing and lending” (??) in the commercial activities exception in Article 7. The enormous amounts that China has loaned to foreign states under the Belt and Road Initiative may explain this addition. But the practical effect of the change seems limited for two reasons. First, “borrowing and lending” would have naturally fallen into the catch-all phrase “other acts of a commercial nature” in any event. Second, as noted above, Article 7 instructs Chinese courts to “undertake an overall consideration of the act’s nature and purpose.” Considering an act’s purpose may lead Chinese courts to conclude that some “borrowing and lending” involving foreign states is not commercial if it is done for governmental purposes.

The NPC Standing Committee also helpfully changed Article 9’s territorial tort exception to clarify when that exception applies. In an earlier post, I wrote that the draft law did “not make clear whether it is the tortious act, the injury, or both that must occur within the territory of China.” The final text of the FSIL now clearly states that the relevant conduct of the foreign state, though not the injury, must occur within China (???????????? ??????????????). This position is generally consistent with Article 12 of the U.N. Convention but, most importantly, it is simply clearer than the text of the draft law.

Another small but important change is the addition of “rulings” (??) to Article 14(3)’s exception for compulsory measures to enforce judgments. The corresponding provision in the draft law referred to Chinese “judgments” (??) but not to “rulings.” As I pointed out before,  this omission was significant because Chinese decisions recognizing foreign court decisions are designated “rulings” rather than “judgments.” Under the draft law, the exception would have allowed execution against the property of a foreign state for Chinese court judgments but not for Chinese rulings recognizing foreign judgments. By adding “rulings” to the final text of the FSIL, the NPC Standing Committee has brought this exception more in line with Article 19(c) of the U.N. Convention and made it available to help enforce foreign judgments against foreign-state-owned property in China if the other requirements of the exception are met.

In another change from the draft law, the NPC Standing Committee has added “PRC Courts” (??????????) to the beginning of Article 17 on service of process. The general practice in China is that courts, rather than litigants, serve process. This is one reason why the practice of some U.S. courts to authorize alternative service on Chinese defendants by email is problematic. For present purposes, the change simply clarifies something that Chinese practitioners would take for granted but non-Chinese practitioners might not.

Article 20 provides that the FSIL does not affect the immunities of certain foreign officials. In its second paragraph, dealing with head-of-state immunity, the NPC Standing Committee has added “international custom” (????? ?) as well as “PRC laws” and “international agreements.” This makes sense. Although diplomatic immunity, consular immunity, and other immunities mentioned in the first paragraph of Article 20 are governed by treaties, head-of-state immunity is governed not by treaty but by customary international law.

Finally, in Article 21’s reciprocity provision, the NPC standing committee has eliminated the word “may” (??). The effect of this change is to make the application of reciprocity mandatory when foreign states accord China and its property narrower immunity than is provided by the FSIL.

The Impact on China-U.S. Relations

Recent media coverage has suggested that China views the FSIL as a legal tool in its struggle with the United States. A senior official in China’s Ministry of Foreign Affairs was quoted as saying that the law “provides a solid legal basis for China to take countermeasures” against discriminatory action by foreign courts and may have a “preventive, warning and deterrent” effect. One analyst has even suggested that the FSIL is “an important part of China’s Wolf Warrior diplomacy, and another step forward in its diplomatic bullying of other countries.” Such comments miss the mark. As Professor Donald Clarke aptly observes: “All China is doing is adopting a policy toward sovereign immunity that is the one already adopted by most other states.”

Professor Sophia Tang points out that, although suits against China in U.S. courts over Covid-19 pushed the issue of state immunity up on Chinese lawmakers’ agenda, the question had been under discussion for years. The Covid-19 lawsuits may explain why China included Article 21’s provision on reciprocity, but it bears emphasis that these suits against China were dismissed by U.S. courts on grounds of state immunity. If Congress were foolish enough to amend the FSIA to permit such suits, the FSIL’s reciprocity provision would allow China to respond in kind, but this scenario seems unlikely.

China’s FSIL will not permit suits against the United States for other actions that China has protested, such as U.S. export controls on selling semiconductors to China or potential restrictions on TikTok. These are governmental actions, and the restrictive theory adopted by the FSIL maintains state immunity for governmental actions.

On the other hand, the FSIL clearly will permit suits in Chinese courts against foreign governments that breach commercial contracts. As Professor Congyan Cai points out, the FSIL may play a role in enforcing contracts with foreign governments under China’s Belt and Road Initiative. More generally, Clarke notes, China’s past adherence to the absolute theory meant that Chinese parties could not sue foreign states in Chinese courts even though foreign parties could sue China in foreign courts. “China finally decided,” he continues, “that there was no point in maintaining the doctrine of absolute sovereignty, since other states weren’t respecting it in their courts and the only people it was hurting were Chinese plaintiffs.”

Ultimately, the FSIL is a step in what Professor Cai has called China’s “progressive compliance” with international law, which helps legitimate China as a rising power. The FSIL brings Chinese law into alignment with the law on state immunity in most other countries, ending its status as an outlier in this area.

[This post is cross-posted at Transnational Litigation Blog.]