Doing Business in China For Dummies®

Sovereign Immunity Waiver

Most countries allow the government to have sovereign immunity, which means that people can’t sue the government for damages unless it waives the immunity. The sovereign immunity waiver is only for when you’re doing business with the government, quasi-governmental bodies, or state-owned enterprises (SOEs). For instance, you’d want to use this waiver if you were to execute an investment agreement with a local government or government company. Typically, the contract guarantees various benefits and incentives for your company.

Most lawyers don’t consider this waiver an ironclad guarantee that you can enforce a judgment or arbitration award on a governmental or quasi-governmental party. It’s pretty untested, actually. However, this provision is better than nothing, particularly because it provides a disincentive for bad behavior.