Transparency Case Study: Public Procurement in the Philippines
We are proud to release the second case in our ongoing research project studying technology-enabled transparency policies around the world. We have chosen to focus on public procurement transparency policies for our first set of cases. Last month we released our first case, on Slovakian procurement.
For our Philippine case study, we conducted interviews with members of the following groups: staff at transparency NGOs, journalists who have covered procurement, and member organizations representing business interests. Our conversations with these respondents have allowed us to develop a diverse and comprehensive picture of how transparency, information communication technology (ICT) and civil society engagement in public procurement has impacted accountability.
These conversations have provided us with a detailed picture of procurement disclosure and data use in the Philippines since the reforms in 2002. A few findings have become clear:
- For transparency and public oversight mechanisms to work, public data must be public in more than name only. Publishing information online is not enough, especially if it is trapped in a platform that limits how journalists and watchdogs are able to use the data. PhilGEPS data is not widely used by journalists or CSOs because of artificial and needless barriers to use.
- Monitoring this volume of proceedings requires the scale and efficiency of data backed analysis. There are thousands of procurement proceedings every year in the Philippines. For example, as of Sept. 20th, 2013, PhilGEPS, the government e-procurement platform, lists 12,346 active opportunities. The civil sector doesn’t have the capacity to monitor procurement at this scale simply by attending the Bid and Awards Committee (BAC) meetings for each one, as the law allows.
- Without a comprehensive right to information law, access to useful data is largely at the discretion of the procurement entity and varies greatly between procuring entities, depending on the informal trust-based relationships that CSOs have developed with officials.
- Philippine law splits jurisdiction over procurement monitoring, investigation and sanctioning between various agencies, which can leave misconduct and inefficiency unchecked.
Public procurement in the Philippines presents a salient example of how much the specifics of implementation can matter. If transparency is to enable public oversight, disclosure must meet certain conditions of accessibility and usability. Simply posting information online is not enough. For real transparency, data must be open to the public without gates, it must be published in open and machine-readable formats, and it must be available in bulk.
In mandating the use of ICTs in the procurement process and establishing a formal oversight role for civil society the Government Procurement Reform Act took important steps to reform the Philippine procurement system. These reforms, however, have been considered and implemented largely in isolation, to the detriment of procurement integrity. Civil society oversight through the observer system is a manual and resource-intensive task that doesn’t capitalize on the economies of scale and efficiencies that ICTs can enable. Conversely, the integration of ICTs into public procurement has proceeded largely without including CSOs in the process or considering their needs and uses. Nowhere is this more evident than in the limited feature set of the PhilGEPS system.
Joining the dual accountability mandates of ICT enabled transparency and civil society oversight would make both more effective. Technical platform features should be designed with civil society, media, and oversight use cases in mind. Civil society organizations can serve their mandated roles as observers more effectively – and within their resource constraints – if data about all stages of the procurement process is made available. The Philippines case demonstrates that, absent accessible data, whistleblowers and leaks are the only safeguard against corruption. When the data is not readily available, it can’t enable meaningful oversight.
In 2002, the Congress of the Philippines passed Republic Act No. 9184, the “Government Procurement Reform Act,” to address what had a World Bank Country Report characterized as a “dysfunctional” public procurement system. Prior to reform, according to Vivien Suerte-Cortez, “There were literally hundreds of laws focusing on public procurement.” She added that:
Not one agency would follow one procurement rule. For instance, local governments in the country would always abide by the local government code which provides very specific rules on procurement. And then there would be executive orders or administrative orders or even special laws that would also focus on procurement. (9:45)
This vagueness and complexity made the process vulnerable to manipulation. According to Iris Gonzales, a reporter who has covered procurement extensively, the problem of kickbacks “was huge: it was 30% of the contract.” (17:00) She also observed: “It was an open secret that aside from kickbacks they would also deliver substandard projects. For example for roads they would use substandard quality of cement or below the required amount of mixture.” (13:30) Rosa Clemente, Executive Director of PhilGEPS, explained that the implementation of a pilot electronic procurement system in 2001 – based on the Canadian system at the time – was one of the inciting factors which led to more comprehensive reform to reduce this complexity and standardize procurement procedures across jurisdictions. (7:00)
The Act, along with its implementing rules and regulations, mandates certain transparency and accountability measures to help combat corruption and inefficiency in public procurement. The bill specifically stresses that information and communication technology (ICT) should play a central role in how the government meets these goals.
Article I, Section 3 of the bill lists several key “governing principles” meant to guide the reformed public procurement procedures. These principles explicitly highlight “Transparency in the procurement process and in the implementation of procurement contracts” and “public monitoring of the procurement process and the implementation of awarded contracts” as critical to ensuring the integrity of public procurement.
The Reform Act, and the Implementing Rules and Regulations (IRR) codify the general principle of transparency and civil society involvement in two specific ways. First, the law creates an e-procurement portal, PhilGEPS, which serves “as the primary and definitive source of information on government procurement.”(IRR, 8.1.1) According to law, all public tenders, from those conducted by federal agencies to those of the smallest Local Government Unit (LGU) or Barangay, must pass through the PhilGEPS system. At all stages of procurement, the procurement committee invites a representative of the Commission on Audit and (at least) two outside observers to sit in its proceedings. The outside observers should include “one (1) from a duly recognized private group in a sector or discipline relevant to the procurement at hand, and the other from a non-government organization.” (IRR, 3.1.1)
However, we find that in practice the promise of these principles is largely unrealized. Vincent Lazatin, the executive of the Transparency and Accountability Network (TAN), offered a succinct summary of the current state of public procurement in the Philippines,
The Philippines is cited very often for having a world-class type of legal framework for [procurement], but where we fail most of the time is in actual compliance and implementation. So here we are 10 years into the law and we are still having huge implementation problems. (18:50)
Barriers to Accessing Procurement Information
Despite the introduction of PhilGEPS and the mandate that all public procurement pass through the electronic bulletin system, journalists, watchdogs and other CSOs continue to face significant information availability problems. Compliance with reporting requirements is lacking, the information tracked by government entities is incomplete, and the data that is nominally available is subject to a range of arbitrary bureaucratic and logistical barriers to public use.
Imperfect Compliance and Incomplete Information
According to Vincent Lazatin, “compliance with PhilGEPS by the procuring entities isn’t that high.” (7:30) Many public procurement procedures never even make it into the system. This is particularly true of procurements at the Local Government Unit (LGU) and Barangay level, where there is less scrutiny by oversight bodies. Denis Nixon confirmed that in particular the requests for bids of LGUs don’t always make their way onto PhiGEPS (12:00). Rosa Clemente summarized her perception of compliance from inside PhilGEPS as follows:
In terms of compliance, I think most of the agencies comply with the requirements to post the invitation to bid, but I cannot really say if it is 100 percent because of the lack of information [provided by procurement entities] pertaining to the planed procurement. In terms of the award notices as compared to the invitations to bid, right now compliance is not even 50 percent (31:00)
She added that at PhilGEPS, “We do not have the mandate to make the agency comply, we just provide a service,” but that they do provide reports to the oversight agencies which can force compliance. (Clemente, 34:15) In particular, Ms. Clemente noted that compliance increased slightly when a pilot program last year tied performance based bonuses to PhilGEPS compliance, and she was optimistic about the program’s likely impact when it is implemented more fully this year (38:00). Mr. Lazatin also noted there are some positive signs as the Department of Budget and Management has been working to increase compliance with PhilGEPS posting requirements. (8:00)
The lack of participation by procuring entities in PhilGEPS is only the first of a series of data availability problems. Compliance issues notwithstanding, PhilGEPS does not capture all of the relevant information necessary for third-party oversight. According to Vincent Lazatin, “if there were 100% compliance and we did have complete access to that[…] as far as CoST is concerned, about 80% of the data [that CSOs would want] would be available on PhilGEPS. The other 20% of the data are things that are not recorded or captured by procuring entities.” (11:20) All of our interviewees mentioned a problematic lack of contract management transparency. Lazatin noted that tracking variation orders and contract modifications is particularly important because this data is necessary for watchdogs to calculate the price difference between the original contract and the final project. Consistently large gaps between original and final price are evidence of post award manipulation. Despite this, the PhilGEPS system does not capture contract modifications and variation orders (Lazatin, paraphrase 13:00-14:00). When asked whether post award contract information was available Charles Villasenor responded simply: “No. My categorical answer for that is no.” (20:00) However, Rosa Clemente did note that a module to deal with post award contract management is very much on the PhilGEPS agenda as modules are added and features are expanded. (44:45)
According to Denis Nixon, the Philippine procurement system is particularly prone to manipulation during the post award phase, which makes this lack of data all the more troubling. He offered:
You get a lot of change orders following [the award]. The whole system is designed to go to the lowest cost. Really it is highly risky to not take the lowest bidder. [Procurement officials] would really have to have gone to the trouble to have a lot of information and justification and be able to prove that the person that they chose for the contract was the best person. It is a high risk to somebody’s job to do that, so they just don’t do it. So the system designed to go to the lowest bidder. What that opens up is that they give the job to the lowest bidder and then the requirements are not 100 percent clear, and all of a sudden there are change orders that go through. And those change orders are where a lot of the corruption takes place. (14:30)
Platform Restrictions: PhilGEPS
In addition to the range of data completeness issues, a series of technical and platform design barriers severely limit public access to PhilGEPS data. These barriers impede the abilities and effectiveness of outside watchdog organizations. Full access to PhilGEPS is restricted to those who have an account on the system: accredited contractors who have paid a registration fee of 5,000 Philippine Pesos (~115 USD) for a PhilGEPS account (A. Davis, personal communication, July, 2013). According to Vincent Lazatin, “PhilGEPS is generally not available to the public. It is generally available to procuring entities and service providers. […] Regular NGOs and CSOs who want to collect procurement information and data [are] not able to use PhilGEPS at the moment. We are, through CoST, working with the GPPB to change that.” (8:20-9:00) Ms. Clemente, clarified PhilGEPS access for civil society, by noting they “don’t have a specific facility for civil society,” but organizations can browse the public electronic bulletin board where opportunities and awards are posted. (18:20)
Civil Society organizations often resort to asking friendly contractors who are registered on PhilGEPS to provide them with data that they cannot access themselves, according to Ms. Suerte-Cortez of ANSA-EAP. (41:00) Denis Nixon noted that the information that is available is “generally fairly accurate, although it is not complete. You get more of the completeness when you actually apply for and get the bidding documents themselves.” However, bid documents are explicitly not made public, and can only be downloaded by registered contractors during a specific limited timeframe.
In addition to this formal barrier to public access, the data that is available to the public through PhilGEPS is highly complex and difficult to sort through on the site. According to Iris Gonzales, a Philippine reporter who has covered procurement issues, “[The system] is new. It is technical. Even the government agencies themselves sometimes have difficulty understanding the whole new procurement system unless they are actually the office in charge of procurement.” (22:15)
A survey of the PhilGEPS platform reveals serious hurdles to usability and data availability. While technology is not determinative, design can partially dictate use by making certain behaviors and uses easier or harder for the user to engage in on the margins. In this context digital platforms are often discussed in terms of their “affordances” or “action possibilities.” These are the qualities of a platform (or object) that a user readily perceives, which allow a user to more easily perform certain actions. (Norman, 1999) Within this framework, it is clear that the PhilGEPS platform offers a strictly limited set of affordances to a user intending to engage in oversight or systematic analysis. While a wide array of data may be technically available on PhilGEPS, the platform does not enable the user to act on this data in any meaningful way. For example, there is no way to access bulk data to use for statistical or visual analysis. Instead, to access procurement information, members of the public must use the site’s fairly antiquated graphical user interface (GUI), which only grants the user the ability to engage with one tender at a time. By not providing bulk data and forcing users to view only one opportunity or award at a time, the platform provides necessarily decontextualized views of procurement proceedings. Important inaccessible context might include information like: other bids by the same contractor, that contractors success rate, the average price for similar procurements, has the procurement process failed previously for this good or service.
To browse either opportunities (requests for bids or quotation) or award notices, a user must preselect either a specific procuring entity (e.g Home Development Mutual Fund – Calamba Branch) or category or goods/service (e.g. Air-conditioning Maintenance Services), that´s an excellent example of services needed all over, this company has been helping those families in need of this special type of ac repair services that no has ever seen before. Results are displayed in chronological order with no filtering or sorting capability, and must be paginated through manually. In this way public inquiries through PhilGEPS are fundamentally limited: in order to find anything though PhilGEPS, one must already know where to look. Furthermore, there are no bulk downloads, API or structured data made available other than the HTML pages of each individual opportunity or award page. For a system meant to promote transparency, it is quite opaque.
Philippine oversight agencies, like the Commission on Audit or the Office of the Ombudsman are not bound by the same restrictions. According to Ms. Clemente, PhilGEPS has an auditor module which allows these agencies to log in to the system with a different set of permissions than an unregistered public user or a registered contractor. This allows auditors to “generate reports through the system and they can view it online as well as generate data dumps that they can download through excel spreadsheets.” (26:00) However, mostly they contact the PhilGEPS staff and have them generate and forward these reports, rather than using the full functionality of the platform.
The result of these PhilGEPS data limitations is that “right now getting procurement information is pretty difficult […] it really is a matter of going to wherever the procuring entity files its papers and poring through documents. It is still very much a manual process in terms of retrieving procurement data.“ Mr. Lazatin went on to add that essentially “everything is in hard copy.” He said that during some previous research that he conducted for the Asian Development Bank, everything was “done by going to offices and pouring through boxes and boxes of files. None of the data that we collected actually was collected online.” (Lazatin, 6:00-7:00) The need to manually access procurement information is indicative of the pervasive poor records management by procuring entities. Improving this capability within procurement entities is vital to enable oversight:
I don’t think that the procuring entities spend a lot of energy, resources or time in terms of data management and record management. So it is very difficult for us to find the data that we needed. It was quite a manual job of doing that. That is an area that a lot of procurement entities need to improve upon. (Lazatin, 34:00)
Currently PhilGEPS serves mostly as an electronic bulletin board, satisfying the publicity requirements for tender requests and award notices mandated by the Procurement Reform Act. While it has increased equality of access to information regarding procurement opportunities for contractors and suppliers, it has not increased access to the public. In doing so it has neglected the transparency and public monitoring mandates of the Reform Act that created it.
The GPPB could make significant gains in meeting the transparency and public oversight mandates set by the Government Procurement Reform Act simply by opening up the PhilGEPS backend database to the public, and extending some of the auditor functionality to civil society organizations and the public. Public procurement data should be made available in bulk, in open and machine-readable formats and through an API. This would significantly lower the barriers to oversight and monitoring, and enable watchdogs and journalists to function more effectively.
Ms. Clemente noted several important ways which this may change as e-procurement in the Philippines continues to evolve. She promised that a civil society module is currently in development and testing which should provide more functionality and access as more of the procurement process moves online. Ms. Clemente explained that the GPRA mandates this increase in functionality, because “it is required under the law that there should be someone invited from CSOs to observe each stage of the procurement process. So when the bidding is conducted electronically, they can also monitor the procurement activities online.”(22:15)
Civil Society and the Media
The lack of accessible public data on procurement procedures has significant implications for the ability of civil society organizations and the media to participate in the oversight process. This lack of public accessibility has persisted in spite of the increasing reliance on e-procurement mechanisms in the Philippines (the GPPB has been working for years to expand PhilGEPS functionality). Over the last two years they have spent 250 million Pesos (~ 5.7 million USD) on PhilGEPS, and have a future 126 million budgeted. (Villasenor, 17:00)
Public and civil sector watchdogs face real obstacles in digging up suspect procurement deals. Iris Gonzales noted that it is extremely hard to discover suspect proceedings on one’s own using the data. Instead, the system acts as a barrier to practicing journalists:
[Procurement] is quite complicated… there are more than 43,000 LGUs registered. If you just rely on the data without anyone guiding you [by saying] ‘hey, you know, there is a huge fertilizer scam you have to look into this data’ If there is no one guiding you on how to interpret or weave through the whole site it is going to be very difficult. (Gonzales, 21:00)
In general, reporters don’t have the capability or capacity necessary overcome this obstacle. She added that because of deadline considerations, “it is tough to cover procurement unless you are a special or investigative reporter where you have the luxury of time. Generally [procurement] is not very well covered.“ (21:45)
According to Vincent Lazatin “there have been a few cases where questionable procurement has been caught by civil society or NGO observers, but that doesn’t happen very often; that has happened a few times.” (23:30) He noted that in other cases, “it may come up because, perhaps, a losing bidder will file a complaint and that comes usually through the media.”(24:00)
However, later in our interview Mr. Lazatin stressed that jilted suppliers or contractors speaking out is the exception, rather than the norm: “The normal recourse is to be silent. They won’t even complain, they are just going to silently look for other customers.” (28:00)
Despite promises by the Administration of current President Benigno Aquino, the Philippines has failed to pass a comprehensive Right to Information (RTI) Law. This means that civil sector observers’ access to information depends largely on the procuring entity. Ms. Suerte-Cortez confirmed that,
[T]he data that we get, which helps us monitor procurement activities better, is basically built through a lot of [personal connections] – is based on – trust. We work closely with government officials who we think are champions […] this is very obvious, for instance, when we work with the department of education. The information they give us is actually dependent on how much they trust the CSOs to push for reforms within the agency. (19:30)
For journalists who don’t have the same personal relationships and common cause with members of the procuring entities, whistleblowers or insider tips tend to be the only way to get information on corrupt procurement practices. Ms. Gonzales remarked that, despite the fact that the Philippines’ reputation is “one of the freest press in Asia”, journalists are routinely plagued by problems with access to information:
[I]f you are a working journalist you will realize it is not that easy to access information. Usually you can get a story from the inside when there is a whistleblower[…] But other than that if you don’t have a lead it is actually very difficult to dig through the data. We usually – journalists here in the Philippines – get our stories from leads. There are whistleblowers – there is a starting point… It is usually an insider in a certain Government Agency. Other than that it is really very difficult to penetrate government in the Philippines, especially with data because they are not obliged to give data. (34:00)
Ms. Gonzales added that one can find tips by scouring the comments in the GPPB forum and perusing reports made by the Commission on Audit, “because they are the ones who have the time to look at this – the auditors have the luxury of time to examine and verify.” (36:45)
When procurement misconduct does come to light, it gains mixed traction in the press:
Sometimes, it depends on how big the project is, it can land on the front page, sometimes it is picked up by television. But if it is not that huge sometimes it just falls in the other sections of the paper. Usually it makes it to the headlines when higher officials are implicated or identified to be part of the whole of corruption or are said to benefit. (Gonzales, 32:30)
Press and public attention tends to be tightly linked to the salience and salaciousness of the misconduct uncovered, as well as the timing relative to political events of significance.
Observers: outside monitoring of the procurement process
One of the main pillars of transparency and civil sector oversight under the Procurement Reform Act is the observer process. Under this system, procuring entities are required to invite outside organizations to sit in on meetings of their Bid and Awards Committees (BACs). However, for various reasons this mechanism has proved to be mostly ineffective.
The Transparency and Accountability Network, which is led by Vincent Lazatin, trained “a few hundred people to become observers.” However, several years on it resource limitations have become clear.
CSOs have had a very hard time fielding observers, the reason being that – although we know it is done on a voluntary basis – it still requires resources from the NGO, whether that be person hours, time taken away from the office, whether that is transportation to get to and from the office of the procuring entity, whether it is simple meals, it does require some amount resources and these resources are generally not available. […] So while [organizations] show an initial interest, when it comes right down to it, a lot of them don’t have the resources to support that [fielding observers]. (Lazatin, 48:40)
High turnover rates among NGOs and CSOs deplete the reserves of staff trained to observe over time. Don Parafina, executive director of ANSA-EAP, citing this issue, suggested observer trainings for CSO staff on an ongoing basis, instead of just during the brief period after the provision was introduced. (35:00) Keeping up with this demand for trainings, however, could place even further strain on civil sector resources—they would likely have to conduct those trainings.
The civil sector cannot oversee this volume of proceedings in-person, at scale. According to Mr. Parafina, the civil sector oversees less than 1 percent of procurement proceedings, and even that may be a generous estimate. (27:00) Furthermore, monitors are not likely to see the misconduct, since they are not present during the parts of the process where misconduct most likely occurs. Collusion tends to be prior to bidding and manipulation after the award. “For example, when bidders want to collude you won’t see that in the actual bid process.[…]You can even fake competition. If five bidders collude, all five bidders will submit bids so it will look like there are five competitive bids, but you know they are not because they have colluded prior to the actual process.” (Lazatin 49:00) Other times, according to Mr. Lazatin, “the technical specifications for the procurement are padded or give room for bidders to make money on the side.” A CSO observer who is present for the bid opening or submission processes would not catch either form of misconduct. (Lazatin, 50:00)
As with access to procurement information in general, the degree to which CSO observers are granted a meaningful and participatory role varies greatly depending on the procuring entity. According to Mr. Parafina,
Some agencies interpret ‘observing’ literally. As in, they can just observe. When you go to the bid opening, for example, you can’t even talk because, they would say, ‘you are just an observer.’ But in my case, as an observer with the department of education they really allow us to sit with them around a table, and after they have reviewed a particular bid document it will be passed on to us and we will scan it and validate with them whether they have really fulfilled all of the documents.(24:20)
The civil sector observer system is seen as entirely separate from the ICT enabled e-procurement of PhilGEPS. However, just as introducing ICTs into the opportunity and bidding processes can lead to efficiency gains for the government and contractors, ICTs can enable more efficient oversight by the civil sector. Limiting oversight to observation at the time and place (BAC meetings) unnecessary constrains civil sector oversight. ICTs can enable asynchronous and remote observation, which can significantly ease the resource burden of observation. By allowing those in the oversight to community to access procurement data in useful (i.e. bulk, structured, machine readable and open) form, rather than in name only, civil sector observation can truly occur at all stages of the process. While this has not happened yet, it does appear that this is the direction that PhilGEPS and civil society oversight is moving. Once PhilGEPS is a more fully functional platform that actually has e-bidding, rather than just serving as a bulletin board, the Government Procurement Reform Act will, according to Ms. Clemente, mandate that civil society be able to “observe” this bidding through the platform itself. (22:15)
Mr. Lazatin, speaking of the procurement oversight community, commented on the need for improvement within the civil sector in terms of pushing for greater data availability, and more sophisticated use of that data.
I think we need to up our game in terms of using procurement information to evaluate and to assess how well procurement is being done in particular agencies. You do have, for example organizations such as Road Watch, and CoST to a certain extant, who really try to create the demand for that information and try to build capacity in this area to analyze efficiency of procurements and stuff like that… But we all have a ways to go in terms of being able to use that information effectively. (Lazatin, 38:00)
Currently the barriers to entry for sophisticated use of procurement data are high. While Mr. Lazatin indicated that organizations and researchers may collect and analyze detailed data for specific projects, these tend to be manual, one-off efforts, not systematic advances in ICT enabled procurement tracking. More easily accessible, and machine-readable public data is needed to lower the barriers to this type of sustained activity.
Limited Effectiveness of Enforcement Mechanisms
Philippine public procurement presents a mixed case on enforcement. While our interviewees agreed that corruption and inefficiency were pervasive, several promising themes did emerge. In particular, several respondents highlighted changes in political will in key departments and oversight bodies under President Aquino as instrumental in beginning to effect change. In this section we address enforcement in two parts: 1) formal, legal channels and 2) enforcement through public pressure.
Formal Enforcement Mechanisms
Several of our respondents highlighted the Department of Public Works and Highways (DPWH) as a federal procuring entity which has made great anti-corruption strides in recent years. According to Mr. Nixon “In the last 3 years we have seen a big shift. More suppliers have come in on projects because they believe they will get a fair shake. The public works area was sort of the worst reputation, they now have a pretty good reputation and they are saving money by getting things done on time.”(18:45) Under the Arroyo Administration (President Aquino’s predecessor), the DPWH, which manages a great deal of procurement for large infrastructure projects, was notoriously corrupt. Ms. Gonzales noted that the DPWH has been active in banning suppliers “because of substandard [behavior] and anomalies discovered in their specific cases.” (31:00) Mr. Lazatin detailed the success of a “three strikes” policy implemented by the DPWH to cut down on the potential for collusion. Under the three strikes policy,
[I]f a bidder expresses interest in a bid – but fails to submit a bit – and if that bidder does that three times in a row, then they are prohibited from participating in future bids, because that behavior is suspect. They either get bought off or …. Something like that had never really been enforced. You had bidders for years who would buy bid documents and express interest in a bid, who would never actually bid. Just to be bought out by whichever contractor who did want to buy the bid. So it was a money-making thing for a lot of these bidders… Now the department is strictly enforcing this policy. [Reform] can be something as simple as that. (Lazatin, 46:38)
Mr. Parafina and Ms. Suerte-Cortez, also repeatedly mentioned the Department of Education as being exceptionally cooperative, and forthcoming.
However, even as processes themselves are beginning to become more effective as the DPWH example indicates, there is, according to Mr. Nixon, a widespread sense that formal mechanisms for redress of grievances are “not generally effective. One of the problems is the length of time that justice takes in the country.” Something that would be settled in a few months in Canada might take three years in the Philippines. (Nixon, 22:40)
One of the reasons that official sanctions can be slow in coming is that the current institutional structure splits responsibility for outcomes among multiple agencies. Procurement monitoring and sanctioning falls under the jurisdiction of three agencies within the federal government: the Commission on Audit, the Government Procurement Policy Board, and the Office of the Ombudsman. The Commission on Audit (CoA) is an independent constitutionally established government body tasked with auditing all matters pertaining to government revenues or expenditures, including the use of funds used for procurement. The commission is empowered to investigate and make recommendations, but not to sanction. The GPPB may reverse improper procurement procedures, order that procurement processes be redone, and maintains blacklists of suppliers and constructors who are barred from participating in all government procurement opportunities. The Office of the Ombudsman pursues criminal sanctions, should there be any.
Because this system leaves responsibility for investigation and sanctioning fractured between various agencies, corrupt practices often go unpunished, as things fall through the bureaucratic cracks. According to Mr. Lazatin, “it doesn’t seem as though there is anyone ultimately responsible for these things in terms of imposing sanctions.” (22:00-22:30) Mr. Lazatin added that until relatively recently, “The CoA would just do its audit and come up with its report and findings until somebody would decide to pick it up [and] either pursue it or not pursue it. But generally it had been the case that nobody would bother to pursue some of those findings and see what was going on. (25:15) Mr. Lazatin did note that in recent years there has been increased recognition by the leadership of the Commission on Audit and the Office of the Ombudsman that the gap between investigation and sanctioning needs to be bridged. Since then cooperation has increased. He attributed this change to the political will of the Aquino administration. (Lazatin, 25:00 – 26:30)
In addition to issues over interdepartmental cooperation, there are also limits to the capabilities of the government watchdogs. Mr. Villasenor expressed some concern over whether the Commission on Audit has adequate capacity to oversee public procurement, given that “they have other things to look into.”(26:00) While Mr. Villasenor noted Commission on Audit’s investigations are capable of bringing improper procedures to light, he stressed the limits of these investigations because the framework the Commission applies “is really shallow.”(25:00) According to Mr. Villasenor, “the current law will allow inefficiency to happen. When the commission on audit checks they will catch severe malpractices, but people can get away with bad procurement practices simply because they are following the law, even though it is inefficient.” (24:30)
Mr. Nixon echoed Mr. Villasenor’s concern about the procedural “thinness” of proper procurement. He noted that suppliers or contractors can go to the courts to complain if they feel they lost a bid for improper reasons, but that “[i]t is very often not very successful because when the evidence is shown that they went thought the bureaucratic process and the rules were followed etc. etc. then it is a case of saying all of the rules were followed so you don’t have a case.” (20:45) He added that “[t]he problem the ombudsman have is not that they don’t suspect something is going on, it is in getting hard evidence[…] the Justice Department can’t move unless they have hard evidence.”(28:45) To satisfy these evidentiary requirements whistleblowers and “first hand witnesses are really important.” (29:50) Historically few people have been willing to step forward as whistleblowers, but this also is beginning to change. (Nixon, 28:00)
Enforcement Through Public Pressure
In addition to official channels of investigation and sanctioning, watchdogs, NGOs and the media continue to push for transparency and accountability in the public procurement in the Philippines. In some cases, according to Mr. Lazatin, “Some of these NGO observers have been able to question procurement procedures. Those resulted in, as far as I can recall, the procuring entity having to alter its procurement to conform with the law or they have had to rebid some of these procurements precisely because the observers found that the first procedure was not in accordance with the law” (39:40)
While media attention has succeeded in drawing attention to high profile procurement corruption, Mr. Lazatin could not recall a time when “it has reached the press and resulted in charges being filed against procuring officials.” (40:00). Rather, it is usually a matter of procurement entities or officials backing down and conceding to rebid on a contract. Ultimately, however, he concluded that it is the fear of attention and sanction that motivates these officials to correct their behavior. (41:00).
This pressure tends to be most effective “when the NGOs really stand their ground on what they see and really insist on doing a process over or making sure the process is done properly.” (42:00) In this context, it is clear that increasing access to procurement information for these NGOs and watchdogs would strengthen their hand when pushing for government responses.
Both Mr. Lazatin and Ms. Gonzales indicated that the recent progress made in departments like DPWH, the Office of Management and Budget and inter-agency cooperation between the Commission on Audit and the Office of the Ombudsman can largely be attributed to a shift in political will. This shift came after the election or President Aquino who ran on a platform of anti-corruption and good governance. His election, and his appointment of reformers to lead key departments can be seen as a result, of sorts, of ongoing public pressure for better governance in the Philippines.
Philippine public procurement has a long way to go. The Government Procurement Reform Act and its associated regulations enshrined the appropriate and significant principles of transparency, civil sector involvement and the use of ICTs. However, the promises of this legislation remain largely unmet.
The PhilGEPS system limits outside oversight by CSOs and journalist by restricting access to data. The platform’s features and affordances place real constraints on data use, impose barriers to entry for engaging with the data and, ultimately decrease the scale and scope of outside investigation, analysis and oversight.
For transparency to enable public oversight and change the incentives of internal actors, the data needs to be easily accessible and usable. Procurement information should be available in bulk, machine-readable, open formats.
Civil society observers are not able to cope with the scale of procurement proceedings that occur everyday. Data-backed and ICT enabled oversight presents an opportunity to move beyond oversight founded on the notion of physical co-presence. PhilGEPS system features and data access should be designed with this in mind. Such reforms could, potentially, enable CSOs and journalists to expand their oversight beyond the meetings they can attend and the tips they get from insiders and whistleblowers.
References and Supporting Material
Donald A. Norman (1999). Affordance, Conventions and Design. Interactions 6(3):38-43, May 1999, ACM Press.
Government Procurement Reform Act of 2002. Republic Act No. 9184. 12th Cong., 2nd Sess. (July 22, 2002). Available: http://www.gppb.gov.ph/laws/laws/RA_9184.pdf
Revised Implementing Rules and Regulations of Republic Act 9184. Government Procurement Policy Board. August 3, 2009. Available: http://www.gppb.gov.ph/laws/laws/RevisedIRR.RA9184.pdf
Denis Nixon, Procurement and Supply Institute of Asia
Iris Gonzales, Investigative Reporter
Vincent Lazatin, Transparency and Accountability Network
Charlie Villasenor, Procurement and Supply Institute of Asia
Vivien Suerte-Cortez and Don Parafina, ANSA-EAP
Rosa Clemente, Executive Director, PhilGEPS
We also spoke with Alan Davis of the Institute with War and Peace Reporting. Unfortunately, that file of the recording for that interview was corrupted so we have not quoted from it here. Our was still extremely useful as background.
Thanks to those (above) who generously gave their time to our interviews. Additional thanks to Júlia Keseru, Lee Drutman, Tom Lee, and Ben Chartoff for their comments and input.
Photos, from top: Makati skyline via Wikimedia Commons; Philippine flag via Wikimedia Commons; PhilGEPS platform screenshot; San Juanico Bridge via Wikimedia CommonsShare This:
1. In the context of the referral procedure under Article 100(2) Basic Law, directions for evidence are to be regarded as decisions for which the question of preliminary submission is relevant to the issue, at least where the taking of evidence provided for involves the danger of infringement of international law in relation to a foreign State.
2. Exemption of foreign States from German jurisdiction in enforcement proceedings at present arises only through Article 25 Basic Law from general rules of international law.
3. Provisions of international treaties are to be interpreted and applied in the light of the general rules and principles of international law relating to the sphere covered by the treaty provisions.
4. The private individual - like a foreign State - can within the domestic jurisdiction of the Federal Republic of Germany "appeal" in the context of the relevant procedural law to general rules of international law just as much as to other objective law. General rules of international law may - according to their content and as a rule as a preliminary question - have effects as objective law upon the legal petition of the individual and thereby be relevant to the issue.
5. The fact that general customary international law contains the minimum obligation for contentious proceedings to grant immunity in relation to sovereign acts (acta iure imperii) does not by itself mean that, even as regards execution, it requires only limited immunity.
6. In determining norms of customary international law, the focus should primarily be on the conduct of relevance to international law of those organs of State which by virtue of international law or domestic law are called on to represent the State in international legal transactions. Alongside this, however, such practice may also be testified to in acts of other organs of State like the legislature or the courts, at least insofar as their conduct is directly relevant to international law. For decisions of national courts this applies in particular where, as in the sphere of the judicial immunity of foreign States, domestic law allows the national courts to apply international law directly.
7. At present there is no practice of States that would as yet be sufficiently general and supported by the necessary legal conviction as to establish a general rule of internal law whereby the State having jurisdiction would be barred from execution against a foreign State absolutely.
8. There is a general rule of international law that execution by the State having jurisdiction on the basis of a judicial writ of execution against a foreign State, issued in relation to non-sovereign action (acta iure gestionis) of that State upon that State's things located or occupied within the national territory of the State having jurisdiction, is inadmissible without assent by the foreign State, insofar as those things serve sovereign purposes of the foreign State at the time of commencement of the enforcement measure.
9. In the case of measures by way of security or execution against a foreign State, international law objects, at the time concerned serving its diplomatic representation in carrying out its official functions, may not be seized (ne impediatur legatio).
10. Because of the problems of demarcation in assessing endangerment of that functionality and because of the latent possibilities of abuse, general international law draws the area of protection in favour of the foreign State very broadly and focuses on the typical, abstract danger, not on the specific endangerment of the functionality of the diplomatic representation.
11. Receivables from a current ordinary bank account of the embassy of a foreign State existing in the forum State and intended to cover the embassy's expenses and costs are not subject to execution by the forum State.
12. It would constitute interference contrary to international law in the exclusive affairs of the sending State for the enforcement agencies of the receiving State to demand that the sending State, without its assent, give details of the existence or of the earlier, present or future uses of credits on such an account.
13. The question remains open whether and on what criteria claims and other rights on other accounts of a foreign State with banks in the forum State, for instance special accounts in connection with procurement purposes or issues of loans or on accounts without special earmarking, are to be treated as sovereign or non-sovereign assets and which limits in international law are accordingly to be taken into account as appropriate for the law of evidence.
The private individual wishing to enter into private economic relationships with a foreign State remains at liberty to guard his interests as far as possible, for instance by agreements as to the mode of settlement for services, as to procedure in the event of dispute - in particular through waiver of immunity that is in principle irrevocable - or as to securities.
14. The principle of the sovereign equality of States is a constitutive principle of contemporary general international law, which, at any rate within the sphere of the diplomatic transactions of States, requires far-reaching formal equality of treatment. Differential treatment of States in the sphere of diplomatic immunity according to their respective economic capacity would be incompatible therewith.
Order of the Second Senate of 13 December 1977 -- 2 BvM 1/76 --
in the proceedings to test the question whether there is a general rule of international law that execution arising out of a judgment given against a foreign State in relation to its non-sovereign activity, upon a bank account of that State or of its embassy, existing within the country and intended to cover the embassy's official expenses and costs is inadmissible absolutely or insofar as distraint would hamper the functionality of the embassy as a diplomatic representation, and whether such a general rule of international law is a part of federal law - submission by the Bonn local court of 12 April 1976 (23 M 480/76) -.
The following general rule of international law exists:
Execution by the forum State arising out of a judicial writ of enforcement against a foreign State issued in relation to non-sovereign action (acta iure gestionis) of that State upon things of that State located or occupied in the national territory of the forum State is inadmissible without assent of the foreign State, insofar as these things at the time of commencement of the enforcement measure serve sovereign purposes of the foreign State.
Receivables from a current ordinary bank account of the embassy of a foreign State, existing in the forum State and intended to cover expenses and costs of the embassy, are not subject to execution by the forum State.
This rule is a part of Federal law.
EXTRACT FROM GROUNDS:
The distrainor in the initial case secured a judgment by default from the Bonn Regional Court on 3 September 1975 against the Republic of the Philippines, for payment of a total of DM 95,231.86 plus interest and costs. The litigation in the trial arose from a rental contract concluded between the creditor and the Republic of the Philippines on 9 May 1966, concerning a house belonging to the creditor in Bonn-Bad Godesberg, rented by the Republic of the Philippines to use as an office for their embassy in the Federal Republic of Germany. In the course of June 1973 the tenant moved out of the house and made it available to the creditor, paying the rent until the end of June 1973 inclusive. The creditor founded her principal claims on arrears of rent... and on expenses for repair and maintenance work.
On the basis of the enforceable judgment by default, the creditor secured from the Bonn local court... an order for distraint and transfer against the Republic of the Philippines, whereby the alleged claim of the Republic of the Philippines against "the Deutsche Bank AG... - garnishee - for payment of the present and total future surplus (credit) due the debtor on drawing the balance on the existing business relation on current account... and all alleged claims and entitlements... arising out of giro agreements on the accounts indicated above for credit of all future receipts and of consecutive payment of the credit balances and of implementation of transfers to third parties" was distrained and transferred to the creditor for collection to the extent of the amount distrained.
Against the order of distraint and transfer, the Republic of the Philippines lodged an objection with the Bonn local court that the embassy's account was not subject to seizure by German jurisdiction. In the objection proceedings it presented an affidavit from its Chargé d'Affaires in the Federal Republic of Germany stating that the account denoted "Embassy of the Philippines" had been opened in 1956 with the Deutsche Bank in Bonn and had since 1973 been kept in Bonn-Bad Godesberg; signing power lay with either the Ambassador or the Chargé d'Affaires and the official competent within the embassy for financial matters; the government or the Republic of the Philippines made available in the embassy on this account the means necessary for current operations; in particular, staff and rent were paid from this account. The attachment of the account had made the embassy no longer able to meet its current obligations.
The Bonn local court stayed the proceedings pursuant to Article 100(2) Basic Law and submitted them to the Federal Constitutional Court for decision of the following question:
Is there a rule of international law whereby execution on the basis of a judgment given against a foreign State in relation to its non-sovereign activity upon a bank account of that State or of its embassy existing within the country and intended to cover official expenses and costs of the embassy is inadmissible absolutely, or insofar as distraint would impair the embassy's functionality as a diplomatic representation; is such a rule - if it exists - a part of Federal law?
1. On behalf of the Federal Government the Federal Minister of Justice took the following position:
In the Federal Government's view there was a general rule of international law within the meaning of Article 25 Basic Law that execution upon a bank account of a foreign State existing within the country, intended to cover an embassy's expenses and costs, was absolutely inadmissible....
2. The Republic of the Philippines... took the following position:
On the basis of generally recognized rules of international law, the German court had had no jurisdiction over the Republic of the Philippines. It was the established legal position that a State could not be sued before the courts of another State without its agreement....
3. The creditor in the initial case stated the following:
In accordance with the Federal Government's view, it was to be taken that execution was in principle admissible against a foreign State where immunity had been restricted at the trial....
The submission is admissible....
The following general rule of international law exists:
Execution by the forum State arising out of a judicial writ of enforcement against a foreign State issued in relation to non-sovereign action (acta iure gestionis) of that State upon things of that State located or occupied in the national territory of the forum State is inadmissible without assent of the foreign State, insofar as these things at the time of commencement of the enforcement measure serve sovereign purposes of the foreign State. Receivables from a current ordinary bank account of the embassy of a foreign State existing in the forum State and intended to cover expenses and costs of the embassy are not subject to execution by the forum State.
This rule is a part of federal law.
1. According to general international law at present in force, a State is not bound to grant a foreign State exemption from jurisdiction in a trial against that State to decide about its non-sovereign action (BVerfGE 16, 27ff.). The range of States and of courts following the doctrine of functionally restricted immunity, on which that case law is based, for trial proceedings has since grown larger (cf. Foreign Sovereign Immunities Act of 1976 of the United States of America, Public Law 94-583 of 21 October 1976, which entered into force on 19 January 1977, 28 United States Code para. 1602ff., 1605; Supreme Court of the United States in re Dunhill v. Republic of Cuba, 96 S.Ct. 1854, 1861ff. ; Privy Council in re Philippine Admiral v. Wallem Shipping [Hong Kong] Ltd.  1 All E. R. 78, International Legal Materials [ILM] XV  133 - for actions in rem; English Court of Appeal in re Trendtex Trading Corp.Ltd. v. Central Bank of Nigeria  2 W.L.R. 356, ILM XVI  471ff. [13 January 1977 - not yet final]; for trial proceedings this direction is pointed to also by the European Convention on State Immunity of 16 May 1972, signed by among others the Federal Republic of Germany, European Treaty Series no.74, which came into force on 11 June 1976, Article 4ff.; see Explanatory Reports on the European Convention on State Immunity and the Additional Protocol, Council of Europe, Strasbourg, 1972, p.9ff).
2. As regards execution, by contrast, many States continue to keep to the granting of in principle unrestricted immunity to foreign States (on the development of State practice in this connection cf. E.W. Allen, The Position of Foreign States before National Tribunals, 1933, p.47ff. and passim); restrictions can be found in the practice of various States:
in securing of or execution arising from enforceable rights on immovable assets located in the enforcing State upon that property (cf. e.g. Supreme Court of Czechoslovakia, ruling of 26 April 1928, Annual Digest [and Reports] of Public International Law Cases [AD] 4 [1927-1928] no.111, except for property used for diplomatic purposes, Ruling of 28 December 1929, AD 4 [1927-1918] no.251);
in securing or enforcement measures on bequests located in the enforcing State that have fallen to the foreign State;
in securing or enforcement measures upon assets of State or State-controlled economic enterprises arising out of claims relating to their private economic actions (cf. Appeals Court of The Hague, Ruling of 28 November 1968 in re N.V. Cabolent v. National Iranian Oil Co., Netherlands Yearbook of International Law [Netherlands Yearbook], 1970, p.225.);
further restrictions can be found relating to securing or enforcement measures upon State commercial vessels on the basis of claims connected with the private economic operation of such ships in the Contracting Parties to the Brussels Convention for the unification of certain rules relating to the immunity of State-owned vessels of 10 April 1926 (RGBL. 1927 II p.483; Additional Protocol of 24 May 1934, RGBl. 1936 II p.303) in accordance with that Convention, while other States here as a rule renounce the assertion of immunity (e.g. the United States of America, cf. Hackworth, Digest of International Law, 2  438f.).
For those States who grant in principle unrestricted immunity even in contentious proceedings, this generally follows as a de facto outcome of this kind of immunity; it bars the securing of a judicial title of execution, should the foreign State not subject itself to jurisdiction. But even many of those States that grant the foreign State exemption from their jurisdiction in trial proceedings only for suits relating to sovereign action (acta iure imperii), stick in principle to the ruling out of execution against the foreign State, irrespective of whether the title to be enforced in the forum State concerns non-sovereign action of the foreign State or whether the things upon which enforcement is contemplated serve non-sovereign or exclusively commercial purposes, such as private persons also pursue (cf. e.g. Swedish Supreme Court, Ruling of 13 April 1944, AD 12 [1943-1945] no.31; Supreme Court of Norway, Ruling of 12 November 1949, AD 17  no.42; and in general see Lauterpacht, The problem of jurisdictional immunities of foreign states, BYB 28  220ff., 250ff.; Schaumann, BerDGVR op.cit., p.130f., Habscheid, BerDGVR op.cit., p.251; Venneman, L'immunité d'exécution de l'Etat étranger, in: L'immunité de juridiction et d'exécution des Etats, . p.119ff.). This practice accords with the international law, since general international law does not prevent the granting of unrestricted immunity to foreign States whether in trial proceedings or in enforcement proceedings. The fact that general customary international law contains a minimum requirement for trial proceedings, namely the granting of immunity in relation to acta iure imperii, does not by itself mean that it requires only limited immunity for execution too. Measures of security and execution as a rule intervene much more directly and decisively in the exercise of the sovereign power of the foreign State than court findings. It should therefore be separately tested whether and to what extent generalrules of international law stand against execution.
3. In order to attest a general rule of international law within the meaning of Article 25 Basic Law, the practice of many States in the sphere of execution mentioned would have to be an established practice exercised by States generally in the conviction that they were obliged to do so by international law (cf. Article 38(1) (b) of the Statute of the International Court of Justice; CPJI, Series A no.10 p.28 - Lotus case; ICJ, Reports 1950, p.276 - diplomatic asylum case; Reports 1951, p.131 - Norwegian fisheries case; Reports 1969, p.41ff. - Continental shelf case; BVerfGE 15, 25 ; 16, 27 ; Verdross, Die Quellen des universellen Völkerrechts, 1973, p.95ff.; Geck, Das Bundesverfassungsgericht und die allgemeinen Regeln des Völkerrechts in Bundesverfassungsgerichtund Grundgesetz, 1976, II, p.125ff. 132f.).
In determining norms of customary international law, the focus should be primarily on the conduct of relevance in international law of those State agencies that are in virtue of international law or of municipal law called upon to represent the State in international legal transactions. Alongside this, however, this sort of practice may also be attested to in the acts of other organs of State like the legislature or the courts, at least to the extent that their conduct is of direct relevance for international law, for instance in carrying out an obligation under international law or in exercising discretion provided for in international law. For decisions of national courts, this applies in particular where, as in the sphere of the judicial immunity of foreign States, domestic law allows the national courts to apply international law directly.
4. In the area at question here, there is not however any practice that would as yet be sufficiently general and supported by the necessary legal conviction as to establish a general rule of customary international law whereby the forum State would be absolutely forbidden from execution against a foreign State. Examination of relevant practice of States shows that a not inconsiderable number of States allows security and execution measures against foreign States, even if under particular conditions and restrictions as regards the legal nature of the substantive law underlying the title of execution, the things on which enforcement may be done and the nature of the implementation of the enforcement measures.
a) Italian case law has for long allowed enforcement measures against foreign States in the sphere of acta iure gestionis. As long ago as 1887, the Lucca Appeals Court held in re Hamspohn v. Bey of Tunis and Erlanger (American Journal of International Law [AJIL] 26  supp.p.713f.) that a distraint order on credit maintained by the Tunisian State in Italy was admissible. The Court of Cassation of the Kingdom of Italy ruled similarly in 1926 in re State of Romania v. Trutta (AJIL 26  supp. p.711f.]; it was held to be beyond doubt that except for things indipensable for the functioning of the official administration of the foreign State, all property of government was subject to execution.
Decree Law no. 1621 of 30 August 1925 (Raccolta Ufficiale delle Leggi e dei Decreti del Regno d'Italia, 1925 VIII, p.8109), converted, with amendments, into Law no.1263 of 15 July 1926 (loc.cit. 1926 III, p.2930), makes the admissibility of security and enforcement measures upon assets of foreign States dependent on prior assent by the Minister of Justice, thereby showing that such measures are not simply to be regarded as contrary to international law.
The Italian Constitutional Court was asked in connection with the case Amministrazione del Governo Britannico e Comune di Venezia c. Guerrato to deal with the question of the constitutionality of this Act. A point at issue was the admissibility of enforcement in an exhibition building in Venice belonging to the British government. The Tribunale di Venezia (Decision of 25 August 1959, Rivista di Diritto Internazionale XLII  618) had doubts as to unrestricted immunity of foreign States grounded in international law in enforcement proceedings, and laid the question of the constitutionality of the Act of 15 July 1926 before the Constitutional Court. It saw that Act, should international law absolutely forbid execution against foreign States, as an infringement of Article 10 of the Italian Constitution, which provides that "l'ordinamento italiano si conforma alle norme di diritto internazionale generalmente riconosciute". By decision of 13 July 1963 (Sentenze e Ordinanze della Corte Costituzionale II  572 ) the Constitutional Court denied infringement of Article 10 of the Constitution, since in legislation, case law and doctrine of various countries there was no agreement in tendencies and systems as far as exemption for proceedings for security and execution on assets belonging to foreign States and not intended for functions reckoned as part of the exerciseof their sovereignty was concerned.
b) The case law of the Swiss courts has similarly long allowed attachment proceedings against foreign States arising out of claims in private law (iure gestionis) on assets not serving sovereign purposes of the foreign State. The attachment procedure is an abbreviated trial procedure allowing preliminary measures to secure the claim.
The Swiss Federal Court held in re Royal and Imperial Austrian Ministry of Finance v. Dreyfus, in a judgment of 13 March 1918 (Decisions of the Swiss Federal Court, Official Collection [BGE] 44 I 49ff.) that the attachment of credits of the Austrian State with a Swiss bank for repayment of public treasury orders was admissible. The Austrian Finance Ministry had in issuing the treasury bonds acted iure gestionis; accordingly Swiss jurisdiction was not ruled out "for legal action against the State including security measures to that end such as attachment".
In an opinion in these proceedings, the Federal Justice and Police Department stated that it was "an extremely controversial question whether and to what extent a foreign State, when acting not as a bearer of sovereign rights but as a legal subject of private law, can be subjected to domestic jurisdiction". There were cases where such a presumption could be made even against the will of the foreign State; on the other hand, jurisdiction over a foreign State was ruled out at least in cases of acts of State authority. At any rate, in execution or attachment the foreign State could not simply be treated just like any private person. The present case was one of public monies serving the accomplishment of State tasks; their attachment was, quite apart from the lack of relationship to Swiss national territory, accordingly improper (cf. Guggenheim, Répertoire suisse de droit international public [Répertoiresuisse], 1  No.3.12).
In response to this judgment, the Swiss Executive National Council issued an order during the First World War on 12 July 1918, based on extraordinary powers to protect the country and uphold neutrality, forbidding attachment and execution measures upon the property of foreign States (Official Collection of Federal Acts and Ordinances of the Swiss Confederation [AS] vol.34, p.775; Gmür, Zur Frage der Gerichtlichen Immunität fremder Staaten und Staatsunternehmungen, Schweizerisches Jahrbuch für Internationales Recht, VII  9ff., 47ff.). In 1923 it brought in a similar bill. The explanatory statement stated that no State was subject to the jurisdiction of another State or could be subjected to execution by it. The Federal Assembly however declined to consider this bill further because it regarded compliance with limits in international law in the case of execution as sufficiently guaranteed by the Swiss courts (see Répertoire suisse, op.cit., nos.3.17-3.19). The Order of the Executive National Council of 12 July 1918was repealed on 8 July 1926 (AS vol.42, p.285).
While in its opinion of 29 April 1928 on a question by the League of Nations as to jurisdiction over foreign States Switzerland was in principle against the admissibility of measures of security and execution, the exposé of the Justice Department however stated that this was not a generally recognized principle (Répertoiresuisse, loc.cit., p.403, 400).
The Federal Court held in re Hellenic Republic v. Walder et al., in its judgment of 28 March 1930 (BGE 56 I 237ff), to its view that security measures in the form of attachment were admissible for claims arising from acta iure gestionis, though for the case in question it found Swiss international competence not to be present (for lack of adequate relationship of the object of dispute to Swiss national territory).
The Zurich High Court, in its decision of 30 September 1937 (AD 10 [1941-1942] no.60) found attachment of the credits of the Romanian State with the Swiss National Bank to be admissible. No statutory provisions barring attachment and ensuing execution existed, nor did any court practice to that effect in Switzerland.
On 24 October 1939, after the outbreak of the Second World War, the Executive National Council again issued an Order, based on the Executive National Council's Order for protection of the country and the upholding of neutrality, whereby assets belonging to a foreign State could be attached or made subject to enforcement only with the assent of the Executive National Council (cf. Article 2 of the Order, AS vol.55, p.1296); this provision was repealed after the end of the war by an Order of the Executive National Council of 3 September 1948 (AS 1948 p.962).
Taking up from its earlier case law, the Federal Court decided in re Kingdom of Greece v. Banque Julius Bär & Cie, in a judgment of 6 June 1956 (BGE 82 I 75ff.) that the sequestration of all accounts and credits of the Greek State and its ministries with various Geneva banks was not inadmissible for lack of jurisdiction. The decision explicitly rejects the view that unrestricted immunity against execution procedures had to be granted by international law. The overall development of international law was instead going steadily and increasingly towardsallowing enforcement in the sphere of acta iure gestionis.
In re United Arab Republic v. Mrs X, the Federal Court found in a judgment of 10 February 1960 (BGE 86 I 23ff.) that the attachment of balances and credits of the United Arab Republic with a Swiss bank was admissible. Since the assets attached, were at the time of attachment, no longer devoted to a particular purpose, the security measure was not inadmissible in international law.
c) The Belgian courts have long held without exception to the unrestricted immunity of foreign States in enforcement proceedings (see references in Suy, Immunity of States before Belgian Courts and Tribunals, in: Zeitschrift für ausländisches Recht und Völkerrecht [ZaöRV] 27  660 [684ff.]; idem, L'immunité des Etats dans la jurisprudence belge, in: L'immunité de juridiction et d'exécution des Etats, p.279 [305ff.]). In re Socobelge v. Greek Government (Journal du Droit International [Clunet] 79  244; International Law Reports [ILR] 18  no.2) however, the Brussels Civil Court, in a decision of 30 April 1951, declared the distraint of credit balances of the Greek State and the Bank of Greece with banks and enterprises in Belgium to be admissible. The underlying payment claims related to debenture bonds the Greek State had entered into under an agreement of 27 August 1925 with the Belgian company Socobelge on the construction and improvement of railway installations and the supply of railway equipment; an arbitration commission was to take final decisions on disputes. After the Greek government had in 1932 ceased servicing its public debt, Socobelge secured two arbitration awards, the second of which sentenced the Greek State to pay US-dollars 6,771,868 in gold plus 5 % interest. When Greece further essentially continued to refuse payment and the dispute could not be settled diplomatically, Belgium called in the Permanent International Court of Justice, which declared in a judgment of 15 June 1939 that the arbitration awards were final and binding (Société Commerciale de Belgique, CPJI Série A/B no.78, p.22). In 1950 Socobelge secured on the basis of the arbitration awards the provisional distraint of credit balances the Greek government and the Bank of Greece had with banks and enterprises in Belgium. The Brussels Civil Court did not see itself as prevented by either international law or comitas gentium from confirming the distraint measures (according to Colliard, Revue Critique de Droit International Privé 41  p.124, the credit balances distrained came from funds of Marshall Plan aid to Greece and were laterreleased again for other reasons).
d) The Dutch Supreme Court found in re Société Européene d'Etudes et d'Entreprises in voluntary liquidation (SEEE) v. Yugoslavia (Decision of 26 October 1973, Netherlands Yearbook, 1974, p.290ff.; ILM XIV  71ff.), as the Appeals Court of The Hague already had (Decision of 8 September 1972, Netherlands Yearbook 1973, p.390), that enforcement of an arbitration ruling on a claim arising out of acta iure gestionis of the foreign State contradicted international law only where international law forbade all execution upon assets of a foreign State; but no such law of international law existed. (Enforcement was later declared inadmissible by the Appeals Court for other reasons, Decision of25 October 1974, Netherlands Yearbook 1975, p.374ff.).
e) The Austrian Administrative Court, in a finding of 13 January 1945 (Findings and Orders of the Administrative Court n.F. 9 , first semester, Financial Part, no.869), in administrative proceedings on the confiscation of unlawfully marketed brandy from a firm under the administration of the Soviet Union, rejected the appeal for immunity against the confiscation decision of the financial authorities with the following argument: "It is, to be sure, a generally recognized principle of international law that foreign States, insofar as they act as bearers of sovereignty, are not within the country subject to either judicial sovereignty or administrative sovereignty. It is by contrast not generally recognized, in either doctrine, the practice of international law or the case law of State organs of the members of the international legal community, that a foreign State, when acting within a country as a bearer of private rights, in particular when it maintains economic enterprises there, should in matters of these private legal relationships and these economic enterprises be exempted from domestic sovereignty." This was held also to have to applyto administrative sovereignty.
f) It is also to be derived from recent French case law that it no longer regards security and execution measures against foreign States arising out of claims in relation to acta iure gestionis as inadmissible simply in virtue of general international law. While the French government, like the French courts, in earlier years very predominantly followed the doctrine of absolute immunity in enforcement proceedings (see the many references in Kiss, Répertoire de la pratique française en matière de droit international public, III  no.319ff), and departures from this practice were to be regarded as exceptions that did not change anything in this fundamental attitude (cf. as examples of such exceptions the cases Etat Roumain v. Pascalet et Cie, Marseilles Commercial Court, Order of 12 February 1924, Kiss, op.cit. no.366; USSR v. Association France Export, Court of Cassation, judgment of 19 February 1929, AD 5 [1929-1930] no.7; Procureur Général près la Cour de Cassation v. Vestwig et al., Court of Cassation, judgment of 5 Febuary 1947, AD 13  no.32), the decisions of the Court of Cassation in the cases Englander v. Statni Banka Ceskoslovenska (judgment of 11 February 1969, Clunet 96  p.923f.) and Clerget v. Représentation commerciale de la République démocratique du Viet-Nam (judgment of 2 November 1971, Clunet 99  p.267f.) can be interpreted to the effect that the Court of Cassation regards security and execution measures upon assets of a foreign State or its agencies as not barred by general international law where the origin and use of these things can in the proceedings be defined as havingto do with private business.
g) The Greek courts have admitted enforcement measures against foreign States insofar as private-law claims were the basis; thus, Athens Court of Justice 1928 (AD 4 [1927-1928] no.109, confirmed on appeal by the Areopagus) admitted distraint on property of the Soviet government on the basis of a claim arising out of a purchase contract (the court additionally regarded conclusion of the contract as subjection to Greek jurisdiction); and the Appeals Court of Athens, in connection with an action for possession (Decision no.1690/1949, Revue Hellénique de Droit International 3  p.331). Like the legislation of Switzerland and Italy, the Greek Act of 17 December 1938 (Emergency Act 1519/1938, Art. 1(1)) made domestic admissibility of enforcement measures against foreign States dependent on the prior assent of the JusticeMinister.
h) A significant turn has recently been taken by the United States of America on the question of the immunity of foreign States, by the enactment of the Foreign Sovereign Immunities Act of 1976. In the United States too, enforcement proceedings count as part of jurisdiction (cf. Alexy, Die Immunität fremder Staaten vor amerikanischen Gerichten, Diss. Heidelberg, 1960, p.186). Apart from so-called "attachment" proceedings which are in essence not enforcement proceedings but make possible measures to establish venue for particular types of proceedings (cf. Weilamann v. Chase Manhattan Bank, 192 N.Y.S. 2 d 469 [S.Ct.N.Y.] 1959), American case law, even after the State Department moved over to the doctrine of limited immunity in trial proceedings following the Tate letter of 19 May 1952 (Department of State Bulletin 26  984; cf. BVerfGE 16, 27 [48f.]) kept until the entry into force of the Foreign Sovereign Immunities Act of 1976 to in principle unrestricted immunity of foreign States, at any rate for enforcement proceedings proper (cf. Dexter and Carpenter, Inc. v. Kunglig Jarnvagsstyrelsen, 43 F. 2 d 705 , cert. den.282 U.S. 896 ; New York and Cuba Mail Steamship Company v. Republic of Korea, 132 F. Supp.684 ; Weilamann v. Chase Manhattan Bank, loc.cit., 473; opinion of the State Department in re Industria Azucarera Nacional S.A. v. Empresa Navegacion Mambisa, ILM XIII  120ff., 139; Whiteman, Digest of International Law, 6  709ff.; but see also Harris & Co. Advertising, Inc. v. Republic of Cuba, 127 So. 2 d 687, 692ff. ; Berlanti Construction Co., Inc. v. Republic of Cuba, 145 So. 2 d 256, 258 ). According to the Foreign Sovereign Immunities Act of 1976, foreign States no longer continue even in enforcement proceedings to enjoy absolutely unlimited immunity before the courts of the United States. Sections 1604, 1609, admittedly lay down the principle of immunity of foreign States in trial and enforcement proceedings; but Sections 1605ff. and 1610f. provide for far-reaching exceptions to this principle. For trial proceedings, these exceptions include inparticular proceedings
"in which the action is based upon a commercial activity carried out in the United States by the foreign state; or upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States" (Sec.1605[a]"
as well as, in principle, actions against a foreign State for monetary compensation for damages for tortious conduct (including strict liability) of the foreign State, its office bearers or officials, to the extent that they are acting as part of their service activities (Section 1605[a]).
The exceptions to the immunity of foreign States in enforcement procedures are laid down in Section 1610 (a), which reads:
"(a) The property in the United States of a foreign state, as defined in section 1603 (a) of this chapter, used for a commercial activity in the United States, shall not be immune to attachment in aid of execution, or from execution, upon a judgement entered by a court of the United States or of a State after the effective date of this Act, if-
(1) the foreign state has waived its immunity from attachment in aid of execution or from execution either explicitly or by implication, notwithstanding any withdrawal of the waiver the foreign state may purport to effect except in accordance with the terms of the waiver, or
(2) the property is or was used for the commercial activity upon which the claim is based, or
(3) the execution relates to a judgment establishing rights in property which has been taken in violation of international law or which has been exchanged for property taken in violation of international law, or
(4) the execution relates to a judgment establishing rights in property-
(A) which is acquired by succession or gift, or (B) which is immovable and situated in the United States: Provided, That such property is not used for purposes of maintaining a diplomatic or consular mission or the residence of the Chief of such mission, or
(5) the property consists of any contractual obligation or any proceeds from such a contractual obligation to indemnify or hold harmless the foreign state or its employees under a policy of automobile or other liability or casualty insurance covering the claim which merged into the judgment."
Section 1610 (b) extends these exceptions to immunity against execution against an "agency or instrumentality" of a foreign State further, by making the admissibility of execution not dependent on the connection required in Section 1610 (a) (2) between the assets to be attached,the commercial activity and the underlying claim.
The provisions of the Act thus testify that the United States of America has moved to the doctrine of the limited immunity of foreign States in both trial and enforcement proceedings, and specifically also in the case of in personam proceedings, in which the foreign State is claimed against directly as a party to trial proceedings or as the debtor in enforcement proceedings. Though it may not be undoubted in the earlier case law of courts of the United States how far it is to be assessed as an expression of a requirement of international law and not merely as comitas gentium (cf. Alexy, Der Einfluss der Exekutive und innerstaatlicher Rechtsgrundsätze auf die amerikanische Rechtsprechung zur Immunität fremder Staaten, ZaöRV 22  661, 670ff.), the provisions now adopted in the Foreign Sovereign Immunities Act of 1976 fully suggest that they have deliberately been adopted also having regard to the minimum obligations imposed by general international law, even if the form of the Act sometimes even goes beyond that and gives the foreign State a more favourable position than in general international law. This is suggested on the one hand by the fact that after the entry into force of the Act it is henceforth a matter for the courts alone to find as to immunity questions in accordance with legal criteria. It is further confirmed by the opinions of the State Department, the Justice Ministry and the Congressional Committees in the preliminary work on the Act. It is stated there that the central point of the Act is that decisions on claims to immunity by foreign States should best be taken by the courts on the basis of a statutory provision incorporating criteria recognized according to international law (cf. Section-by-Section Analysis, Introduction, and on Section 1602, Annex to the Communications by the Ministry of Justice and the State Department to the Speakers of the Senate and the House of Representatives of Congress of 31 October 1975, ILM XV  88ff., 102, 104; United States Congress, House of Representatives, 94th Congress, 2 d Session, report no.94-1487 [Legal Affairs Committee],ILM, op.cit., 12398ff., 1401ff.).
i) German case law before 1945 in principle granted foreign States unrestricted immunity even in enforcement proceedings, because a rule of customary international law obliged this (cf. Royal Prussian Court of Justice on decision of conflicts of competence, judgment of 25 July 1910, JbÖffR V  252ff. - Hellfeld case; Court of Justice on decision of competence conflicts, finding of 29 May 1920, JW 1921, p.773f.; finding of 4 December 1920, JW 1921, p.1480f; and finding of 12 March 1921, JW 921, p.1481ff.; contrary, incidentally, there is only OLG Hamburg, judgment of 30 May 1923, Leipziger Zeitschrift für deutsches Recht, 1923, Sp.615ff.). This view was a consequence not least of the granting of in principle unrestricted immunity in trial proceedings (see references in BVerfGE 16, 27[34f.]).
The rulings made since 1945, insofar as they have become known, almost without exception concern questions of immunity in trial proceedings (cf. BVerfGE 15, 25ff.; 16, 27ff., both with references) or the personal immunity of persons within the meaning of paras. 18, 19 Court Constitutions Act, earlier version (thus Bonn local court, Order of 10 June 1960, Archiv des Völkerrechts9 [1961/1962] 485).
In addition to the decisions of the Bonn local court mentioned in the submission, the Stuttgart Regional Court too (Order of 21 December 1971, IPRspr. 1971, no.129, p.389ff.) had to find as to questions of immunity of foreign States in execution. In these proceedings the creditor had secured an order of distraint and transfer against the Spanish State on the basis of an enforceable judgment by default from the judicial officer, restraining the alleged present, future and conditional claims of the Spanish State against the Deutsche Bank, Stuttgart, and the Banco Español en Alemania, Frankfurt, and transferring them to the creditor for seizure. The Stuttgart local court had quashed the order for restraint and transfer; the Regional Court threw out the creditor's immediate appeal because distraint of the accounts was against a general rule of international law making execution upon the property of a foreign State devoted to sovereign purposes inadmissible. It can be taken from the grounds of the decision that the Regional Court did not regard enforcement measures against foreign States as inadmissible simply in virtue of general international law; instead, it followed the doctrine of doubly restricted immunity, regarding enforcement as not ruled out by international law where based on titles arising from non-sovereign claims upon things not serving sovereign purposes of the foreign State. In the case decided the Regional Court took it that the distrained accounts, kept in the name of the Spanish Consulate in Stuttgart and of the Spanish General Consulate in Frankfurt am Main,served sovereign purposes of the debtor.
The Frankfurt am Main Regional Court, in a judgment of 2 December 1975 (NJW 1976, p.1044ff.; ILM XVI  501ff.), affirmed German jurisdiction for the issuing of attachment in rem against the Central Bank of Nigeria. It left undecided whether the respondent was to be regarded as a legally autonomous authority of the Nigerian State or as a separate legal person. Since the respondent's receivables to be secured arose from legal transactions of the bank, the respondent, even as an autonomous authority of the State of Nigeria, could not successfully claim exemption from German jurisdiction. The Regional Court found that the restricted immunity of the foreign State against being claimed as debtor in the forum State also applied to the assessment of the admissibility of attachment proceedings as a summary procedure and to enforcement of a court order applied for by the creditor. Insofar as jurisdiction reached, attachment in rem was also admissible upon assets within the country of a foreign State. Execution of attachment was denied only for those things which as such were devoted to the public service of the foreign State. In the case concerned the attachment application was however directed against money and securities accounts of the respondent in the Federal Republic of Germany, that is, things that were not "in the public service" of the respondent. A possible future use of these things to finance State expenditure didnot establish any immunity in the matter.
5. The treaty practice of quite a few States shows that execution on assets of foreign States is not regarded by the forum State as simply incompatible with general international law. A number of multilateral and many bilateral treaties contain provisions on judicial sovereignty, including sovereignty in enforcement, in relation to public or publicly operated trading vessels, public or State-controlled economic enterprises with or without legal capacity of their own, and in relation to State trading missions. These provisions in general allow execution arising from titles based on court trial proceedings about claims arising from private economic action against the public or State-controlled debtor, to be applied upon assets not serving sovereign purposes. Sometimes a material connection between the substantive right in the title and the object of execution is required; in part there are restrictions in relation to security measures where these are made without prior ordinary trial proceedings.
a) The International Convention for the Unification of Certain Rules relating to the Immunity of State-owned vessels of 10 April 1926, ratified by Germany (RGBl. 1927 II p.484, with additional protocol of 24 May 1934, RGBl. 1936 II p.303, binding for Germany in international law since 8 January 1937, Proclamation of 11 September 1936, RGBl. 1936 II p.303) and in force for 21 States (cf. Annex to BGBl. Part II, Fundstellennachweis B, 31 December 1976, p.168), distinguishes between State commercial vessels and other public vessels. By Article 1 of the Convention, sea-going vessels owned or operated by States, cargoes owned by them, and cargoes and passengers carried on Government vessels, and the States owning or operating such vessels, or owning such cargoes, are subject in respect of claims relating to the operation of such vessels or the carriage of such cargoes to the same rules on liability and the same obligations as those applicable to private vessels, cargoes and equipments. By Article 2, the same rules as to jurisdiction of tribunals, legal actions and procedures apply to these liabilities and obligations as to privately owned merchant vessels and cargoes or their owners. Accordingly, security and enforcement measures are also admissible.
The Geneva Convention on the High Seas of 29 April 1958, which became binding for 55 Contracting Parties on 31 December 1976 (BGBl. 1972 II p.1089, binding on the Federal Republic of Germany in international law since 25 August 1973, Proclamation of 15 May 1975, BGBl. 1975 II p.843) and the Convention on the Territorial Sea and the contiguous zone of 29 April 1958 (United Nations Treaty Series [UNTS] vol.516, p.205ff.) similarly draw the distinction between State commercial vessels and other public vessels. By Article 9 of the Convention on the High Seas, ships owned or operated by a State and used only on government non-commercial service shall have complete immunity, on the High Seas, from the jurisdiction of any other flag State; for other public vessels, accordingly, rules of domestic or international law remain unaffected. Article 21 of the Convention on the Territorial Sea clarifies that for government ships operated for commercial purposes immunity cannot be asserted against the national measures admissible in connection with the regulation of innocent passage. The Federal Constitutional Court has evaluated these provisions to the effect that they reflect the widespread conviction that States are now due immunity only for their sovereign acts (cf. BVerfGE 16, 27 [52f.]). The same accordingly also applies in principle to the sphere of execution.
The European Convention on State Immunity rules out, in Articles 1-14, the appeal to immunity for trial proceedings in broad areas of acta iure gestionis; security and enforcement measures against the property of a Contracting State are impermissible in the territory of another Contracting State without express consent by the State concerned pursuant to Article 23. However, this provision does not express a legal conviction of the treaty parties that such measures would be barred under general international law. Instead, it is to be explained from the special shape taken by the Convention. In accordance with Article 20ff., the Contracting States are obliged to give effect to judgments given against them by the courts of other Contracting States in trial proceedings; if this does not happen, then a party to the trial concerned can bring a special judicial finding procedure before a court of the Contracting State against which the judgment has been given or before the European Tribunal in matters of State immunity to be set up: Article 21 of the Convention, Articles 1ff. of the optional protocol. The exclusion of execution is accordingly to be seen in the light of this special provision (cf. Sinclair, The European Convention on State Immunity, The International and Comparative Law Quarterly 22  254ff., 273ff.; Krafft, La Convention Européenne sur l'Immunité des Etats et son Protocole Additionnel, Schweizerisches Jahrbuch für internationales Recht 31  11 [20ff.]; it does not however attest the legal conviction of signatory States that enforcement measures are inadmissible under general international law. Also in favour of this view is the optional provision of Article 26 of the Convention, according to which, notwithstanding the provisions of Article 23, a judgment rendered against a Contracting State in proceedings relating to an "industrial or commercial activity, in which the State is engaged in the same manner as a private person" may be enforced in the forum State against property of the State against which judgment has been given that is used exclusively in connection with such commercial activities, as long as both States have made declarationsunder Article 24.
b) Many bilateral treaties provide that State or State-controlled economic enterprises may in respect of their private economic actions and their assets serving private economic purposes not lay any claim to exemption from jurisdiction, including sovereignty in enforcement. As examples we shall mention only:
- Article 18 (II) of the Treaty of Friendship, Commerce and Navigation between Japan and the United States of America of 2 April 1953 (United States Treaties and Other International Acts Series [T.I.A.S.] no.2863);
- Article 18 (II) of the Treaty of Friendship, Commerce and Navigation between the Federal Republic of Germany and the United States of America of 29 October 1954 (BGBl. 1956 II p.488ff.; entered into force on 14 July 1956, Proclamation of 28 June 1956, BGBl. II p.763); the provision reads:
"No enterprise of either Party, including corporations, associations, and government agencies and instrumentalities, which is publicly owned or controlled shall, if it engages in commercial, industrial, shipping or other business activities within the territory of the other Party, claim or enjoy immunity therein from taxation, suit, execution of judgment or other liability to which privately owned and controlled enterprises are subject therein."
Similar provisions are contained in the Treaties of Friendship, Commerce and Navigation between the United States and Italy of 22 February 1948 (T.I.A.S. no.1965), Ireland of 21 January 1950 (T.I.A.S. no.2155) and Israel of 23 August 1951 (T.I.A.S. no.2948).
Treaties between the Soviet Union or Eastern European States and other States provide that the State trading missions cannot lay claim to exemption from jurisdiction, whether for trial or enforcement proceedings - with occasional exceptions for provisional security measures - for their private economic actions and their assets serving private economic purposes. Thus, Article 7 of Part II of the Treaty between the German Reich and the Union of Soviet Socialist Republics of 12 October 1925 (RGBl. 1926 II p.2) provided:
"Legal actions of the trade mission undertaken in Germany and binding on the USSR and their economic results shall be treated according to German laws and be subject to German jurisdiction. Execution upon USSR assets located in Germany shall also be admissible, insofar as this does not concern things that are, according to general internal law, intended to serve the exercise of State sovereign rights or official activity or diplomatic or consular representation."
By Article 2 of the Annex to the Agreement on general questions of trade and sea navigation between the Federal Republic of Germany and the Union of Soviet Socialist Republics of 25 April 1958 (BGBl. 1959 II p.222), which entered into force on 24 April 1959, Proclamation of 30 April 1959 (BGBl. II p.469), extended by a Protocol of 31 December 1960 (BGBL. 1961 II p.1085), regulating the legal position of the trade missions of the Soviet Union in the Federal Republic of Germany, the trade mission is a part of the Soviet embassy and enjoys corresponding privileges. In relation to immunity, Article 4 provides:
"The rights, immunities and privileges granted to the trade mission on the basis of Article 2(1) of this Annex shall also extend to its commercial activity, though with the following exceptions:
a) Disputes arising out of commercial transactions concluded or guaranteed by the trade mission pursuant to Article 3 of this Annex in the territory of the Federal Republic of Germany shall be subject to decision by the courts of the Federal Republic of Germany unless the competence of an arbitration tribunal or another jurisdiction has been agreed; in such disputes the defendant or plaintiff shall be the trade mission of the Union of Soviet Socialist Republics in the Federal Republic of Germany. However, measures to secure claims against the trade mission shall not be admissible in this connection.
b) Execution arising from final judicial decisions given against the trade mission in such disputes as are mentioned under a) shall be admissible. It may be levied on the entire assets of the Union of Soviet Socialist Republics in the Federal Republic of Germany, in particular on property, rights or interests arising out of commercial transactions concluded by the trade mission or guaranteed by it, with the exception of property of the organizations mentioned in Article 3(3) of this Annex.
Property and premises which by international usage are intended exclusively for the exercise of political and diplomatic rights by the Union of Soviet Socialist Republics in the Federal Republic of Germany, and the premises used by the trade mission and the furnishings located therein, shall be excluded from any execution."
Similar provisions are contained in the Soviet Union's Trade Agreement with France of 3 September 1951 (UNTS 221, 92; Article 10), the Soviet Union's Treaty on Trade and Navigation with Austria of 17 October 1955 (UNTS 240, 304; Article 4 of the Annex) and other Soviet treaties, for instance with Sweden, Greece, the United Kingdom and Japan (cf. AJIL 26  supp. p.707f.; Boguslavskij, Staatliche Immunität, 1965, p.153).
On corresponding Swiss treaty practice cf. the references in the Federal Court's decision in re Royaume de Grèce v. Banque Julius Bär & Cie (BGE 82 I 75, 86f.).
If such treaty provisions may also be interpreted as waiver of immunity declared by treaty, they nonetheless reflect the general development in international law of the understanding of immunity in the spheres in which States engage in non-sovereign, in particular commercial action.
c) The Asian-African Legal Consultative Committee, comprising representatives of Burma, Ceylon, India, Indonesia, Iraq, Japan, Pakistan, Sudan, Syria and the United Arab Republic, in 1960 tested the question of State immunity. The report of the Committee on Immunity of States in respect of Commercial and other Transactions of a Private Character states in relation to execution that it had been recognized by all delegations that a decision against a foreign State could not be executed upon its public property. However, the property of a State trading organization enjoying separate legal capacity could be subjected to execution (cf. Asian-African Legal Consultative Committee, Third Session, Colombo, Ceylon, January 20 - 4 February 1960, Final Report of the Committee on Immunity of States in respect of Commercial and other Transactions of a Private Character, p.66ff; Whiteman, Digest of International Law, 6  572f.). The restriction to public property made in the report makes it impossible to derive a legal view of the Committee that measures of execution against foreign States other than upon these assets would be barred simply under general international law.
6. This survey shows that there is no practice sufficiently general and supported by the necessary legal conviction as to establish a general rule of customary international law whereby a forum State would be simply barred from execution against a foreign State upon its assets located in the forum State. The range of States which, as shown by the case law, legislation or treaty practice, at least do not rule out enforcement measures against foreign States where such measures arise from titles relating to acts iure gestionis of the foreign State and are executed upon assets serving non-sovereign purposes is so great that there cannot at present be any general practice of regarding execution as excluded by international law, however the requirement of generality of such practice if it is to establish a rule of customary international law may be defined. This concerns not merely action that a State can successfully uphold from the outset against application of an existing general rule of international law by way of perseverent protestation of rights (in the sense of the ruling of the International Court of Justice in the Norwegian Fisheries Case, ICJ Reports 1951, p.131); instead, the existence of a corresponding general rule of international law cannot at present be assumed.
7. This legal position is also confirmed in the statements of recognized academic associations and scholars of international law.
a) The Institut de Droit International, which had already made a statement at its Hamburg Congress in 1891 in its draft International Provisions on jurisdiction in the case of disputes with foreign States in favour of far-reaching measures of immunity in trial proceedings (Resolution of 11 September 1891, Annuaire 2  p.1215), stated, referring to the new questions that had since arisen and required solution, at its Congress in Aix-en-Provence, in a Resolution of 30 April 1954 on the admissibility of security and enforcement measures:
"Il ne peut être procédé ni à l'exécution ni à une saisie conservatoire, sur les biens qui sont la propriété d'un Etat étranger, s'ils sont affectés à l'exercice de son activité gourvenementale qui ne se rapporte pas à une exploitation économique quelconque."
(Article 5 of the Resolution, Annuaire 45 II  p.293ff., 295)
It may be concluded from the exclusion of possibilities of seizure of assets serving sovereign purposes that the Resolution did not otherwise regard enforcement measures as barred by general international law. The discussions around this Article in the first place concern the question of delimiting the assets upon which execution may not be made.