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Law

Sovereign Immunity for State-Owned Enterprises

Quick fact

Under the restrictive theory of sovereign immunity, state-owned enterprises can be sued for their commercial activities, even though they are an arm of the state. This is because courts distinguish between sovereign acts (immune) and commercial acts (not immune), a distinction that has been codified in laws like the U.S. Foreign Sovereign Immunities Act.

Why this is interesting

When a state-owned airline buys airplane parts from a foreign company, can the airline be sued for breach of contract? As it is owned by a government, you might think it is immune—but the answer is more subtle and has huge implications for international trade.