International Loan Agreement with Public Subjects Participation: Jurisdictional Immunities and Peculiarities of Conflict-of-Laws Regulation

Abstract

The article is dedicated to the analysis of jurisdictional immunities of public subjects being parties to private cross-border legal relations as well as special conflict-of-laws regime of international loan agreement in which such subjects participate. The author states that the agreement in question is of sui generis nature due to peculiarity of its parties and make the following conclusions. First, it is argued that any loan agreement concluded between public subjects (borrowers) and foreign private persons (lenders) is to be considered acta jure gestionis irrespective of socio-economic goals pursued by borrowers. It means that primary consideration should be given to public subject’s concrete actions as a party to the agreement, i.e. whether the borrower exercises its sovereign powers or acts in private capacity in the course of agreement’s conclusion and performance. Second, the author contends that there is a special conflict-of-laws regime in regard to international loan agreement with participation of public subjects that is different from the one inherent in contracts with no such participation. In particular, this difference is manifested in the existence of public subjects’ conflict-oflaws immunity in contractual relations. Two main types of conflict-of-laws immunity doctrine (“hard” and “soft” versions) are introduced by the author. It is highlighted that no international loan agreement with participation of public subjects should be governed by borrower’s own law by default since conflict-of-laws immunity of public subjects is considered a “legal atavism” and puts public subjects in a privileged position as compared to private persons and, consequently, contravenes commonly acknowledged principles of private law — equality and party autonomy. Finally, broader discretion to choose applicable law is vested in parties to the agreement in question allowing them to structure their contractual relations in a manner providing balance of interests and precluding the possibility of either party’s misconduct. It is further suggested that lex mercatoria should be used as law applicable to international loan agreement with participation of public subjects because lex mercatoria is a structured, publicly accessible and universal tool for legal regulation of private cross-border relations.