Litigation in a country without useful recourse

A jurisdiction clause reassures because it names a court, and it says nothing about what matters: the possibility of enforcement. Obtaining a decision and obtaining a payment are two distinct operations, separated by months and sometimes by an impossibility of principle. In the countries where the risks this certification deals with are located, the second often fails although the first has succeeded, and the insured finds itself holding an enforceable title that enforces nowhere. Understanding what that title is really worth is what allows one to decide when to stop spending, and that decision weighs more financially than the choice of court.

The first obstacle has a name and comes in two parts, which is often unknown until the day an attachment is attempted. Sovereign immunity presents itself in two storeys: immunity from jurisdiction, which prevents a state from being brought before a court, and immunity from execution, which prevents its assets from being seized. Waiving the first is not waiving the second, and both waivers must be stipulated separately and expressly. An exporter that negotiated a general waiver clause believes it has protected itself and discovers it has only won the right to litigate, which in this context is a right whose value is close to zero.

The second obstacle is that even a full waiver does not make everything attachable. Assets devoted to sovereign use, diplomatic missions, military property, central bank holdings, remain out of reach in most legal systems, whatever the contract stipulates. What remains attachable is narrow: commercial receivables of the state against foreign buyers, accounts devoted to trading activity, aircraft or cargoes taken outside the territory. That narrowness explains why practitioners reason in terms of asset location rather than legal basis: the useful question is not whether one is right, it is where there is something to take.

Hence the marked preference in international trade for arbitration over the local state judge. An arbitral award travels better than a judgment, because a widely ratified multilateral treaty organizes its recognition and enforcement in the states party, which no comparable instrument does for court decisions. The gain is real and one must see where it stops: the award enforces more easily, but it still enforces against assets, in a cooperative country, and the seat of the arbitration is only of interest once the asset question has been answered first.

It must be added that the insurer watches this sequence with its own requirements, and a misunderstanding frequently settles in there. The policy requires recovery diligence before indemnification, and the insured understands that it must obtain a judgment. That is not what the clause asks. Reasonable diligence in a country without useful recourse consists in establishing that recourse is illusory, and that demonstration is itself evidence: a local counsel's opinion on unenforceability, an inventory of locatable assets, the record of unsuccessful attachment attempts are worth more than a two-year proceeding whose outcome is written in advance. Pursuing beyond that point is not diligence, it is expenditure, and it is discussed with the insurer before being incurred rather than after.

What replaces litigation is prepared upstream, at the moment when one still has something to trade, that is, before signing. Practitioners observe that security comes from the structure and not from the clause: a payment backed by a banking instrument confirmed by an institution in a third country, an escrow account funded outside the territory, an undertaking given by a group entity holding accessible assets. None of these arrangements requires trusting a judicial system, and that is exactly their point. An impeccable jurisdiction clause negotiated at the end of the discussion never makes up for the absence of one of them.

The discipline amounts to reversing the usual order of questions. One does not first ask which court will have jurisdiction; one asks where the attachable assets are and under what regime, then chooses the dispute resolution method that reaches those assets. One stipulates both waivers separately when a public entity sits opposite. And one fixes in advance, with one's insurer, the point at which recovery stops being diligence and becomes expenditure, because that point always arrives earlier than hope suggests.