As the spectre of sovereign default dominates current news headlines, the fallout from an actual default has led the UK Supreme Court to consider, for the first time, the law relating to state immunity. The Court’s decision in NML Capital Ltd v. Republic of Argentina,1 involving an action to enforce a foreign (United States) judgment, will likely be welcomed by investors and their legal advisers, but offers little comfort to impecunious foreign governments. The decision addresses a number of technical points, which are not unimportant in practice. It seems doubtful, however, whether the Court’s reasoning will have a wider significance in the development of state immunity doctrine in the UK or internationally.

In December 2001, the Republic of Argentina declared a temporary moratorium upon over US$80 billion of its foreign debt. This was not a novel occurrence. The US Court of Appeals has pointedly remarked that “Argentina has made many contributions to the law of foreign insolvency through its numerous defaults on its sovereign obligations, as well as through what we might term a diplomacy of default”, and that its history of default had produced a “rich literature” and new mechanisms and theories for addressing sovereign indebtedness.2 In a later decision involving the same parties, the US Court referred to “the pre-eminence of the Republic of Argentina … in the sorry history of defaults on sovereign debt”.3