State Immunity Ordinance, 1981

The State Immunity Ordinance, 1981 sets out when a foreign country (a "State") can and cannot be sued in Pakistani courts. Section 3 states the general rule: a State is immune from the jurisdiction of Pakistani courts, and courts must apply this immunity even if the foreign State does not show up to defend itself.

The bulk of the Ordinance, however, lists specific exceptions where a foreign State loses that immunity and can be sued like anyone else. Section 4 says a State is not immune if it has submitted to a court's jurisdiction, either by starting the case itself or by taking part in it (though merely claiming immunity doesn't count as submission). Section 5 removes immunity for ordinary commercial transactions - contracts for goods or services, loans, and similar business dealings - and for any contract obligation that must be performed in Pakistan. Section 6 removes immunity for employment contracts made or performed in Pakistan, subject to conditions such as the employee's nationality. Section 7 covers disputes over property located in Pakistan, Section 8 covers patents, trademarks, and similar rights registered in Pakistan, Section 9 covers a State's membership in companies or partnerships with non-State members, Section 10 covers arbitration agreements a State has signed, Section 11 covers commercial ships and cargo belonging to a State, and Section 12 removes immunity for a State's liability to pay sales tax, customs duty, or similar levies.

Sections 13 and 14 set out special procedural protections for States even when they are sued: legal notices must be served through the Ministry of Foreign Affairs, proceedings cannot start until two months after service, and courts generally cannot order a State to hand over property or enforce a judgment against its property unless that property is being used for commercial purposes or the State has consented.

Section 15 extends these rules to a foreign government's departments (but not to separate legal entities like state-owned corporations, unless those entities were acting in a sovereign capacity). Section 17 clarifies that the Ordinance does not affect diplomatic immunity under the Diplomatic and Consular Privileges Act, 1972, and does not apply to matters involving foreign armed forces in Pakistan, criminal proceedings, or most tax disputes. Section 19 repeals the older, narrower immunity rules that had existed in Sections 86 and 87 of the Code of Civil Procedure, 1908.