## Facts

- Japanese trading companies contracted with Pakistan, acting through an affiliated agent company, to sell high-performance computers and related equipment.
- After delivery, the parties executed quasi-loan agreements converting unpaid purchase-price obligations into loan-type obligations with interest and default interest.
- Order documents included a clause stating that disputes would be litigated in Japanese courts.
- The trading companies sued Pakistan in a Japanese district court for nonpayment and obtained a default judgment after Pakistan failed to appear.
- On appeal, Pakistan asserted jurisdictional immunity as a foreign sovereign; the high court accepted the immunity defense and dismissed the action as procedurally inadmissible, reasoning that waiver required a treaty or a formal state-to-state declaration.
- The trading companies sought further review, arguing the transactions were commercial and that the forum-selection clause constituted consent to Japanese jurisdiction.

## Issues

1. Whether customary international law requires Japanese courts to recognize absolute state immunity for civil claims arising from a foreign state’s private-law or commercial acts.
2. Whether a foreign state can waive jurisdictional immunity through an explicit forum-selection clause contained in a written contract with private parties, rather than only by treaty or formal state-to-state communication.
3. Whether Pakistan’s procurement and refinancing arrangements were non-sovereign commercial acts such that jurisdictional immunity should not apply absent special circumstances.

## Decision

- The Supreme Court reversed the high court and remanded for further proceedings.
- The Court held that customary international law continues to grant immunity for sovereign acts, but no longer grants immunity for private-law or business-administration (commercial) acts.
- The Court concluded Pakistan’s contracts for computers and the related quasi-loan arrangements were commercial acts that private parties could undertake; no special circumstances justified immunity.
- The Court held that a foreign state, in principle, is not immune where it clearly expresses in a written contract with private parties an agreement to submit disputes arising from that contract to Japanese courts.
- The Court rejected the high court’s view that waiver must be limited to treaties or formal state-to-state declarations and modified earlier precedent to the extent inconsistent.

## Legal Principles

- State immunity in civil jurisdiction protects foreign states from being sued for sovereign acts, grounded in sovereign equality, but does not extend to ordinary commercial or private-law conduct under contemporary customary international law.
- For a state’s commercial/private acts, exercising civil jurisdiction ordinarily does not threaten sovereignty; denying judicial remedies to private counterparties without justification is unfair.
- A foreign state may waive jurisdictional immunity by clearly consenting in writing—within a private contract—to the forum state’s courts for disputes arising out of that contract.
- Once such written consent is given, allowing the state to invoke immunity to defeat the agreed forum is generally inconsistent with fairness and good faith.
- Earlier case law supporting absolute immunity is displaced to the extent it conflicts with restrictive immunity and recognition of contractual waiver through private agreements.

## Conclusion

The Supreme Court held that foreign states are not entitled to civil jurisdictional immunity for commercial or private-law acts under customary international law and that explicit written consent in a private contract to litigate in Japanese courts generally waives immunity, requiring reversal of the dismissal and remand for merits proceedings.


Tokyo Sanyō Bōeki K.K. v. Islamic Republic of Pakistan, 60 Minshū 2542 (Sup. Ct. Japan 2006)