Why can a judgment against a government be hard to collect?

Because winning removes only the first immunity. A court may hear a claim against a state under an exception, such as commercial activity or an arbitration agreement, but collecting requires reaching property that is not immune from execution. In the US, a foreign state's property is generally reachable only if it is 'used for a commercial activity in the United States' and a further condition applies, such as a waiver or use for the commercial activity the claim is based on (28 U.S.C. 1610(a)). Embassy, central bank and military assets are typically protected.

When can a foreign state be sued in the US?

Under the exceptions in 28 U.S.C. 1605(a), which include waiver; actions 'based upon a commercial activity carried on in the United States by the foreign state' or acts abroad with a direct effect in the US; certain expropriation claims; and actions to confirm arbitration awards. If no exception applies, the court has no jurisdiction regardless of the merits.

Does ICSID solve the enforcement problem?

Partly. ICSID Convention Article 54 requires each Contracting State to enforce an award's pecuniary obligations 'as if it were a final judgment of a court in that State,' but Article 55 says nothing in Article 54 derogates from the law 'relating to immunity of that State or of any foreign State from execution.' So an ICSID award is easier to have recognized, and still faces execution immunity.

What did the YPF case show?

How far a sovereign case can go and still not pay. The $16.1 billion judgment against Argentina was entered in September 2023; in June 2025 the court ordered Argentina to turn over its 51% of YPF's Class D shares, an order stayed pending appeal; and in March 2026 the Second Circuit reversed the judgment, per Burford's filings. Burford's 10-Q says further US proceedings and international arbitration are being pursued.

Can a sovereign case fail before the merits?

Yes, on jurisdiction. Silver Bull Resources' arbitration against Mexico under NAFTA and the USMCA was dismissed by an ICSID tribunal on May 29, 2026 because it concluded it lacked jurisdiction and/or the claim was time-barred, and Silver Bull was ordered to pay about $998,000 of Mexico's costs. Treaty claims depend on the treaty's scope and time limits as much as on the facts.

How do funders price sovereign claims?

With long timelines and heavy discounts for enforcement. Burford's 10-K risk factors highlight the difficulty of collecting when a defendant 'is unable or unwilling to pay,' and its valuation adjusts by geography and milestone. The YPF assets were carried at about 11% of the judgment on a Burford-only basis before the appeal, reflecting both appellate and enforcement risk.

Sovereign Immunity

Litigation Finance & Legal Claims

Definition

Sovereign immunity is the legal protection a foreign state has from the jurisdiction of another country's courts and from the attachment and execution of its property. In the US it is governed by the Foreign Sovereign Immunities Act: a foreign state is immune from jurisdiction 'except as provided in sections 1605 to 1607' (28 U.S.C. 1604), and its US property is immune from attachment and execution except as provided in sections 1610 and 1611 (1609). Immunity from execution survives even when a claim is won.

Why it matters

Sovereign claims can be among the largest in litigation finance, and among the hardest to turn into cash. A state can be immune from suit, and even after losing, its assets are often immune from seizure; payment then depends on negotiation, political change or finding commercial assets abroad. ICSID awards help with recognition but not with immunity from execution. For an investor, a fund with sovereign exposure has concentrated, long-dated and politically sensitive risk. Ask how much of the book is against states or state entities, what commercial assets exist, and how enforcement has gone on concluded sovereign cases.

Common misconceptions

•Winning against a state is not collecting, because immunity from execution survives a judgment or award.
•An ICSID award is not self-enforcing against state assets, because Article 55 preserves immunity from execution.
•Jurisdiction is not assumed, because a claim against a state must fit an FSIA exception or a treaty's terms before the merits are heard.
•Any state asset is not reachable, because US law generally limits execution to property used for a commercial activity in the United States.
•A large sovereign judgment is not a large asset, because Burford carried YPF at about 11% of its face before the appeal and far less after.

Technical details

Worked example (illustrative): pricing a sovereign award

Award: $500 million against a state, recognized in two countries.

Commercial assets identified in those countries: $80 million, of which $50 million is likely reachable.

Probability of a negotiated settlement within five years: 40%, at 50% of face.

Expected value: 0.4 x $250 million + 0.6 x $50 million = $130 million, about 26% of the award, before enforcement costs.

The expected value is a fraction of the $500 million face, received over years, which is why sovereign claims are discounted heavily.

Two immunities

From jurisdiction: 28 U.S.C. 1604; exceptions in 1605 (waiver, commercial activity, expropriation, arbitration).

From execution: 28 U.S.C. 1609; exceptions in 1610 (commercial property in the US, with conditions) and 1611 (protections for central bank and military property).

ICSID: Article 54 enforcement as a final judgment; Article 55 preserves execution immunity.

Treaty claims: jurisdiction and time limits set by the treaty.

What AltStreet's reviews and filings show

Under the Foreign Sovereign Immunities Act, a foreign state is immune from US jurisdiction except as provided in 28 U.S.C. 1605 to 1607 (section 1604), with exceptions including waiver, commercial activity and actions to confirm arbitration awards (1605(a)); its US property is immune from execution (1609) unless, among other conditions, the property is 'used for a commercial activity in the United States' and the state has waived immunity or the property was used for the commercial activity on which the claim is based (1610(a)).

ICSID Convention Article 53 makes an award 'binding on the parties' and 'not ... subject to any appeal or to any other remedy except those provided for in this Convention'; Article 52 allows annulment on five narrow grounds, applied for within 120 days; Article 54 requires each Contracting State to enforce an award's pecuniary obligations 'as if it were a final judgment of a court in that State'; Article 55 leaves intact the law 'relating to immunity of that State or of any foreign State from execution'.

Burford's YPF-related assets rested on a $16.1 billion judgment against Argentina entered September 15, 2023; the Second Circuit reversed it on March 27, 2026, and the assets' consolidated fair value fell from $2.6 billion at December 31, 2025 to $145.9 million at September 30, 2026; Turnover Order of June 30, 2025 stayed pending appeal.

Silver Bull Resources' funding agreement with Bench Walk Advisors (September 5, 2023) committed up to $9.5 million for legal, tribunal, expert and defined corporate costs of its ICSID arbitration against Mexico; on May 29, 2026 the tribunal dismissed the claim, concluding it lacked jurisdiction and/or the claim was time-barred, and ordered Silver Bull to pay about $998,000 of Mexico's legal costs, and Bench Walk then terminated the agreement (Silver Bull 10-Q for July 31, 2026).

Questions about sovereign claims

Is the defendant a state, an agency or a state-owned company?

Which jurisdictional exception or treaty provision supports the claim?

What commercial assets exist, where, and are they reachable?

Has the state paid awards before, and on what terms?

What share of the fund's value is sovereign exposure?

How investors apply the term

Investors usually apply this term by tying the definition back to the controlling documents and then asking which cash flows, rights, restrictions, or valuation assumptions it changes. A useful review looks at the term alongside fees, leverage, liquidity, reporting frequency, and manager discretion rather than treating it as a standalone concept.

The practical diligence test is simple: identify who benefits if the assumption is wrong, who has control when conditions change, and what evidence the investor receives after closing. Terms that cannot be reconciled to documents, cash movements, and monitoring data should be treated as marketing shorthand until proven otherwise.

Frequently asked questions

Why can a judgment against a government be hard to collect?: Because winning removes only the first immunity. A court may hear a claim against a state under an exception, such as commercial activity or an arbitration agreement, but collecting requires reaching property that is not immune from execution. In the US, a foreign state's property is generally reachable only if it is 'used for a commercial activity in the United States' and a further condition applies, such as a waiver or use for the commercial activity the claim is based on (28 U.S.C. 1610(a)). Embassy, central bank and military assets are typically protected.
When can a foreign state be sued in the US?: Under the exceptions in 28 U.S.C. 1605(a), which include waiver; actions 'based upon a commercial activity carried on in the United States by the foreign state' or acts abroad with a direct effect in the US; certain expropriation claims; and actions to confirm arbitration awards. If no exception applies, the court has no jurisdiction regardless of the merits.
Does ICSID solve the enforcement problem?: Partly. ICSID Convention Article 54 requires each Contracting State to enforce an award's pecuniary obligations 'as if it were a final judgment of a court in that State,' but Article 55 says nothing in Article 54 derogates from the law 'relating to immunity of that State or of any foreign State from execution.' So an ICSID award is easier to have recognized, and still faces execution immunity.
What did the YPF case show?: How far a sovereign case can go and still not pay. The $16.1 billion judgment against Argentina was entered in September 2023; in June 2025 the court ordered Argentina to turn over its 51% of YPF's Class D shares, an order stayed pending appeal; and in March 2026 the Second Circuit reversed the judgment, per Burford's filings. Burford's 10-Q says further US proceedings and international arbitration are being pursued.
Can a sovereign case fail before the merits?: Yes, on jurisdiction. Silver Bull Resources' arbitration against Mexico under NAFTA and the USMCA was dismissed by an ICSID tribunal on May 29, 2026 because it concluded it lacked jurisdiction and/or the claim was time-barred, and Silver Bull was ordered to pay about $998,000 of Mexico's costs. Treaty claims depend on the treaty's scope and time limits as much as on the facts.
How do funders price sovereign claims?: With long timelines and heavy discounts for enforcement. Burford's 10-K risk factors highlight the difficulty of collecting when a defendant 'is unable or unwilling to pay,' and its valuation adjusts by geography and milestone. The YPF assets were carried at about 11% of the judgment on a Burford-only basis before the appeal, reflecting both appellate and enforcement risk.