Sovereign Immunity Analysis in Subscription Credit Facilities

Subscription credit facilities have become a popular form of financing for private equity and real estate funds. Governmental pension plans, state endowment funds, sovereign wealth funds and other instrumentalities of foreign and domestic governments are frequent Investors that may possess certain sovereign immunity rights against enforcement proceedings rooted in the common law concept that “the King can do no wrong.” Governmental Investors must be evaluated on a case-by-case basis to ascertain if any sovereign rights apply and, if so, whether such Investor has effectively waived its immunity. This Legal Update seeks to set forth the basic legal framework of sovereign immunity in the United States relevant to subscription credit facilities.