Sovereign
 A sovereign, yesterday
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One of ISDA’s vaunted netting categories.
Sovereign: A sovereign nation state recognized internationally as such, typically acting through a direct agency or instrumentality of the central government without separate legal personality, for example, the ministry of finance, treasury or national debt office. This category does not include a State of a Federal Sovereign or other political sub-division of a sovereign nation state if the sub-division has separate legal personality (for example, a Local Authority) and it does not include any legal entity owned by a sovereign nation state (see “Sovereign-owned entity”).
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Also one who might claim sovereign immunity, a status likely to get all your resident chicken lickens squawking and gabbling, though in the context of a daily margined master trading agreement, less of a drama than it might seem.
Of course sovereigns are just the types to go "who’s queen?" and refuse to provide you with credit support.
Or claim sovereign immunity; as to which there is more to say elsewhere.
Sovereign immunity and close-out netting
Does the fact that a counterparty may have, or may claim, sovereign immunity from legal proceedings before a foreign court (or its own courts, for that matter) invalidate a close-out netting clause?
We think not: the close-out mechanism does not require the intervention of any court to work: it is a self-help remedy. You terminate, net off and walk away.[1] To the contrary, it would only come before a court were the Defaulting Party to apply to the court to challenge its exercise. And you can’t have it both ways: a sovereign immunity right only avails you if you stay away from court. The moment Queenie puts the matter before a court she submits to the court and, Q.E.D., waives her immunity. Sorry, Your Majesty: I don’t make the rules.