Monthly Archives: January 2014

Injunctive Relief and the FSIA’s Tort Exception

January 26, 2014 By in Tort Exception Tags: , , , , Leave a comment

There has been a lot of recent attention to the issue of whether injunctions are permitted under the FSIA.  See, e.g., NML Capital, Ltd. v. Republic of Argentina, 699 F.3d 246, 262-63 (2d Cir. 2012) cert. denied, 134 S. Ct. 201 (U.S. 2013).  However, one issue that has not been widely discussed is the possibility of injunctive relief in a lawsuit proceeding under the FSIA’s tort exception.  Using Federal Tort Claims Act (“FTCA”) precedent, a foreign sovereign has a strong basis for arguing that injunctive relief is impermissible under 28 U.S.C. section 1605(a)(5).

The FSIA’s tort exception was modeled on the waiver of immunity contained in the FTCA.  Compare 28 U.S.C. § 1605(a)(5) with 28 U.S.C. § 1346(b)(1); see also, e.g., De Sanchez v. Banco Central de Nicaragua, 770 F.2d 1385, 1398 (5th Cir. 1985).  Similar to the FTCA’s immunity waiver, the tort exception is limited to cases “in which money damages are sought against a foreign state.”  28 U.S.C. § 1605(a)(5) (emphasis added).  Courts have repeatedly held that analogous language in the FTCA precludes injunctive relief.  See Kaskaskia River/Marina Campgrounds, Inc. v. United States, 07-CV-0166-MJR, 2008 WL 4594979, at *2 (S.D. Ill. Oct. 15, 2008) (“The explicit terms of the FTCA only provide for money damages. . . . Given the plain meaning of the statute, it is clear that this Court lacks subject matter jurisdiction to award any relief other than money damages.”); see also Moher v. United States, 875 F. Supp. 2d 739, 755 (W.D. Mich. 2012) (collecting cases).  Accordingly, applying FTCA precedent to cases under the FSIA’s tort exception, section 1605(a)(5) does not confer subject matter jurisdiction over claims seeking injunctive relief against foreign sovereigns.

The FSIA, Agency and Agents: Avoiding a Basic Pitfall

January 20, 2014 By in Agency Tags: , , , , , , , , , , , Leave a comment

On appeal in the Ninth Circuit in Sachs v. Republic of Austria, et al., Case No. 11-15458, the Austrian instrumentality OBB Personenverkehr AG (“OBB”) argued that an entity’s conduct may be attributed to a foreign state under the FSIA only if that entity meets the “agency or instrumentality” requirements set forth in 28 U.S.C. section 1603(b).  OBB contended that because the entity in question did “not fall within the agency definition” set forth in section 1603(b), the “acts of [the entity] cannot be imputed to OBB for purposes of Section 1605(a)(2).”  OBB’s Supplemental Letter, dated Apr. 8, 2013, Docket No. 52, at 2.  Because OBB’s erroneous argument has been made by litigants in FSIA cases before (see Gates v. Victor Fine Foods, 54 F.3d 1457, 1460 n.1 (9th Cir. 1995)), this post examines the issue more closely.

Under the FSIA, the term “‘foreign state,’ except as used in section 1608 . . . , includes a political subdivision of a foreign state or an agency or instrumentality of a foreign state as defined in subsection (b).”  28 U.S.C. § 1603(a) (emphasis added).  An “agency or instrumentality” is defined as any entity which (1) “is a separate legal person, corporate or other,” (2) “is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof,” and (3) “is neither a citizen of a State of the United States as defined in section 1332(c) and (e) of this title, nor created under the laws of any third country.”  28 U.S.C. § 1603(b).   The term “agency or instrumentality” was intended to include entities such as “state trading corporation, a mining enterprise, a transport organization such as a shipping line or airline, a steel company, a central bank, an export association, a governmental procurement agency or a department or ministry which acts and is suable in its own name.”  H.R. Rep. No. 94-1487, at 16 (1976).

Despite section 1603(a)’s sole reference to section 1608 – the FSIA’s service provision – the statutory scheme reflects different treatment of agencies or instrumentalities that extends well beyond service of process.  For example, it is easier to establish jurisdiction under the international takings exception over an agency or instrumentality than it is over a foreign sovereign itself.  See 28 U.S.C. § 1605(a)(3).  The FSIA precludes recovery of punitive damages against a foreign sovereign, but not against an agency or instrumentality.  28 U.S.C. § 1606.  And it is easier to attach or execute on the property of an agency or instrumentality than it is on the property of a foreign sovereign.   Compare 28 U.S.C. § 1610(a) with § 1610(b).

As a result, the determination of whether an entity qualifies as a foreign sovereign or as an agency or instrumentality is an important one.  However, contrary to OBB’s argument, the determination has nothing to do with the issue of attribution – i.e., common law “agency” – under the FSIA.   Section 1603(b) was intended to delineate the entities entitled to the protections of the FSIA, but nothing suggests that the provision was meant to address attribution for purposes of jurisdiction or liability.

In contrast to the requirements of section 1603(b), “agency” for purposes of attribution is governed by common law principles as informed by international law and articulated congressional policies.  First Nat. City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611, 623 (1983).  For example, with respect to separate juridical entities, courts examine whether an entity is under the “day-to-day” control of a foreign sovereign.  See, e.g., Dale v. Colagiovanni, 443 F.3d 425, 429 (5th Cir. 2006).  In addition, an actual authority agency inquiry will typically turn on foreign law, since that will dictate whether the putative agent was in fact authorized to engage in the conduct alleged.  See, e.g., Velasco v. Gov’t Of Indonesia, 370 F.3d 392, 401-02 (4th Cir. 2004); see also Fed. R. Civ. P. 44.1.  And apparent authority is not permitted as an agency theory under the FSIA, for all of the reasons I have previously discussed.  Plainly, all of these issues are far afield from the statutory inquiry set forth in section 1603(b).

OBB’s erroneous argument may have arisen from use of the term “agency” in the FSIA, which at first blush may appear to refer to common law “agency” principles.  See Hester Int’l Corp. v. Fed. Republic of Nigeria, 879 F.2d 170, 176 n.5 (5th Cir. 1989) (“The use of the single term ‘agency’ for two purposes . . . may cause some confusion.”).    However, as the Fifth Circuit explained long ago:

The FSIA uses [the term] to determine whether an “agency” of the state may potentially qualify for foreign sovereign immunity itself under the FSIA. This is a completely different question from that which we must address here: whether or not the [entity] enjoyed an alter ego relationship with the [foreign sovereign] so that it could bind [the sovereign] to a contract. Although such an alter ego relationship may be described in terms of “agency,” it is a completely different inquiry than that which might be conducted under § 1603.

Hester Int’l Corp. v. Fed. Republic of Nigeria, 879 F.2d 170, 176 (5th Cir. 1989). 

The Ninth Circuit followed Hester in Gates, 54 F.3d at 1460 n.1.  The Ninth Circuit recently reaffirmed Gates when it strongly rejected OBB’s argument in Sachs:

The plain text of the FSIA does not support OBB’s proposed framework for determining whether [the entity in question] is an agent of OBB. Section 1603(b) defines what type of entity can be considered a foreign state for purposes of claiming sovereign immunity. If an entity cannot show that it meets that definition then it is not entitled to sovereign immunity. Whether an entity meets the definition of an “agency or instrumentality of a foreign state” to claim immunity is a completely different question from whether the acts of an agent can be imputed to a foreign state for the purpose of applying the commercial-activity exception.

Sachs v. Republic of Austria, 737 F.3d 584, 595 (9th Cir. 2013) (en banc) (citations and quotations omitted).

Because the term “agency” is used both under section 1603(b) and under the common law, the erroneous argument made by OBB in the Sachs appeal is capable of repetition.  However, FSIA practitioners should be aware of the distinction, and thereby avoid this basic pitfall in FSIA law.

The Sole Method of Service Upon a Diplomatic Agent

January 16, 2014 By in Diplomatic Immunity Tags: , , , , , , Leave a comment

Although this site focuses on developments in FSIA law, I will also occasionally address legal issues relating to head-of-state immunity, official immunity and diplomatic immunity.  Today, I address an unusual issue: the proper method of service of process upon a diplomatic agent.

While a sitting diplomatic agent is immune from criminal jurisdiction under Article 31 of the Vienna Convention on Diplomatic Relations  (“VCDR”), there are three narrow exceptions to immunity from civil jurisdiction.  See VCDR, art. 31(1)(a)-(c).  In the (unlikely) event that a plaintiff’s attorney files an action against a diplomatic agent that falls within one of the three limited exceptions to diplomatic immunity, the issue arises of service of process upon a sitting diplomatic agent.  It is a matter not addressed by statute or rule, and it has received little attention in the commentary.  In this post, I conclude that international law requires that service upon a diplomatic agent may only be accomplished via diplomatic channels.

Under the principle of personal inviolability, it is without question that a diplomatic agent may not be personally served with legal process.  See VCDR, art. 29 (“The person of a diplomatic agent shall be inviolable.”); see also Tachiona v. United States, 386 F.3d 205, 221-24 (2d Cir. 2004); Hellenic Lines, Ltd. v. Moore, 345 F.2d 978, 979-81 (D.C. Cir. 1965).  Moreover, because the premises of a diplomatic mission are inviolable under Article 22 of the VCDR, a plaintiff’s attorney may not send a process server onto the premises of a mission to serve process upon an ambassador or any other individual.  See VCDR, art. 22(1) (“The premises of the mission shall be inviolable.”); see also 767 Third Ave. Assoc. v. Permanent Mission of Republic of Zaire to United Nations, 988 F.2d 295, 300 (2d Cir. 1993) (stating that the VCDR “recognized no exceptions to mission inviolability”); Harvard Research in International Law, Diplomatic Privileges and Immunities, 26 Am. J. Int’l L. Supp. 15, 55 (1932) (“Customary international law, recognized by municipal legislation, prohibits the serving of any writ, summons, order, or process within the premises of a mission.”).

Whether or not a diplomatic agent may be served by mail poses a more difficult question.  However, four decades ago, the United States Department of State concluded that service by mail would run afoul of Article 22’s inviolability provision.  The Department determined that “countries party to the Convention on Diplomatic Relations . . . would have a basis for objection to the propriety of process served [by mail] under Article 22, section 1, of that Convention, as interpreted in light of the negotiating history of that Convention (Official Records, Volume I, page 141).”  Diplomatic Premises – Inviolability, 69 Am. J. Int’l L. 146, 146-47 (1975); see also 1974 Digest of United States Practice in International Law 171, 171-72 (same).  The Vienna Convention negotiating history cited by the State Department consisted of the following statement by the Japanese representative, made upon withdrawal of an amendment prohibiting service by a process server on mission premises:

Mr. Takahashi (Japan) said that the purpose of the Japanese amendment was to establish a uniform rate concerning the service of judicial documents.  He was prepared to withdraw the amendment, on the understanding that it was the unanimous interpretation of the Committee that no writ could be served, even by post, within the premises of a diplomatic mission.

United Nations Conference on Diplomatic Intercourse and Immunities (Vienna – 2 March – 14 April 1961), Official Records, Vol. I: Summary Records of Plenary Meetings and of Meetings of the Committee of the Whole (1962), A.Conf.20/14, at 141 (emphasis added).

The few commentators who have addressed the issue agree that Article 22 of the Vienna Convention prohibits service by mail.  See, e.g., Brownlie, Principles of Public International Law 357 (7th ed. 2008) (“It follows from Article 22 that writs may not be served, even by post, within the premises of a mission.”); Dembinski, The Modern Law of Diplomacy 193 (1988) (stating that Article 22 “protects the mission from receiving by messenger or by mail any notification from the judicial or other authorities of the receiving State”); Salmon, Manuel de Droit Diplomatique § 302 (1994) (stating that service of process is not permitted by mail under Article 22).

As the same commentators recognize, the sole remaining method of service upon a diplomatic agent is via diplomatic channels.  See Brownlie, Principles of Public International Law 357 (stating that writs may be served “only through the local Ministry of Foreign Affairs”); Dembinski, The Modern Law of Diplomacy 193 (“If absolutely necessary such documents have to be transmitted through the Foreign Ministry.”); Salmon, Manuel de Droit Diplomatique § 302 (1994) (stating that service of process is permitted only via diplomatic channels under Article 22).

There are several important policy reasons underlying the requirement of service via diplomatic channels.  First, such service ensures that the head of the diplomatic mission and the foreign sovereign are apprised of the attempted service of process.  Notice in an international case with unique constitutional status (cf. U.S. Const. art. III, § 2, cl. 1) and potential serious foreign relations implications should not depend upon mere service by mail. 

Second, service by diplomatic channel guarantees notice to the receiving state’s foreign ministry – important under Article 22, given the receiving state’s “special duty” to “take all appropriate steps to protect the premises of the mission against any intrusion . . . and to prevent any . . . impairment of its dignity.”  VCDR, art. 22(3). 

Third, requiring service by diplomatic channel helps ensure similar treatment for U.S. diplomatic missions overseas.  See, e.g., 767 Third Ave. Assoc., 988 F.2d at 300 (in Article 22 case, stating that “the United States recognizes the privileges of foreign diplomats in the U.S. with the understanding that American diplomats abroad will be afforded the same protections from intrusions by the host state. The most secure way to guarantee this protection, the United States tells us, is through blanket immunities and privileges without exception.”); see also The Schooner Exchange v. McFaddon, 11 U.S. 116, 138-39 (1812).

In short, if a plaintiff’s attorney files a lawsuit against a diplomatic agent falling into one of the exceptions set forth in Article 31(1) of the Convention, the only acceptable means of service under international law is via diplomatic channels.  All other methods of service would be subject to challenge under Federal Rule of Civil Procedure 12(b)(5).

The Supreme Court’s Grant of Certiorari in Republic of Argentina v. NML Capital, Ltd.

January 10, 2014 By in Discovery Tags: , , , , , , , Leave a comment

The United States Supreme Court granted certiorari today in Republic of Argentina v. NML Capital, Ltd., Case No. 12-842.  For all of the reasons I discussed in a previous post, the NML Capital case has the potential of becoming a major development in FSIA jurisprudence, particularly with respect to the “nuts and bolts” of federal litigation involving foreign sovereigns.

Recent Development: TJGEM LLC v. Republic of Ghana

January 9, 2014 By in Commercial Activity Exception Tags: , , , , , , , , Leave a comment

In the recent case of TJGEM LLC v. Republic of Ghana, — F. Supp. 2d —, CV 13-382 (BAH), 2013 WL 6857988 (D.D.C. Dec. 31, 2013), District Judge Beryl Howell applied three important rules that are often implicated in cases under the FSIA’s commercial activity exception.

First, the district court emphasized that the commercial activity exception does not apply where the alleged commercial activity is unrelated to a plaintiff’s claims.  Id. at *5; see also, e.g., Transatlantic Shiffahrtskontor GmbH v. Shanghai Foreign Trade Corp., 204 F.3d 384, 390 (2d Cir. 2000) (holding that the term “‘based upon’ [under the commercial activity exception] requires a degree of closeness between the acts giving rise to the cause of action and those needed to establish jurisdiction that is considerably greater than common law causation requirements”).

Second, the court followed Phaneuf v. Republic of Indonesia, 106 F.3d 302, 308 (9th Cir.1997), in holding that apparent authority is insufficient to confer jurisdiction over a foreign state under the commercial activity exception.  TJGEM LLC, 2013 WL 6857988, at *6; see also The Second Circuit’s Apparent FSIA Authority.

Third, the district court reaffirmed that an alleged financial loss to an American individual or firm does not satisfy the “direct effect” requirement of section 1605(a)(2)’s third clause.  TJGEM LLC, 2013 WL 6857988, at *6; see also Recent Development: The D.C. Circuit’s Latest FSIA Decision.

District Judge Howell’s decision is interesting with respect to another issue that I have previously addressed on this blog.  The district court held that to “survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(1), the plaintiff must establish the court’s jurisdiction over the subject matter by a preponderance of the evidence.”  TJGEM LLC, 2013 WL 6857988, at *4.  The TJGEM case is therefore the latest opinion to indicate that traditional subject matter jurisdiction procedural rules apply with respect to a plaintiff’s burden under the FSIA. See Peterson v. Islamic Republic Of Iran, 627 F.3d 1117, 1125 (9th Cir. 2010) (“It must fall to the plaintiff to prove that immunity does not exist.”); see also Am. Telecom Co., L.L.C. v. Republic of Lebanon, 501 F.3d 534, 537 (6th Cir. 2007).