The Default Strategy Under the FSIA

The Third Circuit last week denied a petition for writ of mandamus in In re Abdulla, No. 14-1244, 2014 WL 594347 (3d Cir. Feb. 18, 2014).  The procedural posture of the Abdulla case was unusual.  The foreign state, despite being served, decided not to appear in the litigation.  As a result, the district court proceeded under 28 U.S.C. section 1608(e), and its decision provides an interesting perspective on default proceedings under the FSIA.

In the absence of the foreign state, the district court in Abdulla followed a two-step procedure.  First, the court determined whether the action –  which arose out of an alleged breach of contract by the Embassy of Iraq – satisfied the commercial activity exception to sovereign immunity.  Abdulla v. Embassy of Iraq, CIV.A. 12-2590, 2013 WL 4787225, at *1 (E.D. Pa. Sept. 9, 2013).  Examining the relevant facts and law – all without any briefing from the sovereign – the district court found that the action fell within the FSIA’s commercial activity exception.  In so holding, the district court noted that the plaintiff’s burden was to produce “some evidence that an exception to immunity applies,” but that the ultimate burden of persuasion remained with the foreign state.  Id. at *6.  The court also noted that the plaintiff “cannot be expected to produce evidence peculiarly within the possession of the defendant government,” thereby indicating that the court did not place a particularly high burden on the plaintiff with respect to a factual showing of jurisdiction.  Id. (citation omitted); cf. Recent Development: The D.C. Circuit’s Latest FSIA Decision.

In the second step of the analysis, the district court recognized that “[u]nder the FSIA, unlike in a case against a private party, a court may not enter a default judgment against a foreign state ‘unless the claimant establishes his claim or right to relief by evidence satisfactory to the court.’”  Abdulla, 2013 WL 4787225, at *7, quoting 28 U.S.C. § 1608(e); see also Fed. R. Civ. P. 55(d) (same requirement with respect to actions against the United States).  The district court thereafter engaged in a detailed evidentiary analysis of whether plaintiff had established his claim or right to relief under section 1608(e).  Abdulla, 2013 WL 4787225, at *7-13.  The court stated that section 1608(e)’s requirement “does not impose on plaintiffs the burden of producing the full range of evidence that would be available to them if the opposing party had participated in discovery; rather, the quantum and quality of evidence that might satisfy a court can be less than that normally required.”  Id. at *7 (citation and quotations omitted).  Nevertheless, after a careful review of the evidence, the district court held that plaintiff had not met his burden on the merits.  Id. at *13.  The district court also rejected the plaintiff’s argument that the court should not apply section 1608(e) “because the Embassy’s default was willful,” finding the plaintiff’s position “not supported by the language of the statute or the case law.”  Id. at 7 n.9. 

Abdulla demonstrates that foreign sovereigns can pursue an intentional “default strategy” under the FSIA.  A foreign sovereign can, under sections 1330(a) and 1608(e), leave it to the court to resolve both jurisdiction and merits issues without any participation by the sovereign in the litigation.  In Abdulla, the strategy paid off, and the sovereign likely saved litigation fees and costs in the process. 

However, while the strategy may be appropriate in certain cases, foreign sovereigns should be aware that it comes with substantial risks.  The United States legal system is fundamentally adversarial, and the courts depend upon counsel for all parties to identify the applicable law and develop the relevant evidence.  Foreign sovereigns cannot expect judges to be familiar with the vast and complex case law under the FSIA, and it is possible that a judge would miss important cases that materially affect the jurisdictional analysis.  And, with regard to facts, the Abdulla case shows that courts will generally apply a more lenient standard in the default context.  As a result, foreign sovereigns are free to choose to the “default strategy,” but in so doing they significantly increase the risk of a negative judgment – and of potential harmful precedent that can be used against the sovereign in future litigation.

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