Plaintiffs and Their Counsel Should Determine a Foreign State Entity’s Status Early in the Litigation

In FSIA cases, plaintiffs and their counsel frequently fail to examine carefully at the outset of the litigation a foreign state entity’s status under section 1603.  That mistake, which is easily avoidable, has resulted in numerous instances of defective service of process and other unnecessary delays in FSIA litigation.  

In Howe v. Embassy of Italy, No. CV 13-1273 (BAH), 2014 WL 4449697 (D.D.C. Sept. 11, 2014), the court recently held that the Italian Embassy was a foreign state for purposes of the FSIA’s service provisions.  The court relied on the “categorical” approach adopted by the D.C. Circuit in Transaero, Inc. v. La Fuerza Aerea Boliviana, 30 F.3d 148 (D.C. Cir. 1994), which examines if an entity is “an integral part of a foreign state’s political structure” in determining whether the entity qualifies as a “foreign state.”  Howe, 2014 WL 4449697, at *5-6; see also Transaero, 30 F.3d at 151.  The Howe court also relied on a line of FSIA cases that have determined that an embassy is part of the foreign state itself.  See Howe, 2014 WL 4449697, at *6; see also Barot v. Embassy of Republic of Zam., No. 13-451, 2014 WL 1400849, at *4 (D.D.C. Apr. 11, 2014) (holding defendant foreign embassy in Washington, D.C., is “foreign state or [a] political subdivision of a foreign state” for FSIA purposes (alteration in original)); Ellenbogen v. The Can. Embassy, No. 05-1553, 2005 WL 3211428, at *2 (D.D.C. Nov. 9, 2005) (“[I]t is well-settled that an embassy is a ‘foreign state’ . . . not an ‘agency or instrumentality’ thereof”); Int’l Rd. Fed’n v. Embassy of Dem. Republic of the Congo, 131 F. Supp. 2d 248, 250 (D.D.C. 2001) (holding embassy of foreign state in Washington, D.C., a “foreign state” for the purposes of the FSIA and collecting cases); Underwood v. United Republic of Tanz., No. 94-902, 1995 WL 46383, at *2 (D.D.C. Jan. 27, 1995) (“Applying the categorical approach to the status of the Embassy, we conclude that as a matter of law an embassy of a sovereign nation is a foreign state which must be served pursuant to § 1608(a).”).  Based upon this conclusion regarding the Italian Embassy’s status, the Howe court held that the plaintiff’s attempted service – which did not meet the requirements of section 1608(a) – was defective.  Howe, 2014 WL 4449697, at *6.

It is not always easy to tell whether an entity is a foreign state or an agency or instrumentality thereof.  While each entity must be analyzed separately in the context of the foreign political system at issue, a good rule of thumb is that ministries or departments, the military, and embassies will be deemed “foreign states” – and not agencies or instrumentalities thereof – under 28 U.S.C. § 1603(a).  See, e.g., Garb v. Republic of Poland, 440 F.3d 579, 597-98 (2d Cir. 2006) (holding that the Ministry of the Treasury of Poland is a foreign state and not an “agency or instrumentality” thereof); Transaero, 30 F.3d at 153 (“We hold that armed forces are as a rule so closely bound up with the structure of the state that they must in all cases be considered as the ‘foreign state’ itself, rather than a separate ‘agency or instrumentality’ of the state.”); Howe, 2014 WL 4449697, at *5-6 (holding that an embassy is a foreign state under section 1603(a)). 

In any event, plaintiffs and their counsel would be well-served to examine the issue carefully at the outset of the case.  An entity’s status can have a major impact on the ensuing litigation, including with respect to service (28 U.S.C. § 1608), jurisdiction (28 U.S.C. § 1605(a)(3)), damages (28 U.S.C. § 1606), and attachment or execution (28 U.S.C. § 1610).  An early resolution of the issue should not be difficult – Transaero is the key case to get the research started – and can avoid costly and unnecessary litigation.

Discovery Targeting FSIA Counsel

A recent decision by the Second Circuit serves as a warning signal to foreign states and their attorneys in the United States.  In Mare Shipping Inc. v. Squire Sanders (US) LLP, No. 13-4426-CV, — Fed. Appx. —, 2014 WL 3733133 (2d Cir., July 30, 2014), the Second Circuit held that the FSIA does not preclude discovery requests targeting a foreign state’s counsel in the United States.  Relying on Rep. of Argentina v. NML Capital, Ltd., — U.S. —, 134 S.Ct. 2250, 2256, (2014), the court held that the FSIA’s “explicit definition” of a “foreign state,” by “its plain text, excludes a foreign sovereign’s U.S. counsel.”  Mare Shipping, 2014 WL 3733133, at *3. 

It is unclear what practical impact Mare Shipping will have, since documents and other information obtained by FSIA defense counsel from a foreign state would presumably remain protected by the attorney-client privilege.  In addition, FSIA counsel’s work should remain protected by the attorney work product doctrine.  However, in the event that such protections do not apply, defense counsel should be aware that they likely cannot rely upon the FSIA to fight discovery related to their representation of foreign states.

The Narrow Implied Waiver Exception

A recent decision from the United States District Court for the District of Columbia underscores the difficulty of establishing FSIA jurisdiction based upon a foreign state’s implied waiver of immunity.  The case also highlights that defense counsel in FSIA cases should take a simple step to prevent an inadvertent waiver of immunity in litigation.

The FSIA’s legislative history indicates that implied waivers may be found “in cases where a foreign state has agreed to arbitration in another country or where a foreign state has agreed that the law of a particular country should govern a contract.”  H.R.Rep. No. 94–1487, at 18 (1976).  In addition, “[a]n implicit waiver would . . . include a situation where a foreign state has filed a responsive pleading in an action without raising the defense of sovereign immunity.”  Ibid.  Based upon this legislative history, “[f]ederal courts have been virtually unanimous in holding that the implied waiver provision of Section 1605(a)(1) must be construed narrowly.”  Shapiro v. Republic of Bolivia , 930 F.2d 1013, 1017 (2d Cir. 1991).  Moreover, while “the examples given in the House Report are not necessarily the only circumstances in which an implied waiver might be found,” Smith v. Socialist People’s Libyan Arab Jamahiriya, 101 F.3d 239, 244 (2d Cir. 1996), “courts have been reluctant to stray beyond these examples when considering claims that a nation has implicitly waived its defense of sovereign immunity.” Princz v. Federal Republic of Germany, 26 F.3d 1166, 1174 (D.C. Cir. 1994).

Diag Human S.E. v. Czech Republic-Ministry of Health, CV 13-0355 (ABJ), 2014 WL 3956747 (D.D.C. Aug. 14, 2014), is consistent with precedent narrowly construing implied waivers under section 1605(a)(1).  In determining whether the Czech Republic had implicitly waived its immunity, the district court held that there had been no implied waiver because the foreign state’s conduct did not fall within any of the three examples set forth in the legislative history.  Diag Human, 2014 WL 3956747, at *6.

While the analysis in Diag Human is straightforward, the case highlights an important issue for FSIA defense counsel.  The Czech Republic filed a motion to dismiss in Diag Human that did not raise the issue of foreign sovereign immunity.  The district court determined that such a filing did not fall within the “responsive pleading” implicit waiver exception, because a motion to dismiss is not a responsive pleading.  Diag Human, 2014 WL 3956747, at *6.  As a procedural matter, the district court was correct: under the Federal Rules of Civil Procedure, a motion to dismiss is technically not a “responsive pleading.”  See, e.g., Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995).  However, as a practical matter, defense counsel in FSIA cases should be cautious about filing a motion to dismiss that fails to include a sovereign immunity defense.  At a bare minimum, any such motion should expressly reserve the sovereign immunity defense so that the plaintiff cannot argue implicit waiver under section 1605(a)(1).  In fact, it is good practice for defense counsel to include explicit “non-waiver” language in all early filings in an FSIA case – including, for example, stipulations to extend time to file an answer or otherwise respond – to avoid waiver becoming an issue in the litigation.