Tag Archives: FSIA

The D.C. Circuit’s Recent Decision Reinforces the Urgent Need for a Cyberattack Exception to the FSIA

March 16, 2017 By in Attachment and Execution, Cyberattack Exception, FSIA, Tort Exception Tags: , , , , , , , , , Leave a comment

On March 14, 2017, the D.C. Circuit affirmed the district court’s dismissal of a lawsuit against Ethiopia that arose out of an alleged hacking of a computer in the United States.  See Doe v. The Federal Democratic Republic of Ethiopia, — F.3d —, 2017 WL 971831 (D.C. Cir., Mar. 14, 2017, No. 16-7081). You can read the opinion here. 

The D.C. Circuit’s opinion makes it clear that the FSIA’s tort exception is wholly inadequate as a means to assert jurisdiction over a foreign state in a cyberattack case.  As the D.C. Circuit correctly held, the tort exception is inapplicable in such cases because of the situs requirement: “The tort [the plaintiff] alleges . . . did not occur entirely in the United States; it is a transnational tort over which we lack subject matter jurisdiction.”  Doe, 2017 WL 971831, at *3, citations, quotations and brackets omitted. The D.C. Circuit stated that Congress’s “primary purpose in enacting § 1605(a)(5) was to eliminate a foreign state’s immunity for traffic accidents and other torts committed in the United States,” and that “[i]t is thus unsurprising that transnational cyberespionage should lie beyond section 1605(a)(5)’s reach.”  Ibid., citation and quotations omitted.

The D.C. Circuit’s holding – that the tort exception’s situs requirement bars a claim arising out of a cyberattack originating overseas – corresponds exactly with the point that I made in my prior post. It is the reason why commentators who argue that the tort exception is sufficient to address the growing cyberattack problem are simply wrong.

Sovereign immunity was born centuries ago, and it underwent an important evolution in the 20th century to reflect a changing world. The FSIA now needs to catch up to the modern realities of the Internet Age. Given the prevalence of computer hacking by foreign states, and the resulting harm to American individuals and companies, a new cyberattack exception to the FSIA is urgently needed. However, as I previously explained, such an exception will only work if it has teeth – such as, for example, the ability to collect on judgments against foreign states from the state’s instrumentalities and agencies, even if such entities were not involved in the cyberattack at issue.  Cf. 28 U.S.C. § 1610(g)(1)(A)-(E). Otherwise, a new exception will do little to stem the rising tide of cyberattacks by foreign sovereigns in the United States.

Sachs’s Meritless Commercial Activity Argument

September 14, 2015 By in Uncategorized Tags: , , , , , , , , Leave a comment

Last week, I examined the problems with the main attribution argument advanced by OBB in the Supreme Court.  Now it is time to analyze the merits of one of the central commercial activity arguments proffered by Sachs. 

The first clause of the commercial activity exception requires that a plaintiff’s action be “based upon a commercial activity carried on in the United States by the foreign state.”  28 U.S.C. § 1605(a)(2).  As a result, to establish jurisdiction under section 1605(a)(2)’s first clause, Sachs must show that her action – which arises from a railway accident in Innsbruck, Austria – is based upon a commercial activity carried on in the United States by OBB.

In her merits brief, Sachs argues that her claims are based upon “OBB’s overall commercial railway enterprise.”  There are three problems with Sachs’s argument.

First, Sachs did not advance the argument below.  It may be that Sachs can avoid a claim of waiver because the issue relates to subject matter jurisdiction (cf. Fed. R. Civ. P. 12(h)(3)), but the fact that Sachs did not raise the argument before her merits brief in the Supreme Court does not inspire confidence.  Like OBB’s novel (and unsupported) agency argument, this was probably an idea that would have been best left on the cutting room floor.

Second, Sachs’s claim ignores a host of FSIA cases (which are also not cited in OBB’s reply on the merits).  Under established law, a plaintiff cannot rely on a sovereign’s alleged general commercial activities under the commercial activity exception.  As courts have repeatedly held for over thirty-five years, it is not the sovereign’s general commercial activities that matter for purposes of the exception:

The focus of the exception to immunity recognized in § 1605(a)(2) is not on whether the defendant generally engages in a commercial enterprise or activity. . . ; rather, it is on whether the particular conduct giving rise to the claim in question actually constitutes or is in connection with commercial activity, regardless of the defendant’s generally commercial or governmental character.

Arango v. Guzman Travel Advisors Corp., 621 F.2d 1371, 1379 (5th Cir. 1980); see also, e.g., Rush-Presbyterian-St. Luke’s Med. Ctr. v. Hellenic Republic, 877 F.2d 574, 580 n.8 (7th Cir. 1989) (same); Jungquist v. Sheikh Sultan Bin Khalifa Al Nahyan, 115 F.3d 1020, 1030 (D.C. Cir. 1997) (stating that the plaintiffs “confuse general activity related to the claim with the specific activity upon which the claim is based”); cf. Sun v. Taiwan, 201 F.3d 1105, 1109 (9th Cir. 2000) (holding that the “focus must be solely upon those specific acts that form the basis of the suit”).  In other words, if the Supreme Court accepts Sachs’s argument, it would be overturning decades of FSIA precedent.  The Court would also be swinging the gates wide open to jurisdiction under the first clause of the commercial activity exception, since plaintiffs’ lawyers can almost always conjure an underlying general commercial activity that can serve as a “basis” for their suits.

Finally, Sachs’s argument lacks merit because OBB “carries on” its “overall commercial railway enterprise” in Austria – and not, as the first clause of the commercial activity exception requires, “in the United States.”  28 U.S.C. § 1605(a)(2).  I understand that Sachs relies on section 1603(e), which defines a “commercial activity carried on in the United States by a foreign state” to mean “commercial activity carried on by such state and having substantial contact with the United States.”  28 U.S.C. § 1605(e).  However, Sachs cannot have it both ways.  If the commercial activity is deemed to be the ticket sale by the travel agency in Massachusetts (and that sale is attributable to OBB), then it may be true that the sale constitutes commercial activity carried on in the United States by OBB.  See Sachs v. Republic of Austria, 737 F.3d 584, 598-99 (9th Cir. 2013) (en banc).  Yet, for reasons I will explain in a subsequent post, Sachs’s lawsuit is not based upon the ticket sale.  And even if a plaintiff were not precluded under FSIA precedent from relying on a foreign state’s general commercial activity, OBB’s operation of its “overall commercial railway enterprise” is carried on in Austria; OBB is Austria’s national railroad company, and it appears undisputed that OBB does not have offices, employees or bank accounts in the United States. 

On its face, this analysis may seem hyper-technical and unfair to Sachs.  The opposite is true.  It is Sachs who is trying to fit a square peg into a round hole.  Sachs’s claims, after all, arise from an alleged tortious act or omission occurring in Austria in connection with a commercial activity overseas.  Sachs should therefore be asserting jurisdiction under the third clause of the commercial activity exception.  Cf. 28 U.S.C. § 1605(a)(2) (third clause stating that a foreign state is not immune in any case based “upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States”).  Sachs is not doing so, presumably because she cannot demonstrate the requisite “direct effect in the United States” under existing law.  See, e.g., Zernicek v. Brown & Root, Inc., 826 F.2d 415, 418 (5th Cir.1987) (“consequential damages [from personal injury tort abroad] are insufficient to constitute a ‘direct effect in the United States’ for purposes of abrogating sovereign immunity”).  Sachs also cannot assert jurisdiction under the FSIA’s tort exception for her slip-and-fall case, because the alleged tortious conduct occurred overseas.  See  Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 441 (1989) (stating that the FSIA’s tort exception, 28 U.S.C. § 1605(a)(5), “covers only torts occurring within the territorial jurisdiction of the United States”).  As a result, to get around the requirements of the FSIA’s other (and more applicable) exceptions to sovereign immunity, Sachs is forced to proceed under the first clause of the commercial activity exception.  However, reliance on that clause does not work — at least not if Sachs’ argument is based on OBB’s general commercial activity of operating a national railway in Austria.

In the end, because she cannot rely on OBB’s general commercial activity in Austria, Sachs is stuck with arguing that her personal injury action is “based upon” the ticket sale in the United States.  As I will explain in subsequent posts, that should spell the end of Sachs’s lawsuit under existing Supreme Court precedent.

[Next week, I will examine why the Supreme Court’s decision in Saudi Arabia v. Nelson, 507 U.S. 349 (1993), should control the result in OBB v. Sachs.]

OBB’s Novel “Agency or Instrumentality” Argument Revisited

September 11, 2015 By in Agency Tags: , , , , , , , , , Leave a comment

OBB v. Sachs is scheduled for oral argument in the United States Supreme Court on October 5, 2015.  During the period leading up to oral argument, I intend to publish a series of posts regarding issues in the Sachs case.  My general view is that Sachs is an easy case to resolve under Saudi Arabia v. Nelson, 507 U.S. 349 (1993), but that there is potential for a major mistake by the Supreme Court on the critical issue of attribution.  I will provide more information on these key points in the upcoming weeks.

Today, I want to focus on an issue that I have discussed before, namely OBB’s argument that the determination of whether an entity is an “agent” of a foreign state should be resolved through the definition of “agency or instrumentality” set forth in 28 U.S.C. section 1603(b).  I will not revisit the points I made in previous posts (here and here).  I do, however, want to add three points:

(1) OBB did not raise its argument that section 1603(b) controls the inquiry of whether an entity is an “agent” of a foreign state during district court proceedings.  OBB also did not raise the argument in its main briefing before the Ninth Circuit Court of Appeals.  Instead, OBB raised the issue for the first time during oral argument on en banc rehearing, and was subsequently ordered by the Ninth Circuit to submit supplemental briefing addressing its new argument.  See Sachs v. Republic of Austria, 737 F.3d 584, 594 n. 7 (9th Cir. 2013) (en banc).  OBB’s novel argument – which was contrary to FSIA precedent – was thereafter squarely rejected by the Ninth Circuit.  Sachs, 737 F.3d at 594-98.  That OBB itself did not see fit to raise the issue until oral argument on en banc rehearing fails to inspire confidence, and a closer look shows why OBB’s novel interpretation of the FSIA should have remained on the cutting room floor.

(2) OBB’s argument would require an extremely strained (and confusing) interpretation of 28 U.S.C. section 1603.  The relevant portion of section 1603 states:

(a) A “foreign state”, except as used in section 1608 of this title, includes a political subdivision of a foreign state or an agency or instrumentality of a foreign state as defined in subsection (b).

(b) An “agency or instrumentality of a foreign state” means any entity—

. . .

(2) which 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

. . . .

28 U.S.C. § 1603(a), (b)(2).  For OBB’s argument to work, the term “foreign state” in section 1603(b) must include “agencies or instrumentalities” of foreign states; otherwise, under OBB’s framework, an “agency or instrumentality” of a foreign state could never be held to have an “agent.”  Yet, as applied to OBB’s situation (that is, the question of whether an entity is an agent of an agency or instrumentality), OBB’s interpretation would effectively yield a statute that states the following:

(b) An “agency or instrumentality of [an agency or instrumentality of] a foreign state” means any entity—

. . .

(2) which is an organ of [an agency or instrumentality of] a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by [an agency or instrumentality of] a foreign state or political subdivision thereof

. . . .

Such a reading of section 1603(b) is not only deeply confusing, but it is also inconsonant with the statute’s use of the term “political subdivision thereof” (since agencies or instrumentalities of a foreign state do not have “political subdivisions”).  In other words, when section 1603(b) used the term “foreign state,” it was referring to foreign states proper – such as the Republic of Austria – and not to agencies or instrumentalities of a foreign state.  That is, in fact, exactly what the FSIA’s legislative history demonstrates.  See H.R. Rep. No. 94-1487, at 15 (1976) (stating that an agency or instrumentality must “be either an organ of a foreign state (or of a foreign state’s political subdivision), or that a majority of the entity’s shares or other ownership interest be owned by a foreign state (or by a foreign state’s political subdivision)”).  It is also what the Supreme Court concluded in Dole Food Co. v. Patrickson, 538 U.S. 468 (2003), when the Court held “that only direct ownership of a majority of shares by the foreign state satisfies the statutory requirement [set forth in section 1603(b)(2)].”  Id. at 474 (emphasis added).

There is, in short, no statutory support for OBB’s approach.  Nothing in the FSIA indicates that a court first needs to examine section 1603(b) to determine whether the defendant (like OBB) is an agency or instrumentality of a foreign state, and then re-examine section 1603(b) to determine whether the putative agent is an “agency or instrumentality” of the “agency or instrumentality.”  No court has ever adopted that type of circular analysis under section 1603, and for good reason: it makes no sense. 

(3) OBB’s agency or instrumentality argument fails for another reason: it would render far too many entities incapable of being deemed an “agent” of a foreign state, and thereby deeply undermine the FSIA’s commercial activity exception.

Consider the following scenario: through individual intermediaries, a foreign state creates a separate corporation in New York State.  The foreign state exercises extensive day-to-day control over the corporation, which engages in a series of commercial transactions in the United States.  After the corporation’s conduct leads to multi-million dollar losses for a number of United States citizens, the individuals damaged file suit against the corporation and the foreign state.  Their main jurisdictional argument under the FSIA is that the corporation was an agent of the foreign state through the latter’s exercise of day-to-day control, and that the corporation’s conduct is attributable to the foreign state for jurisdictional purposes. 

Under OBB’s (mis)interpretation of section 1603(b), the plaintiffs in this scenario could not proceed against the foreign state itself because the corporation does not meet the definition of an agency or instrumentality under the FSIA.  The corporation was created in New York, not in the foreign state, and therefore could never (under OBB’s theory) be an agent of a foreign state.  See 28 U.S.C. § 1603(b)(3) (stating that an “agency or instrumentality of a foreign state” means any entity which, inter alia, “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”).  The same would hold true if the foreign state created the entity under the law of a third country, such as the law of the Bahamas or Panama.  In fact, OBB’s formulation would provide a blueprint to foreign states about how to engage in commercial activity in the United States without risking the possibility of litigation: if the foreign state engages in commercial activity through a corporation created under the law of the United States or a third country, it will never be held to engage in commercial activity in the United States — even if the foreign state exercises day-to-day control over the corporation created, and effectively engages in extensive commercial activity in the United States through the nominally separate corporation.

OBB’s position, in other words, would profoundly undermine the effectiveness of the FSIA’s commercial activity exception.  Where a foreign state dominates a separate corporation to such an extent that a principal-agent relationship is created, courts must be permitted to attribute the corporation’s conduct to the foreign state for jurisdictional purposes.  Otherwise, the first clause of the commercial activity exception would contain a loophole that would swallow the exception itself.

[Next week, I will examine Sachs’s argument that OBB’s “overall commercial railway enterprise” satisfies the “commercial activity” requirement under the first clause of the FSIA’s commercial activity exception.]

Prejudgment Security and Immunity from Attachment

December 15, 2014 By in Attachment and Execution Tags: , , , , Leave a comment

In its recent decision in Pine Top Receivables of Illinois, LLC v. Banco de Seguros del Estado, 771 F.3d 980 (7th Cir. 2014), the Seventh Circuit held that the FSIA’s ban on prejudgment attachment barred enforcement of the Unauthorized Insurers Process Act’s prejudgment security requirement.  The Seventh Circuit’s decision accords with the FSIA’s plain language.

Pine Top Receivables (“Pine Top”) filed suit against the Uruguayan instrumentality Banco de Seguros del Estado (“Banco”) in 2012, seeking claimed overdue balances on various reinsurance contracts.  In the district court litigation, Pine Top moved to strike Banco’s answer on the basis that Banco was required to post pre-answer security in the full amount of the disputed debt under 215 ILCS 5/123(5).  Pine Top Receivables, 771 F.3d at 982; see also 215 ILCS 5/123(5) (“Before any unauthorized foreign or alien company shall file or cause to be filed any pleading in any action or proceeding, including any arbitration, instituted against it, such unauthorized company shall . . . deposit with the clerk of the court in which such action or proceeding is pending or with the clerk of the court in the jurisdiction in which the arbitration is pending cash or securities or file with such clerk a bond with good and sufficient sureties, to be approved by the court, in an amount to be fixed by the court sufficient to secure the payment of any final judgment which may be rendered in such action, proceeding, or arbitration.”).   The district court denied Pine Top’s motion to strike, concluding that the FSIA’s prohibition on attaching a foreign state’s property prevents application of the Illinois security requirement.

On appeal, Pine Top argued that the FSIA’s prohibition against prejudgment attachment was limited to jurisdictional attachments.  That was, indeed, one of the key problems that the FSIA was intended to resolve.  See, e.g., H.R. Rep. 94-1487, at 27 (1976) (“The elimination of attachment as a vehicle for commencing a lawsuit will ease the conduct of foreign relations by the United States and help eliminate the necessity for determinations of claims of sovereign immunity by the State Department.”).  However, the statute’s prohibition extends well beyond prejudgment attachments for purposes of establishing jurisdiction.

In rejecting Pine Top’s argument, the Seventh Circuit relied mainly on the plain language of the FSIA.  Section 1609 provides that “the property in the United States of a foreign state shall be immune from attachment arrest and execution except as provided in sections 1610 and 1611 of this chapter.”  28 U.S.C. § 1609.  As the court recognized, the “FSIA does not define the term ‘attachment arrest and execution,’ nor does § 1609 make any other reference that would clarify whether it covers only jurisdictional attachments or attachments to secure judgments.”  Pine Top Receivables, 771 F.3d at 983.  However, relying on the established rule that “‘[i]nterpretation of a word or phrase depends upon reading the whole statutory text, considering the purpose and context of the statute,’” the Seventh Circuit examined the language of section 1610(d).  Id. at 983 n.3, quoting Dolan v. United States Postal Service, 546 U.S. 481, 486 (2006).  Section 1610(d) provides that the property of a foreign state used for a commercial activity is not immune from prejudgment attachment if “the foreign state has explicitly waived its immunity from attachment prior to judgment” and the “purpose of the attachment is to secure satisfaction of a judgment that has been or may ultimately be entered against the foreign state, and not to obtain jurisdiction.”  28 U.S.C. § 1610(d)(1)-(2).  The Seventh Circuit concluded that “[i]f we accepted Pine Top’s reading—that § 1609 deals exclusively  with jurisdictional attachments—§ 1610(d) would accomplish nothing; it would allow waiver of immunity only for a class of property to which no immunity attached by virtue of the prior section. That is, unless § 1609 includes attachments ‘the purpose of [which] is to secure satisfaction of a judgment,’ § 1610(d) is superfluous.”  Pine Top Receivables, 771 F.3d at 983-84.  Given the settled rule that courts should avoid interpretations that “would render a statutory term superfluous,”  Dole Food Co. v. Patrickson, 538 U.S. 468, 477 (2003), the Seventh Circuit correctly rejected Pine Top’s contention.

The Seventh Circuit’s decision is consistent with FSIA precedent, namely the Second Circuit’s decision in Stephens v. National Distillers & Chemical Corp., 69 F.3d 1226 (2d Cir.1995); see also, e.g., Dellapenna, Suing Foreign Governments and Their Corporations, at 745 (2d ed. 2003).  As a result, in addition to adhering the FSIA’s plain language, the Pine Top Receivables case has the added benefit of not creating a circuit split.  See, e.g., Vencedora Oceanica Navigacion, S.A. v. Compagnie Nationale Algerienne de Navigation, 730 F.2d 195 (5th Cir. 1984) (“[I]t is highly desirable to avoid circuit conflicts in the sensitive area of sovereign immunity.”); Abrams v. Societe Nationale des Chemins de Fer Francais, 332 F.3d 173, 186 (2d Cir. 2003), vacated on other grounds by Societe Nationale des Chemins de Fer Francais v. Abrams, 542 U.S. 901 (2003) (discussing “the importance of having a uniform, consistent law in this area”).

One final note: it appears that the FSIA’s treatment of prejudgment attachments is much stricter than the approach taken in other countries.  See generally Yang, State Immunity in International Law, at 378-90 (2012).  Accordingly, while the Seventh Circuit’s decision is correct as a matter of statutory interpretation, the FSIA could be amended – in a manner consistent with customary international law – to permit greater flexibility with regard to prejudgment attachments.  However, since Congress has not done so, the Seventh Circuit properly followed the statute’s plain language.

Attachment in Terrorism Cases

October 22, 2014 By in Terrorism Exception Tags: , , , , Leave a comment

The Seventh Circuit recently removed a significant obstacle to attachment or execution in terrorism cases. 

Section 1610(c) provides that “[n]o attachment or execution referred to in subsections (a) and (b) of this section shall be permitted until the court has ordered such attachment and execution after having determined that a reasonable period of time has elapsed following the entry of judgment and the giving of any notice required under section 1608(e) of this chapter.”  28 U.S.C. § 1610(c).  In Gates v. Syrian Arab Republic, 755 F.3d 568 (7th Cir. 2014), the Seventh Circuit held that the limitations set forth in section 1610(c) did not apply to attachments in terrorism cases.  In reaching that result, the Seventh Circuit focused on section 1610(c)’s express limitation to attachment or execution under subsections (a) and (b).  Since section 1610(g) – the provision addressing attachment and execution in terrorism cases – “is not mentioned in section 1610(c),” the latter section “simply does not apply to execution or attachment under section 1610(g).”  Gates, 755 F.3d at 575.

By recognizing that section 1610(c)’s limitations are inapplicable to attachment proceedings in terrorism cases, the Seventh Circuit properly adhered to the plain terms of the statute.  The ruling should also serve the goal of helping to streamline attachment proceedings in cases involving terrorism.

Non-Economic Quasi-Property Rights Under Section 1605(a)(3)

October 15, 2014 By in International Takings Exception Tags: , , , Leave a comment

Section 1605(a)(3) provides that a foreign state shall not be immune in any case “in which rights in property taken in violation of international law are in issue and that property or any property exchanged for such property is present in the United States in connection with a commercial activity carried on in the United States by the foreign state; or that property or any property exchanged for such property is owned or operated by an agency or instrumentality of the foreign state and that agency or instrumentality is engaged in a commercial activity in the United States.”  28 U.S.C. § 1605(a)(3).  In LaLoup v. United States, No. CIV.A. 13-7124, 2014 WL 3361804 (E.D. Pa. July 10, 2014), the court held that a family’s “quasi-property right” in a deceased family member’s body – a right that “can be used for only the one purpose of burial, and has no pecuniary value” – satisfied the “rights in property” requirement set forth in section 1605(a)(3).  Id. at *14-15. 

I am skeptical of the LaLoup court’s conclusion.  As then-Circuit Judge Scalia observed with regard to the analogous immovable property exception, 28 U.S.C. § 1605(a)(4), a court’s “job is not to give the term [rights in immovable property] the most expansive reading possible, nor to extract from different sources of law an artificial consensus definition of the term, but to determine what Congress meant by the language in this particular statute.”  Asociacion de Reclamantes v. United Mexican States, 735 F.2d 1517, 1521 (D.C. Cir. 1984).  The purpose of section 1605(a)(3) was  to address “expropriation claims.”  H.R. Rep. No. 94-1487, at 19 (1976).  As the full language of the jurisdictional provision demonstrates, it was intended to cover property that could be used “in connection with a commercial activity.”  28 U.S.C. § 1605(a)(3); see also, e.g., Robinson v. Shell Oil Co., 519 U.S. 337, 341 (1997) (“The plainness . . . of statutory language is determined by reference to the language itself, the specific context in which that language is used, and the broader context of the statute as a whole.”).  Given the legislative history and the specific context of the term “rights in property” as it is used in section 1605(a)(3), it does not appear that the term should be extended to “quasi-property rights” in a human body that have no pecuniary or economic value.

“Head of the Foreign Ministry” is Strictly Construed Under Section 1608(a)

October 8, 2014 By in Service of Process Tags: , , , , Leave a comment

In Barot v. Embassy of Republic of Zambia, No. CV 13-0451 (ABJ), 2014 WL 2443868 (D.D.C. June 2, 2014) – a case that I have discussed before – the court reaffirmed that strict compliance under section 1608(a) requires careful adherence to all of the service requirements. 

The plaintiff in Barot argued that sending service documents to the Zambia’s Ministry of Foreign Affairs complied with section 1608(a)(3)’s requirement that the documents be sent to “the head of the ministry of foreign affairs of the foreign state concerned.”  28 U.S.C. § 1608(a)(3).  The court disagreed, finding the service defective because “[t]he plain language of the statute requires that the service package be addressed to the head of the ministry, or the minister of foreign affairs, not to the ministry in general.”  Barot, 2014 WL 2443868, at *2.  The district court also rejected plaintiff’s argument that “no other court has required ‘head of’ or the name of the minister before there is proper service under section 1608(a)(3),” holding that such a contention “ignores the plain language of that section[] and . . . overlooks the fact that this issue has not been presented to a court before.”  Id. at *3.

Barot should serve as a reminder to plaintiffs that courts will not excuse even relatively minor defects in service on a foreign state under section 1608(a).  To the extent that a plaintiff is uncertain about service requirements under section 1608(a), the plaintiff should seek legal counsel to help ensure that service is perfected.

Lurking Attribution Issues Under the FSIA

October 1, 2014 By in Agency Tags: , , , Leave a comment

During my regular review of FSIA cases, I am constantly surprised by the inattention paid to attribution.

For example, in LaLoup v. United States, No. CIV.A. 13-7124, 2014 WL 3361804 (E.D. Pa., July 10, 2014), the court assumed that Greece owned an item for purposes of the international takings exception because the item was owned by an agency or instrumentality of Greece.  LaLoup, 2014 3361804, at *18.  The court’s conclusion ignores a fundamental principle underlying the FSIA, namely that “government instrumentalities established as juridical entities distinct and independent from their sovereign should normally be treated as such.”  First Nat. City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611, 626-27 (1983).  If property is owned by an agency or instrumentality of a foreign state, it is not owned by the foreign state itself for purposes of the FSIA’s jurisdictional provisions – at least absent a principal-agent relationship or another basis upon which to disregard the agency or instrumentality’s separate legal status.

Attribution issues under the FSIA can be complex and can (as I have explained before) lead to confusion.  However, courts and attorneys should follow a basic rule: if there are distinct legal entities involved under a plaintiff’s theory of the case, there is a lurking attribution issue.  That issue must be addressed and resolved before the conduct or ownership rights of one entity can be freely imputed to another.

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

September 24, 2014 By in FSIA Tags: , , , , , , Leave a comment

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

September 17, 2014 By in Discovery Tags: , , Leave a comment

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.