Apart from waiver and consent, foreign states do not enjoy sovereign immunity from the jurisdiction of US courts in the following areas:
- commercial activities (section 1605(a)(2));
- taking of property in violation of international law (ie, expropriation) (section 1605(a)(3));
- rights in property in the United States acquired by succession or gift or rights in immovable property situated in the United States (section 1605(a)(4));
- personal injury or death, or damage to or loss of property occurring in the United States (section 1605(a)(5));
- monetary damages concerning a terrorist act (section 1605A) or international terrorism (section 1605B);
- admiralty proceedings (specifically suits involving maritime liens) (section 1605(b)); and
- when the claim against a foreign state arises in the form of a counterclaim (section 1607).
All these are exceptions to jurisdictional immunity and do not in themselves overcome enforcement immunity.
The commercial activity exception is limited to those cases in which the action is based upon a commercial activity carried on by the foreign state, an act performed in connection with a commercial activity of the foreign state elsewhere, or 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 (section 1605(a)(2)). A ‘commercial activity’ is further defined as ‘either a regular course of commercial conduct or a particular commercial transaction or act’, whose commercial character ‘shall be determined by reference to the nature of the course of conduct or particular transaction or act, rather than by reference to its purpose’ (section 1603(d)). On the other hand, a ‘commercial activity carried on in the US by a foreign state’ means commercial activity carried on by a state and having substantial contact with the United States (section 1603(e)).
In Republic of Argentina v Weltover Inc, the Supreme Court held that the issuance of bonds by Argentina constituted a commercial activity under the Act because Argentina had acted ‘not as a regulator of a market, but in the manner of a private player within it’ (504 US 607 (1992), at 614). Argentina argued that the nature-purpose distinction is not appropriate because the ‘essence of an act is defined by its purpose’, but the Supreme Court pointed to the wording of section 1605(a)(2) and considered that such an argument was ‘squarely foreclosed by the language of the’ Act, as however ‘difficult it may be in some cases to separate “purpose” from “nature” . . . the statute unmistakably commands that to be done’ (504 US 607 (1992), at 617). In another leading case on the commercial activity exception, Texas Trading & Milling Corp v Federal Republic of Nigeria, the Court of Appeals for the Second Circuit held that Nigeria’s anticipatory breach of more than 100 contracts for the purchase of cement qualified as commercial (647 F2d 300 (2d Cir 1981) cert den). In another case, the Court of Appeals for the Seventh Circuit held that Greece had engaged in commercial activity and was thus amenable to suit where Greece had contracted with a healthcare provider for the provision of medical services to Greek nationals in the United States (see Rush-Presbyterian-St Luke’s Medical Center v Hellenic Republic, 877 F2d 574 (7th Cir 1989) cert den).
The expropriation exception (section 1605(a)(3)) actually creates two exceptions to the general rule of sovereign immunity. First, a state is not 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’. Property is ‘taken in violation of international law’ through nationalisation or expropriation that does not serve a public purpose, is discriminatory in nature and is without payment of prompt, adequate and effective compensation (see, generally, Zappia Middle E Constr Co v Emirate of Abu Dhabi, 215 F3d 247 (2d Cir 2000)). Exhaustion of local remedies in the foreign jurisdiction is also not a statutory prerequisite to jurisdiction under the expropriation exception (see Cassirer v Kingdom of Spain, 616 F3d 1019 (9th Cir 2010) cert den; however, see also Restatement (Third) of Foreign Relations Law (1987), section 713, comment f: ‘Under international law, ordinarily a state is not required to consider a claim by another state for an injury to its national until that person has exhausted domestic remedies, unless such remedies are clearly sham or inadequate, or their application is unreasonably prolonged.’).
Second, a state is not immune when the taken property or any property exchanged for that 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’. For example, in De Sanchez v Banco Central de Nicaragua, the court found that the defendant was engaged in commercial activity in the United States through the holding of funds in a US bank for the facilitation of currency exchanges (515 F Supp 900 (ED La 1981), at 911; and 770 F2d 1385 (5th Cir 1985)). Accordingly, in Dayton v Czechoslovak Socialist Republic, the Court of Appeals for the DC Circuit held that the nationalisation of textile plants without the payment of compensation did not fall within the expropriation exception because the plants were located in Czechoslovakia, no property exchanged for the plants was located in the United States and a Czechoslovakian trading company, which was sought to be held liable, did not own or operate the plants or property exchanged for them (Dayton v Czechoslovak Socialist Republic, 834 F2d 203 (DC Cir 1987) cert den).
Further, the Supreme Court recently opined that ‘whether the rights asserted are rights of a certain kind, namely, rights in “property taken in violation of international law”, is a jurisdictional matter that the court must typically decide at the outset of the case, or as close to the outset as is reasonably possible’ (see Bolivarian Republic of Venezuela v Helmerich & Payne Int’l Drilling Co, 137 US 1312 (2017), at 1319).
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