International Law Update

SOVEREIGN IMMUNITY

In case of alleged torture and murder in Somalia, U.S. Supreme Court holds that Foreign Sovereign Immunities Act (FSIA) does not govern an individual’s claim of immunity

The Respondents in the following case are members of the Somali Isaaq clan, who suffered persecution and torture during the 1980s military regime in their homeland. Petitioner Mohamed Ali Samantar was Somalia’s First Vice President and Minister of Defense, and later the Prime Minister. He now resides in Fairfax, Virginia.

The Respondents sued Samantar in the U.S. District Court for the Eastern District of Virginia, pursuant to the Torture Victim Protection Act of 1991, 106 Stat. 73, note following 28 U.S.C. Section 1350 (TVPA), and the Alien Tort Claims Act , 28 U.S.C. Section 1350 (ACTA). According to the Complaint, Samantar exercised command control over the Somali military forces who committed the acts.

The District Court concluded that it lacked subject‑matter jurisdiction and dismissed the case. The U.S. Court of Appeals for the Fourth Circuit reversed and remanded for a determination of whether Petitioner is entitled to immunity. The Supreme Court granted certiorari and holds that the Foreign Sovereign Immunities Act of 1976 (FSIA or Act), 28 U.S.C. Sections 1330, 1602, does not govern the determination of Petitioner’s immunity from suit.

The Court then summarizes the relevant law. “The FSIA provides that ‘a foreign state shall be immune from the jurisdiction of the courts of the United States and of the States’ except as provided in the Act. § 1604. Thus, if a defendant is a ‘foreign state’ within the meaning of the Act, then the defendant is immune from jurisdiction unless one of the exceptions in the Act applies. See §§ 1605‑1607 (enumerating exceptions). The Act, if it applies, is the ‘sole basis for obtaining jurisdiction over a foreign state in federal court.’ Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 439 ¼ (1989). The question we face in this case is whether an individual sued for conduct undertaken in his official capacity is a ‘foreign state’ within the meaning of the Act.”

“The Act defines ‘foreign state’ in § 1603 as follows:‘(a) A `foreign state’ … 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—‘(1) which is a separate legal person, corporate or otherwise, and ‘(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, and ‘(3) which 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 term ‘foreign state’ on its face indicates a body politic that governs a particular territory. See, e.g., Restatement of Foreign Relations Law § 4 (defining ‘state’ as ‘an entity that has a defined territory and population under the control of a government and that engages in foreign relations’). In § 1603(a), however, the Act establishes that ‘foreign state’ has a broader meaning, by mandating the inclusion of the state’s political subdivisions, agencies, and instrumentalities. Then, in § 1603(b), the Act specifically delimits what counts as an agency or instrumentality. Petitioner argues that either ‘foreign state,’ § 1603(a), or ‘agency or instrumentality,’ § 1603(b), could be read to include a foreign official. Although we agree that Petitioner’s interpretation is literally possible, our analysis of the entire statutory text persuades us that Petitioner’s reading is not the meaning that Congress enacted.” [2285‑6]

The Court then analyzes the term “agency or instrumentality of a foreign state” (§ 1603(b)). While an individual official could be an “agency or instrumentality,” Congress specifically defined “agency or instrumentality” in the FSIA. The wording indicates that it should be narrowly interpreted. The term “agency or instrumentality” generally refers to an organization rather than an individual. It is awkward to refer to an individual as the “agency or instrumentality” or “organ” of a foreign state. Also, an individual cannot be a citizen of a State “as defined in section 1332(c) and (e),” as those sub‑sections refer to corporations and estates. In sum, there is no indication that Congress intended to include individual officials within the meaning of “agency or instrumentality.”

SOVEREIGN IMMUNITY

Second Circuit affirms dismissal of civil lawsuit against bank that was instrumentality of Turkish government because, under Foreign Sovereign Immunities Act, negligence that allegedly took place in Turkey did not have direct effect in U.S.

Theresa Guirlando (Plaintiff) filed a lawsuit against T.C. Ziraat Bankasi A.S. bank (Defendant), claiming that Defendant was negligent and enabled the theft of money from her Turkish bank account. It was Mevlut Cicek , Plaintiff’s own husband who withdrew most of her life savings from the Turkish bank account. Plaintiff is a 67‑year‑old U.S. citizen, who in 2006 had married Cicek apparently within the U.S. Cicek, however, was an illegal alien at the time and the U.S. had deported him to Turkey in 2007. Upon Cicek’s request, Plaintiff had sold her house and car and followed him to Turkey, carrying a check for $251,156.63.

Cicek took Plaintiff to a Defendant’s branch bank to deposit the check. The bank employees allegedly made Plaintiff put the money into a joint account with Cicek thus enabling him to withdraw $200,000 later on. Plaintiff also found out that Cicek was already married to another woman. Upon her return to the U.S., Plaintiff filed the present lawsuit against Defendant in a New York federal court.

All parties agree that Defendant bank is an instrumentality of the Turkish Government. The District Court dismissed for lack of subject matter jurisdiction under section 1605(a)(2) of the Foreign Sovereign Immunities Act (FSIA), because the Defendant’s alleged actions did not cause a direct effect in the U.S. Plaintiff noted a timely appeal. The Second Circuit affirms.

The “commercial activity exception” of FSIA section 1605 provides that a foreign state or its instrumentality shall not be immune from the jurisdiction of the U.S. courts if the action is based upon an act outside the U.S. that caused a direct effect in the U.S. The mere fact that a foreign state’s commercial activity outside the U.S. caused physical or financial injury to a U.S. citizen, however, does not amount to producing a direct effect in the U.S.

“Plaintiff’s complaint alleges principally that, in Turkey, Defendant’s employees [1] told her, falsely, that she could not open an individual checking account into which to deposit her Citibank check, [2] caused her to open a disjunctive joint account from which funds could be withdrawn by one joint owner without the consent of the other, rather than an account for which the consent of both owners would be required for a withdrawal, and [3] notified Cicek, rather than Plaintiff, when the funds had arrived in the new account with Defendant.

She asserts that these acts had a direct effect in the United States both because they resulted in the payment of $251,156.63 from her New York Citibank account and because she, who was an American citizen, lost more than $200,000. Regardless of how the ‘legally significant act’ test is formulated, we cannot conclude that either event constituted a direct effect in the United States within the meaning of § 1605(a) (2).”

“Plaintiff’s contention that the requisite direct effect occurred because she ‘returned to the United States where she lives in much reduced circumstances’ … is quickly disposed of for two reasons. ¼ ‘[T]he fact that an American individual . . . suffers some financial loss from a foreign tort cannot, standing alone, suffice to trigger the [commercial activity] exception.’ … Second, Plaintiff’s financial loss was not a direct result of the Bank’s denying her the right to open an individual account, for between that conduct and her impoverishment there was an intervening element, to wit, Cicek’s larcenous withdrawals.” [...]

“Plaintiff’s contention that the requisite direct effect in the United States consisted of the transfer of the funds out of her New York Citibank account requires somewhat more discussion, but it suffers from multiple flaws. First, we note that her complaint that Defendant caused her to open a disjunctive joint account, rather than a two‑signature account from which withdrawals could not be made without the consent of both owners, loses considerable significance upon scrutiny.”

“Although the latter type of account would have prevented Cicek from withdrawing funds without Plaintiff’s knowledge and consent, it would also have given him control over Plaintiff’s own ability to withdraw the funds. Thus, the two‑signature joint account that Plaintiff purports to have preferred would have deprived Plaintiff of independent access to her money. Her more logical complaint is that Defendant did not allow her to open an individual account.”

SOVEREIGN IMMUNITY

Tenth Circuit rejects preliminary FSIA jurisdictional challenge by Indonesian Government‑controlled bank because initial evidence was minimal although limited discovery is often permissible to determine whether “commercial activity” exception to FSIA does apply

Theodore Hansen agreed to sell various gas stations, convenience stores and other assets to Native American Oil Refinery Company (NARCO). To secure the deal, NARCO provided bank guarantees of $90 million provided by the Indonesian entity PT Bank Negara Indonesia (Persero) TBK (“BNI”). BNI also issued two standby letters of credit for $25 million and a $3 million bank guarantee to the other Plaintiffs. When NARCO defaulted, BNI refused to honor the financial instruments, claiming they were forgeries.

The Plaintiffs sued in Utah district court. BNI moved for Judgment on the Pleadings because of sovereign immunity. Plaintiffs presented evidence from individuals who had contacted BNI regarding the financial instruments and received information that indicated their authenticity. BNI presented 15 declarations from BNI employees that denied that authenticity.

The district court denied BNI’s motion because BNI had failed to show that the “commercial activity” exception to sovereign immunity did not apply. The district court, however, did order discovery limited to facts bearing on this point.

BNI appealed. The main issue on appeal is whether BNI or any of its representatives in fact generated the financial instruments assigned to the Plaintiffs thus triggering the “commercial activity” exception to the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. Sections 1330(a), 1603‑1605. The Tenth Circuit affirms the district court’s denial of judgment on the pleadings, and orders the dismissal of the discovery order for lack of jurisdiction.

The Court first turns to BNI’s motion for judgment on the pleadings. “Courts apply a burden‑shifting analysis to determine whether a foreign state or its instrumentality is immune under the FSIA. … Under this analysis, once the defendant establishes that it is a foreign state entitled to immunity, the plaintiff bears the burden of production to make an initial showing that an FSIA exception to immunity applies. … If the plaintiff carries its initial burden, the defendant bears the ultimate burden of proving by a preponderance of the evidence that the claimed exception does not apply in the particular case. …”

“[Plaintiffs] concede that BNI is an instrumentality of a foreign state for the purposes of the FSIA. They argue, however, that the FSIA’s commercial activity exception applies in this case. Under the commercial activity exception in section 1605(a)(2): ‘A foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case (2) in which the action is based [1] upon a commercial activity carried on in the United States by the foreign state; or [2] upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or [3] 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.’”

“[Plaintiffs] contend, however, that the evidence they presented satisfies all three of the independent prongs of the commercial activity exception. Specifically, Plaintiffs argue that BNI’s authentication and subsequent rejection of the guarantees and letters of credit in New York constitute both commercial activity carried on in the United States by a foreign state and acts performed in the United States in connection with commercial activity of a foreign state elsewhere.”

“Furthermore, [Plaintiffs] contend that BNI’s generation of the financial instruments in Indonesia, its issuance of the instruments directly to parties in the United States, and its refusal to honor the instruments, which caused significant loss to [Plaintiffs] in the United States, constitute commercial acts outside the United States that caused a direct effect in the United States.” [...]

“As discussed above, the evidence presented to the district court consisted of fifteen declarations from BNI employees and the testimony of [Plaintiffs] and Mr. Jensen. The BNI declarations all dispute the authenticity of the BNI guarantees and letters of credit and all deny any BNI participation in the generation of those instruments. On the other hand, the evidence presented by [Plaintiffs] suggests that BNI employees were involved with the generation of the financial instruments and at the very least authenticated and then subsequently rejected them.”

SOVEREIGN IMMUNITY

In case of art appropriation by agent of Nazi government in 1939, Ninth Circuit finds in matter of first impression that FSIA expropriation exception applies even where foreign sovereign defendant is not entity alleged to have expropriated property at issue

Claude Cassirer (Plaintiff) claims that, in 1939, an agent of the Nazi regime unlawfully seized a painting by French impressionist painter Camille Pissaro [1830‑93] from his grandmother Lilly Cassirer. It is entitled “Rue Saint‑Honore, Apres‑midi, Effet de Pluie.” Mme Cassirer’s great‑grandfather, Julius, a German citizen, had bought the painting in 1898.

Eventually, Cassirer’s grandmother inherited the painting. As the persecution of Jews in Germany increased, Lilly sought permission to leave Germany with her possessions. A government appraiser forced her to sell the painting for about $360. She agreed only because she was afraid that, otherwise, they would not let her leave the country. Decades later, Baron Hans‑Heinrich Thyssen‑Bornemisza, a private art collector, bought the work.

The Museum of the Thyssen‑Bornemisza Collection Foundation (Foundation) in Madrid, Spain is now displaying the Pissaro painting. At some point, the Kingdom of Spain (Spain) agreed to acquire the painting as well as the rest of the Foundation’s collection. Cassirer first unsuccessfully petitioned the Spanish Minister for Education, Culture and Sports, the Chair of the Foundation’s Board, to return the painting. Cassirer did not file any further claims in Spain.

Instead Plaintiff brought suit in a California federal court, naming the Foundation and Spain as Defendants. The district court denied the Defendants’ challenges to personal jurisdiction, standing, and the existence of a justiciable case or controversy, and this interlocutory appeal ensued. The U.S. Court of Appeals for the Ninth Circuit dismisses the appeal as to these rulings.

As to the collateral order doctrine, however, the Court does find jurisdiction to review the sovereign immunity question. In a matter of first impression, the Court considers whether the expropriation exception of the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. § 1605(a)(3) applies when the foreign state defendant is not the entity that originally expropriated the property in violation of international law. In a two to one vote, the Court concludes that it does.

Plaintiff argued that neither the Foundation nor Spain are immune because of the “expropriations exception” of § 1605(a)(3); it 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 …” Its language does not literally limit the class of Defendants to the very sovereign entity that seized the property in violation of international law. In this case, both sides agree that it was Germany that originally expropriated the painting. The Defendants urged the Court to avoid reading such a requirement into § 1605(a)(3). The Court agrees with the Plaintiff.

“We find § 1605(a)(3) to be unambiguous. Where ‘the intent of Congress is clear and unambiguously expressed by the statutory language,’ that is normally the end of the statutory analysis. Zuni Pub. Sch. Dist. No. 89 v. Dep’t of Educ., 550 U.S. 81, 93 (2007). We hold that the plain language of § 1605(a)(3) does not require that the foreign state (against whom the claim is made) be the entity who expropriated the property in violation of international law.”

“Our holding is consistent with the legislative history … In reviewing Congress’s intent in enacting the FSIA, we consider§ 1602, which sets forth Congress’s findings and purpose. This section expresses Congress’s understanding that foreign states are not immune from suit ‘insofar as their commercial activities are concerned.’… In explaining § 1602, the House Report states that Congress is adopting the restrictive theory of sovereign immunity, that is, ‘[T]he sovereign immunity of foreign states should be ‘restricted’ to cases involving acts of a foreign state which are sovereign or governmental in nature, as opposed to acts which are either commercial in nature or those which private persons normally perform.’ H.R. Rep. No. 94‑1487 at 14 (1976), reprinted in 1976 U.S.C.C.A.N. 6604, 6613.” [Slip op. 12‑13]

“Because nothing in the plain language of the FSIA or the legislative history requires us to read additional language into the statute, we hold that the expropriation exception to sovereign immunity found in § 1605(a)(3) does not require that the foreign state against whom the [federal] claim is made be the [same] foreign state that took property in violation of international law.” [Slip op. 15]

The Court then turns to the “commercial activity” exception of the FSIA. It removes immunity where “property or any property exchanged for such property is owned or operated by an agency or instrumentality of the 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)(2). The district court had reviewed the Foundation’s activities in the U.S., which included buying books and other materials from U.S. sources; selling posters and books to U.S. purchasers; and contracting with U.S. museums for the lending of art works. The district court concluded that the Foundation had in fact engaged in such commercial activity.

The Appellate Court agrees. It remands the matter to the district court to consider, in light of Sarei, whether the circumstances of this case require an exhaustion of other available local remedies.

The Court then turns to the question of whether Plaintiff should have exhausted his remedies elsewhere. Spain claims that Section 1605(a)(3) does not apply because Plaintiff failed to pursue legal remedies in either Spain or Germany. Whether § 1605(a)(3) requires such exhaustion is also a matter of first impression. The FSIA’s language and its legislative history give no indication whether it demands preliminary exhaustion of local remedies.

“Neither Congress nor this court have imposed an absolute exhaustion of remedies requirement in cases brought against foreign states under an exception to the FSIA. Yet, where principles of international comity and rules of customary international law require exhaustion, we exercise sound judicial discretion and consider exhaustion on a prudential, case‑by‑case basis. See Sarei v. Rio Tinto, PLC, 550 F.3d 822, 828 (9th Cir. 2008) (en banc) (plurality opinion) [see 2008 International Law Update 190].”

“In Sarei, we held that domestic prudential standards and core principles of international law require a district court to consider exhaustion in appropriate cases. Id. at 824 … Under our prudential approach, when a defendant affirmatively pleads failure to exhaust remedies, the district court must, as a discretionary matter, determine in the first instance whether to impose such a requirement on a plaintiff. Id. at 832.”

“Although Sarei addressed exhaustion in the context of the [ACTA], where Congress has not clearly adopted or rejected exhaustion as a jurisdictional prerequisite, our formulation of prudential exhaustion applies equally to cases brought against foreign states (and their instrumentalities) under the FSIA … In this case, Appellants have asserted that Plaintiff failed to exhaust available remedies in Spain or Germany. Although the district court correctly concluded that the FSIA does not [explicitly] require exhaustion of remedies, the court erred by failing to conduct a prudential exhaustion analysis.”

“On remand, the district court should be guided by the principles we outlined in Sarei. Summarizing the Sarei framework generally, we first note that the district court need only consider exhaustion to the extent the defendant has affirmatively pleaded Plaintiff’s failure to exhaust local remedies. See Sarei, supra at 832 (‘The defendant bears the burden to plead and justify an exhaustion requirement, including the availability of local remedies.’) …”

“Second, the court must consider whether Congress has clearly required exhaustion for the specific claims asserted in the complaint. If, as in this case, Congress has not imposed or rejected such a requirement, the court must then determine whether the applicable substantive law would require exhaustion. …”

“Third, the court must consider whether the defendant has met its burden to show the availability of local remedies and that such remedies have not been exhausted. Id. The plaintiff may rebut a showing of unexhausted remedies abroad by demonstrating the futility of exhaustion (‘by showing that the local remedies were ineffective, unobtainable, unduly prolonged, inadequate, or obviously futile.’). Id. …”

“Finally, the court may, in its sound discretion, impose or waive exhaustion after assessing the availability, effectiveness, and possible futility of any unexhausted remedies in light of various prudential factors, including but not limited to: (1) the need to safeguard and respect the principles of international comity and sovereignty, (2) the existence or lack of a significant United States ‘nexus,’ … (3) the nature of the allegations and the gravity of the potential violations of international law, and (4) whether the allegations implicate matters of ‘universal concern’ for which a state has jurisdiction to adjudicate the claims without regard to territoriality or the nationality of the parties. See id. at 830‑31.” [Slip op. 22‑26]

Citation: Cassirer v. Kingdom of Spain, 580 F.3d 1048 (9th Cir. 2009).

Russian Constitutional Court extends moratorium on death penalty. The Russian Constitutional Court has ruled that a moratorium on capital punishment should remain in force until the nation expressly outlaws the death penalty. The original moratorium came about in 1999 but its legal basis will expire in January 2010. The Chief Judge says that Russia must extend the moratorium on executions until it ratifies the amendment to the European convention that bans the death penalty. When it joined the Council of Europe in 1996, an organization of over forty nations in the European sphere (not to be confused with the European Union) Russia proclaimed a moratorium on capital punishment and pledged to abolish it, but has not yet done so. The Russian Federation is a party to the European Convention for the Protection of Human Rights and Fundamental Freedoms, [312 U.N.T.S. 221; E.T.S. 5, as amended]. On the other hand, it has not yet ratified Protocol 6 [E.T.S. 114] to the Convention which contains an unqualified ban on the death penalty. Citation: Russian Constitutional Court, St. Petersburg, Russia, Thursday, November 19, 2009, 07:59:03 GMT (Associated Press Report).

SOVEREIGN IMMUNITY

District of Columbia Circuit reverses dismissal of Plaintiff’s complaint involving 1984 murder of his grandfather, former Iranian Chief of Armed Forces, in Paris since choice‑of‑law factors require application of French law

Plaintiff, Amir Reza Oveissi is a U.S. citizen; he is the grandson of Gholam Oveissi, the former Chief of the Iranian Armed Forces until 1979. Members of the terrorist organization Hezbollah (a.k.a. Islamic Jihad) killed Gholam Oveissi in Paris in 1984.

In 2003, Amir Oveissi sued Iran and its Ministry of Information and Security (MOIS) in the District of Columbia federal Court alleging that they had funded and directed the Islamic Jihad. The District Court found that the Defendants were not entitled to sovereign immunity and were culpable in Gholam Oveissi’s murder. The court, however, rejected Plaintiff’s claims for intentional infliction of emotional distress (IIED) and wrongful death. Amir Oveissi appealed. The U.S. Court of Appeals for the District of Columbia Circuit reverses because the District Court conducted an erroneous choice‑of‑law analysis.

Since Defendants failed to appear in this lawsuit, the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. § 1602, requires the court itself to decide whether the Plaintiff has a right to relief. See 28 U.S.C. § 1608(e). Therefore, the District Court held a bench trial on that issue. The District Court concluded that the then‑applicable FSIA terrorism exception, § 1605(a)(7), removed Defendants’ immunity, and that Defendants would be responsible for Gholam Oveissi’s murder.

As for the claims of IIED and wrongful death, however, the District Court applied District of Columbia choice‑of‑law rules, deciding that the law of the Plaintiff’s domicile at the time of the acts at issue governs the claim. Because Amir Oveissi was born in California and had briefly resided there, the District Court applied California law, but ultimately concluded that he lacked standing. If Gholam Oveissi had survived the attack, he himself could not have sued under the FSIA terrorism exception, so neither could Plaintiff, his grandson, maintain such a lawsuit.

The Court of Appeals first reviews which choice‑of‑law rules and substantive law applies, then whether the District Court properly construed California law on a wrongful death claim by a deceased’s descendent.

On the choice‑of‑law issue, the Court points out that : “The FSIA does not contain an express choice‑of‑law provision. FSIA § 1606 does, however, provide that a foreign state stripped of its immunity ‘shall be liable in the same manner and to the same extent as a private individual under like circumstances.’ 28 U.S.C. § 1606. This section ensures that, if an FSIA exception abrogates immunity, plaintiffs may bring state law claims that they could have brought if the defendant were a private individual. …”

“Relying on the language of §1606, the Second Circuit has held that courts considering issues governed by state substantive law in FSIA cases should apply the choice‑of‑law rules of the forum state. Barkanic v. Gen. Admin. of Civil Aviation of the People’s Republic of China, 923 F.2d 957, 959‑60 (2d Cir. 1991) … As the Second Circuit persuasively reasoned, ‘[t]he goal of applying identical substantive laws to foreign states and private individuals . . . cannot be achieved unless a federal court utilizes the same choice of law analysis in FSIA cases as it would apply if all the parties to the action were private.’ Barkanic, supra at 959‑60.”

SOVEREIGN IMMUNITY

In actions against Iraq by U.S. citizens and their relatives for allegedly imprisoning and mistreating them during and after First Gulf War at time when Foreign Sovereign Immunities Act (FSIA) contained exception to FSIA immunity for state sponsors of terrorism at time when U.S. had designated Iraq as state sponsor of terrorism, U.S. Supreme Court rules that changes in statutory language and removal of designation by President Bush deprived federal courts of jurisdiction over such cases

The Foreign Sovereign Immunities Act of 1976 (FSIA), 28 U.S.C. §§ 1602ff, bars the bringing of law suits against other nations in American courts, with a number of exceptions. One of them lay in § 1605(a)(7) (now repealed) which stripped a foreign state of immunity in any suit arising from certain acts of terrorism that took place when the U.S. was designating that state as a sponsor of terrorism under § 6(j) of the Export Administration Act of 1979(EAA) or § 620A of the Foreign Assistance Act of 1961(FAA).

The U.S. had listed Iraq as a sponsor of terrorism in 1990, but in 2003, after the American‑led invasion of Iraq, Congress enacted the Emergency Wartime Supplemental Appropriations Act (EWSAA); § 1503 of the Act contained a proviso clause authorizing the President to make §620A of the FAA or any other provision of law that applies to countries that have supported terrorism no longer applicable to Iraq. Although President Bush did exercise that authority, the D.C. Circuit held in Acree v. Republic of Iraq, 370 F.3d 41, 48 (2004) that the EWSAA did not allow the President to waive § 1605(a)(7), and thereby to restore Iraq’s sovereign immunity, for claims arising from actions Iraq carried out while designated as a state sponsor of terrorism.

Congress later repealed § 1605(a)(7) in § 1083(b)(1)(A)(iii) of the National Defense Authorization Act for Fiscal Year 2008 (NDAA) and replaced it with a new, roughly similar exception, § 1083(a). The NDAA also declared that nothing in EWSAA ever authorized, directly or indirectly, the making inapplicable of any provision of [the FSIA] or the removal of the jurisdiction of any court § 1083(c)(4). This seemingly approved of the holding in Acree; and authorized the President to waive any provision of this section with respect to Iraq under certain conditions, § 1083(d). On the same day that the President *2185 signed the NDAA into law, he also waived all of the sections formerly applicable to Iraq in § 1083.

Before the Supreme Court, Respondents in the Simon case are American nationals (and relatives of those nationals) who allege that the Hussein regime captured and cruelly mistreated them during the 1991 Gulf War. The Beaty respondents are the children of two other Americans, Kenneth Beaty and William Barloon, who claim that the same regime similarly abused them in the aftermath of that war. Each set of Respondents filed suit in early 2003 against Iraq in the District of Columbia federal court, alleging violations of local, federal, and international law.

Citing Acree, the lower courts declined to dismiss either case on jurisdictional grounds. The D.C. Circuit also rejected Iraq’s alternative argument that, even if FSIA § 1605(a)(7)’s application to it survived the President’s EWSAA waiver, NDAA § 1083(b)(1)(A)(iii) had repealed the provision and that the President had waived NDAA § 1083(a)’s new exception with respect to Iraq under his § 1083(d) authority. The court held instead that it retained jurisdiction over cases pending against Iraq after the enactment of the NDAA.

The Supreme Court consolidated the above cases, however, and granted certiorari. In a unanimous opinion, the Court reverses on the grounds that Iraq is no longer subject to suit in federal courts.

In the first place, the District Court lost jurisdiction over both suits in May 2003, when the President effectuated his EWSAA authority to make § 1605(a)(7) inapplicable with respect to Iraq. “To a layperson, the notion of the President’s suspending the operation of a valid law might seem strange. But the practice is well established, at least in the sphere of foreign affairs. See United States v. Curtiss‑Wright Export Corp., 299 U.S. 304, 322‑324 (1936) (canvassing precedents from as early as the ‘inception of the national government’). The granting of Presidential waiver authority is particularly apt with respect to congressional elimination of foreign sovereign immunity, since the granting or denial of that immunity was historically the case‑by‑case prerogative of the Executive Branch. See, e.g., Ex parte Peru, 318 U.S. 578, 586‑590 (1943).” [2188]

“It is entirely unremarkable that Congress, having taken upon itself in the FSIA to ‘free the Government’ from the diplomatic pressures engendered by the case‑by‑case approach, Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 488, 489 (1983), would nonetheless think it prudent to afford the President some flexibility in unique circumstances such as these. . . . In brief, § 1605(a)(7) stripped immunity from a foreign state for claims arising from particular acts, if those acts were taken at a time when the state was designated as a sponsor of terrorism. . . .”

“Toward that end, Congress enacted [EWSAA] in April 2003. Section 1503 of that Act authorized the President to ‘make inapplicable with respect to Iraq section 620A of the [FAA] of 1961 or any other provision of law that applies to countries that have supported terrorism.’ President George W. Bush exercised that authority to its fullest extent in May 2003, declaring ‘inapplicable with respect to Iraq section 620A of the [FAA] of 1961 … and any other provision of law that applies to countries that have supported terrorism.’ 68 Fed. Reg. 26459 . . . .”

“There is yet another legislative enactment, and yet another corresponding executive waiver, that bear on the question presented. The National Defense Authorization Act for Fiscal Year 2008 (NDAA), 122 Stat. 3, was passed in January 2008. That Act (1) repealed the FSIA’s terrorism exception, § 1083(b)(1)(A)(iii); (2) replaced it with a new, roughly similar exception, § 1083(a); (3) declared that nothing in § 1503 of the EWSAA had ‘ever authorized, directly or indirectly, the making inapplicable of any provision of chapter 97 of title 28, United States Code, or the removal of the jurisdiction of any court of the United States’ . . ., § 1083(c)(4), 122 Stat. 343; and (4) authorized the President to waive ‘any provision of this section with respect to Iraq’ so long as he made certain findings and so notified Congress within 30 days, § 1083(d), id., at 343‑344.”

“Section 1503 of the EWSAA consists of a principal clause, followed by eight separate proviso clauses. The dispute in these cases concerns the second of the provisos. The principal clause and that proviso read: ‘The President may suspend the application of any provision of the Iraq Sanctions Act of 1990: … Provided further, That the President may make inapplicable with respect to Iraq section 620A of the [FAA] of 1961 or any other provision of law that applies to countries that have supported terrorism….’ 117 Stat. 579.” [2190]

“Iraq and the United States both read the quoted proviso’s residual clause as sweeping in the terrorism exception to foreign sovereign immunity. Certainly that reading is, as even the Acree Court acknowledged, ‘straightforward.’ 370 F.3d, at 52.”

“In the Court of Appeals’ view, the second proviso related to that subsection of the Iraq Sanctions Act (ISA)(referred to in the principal provision) which dictated that certain enumerated statutory provisions, including § 620A of the [FAA] of 1961 and ‘all other provisions of law that impose sanctions against a country which has repeatedly provided support for acts of international terrorism,’ shall be fully enforced against Iraq. § 586F(c), 104 Stat. 2051 . . . .”

“This is a highly sophisticated effort to construe the proviso as a limitation upon the principal clause. Ultimately, however, we think that effort neither necessary nor successful. It is true that the ‘general office of a proviso is to except something from the enacting clause, or to qualify and restrain its generality.’ United States v. Morrow, 266 U.S. 531, 534‑535 (1925).”

“But its general (and perhaps appropriate) office is not, alas, its exclusive use. Use of a proviso ‘to state a general, independent rule,’ Alaska v. United States, 545 U.S. 75, 106 (2005), may be lazy drafting, but is hardly a novelty. See, e.g., McDonald v. United States, 279 U.S. 12, 21 (1929). Morrow itself came with the caveat that a proviso is sometimes used ‘to introduce independent legislation.’ We think that was its office here. The principal clause granted the President a power; the second proviso purported to grant him an additional power. It was not, on any fair reading, an exception to, qualification of, or restraint on the principal power. . . .”

“Even if the best reading of the EWSAA proviso were that it encompassed only statutes that impose sanctions or prohibit assistance to state sponsors of terrorism, see Acree, 370 F.3d, at 54, we would disagree with the Court of Appeals’ conclusion that the FSIA exception is not such a law. Allowing lawsuits to proceed certainly has the extra benefit of facilitating the compensation of injured victims, but the fact that § 1605(a)(7) targeted only foreign states designated as sponsors of terrorism suggests that the law was intended as a sanction, to punish and deter undesirable conduct.”

“Stripping the immunity that foreign sovereigns ordinarily enjoy is as much a sanction as eliminating bilateral assistance or prohibiting export of munitions (both of which are explicitly mandated by § 586F(c) of the [ISA]. The application of this sanction affects the jurisdiction of the federal courts, but that fact alone does not deprive it of its character as a sanction.”

“Having concluded that the President did render 28 U.S.C. § 1605(a)(7) ‘inapplicable with respect to Iraq,’ and that such action was within his assigned powers, we consider Respondents’ argument that the inapplicability of the provision does not bar their claims, since they arise from Iraq’s conduct prior to the President’s waiver. Any other interpretation, they say, would cause the law to operate in a disfavored retroactive fashion. . . . ”

“As for the judicial presumption against retroactivity, that does not induce us to read the EWSAA proviso more narrowly. Laws that merely alter the rules of foreign sovereign immunity, rather than modify substantive rights, are not operating retroactively when applied to pending cases. Foreign sovereign immunity ‘reflects current political realities and relationships,’ and its availability (or lack thereof) generally is not something on which parties can rely ‘in shaping their primary conduct.’ Republic of Austria v. Altmann, 541 U.S. 677, 696 (2004). . . .”

SOVEREIGN IMMUNITY

Second Circuit holds that former director of Israeli Security Agency is immune from suit brought under ATCA and TVPA, for his official actions related to aerial bombing of Gaza City apartment complex, where U.S. Department of State recognized his entitlement to immunity, but declines to rule on categorical immunity for former officials under FSIA

On July 22, 2002, an Israeli Defense Force aircraft bombed an apartment complex in Gaza City in a successful attempt to kill alleged Hamas leader Saleh Mustafah Shehadeh. The attack killed fourteen additional people and injured numerous others. In December 2005 individuals injured in the attack and representatives of others killed or injured in the attack (Plaintiffs) sued Avraham Dichter (Defendant), the former director of the Israeli Security Agency, in New York federal court. Plaintiffs allege that Defendant is liable pursuant to the Alien Tort Claims Act (ATCA) and the Torture Victims Protection Act (TVPA), 28 U.S.C. § 1350 & note, for war crimes and other violations of international law.

Defendant moved to dismiss the suit arguing that he is immune from prosecution under the Foreign Sovereign Immunities Act of 1976 (FSIA), 28 U.S.C. §§ 1602‑1611, that the Act of State doctrine barred suit and that it also presents a non‑justiciable Political Question. The U.S. State Department filed a Statement of Interest in November 2006 arguing that the FSIA applied only to countries and not to individuals. The statement, however, further argued that Defendant was immune under the common law as an official of a foreign state.

The district court granted Defendant’s motion to dismiss, holding that Defendant was immune under the FSIA as an “agency or instrumentality of a foreign state” and, in the alternative, the suit raised a non‑justiciable political question. The district court did not rule on the State Action doctrine. Plaintiffs appealed to the U.S. Court of Appeals for the Second Circuit.

The Second Circuit affirms on the grounds of common law immunity. It does not reach the issue, however, of whether the case presents a non‑justiciable Political Question.

The FSIA grants immunity from suit to foreign sovereigns, unless certain exceptions apply. In this case the Plaintiffs have not pointed to any exceptions to the statutory immunity. Thus the FSIA question rests solely on the issue of Defendant’s status as an “agency or instrumentality of a foreign state.” Plaintiffs had argued that the FSIA did not apply to individual foreign officials. After the briefs on appeal were filed, but before the oral argument, the Second Circuit ruled, in another case, that “an individual official of a foreign state acting in his official capacity is the ‘agency or instrumentality’ of the state, and is thereby protected by the FSIA.” See In re Terrorist Attacks on September 11, 2001, 538 F.3d 71, 81 (2d Cir. 2008).

Plaintiffs tried to distinguish the Terrorist Attacks holding by contending that the FSIA does not grant him immunity since Defendant was no longer an official of the Israeli government at the time Plaintiffs filed the suit. They maintain that the courts determine whether a foreign official is an instrumentality of a foreign state at the time that the suit is filed and not at the time that the actionable wrong took place. Plaintiffs rely on Dole Food Co. v. Patrickson, 538 U.S. 468 (2003), in which the Supreme Court had held that courts should determine a corporation’s status as of the time that the plaintiff filed suit. The Court declined to rule on whether this rule applied to foreign officials because the common law endowed this Defendant with immunity.

The Circuit Court finds that the FSIA provides no guidance on the question of a former foreign government official’s immunity. The Circuit Court therefore looks to the common law to determine the question. The common law of foreign sovereign immunity recognizes a right to immunity for former foreign officials for acts performed in their official capacity. At common law, courts left the decision of immunity for foreign sovereigns to the political branches of government, especially the Executive Branch. Because the State Department had recognized Defendant’s immunity, the Circuit Court holds that the Defendant is immune from suit under the common law, although the Circuit Court does not go so far as to hold that all former foreign officials enjoy categorical immunity.

“Common law recognizes the immunity of former foreign officials. At the time the FSIA was enacted [in 1976], the common law of foreign sovereign immunity recognized an individual official’s entitlement to immunity for ‘acts performed in his official capacity.’ Restatement (Second) of Foreign Relations Law of the United States § 66(f) (1965) … An immunity based on acts – rather than status – does not depend on tenure in office.”

Ninth Circuit finds that Holy See is not immune under Foreign Sovereign Immunities Act of 1976 for certain causes of action based on alleged sexual abuse committed by parish priest within United States

John Doe (Plaintiff) filed a lawsuit in Oregon district court against the Archdiocese of Portland, Oregon (Archdiocese), the Catholic Bishop of Chicago (Chicago Bishop), and the Order of the Friar Servants (Order), alleging that Father Andrew Ronan, a priest in the Archdiocese and a member of the Order sexually abused him when he was 15 or 16 years old. According to the complaint, after sexually abusing boys in other locations, the Holy See (Defendant) and the Order “placed” Ronan as a parish priest at St. Albert’s Church in Portland, Oregon. Ronan was Plaintiff’s “priest, counselor and spiritual advisor,” and later allegedly used that position to perform sexual acts with Plaintiff.

Plaintiff’s causes of action against the chief Defendant are: (1) vicarious liability for the actions of the Defendant’s instrumentalities; (2) respondeat superior liability for the actions of Ronan, the Defendant’s employee; and (3) direct liability for the Defendant’s negligent retention and supervision of Ronan and its negligent failure to warn Plaintiff of Ronan’s proclivities. The Defendant claimed sovereign immunity and moved to dismiss.

The district court disagreed and found that it had jurisdiction over almost all of Plaintiff’s claims based on the FSIA’s tortious act exception to sovereign immunity. The Defendant noted its appeal. The U.S. Court of Appeals for the Ninth Circuit, in a per curiam opinion, affirms in part and reverses in part.

The Court concludes that Plaintiff has not alleged enough facts to overcome the presumption of separate juridical status for governmental instrumentalities, and thus the law cannot attribute the negligent acts of those entities to the Defendant for jurisdictional purposes. Thus, Plaintiff’s claims of vicarious liability cannot proceed. Plaintiff has sufficiently alleged that Ronan was an employee of the Defendant acting within the “scope of his employment” under Oregon law, and thus Ronan’s acts can be attributed to the Defendant for jurisdictional purposes under respondeat superior liability.

Furthermore, Ronan’s alleged acts came within the FSIA’s tortious act exception, and the Defendant is thus not immune from suit for the respondeat superior cause of action. Plaintiff’s negligence claims under the FSIA’s tortious act exception, however, cannot proceed because the FSIA preserves immunity for discretionary acts. The Court thus may not adjudicate Plaintiff’s allegations under the FSIA “commercial activity” exception.

The Circuit Court then determines which acts the law may attribute to the Defendant for jurisdictional purposes. Plaintiff alleges that Defendant created the following institutions: the Archdiocese, the Order and the Bishop. The Defendant argues that Plaintiff failed to allege enough facts to overcome the presumption of the separate juridical status of those institutions.

While the Court agrees with the Defendant in this respect, it concludes that certain acts of the Defendant, including the creation of Archdioceses and religious orders, approving the creation and division of such institutions, and “placing” Ronan in the Archdiocese in Oregon, do create jurisdiction over the Defendant.

“In arguing that the actions of the corporations are not attributable to Holy See for purposes of determining jurisdiction, the Holy See relies on First Nat. City Bank v. Banco Para el Comercio Exterior de Cuba (‘Bancec’), 462 U.S. 611 (1983). In Bancec, the Supreme Court considered whether an instrumentality created by a foreign state could be held liable for the actions of the foreign state itself, a question the reverse of ours. …. “ [...] Surveying international and federal law on the status of corporations, the Supreme Court recognized a presumption of ‘separate juridical [status]’ for the instrumentalities of foreign states. Id. at 624, 624‑28.”

“That presumption can be overcome, the Court explained, in two instances: [1] when ‘a corporate entity is so extensively controlled by its owner that a relationship of principal and agent is created,’ or [2] when recognizing the separate status of a corporation ‘would work fraud or injustice.’ Id. at 629. [...]”

“The Supreme Court in Bancec did not have the opportunity to consider whether the actions of a corporation may be attributed to the sovereign —the reverse of the Bancec scenario—for purposes of determining whether jurisdiction over that sovereign exists. This Circuit has not previously addressed that question either. … At least two other circuits, however, faced with such a scenario, have applied Bancec’s substantive corporate law principles in determining whether jurisdiction exists under the FSIA.” [...]

“We join the D.C. Circuit and the Fifth Circuit in extending Bancec’s analysis to the question [of] whether the actions of a corporation may render a foreign sovereign amenable to suit. A foreign state can only ‘act[ ] through its agents,’ be they corporations or individual people. … Therefore, in applying the jurisdictional provisions of the FSIA, courts will routinely have to decide whether a particular individual or corporation is an agent of a foreign state.”

“Bancec provides a workable standard for deciding this question. Applying Bancecs’s presumption in favor of separate juridical status for foreign state instrumentalities at the jurisdiction phase, not just at the liability phase, is consistent with the FSIA’s broad policy goals. In Bancec, the Court discussed at length the comity considerations at play when entertaining suits against foreign government instrumentalities in U.S. courts. supra at 626 …”

“As at the merits phase, failing to recognize the presumption of separate juridical status at the jurisdictional phase could ‘result in substantial uncertainty over whether an instrumentality’s assets would be diverted to satisfy a claim against the sovereign,’ and might frustrate ‘the efforts of sovereign nations to structure their governmental activities in a manner deemed necessary to promote economic development and efficient administration.’ Bancec, supra at 626. Applying Bancec’s presumption—as well as the standard for overcoming that presumption—at the outset of a suit as well as at the merits phase makes good sense.”

“With these considerations in mind, we conclude that it is appropriate to use the Bancec standard to determine whether Doe’s allegations are sufficient to permit jurisdiction over the Holy See based on acts committed by its affiliated domestic corporations.” [Slip op. 18‑21] The Court then finds that Doe has not alleged sufficient facts to overcome the presumption of separate juridical status.

“In Flatow v. Islamic Republic of Iran, 308 F.3d 1065 (9th Cir. 2002), we applied Bancec to the relationship between the Iranian government and the Bank Saderat Iran (‘BSI’). BSI was created by the Iranian government and fully owned by it. Id. at 1072‑73. Its actions were regulated by Iran’s General Assembly of Banks and High Council of Banks, which reviewed BSI’s annual statements and ‘perform[ed] broad policymaking functions.’ Id. at 1073. Flatow held these facts insufficient to overcome the presumption of separate juridical status, because the government’s ‘involvement [did not] rise to a [sufficiently] high[ ] level,’ and in particular, did not involve ‘day‑to‑day’ control. Id. (citing McKesson Corp v. Islamic Republic of Iran, 52 F.3d 346, 351‑52 (D.C. Cir. 1995) (holding the presumption of separateness overcome where Iran controlled routine business decisions, such as declaring and paying dividends and honoring contracts).”

“Doe’s complaint does not allege day‑to‑day, routine involvement of the Holy See in the affairs of the Archdiocese, the Order, and the Bishop. Instead, it alleges that the Holy See ‘creates, divides[,] and re‑aligns dioceses, archdioceses and ecclesiastical provinces’ and ‘gives final approval to the creation, division or suppression of provinces of religious orders.’ Doe also alleges that the Holy See ‘promulgates and enforces the laws and regulations regarding the education, training[,] and standards of conduct and discipline for its members and those who serve in the governmental, administrative, judicial, educational[,] and pastoral workings of the Catholic [C]hurch world‑wide.’ These factual allegations – that the Holy See participated in creating the corporations and continues to promulgate laws and regulations that apply to them – are quite similar to the facts in Flatow, and are, as in Flatow, insufficient to overcome the presumption of separate juridical status.” [Slip op. 22]

“… Doe has not alleged that the Holy See has inappropriately used the separate status of the corporations to its own benefit, as in Bancec, or that the Holy See created the corporations for the purpose of evading liability for its own wrongs. Rather, in ruling for Doe on this point, the district court seemed to be influenced by the complaint’s allegations of wrongful acts perpetrated directly by the Holy See. … The existence of such direct wrongful acts cannot determine whether the distinct wrongful acts of the affiliated corporations should also be attributed to the Holy See.” [Slip op.23‑24]

“Doe’s vicarious liability claim for the actions of the [Holy See’s] Archdiocese, Chicago Bishop, and Order is based entirely on an allegation that the actions of the domestic corporations are attributable to the Holy See. Doe has therefore not alleged sufficient facts to demonstrate that any exception to sovereign immunity applies to that cause of action. We therefore conclude that the district court lacked jurisdiction over the Holy See for the tortious acts allegedly committed by the Archdiocese, the Chicago Bishop, and the Order. [Slip op. 22‑24]

The Court then turns to Doe’s respondeat superior allegations and whether they are sufficient to support jurisdiction over the Holy See. “The district court held that all of Doe’s claims, except the one for fraud, come within the exception to immunity for a ‘tortious act or omission of [a] foreign state or of any official or employee of that foreign state while acting within the scope of his or her employment.’ § 1605(a)(2); [Cite] We agree in part.”

“Doe’s respondeat superior claim based on Ronan’s actions comes within the Tortious Act exception. Doe has clearly alleged that Ronan was an employee of the Holy See, acting within the scope of his employment, when he molested Doe. We conclude, however, that Doe’s claims against the Holy See for negligent retention and supervision and failure to warn cannot be brought under the tort exception because they are barred by the FSIA’s exclusion for discretionary functions, § 1605(a)(5)(A).” [...] [Slip op. 24]

Second Circuit finds that clauses in Argentine offering circulars for government bonds waiving sovereign immunity in Frankfurt and Buenos Aires courts, as well as for enforcement in other courts, also waived immunity under Foreign Sovereign Immunities Act thus supporting jurisdiction of U.S. court

Capital Ventures International (CVI) owns certain bonds issued by the Republic of Argentina. German law governs one group of bonds, denominated in German Marks and Euros (the German bonds). According to the offering circulars, Argentina submits to jurisdiction in Frankfurt, Germany, and in Buenos Aires, and waives any objection as to forum non conveniens. The prevailing party may enforce a final judgment in other jurisdictions as provided by law. The other group of bonds is listed in U.S. dollars.

In December 2001, Argentina declared a moratorium on its foreign debt and stopped paying. CVI reacted by accelerating the bonds it owned, making the principal due immediately. CVI filed this action in New York federal court in April 2005 . The district court gave summary judgment to CVI on the U.S. bonds. As for the German bonds, the court found that it lacked subject matter jurisdiction under the Foreign Sovereign Immunities Act, 28 U.S.C. §§ 1330(a), 1604 (FSIA). On these bonds, Argentina had tried to limit its waivers of sovereign immunity to the courts of Frankfurt and Buenos Aires.

CVI appealed. The U.S. Court of Appeals for the Second Circuit affirms in part and vacates in part.

The main question here is whether Argentina has explicitly waived its sovereign immunity from suit in the U.S. The FSIA is the statutory source for determining subject matter jurisdiction over any civil action against a foreign state. It preserves the traditional immunity of all foreign states unless a specific statutory exception applies. Section 1605(a)(1) provides an exception to sovereign immunity where “the sovereign state has waived immunity either explicitly or by implication.” The language in the offering circulars clearly waives Argentina’s immunity.

“Argentina advances the argument that § 13(4), read in conjunction with § 13(3), merely allows for judgments obtained pursuant to § 13(3) to be enforced in other courts. However, the language of subsection 4 is not so limited. Subsection 4 refers to ‘any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise),’ language that contemplates actions other than those to enforce judgments.”

“Further, subsection 3 ends with the provision that ‘a final judgment in any such suit … in the courts mentioned above … may be enforced in other jurisdictions by suit on the judgment or any other method provided by law.’ If the Republic’s interpretation of subsection 4 were adopted, this last sentence in subsection 3 would render subsection 4 superfluous, a result that should be avoided. … Further, if subsection 4 were intended to discuss enforcement in other jurisdictions, we would expect that the same terms in the last sentence of subsection 3 would be repeated in subsection 4—but they are not. Accordingly, we do not read § 13(4) as applying only to the enforcement of judgments.”