Sovereigns in the Courtroom: Is the U.S. Foreign Sovereign Immunities Act the Golden Key?

By Kiran Nasir Gore and Charles H. Camp

How can a foreign sovereign be brought into an American courtroom to answer for its bad acts? This article discusses the U.S. Foreign Sovereign Immunities Act, including brief historical context, opportunities, and the latest developments. In sum, the FSIA remains a powerful tool to be wielded by aggrieved litigants, guided by expert legal advisers, when the foreign State acts more like a private player than a sovereign.  

Introduction

In February of this year, the U.S. Supreme Court decided Germany v. Philipp,[i] a Holocaust expropriation case filed against the Republic of Germany for claims concerning the return of Medieval art stolen by the Nazis.

The case was pursued under the U.S. Foreign Sovereign Immunities Act of 1976 (FSIA), the primary means to bring a lawsuit against a foreign sovereign or its agencies and instrumentalities.[ii] In short, the FSIA provides a list of circumstances where a sovereign can be compelled to litigate a dispute in American courts, but as the Philipp case demonstrates, there remain fuzzy gray areas within those confines which necessitate expert advice from counsel well-versed in the FSIA.

In Philipp, Chief Justice Roberts wrote for a unanimous bench and held that the FSIA’s expropriation exception, which permits suit for cases involving “rights in property taken in violation of international law,” does not extend to a sovereign’s taking of the property of its own nationals. The justices did not address the second question presented—whether a court may decline jurisdiction on grounds of international comity—leaving the law on international comity abstention in confusion for now. On the same day, the Supreme Court decided a companion case, Hungary v. Simon,[iii] concerning the return of personal property stolen from Holocaust survivors. That case only raised the comity question and was vacated and remanded to the lower court for reconsideration in light of the Supreme Court’s decision in Philipp.

Both cases were closely watched by advocates for restorative justice, who hoped that American courts could provide a forum to litigate against sovereigns to hold them liable for these past bad acts. While we cannot predict whether, how, or where that justice could unfold in the future, as of now, the FSIA is the only avenue in the United States to remove a sovereign’s immunity from liability.

This pair of cases is not the only recent big headline for the FSIA. Since spring of 2020, numerous private lawsuits have been filed all over the U.S., including some class actions, seeking damages arising from alleged governmental misconduct in concealing or failing to prevent the spread of COVID-19.[iv] Each of these cases invoked the FSIA to establish that American courts had jurisdiction. Most legal commentators were skeptical of this strategy and none of these cases have yet resulted in a positive outcome.

In June 2020, the Senate Judiciary Committee held a hearing to explore a different angle. Its hearing on “The Foreign Sovereign Immunities Act, Coronavirus, and Addressing China’s Culpability” sought to consider whether Congress should amend the FSIA to expand its scope and permit lawsuits like the ones seeking to hold China responsible for its alleged bad acts relating to the spread of COVID-19.[v] Since then, there has not been any meaningful progress on this initiative following the January 2021 change in Presidential administration.

At the very least, collectively, these outcomes demonstrate the existence of a toolkit that well-advised litigants can employ as they seek restorative justice against sovereigns in American courtrooms. This article provides brief historical context, outlines opportunities, and offers useful guidance. 

The FSIA: Origins and Context

For more than 150 years after the founding of the United States, sovereigns were almost entirely exempt from the jurisdiction of U.S. courts as a matter of comity (i.e., respect for the sovereignty of other nations). This was not a unique proposition. It is customary international law that one foreign State is immune from the jurisdiction of the courts of another foreign State.

But in the early-to-mid twentieth century, the U.S. government began to join other States in recognizing that this “absolute” immunity was inappropriate in certain cases, especially those in which a State was behaving less like a sovereign and more like a private actor. This development coincided with various global developments, including that governments began to conduct commercial activities between themselves and with private actors on an increasingly frequent basis. In these cases, complete sovereign immunity gave State governments an unfair advantage in commercial dealings.

Thus, in 1952, the U.S. State Department began informing federal courts that the immunity of foreign States was limited or “restricted” to situations where the foreign government engages in governmental functions. However, the State Department’s determinations were inconsistent and occasionally colored by political considerations. In 1976, U.S. Congress addressed these problems with enactment of the FSIA.[vi] The FSIA was signed into law by U.S. President Gerald Ford and standardized new, “restrictive” rules of immunity and assigned responsibility for determining immunity to U.S. federal courts.

Except where an exception to immunity exists under the FSIA, sovereigns and certain State agencies and companies are presumptively immune from court jurisdiction under the FSIA, meaning that American courts generally cannot hear cases brought against them.

But the FSIA has three significant exceptions that are worth highlighting: (1) the commercial activity exception, (2) the non-commercial tort exception, and (3) the expropriation exception.[vii] Each exception has been hotly litigated and each carries significant consequences. If a litigant successfully establishes that one of these exceptions applies to a State, its sovereign immunity falls away and an American court can adjudge the sovereign’s liability for the alleged bad acts.

The Commercial Activity Exception

It is unsurprising that the FSIA’s commercial activity exception is often invoked by litigants. Modern States conduct a variety of commercial non-sovereign activities through their State-owned enterprises. For example, in 2019, the World Bank observed that China’s ambitious Belt and Road Initiative (BRI) projects around the world have been driven predominantly by China’s State-owned banks and State-owned enterprises.[viii]

The commercial activity exception applies in lawsuits that are based upon (1) “a commercial activity carried on in the United States by a foreign state;” (2) “an act performed in the United States in connection with a commercial activity of the foreign state elsewhere;” or (3) “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.”[ix] Each of provides a separate ground for a court to exercise its jurisdiction over the sovereign. Importantly, regardless of which ground applies, the court must question whether the activity of the foreign state is “commercial,” rather than “sovereign,” in nature, and also whether the plaintiff’s claim is “based upon” that act.[x] The FSIA defines “commercial activity” as either “a regular course of commercial conduct” or “a particular commercial transaction or act,” but it also says that courts must look to the nature of the activity rather than its purpose.[xi] That is to say, regardless of the sovereign’s motive, a court must determine whether its conduct is the type of conduct typically engaged in by private players.

In Republic of Argentina v. Weltover, Inc., the Supreme Court determined that the commercial activity exception applied where Argentina had failed to pay bonds, the place designated for payment of its bonds was New York, and Argentina’s issuance of bonds in an attempt to pay its debt was an activity in which private actors could also partake.[xii] Similarly, in De Cespel v. Republic of Hungary, a federal district court applied the commercial activity exception to Hungary in a case alleging breach of a bailment agreement by Hungary.[xiii] This was a commercial activity because “a bailment is a form of contract, and a foreign state’s repudiation of a contract is precisely the type of activity in which a ‘private player within the market’ engages.”[xiv]

The Non-Commercial Tort Exception

While the FSIA’s non-commercial tort exception was intended by its drafters to cover “primarily… traffic accidents,” the final text is more general and covers “all tort actions for money damages.”^[xv] Examples include “claims for personal injury or death, or for damage to or loss of property caused by tortious act or omission of a foreign state or its officials or employees, acting within the scope of their authority.”^[xvi] All claims must be based upon at least one complete tort committed within the United States,[xvii] and this exception only deals “with the immunity of foreign states and not its diplomatic or consular representatives.”^[xviii]

This creates an important tool for litigants seeking to hold a State responsible for bad acts in the United States. In USAA Casualty Insurance Co. v. Permanent Mission of the Republic of Nambia, for example, the non-commercial torts exception conferred a New York court with jurisdiction over plaintiffs’ claims against the Nambia’s diplomatic Mission.[xix] In that case, the Mission’s contractors had violated New York building code laws, the Mission had a duty to ensure that such laws were complied with, and its failure resulted in substantial damage to adjoining property. ^[xx]

The Expropriation Exception

The FSIA was carefully drafted, and expressly designed, to not modify the existing American act of state doctrine, which prevents the U.S. judiciary from examining the validity of a foreign government taking, a concept also known as “expropriation,” within its own territory from its own national.^[xxi] This is the same doctrine that the Philipp plaintiffs had hoped the Supreme Court would reconsider.[xxii] They argued that, despite involving a domestic taking, the expropriation exception applied because the conduct violated international law generally, in this case, international human rights law.

While the Supreme Court did not accept this creative formulation, this does not mean the expropriation exception is not a useful tool. In Altmann v. Republic of Austria, in stark contrast from the outcome in Philipp, an Austrian-born U.S. national was able to proceed with a lawsuit against Austria and “an art gallery that was an instrumentality of the Republic” when “her father’s will bequeathed to her certain valuable paintings which were confiscated by the Nazis during World War II and subsequently expropriated by Austria.”^[xxiii] Key facts considered by Ninth Circuit included its determination that the paintings were stolen and sold for personal gain by Austria while targeting a Czech family, i.e. foreigners, not its own nationals.^[xxiv]

Similarly, in Siderman de Blake v. Republic of Argentina, plaintiffs were able to establish jurisdiction under the FSIA where plaintiff was a U.S. citizen and a company owned by plaintiff was seized by Argentine officials without compensation, and the company was later converted into an agency of the State.[xxv]

FSIA: Powerful Tool or Dull Substitute?

In general, the modern contours of the FSIA accord with a “restrictive” theory of foreign sovereign immunity. This is to say, the immunity exists but remains subject to key exceptions, which are largely triggered where the sovereign acts less like a sovereign and more like a private player. Aggrieved litigants with claims against sovereigns are recommended to actively seek timely expert legal advice to determine whether the FSIA can be a powerful tool to hold a sovereign or its agencies and instrumentalities liable for their bad acts.

About the Authors

Charles H. Camp is an international lawyer with over thirty years of experience representing foreign and domestic clients in international litigation, arbitration, negotiation, and international debt recovery, including various actions brought under the FSIA. In 2001, Mr. Camp opened the Law Offices of Charles H. Camp, P.C. in Washington, D.C. to focus on effective, personalized representation in complex, international matters. Mr. Camp teaches international negotiations at the George Washington University Law School.

Kiran Nasir Gore is Counsel at the Law Offices of Charles H. Camp, P.C. Her expertise is in international dispute resolution, including advocacy before U.S. courts, commercial and investment arbitration tribunals, and investigative authorities. She also draws on her professional experiences as an educator at the George Washington University Law School and New York University’s Global Study Center in Washington, D.C.

References

• [i] Federal Republic of Germany et al. v. Philipp et al., U.S. S. Ct. No. 19-351 (Feb. 3, 2021).
• [ii] Foreign Sovereign Immunities Act of l976, Pub. L. 94-583, 90 Stat. 289l, 28 U.S.C. Sec. l330, l332(a), l39l(f) and l60l-l6ll (collectively, the ‘FSIA’).
• [iii] Republic of Hungary et al. v. Simon, et al., U.S. S. Ct. No. 18-1447 (Feb. 3, 2021).
• [iv] See Chimène Keitner, Testimony on the Foreign Sovereign Immunities Act, Coronavirus, and Addressing China’s Culpability, HARV. NAT’L SEC. J. ONLINE (Feb. 23, 2021), https://harvardnsj.org/wp-content/uploads/sites/13/2021/02/Keitner_The-ForeignSovereign-Immunities-Act-Coronavirus-and-Addressing-Chinas-Culpability-Part-I.pdf. In an Annex, current as of February 2021, Professor Keitner indexes all known such cases.
• [v] Full Senate Judiciary Committee Hearing, “The Foreign Sovereign Immunities Act, Coronavirus, and Addressing China’s Culpability” (June 23, 2020). A video of the hearing is available here: https://www.judiciary.senate.gov/meetings/the-foreign-sovereign-immunities-act-coronavirus-and-addressing-chinas-culpability.
• [vi] 28 U.S.C. §§ 1330, 1332, 1391(f), 1441(d), and 1602–1611.
• [vii] Other important exceptions include the waiver exception and the terrorism exception. See FSIA, 28 U.S.C. § 1605(a)(1) and 28 U.S.C. § 1607(a).
• [viii] Belt and Road Economics: Opportunities and Risks of Transport Corridors (World Bank, 2019), p. 80, available at: https://www.worldbank.org/en/topic/regional-integration/publication/belt-and-road-economics-opportunities-and-risks-of-transport-corridors.
• [ix] FSIA, 28 U.S. Code § 1605(a)(2).
• [x] Id.
• [xi] Id., 28 U.S.C. § 1603(d).
• [xii] 504 U.S. 607, 608 (1992).
• [xiii] 714 F.3d 591 (D.C. Cir. 2013).
• [xiv] Id. at 599.
• ^[xv] S. Rep. No. 94-1310, 94th Cong., 2d Sess. (Sept. 27 (legislative day, Sept. 24), 1976 at 20.
• ^[xvi] Id.
• [xvii] See e.g., Olsen v. Government of Mexico, 729 F.2d 641, 646 (9th Cir. 1984)
• ^[xviii] S. Rep. No. 94-1310, 94th Cong., 2d Sess. (Sept. 27 (legislative day, Sept. 24), 1976 at 20.
• [xix] 681 F.3d 103 (2d Cir. 2012).
• ^[xx] Id. at 104.
• ^[xxi]Jurisdiction of U.S. Courts in Suits Against Foreign States, Subcomm. on Administrative Law and Governmental Relations of the Comm. on the Judiciary (June 2 and 4, 1976) at 34.
• [xxii] Federal Republic of Germany et al. v. Philipp et al., U.S. S. Ct. No. 19-351 (Feb. 3, 2021), Slip Op. at p. 8.
• ^[xxiii] Republic of Aus. v. Altmann, 541 U.S. 677, 680, 124 S. Ct. 2240, 2243 (2004).
• ^[xxiv] Id. It is worth noting that the case went to the U.S. Supreme Court, but on a different issue (whether the FSIA applied retroactively, which it determined in the affirmative). See Republic of Austria v. Altmann, 541 U.S. 677 (2004).
• [xxv] 965 F.2d 699 (9th Cir. 2002).