FSIA Dispute Over 142-Year-Old Bonds
In a case whose main events dated as far back as 1875, the Court of Appeals for the Second Circuit dismissed a consultants’ suit against a foreign government for lack of subject-matter jurisdiction. The point-at-issue in MMA Consultants 1 Inc. v. Republic of Peru began when Peru signed and executed fourteen bonds and left them in MMA’s possession without payment. In 2015, 140 years after the fact, MMA sent three demand letters to the Peruvian embassy in Washington D.C. for payment on the Bonds, then sued to collect principal and interest. This was not, however, the first time legal issues related to these bonds had arisen, as one of the pieces of evidence the district court considered was an Arbitration Tribunal award from 1901.
Since Peru is a foreign state, the only method of judging whether or not the case was entitled to subject-matter jurisdiction in a United States district court arises under the Foreign Sovereign Immunities Act. The burden rested on the plaintiff to prove that this particular case should be permitted under an exception of the FSIA. MMA claimed the case fell under the FSIA's commercial activity exception: A foreign country may be entitled to jurisdiction if the action in question is based upon either a commercial activity carried on in the United States by the foreign state or an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere that causes a direct effect in the United States.
Since the act was Peru's failure to redeem the bonds, MMA had to prove that this failure either took place in the United States or caused a direct effect in the United States. According to case law, a foreign government’s decision not to redeem a bond is an act that occurs in the foreign country, not in the United States. Therefore, Peru’s failure to redeem the bonds did not take place in the United States and the first exception does not apply. Furthermore, simply because the plaintiff is an American corporation does not mean that direct effect was caused in the United States, thus the second exception does not apply. Accordingly, the case was correctly dismissed by the district court for lack of subject-matter jurisdiction, the appellate court in New York City determined on December 19, 2017. -- Madeline Henshaw-Greene, Legal Assistant, Berliner Corcoran & Rowe LLP , Washington, DC.
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U.S. Federal Courts and Subject-Matter Jurisdiction
On November 30, 2017, the United States District Court for the District of Columbia dismissed the case Jimenez v. Colombian State for lack of subject matter jurisdiction. The plaintiffs consist of three Ecuadorian citizens who filed a complaint against Colombia, accusing the government of Columbia of denying the fundamental human rights of Plaintiffs Prado Alava and Vera Calderón in violation of a peace deal between the government and the allgedly subversive group FARC-EP. The plaintiffs asked that the court study and evaluate this case.
United States federal courts have limited jurisdiction and are only able to hear cases based on whether or not the court has subject-matter jurisdiction. Therefore, the court was unable to review this case. The court does not have the ability to enforce the peace treaty that the plaintiffs referred to, and thus could not rule in either party's favour. The only means by which subject-matter jurisdiction can arise is under the Foreign Sovereign Immunities Act. However, it noted, the plaintiffs have cited no applicable exception under the FSIA.
The court stated that the complaint was therefore patently insubstantial, presenting no federal question suitable for decision. The case was dismissed following precedent from Evans v. Suter, 2010 WL 1632902(D.C. Cir. 2010), which states that a district court may dismiss a complaint sua sponte prior to service on the defendants pursuant to Fed. R. Civ. P. 12(h)(3) when, as here, it is evident that the court lacks subject-matter jurisdiction. -- Madeline Henshaw-Greene, Legal Assistant, Berliner Corcoran & Rowe LLP, Washington, DC.
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Free Speech Under the FSIA During Arbitration
On November 13, 2017, Judge James E. Boasberg of the U.S. District Court for the District of Columbia issued a memorandum opinion in Sharp Electronics Corporation v. Hisense USA Corporations and Hisense International (Hong Kong) America Investment Co. Ltd. In May 2017, the Japanese-owned Sharp Corporation moved to terminate a licensing agreement under which the Chinese-owned Hisense Corporation was to make and market television sets under the Sharp name becuase of regulatory concerns. Sharp took the case before the US DC District Court, challenging the enforcability of an injunctive request by the third-party arbitration center compelling Sharp to abide with the licensing agreement while the arbitration was pending, and preventing the company from violating the confidentiality agreement by making disparaging statements about Hisense or the dispute. Judge Boasberg dismissed Sharp's complaint on both substantive -- the absence of a First Amendment violation -- and procedural -- lack of personal jurisdiction -- grounds.
As a government-owned entity, Hisense also presented a defense under the Foreign Sovereign Immunities Act.
One of the procedural questions the Court considered was whether the two defendants in the case, Hisense Intl. and Hisense USA, are instrumentalities of a foreign government under the FSIA.
The FSIA generally states that a foreign state shall be immune from the jurisdiction of the courts of the United States and of the States. It also, however, articulates specific conditions under which plaintiffs may sue foreign states and their instrumentalities in U.S. courts. One such condition concerns commercial activity. A foreign state or its instrumentality is not immune from the jurisdiction of U.S. courts in any case in which the action is based upon a commercial activity carried on in the United States by the foreign state. Selling the TV sets per the terms of the licensing agreement constitutes such commercial activity.
However, foreign states, like U.S. states, do not constitute persons under the Fifth Amendment's Due Process Clause. In First Nationall City Bank v. Banco Para El Comercio Exterior De Cuba, however, the Court determined that foreign state instrumentalities, unless they are primarily controlled by a foreign sovereign, such as through a principal-agent relationship, should be treated as distinct juridical entities from governments. Thus, just because foreign governments do not constitute persons for due process purposes, does not mean that foreign companies also do not. Foreign companies may in fact be persons in the U.S. for due process purposes, and those that qualify as persons may in fact raise a personal jurisdiction defense before a U.S. court.
In the end, the subject-matter inquiry under the FSIA was not determinative of the outcome, the court decided, but its discussion is nonetheless instructive. -- Zarine Kharazian, Legal Assistant, Berliner Corcoran & Rowe LLP, Washington, DC, and Assistant Editor of the International Enforcement Law Reporter.
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How to Address the Ambassador? Protocol, not Law
Protocol lays down rules, as does the law, but they are not the same. A frequently asked question is how to address diplomats, from the ambassador down the ranks to junior attaches, and the most important persons who can decide over access and level of attention, the assistants and secretaries. Related is the issue of different styles for diplomats from different countries.
At the State Department and Foreign Offices abroad, these are no small matters. While diplomats appear to have a special gene that enables them to recall names, titles and etiquette, even they look up guidance, such as internal memos on protocol found in missions as well as in international organizations, or the State Department's online manual Protocol for the Modern Diplomat.
In a pinch, go with the the recommendation in the Wikipedia of His Excellency or Her Excellency.; and use Your Excellency in direct address. -- Clemens Kochinke, partner, Berliner Corcoran & Rowe LLP, Washington, DC.
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Limited Review of NAFTA Arbitration Award
In Mesa Energy Group LLC v. Government of Canada, the United States District Court for the District of Columbia explored numerous challenges to an adverse arbitral award issued in Miami under NAFTA rules. The plaintiff had entered into an energy supply contract with Canada and assumed it had won a regional exclusivity. Canada supposedly breached the contract, and arbitration followed. The panel decided against the plaintiff, supported by its finding that the plaintiff misunderstood the contract and had been aware of other supply arrangements.
Canada argued unsuccessfully that the court in Washington, DC, should apply the precedent developed in the Eleventh Circuit where Miami is located. The district court analyzed the requirements of the Federal Arbitration Act as well as general procedural rules and precedent. On June 15, 2017, it found that while precedent in the Eleventh Circuit would be less favorable to the plaintiff than that in the D.C. Circuit, the outcome would be identical.
Bound by its limited powers of review, which the court discussed in detail, as well as its analysis of alleged errors, it determined that the arbitral award must stand. In addition to the type of mistakes and errors in arbitration, its opinion explores also the deference afforded governments in procurement matters and generally under NAFTA. The court granted Canada's counter-petition to affirm the award but did not grant Canada's request for an award of attorneys' fees because Mesa's arguments that these three grounds justify vacating the award are not meritorious, they are not so lacking in merit to be described as frivolous or as evidence of bad faith. Id. 22. -- Clemens Kochinke, partner, Berliner Corcoran & Rowe LLP, Washington, DC.
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District Court Limits Sovereignty in Expropriation Matter
The United States District Court for the District of Columbia in Washington, DC, limited in Philipp v. Federal Republic of Germany the defendant's sovereign immunity in a clear separation of claims related to alleged takings by Nazi Germany:
[T]he Court GRANTS Defendants' request that the Court dismiss five non-property based claims because Defendants are entitled to sovereign immunity on the following claims: fraud in the inducement …; breach of fiduciary duty …; breach of the covenant of good faith and fair dealing …; civil conspiracy …; and tortious interference …. The Court DENIES Defendants' request for dismissal on the remaining five claims: declaratory relief …; replevin …; conversion …; unjust enrichment …; and bailment …. Specifically, the Court finds that Plaintiffs have sufficiently pled these five claims under the expropriation exception to the FSIA pursuant to 28 U.S.C. § 1605(a)(3). The Court further finds that these five claims are not preempted or non-justiciable, nor should they be dismissed under the doctrine of forum non conveniens.While the March 31, 2017 decision will likely become the subject of an appeal to the United States Court of Appeals for the District of Columbia in Washington, DC, the 42-page opinion illustrates the court's perception of immunity issues for various types of claims in the expropriation context. -- Clemens Kochinke, partner, Berliner Corcoran & Rowe LLP, Washington, DC.
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Rulings on Sovereigns in U.S. District Court
The United States District Court for the District of Columbia in Washington, DC, handles numerous disputes involving foreign missions, such as embassies, consulates and international organizations, and of foreign nations, whether or not they maintain mission offices in the capital, and their instrumentalities. The following table lists linked rulings published so far in 2017:
|04/19/2017||Karcher v. Islamic Republic of Iran||Judge Kollar-Kotelly|
|04/13/2017||Science Applications International Corporation v. Hellenic Republic||Judge Kessler|
|04/13/2017||Foley v. Syrian Arab Republic||Judge Kollar-Kotelly|
|04/06/2017||Gill v. Islamic Republic of Iran||Judge Walton|
|03/31/2017||Fraenkel v. Islamic Republic of Iran||Judge Collyer|
|03/31/2017||Philipp v. Federal Republic of Germany||Judge Kollar-Kotelly|
|03/30/2017||EIG Energy Fund v. Petroleo Brasileiro SA||Judge Metha|
|03/25/2017||Crystallex International Corporation v. Bolivarian Republic of Venezuela||Judge Contreras|
|03/22/2017||Miango v. Democratic Republic of Congo||Judge Berman Jackson|
|03/21/2017||SACE S.p.a. v. Republic of Paraguay||Judge Brown Jackson|
|03/01/2017||Cohen v. Islamic Republic of Iran Et Al||Judge Cooper|
|02/27/2017||Nnaka v. Federal Republic of Nigeria||Judge Bates|
|02/17/2017||Continental Transfert Technique Ltd. v. Federal Government of Nigeria||Judge Friedman|
|02/10/2017||Salini Costruttori SPA v. Kingdom of Morocco||Judge Chutkan|
|02/06/2017||BCB Holdings Ltd. v. Government of Belize||Judge Kollar-Kotelly|
|01/25/2017||Schermerhorn v. State of Israel||Judge Berman Jackson|
|01/25/2017||Estate of Yonadav Hirshfeld v. Islamic Republic of Iran||Judge Kollar-Kotelly|
|01/09/2017||De Sousa v. Embassy of The Republic of Angola||Chief Judge Howell|
|01/09/2017||Braun v. Islamic Republic of Iran Et Al||Chief Judge Howell|
|01/05/2017||Science Applications International Corporation v. Hellenic Republic||Judge Kessler|
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Conditions on Diplomacy: Executive Order
The White House established a new condition precedent to diplomatic efforts and negotiations in its Executive Order of Janury 25, 2017, titled Executive Order: Enhancing Public Safety in the Interior of the United States. Nominally, the precondition applies to Recalcitant Countries. The order does not defined the term.
Sec. 12. Recalcitrant Countries. The Secretary of Homeland Security and the Secretary of State shall cooperate to effectively implement the sanctions provided by section 243(d) of the INA (8 U.S.C. 1253(d)), as appropriate. The Secretary of State shall, to the maximum extent permitted by law, ensure that diplomatic efforts and negotiations with foreign states include as a condition precedent the acceptance by those foreign states of their nationals who are subject to removal from the United States.Another new executive order that affects foreign relations to some degree deals with ethics commitments of senior executive branch staff in the Trump administration. The January 28, 2017 ethics order ensures compliance, inter alia, with the Foreign Agents Registration Act but also grants, in §3, extreme latitude in waiving the ethics requirements. -- Clemens Kochinke, partner, Berliner Corcoran & Rowe LLP, Washington, DC.
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