BIT not commercial? Court disagrees.
Chinese entities established and operated a free trade zone in Nigeria in conjunction with a Nigerian state which kicked it out, resulting ultimately in an arbitral award which the petitioner in Zhongshan Fucheng Industrial Investment Co. Ltd. v. Federal Republic of Nigeria seeks to have confirmed in Washington, DC. Nigeria opposed the action with immunity arguments. No exception to the Foreign Sovereign Immunities Act would apply because the proceeding under the New York Convention and the Federal Arbitration Act does not relate to a commercial activity. The action is supposedly based on the Bilateral Investment Treaty which is argued to be non-commercial in nature, as it relates to the bilateral relations between Nigeria and China. The United States District Court for the District of Columbia analyzed and debunked the argument and allowed the case to proceed on January 26, 2023. -- Clemens Kochinke, of counsel, Berliner Corcoran & Rowe LLP, Washington, DC.
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FSIA Expropriation: Commingled Funds
In Ambar v. Federal Republic of Germany, The United States District Court for the District of Columbia Circuit analyzes two important elements in the expropriation exception to immunity under the Foreign Sovereign Immunities Act. First, it needs to determine the relevant citizenship of an expropriated building owner in order to assess whether the expropriation by the Nazi government violated international law.
On March 15, 2022, the court found that the expropriation following the annexation of Austria, of which the owner was a citizen, to Germany, was international in nature. The defendant argued that the expropriation was domestic rather than international due to the Reich issuing German citzenship to Austrians following the annnexation and, therefore, was not in violation of international law under the FSIA. Both parties presented decent arguments, the court held when examining the complex factual setting, but the plaintiff heirs of the expropriated owner had the stronger ones.
Secondly, these heirs had also alleged that Germany commingled the proceeds of the expropriation with its general funds which were then used for commercial purposes within the United States. Their argument won the day by sufficiently establishing the required United States nexus that enables the court to deny Germany's motion for dismissal on the grounds of sovereign immunity. -- Clemens Kochinke, partner, Berliner Corcoran & Rowe LLP, Washington, DC.
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Exceptions to Sovereign Immunity
After nearly a decade of litigation, the United States Court of Appeals for District of Columbia explains in Wye Oak Technology, Inc. v. Republic of Iraq why its sister court in Richmond, Virginia, wrongly denied the defendant foreign state its immunity defense under the Foreign Sovereign Immunities Act in 28 USC 1602 et seq. That court had rejected the commercial activities exception which the DC Circuit analyzed in the context of a post-trial judgment.
The defendant state had defended itself in the trial before the United States District Court for the District of Columbia. The DC Circuit held that the participation in the trial did not cause the defendant state to lose any immunity claim by an implicit waiver. The Court disagrees with the sister court on the second clause of the commercial activities exception.
Examining the law of the case doctrine, it determines that it is not bound by the Fourth Circuit's assessment. In its opinion, it explores other exceptions to sovereign immunity and concludes that the third exception in 28 USC 1605(a)(2) may apply "if the action is 'based upon … an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States'". It returns that issue to the District Court for its evualation or development of its case record and a ruling. -- Clemens Kochinke, partner, Berliner Corcoran & Rowe LLP, Washington, DC.
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Foreign Nation Sanctioned $1.5 Million for Contempt
Failures to properly participate in litigation are routinely subject to sanctions, but they are not the norm in matters involving sovereigns. In Micula v. Government of Romania, the United States District Court for the District of Columbia granted the plaintiff's motion for sanctions. However, it limited the award to $1.5 million, half of the sanctions accrued, giving credit to the defendant nation's partial efforts at compliance.
The plaintiff had earned an arbitral award against the state as well as its confirmation in the federal court. The sanctioned actions occurred in the enforcement stage, during which the state refused to fully participate. The decision of November 8, 2021 explains the reasoning. -- Clemens Kochinke, partner, Berliner Corcoran & Rowe LLP, Washington, DC.
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IOIA Protects Inter-American Development Bank
On April 5, 2021, the United States District Court for the District of Columbia ruled in the matter of Noah J. Rosenkrantz v. Inter-American Development Bank that the defendant is protected under the International Organization Immunities Act and, therefore, the United States Federal court system has no jurisdiction in this case.
The plaintiffs assert that IADB is subject to jurisdiction in the United States because it had entered into a contract with the plaintiffs and, therefore, the relationship falls under the commercial activity exception in the Foreign Sovereign Immunities Act, which also governs International Organizations after the ruling in Jam v. Int’l Fin. Corp., 139 S. Ct. 759, 768 (2019). The IADB counters that complaint is based upon the Office of Institutional Integrity. Therefore, the commercial relationship between the plaintiff and the defendant does not control and the case does not fall under the commercial activity exception. IADB has sanction-like powers in the community of international organizations; it acts as a regulator of their market and not a participant. For this reason, the IADB cannot fall under the commercial activity exception because their role in the market is not commercial in nature.
The plaintiffs also assert that under the waiver exception of FSIA, the IADB implicitly waived its immunity when entering into the contract. The court decided that because there would be a significant disadvantage to the IADB waiving its immunity in this case that Article XI Section 3 should not be construed to waive the Bank’s immunity in this case.
Thus, the court confirms that IADB is protected by the IOIA and the FSIA. As none of the exceptions to these acts apply in this case, the court lacks subject-matter jurisdiction and the IADB’s motion to dismiss is granted. — Emma Byrne, Legal Assistant at Berliner Corcoran & Rowe LLP, Washington, DC.
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Taking France.com neither commercial nor expropriating
The United States Court of Appeals for the Fourth Circuit corrected a lower court that believed the immunity issue arising from the Foreign Sovereign Immunities Act should be addressed only after discovery. The case, France.com, Inc. v. The French Republic , involves the domain name FRANCE.COM that the American plaintiff registered and sought to enforce against an infringer in a French court. France intervened, and the court and court of appeals awarded the domain name to France.
The plaintiff sued France in the United States and asserted both commercial activity by France in using the domain promotionally, and expropriation. The decision of March 25, 2021 clarifies that the lower court should have addressed the FSIA promptly. It states that a seizure, if a judgment can be called that, is not a commercial activity but a sovereign act. As to an expropriation, the FSIA requires a violation of international law which is not the case here. -- Clemens Kochinke, partner, Berliner Corcoran & Rowe LLP, Washington, DC.
Thu, Embassy Law Link/
In TIG Insurance Co. v. Republic of Argentina, the United States Court Appeals for the District of Columbia Circuit ruled on July 30, 2020, that the lower court must look at the totality of circumstances when assessing whether real estate owned by a foreign state is immune from jurisdiction and execution. The plaintiff sought to execute a judgment into such a property in Washington, DC, arguing that it was used commercially when the embassy put it up for sale. The embassy countered that it was not commercially used because (1) it held embassy files, and (2) it was removed from the market before the court ruled on the registration of the judgment in Washington and issued a writ of execution.
The appellate court found that the lower court based its dismissale of the plaintiff's motion on too narrow grounds. It explains the factors in the analysis of the exceptions of a state from foreign sovereign immunity under the Foreign Sovereign Immunities Act which range from jurisdictional immunity to execution immunity. After considering the standards proposed by the parties, it sent the case back to the United States District Court for the District of Columbia, ordering an assessment of the totality of circumstances. Ultimately, the embassy may lose its property to the creditor. -- Clemens Kochinke, partner, Berliner Corcoran & Rowe LLP, Washington, DC.
Thu, Embassy Law Link/
FSIA Effect of Joining European Union
In Micula v. Government of Romania, the United States Court of Appeals for the District of Columbia looked at the arbitration exception in the Foreign Sovereign Immunities Act in the context of an arbitration agreement signed by an E.U. member state. The member now belongs to the E.U. but did not when it signed. The E.U. Commission joined the matter as an amicus to state that the court lacked jurisdiction over the foreign sovereign under the FSIA. On May 20, 2020, the court held:
A U.S. court lacks jurisdiction over a foreign sovereign unless an exception to sovereign immunity applies. 28 U.S.C. §§1330(a); 1604. As Romania now agrees, the district court properly invoked the exception for actions to enforce arbitration awards. Id. § 1605(a)(6). The European Commission questions whether Romania's agreement to arbitrate was nullified by its ascension to the European Union. But as the district court carefully explained, Romania did not join the EU until after the underlying events here, so the arbitration agreement applied. See Micula v. Gov't of Rom., 404 F. Supp. 3d265, 276-80(D.D.C. 2019).The United States District Court for the District of Columbia had granted a petition of the plaintiff and three affiliated corporations to confirm an arbitration award against the Government of Romania. -- Clemens Kochinke, partner, Berliner Corcoran & Rowe LLP, Washington, DC.
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Ammunition in Employment Disputes Over FSIA
On October 23, 2019, the United States Court of Appeals for the First Circuit in Boston provided plaintiffs and defendants with more ammunication in disputes over employment terms governing local hires at consulates and, possibly, embassies, with its interpretation of the Foreign Sovereign Immunities Act in the matter Merlini v. Canada. In the latest release, a minority opinion argues that the FSIA must be construed by its text, not merely the legislative history. As such, the opinion finds certain restraints of foreign missions incompatible with the FSIA, congressional intent as well as the interests of U.S. missions abroad:
The majority's conclusion that Canada's administration of its own statutory workers' compensation scheme here is not protected by its sovereign immunity leads to the conclusion that our government's similar actions as to employees, foreign or American, of its consulates and embassies will not be granted immunity. … By denying Canada's choice to implement a federal workers' compensation scheme the respect and deference it is entitled to, the consequences of the opinion will likely be that FECA--Congress's choice of comprehensive workers' compensation--will not be given that deference.-- Clemens Kochinke, partner, Berliner Corcoran & Rowe LLP, Washington, DC.
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China Diplomats under OFM Scrutiny: Restraints
On October 21, 2019, the Federal Register will publish two special restraints on Chinese diplomats. Under the title Determination Pursuant to the Foreign Missions Act, the State Department subjects travel plans of military staff to a prior notice requirement if the travel would exceed a distance 25 miles from Washington.
A second rule, Designation and Determination Pursuant to the Foreign Missions Act imposes a prior notification requirement for all diplomatic interactions with U.S. officials and other institutions.. Both restraints are based on the Foreign Missions Act, 22 U.S.C. 4301, et seq., and require notification of the Office of Foreign Missions. The latter scrutiny is extensive:
1. All official meetings with representatives of state, local, and municipal governments in the United States and its territories;The second notice requirement covers all Chinese members of the PRC's missions in the United States, including its representatives temporarily working in the United States, and accompanying Chinese dependents and members of their households. -- Clemens Kochinke, partner, Berliner Corcoran & Rowe LLP, Washington, DC.
2. All official visits to educational institutions (public or private) in the United States and its territories; and
3. All official visits to research institutions (public or private), including national laboratories, in the United States and its territories.
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