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Enforcement Non-Immunity Under FSIA

Fresh off the United States Supreme Court decision in Republic of Argentina v. NML Capital, Ltd., see No Discovery Immunity Under FSIA, the United States Court of Appeals for the Second Circuit in New York City held on September 9, 2014 that a foreign sovereign state's assets around the world are not immune from discovery, even if a majority of the assets in question are considered outside of the commercial activity exception to the Foreign Sovereign Immunities Act, Export-Import Bank of the Republic of China v. Grenada. 

In the Southern District Court of New York, Export-Import Bank had sought a $21 million judgment in defaulted loans made to Grenada, based on Grenada's waiver of immunity in loan documents between the two entities. Any property of Grenada used for commercial activity within the U.S. is no longer immune from attachment, according to FSIA. Yet even a sovereign state's waiver of immunity does not always result in a favorable judgment for the other party. The Second Circuit affirmed the District Court's decision that the two sets of funds in question were immune. Following Argentina v. NML, though, the FSIA does not afford Grenada immunity from discovery of its assets. The Court questions a subset of funds that passed through the International Air Transport Association, which has operations in the United States. Export-Import Bank can now further its efforts in the district court to determine whether any Grenadian property face attachment. If funds are used at any point within the U.S., Export-Import Bank could possibly execute a judgment in their favor. While both Argentina and Grenada waived immunity in their respective contracts, Argentina took legislative action to avoid payment to particular creditors, while Grenada has defaulted on payments to many of their bondholders. The Second Circuit's ruling allows the District Court jurisdiction to search all foreign assets of Grenada -- an act that could affect foreign relations with the United States. While the Supreme Court's opinion in Argentina suggested that possibility, Justice Antonin Scalia pointed to other foreign statutes that could hinder a lower court's granting of discovery. 

Original post located at: http://embassylaw.com/#0929-enforcement-immunity-fsia

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Then corrupt, now clean: Damages?

According to the U.S. Court of Appeals for the Second Circuit, a sovereign entity cannot separate itself from its past government or leaders, even if the government committed illegal acts or violated international law. 

In its decision on September 18, 2014, the Court affirmed the district court ruling inRepublic of Iraq v. ABB AG that Iraq was equally at fault as the defendants in the alleged conspiracy to corrupt a United Nations humanitarian program created during the Hussein Regime. 

Iraq had sought recovery from various business entities under the Racketeer Influenced and Corrupt Organizations Act, 18 USC §1961, the Foreign Corrupt Practices Act, 15 USC §78, and also state common law. The Court determined that RICO was inapplicable to extraterritorial actions, and that the FCPA does not provide private parties right of action. Iraq's complaint stated that Hussein and Iraqi ministry officials orchestrated the exploitation of funds from the UN Oil-for-Food Program that were meant to provide humanitarian aid to the Iraqi people. It posited that certain corporations conspired with the Regime, while others were coerced by Hussein. Despite Iraq's argument that the Hussein-led government was illegitimate and that its actions were detrimental to the Iraqi people, the Court determined that the actions of a government are representative of its sovereign entity. Although the district court suggested the obvious distinctions between state and government, a sovereign cannot skirt responsibility for the acts committed by past, albeit corrupt, governmental leaders. For a prior report on the case in German, see Kochinke, Erst korrupt, dann so sauber: Irak, Schadensersatz für vormals bestechlichen Staat?, German American Law Journal--US-Recht auf Deutsch, Sept. 19, 2014.

Original post located at: http://embassylaw.com/#1010-iraq-corruption

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IOIA Immunity Parallel to FSIA

Just as sovereign states enjoy immunity through the Foreign Sovereign Immunities Act, so do certain international organizations of which the United States is a member. Under the International Organizations Immunity Act, codified in 22 U.S.C. §288, immunity and privileges are provided to public international organizations in which the U.S. participates under a treaty or an Act of Congress. In addition to other exceptions to the FSIA, if a sovereign state expressly waives its immunity in contracts or other in another manner, a district court can establish jurisdiction. An international organization's waiver of immunity would also warrant jurisdiction in a U.S. court. 

Relying upon this exception, the plaintiff in Nyambal v. International Monetary Fundfiled suit against the IMF for assault and false imprisonment after an incident at the IMF's Bank-Fund Staff Credit Union. The plaintiff had been recently terminated after alleging corruption within the IMF. In its decision of November 25, 2014, the U.S. Court of Appeals for the District of Columbia Circuit reversed the district court's granting of jurisdictional discovery. The granting of discovery against an immune defendant allowed the Court collateral review of the case. Despite the plaintiff’s request for the Court to revisit and narrow the scope of the IOIA immunity in Atkinson v. Inter-American Development Bank, the Court refused, citing Atkinson's explicit ruling that international organizations share the same immunity as foreign sovereigns, unless it is waived. In its amended complaint, the plaintiff relied upon a subclause of the IMF's Articles of Agreement with the Credit Union, claiming that it purportedly waived the IMF's immunity. The Court begged to differ, noting that discovery in a case with an immune party can be called only when specific facts require verification; the IMF's discovery production of the Articles of Agreement demonstrated the explicit non-waiver of immunity -- and the inapplicability of the subclause. The Court also rejected the plaintiff's alternative argument that the contract between the IMF and its Credit Union created a framework for the IMF to waive its immunity. Just as with the FSIA, an examination of IMF's immunity must not only demonstrate an explicit and express waiver, but the plaintiff must allege specific facts as to the waiver of immunity -- none of which were fulfilled in this case. 

Original post located at: http://embassylaw.com/#1205-ioia-immunity