Originally from:
The Practice of International Litigation - 2nd Edition - Looseleaf
The Practice of International Litigation - 2nd Edition - Electronic
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Proposed Amendments to Foreign Sovereign Immunities Act of 1976
Lawrence W. Newman and Michael Burrows
With foreign sovereigns participating increasingly in the commercial
marketplace, either directly or through controlled entities, transnational
litigation involving foreign sovereigns and their instrumentalities has
become commonplace. The rules governing such litigation, particularly
those relating to sovereign immunity, have thus attracted considerable
interest.
The Foreign Sovereign Immunities Act of 1976 (the “FSIA”),
principally governs when and how parties can maintain an action against a
foreign state or its agencies or instrumentalities in the courts of the
United States and when a foreign state is entitled to sovereign immunity.
Against a background of over 250 judicial decisions interpreting this statute,
a proposal was made for correcting the statute’s defects. On August 8,
1984, the American Bar Association's House of Delegates approved
proposed amendments to the FSIA recommended by the ABA section of
International Law and Practice (the “ABA Proposal”). This chapter analyzes some of the key amendments
suggested by the ABA Proposal.
Agreements to Arbitrate
When a private party and foreign state negotiate a contract, they often
agree to arbitrate future disputes. This agreement commonly results from
the parties’ unwillingness to be subject to one another’s courts rather than a
preference for the arbitral process. But when a dispute arises and a foreign
state party refuses to abide by its agreement to arbitrate or pay an arbitral
award against it, what can one do in a U.S. court?
Under section 1330(a) of the FSIA, a federal court has subject-matter
jurisdiction over actions against a foreign state as to any claims for which
the foreign state is not entitled to immunity under sections 1605-1607.
Section 1605 provides that a foreign state shall not be immune in any case
where it has waived its immunity either explicitly or by implication. The
FSIA’s legislative history states that an “implicit waiver” would arise “where
a foreign state has agreed to arbitrate in another country . . . .” The courts
have had no difficulty in holding that a party may compel a foreign state to
arbitrate (or may enforce an arbitral award) when the parties agreed to
arbitrate in the United States. Where the arbitration is to take place abroad,
however, some courts have expressed an unwillingness to conclude that the
foreign state implicitly waived its immunity from suit in the United States.
This concern is made greater when the plaintiff seeking to enforce the
agreement to arbitrate or the arbitral award is an alien. Absent a U.S. nexus,
it could be questioned whether the exercise of jurisdiction would even be
constitutional. In these circumstances, it might be argued that it simply
would be unfair, and unforeseeable by the foreign state, to attach U.S.
consequences to a foreign state’s willingness to arbitrate with an alien
abroad.
Lawrence W. Newman has been a partner in the New York office of Baker & McKenzie since 1971, when, together with the late Professor Henry deVries, he founded the litigation department in that office. He is the author/editor of 4 works on international litigation/arbitration.
Michael Burrows, Formerly, Of Counsel, Baker & McKenzie, New York.
