Exceptional Judgments: Revising the Terrorism Exception to the Foreign Sovereign Immunities Act.

• Author: Bissell, E. Perot

INTRODUCTION

In 2016, family members of victims of the September 11 terrorist attacks sued Iran in the Southern District of New York for aiding and abetting al Qaeda in the perpetration of those attacks. (1) They proceeded under the terrorism exception to foreign sovereign immunity, which allows plaintiffs to sue foreign nations appearing on the State Department's list of state sponsors of terrorism. (2) When Iran failed to appear in court, a judge awarded the class a default judgment of $1.8 billion in damages. (3) The massive judgment was consistent with other terrorism-exception judgments against Iran; (4) to date, plaintiffs have won at least $50 billion in default judgments of this kind. (5)

These judgments, and more specifically attempts to enforce these judgments, have inflamed international tensions. They have complicated the amelioration, to different degrees, of relations between the United States and two particular countries--Iran and Cuba. (6) In 2016, for example, following the Supreme Court's decision in Bank Markazi to uphold congressional efforts to facilitate execution of judgments against Iranian property awarded under the terrorism exception, (7) Hassan Rouhani, Iran's president, decried "illegal actions" by the United States and excoriated the United States for jeopardizing the nuclear deal through the attempt to recover the judgments from Iran's central bank. (8) Iran has been subjected to billions of dollars in default judgments for involvement in the September 11 attacks, even though the nation has never been directly implicated. (9) Indeed, the 2016 judgment against Iran was dwarfed by a judgment in 2012, in which the same judge awarded a different group of family members of 9/11 victims nearly $7 billion. (10) Similarly, plaintiffs hold more than $4 billion in default judgments against Cuba, and many of these judgments involve activities that occurred decades ago and bear only a tenuous link to terrorism. (11) A significant portion of all of these default judgments is punitive, (12) assessed by judges to punish and deter future actions, but neither country has ever appeared in court to contest the judgments. (13)

The problems created by the enormous default judgments won under the terrorism exception are likely to grow. Judges continue to issue default judgments against Iran and other countries currently listed as state sponsors of terrorism. In one 2013 case, a court issued a judgment totaling more than $25 billion against the Syrian government for its involvement in a 1985 bombing. (14) It is hard to see the logic of the size of these judgments 189; they have limited initial deterrent effects and frustrate efforts to work with recalcitrant regimes, if and when those regimes change course.

This Comment suggests a partial solution: limiting damages against defaulting defendants by having the State Department certify that a specific state sponsor has been involved in the act at issue and that the Department believes punitive damages are appropriate. Punitive damages serve little purpose in cases in which the state sponsor does not have a strong link to the action or where the action at issue has little to do with the state's status as a sponsor of terrorism. (15) This Comment argues that the solution lies in involving the executive branch, which has to negotiate sensitive international agreements in the shadow of these default judgments. Specifically, Congress should authorize the State Department to make a determination of the appropriateness of punitive damages in terrorism exception cases. Under this proposal, the State Department would be required to certify particular acts of terror as sponsored by a particular state before courts could award punitive damages.

Our proposal would not affect the terrorism exception's general waiver of sovereign immunity for state sponsors of terrorism, nor would it preclude punitive damages. Instead, our solution would limit the availability of punitive damages to situations in which they are tightly linked to the conduct that harmed plaintiffs. Moreover, it would bring determinations of the appropriateness of punitive damages against state sponsors of terrorism into alignment with other existing judicial processes for adjudicating disputes implicating foreign policy concerns. (16) By doing so, our proposal aims to strike a balance between the legitimate need to compensate victims of state-sponsored terrorism, fairness to defendant nations, and the United States's broader foreign policy agenda--of which deterring states from sponsoring terrorism, while essential, is only one element.

We develop this proposal in three parts. Part I briefly charts the history of sovereign immunity, which is useful in understanding the terrorism exception and its flaws, and describes the terrorism exception itself. Part II outlines complications that have arisen as a result of the enormous default judgments awarded through the terrorism exception and the attempts of plaintiffs to enforce those judgments against countries on the state sponsors of terrorism list. Finally, Part III presents our proposal to address the default judgment problem going forward.

1. THE TERRORISM EXCEPTION TO FOREIGN SOVEREIGN IMMUNITY

   1. The Course of Sovereign Immunity

      Until the mid-twentieth century, the United States adhered to a policy of absolute foreign sovereign immunity. (17) The policy changed in 1952, when, pursuant to a recommendation by Jack Tate, Acting Legal Advisor to the State Department, courts began to apply a policy of restrictive foreign sovereign immunity so that U.S. companies would be protected in an increasingly globalized economy (18) As sovereigns increased international commercial activities through their instrumentalities, absolute sovereign immunity was recognized as untenable, because it allowed public commercial concerns to escape liability for private law violations. (19) The restrictive theory permitted liability against sovereigns for their commercial activities, while continuing to grant immunity for other acts. (20) In the period following the Tate Letter, the State Department asserted the right to make determinations of immunity in certain contexts, particularly in the area of liability for agencies, instrumentalities, and foreign officials. (21) The State Department process, however, was criticized for being inconsistent and susceptible to undue political influence. (22)

      As a response to concerns about this process, Congress codified restrictive foreign sovereign immunity in 1976 in the Foreign Sovereign Immunities Act (FSIA). (23) The Act formally transferred the power to make determinations about sovereign immunity from the Executive to the courts. (24) Rather than relying on the Executive to assess how relations between states might be affected, the Act made sovereign immunity determinations a matter of statutory interpretation. (25) The Act allowed for several exceptions to foreign sovereign immunity, including via waiver, (26) for commercial activities, (27) and for expropriation of foreign property taken in violation of international law. (28)

      Although the FSIA deprived the Executive of decision-making power over the immunity of nation-states from suit in American courts, the Executive continued to make immunity determinations in cases involving the immunity of foreign officials. While sovereign immunity protects states from suits, official immunity applies to individual government officials, such as current and former heads of state. The Executive has always maintained that the FSIA did not apply to immunity determinations for foreign officials. (29) A unanimous Supreme Court echoed this view in 2010 in Samantar v. Yousuf, in which the Court held that the FSIA did not reach claims involving official immunity. (30) In the government official context, the State Department is thus entitled to make determinations through "letters of suggestion" as to whether a foreign official ought to be subject to suit in a United States court. Moreover, despite their title, State Department suggestions are essentially dispositive: courts have typically accepted the State Department's determinations of official immunity, (31) deferring to the Executive's perceived superiority in balancing "remedial, substantive, and prudential concerns." (32) The State Department, through the suggestion process, remains engaged in immunity determinations even after the FSIA.

   2. The Origin and Mechanics of the Terrorism Exception

      In 1996, Congress added to the exceptions to sovereign immunity under the FSIA by creating the "terrorism exception" as part of the Antiterrorism and Effective Death Penalty Act (AEDPA). (33) The exception allows nations on the State Department's list of state sponsors of terrorism to be sued for money damages "for personal injury or death that was caused by an act of torture, extrajudicial killing, aircraft sabotage, hostage taking, or the provision of material support or resources." (34)

      Congress created the terrorism exception with three stated goals: (1) to allow victims of terrorism to seek compensation for harms suffered, (2) to punish states that habitually sponsor terrorist groups and actions, and (3) to protect Americans by deterring terrorism. (35) Congress targeted countries designated as state sponsors of terrorism because of specific concerns about the need to sanction countries that use terrorism as a tool of foreign policy. (36) Congress likely employed the State Department's list as a proxy for determining which countries should be subject to liability in order to "avoid inadvertent interference with the conduct of foreign relations." (37) Five months after the initial passage of the terrorism exception, Congress authorized punitive judgments in terrorism exception cases. (38) The amendment limited punitive damages to cases in which U.S. officials would have been liable if they had carried out the act within the United States. (39)

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