Immunity and the foreign sovereign.

• Author: Tessitore, Michael A.

An Introduction to the Foreign Sovereign Immunities Act

While visiting Florida for a seminar, an employee of the Brazilian oil monopoly, Petrobras, negligently injures a Florida resident in an auto accident. The Malaysian government defaults on its contractual obligation to pay a Florida engineering firm for services rendered in connection with a major environmental cleanup in Kuala Lumpur. A U.S. tourist slips and falls while walking through an airport in Jamaica which is owned and operated by a local airport authority. What do all of these scenarios have in common?

The answer is that they all involve a potential claim against a "foreign state" as that term is defined by the Foreign Sovereign Immunities Act (FSIA or "the act").(1) For the lawyer representing the interest of the injured U.S. citizen, all three scenarios raise the specter of the foreign entity enjoying immunity from suit in a U.S. court under the provisions of the FSIA. This article provides an overview of the FSIA and the immunity problem faced by the U.S. lawyer under the principal provisions of the act. It also examines the primary exceptions to immunity under the act that might allow a suit to proceed against the foreign state in a U.S. court.(2)

Brief History of Immunity

Foreign sovereign immunity has a long history in this country dating back to the landmark case of Schooner Exchange v. M'Faddon, 7 Cranch 116, 3 L. Ed. 287 (1812), which was regarded as extending almost absolute immunity to foreign states.(3) Over time, however, the U.S. courts came to adopt the "restrictive theory" of sovereign immunity. Under this theory, the foreign state enjoyed immunity only for its public acts and not for acts arising out of a state's strictly commercial or private activity.(4) Adoption of the theory was viewed as necessary given the ever increasing involvement of governments either directly or indirectly in traditionally private matters such as international commerce.(5) In addition, by adopting the restrictive theory, the U.S. fell in line with many other jurisdictions throughout the world that were already limiting government immunity to public acts.(6)

The U.S. courts found application of the restrictive theory difficult. The courts had problems establishing standards for differentiating between public and private acts.(7) Moreover, the courts routinely deferred to the political branches (namely, the U.S. State Department) on the question of whether immunity should be granted to a particular foreign state.(8) As a result, political considerations and diplomatic pressure often influenced the court's decisions, as opposed to a strict legal application of the restrictive theory.(9)

Congress passed the Foreign Sovereign Immunities Act in 1976 to provide clearer standards for resolving immunity questions and to free the political branches from the diplomatic and political pressures that hampered the resolution of these questions.(10) The FSIA essentially codified the restrictive theory of immunity and established a comprehensive framework for resolving claims of immunity in any civil action against a foreign state or its political subdivisions, agencies, or instrumentalities.(11)

Presumption of Immunity

The cornerstone of the FSIA is a broad grant of immunity to foreign states. The act declares foreign states immune from suit in any civil action in any court of the United States, whether state or federal.(12) However, what the act gives, it is quick to take away. The act carves out significant exceptions to the immunity in several statutorily defined circumstances.(13) As discussed in detail below, these exceptions are far reaching and bring a great deal of foreign sovereign conduct within the cognizance of the U.S. courts.

Once a defendant establishes that it qualifies as a "foreign state" within the meaning of the act, the state is presumed to be immune.(14) The plaintiff must then prove that one of the exceptions to immunity applies under the particular facts of the case.(15) Even if the plaintiff successfully establishes an exception to immunity, the plaintiff will not be entitled to a jury trial under the FSIA.(16)

Sole Basis for Jurisdiction over a Foreign State

It is important to emphasize that the FSIA is the sole basis for obtaining jurisdiction over a foreign state in a civil action in a U.S. court.(17) That is, if the potential defendant qualities as a foreign state within the meaning of the act and no exception applies, it cannot be sued in a state or federal court in the United States? In short, the court's subject matter jurisdiction depends entirely on the applicability of one of the enumerated exceptions to immunity.(19)

A State is a State ... and More

The FSIA defines a "foreign state" to include 1) a political subdivision of a foreign state, or 2) an agency or instrumentality of a foreign state.(20) The act then defines "an agency or instrumentality of a foreign state" as an entity 1) which is a separate legal person, corporate or otherwise and 2) which is (a) an organ of a foreign state or political subdivision thereof or (b) a majority of whose ownership interest is owned by a foreign state or a political subdivision thereof.(21) This definition is broad enough to cover foreign government-owned corporations, and such corporations enjoy the broad grant of immunity provided by the act.(22) An individual may also qualify for immunity under the act if the individual's employer is a foreign state and the individual was acting in his or her official capacity and within the scope of his or her authority when he or she engaged the acts which are the subject of the lawsuit.(23)

To illustrate how the definition of a foreign state might be applied, consider the three entities mentioned in the scenarios at the beginning of this article: the Malaysian government, the local airport authority in Jamaica, and Petrobras. The "Malaysian government," assuming the term refers to the state of Malaysia, clearly qualifies as a foreign state.(24) The Jamaican airport authority would also appear to easily qualify for immunity, assuming it is majority owned by the Jamaican state. A more murky issue could arise with respect to Petrobras. Does it qualify as an agency or instrumentality of a foreign state?

To qualify as an agency or instrumentality of a foreign state, Petrobras must first meet the requirement of being a separate legal person.(25) Courts dealing with this provision have applied the "legal characteristics test."(26) Under this test, an entity is a separate legal person if it can function legally independent of the state.(27) This requires that the entity take the form of a corporation, association, foundation, or any other entity which can sue or be sued in its own name, contract in its own name, or hold property in its own name under the law of the foreign state that...