PROPERTY/CIVIL PROCEDURE - FOREIGN EMBASSIES BEWARE: YOUR PROPERTY IN WASHINGTON D.C. MAY BE SUSCEPTIBLE TO ADVERSE JUDGMENTS - TIG INS. CO. V. REPUBLIC OF ARG., 967 F.3D 778 (D.C. CIR. 2020).

• Author: Martin, Max

The Foreign Sovereign Immunities Act (FSIA) establishes codified law describing when a foreign nation is immune from liability within the U.S. court system. (1) A foreign nation is generally immune from liability so long as the foreign nation's activities or omissions do not fall within the exceptions of the FSIA, notably those relating to "commercial activities." (2) In TIG Insurance Company v. Republic of Argentina, (3) the D.C. Court of Appeals considered how district courts should determine whether a property is eligible for attachment, through FSIA's "used for a commercial activity" exception, after a plaintiff has registered a judgment on a foreign nation's property. (4) The D.C. Court of Appeals vacated and remanded the lower court's ruling, holding that district courts should assess the "used for a commercial activity" exception at the time a judgment is registered, using a totality of the circumstances approach. (5)

In 2001 and 2018, TIG confirmed the Northern District of Illinois's arbitral awards levied on Argentina for not paying its share of losses due under reinsurance contracts with TIG's predecessor, International Surplus Lines Insurance Company. (6) Argentina had not paid any of the money it owed TIG during this period. (7) When TIG learned Argentina placed real estate on the market, located in Washington D.C. at 2136 R Street Northwest (the "Property"), TIG registered its judgments to the District of Columbia, stating the attempted sale of the Property invoked the "used for a commercial activity" exception through Argentina's usage of a private real estate broker. (8) Although the Property had remained vacant since 1997 and needed significant renovations, Argentina claimed the Property maintained sovereign use through its usage of storing diplomatic files. (9)

Following TIG registering its judgments in D.C., but prior to the district court judge assignment, Argentina took the Property off the market. (10) TIG's motions to register its judgments on Argentina's Property failed because the district court purportedly held that the "used for a commercial activity" exception should be measured at the time a writ of attachment is issued, and not when a motion for writ of attachment is filed, as contended by TIG contended. (11) The D.C. Court of Appeals subsequently vacated and remanded the case back to the district court, with instructions to measure the "used for a commercial activity" exception at the time of filing, using a totality of the circumstances test, which allows the district court to view the property through its past and present uses. (12)

Prior to the enactment of the FSIA, the U.S. State Department gave sovereign nations wide immunity in all actions. (13) Following the Tate Letter's adoption in 1952, the State Department became more restrictive with immunity privileges, and began to give courts some responsibility in determining sovereign immunity to private actions. (14) While courts were given decision making power in the immunity process, courts followed "suggestions of immunity" from the State Department, and no uniform standards were expressly given to the courts in the Tate Letter era. (15)

It was not until Congress adopted the FSIA in 1976, which codified the restrictive theory that gave United States courts full discretion on sovereign immunity. (16) The central purpose of the FSIA is to "protect the rights of both foreign states and litigants in United States courts." (17) Within the "used for a commercial activity" exception in execution immunity, property can be attached to collect on a prior judgment when courts can make factual findings that show (1) the property is in the United States; and (2) the property is "used for a commercial activity." (18) In contrast to the FSIA's jurisdictional immunity, which gives plaintiffs the ability to initiate litigation against a sovereign nation, execution immunity's standard is less stringent. (19)

The denotation between the language of 28 U.S.C. [section] 1605, jurisdiction immunity, and 28 U.S.C. [section] 1610, execution immunity, induces courts to read the latter much narrower than the former. (20) Where jurisdiction immunity uses "in connection with a commercial activity," execution immunity explicitly states the property is "used for a commercial activity." (21) The Fifth Circuit made this distinction by stating:

What matters under the statutes is what the property is "used for," not how it was generated or produced. If property in the United States is used for a commercial purpose here, that property is subject to attachment and execution even if it was purchased with tax revenues or some other noncommercial source of government income. (22) Furthermore, the Ninth Circuit describes this distinction as "property is 'used for a commercial activity' in the United States when the property is put into action, put into service, availed or employed for a commercial activity, not in connection with a commercial activity or in relation to a commercial activity." (23)

Moreover, after establishing that a commercial activity has been found within the United States, the Fifth Circuit and the Ninth Circuit each developed their own versions of a totality of the circumstances test to determine if the foreign nation waived their execution immunity. (24)

In TIG Insurance Company v. Republic of Argentina, the United States Court of Appeals for the District of Columbia first determined the correct point of time to analyze the "used for a commercial activity" exception for Argentina's attempted sale. (25) Since Argentina took the Property off the market prior to the issuance of the writ of attachment and execution in the district court, their primary argument contended that a property "used for a commercial activity" is used within [section] 1610(a) "as a passive phrase with an implicit 'is,'" which therefore warrants an execution immunity analysis in this case. (26) The Court first reasoned they could neither confirm nor deny a present tense reading, and moreover, the "used for a commercial activity" exception should be read as an "adjectival phrase" to "describe the property that may be attached." (27) Next, the Court explained that even assuming an implicit "is" does exist as Argentina argues, statutes using present tense and compliance with particular civil procedure requirements are generally assessed at the time of filing--not the time the court rules. (28) Finally, the Court defined "used for a commercial activity" as "either a regular course of commercial conduct or a particular commercial transaction or act," and if Argentina's argument is assumed, the latter part of the definition is entirely disregarded. (29) Therefore, the Court disagreed with the district court's decision to measure the Property's commercial activity after Argentina took the Property off the market, and instructed the district court on remand to assess the "used for a commercial activity" exception at the time TIG registered its judgment with the District Court of the District of Columbia. (30)

After holding that the district court should determine the "used for a commercial activity" exception at the time Argentina's Property is on the market, the Court considered whether the Property should be analyzed when TIG registered its judgments, or by using a totality of the circumstances approach, which would bring in the historical background of Argentina's usage. (31) The Court recognized the gamesmanship Argentina used to circumvent the executory judgment, which allowed the Court to adopt a new a totality of the circumstances approach. (32) To establish Washington D.C.'s new totality of the circumstances approach, the Court used persuasive authority from the Fifth Circuit that would quantify the number of times a commercial act had taken place to determine if such acts were significant or "bona fide exceptions." (33) The Court was also persuaded by the Ninth Circuit's totality of the circumstances test, which put a "proper appreciation [on] the fact that the further removed the property is from the referenced commercial transaction, the less likely it is that the property was used for that transaction." (34) The Court vacated and remanded with instructions for the district court to make the decision on which approach to use, either the Ninth Circuit's or Fifth Circuit's, as the Court recognized. (35) The D.C. Circuit's decision in TIG Ins. Co. v. Republic of Argentina to evaluate the "used for a commercial activity" exception at the time of filing is consistent with FSIA case law dealing with present tense statutes and parallels analogous civil procedure methods. (36) Moreover, the Court dismissed Argentina's contention relating to the latter of half of the definition of "commercial activity" to find an equitable line within restrictive immunity that keeps sovereign nations immune for their sovereign acts, but allows plaintiffs to receive judgments as they would in a normal commercial setting. (37) When Argentina evaded the judgment by taking the Property off the market, "regular course of commercial conduct" stopped, and the Court recognized the "gamesmanship" foreign nations had within Washington D.C.'s "used for a commercial activity" analysis. (38)

Further, the Court's decision in TIG Ins. Co. v. Republic of Argentina, that gave district courts the discretion to pick either the Fifth Circuit's or Ninth Circuit's totality of the circumstances test, is the most equitable for both plaintiffs and foreign nations. (39) While plaintiffs need the ability to register judgments on foreign nations' commercial acts, foreign nations also deserve protection from their rare, singular commercial acts, especially when coupled with the policy rationale that execution immunity is harder to circumvent than jurisdiction immunity. (40) Moreover, because foreign immunity is at the discretion of the courts, the U.S. court system has every right to determine their approach...