The United States Approach to Foreign Sovereign Immunity†

美国对外国主权豁免的做法

By: Circuit Judge John M. Walker Jr. / On: February 28, 2024

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The United States Approach to Foreign Sovereign Immunity
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Under the doctrine of foreign sovereign immunity, foreign states enjoy broad protection from lawsuits in the courts of other states.  This doctrine is rooted in a long-standing principle of international law, par in parem imperium non habet, meaning “an equal has no power over an equal”.1  Historically, most states afforded foreign states absolute immunity from suit.  But over the last century, the rise of international travel and commerce has led many states, including the United States, to adopt a theory of “restrictive” immunity.2  According to this theory, foreign states are afforded immunity with respect to their governmental activities, but not their commercial activities.3  In the United States, the restrictive theory is expressly codified in the Foreign Sovereign Immunities Act (“FSIA”) of 1976, which governs the jurisdictional immunity of foreign states in U.S. courts.4

This article provides an overview of the U.S. approach to foreign sovereign immunity.  First, it traces the doctrine’s origins in early American jurisprudence and recounts the development of the doctrine and its eventual codification in the FSIA.  The article then summarizes relevant provisions and certain judicial interpretations of the FSIA.

Historical Background

In American jurisprudence, the doctrine of foreign sovereign immunity originated with a Supreme Court case from 1812, The Schooner Exchange v. McFaddon.5  In this case, Chief Justice John Marshall explained that immunity was not a right inherent to foreign sovereigns because “[t]he jurisdiction of [a] nation within its own territory is necessarily exclusive and absolute”.6  Nevertheless, the Chief Justice held that, in the interests of comity, friendly foreign sovereigns should be protected against suit in the United States.  As the Chief Justice reasoned, the “absolute independence of sovereign [nations]” and “interchange of good offices with each other” compel them to “wa[i]ve the exercise of a part of [their] complete exclusive territorial jurisdiction” with respect to other foreign sovereigns.7

The Schooner Exchange “came to be regarded as extending virtually absolute immunity to foreign sovereigns”.8  For nearly a century and a half thereafter, the United States adhered to this theory of “absolute” immunity.9  During this period, courts declined to make immunity determinations themselves.  Recognizing that foreign sovereign immunity was a matter of “grace and comity” on the part of the United States, courts instead deferred to the Department of State (“State Department”) to determine whether to assert jurisdiction over suits brought against foreign states.10  And the State Department, for its part, requested immunity in “nearly every action brought against a foreign sovereign”.11

But in 1952, the State Department changed course.  In a letter from Jack B. Tate, Acting Legal Adviser to the State Department, to Acting Attorney General Philip B. Perlman, the State Department announced that the United States would adopt the newer restrictive theory.12  As the State Department explained, it would henceforth recognize “the immunity of the sovereign […] with regard to sovereign or public acts (jure imperii) of a state, but not with respect to private acts (jure gestionis)”.13  To justify this policy shift, the State Department cited growing support for the restrictive theory among foreign courts, as well as “the widespread and increasing practice on the part of governments of engaging in commercial activities”, which “ma[de] necessary a practice [of restrictive immunity] [that would] enable persons doing business with [governments] to have their rights determined in the courts”.14

However, the State Department applied the restrictive theory inconsistently.  In some cases, diplomatic pressure from foreign nations and other “political considerations” led the State Department to support immunity for foreign sovereigns “when a straightforward reading of the restrictive theory would have led it to oppose”.15  This situation did “throw immunity determinations into some disarray”, as the standards governing sovereign immunity “were neither clear nor uniformly applied”.16

“In enacting the [Foreign Sovereign Immunities Act], Congress intended to […] ‘assur[e] litigants’ that [immunity] determinations would be ‘made on purely legal grounds and under procedures that insure due process’.”

Seeking to bring “order to the chaos”, Congress eventually intervened.17  In 1976, Congress passed the FSIA, which codified legal standards for foreign sovereign immunity claims and transferred the responsibility for resolving such claims from the executive branch to the judicial branch.18  In enacting the FSIA, Congress intended to “reduc[e] the foreign policy implications of immunity determinations” and “assur[e] litigants” that such determinations would be “made on purely legal grounds and under procedures that insure due process”.19

Judicial Interpretations of the Foreign Sovereign Immunities Act

The FSIA establishes the “sole and exclusive” standards that U.S. courts use to resolve claims of foreign sovereign immunity.20  Under the FSIA, a “foreign state”—which includes the state itself, as well as its political subdivisions, agencies, and instrumentalities—is immune from the jurisdiction of U.S. courts.21  However, in accordance with the restrictive theory, the FSIA withdraws a foreign state’s immunity through several general exceptions, which are discussed below.22  The FSIA also provides that a foreign state’s property in the United States is immune from attachment and execution, subject to similar exceptions.23

Various types of foreign entities qualify for immunity under the FSIA.  First, a foreign “state” qualifies.  The FSIA does not define a state, but courts have interpreted this term to mean an entity that has a defined territory, a permanent population, a government, and the capacity to conduct foreign relations.24  Second, a “political subdivision” of or within a state qualifies.25  A “political subdivision” includes “all governmental units beneath the central government, including local governments”.26  Third, an “agency or instrumentality” of a state qualifies.27  This is any entity that is (1) a separate legal person; (2) either an “organ” of a foreign state or a political subdivision,28 or else an entity “a majority of whose shares or other ownership interest” is held by a foreign state or a political subdivision; and (3) neither a citizen of the United States nor created under the laws of any third country.29

Once a foreign entity makes a prima facie case that it is a “foreign state” or its equivalent as specified under the FSIA, it is afforded presumptive immunity from suit.30  Foreign states lose this immunity, however, if one of the FSIA’s general exceptions applies.31  Notable exceptions include cases involving or based upon a foreign state’s waiver of immunity, certain counterclaims, commercial activities, non-commercial tortious acts, expropriation of property in violation of international law, and terrorist acts, provided that the foreign state’s conduct has some connection to the United States.32  The sections below discuss the waiver, counterclaim, commercial activity, and non-commercial torts exceptions, which give rise to a substantial number of lawsuits against foreign states in U.S. courts.

1. Waiver Exception

According to the FSIA’s waiver exception, a foreign state is not immune from the jurisdiction of U.S. courts in cases “in which the foreign state has waived its immunity either explicitly or by implication”.33  Courts have explained that explicit waivers must be “clear and unambiguous”.34  These waivers typically occur in written contracts with private parties or in international treaties.35  And courts have generally found implicit waivers only where a foreign state “agrees to arbitration in the United States”, “agrees that U.S. laws govern a contract”, or “files a responsive pleading without raising the immunity defense”.36

The waiver exception further provides that a foreign state’s waiver shall be effective “notwithstanding any withdrawal of the waiver which the foreign state may purport to effect except in accordance with the terms of the waiver”.37  As the FSIA’s legislative history explains, this language means that “a foreign state which has induced a private person into a contract by promising not to invoke its immunity cannot, when a dispute arises, go back on its promise and seek to revoke the waiver unilaterally”.38

2. Counterclaim Exception

Under the FSIA’s counterclaim exception, a foreign state loses its immunity with respect to certain counterclaims asserted in cases brought by the foreign state or in which the foreign state intervenes.39  Notably, for example, a foreign state is not accorded immunity from counterclaims “arising out of the transaction or occurrence that is the subject matter of the claim of the foreign state”.40  As the Supreme Court has explained, when a “sovereign has freely come as a suitor into [U.S.] courts”, the principle of “fair dealing […] allows a  […] counterclaim based on the same subject matter” as the claims brought by the sovereign.41  The counterclaim exception also applies to a counterclaim “for which a foreign state would not be entitled to immunity” under another FSIA exception “had such claim been brought in a separate action against the foreign state”, as well as “to the extent that the counterclaim does not seek relief exceeding in amount or differing in kind from that sought by the foreign state”.42

3. Commercial Activity Exception

The FSIA’s commercial activity exception, the most frequently litigated exception, strips a foreign state’s immunity in cases “based upon” a foreign state’s (1) “commercial activity carried on in the United States”; (2) “act performed in the United States in connection with a commercial activity of the foreign state elsewhere”; or (3) “act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States”.43  Each of these three clauses provides an independent basis for a U.S. court to exercise jurisdiction over a foreign state.

To determine whether the commercial activity exception applies, courts first identify the “particular conduct” of the foreign state upon which the plaintiff’s case is “based”.44  In other words, courts must locate the “gravamen” of the complaint, or the “sovereign acts that actually injured” the plaintiff.45  Courts then assess whether this “particular conduct” constitutes “commercial activity” or an “act […] in connection with a commercial activity” within the meaning of the FSIA.

The FSIA defines “commercial activity” as “either a regular course of commercial conduct” or “a particular commercial transaction or act”.46  A foreign state’s activities are “commercial” when the foreign state acts, “not as a regulator of a market, but in the manner of a private player within it”.47  Activities that courts generally deem to be commercial include the production and sale of goods, the provision of standard banking services, the trade of intellectual property, the ownership of shares, and contracts for services.48  In contrast, activities attributable to the foreign state acting in its sovereign capacity are considered non-commercial and typically include such things as the regulation of the market, the administration of government programs, condemnation and eminent domain, and the employment of civil servants and military personnel.49

The FSIA further provides that the commercial character of an activity is to be determined by reference to its “nature”, rather than its “purpose”.50  Courts have explained that the “nature” of an activity is “the outward form of the conduct that the foreign state performs”, while its “purpose” refers to “the reason why the foreign state engages in the activity”.51  Accordingly, when determining whether a foreign state’s actions are “commercial”, the “presence or absence of a profit motive is not dispositive”.52  Instead, courts ask whether such actions, “whatever the motive behind them”, are “the type of actions by which a private party engages in […] commerce”.53

Furthermore, courts have explained that an “act” of a foreign state is performed “in connection with” a commercial activity “when there is a substantive connection or a causal link between the acts and the commercial activity”.54  And an act causes a “direct” effect in the United States if the effect “follows as an immediate consequence” of the act, although the effect “need not be substantial or foreseeable”.55

4. Non-Commercial Torts Exception

Under the non-commercial torts exception, the FSIA denies a foreign state’s immunity in cases in which a plaintiff seeks money damages for a “tortious act or omission” by a foreign state or official of that foreign state “acting within the scope of his office or employment” that causes “personal injury or death, or damage to or loss of property, occurring in the United States”.56

Congress explained that this exception was primarily intended to enable plaintiffs to sue foreign states for traffic accidents in the United States caused by their foreign officials while acting within the scope of their employment.57  Still, this exception was “cast in general terms” to apply “to all [non-commercial] torts actions for money damages”.58  If a foreign state is not immune under this exception, courts apply the same standard of liability against a foreign state that would apply to a private defendant, “whether the claim is for negligence, liability without fault, or certain intentional wrongs”.59

The non-commercial torts exception contains two “exception[s] within the exception”.60  First, a foreign state’s immunity is preserved with respect to claims “based upon the exercise or performance or the failure to exercise or perform a discretionary function regardless of whether the discretion be abused”.61  This exclusion is meant to prevent U.S. courts from passing judgment on foreign states’ discretionary decisions, especially those “grounded in considerations of social, economic, and political policy”.62  Second, foreign states retain their immunity with respect to the torts of malicious prosecution, abuse of process, libel, slander, misrepresentation, deceit, and interference with contract rights.63

Conclusion

As this article indicates, difficult questions involving foreign sovereign immunity, particularly its more “restrictive” conception, frequently command the attention of courts in the United States.  Initially, U.S. courts applied principles of absolute immunity, but as commercial transactions and interconnectivity between countries have expanded and deepened, the courts have come to recognize a foreign state’s immunity with respect to its sovereign acts but not its commercial acts.   Congress codified this restrictive approach in the FSIA, with the expectation that the judicial branch would bring order to a previously chaotic situation by consistently applying the legal standards set forth in the FSIA.

“What is certain, however, is that newly evolved legal standards will be supported by jurisprudence rooted in a wealth of precedents […].”

Nearly 50 years have passed since Congress enacted the FSIA.  U.S. courts have performed well, surpassing Congress’s expectation, and have consequently assured litigants that FSIA cases are being decided on purely legal grounds.  As our courts hear new cases involving questions under the statute, our approach to foreign sovereign immunity will continue to evolve.  What is certain, however, is that newly evolved legal standards will be supported by jurisprudence rooted in a wealth of precedents, instead of the arbitrary decisions made by the executive branch that Congress sought to avoid.  Anyone wishing to understand the approach to sovereign immunity taken by the United States should, therefore, become familiar with our court decisions interpreting the provisions of the FSIA.

  • The citation of this article is: Circuit Judge John M. Walker Jr., The United States Approach to Foreign Sovereign Immunity, SINOTALKS.COM®, SinoForum&Foresight™, Feb. 28, 2024, https://sinotalks.com/sinoforumforesight/202402-john-walker-us-foreign-sovereign-immunity.
    Judge Walker is a senior judge on the United States Court of Appeals for the Second Circuit.  Judge Walker gratefully appreciates the expertise of his law clerk Juan Pablo Miramontes, a former Articles Editor of the Yale Journal of International Law, in the preparation of this article.
    The original, English version of this article was edited by Nathan Harpainter and Dr. Mei Gechlik.  The information and views set out in this article are the responsibility of the author and do not necessarily reflect the work or views of SINOTALKS®. ↩︎
  1. Beth Van Schaack, Par in Parem Imperium Non Habet: Complimentarity and the Crime of Aggression, 10 J. Int’l Crim. Just. 133, 149 (2012). ↩︎
  2. Chimène I. Keitner, Between Law and Diplomacy: The Conundrum of Common Law Immunity, 54 Ga. L. Rev. 217, 221 (2019). ↩︎
  3. Restatement (Fourth) of the Foreign Relations Law of the United States § 451 (Am. L. Inst. 2017) (hereinafter “Restatement (Fourth) of Foreign Relations Law”). ↩︎
  4. Foreign Sovereign Immunities Act of 1976, 28 U.S.C. §§ 1602 et seq. ↩︎
  5. The Schooner Exchange v. McFaddon, 11 U.S. (7 Cranch) 116 (1812). ↩︎
  6. Id. at 136. ↩︎
  7. Id. at 137. ↩︎
  8. Verlinden B. V. v. Central Bank of Nigeria, 461 U.S. 480, 486 (1983). ↩︎
  9. Id. ↩︎
  10. Id. ↩︎
  11. Beierwaltes v. L’Office Federale De La Culture De La Confederation Suisse, 999 F.3d 808, 818 (2d Cir. 2021). ↩︎
  12. Bartlett v. Baasiri, 81 F.4th 28, 31-32 (2d Cir. 2023) (citing Letter of Jack B. Tate, Acting Legal Adviser, Department of State, to Acting Attorney General Philip B. Perlman, Department of Justice (May 19, 1952), reprinted in 26 Dep’t of State Bull. 984, 984–85 (1952) (hereinafter “Tate Letter”). ↩︎
  13. Tate Letter, supra note 12. ↩︎
  14. Id. ↩︎
  15. Bartlett v. Baasiri, supra note 12, at 32. ↩︎
  16. Republic of Austria v. Altmann, 541 U.S. 677, 690-91 (2004). ↩︎
  17. Bartlett v. Baasiri, supra note 12, at 32. ↩︎
  18. Foreign Sovereign Immunities Act of 1976, supra note 4. ↩︎
  19. H.R. Rep. No. 1487, 94th Cong., 2d Sess. 7 (1976). ↩︎
  20. Id. at 12. ↩︎
  21. 28 U.S.C. § 1604. ↩︎
  22. See id. §§ 1605-07. ↩︎
  23. Id. § 1609; see also id. §§ 1610-11. ↩︎
  24. When courts decide whether an entity qualifies as a “state” for purposes of the FSIA, they typically draw on the definition of a “state” from the Restatement of the Foreign Relations Law of the United States, a treatise compiled by judges, legal academics, and practitioners.  See, e.g., Knox v. Palestine Liberation Organization, 306 F. Supp. 2d 424, 434 (S.D.N.Y. 2004) (adopting the Restatement’s definition of a “state” for purposes of the FSIA).  The Restatement sets forth the four legal prerequisites for statehood listed above.  See Restatement (Fourth) of Foreign Relations Law, supra note 3, at § 452 cmt. a. ↩︎
  25. 28 U.S.C. § 1603(a). ↩︎
  26. H.R. Rep. No. 1487, supra note 19, at 15. ↩︎
  27. 28 U.S.C. § 1603(b).  ↩︎
  28. “Courts have applied different tests to determine whether a particular entity is an organ of a foreign state.”  Restatement (Fourth) of Foreign Relations Law, supra note 3, at § 452 cmt. e.  The test adopted by the court in Kelly v. Syria Shell Petroleum Development, 213 F.3d 841 (5th Cir. 2000), is the most widespread.  The Kelly test asks “(1) whether the foreign state created the entity for a public purpose; (2) whether the foreign state actively supervises the entity; (3) whether the foreign state requires the hiring of public employees and pays their salaries; (4) whether the entity holds exclusive rights to some right in the country; and (5) how the entity is treated under foreign-state law”.  Restatement (Fourth) of Foreign Relations Law, supra note 3, at § 452 cmt. 5. ↩︎
  29. The rationale behind this third requirement is “that if a foreign state acquires or establishes a company or other legal entity in a foreign country, such entity is presumptively engaging in activities that are either comer[ci]al or private in nature”.  See H.R. Rep. No. 1487, supra note 19, at 15. ↩︎
  30. Anglo-Iberia Underwriting Mgmt. v. P.T. Jamsostek, 600 F.3d 171, 175 (2d Cir. 2010). ↩︎
  31. Id. ↩︎
  32. See 28 U.S.C. §§ 1605-07. ↩︎
  33. Id. § 1605(a)(1). ↩︎
  34. Capital Ventures Int’l v. Republic of Argentina, 552 F.3d 289, 293 (2d Cir. 2009). ↩︎
  35. H.R. Rep. No. 1487, supra note 19, at 18. ↩︎
  36. Restatement (Fourth) of Foreign Relations Law, supra note 3, at § 453 cmt. 1; see also H.R. Rep. No. 1487, supra note 19, at 18; Drexel Burnham Lambert Group v. Committee of Receivers for Galadari, 12 F.3d 317, 326 (2d Cir. 1993) (explaining that there would be implicit waiver if a defendant filed a responsive pleading without previously asserting a defense of sovereign immunity). ↩︎
  37. 28 U.S.C. § 1605(a)(1). ↩︎
  38. H.R. Rep. No. 1487, supra note 19, at 18. ↩︎
  39. 28 U.S.C. §§ 1607(a)-(c). ↩︎
  40. Id. § 1607(b). ↩︎
  41. National City Bank of New York v. Republic of China, 348 U.S. 356, 364-65 (1955). ↩︎
  42. 28 U.S.C. §§ 1607(a), (c). ↩︎
  43. Id. § 1605(a)(2); see also Ingrid (Wuerth) Brunk, A Primer on Foreign Sovereign Immunity, Transnat’l Litig. Blog (Apr. 13, 2023), https://tlblog.org/a-primer-on-foreign-sovereign-immunity. ↩︎
  44. OBB Personenverkehr AG v. Sachs, 577 U.S. 27, 33 (2015). ↩︎
  45. Id. at 34-35. ↩︎
  46. 28 U.S.C. § 1603(d). ↩︎
  47. Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 614 (1992). ↩︎
  48. Restatement (Fourth) of Foreign Relations Law, supra note 3, at § 454 cmt. b. ↩︎
  49. Id. ↩︎
  50. 28 U.S.C. § 1603(d). ↩︎
  51. United States v. Turkiye Halk Bankasi A.S., 16 F.4th 336, 349 (2d Cir. 2021), aff’d in part, vacated in part, remanded, 598 U.S. 264 (2023). ↩︎
  52. Restatement (Fourth) of Foreign Relations Law, supra note 3, at § 454 cmt. b. ↩︎
  53. Republic of Argentina v. Weltover, Inc., supra note 47, at 614. ↩︎
  54. U.S. Fidelity & Guar. Co. v. Braspetro Oil Servs., Co., 199 F.3d 94, 98 (2d Cir. 1999). ↩︎
  55. Id. ↩︎
  56. 28 U.S.C. § 1605(5). ↩︎
  57. H.R. Rep. No. 1487, supra note 19, at 20-21. ↩︎
  58. Id. ↩︎
  59. Restatement (Fourth) of Foreign Relations Law, supra note 3, at § 457 cmt. b. ↩︎
  60. Id. § 457(4). ↩︎
  61. 28 U.S.C. § 1605(5)(A). ↩︎
  62. Restatement (Fourth) of Foreign Relations Law, supra note 3, at § 457 cmt. 4. ↩︎
  63. 28 U.S.C. § 1605(5)(B). ↩︎
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China’s NEW Law on Foreign State Immunity and Related U.S. Experiences

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