First Tuesday Update is our monthly take on current issues in commercial disputes, international arbitration, and judgment enforcement. In this update, we take a look at several front-page issues relevant to litigating against foreign sovereigns and their instrumentalities: first, an update on Supreme Court proceedings in Republic of Hungary v. Simon; second, some new developments in personal jurisdiction over sovereign defendants; and third, an overview of a Supreme Court cert petition that was recently denied in an FSIA case against Argentina. Finally, we will provide an update on recent policy changes related to the Helms-Burton Act.
An Update on Republic of Hungary v. Simon
We previously wrote about the Supreme Court's grant of certiorari in Republic of Hungary v. Simon.1 The case, which has been pending for over a decade, seeks damages from the Hungarian state on behalf of survivors or heirs of survivors of the Holocaust for the unlawful seizure of their property by Hungary's then-government. The case's latest development involves the question of whether plaintiffs can invoke the FSIA's expropriation exception, which, as relevant here, permits lawsuits against sovereigns "in which rights in property taken in violation of international law are in issue and that property or any property exchanged for such property is present in the United States in connection with a commercial activity carried on in the United States by the foreign state."2 According to the plaintiffs, the property in issue – which was unlawfully taken decades earlier – had been liquidated, and is currently commingled with funds in the possession of the Hungarian government that are being used in connection with commercial activity in the United States. Plaintiffs allege that these allegations are sufficient to withstand a motion to dismiss, while defendants allege that plaintiffs need to come forward with evidence to actually "trace" the confiscated property from being liquidated to its current use in commercial activity. In a rare moment of agreement, the parties both asked the court to grant certiorari to resolve this question. While they prevailed below, plaintiffs argued to the court that it would be most efficient to resolve the "commingling theory" now along with a broader question relating to a split between the DC Circuit and the Second Circuit on the extent to which a party needs to come forward with affirmative evidence to withstand a motion to dismiss under the FSIA. In particular, according to the parties, the DC Circuit permits a plaintiff to "rest on plausible allegations" while the Second Circuit requires a stricter showing that the plaintiff has "[made] out a valid argument showing jurisdiction" by coming forward with certain affirmative evidence to establish jurisdiction.
The Supreme Court heard oral argument on December 3, 2024. Notably, the United States Solicitor General sought leave to participate in oral argument as an amicus curiae to advocate against plaintiffs' "commingling theory" and asked the court to weigh in on the issue of the larger circuit split on pleading FSIA standards, which, according to the Solicitor General "affects every FSIA case."3 During oral argument, the justices seemed to signal that they were not inclined to accept the plaintiffs' commingling theory and, thus, seemed unlikely to reach the larger question of the circuit split on the pleading standard question. As Justice Gorsuch noted, "I am having a hard time seeing why we'd have to answer [the question of the circuit split]" given that the case could likely be resolved on the narrower question.
Accordingly, the Simon case may not ultimately represent a sea change in FSIA pleading. The court's decision on "commingling" will undoubtedly reverberate through FSIA jurisprudence. As counsel for the US government explained, the narrower question of commingling is "intertwined" with the larger pleading question. Thus, the court's rationale for whether allegations of historical commingling is sufficient will likely speak to the larger question of how much evidence a plaintiff must produce in the first instance to withstand a motion to dismiss.
Potential Developments in Personal Jurisdiction Over Sovereign Defendants
Another case we are tracking is CC/Devas (Mauritius) Limited, et al., v. Antrix Corp. Ltd., et al.4 in which the court granted certiorari in connection with two important FSIA-related questions. The first question involves the interpretation of the FSIA's exception for arbitration, which requires a plaintiff to establish a connection between the parties' arbitration agreement and the United States to support the exercise of personal jurisdiction under the FSIA's personal-jurisdiction provision.5 The second question touches on whether foreign sovereigns are subject to the "minimum contacts" test in assessing whether they are subject to personal jurisdiction.
This second question, in particular, is notable. Below, the Ninth Circuit departed from its sister circuits to find that a sovereign (or, as in Devas, a corporation owned and controlled by the state) needed to meet the minimum contacts test to be subject to personal jurisdiction.6 Two of the judges on the three-judge panel filed a separate concurrence explaining that they reached this conclusion because they believed they were bound by Ninth Circuit precedent and encouraged an en banc Ninth Circuit to take the case and reconsider.7 But, the Ninth Circuit refused to take the case en banc8notwithstanding a dissent from seven of its judges, which asserted that Ninth Circuit precedent was wrong and out of step with courts elsewhere in the country.9 The case now proceeds to the Supreme Court where the court may—but does not necessarily need to—answer the question directly.
Whatever the answer, the court's ruling could have a significant impact on cases against foreign sovereigns, including judgment enforcement actions. As illustrated by Devas, the FSIA's arbitration exception does not currently require the same nexus with the United States as the minimum contacts test. This additional showing could create a significant hurdle for any plaintiff seeking to enforce an arbitration judgment against a foreign state in the US.
The case is currently being briefed with oral argument yet to be scheduled.
Supreme Court Denies Cert in FSIA Judgment Enforcement Case Against Argentina
On January 27, the Supreme Court denied certiorari in Republic of Argentina v. Attestor Master Value Fund, LP, leaving in place a Second Circuit decision – and a circuit split –
that could have impacts on judgment enforcement actions against foreign states.10 In its petition for a writ of certiorari,Argentina asked the Supreme Court to review the Second Circuit's decision affirming a lower court order for Argentina to turn over reversionary interests in collateralized bonds, secured by US Treasury bonds and Deutsche Mark bonds which were issued in the 1990s as part of a sovereign debt relief plan, to the holders of other bonds on which Argentina had defaulted.11
The bondholder plaintiffs had sought to attach the reversionary interests, and thereby attach the collateral bonds, to satisfy judgments against Argentina in favor of the plaintiffs' other defaulted bonds.12 Argentina had argued that the reversionary interests were immune from attachment and execution under the FSIA for multiple reasons, including that the collateral was held partly outside the United States, and that the collateral had never been used for a commercial activity in the United States.13
The Second Circuit rejected all of these arguments. First, the Second Circuit held that Argentina had used the reversionary interests in commercial activity because Argentina made two offers to alter or extinguish the reversionary interests to incentivize bondholders to participate in other exchange offers,14 and that this activity occurred in the United States because these offers were made "at least in part in the United States" and were registered with the Securities and Exchange Commission.15 Second, the Second Circuit held that the reversionary interests were located "in the United States" for FSIA purposes because they were created by CPAs in the United States.16
The second question is of particular importance because when determining whether commercial activity occurred with respect to "property in the United States" for FSIA purposes, a circuit split exists. In the Second Circuit, the court applies state law to determine the situs of the property.17 Accordingly, the Second Circuit in Argentina's case applied New York state law to determine that the reversionary interests were located in the United States. But in the Fifth Circuit, the court applies a holistic "context specific" approach to make a "common sense appraisal of the requirements of justice and convenience."18
At the Supreme Court, Argentina asked the justices to weigh in on the Second Circuit's determination that Argentina had used the collateral for a commercial activity in the United States, arguing that the Deutsche Mark bonds specifically should be immune from attachment under the FSIA because they are not located in the United States.19 In Argentina's view, the Fifth Circuit's test would have mandated an outcome in its favor. Argentina identified the split between the Second and Fifth Circuits, but the Supreme Court declined to hear the case, leaving the Second Circuit's decision fully intact.
For judgment creditors and debtors, the circuit split means that there may be uncertainty about whether the property of a foreign sovereign or instrumentality is "in the United States" for purposes of analyzing the commercial activity exception to the FSIA. Judgment creditors should be accordingly aware of the uncertainty and these differing standards when considering where to file an execution action – in particular when intangible property may be involved, because whether the property is "in the United States" may be a close call.
Trump Reinstates Cuba Sanctions and Helms-Burton Lawsuits
As we wrote on January 17, in the last days of his administration, President Joe Biden announced a series of executive actions that eased US restrictions on Cuba. But as expected, President Trump has reversed all of those executive actions in his first weeks of office – including a reinstatement of the private right of action under Title III of the Helms-Burton Act.
Title III of the Helms-Burton (or "LIBERTAD") Act provides the owners of claims to property confiscated by the Cuban government with a private right of action against any entity "trafficking" in that confiscated property. The Act, notably, contains a suspension provision that allows the president to suspend this private right of action. Every president utilized that suspension provision from 1996 until 2019, when President Trump allowed the private right of action to proceed for the first time during his first administration.
Lawsuits under the Helms-Burton Act began shortly thereafter, and continued through the Biden administration. Then, on January 14, President Biden reinstated the suspension, effective January 29, alongside other changes in US-Cuba policy. But before the Biden suspension could take effect, the Trump administration took office and acted quickly.
On the first day of his presidency, President Trump signed a number of executive orders, including one entitled "Initial Rescissions of Harmful Executive Orders and Actions" that re-designated Cuba as a state sponsor of terrorism, and reinstated the "restricted list" of Cuban entities subject to additional sanctions. The president's first day orders did not affect the Biden suspension of Helms-Burton Act lawsuits.
But within the first two weeks of the Trump administration, Secretary Marco Rubio announced on January 29, 2025 that the United States, through the State Department, would be taking "decisive action to rescind major last-minute policy changes on Cuba announced by the previous administration on January 14." Secretary Rubio recognized that President Trump had already added Cuba back to the list of state sponsors of terrorism, and announced additional actions that the United States would take with respect to Cuba.
Reinstating the private right of action under the Helms-Burton Act was first in Rubio's announcement: "In a January 29 letter to the appropriate Congressional committees, I withdrew the prior administration's letter regarding the LIBERTAD Act." By that letter, the Trump administration reinstated the Helms-Burton Act private right of action before the Biden suspension could take effect on the same day.
These developments have not affected pending Helms-Burton litigation, which continues irrespective of whether the current administration suspends Title III, including cases brought by Steptoe. Steptoe is a leading firm in this space, representing a number of clients with claims against certain Cuban state-owned entities. In December 2024, Steptoe filed for one of its clients a petition for a writ of certiorari to the Supreme Court on an issue of first impression—whether the Helms-Burton Act itself abrogates sovereign immunity such that a Helms-Burton plaintiff need not prove that its allegations fall within one of the exceptions to the FSIA. A ruling by the court in favor of the claimant could change the manner in which Helms-Burton claims are brought (i.e., plaintiffs could sue sovereign actors without having to litigate the applicability of an FSIA exception). The US Chamber of Commerce and a group of Helms-Burton claim holders recently filed amicus briefs in support as well. Defendants' brief in opposition is anticipated in the coming month.
Footnotes
1. No. 23-867 (cert. granted June 24, 2024).
2. 28 U.S.C. § 1605(3).
3. Transcript of Oral Argument at 28:12.
4. No. 23-1201 (cert. granted Oct. 4,2024)
5. 28 USC § 1330(b).
6. Devas Multimedia Priv. Ltd. v. Antrix Corp. Ltd., No. 20-36024, 2023 WL 4884882, at *1 (9th Cir. Aug. 1, 2023).
7. Id. at *3, *4 (Miller, J., concurring).
8. Devas Multimedia Priv. Ltd. v. Antrix Corp. Ltd., 91 F.4th 1340 (9th Cir. 2024).
9. Devas, 91 F.4th at 1342-1343 (Bumatay, J., dissenting).
10. Republic of Argentina v. Attestor Master Value, LP, No. 24-668 (petition filed Dec. 11, 2024).
11. Attestor Master Value Fund, LP v. Argentina, 113 F.4th 220 (2d Cir. 2024).
12. Id. at 226-27.
13. Id. at 229.
14. Id. at 230.
15. Id. at 233.
16. Id.
17. Id. (applying New York law).
18. Af-Cap, Inc. v. Republic of Congo, 383 F.3d 361, 371-73 (5th Cir. 2004).
19. Supra note 10 at 4.
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