The First Tuesday Update is our monthly take on current issues in commercial disputes, international arbitration, and judgment enforcement. This month, our update was released on the second Tuesday of November, in light of Election Day on November 5, 2024.
SCOTUS to Decide if Award Creditors Must Prove Minimum Contacts
We start with a recent update regarding certiorari review of a decision in the Ninth Circuit that addressed the requirements for exercising personal jurisdiction over a foreign sovereign under the Foreign Sovereign Immunities Act (FSIA). The US Supreme Court granted certiorari over a pair of cases1 related to the enforcement of an arbitral award and whether a plaintiff must demonstrate that a foreign sovereign has "minimum contacts" with the US before a federal court may assert personal jurisdiction over foreign states sued under the FSIA. The Ninth Circuit had reversed enforcement of the award on the grounds that the District Court incorrectly held that it did not have to determine whether an India-owned corporation had minimum contacts with the US.2 Petitioners argued that the Ninth Circuit's approach to the minimum contacts test conflicts with decisions from other circuits.
The controlling federal statute on the exercise of personal jurisdiction over a foreign sovereign is 28 U.S.C. § 1330(b): "Personal jurisdiction over a foreign state shall exist as to every claim for relief over which the district courts have jurisdiction under subsection (a) where service has been made under section 1608 of this title." Traditionally, courts have interpreted this provision as conferring personal jurisdiction over a sovereign where there has been proper service, and a plaintiff has satisfied one of the exceptions to sovereign immunity under the FSIA. Accordingly, the widespread view is that the test for personal jurisdiction over a foreign sovereign does not extend as far as the Due Process Clause. The Ninth Circuit, however, held that the FSIA itself statutorily requires satisfying the minimum-contacts analysis to exercise personal jurisdiction over a foreign sovereign.
In particular, the Ninth Circuit determined that it had previously "rejected the plaintiff's argument that the FSIA's long-arm provision changed the minimum contact analysis for foreign states."3 Relying on its 1980 Gonzalez decision, the court held that "personal jurisdiction under the FSIA requires satisfaction of the traditional minimum contacts standard."4 The Gonzalez decision relied "on a reading of the FSIA's legislative history to conclude that the FSIA was intended to be consistent with the minimum contacts analysis."5
US Circuit Judge Eric D. Miller noted, in his concurring opinion joined by US Circuit Judge Lucy H. Koh, that he was open to a full court rehearing regarding the minimum contacts test. He noted that while the court's previous cases "have clearly recognized a minimum-contacts requirement for subjecting foreign states to personal jurisdiction," they have been "less clear about the source" of it.6 Judge Miller concluded that the "precedent applying the minimum-contacts test to the exercise of personal jurisdiction over foreign states has no foundation in the Constitution or the FSIA, and it is contrary to the views of other courts of appeals."7 Ultimately, the appeals court denied en banc rehearing earlier this year.
In their petitions for certiorari, both petitioners emphasized that the Ninth Circuit's position is an outlier, and has created a circuit split as a result. Citing opinions from the Second, Seventh, Eleventh, and DC Circuits, petitioners argued that all other circuit courts of appeals to have considered the issue have all held that personal jurisdiction under the FSIA requires nothing more than satisfying the subject-matter jurisdiction and proper service requirements set out in 28 U.S.C. § 1330(b).8
Petitioners also argued that nothing in the text of the FSIA's long-arm provision imposes a minimum contacts requirement. For support, Petitioners cited Judge Bumatay's dissent in the Ninth Circuit Order denying the panel's petitions for rehearing en banc of the August 2023 Devas decision.9 Quoting the language of 28 U.S.C. § 1330(b), Judge Bumatay concluded that "when subject-matter jurisdiction and service are proper under the FSIA, the district court 'shall' have personal jurisdiction."10 Nor does the presence of a minimum contacts provision in the commercial activity exception under the FSIA,11 argued petitioners, impose that requirement in the FSIA's long-arm provision—the former provision governs subject-matter jurisdiction, while the latter addresses personal jurisdiction.12
In October 2024, the US Supreme Court granted the petitions for certiorari.13 The Supreme Court's ruling on those petitions may have serious consequences for creditors of foreign sovereigns. If the Supreme Court decides that the FSIA does require the minimum-contacts test, foreign sovereigns may more easily avoid obligations to creditors in the US. Creditors would then be required to demonstrate that the foreign sovereign "purposefully availed" itself of the privilege of acting within the United States—a requirement that could be difficult to satisfy and regardless would create another hurdle for collecting against sovereigns.
Closely related to this issue is the question of how to establish personal jurisdiction over an award debtor in actions to confirm an arbitral award under the New York Convention. Recently, the Fifth Circuit addressed the requirements for asserting personal jurisdiction in this context in Conti 11. Container Schiffarts-GMBH & Co. KG M.S., MSC Flaminia v. MSC Mediterranean Shipping Co. S.A.14 Relying on opinions from the Second Circuit,15 the Fifth Circuit found that a federal court should evaluate personal jurisdiction based on the award debtor's contacts related to the arbitration proceeding and its jurisdictional contacts related to the parties' underlying dispute. This issue is a complex one, and will be the topic of an upcoming First Tuesday Update.
Upcoming Oral Argument on Another FSIA Case
Finally, we turn to an update in a case previously covered in Steptoe's August 2024 First Tuesday Update: Republic of Hungary v. Simon.16 At issue in the case is whether the plaintiffs have satisfied the "expropriation exception" to sovereign immunity under the FSIA. Plaintiffs alleged that their property was seized from them in violation of international law, and that this property was liquidated into currency commingled with Hungarian state funds now being used in connection with commercial activity in the United States. The parties argued in the DC Circuit that a plaintiff may satisfy the expropriation exception based on "plausible allegations" and need not affirmatively trace the confiscated assets to the funds currently in use in US commercial activity.17 This position conflicts with that taken by the Second and Eleventh Circuits, which requires a plaintiff to "make out a valid argument showing jurisdiction" with affirmative evidence that the property can be traced.18
The United States submitted an amicus brief on these issues rejecting the "commingling theory" advanced by the plaintiffs.19The United States argued that "specific property cannot be said to have been 'exchanged for' expropriated property through such a series of transactions unless it can actually be traced back through that chain of transactions to the expropriated property."20
These issues are set for oral argument before the Supreme Court on December 3, 2024.
Footnotes
1 CC/Devas(Mauritius) Limited, et al. v. Antrix Corp. Ltd. et al., No. 23-1201 (U.S. Oct. 4, 2024); Devas Multimedia Private Ltd. v. Antrix Corp. Ltd., No. 24-17 (U.S. Oct. 4, 2024) ("Devas cases").
2 Devas Multimedia Private Ltd. v. Antrix Corp. Ltd., 20-36024, 2023 WL 4884882 (9th Cir. Aug. 1, 2023).
3 Devas, 20-36024, 2023 WL 4884882, at *1 (citing Thomas P. Gonzalez Corp. v. Consejo Nacional De Produccion De Costa Rica, 614 F.2d 1247 (9th Cir. 1980)).
4 Id. (quoting Gonzalez, 614 F.2d at 1255); see also Theo. H. Davies & Co. v. Republic of Marshall Islands, 174 F.3d 969, 974 (9th Cir. 1998) ("The FSIA's long-arm statute, however, is constrained by the minimum contacts required by International Shoe ... and its progeny." (citation omitted)); Gregorian v. Izvestia, 871 F.2d 1515, 1529 (9th Cir. 1989); Richmark Corp. v. Timber Falling Consultants, Inc., 937 F.2d 1444, 1446 (9th Cir. 1991).
5 Id. at *2.
6 Id. at *3 (Miller, J., concurring).
7 Id. at *4 (Miller, J., concurring).
8 CC/Devas(Mauritius) Limited, et al. v. Antrix Corp. Ltd. et al., Petition at 2 (filed May 6, 2024); Devas Multimedia Private Ltd. v. Antrix Corp. Ltd., Petition at 9-10 (filed July 3, 2024). See TMR Energy Ltd. v. State Prop. Fund of Ukraine, 411 F.3d 296, 303 (D.C. Cir. 2005); Frontera Res. Azerbaijan Corp. v. State Oil Co. of Azerbaijan Republic, 582 F.3d 393, 396 (2d Cir. 2009) (action to confirm foreign arbitral award); Abelesz v. Magyar Nemzeti Bank, 692 F.3d 661, 694 (7th Cir. 2012) (explaining that the "commercial activity" immunity exception "is not congruent with the general personal jurisdiction inquiry"); S & Davis Int'l, Inc. v. Republic of Yemen, 218 F.3d 1292, 1303 (11th Cir. 2000) (finding that "under the FSIA, personal jurisdiction exists" when an immunity exception applies and there is proper service).
9 Devas Multimedia Private Ltd. v. Antrix Corp. Ltd., 91 F.4th 1340 (9th Cir. 2024) (Bumatay, J., dissenting).
10 Devas, 91 F.4th at 1347-1348 (Bumatay, J., dissenting).
11 28 U.S.C. § 1605(a)(2).
12 CC/Devas(Mauritius) Limited, et al. v. Antrix Corp. Ltd. et al., Petition at 15-16 (filed May 6, 2024) ((citing Devas, 91 F.4th at 1348 (Bumatay, J., dissenting); Devas Multimedia Private Ltd. v. Antrix Corp. Ltd., Petition at 12 (filed July 3, 2024) at 12 (citing Devas, 91 F.4th at 1348 (Bumatay, J., dissenting))
13 CC/Devas(Mauritius) Limited, et al. v. Antrix Corp. Ltd. et al., No. 23-1201 (U.S. Oct. 4, 2024); Devas Multimedia Private Ltd. v. Antrix Corp. Ltd., No. 24-17 (U.S. Oct. 4, 2024).
14 91 F.4th 789 (5th Cir. 2024).
15 Sole Resort, S.A. de C.V. v. Allure Resorts Mgmt., LLC, 450 F.3d 100 (2d Cir. 2006).
<16 No. 23-867 (cert. granted June 24, 2024).
17 Republic of Hungary, Petition at 23 (filed Feb. 7, 2024).
18 Id.
19 Republic of Hungary, Brief Amicus Curiae of United States, 8 (filed Sept. 3, 2024)
20 Id.
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