461 U.S. 480 (1983), 81-920, Verlinden B.v. v. Central Bank of Nigeria

• Citation: 461 U.S. 480, 103 S.Ct. 1962, 76 L.Ed.2d 81
• Party Name: VERLINDEN B.V., Petitioner v. CENTRAL BANK OF NIGERIA.
• Case Date: May 23, 1983
• Court: U.S. Supreme Court

Page 480

461 U.S. 480 (1983)

103 S.Ct. 1962, 76 L.Ed.2d 81

VERLINDEN B.V., Petitioner

v.

CENTRAL BANK OF NIGERIA.

No. 81-920.

United States Supreme Court.

May 23, 1983

Argued Jan. 11, 1983.

Dutch corporation brought suit against an instrumentality of the Federal Republic of Nigeria, alleging anticipatory breach of a letter of credit. The United States District Court for the Southern District of New York, Edward Weinfeld, J., 488 F.Supp. 1284, dismissed for lack of jurisdiction, and plaintiff appealed. The Court of Appeals, 647 F.2d 320, affirmed, and certiorari was granted. The Supreme Court, Chief Justice Burger, held that Congress, in enacting the Foreign Sovereign Immunities Act, did not exceed the scope of Article III by granting federal district courts subject-matter jurisdiction over certain civil actions by foreign plaintiffs against foreign sovereigns where the rule of decision may be provided by state law; while the diversity clause of Article III is not broad enough to support such jurisdiction, the "arising under" clause is an appropriate basis for the statutory grant of jurisdiction.

Reversed and remanded.

[103 S.Ct. 1964] Syllabus^[*]

SYLLABUS

A contract between the Federal Republic of Nigeria and petitioner Dutch corporation for the purchase of cement by Nigeria provided that Nigeria was to establish a confirmed letter of credit for the purchase price. Subsequently, petitioner sued respondent bank, an instrumentality of Nigeria, in Federal District Court, alleging that certain actions by respondent constituted an anticipatory breach of the letter of credit. Petitioner alleged jurisdiction under the provision of the Foreign Sovereign Immunities Act of 1976 (Act), 28 U.S.C. § 1330(a), granting federal district courts jurisdiction without regard to the amount in controversy of "any nonjury civil action against a foreign state ... as to any claim for relief in personam with respect to which the foreign state is not entitled to immunity either under sections 1605-1607 of this title or under any applicable international agreement." The District Court, while holding that the Act permitted actions by foreign plaintiffs, dismissed the action on the ground that none of the exceptions to sovereign immunity specified in the Act applied. The Court of Appeals affirmed but on the ground that the Act exceeded the scope of Art. III of the Constitution, which provides, in part, that the judicial power of the United States shall extend to "all Cases arising under [the] Constitution, the Laws of the United States, and Treaties made ... under their authority," and to "Controversies ... between a State, or the Citizens thereof, and foreign States, Citizens, or Subjects." The court held that neither the Diversity Clause nor the "Arising Under" Clause of Art. III is broad enough to support jurisdiction over actions by foreign plaintiffs against foreign sovereigns.

Held:

1. For the most part, the Act codifies, as a matter of federal law, the restrictive theory of foreign sovereign immunity under which immunity is confined to suits involving the foreign sovereign's public acts and does not extend to cases arising [103 S.Ct. 1965] out of its strictly commercial acts. If one of the specified exceptions to sovereign immunity applies, a federal district court may exercise subject-matter jurisdiction under § 1330(a), but if the claim does not fall within one of the exceptions, the court lacks such jurisdiction. Pp. 1967-1969.

Page 481

2. On its face, § 1330(a) allows a foreign plaintiff to sue a foreign sovereign in federal court provided the substantive requirements of the Act are satisfied. The Act contains no indication of any limitation based on the plaintiff's citizenship. And, when considered as a whole, the legislative history reveals an intent not to limit jurisdiction under the Act to actions brought by American citizens. Pp. 1969-1970.

3. Congress did not exceed the scope of Art. III by granting federal district courts subject-matter jurisdiction over certain civil actions by foreign plaintiffs against foreign sovereigns where the rule of decision may be provided by state law. While the Diversity Clause of Art. III is not broad enough to support such subject-matter jurisdiction, the "Arising Under" Clause is an appropriate basis for the statutory grant of jurisdiction. In enacting the Act, Congress expressly exercised its power to regulate foreign commerce, along with other specified Art. I powers. The Act does not merely concern access to the federal courts but rather governs the types of actions for which foreign sovereigns may be held liable in a federal court and codifies the standards governing foreign sovereign immunity as an aspect of substantive federal law. Thus, a suit against a foreign state under the Act necessarily involves application of a comprehensive body of substantive federal law, and hence "arises under" federal law within the meaning of Art. III. Pp. 1970-1973.

4. Since the Court of Appeals, in affirming the District Court, did not find it necessary to address the statutory question of whether the present action fell within any specified exception to foreign sovereign immunity, the court on remand must consider whether jurisdiction exists under the Act itself. Pp. 1973-1974.

647 F.2d 320 (2nd Cir., 1981), reversed and remanded.

COUNSEL

Abram Chayes argued the cause for petitioner. With him on the briefs wereBerthold H. Hoeniger and Mitchell M. Bailey.

Deputy Solicitor General Bator argued the cause for the United States asamicus curiae urging reversal. On the brief were Solicitor General Lee, Assistant Attorney General McGrath, Kenneth S. Geller and Stephen M. Shapiro, Deputy Solicitors General, William Kanter, and Eloise Davies.

Page 482

Stephen N. Shulman, by invitation of the Court, 459 U.S. 964, argued the cause as amicus curiae in support of the judgment below.*

* Briefs of amici curiae urging reversal were filed by Lori Fisler Damrosch and Joseph McLaughlin for the Committee on International Law of the Association of the Bar of the City of New York; and by Monroe Leigh, Timothy B. Atkeson, Cecil J. Olmstead, and Stewart A. Baker for the Rule of Law Committee et al.

A brief of amicus curiae urging affirmance was filed by Stephen N. Shulman andMark C. Ellenberg for the Republic of Guinea.

Abram Chayes, Washington, D.C., for petitioner.

Paul M. Bator, Cambridge, Mass., for the U.S., as amicus curiae, by special leave of Court.

Stephen N. Shulman, Washington, D.C., as amicus curiae, in support of the judgment below, by special leave of Court.

OPINION

Chief Justice BURGER delivered the opinion of the Court.

We granted certiorari to consider whether the Foreign Sovereign Immunities Act of 1976, by authorizing a foreign plaintiff to sue a foreign state in a United States District Court on a non-federal cause of action, violates Article III of the Constitution.

I

On April 21, 1975, the Federal Republic of Nigeria and petitioner Verlinden B.V., a Dutch corporation with its principal offices in Amsterdam, The Netherlands, entered into a contract providing for the purchase of 240,000 metric tons of cement by Nigeria. The parties agreed that the contract would be governed by the laws of the Netherlands and that disputes would be resolved by arbitration before the International Chamber of Commerce, Paris, France.

The contract provided that the Nigerian government was to establish an irrevocable, confirmed letter of credit for the total purchase price through Slavenburg's Bank in Amsterdam. According to petitioner's amended complaint, however, respondent Central Bank of Nigeria, an instrumentality of Nigeria, improperly established an unconfirmed letter of credit payable through Morgan Guaranty Trust Company in New York. ¹

Page 483

[103 S.Ct. 1966] In August 1975, Verlinden subcontracted with a Liechtenstein corporation, Interbuco, to purchase the cement needed to fulfill the contract. Meanwhile, the ports of Nigeria had become clogged with hundreds of ships carrying cement, sent by numerous other cement suppliers with whom Nigeria also had entered contracts. ² In mid-September, Central Bank unilaterally directed its correspondent banks, including Morgan Guaranty, to adopt a series of amendments to all letters of credit issued in connection with the cement contracts. Central Bank also directly notified the suppliers that payment would be made only for those shipments approved by Central Bank two months before their arrival in Nigerian waters. ³

Verlinden then sued Central Bank in United States District Court for the Southern District of New York, alleging that Central Bank's actions constituted an anticipatory breach of the letter of credit. Verlinden alleged jurisdiction under § 2 of the Foreign Sovereign Immunities Act, 28 U.S.C.§ 1330. ⁴ Respondent moved to dismiss for, among other reasons, lack of subject matter and personal jurisdiction.

Page 484

The District Court first held that a federal court may exercise subject matter jurisdiction over a suit brought by a foreign corporation against a foreign sovereign. Although the legislative history of the Foreign Sovereign Immunities Act does not clearly reveal whether Congress intended the Act to extend to actions brought by foreign plaintiffs, Judge Weinfeld reasoned that the language of the Act is "broad and embracing. It confers jurisdiction over 'any nonjury civil action' against a foreign state." 488 F.Supp. 1284, 1292 (S.D.N.Y.1980). Moreover, in the District Court's view, allowing all actions against foreign sovereigns, including those initiated by foreign plaintiffs, to be brought in federal court was necessary to effectuate "the Congressional purpose of concentrating litigation against sovereign states in the federal courts in order to aid the development of a uniform body of federal law governing assertions of sovereign immunity." Ibid. The District...