Republic of Argentina v. Weltover, Inc

Decision Date12 June 1992
Docket NumberNo. 91-763,91-763
Citation119 L.Ed.2d 394,112 S.Ct. 2160,504 U.S. 607
PartiesREPUBLIC OF ARGENTINA and Banco Central De La Republica Argentina, Petitioners, v. WELTOVER, INC., et al
CourtU.S. Supreme Court
Syllabus

As part of a plan to stabilize petitioner Argentina's currency, that country and petitioner bank (collectively Argentina) issued bonds, called "Bonods," which provided for repayment in U.S. dollars through transfer on the market in one of several locations, including New York City. Concluding that it lacked sufficient foreign exchange to retire the Bonods when they began to mature, Argentina unilaterally extended the time for payment, and offered bondholders substitute instruments as a means of rescheduling the debts. Respondent bondholders, two Panamanian corporations and a Swiss bank, declined to accept the rescheduling and insisted on repayment in New York. When Argentina refused, respondents brought this breach-of-contract action in the District Court, which denied Argentina's motion to dismiss. The Court of Appeals affirmed, ruling that the District Court had jurisdiction under the Foreign Sovereign Immunities Act of 1976 (FSIA), 28 U.S.C. § 1602 et seq., which subjects foreign states to suit in American courts for, inter alia, acts taken "in connection with a commercial activity" that have "a direct effect in the United States," § 1605(a)(2).

Held: The District Court properly asserted jurisdiction under the FSIA. Pp. 610-620.

(a) The issuance of the Bonods was a "commercial activity" under the FSIA, and the rescheduling of the maturity dates on those instruments was taken "in connection with" that activity within the meaning of § 1605(a)(2). When a foreign government acts, not as a regulator of a market, but in the manner of a private player within that market, its actions are "commercial" within the meaning of the FSIA. Cf. Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 695-706, 96 S.Ct. 1854, 1861-1867, 48 L.Ed.2d 301 (plurality opinion). Moreover, because § 1603(d) provides that the commercial character of an act is to be determined by reference to its "nature" rather than its "purpose," the question is not whether the foreign government is acting with a profit motive or instead with the aim of fulfilling uniquely sovereign objectives. Rather, the issue is whether the government's particular actions (whatever the motive behind them) are the type of actions by which a private party engages in commerce. The Bonods are in almost all respects garden-variety debt instruments and, even when they are considered in full context, there is nothing about their issuance that is not analogous to a private commercial transaction. The fact that they were created to help stabilize Argentina's currency is not a valid basis for distinguishing them from ordinary debt instruments, since, under § 1603(d), it is irrelevant why Argentina participated in the bond market in the manner of a private actor. It matters only that it did so. Pp. 612-617.

(b) The unilateral rescheduling of the Bonods had a "direct effect in the United States" within the meaning of § 1605(a)(2). Respondents had designated their accounts in New York as the place of payment, and Argentina made some interest payments into those accounts before announcing that it was rescheduling the payments. Because New York was thus the place of performance for Argentina's ultimate contractual obligations, the rescheduling of those obligations necessarily had a "direct effect" in this country: money that was supposed to have been delivered to a New York bank was not forthcoming. Argentina's suggestion that the "direct effect" requirement cannot be satisfied where the plaintiffs are all foreign corporations with no other connections to this country is untenable under Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 489, 103 S.Ct. 1962, 1969, 76 L.Ed.2d 81. Moreover, assuming that a foreign state may be a "person" for purposes of the Due Process Clause of the Fifth Amendment, Argentina satisfied the "minimum contacts" test of International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 by issuing negotiable debt instruments denominated in U.S. dollars and payable in New York and by appointing a financial agent in that city. Pp. 617-620.

941 F.2d 145 (CA2 1991), affirmed.

SCALIA, J., delivered the opinion for a unanimous Court.

Richard J. Davis, New York City, for petitioners.

Richard W. Cutler, New York City, for respondents.

Jeffrey P. Minear, Washington, D.C., as amicus curiae for U.S. by special leave of Court.

Justice SCALIA delivered the opinion of the Court.

This case requires us to decide whether the Republic of Argentina's default on certain bonds issued as part of a plan to stabilize its currency was an act taken "in connection with a commercial activity" that had a "direct effect in the United States" so as to subject Argentina to suit in an American court under the Foreign Sovereign Immunities Act of 1976, 28 U.S.C. § 1602 et seq.

I

Since Argentina's currency is not one of the mediums of exchange accepted on the international market, Argentine businesses engaging in foreign transactions must pay in U.S. dollars or some other internationally accepted currency. In the recent past, it was difficult for Argentine borrowers to obtain such funds, principally because of the instability of the Argentine currency. To address these problems, petitioners, the Republic of Argentina and its central bank, Banco Central (collectively Argentina), in 1981 instituted a foreign exchange insurance contract program (FEIC), under which Argentina effectively agreed to assume the risk of currency depreciation in cross-border transactions involving Argentine borrowers. This was accomplished by Argentina's agreeing to sell to domestic borrowers, in exchange for a contractually predetermined amount of local currency, the necessary U.S. dollars to repay their foreign debts when they matured, irrespective of intervening devaluations.

Unfortunately, Argentina did not possess sufficient reserves of U.S. dollars to cover the FEIC contracts as they became due in 1982. The Argentine government thereupon adopted certain emergency measures, including refinancing of the FEIC-backed debts by issuing to the creditors government bonds. These bonds, called "Bonods," provide for payment of interest and principal in U.S. dollars; payment may be made through transfer on the London, Frankfurt, Zurich, or New York market, at the election of the creditor. Under this refinancing program, the foreign creditor had the option of either accepting the Bonods in satisfaction of the initial debt, thereby substituting the Argentine government for the private debtor, or maintaining the debtor/creditor relationship with the private borrower and accepting the Argentine government as guarantor.

When the Bonods began to mature in May 1986, Argentina concluded that it lacked sufficient foreign exchange to retire them. Pursuant to a Presidential Decree, Argentina unilaterally extended the time for payment, and offered bondholders substitute instruments as a means of rescheduling the debts. Respondents, two Panamanian corporations and a Swiss bank who hold, collectively, $1.3 million of Bonods, refused to accept the rescheduling, and insisted on full payment, specifying New York as the place where payment should be made. Argentina did not pay, and respondents then brought this breach-of-contract action in the United States District Court for the Southern District of New York, relying on the Foreign Sovereign Immunities Act of 1976 as the basis for jurisdiction. Petitioners moved to dismiss for lack of subject-matter jurisdiction, lack of personal jurisdiction, and forum non conveniens. The District Court denied these motions, 753 F.Supp. 1201 (S.D.N.Y.1991), and the Court of Appeals affirmed, 941 F.2d 145 (CA2 1991). We granted Argentina's petition for certiorari, which challenged the Court of Appeals' determination that, under the Act, Argentina was not immune from the jurisdiction of the federal courts in this case. 502 U.S. ----, 112 S.Ct. 858, 116 L.Ed.2d 766 (1992).

II

The Foreign Sovereign Immunities Act of 1976, 28 U.S.C. § 1602 et seq. (FSIA), establishes a comprehensive framework for determining whether a court in this country, state or federal, may exercise jurisdiction over a foreign state. Under the Act, a "foreign state shall be immune from the jurisdiction of the courts of the United States and of the States" unless one of several statutorily defined exceptions applies. § 1604 (emphasis added). The FSIA thus provides the "sole basis" for obtaining jurisdiction over a foreign sovereign in the United States. See Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 434-439, 109 S.Ct. 683, 688-690, 102 L.Ed.2d 818 (1989). The most significant of the FSIA's exceptions and the one at issue in this case—is the "commercial" exception of § 1605(a)(2), which provides that a foreign state is not immune from suit in any case

"in which the action is based upon a commercial activity carried on in the United States by the foreign state; or upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or upon an 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." § 1605(a)(2).

In the proceedings below, respondents relied only on the third clause of § 1605(a)(2) to establish jurisdiction, 941 F.2d, at 149, and our analysis is therefore limited to considering whether this lawsuit is (1) "based . . . upon an act outside the territory of the United States"; (2) that was taken "in connection with a commercial activity" of Argentina outside this country; and (3) that "cause[d] a direct effect in the United States." 1 The complaint in this case alleges...

To continue reading

Request your trial
659 cases
  • De Csepel v. Republic of Hungary
    • United States
    • U.S. District Court — District of Columbia
    • 1 Septiembre 2011
    ...governmental acts from those that can be engaged in by private persons or entities. Id. (citing Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 614, 112 S.Ct. 2160, 119 L.Ed.2d 394 (1992)) (“[W]hen a foreign government acts ... in a manner of a private player within [a market], the f......
  • Daliberti v. Republic of Iraq
    • United States
    • U.S. District Court — District of Columbia
    • 23 Mayo 2000
    ...... are the type of actions by which a private party engages in trade and traffic or commerce" Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 614, 112 S.Ct. 2160, 119 L.Ed.2d 394 (1992) (internal quotation omitted) (finding commercial activity exception to immunity applied where Arg......
  • In re Ikalowych
    • United States
    • U.S. Bankruptcy Court — District of Colorado
    • 15 Abril 2021
    ...See , e.g. , Saudi Arabia v. Nelson, 507 U.S. 349, 113 S.Ct. 1471, 123 L.Ed.2d 47 (1993) ; Republic of Argentina v. Weltover , 504 U.S. 607, 112 S.Ct. 2160, 119 L.Ed.2d 394 (1992). According to the Supreme Court, the general thrust of the FSIA "commercial activities" exception is that "a fo......
  • Agudas Chasidei Chabad v. Russian Federation
    • United States
    • U.S. District Court — District of Columbia
    • 4 Diciembre 2006
    ...are the type of actions by which a private party engages in trade and traffic or commerce." Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 614, 112 S.Ct. 2160, 119 L.Ed.2d 394 (1992) (internal quotation marks omitted). The term "commercial" is used to distinguish governmental acts f......
  • Request a trial to view additional results
5 firm's commentaries
  • Sovereign Immunity Analysis In Subscription Credit Facilities
    • United States
    • Mondaq United States
    • 28 Noviembre 2012
    ...US courts, it has been our experience that a number of foreign sovereigns will submit to binding arbitration with the Fund or a Lender. 25 504 U.S. 607 26 Id. at 619. 27 See Section 31452 of the California County Employees Retirement Law (Cal. Gov. Code §31450 et seq.), which suggests that ......
  • Devas v. Antrix: Ninth Circuit Requires Minimum Contacts For Personal Jurisdiction Over Foreign States
    • United States
    • Mondaq United States
    • 29 Febrero 2024
    ...5 (citing H. Rep. No. 54-1487, 94th Cong., 2d Sess. 13-14 (1976), reprinted in 1976 U.S. Code Cong. & Admin. News at pp. 6604, 6612). 18. 504 U.S. 607, 619 19. Weltover, 504 U.S. at 619 (citing South Carolina v. Katzenbach, 383 U.S. 301, 323 (1966) holding "States of the Union are not 'pers......
  • FTAIA And Foreign Sales: Seventh Circuit Limits Extraterritorial Reach Of U.S. Antitrust Law In Motorola Mobility v. AU Optronics
    • United States
    • Mondaq United States
    • 9 Abril 2014
    ...United States v. LSL Biotechnologies, 379 F.3d 672, 680 (9th Cir. 2004) (emphasis added) (citing Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 618 (1992)). The Seventh Circuit's Minn-Chem opinion, on the other hand, held that an effect is direct if it bears a "reasonably proximate ......
  • Goodwin Procter Discusses Yet Another Two Decisions in Bernie Madoff Case
    • United States
    • LexBlog United States
    • 21 Noviembre 2023
    ...Int’l, Inc. v. Kingdom of Saudi Arabia, No. 21-941-cv, 2022 WL 2236946, at *2 (2d Cir. June 22, 2022) (summary order); see also Weltover, 504 U.S. 607 at 620 (concluding that the “rescheduling of the maturity dates” on certain bonds by the government of Argentina, rather than the “issuance ......
  • Request a trial to view additional results
16 books & journal articles
  • Table of Cases
    • United States
    • ABA Antitrust Library Handbook on the Scope of Antitrust Procedural issues
    • 1 Enero 2015
    ...v. Nat’l Cranberry Ass’n, 168 F. Supp. 919 (D. Mass. 1958), 220 Arbaugh v. Y&H Corp 546 U.S. 500 (2006), 364 Argentina v. Weltover, Inc., 504 U.S. 607 (1992), 42, 43 Arkansas La. Gas Co. v. Hall, 453 U.S. 571 (1981), 154, 156, 160, 163 Arroyo-Melecio v. Puerto Rican Am. Ins. Co., 398 F.3d 5......
  • The International Scope of U.S. Antitrust
    • United States
    • ABA Antitrust Library Handbook on the Scope of Antitrust An introduction to the scope of antitrust
    • 1 Enero 2015
    ...Sovereign Immunities Act of 1976, 28 U.S.C. §§ 1330, 1332, 1391(f), 1441(d), and 1602-1611. 66. Id. 67. See Argentina v. Weltover, Inc., 504 U.S. 607, 611 (1992) (“[FSIA] provides the sole basis for obtaining jurisdiction over a foreign sovereign in the United States.”); see also FED. R. CI......
  • Table of Cases
    • United States
    • ABA Antitrust Library Antitrust and Associations Handbook
    • 1 Enero 2009
    ...MLS Corp., 368 F. Supp. 2d 912 (W.D. Wis. 2005), aff’d , 450 F.3d 312 (7th Cir. 2006), 54, 61 Republic of Argentina v. Weltover, Inc., 504 U.S. 607 (1992), 118 Reserve Supply Corp. v. Owens@Corning Fiberglas Corp., 971 F.2d 37 (7th Cir. 1992), 86 Rickards v. Canine Eye Registration Found., ......
  • Trials
    • United States
    • ABA Antitrust Library International Antitrust Cartel Handbook
    • 6 Diciembre 2019
    ...interpret similar ‘direct effects’ language in the Foreign Sovereign Immunities Act (FSIA). See Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 618 (1992) (“[A]n effect is ‘direct’ if it follows ‘as an immediate consequence of the defendant’s . . . activity.’”). 86. See United States......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT