Verlinden v. Central Bank of Nigeria, 81-920

Citation76 L.Ed.2d 81,103 S.Ct. 1962,461 U.S. 480
Decision Date23 May 1983
Docket NumberNo. 81-920,81-920
CourtUnited States Supreme Court

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.


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 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. 486-489.

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. 489-491.

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. 491-497.

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. 497-498.

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

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.

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.


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

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.

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 Court also held that Article III subject matter jurisdiction extends to suits by foreign corporations against foreign sovereigns, stating:

"[The Act] imposes a single, federal standard to be applied uniformly by both state and federal courts hearing claims brought against foreign states. In consequence, even though the plaintiff's claim is one grounded upon common law, the case is one that 'arises under' a federal law because the complaint compels the application of the uniform federal standard governing assertions of sovereign immunity. In short, the Immunities Act injects an essential federal element into all suits brought against foreign states." Ibid.

The District Court nevertheless dismissed the complaint, holding that a foreign instrumentality is entitled to sovereign immunity unless one of the exceptions specified in the Act ap- plies. After carefully considering each of the exceptions upon which petitioner relied, the District Court concluded that none applied, and accordingly dismissed the action.5

The Court of Appeals for the Second Circuit affirmed, but on different grounds. 647 F.2d 320 (CA2 1981). The court agreed with the District Court that the Act was properly construed to permit actions brought by foreign plaintiffs. The court held, however, that the Act exceeded the scope of Article III of the Constitution. In the view of the Court of Appeals, neither the diversity clause 6 nor the "arising under" clause 7 of Article III is broad enough to support jurisdiction over actions by foreign plaintiffs against foreign sovereigns; accordingly it concluded that Congress was without power to grant federal courts jurisdiction in this case, and affirmed the District Court's dismissal of the action.8

We granted certiorari, 454 U.S. 1140, 102 S.Ct. 997, 71 L.Ed.2d 291 (1982), and we reverse and remand.


For more than a century and a half, the United States generally granted foreign sovereigns complete immunity from suit in the courts of this country. In The Schooner Exchange v. M'Faddon, 7 Cranch 116, 3 L.Ed. 287 (1812), Chief Justice Marshall concluded that, while the jurisdiction of a nation...

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