Foreign Sovereign Foreign Sovereign Immunities Act and Immunities Act and

United States United States AntitrustAntitrust

Chinese Inter-Agency DelegationChinese Inter-Agency DelegationUnited States Chamber of United States Chamber of

CommerceCommerceMarch 26, 2009March 26, 2009Washington, DCWashington, DC

Scope of IssueScope of Issue

• Governments Around World Engage in Governments Around World Engage in Economic Activity Outside their Borders or Economic Activity Outside their Borders or Which Affect Other MarketsWhich Affect Other Markets

• This Activity May Raise Questions of Legality This Activity May Raise Questions of Legality Under the Competition Laws of Other Under the Competition Laws of Other NationsNations

• How to Create Level Playing Field, Proper How to Create Level Playing Field, Proper Incentives for Both Parties in Transactions, Incentives for Both Parties in Transactions, While Still Respecting Traditional Notions of While Still Respecting Traditional Notions of Sovereign Immunity for Core Governmental Sovereign Immunity for Core Governmental FunctionsFunctions

United States Approach to United States Approach to Sovereign ImmunitySovereign Immunity

• Traditional Approach of Absolute Immunity Traditional Approach of Absolute Immunity (Absent Waiver in Contract or Treaty (Absent Waiver in Contract or Treaty Provisions)Provisions)

• Replaced by Restrictive Theory of Sovereign Replaced by Restrictive Theory of Sovereign ImmunityImmunity

• No Immunity for Purely Commercial Activity No Immunity for Purely Commercial Activity of Government or Government Owned of Government or Government Owned EnterpriseEnterprise

• Prior to 1976, Importance of United States Prior to 1976, Importance of United States Government Representations to Court Government Representations to Court Hearing the Particular DisputeHearing the Particular Dispute

Foreign Sovereign Foreign Sovereign Immunities ActImmunities Act

• Congress Passed FSIA in 1976 to Codify Congress Passed FSIA in 1976 to Codify Restrictive Theory of Immunity and Make Restrictive Theory of Immunity and Make Immunity Matter of Judicial Determination Immunity Matter of Judicial Determination and not Executive Branch Discretionand not Executive Branch Discretion

• If Defendant is Foreign Government, Agent, If Defendant is Foreign Government, Agent, or Instrumentality then Immune from or Instrumentality then Immune from Jurisdiction Unless One of Exceptions in Act Jurisdiction Unless One of Exceptions in Act AppliesApplies

• Has Numerous Important Procedural Has Numerous Important Procedural Provisions on Service of Process, Attachment Provisions on Service of Process, Attachment of Property, Enforcing Judgments, and of Property, Enforcing Judgments, and Removal from State to Federal CourtsRemoval from State to Federal Courts

Foreign Governments, Foreign Governments, Agents, InstrumentalitiesAgents, Instrumentalities

• ““foreign state” includes a political subdivision foreign state” includes a political subdivision of a foreign state or an agency or of a foreign state or an agency or instrumentality of a foreign state, 28 U.S.C. instrumentality of a foreign state, 28 U.S.C. 1603a.1603a.

• An "agency or instrumentality of a foreign An "agency or instrumentality of a foreign state" means any entity -- state" means any entity -- – (1) which is a separate legal person, corporate or (1) which is a separate legal person, corporate or

otherwise, and otherwise, and – (2) which is an organ of a foreign state or political (2) which is an organ of a foreign state or political

subdivision thereof, or a majority of whose shares subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign or other ownership interest is owned by a foreign state or political subdivision thereof, and state or political subdivision thereof, and

– (3) which is neither a citizen of a State of the (3) which is neither a citizen of a State of the United States nor created under the laws of any United States nor created under the laws of any third country. third country.

Immunity Unless Exception Immunity Unless Exception AppliesApplies

• A foreign state shall not be immune from the A foreign state shall not be immune from the jurisdiction of courts of the United States or of jurisdiction of courts of the United States or of the States in any case -- the States in any case -- – (1) in which the foreign state has waived its immunity (1) in which the foreign state has waived its immunity

either explicitly or by implication, notwithstanding either explicitly or by implication, notwithstanding any withdrawal of the waiver which the foreign state any withdrawal of the waiver which the foreign state may purport to effect except in accordance with the may purport to effect except in accordance with the terms of the waiver; terms of the waiver;

– (2) in which the action is based upon a commercial (2) in which the action is based upon a commercial activity carried on in the United States by the foreign activity carried on in the United States by the foreign state; or upon an act performed in the United States state; or upon an act performed in the United States in connection with a commercial activity of the in connection with a commercial activity of the foreign state elsewhere; or upon an act outside the foreign state elsewhere; or upon an act outside the territory of the United States in connection with a territory of the United States in connection with a commercial activity of the foreign state elsewhere and commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States… that act causes a direct effect in the United States…

The Commercial Activity The Commercial Activity ExceptionException

• A "commercial activity" means either a A "commercial activity" means either a regular course of commercial conduct regular course of commercial conduct or a particular commercial transaction or a particular commercial transaction or act. or act. The commercial character of The commercial character of an activity shall be determined by an activity shall be determined by reference to the nature of the reference to the nature of the course of conduct or particular course of conduct or particular transaction or act, rather than by transaction or act, rather than by reference to its purpose.reference to its purpose. 28 U.S.C. 28 U.S.C. 1603(d).1603(d).

Commercial Exception in Commercial Exception in ActionAction

• In general, deemed commercial activity if type In general, deemed commercial activity if type of activity customarily engaged in by private of activity customarily engaged in by private persons for profit.persons for profit.

• Nature, not purpose, of act is critical Nature, not purpose, of act is critical consideration.consideration.– Construction contracts for embassies or Construction contracts for embassies or

infrastructure commercial in natureinfrastructure commercial in nature– Equipment contracts for armed forces commercialEquipment contracts for armed forces commercial– Health care for key government personnel Health care for key government personnel

commercialcommercial– Issuance of bonds and default commercial in natureIssuance of bonds and default commercial in nature

Commercial activity key Commercial activity key exception for most antitrust exception for most antitrust

casescases• Price Fixing, Monopolization, Restraints on Price Fixing, Monopolization, Restraints on

Distribution and Intellectual Property, Distribution and Intellectual Property, Mergers all Typically Commercial in NatureMergers all Typically Commercial in Nature

• Many Defendants, Even if Government, Many Defendants, Even if Government, Agencies, or Instrumentalities, Enjoy no Agencies, or Instrumentalities, Enjoy no Special ImmunitySpecial Immunity

• AirlinesAirlines– Current Price Fixing LitigationCurrent Price Fixing Litigation– Laker Case in 1980sLaker Case in 1980s

• Golf Cart ManufacturerGolf Cart Manufacturer

Greater Immunity for Greater Immunity for Regulation of Natural Regulation of Natural

ResourcesResources• Series of Cases Where Sovereign Immunity Series of Cases Where Sovereign Immunity

Found when Defendants Regulating Found when Defendants Regulating Extraction of Natural or Human Resources in Extraction of Natural or Human Resources in Manner Unique to GovernmentManner Unique to Government– OPEC litigationOPEC litigation– Government of Bangladesh and WildlifeGovernment of Bangladesh and Wildlife– Government of Jamaica and Migrant Labor Government of Jamaica and Migrant Labor

RegulationRegulation

• Matter of Characterization Since Many Matter of Characterization Since Many Private Companies Also Heavily Involved in Private Companies Also Heavily Involved in Natural Resource ExtractionNatural Resource Extraction

Still Have to Show Link to Still Have to Show Link to United StatesUnited States

• Must be a commercial activity in the Must be a commercial activity in the United States by the foreign state; United States by the foreign state;

• or an act performed in the United or an act performed in the United States in connection with a commercial States in connection with a commercial activity of the foreign state elsewhere; activity of the foreign state elsewhere;

• or an act outside the territory of the or an act outside the territory of the United States in connection with a United States in connection with a commercial activity of the foreign state commercial activity of the foreign state elsewhere and that act causes a direct elsewhere and that act causes a direct effect in the United States. effect in the United States.

Other Possible Bases for Other Possible Bases for JurisdictionJurisdiction

• TreatyTreaty• WaiverWaiver

– ExpressExpress– ImpliedImplied

• TortTort• ArbitrationArbitration• CounterclaimCounterclaim• Expropriation of PropertyExpropriation of Property

Other Possible Defenses or Other Possible Defenses or ImmunitiesImmunities

• ComityComity• Political Question DoctrinePolitical Question Doctrine• Act of State DoctrineAct of State Doctrine• Foreign Sovereign Compulsion Foreign Sovereign Compulsion

DefenseDefense• Defenses on the MeritsDefenses on the Merits

For More Information For More Information

• James Atwood, Kingman Brewster & James Atwood, Kingman Brewster & Spencer Weber Waller, Spencer Weber Waller, Antitrust and Antitrust and American Business AbroadAmerican Business Abroad Ch. 8 (3d ed. Ch. 8 (3d ed. 2009 Thomson/West).2009 Thomson/West).

• Joseph W. Delapenna, Joseph W. Delapenna, Suing Foreign Suing Foreign Governments and Their CorporationsGovernments and Their Corporations (2003).(2003).

• Section of Antitrust Law, American Bar Section of Antitrust Law, American Bar Association, Association, Special Defenses in Special Defenses in International Antitrust LitigationInternational Antitrust Litigation (1995). (1995).

Respectfully SubmittedRespectfully Submitted

• Spencer Weber WallerSpencer Weber Waller• Professor and DirectorProfessor and Director• Institute for Consumer Institute for Consumer

Antitrust StudiesAntitrust Studies• Loyola University Loyola University

Chicago School of LawChicago School of Law• swalle1@luc.eduswalle1@luc.edu • http://www.luc.edu/anthttp://www.luc.edu/ant

itrustitrust