Sovereign Immunity

AuthorInternational Law Group

Samco Global Arms, Inc. (SGA) is a Florida-based arms dealer. In 1985, Longlac Enterprises Corporation (LEC), a Panamanian company, entered into a contract with Honduras to ship weapons to Honduras free of taxes and other fees. The Honduran Armed Forces were to store the weapons at military facilities. In return, Honduras would have a right of first refusal to buy weapons from that inventory.

This arrangement continued until 1994 when the Honduran government changed. Thereafter, LEC ran into bars to accessing its weapons. Eventually, LEC sold all of its rights in the weapons to SGA. SGA sued (1) Carlos Arita (in his official capacity as the "Procurador General" of Honduras), (2) the "Procuraduria General" itself, as well as the State of Honduras, for breach of contract.

[Note: The "Procuraduria General" is the agency in charge of legally representing Honduras. Its head, the "Procurador General," resembles the U.S. Attorney General.] SGA here argued that Honduras had been carrying on a commercial activity outside the U.S. that had a direct effect in the U.S. For example, Honduras allegedly breached its contract by attaching the weapons during an investigation and by letting their condition go downhill while in storage.

The district court dismissed the case without prejudice because it considered the defendants immune under the Foreign Sovereign Immunities Act (FSIA) (28 U.S.C. Section 1602). Moreover, the Act of State Doctrine barred the action. On plaintiffs' appeal, the U.S. Court of Appeals for the Eleventh Circuit affirms on FSIA grounds.

Under the FSIA, a foreign state is not immune from the jurisdiction of U.S. courts if the dispute arises out of a commercial activity carried on in the U.S. See Section 1605(a). U.S. courts may also have jurisdiction in such a case even if the commercial actions took place outside the U.S. during the foreign state's commercial activity but caused a direct effect in the U.S. See Section 1605(a)(2).

The Court agrees that Honduras' actions in fact did constitute commercial activity. "We readily conclude that the 1985 contract constituted a commercial activity under the FSIA. This Circuit has held that where the activity at issue involves a government's contract for purchase and sale of goods, the activity is commercial, and not sovereign. ..."

"This...

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