Sovereign Immunity

• Author: International Law Group

In 1996, Congress passed the Federal Anti-Terrorism and Effective Death Penalty Act and the Flatow Amendment, which together waived foreign sovereign immunity and created a cause of action for individuals harmed by state-sponsored acts of terrorism. See 28 U.S.C. Section 1605(a)(7).

Subsequently, the victims and families of Americans who were held hostage in Iran beginning in 1979 for 444 days brought for the second time a class action against the Islamic Republic of Iran and its Ministry of Foreign Affairs (hereinafter "Iran"). They argued that the new statutes created a new cause of action and demanded compensatory and punitive damages of $33 billion.

Iran did not defend this action, and the district court eventually entered a default judgment on liability in August 2001. Before trial on damages, however, the U.S. Department of State notified the district court that the Algiers Accords, and 1980 bilateral agreement between the U.S. and Iran which facilitated the release of the hostages, prohibited lawsuits arising out of the hostage- taking at issue. Moreover, a few months later, an amendment to the Foreign Sovereign Immunities Act (FSIA) was enacted that specifically referred to this case. The district court dismissed for failure to state a claim.

The U.S. Court of Appeals for the District of Columbia Circuit affirms. The main issue on appeal is whether legislation specifically directed at this lawsuit, and enacted while the case was pending in the district court, provided a cause of action for the hostages and their families.

"The FSIA provides generally that a foreign state is immune from the jurisdiction of the United States courts unless one of the exceptions listed in 28 U.S.C. Section 1605(a) applies. ... At the time plaintiffs filed their complaint and up to entry of the default judgment of liability, none of the exceptions applied to this case. Section 1605(a)(7)(A), added as part of the Antiterrorism and Effective Death Penalty Act of 1996, allowed an exception to the immunity bar if plaintiffs showed that the foreign state had been designated a state sponsor of terrorism when the act occurred or as a result of the act. 28 U.S.C. Section 1605(a)(7)(A) (2000). Iran had not been so designated."

"After the United States moved to intervene and vacate the default judgment, Congress amended the...