Sovereign immunity

• Pages: 32-34

32 Volume 20, April–June 2014 international law update

© 2014 Transnational Law Associates, LLC. All rights reserved. ISSN 1089-5450, ISSN 1943-1287 (on-line) | www.internationallawupdate.com

SOVEREIGN IMMUNITY

In context of Argentina’s default on

external debt, U.S. Supreme Court

decides whether the Foreign Sovereign

Immunities Act (FSIA) limits the scope of

discovery for a judgment creditor

In the following case, the U.S. Supreme

Court outlines the scope of discovery available to

a judgment creditor in a federal post-judgment

execution proceeding against a foreign sovereign.

See Foreign Sovereign Immunities Act (FSIA), 28

U.S.C. Sections 1330, 1602.

Argentina defaulted on its external debt in 2001

and subsequently oered creditors new securities to

swap for the defaulted ones. Most creditors agreed,

but the Respondent, NML Capital, Ltd. (“NML”),

did not.

NML led several lawsuits in the U.S. District

Court for the Southern District of New York in

regard to the approximately $2.5 billion owed

by Argentina. NML prevailed in all lawsuits and

sought to execute against Argentina’s property.

NML began with trying to ascertain Argentine

property by serving subpoenas upon Bank of

America (BOA) and the Banco de la Nacion

Argentina (BNA) in New York.

Argentina and BOA moved to quash the BOA

subpoena, but the District Court granted a motion

to compel. e District Court explained that

that extraterritorial asset discovery did not oend

Argentina’s sovereign immunity. e District

Court also expected the parties to negotiate further

regarding reasonable limits on discovery.

Argentina appealed to the U.S. Court of

Appeals for the Second Circuit, claiming that the

order violates the FSIA by permitting discovery

of Argentina’s extraterritorial assets. e Second

Circuit armed the District Court.

e U.S. Supreme Court granted certiorari

and now arms. As for discovery in postjudgment

execution proceedings, the general rule in federal

courts is that the parties may obtain discovery

regarding any non-privileged matter that is relevant

to any party’s claim or defense. Fed.R.Civ.P. 26(b)

(1).

e Court rst claries the scope of its review

in this case.

“In the Court of Appeals, Argentina’s only

asserted ground for objection to the subpoenas was

the Foreign Sovereign Immunities Act. … And

Argentina’s petition for writ of certiorari asked us to

decide only whether that Act ‘imposes [a] limit on

a United States court’s authority to order blanket

post-judgment execution discovery on the assets of

a foreign state used for any activity anywhere in the

world.’ … We thus assume without deciding that,

as the Government conceded at argument …, and

as the Second Circuit concluded below, ‘in a run-

of-the-mill execution proceeding . . . the district

court would have been within its discretion to order

the discovery from third-party banks about the

judgment debtor’s assets located outside the United

States.’ … e single, narrow question before us

is whether the Foreign Sovereign Immunities Act

species a dierent rule when the judgment debtor

is a foreign state.” [Slip op. 2-3] (footnote omitted)

e Court then summarizes the FSIA grants

of immunity.

“e text of the Act confers on foreign states

two kinds of immunity. First and most signicant, ‘a

foreign state shall be immune from the jurisdiction

of the courts of the United States . . . except

as provided in sections 1605 to 1607.’ §1604.

at provision is of no help to Argentina here: A

foreign state may waive jurisdictional immunity,

§1605(a)(1), and in this case Argentina did so …

Consequently, the Act makes Argentina ‘liable in

the same manner and to the same extent as a private

individual under like circumstances.’ §1606.”

“e Act’s second immunity-conferring

provision states that ‘the property in the United

States of a foreign state shall be immune from

attachment[,] arrest[,] and execution except

as provided in sections 1610 and 1611 of this

chapter.’ §1609. e exceptions to this immunity

defense (we will call it ‘execution immunity’) are

narrower. ‘e property in the United States of a

foreign state’ is subject to attachment, arrest, or

execution if (1) it is ‘used for a commercial activity