The United States Supreme Court this past Tuesday made known its desire for the Obama administration’s input regarding the appeal sought by holders of Argentina’s defaulted bonds, who dispute the Second United States Circuit Court of Appeals ruling last July that blocked the seizure of approximately 105 million dollars in Central Bank of Argentina assets held at the Federal Reserve Bank in New York. The justices requested that the administration’s counsel at the high court, the United States solicitor general, articulate the official government position on the appeal question. The Second Circuit decision constituted a serious setback for holdout bondholders, including plaintiffs EM Ltd. and NML Capital Ltd. in the current action, that refused to participate in a greatly discounted Argentine bond swap. The court held that the principle of sovereign immunity delineated in the Foreign Sovereign Immunities Act protected the Central Bank of Argentina deposits from confiscation or freeze, because said funds linked to a foreign central bank did not figure in commercial transactions. Thus, the freeze on the aforementioned assets in effect since 2006, was lifted. The present suit numbers among many arising from attempts to recover debt created by Argentina’s 100 billion dollar bond default more ten years ago, and Argentine funds in the U.S. have been targeted. The submission of the solicitor general’s brief elaborating the government’s views on the proceedings might be months away. Only at that time will the Supreme Court make its determination on the appeal issue.

A Claim for Restitution of Assets seized by the Hungarian National Railroad and Banks from Jews.

The U.S. Court of Appeals for the Seventh Circuit hear arguments regarding the restitution suit brought by Holocaust survivors and heirs against the Hungarian national railway and banks. The case, in reality a number of related actions, centers on the assets seized by the Hungarian national railroad and banks from Jews sent to Nazi death camps in 1944. The three judge panel considered an appeal sought by the defendants in the action already underway for trial. The appellate ruling, not subject to time constraints, will decide if the trial being held in the U.S. District Court proceeds. The suit was instituted in February 2010 in a federal court in Chicago by Northwestern University law professor Anthony D’Amato on behalf of Hungarian Holocaust survivors and heirs. Mr. D’Amato, whose area of expertise is international law, was aware of the restrictions placed on actions against foreign countries or state controlled entities involving claims of suffering or death. Knowing that no such limitations extend to the loss of assets, his suit turned on the stealing of possessions of the victims rather than their suffering or deaths. Requested were compensatory damages totaling 240 million dollars, or 5 percent of the approximate value of everything confiscated, along with punitive damages in the amount of 1 billion dollars.

Arguments as to sovereign immunity and personal jurisdiction have figured prominently during the proceedings. Since the current case entails American citizens suing in American courts for losses inflicted in Hungary, Judge David Hamilton then inquired of the plaintiffs if it followed that American Indians could sue in European courts with respect to the lands taken from them. Other questions posed dealt with whether restitution
cases constituted an obstacle to U.S. diplomacy, and what was the original American aim of sovereign immunity. According to Peter Black, U.S. Holocaust Memorial senior historian, other restitution suits of late have met with success. Swiss banks finally admitted to deposits made by Holocaust victims, and European insurance companies have at last acknowledged policies purchased by persons who perished at the hands of the Nazis. Also, the Germans have set up a fund as a means to make reparations to forced laborers. A spokesman for the Hungarian delegation in America declared no official response to the current action would be forthcoming.

The United States District Court for the District of Columbia denied a motion to confirm an arbitration award sought by GSS Group Ltd. (GSS) against the National Port Authority of Liberia (NPA). The court granted NPA’s motion to dismiss the confirmation petition due to lack of personal jurisdiction. The roots of the case lie in a contract entered into in June 2005 between GSS, a private corporation established in the British Virgin Islands, and NPA, a state owned corporation, for the express purpose of building and operating a container park in the Liberian capital of Monrovia. GSS later claimed breach of contract and consequently instituted arbitration proceedings the following year. NPA largely ignored the proceedings, which went ahead in spite of its minimal presence. In the end, the arbitrator agreed that NPA did breach the
contract with GSS, culminating with two arbitration awards totaling $44,347,260 in damages. GSS then sought confirmation of said arbitration awards and petitioned the court to that effect in July 2009.

The court resorted to sovereign immunity exception requirements set forth in the Foreign Sovereign Immunities Act (FSIA) in its consideration of the jurisdiction question, and concluded that the requisite subject matter jurisdiction and proper service had been satisfied. First and foremost, it held that NPA was a foreign state according to the FSIA, which specifies instrumentalities and agencies of a foreign state as well. Secondly, the FSIA withholds the shield of sovereign immunity in particular actions, one of which is the petitioning for confirmation of arbitration awards made pursuant to the New York Convention. Lastly, the court emphasized that the issue of service of process never was raised. Thus, it found that a statutory basis for personal jurisdiction had been demonstrated. However, the court also examined the applicability of the Due Process Clause with regards to the exercise of such jurisdiction. The Due Process Clause restricts the jurisdiction of courts over nonresident defendants and stipulates that minimum contacts with the forum are necessary in constituting jurisdiction. Its protections do not extend to foreign sovereign states and the court stressed they only pertained to private foreign entities. While acknowledging that NPA occupied a somewhat fuzzy area between the two groups of defendants, the court maintained that because NPA portrayed itself as legally and financially autonomous from the Liberian government, a representation to which GSS offered no opposition, the exemption of foreign states from due process rights was not called for in this case. In addition, NPA described itself as operating solely in Liberia, again eliciting no opposition from GSS to such characterization, as the court pointed out. It ruled that it did not have jurisdiction over NPA, the minimum contacts standard not having been met, and underscored the fact that GSS had not tried in the least to show that NPA had any contacts with the United States.

Judge John Bates, of the United States District Court, District of Columbia, rendered his decision on November 28th regarding Owens v. Sudan, civil proceedings brought by the victims of the 1998 suicide bombings of the American embassies in Nairobi, Kenya and Dar es Salaam, Tanzania, along with their families, against Sudan and Iran, and ruled in favor of the plaintiffs, who possibly could be awarded damages reaching billions of dollars. In point of fact, the judge’s findings pertained to six distinct actions that had been consolidated for reasons of a hearing conducted this past October and for the assessment of damages. The attacks claimed hundreds of lives and those injured numbered more than one thousand, with most of the victims being foreign national employees of the embassies. The complaint specifically named the Republic of Sudan, the Ministry of the Interior of Sudan, the Islamic Republic of Iran, the Iranian Revolutionary Guards Corps, and the Iranian Ministry of Information and Security, as defendants. Sudanese participation in the case ended over two years ago, while there has been no response whatsoever on the part of Iran. Thomas Fay, lead attorney for a number of the plaintiffs, stressed that Sudan’s liability would not be assigned to the newly formed Republic of South Sudan, recognized as an autonomous state only since July of this year.

The district court opinion made abundantly clear that the sole means by which an American court could establish personal and subject matter jurisdiction over a foreign nation, and thereby overcome the shield of sovereign immunity, would entail satisfying certain criteria put forth in the Foreign Sovereign Immunities Act (FSIA). The judge pointed out that personal jurisdiction stemmed from proper service of process, a requirement fulfilled in the present actions, adding that the failure of the defendants to respond or appear within 60 days of service prompted a default judgment to be entered. Bates maintained that subject matter jurisdiction was conferred because of the FSIA state sponsor exception that allowed money damages for personal injury or death resulting from torture, extrajudicial killings, airplane sabotage, hostage situations, or the supply of materials or resources for said acts. He asserted that all the subject matter jurisdiction requisites were met, beginning with the condition that defendants be listed by the State Department as “state sponsors of terrorism” when the aforementioned acts took place. Iran’s classification as such dates back to 1984 and Sudan has occupied a place on the list since 1993. Next, the court declared that Sudan and Iran backed the “extrajudicial killings” perpetrated by al Qaeda and Osama Bin Laden during the bombings of the embassies. The definition given for extrajudicial killing was a considered killing not authorized by the judiciary. The decision went on to describe how Sudan and Iran provided support to al Qaeda and Bin Laden. Sudan served as a “safehouse” for them, from whence organization, logistics, and training were implemented, while Iran itself furnished training, as well as arranging for Hezbollah to give instruction on explosives, especially where large structures were concerned. Finally, the victims of the attacks were either American nationals or employed by the U.S. government.

However, the judge found that the amendment to the FSIA embodied in the National Defense Authorization Act for Fiscal Year 2008, so that foreign nationals could bring suit against state sponsors of terrorism for injuries or death incurred while at work, did not extend to family of the foreign nationals, including those members who are plaintiffs in the current actions. Although Bates stated a federal cause of action relative to liability was absent, he also indicated that state and/or foreign law might serve as avenues for proceedings. The court directed the appointment of a special master entrusted with determining the handling of each case and the attendant damages.

The United States Court of Appeals for the Second Circuit ruling of November 7th on the appeal by Afghanistan of the district court’s decision blocking dismissal of a 9/11 widower’s conspiracy and wrongful death action against the nation, concurred with the lower court’s findings. The suit had been brought by Judicial Watch, the government corruption watchdog, on behalf of “John Doe”, whose wife perished in the south tower of the World Trade Center on September 11, 2001. It was filed in the United States District Court for the District of Columbia in December of that year, naming Usama bin Laden and Afghanistan as defendants, and citing the noncommercial tort exception to the Foreign Sovereign Immunities Act (FSIA). A default judgment against Afghanistan followed in 2003, due to a lack of response on its part to the complaint. The next year the response came in the form of two motions, one to vacate the default judgment and a second seeking dismissal of the proceedings. The aforementioned adverse district court decision regarding Afghanistan was handed down in September 2008.

The appellate court agreed with the lower court’s application of the noncommercial tort sovereign immunity exception, which removes the shield against the jurisdiction of the American judiciary, and permits lawsuits against foreign countries for monetary compensation relative to damages in personal injury cases, when said injury is inflicted in the United States and brought about by the wrongful act of the foreign nation. The Court of Appeals also offered no dissent to the district court’s repudiation of the argument made by counsel for Afghanistan that accountability for terrorist activity be determined solely by placement on the State Department’s list of state supporters of terrorism on September llth, from which Afghanistan was absent. The district court maintained that to interpret the noncommercial tort exception in such a manner would have a ludicrous outcome. However, the higher court did remand the suit for jurisdictional discovery, due to factual issues dealing with attribution of the Taliban’s alleged part in the 9/11 attacks to
Afghanistan, and the question of whether the acts could be considered “discretionary” with regards to the noncommercial tort exception, according to section 1605(a)(5)(A).

The United States Court of Appeals, Second Circuit rendered its decision on October 26th regarding the 2007 conviction of onetime United Nations Chief of the Commodity Procurement Section, Sanjaya Bahel, on bribery and fraud charges, upholding the lower court’s ruling. Mr. Bahel had been found guilty of directing UN contracts totaling 50 million dollars to companies with ties to Nanak Kohli, a friend. In return, Bahel received $5,000 per month for the duration of the contracts, first-class airfare to India, U.S. Open tickets, and a preferential rate on a three bedroom rental in Manhattan. Additionally, when he bought the apartment afterwards, the purchase price fell below the market appraisal by $600,000.

Bahel predicated his immunity defense on his UN connection. The federal appeals court, located in Manhattan, dismissed the Bahel claim that the necessary UN waiver of his immunity from prosecution by the American judiciary had not been provided specifically, countering that the UN had consented to the waiver on two separate occasions, by means of official letters in 2006 and 2008. Furthermore, the panel of three judges maintained that even in the absence of the UN waiver, Bahel himself indicated he had relinquished protection from the jurisdiction of U.S. courts, by playing an active role in preparing his case, and by his failure to bring up the immunity issue before his conviction. The court likewise cast aside Bahel’s arguments that American laws regarding honest services were not applicable to workers at the UN, and that the sentencing judge was mistaken in imposing a penalty enhancement since he did not meet the criteria for a public official specified by law. To the former assertion, and Bahel’s reliance on the Supreme Court ruling of 2010 in Skilling v. United States, whereby the honest services conviction of an ex-Enron executive was reversed, the appeals court emphasized that the basis for the reversal was the nature of the transgressions – neither bribery nor kickbacks were involved. It went on to state that Bahel’s attempt to contend that the Skilling decision established an exception for employees of international organizations was entirely without merit. The appeals court agreed with the lower court’s sentencing guidelines, including broadening the parameters of “public official” to encompass officials of public international organizations, declaring the UN to be most certainly a public international organization. It admonished Bahel’s efforts to portray himself as a lowly employee rather than a high ranking official.

Bahel has made restitution in the amount of almost one million dollars and surrendered the title to the Manhattan apartment. His release on bail occurred during this past summer.

By Daria Carmon
The complaint lodged by American oil-drilling company Helmerich & Payne on September 23 in the United States District Court for Columbia, against Venezuela and the state-controlled Petroleos de Venezuela and PDVSA Petroleo, claims violation of international law and breach of contract. The well established company, headquartered in Tulsa, Oklahoma and one of the oldest of its kind in the world, has long done business in Venezuela, in fact more than fifty years. Its counsel is David Ogden of Wilmer Cutler. Helmerich & Payne alleges that the current dispute had its beginnings in chronic nonpayment of invoices and breaches of oil and gas contracts as far back as 2008, which escalated to the June 2010 armed seizure and nationalization of its business and 11 rigs in Venezuela at the direction of President Hugo Chavez. Thus, it has petitioned for 32 million dollars in payment of the unsatisfied invoices, and hundreds of millions of dollars to cover the loss of its entire business in Venezuela along with the 11 rigs.

The complaint points out that suit was brought in an American jurisdiction as a consequence of the powerful hold Chavez exerts on the Venezuelan courts, posing an insurmountable obstacle to successful actions by American companies against his regime, borne out by the statistic that not one has succeeded in securing damages in the Chavez era. Helmerich & Payne cites 324 rulings out of 325 by the Venezuelan appellate court that would handle the case favoring the government over private citizens, and refers to its own suit being mired in Venezuela’s judiciary. More significantly, the argument is made that the inherent sovereign immunity of Venezuela does not shield it from the reach of American courts in this action since exceptions exist to the Foreign Sovereign Immunities Act. The complaint asserts that subject matter and personal jurisdiction are invested in the American courts via the commercial activity exception and the expropriation exception.

By Daria Carmon
The September 1 ruling by the United States District Court for the District of Columbia, in proceedings declared to constitute the closing curtain on major Nazi art cases, has dealt a serious blow to Hungary’s ongoing efforts to maintain possession of the world-class art collection of Baron Herzog housed in its state-controlled museums and university, and keep it out of the hands of the baron’s scions. The baron himself was Mor Lipot Herzog, an Hungarian Jewish art collector whose impressive holdings of paintings and sculptures were secreted away by his children in the basement of a Herzog factory in rural Hungary in a futile attempt to circumvent Nazi confiscation. Prize works made their way to the pinnacle of the Nazi hierarchy, Adolf Eichmann. The remainder of the collection came to reside in the Budapest Museum of Fine Arts, the Hungarian National Gallery, and the Budapest University of Technology and Economics, among other locations. All told, more than 40 pieces, including paintings by El Greco, Francisco de Zurbaran, and Lucas Cranach the Elder, and appraised in excess of 100 million dollars, lie at the heart of the dispute. The Herzog heirs have waged a protracted battle to regain ownership, initially thwarted by the Communist authorities. Last year three of those heirs brought action in the aforementioned jurisdiction.

During the course of the litigation, Hungary did not deny that the Herzog art holdings were relinquished unwillingly but it refused to consider restitution. Its case was predicated heavily on the principle of foreign sovereign immunity and the shield from American judicial jurisdiction embodied in the United States Foreign Sovereign Immunities Act. Judge Ellen Huvelle’s 46 page ruling disallowed the sovereign immunity defense and the court threw out Hungary’s motion to dismiss the suit. Judge Huvelle maintained that the baron’s collection had been appropriated without fair remuneration and for discriminatory reasons. She emphasized that even if Hungary’s deeds did not represent a violation of international law, the Nazi role in the dispersal of the collection fit the criteria. The judge upheld the assertions made by the Herzog attorney, Michael Shuster of Kasowitz Benson Torres & Friedman, that the art confiscation divested the Herzog heirs of their citizenship, was an attack on their human rights, as well as the argument of improper Hungarian commercial benefit by means of American ticket and merchandise revenue derived from the art. She also rejected Hungary’s attempt to bring forum into question, since it insisted the action should be heard there instead of in America. The court offered no final decision on the statute of limitations issue, but the judge stressed that Hungary had stalled proceedings in that jurisdiction for years.

The sole part of the suit that was dismissed involved 11 of the paintings, which had figured in a prior case in Hungary of an American Herzog heiress who claimed direct inheritance. The complaint at that time had been set aside on the grounds of a 1973 American-Hungarian settlement that provided remuneration to the mother of said heiress. The 11 paintings are some of the finest in the collection and number among them works by El Greco, Cranach, and Courbet. Thaddeus Stauber of Peabody Nixon, Hungary’s lead attorney, stated that as a result of the court’s reliance on the Hungarian ruling, Hungary planned to mount an appeal of the current decision based on the forum issue.

By Daria Carmon

The United States Court of Appeals, Eleventh Circuit, issued its decision in the Lubian v. Cuba suit four days ago, on September 21, affirming the district court’s ruling that all claims be dropped in the action brought by Cuban medical personnel against the nations of Cuba and Venezuela, and the state-controlled Petroleous de Venezuela, and alleging forced labor. It agreed with the lower court’s findings that the facts of the case did not meet the criteria for exceptions to the Foreign Sovereignties Immunities Act (FSIA), required for subject matter jurisdiction when the plaintiffs are foreign citizens and the defendants are foreign sovereignties. The court stressed that the FSIA confers immunity from the jurisdiction of American courts on sovereign nations, inclusive of their agencies and instrumentalities, thus shielding all defendants in this suit, unless statutory exception could be applied. It then proceeded to address plaintiffs’ assertion that the commercial activity exception and the terrorism exception had operated to grant jurisdiction to the district court. The ruling rejected said argument on both counts, holding that the commercial activity exception could not be invoked since the alleged forced labor and false imprisonment relative to police actions clearly were not commercial in scope nor was the prerequisite of a direct effect in the United States satisfied. Plaintiffs’ counsel had maintained that the labor of the Cuban medical personnel contributed to the influx of money and oil into Cuba, which translated to greater military financing and a direct danger to America. Furthermore, according to plaintiff’s attorney, the transactions of Petroleous de Venezuela in the oil business, and the arrangement between Cuba and Venezuela, had a direct impact on American gas prices. The court went on to deny the applicability of the terrorism exception on the basis that no allegations were made of personal injury or death resulting from torture, hostage taking, or sabotage of a plane by foreign agents. Even had there been such claims, it stipulated three more criteria had to be fulfilled and were not: 1) the foreign nation must be identified as a state sponsor of terrorism at time of the occurrence; 2) the claimant had to be a citizen, soldier, or employee of the United States at time of the occurrence; and 3) the claimant had to allow the foreign nation sufficient time to arbitrate prior to filing suit.

By Daria Carmon

A decision rendered by the United States District Court for the Central District of California on August 24 denied Robert Eringer, who had been a foreign intelligence liaison to Prince Albert II of Monaco, legal redress against the principality in an employment dispute, by reason of the sovereign immunity embodied in the Foreign Intelligence Surveillance Act. Mr. Eringer entered the employ of the current Monegasque ruler and Sovereign Prince, in 1999, when Albert held the title of Hereditary Prince, and thereafter was placed on a retainer that was in effect for the period of 2002 through 2008. He quit his position over alleged nonpayment of his quarterly fee of 40,000 euros and consequently brought suit.

U.S. District Judge Gary Feess examined Eringer’s job responsibilities in depth in his ruling in order to lay the groundwork for the application of the sovereign immunity principles promulgated by the Foreign Intelligence Surveillance Act. In addition to serving as intelligence advisor, Eringer’s other principal duties were to foster relations with the foreign intelligence community and to investigate people who sought access to the prince’s social circle, affiliation with an organization of which he was a patron, or employment in the government. Eringer also was called upon to carry out a variety of other assignments, including mediating in the matter of the mother of the prince’s illegitimate daughter, probing press leaks regarding the prince, and assisting a woman who accused the prince of rape. However, he conceded that the demands of his position lessened in 2007, centering primarily on tasks related to his work as foreign intelligence liaison, but that he did take on select investigations for the prince. The judge concluded that the referred to responsibilities did not fulfill the requirements for the commercial exclusion to sovereign immunity found in the Foreign Intelligence Surveillance Act, particularly the duties of foreign intelligence liaison. He asserted that interaction with the intelligence agencies of other countries can be traced directly to service to a sovereign nation. Furthermore, while the court admitted that a credible argument could be made that the private investigator aspect of Eringer’s job might be construed to be commercial activity, it maintained that the added dimension of protecting the prince raised said activity to an entirely different level. The decision stressed that even if the secondary task of undertaking special investigations at the prince’s behest was deemed commercial, the court still would hold that Monaco was shielded by sovereign immunity.