Academic journal article
By Donahue, Timothy E.
Boston College International and Comparative Law Review , Vol. 35, No. 1
Abstract: In 1976, Congress sought to codify the application of sovereign immunity with the passing of the Foreign Sovereign Immunities Act (FSIA). As foreign governments began to routinely act as participants in international commerce, Congress intended that the FSIA waive sovereign immunity when a foreign government engages in commercial activity that has a "direct effect" in the United States. This exception permits suits against foreign governments in U.S. courts when there is a breach a commercial contract that directly affects economic interests in the United States. Under U.S. contract law, a binding unilateral contract may form when one party performs the acts requested in an open offer, such as providing the whereabouts of a wanted fugitive in return for a reward. A recent Eleventh Circuit case, Guevara v. Republic of Peru, displayed the court's inconsistent application of the FSIA's commercial activity exception to fugitive reward offers, and prohibits the judicial enforcement of these contracts, even when offered by a foreign government and entered into on U.S. soil. The Guevara decision illustrates the unsettled interpretation and application of the FSIA by U.S. courts, and may have very damaging effects on U.S. participation in the pursuit of international fugitives.
Perhaps best epitomized by the "wanted" posters of nineteenth Century America, large cash rewards have commonly been used to so- licit public assistance in the capture of dangerous fugitives.1 The legal concept of a fugitive reward as a contract is a relatively simple one, re- plete with the notions of offer, acceptance, and performance that are well rooted in contract law.2 Nevertheless, when the pursuit of a fugitive crosses international boundaries, such reward offers become subject to a more complicated legal framework.3
In a recent Eleventh Circuit case, Guevara v. Republic of Peru, the plaintiff sought to enforce a $5 million reward offer from the govern- ment of Peru after he assisted in the capture of Vladimiro Lenin Mon- tesinos Torres (Montesinos).4 After a lengthy journey through the fed- eral courts, the circuit court dismissed the suit for lack of jurisdiction under the Foreign Sovereign Immunities Act (FSIA) ,5 The FSIA pro- vides immunity to foreign governments from lawsuits in U.S. courts while codifying certain enumerated exceptions to immunity.6 One such exception allows for suits against a foreign government that has en- gaged in "act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States."7 Although the court con- cluded in an earlier decision that Peru's reward offer qualified as a "commercial activity" under the FSIA, it held that the offer did not have a sufficiently "direct effect" in the United States to merit the immunity exception.8 The correct interpretation of this direct effect requirement, however, has puzzled district courts since the FSIA was signed into law in 1976.9 The context of the Guevara case illustrates the inconsistent applications and interpretations of the "commercial activity" exception by federal courts.10 In November 2010, the Supreme Court declined an opportunity to resolve this split amongst the circuits and denied the plaintiff's petition for certiorari.11
The application of the FSIA has extended beyond simple interna- tional business disputes and now includes criminal acts, as well as the pursuit of criminals.12 The Eleventh Circuit's apparent reversal of its previous decision in Guevara illustrates the unpredictability of FSIA ap- plication and shows that a unilateral reward contract, performed in the United States, will not always be enforceable in U.S. courts.13 The con- flicting decisions in Guevara have made apparent the need for courts to interpret the direct effect requirement as Congress intended and waive immunity when foreign governments act as marketplace participants in international commerce. …