Walters v. Industrial & Commercial Bank of China, Ltd., 651 F.3d 280 (2d Cir. 2011).
A recent decision by the U.S. Court of Appeals for the Second Circuit involved very high-profile parties: the People's Republic of China, its Embassy in Washington, D.C., and multiple branch representatives of its billiondollar, state-owned bank operating in New York City. (1) However, this case arose from a small-scale business transaction: the retail purchase of a Chinese-manufactured SKS semi-automatic rifle (2) during the regular course of business in the small town of Lamar, Missouri. (3) This rifle, purchased by a father for his son in 1993, allegedly malfunctioned during a hunting trip and discharged a bullet into the son's head, killing him in front of his father. (4) Since this event, the son's parents have pursued many avenues of legal action seeking justice for their loss against China and its state-affiliated companies and assets. (5) This process, pursued intermittently from 1993 to 2011, just shy of two decades, reached yet another dead end for the parents on July 7, 2011, in the Second Circuit. (6)
Walters v. Industrial & Commercial Bank of China, Ltd. presented the Second Circuit with the issue whether, in the context of the execution of assets, immunity for foreign states under the Foreign Sovereign Immunities Act (FSIA) may be considered sua sponte by a district court or at the behest of a third party. (7) The Second Circuit held that "where a judgment creditor seeks to enforce a judgment rendered against a foreign [state] by attaching or executing upon its property, a district court may [have the power to] apply the FSIA's execution immunity provisions [sua sponte,] regardless of whether the foreign sovereign enters an appearance." (8) Sua sponte, Latin for "of one's own accord; voluntarily," refers to the power of a court to raise an issue or motion without the need for another party to raise it first. (9) In the context of the FSIA, raising execution immunity sua sponte refers to the ability of a court to raise the issue of immunity without requiring a representative of a foreign state or a third party to appear in court and/or raise it personally. (10) In reaching this conclusion, the Second Circuit relied on the structure, history, and purpose of the FSIA. (11)
Walters is noteworthy for addressing several aspects of the FSIA. In addition to holding that a district court can raise the issue of immunity sua sponte, Walters reaffirmed the independence of the issues of jurisdictional immunity and execution immunity as separate and distinct principles under the FSIA. (12) Walters also asserted the narrow and "restrictive" view toward the exceptions to execution immunity under the FSIA. (13)
Walters clarifies the FSIA execution provisions, which have been described "as among the most confusing and ineffectual in the statute" and in need of reform. (14) The execution provisions under the FSIA are confusing and ineffectual for a multitude of reasons, including structure and procedure. (15) Structurally, the execution provisions are confusing because: they grant differing levels of execution immunity to instrumentalities based on whether they conduct commercial activity in the U.S.; they distinguish different grounds for obtaining attachment before or after judgment against a foreign state; and they suggest that a non-foreign state party seeking a contractual waiver of immunity with a foreign state party to attain three separate waivers of immunity for pre-judgment attachment, jurisdiction, and execution. (16) Procedurally, the execution immunity provisions are ineffectual and prevent practical application because they create an exceedingly "restrictive regime" in order to successfully enforce judgments against foreign states. (17)
This confusion arising from the execution immunity provisions under the FSIA has been a source of prolonged litigation in U. …