Foreign Sovereign Immunities Act of 1976 - Postjudgment Discovery

Harvard Law Review, November 2014 | Go to article overview

Foreign Sovereign Immunities Act of 1976 - Postjudgment Discovery


The Foreign Sovereign Immunities Act of 1976 (1) (FSIA) immunizes foreign state property in the United States from attachment in U.S. courts, (2) except in the case of certain assets "used for a commercial activity in the United States." (3) Last term, in Republic of Argentina v. NML Capital, Ltd., (4) the Supreme Court held that the FSIA does not also restrict the discovery of a foreign state's extraterritorial assets in aid of postjudgment attachment. (5) NML is consistent with the Roberts Court's generally formalistic approach to statutory interpretation in foreign relations law cases. However, in some recent cases the Roberts Court has considered the potential international consequences of its rulings. By contrast, the NML Court refused to consider such consequences, suggesting that its reasoning was not simply a reflection of recent trends in the Court's jurisprudence, but also owed much to the particular nature, text, and history of the FSIA.

In December 2001, the Argentine government, facing economic collapse, ceased paying its external debt. (6) NML Capital, Ltd. (NML), a holder of Argentine bonds, filed suit in the Southern District of New York to collect on its bonds. (7) Since 2003, the district court has ruled in favor of NML in several actions involving claims totaling more than $2.5 billion. (8) Argentina has refused to comply with the court's rulings and instead has transferred significant assets out of the United States to avoid attachment in U.S. courts. (9) NML in response has launched an extraordinary effort to attach Argentine assets both in the United States and around the world through lawsuits in U.S. and foreign courts respectively. (10) These attempts have even included the dramatic temporary seizure of an Argentine naval vessel in Ghana and failed plans to seize Argentina's presidential plane. (11) In 2010, NML served subpoenas on Bank of America (BOA) and Banco de la Nacion Argentina (BNA), asking for information on assets or accounts owned by Argentina without any territorial limitation. (12)

Argentina and both banks filed objections to the subpoenas with the district court. (13) The district court ultimately compelled compliance with the subpoenas; while it approved the subpoenas "in principle," it expected the parties to limit discovery to those assets "reasonably calculated to lead to attachable property." (14) After the subpoenas were narrowed, BOA, but not BNA, began complying. (15) The district court subsequently issued a second order requiring BNA to comply. (16) Argentina appealed the court's first order to the Second Circuit, arguing that it violated the FSIA. (17)

The Second Circuit affirmed the order. (18) Writing for the panel, Judge Walker (19) held that the order did not infringe upon Argentina's sovereign immunity. (20) The court first established its jurisdiction to review Argentina's appeal. (21) Then, noting that "the district court's power to order discovery ... does not derive from its ultimate ability to attach the property in question," the court considered whether the FSIA overrode ordinary federal procedural rules, which it viewed as authorizing extraterritorial discovery. (22) It ultimately determined that the FSIA did not provide for immunity against discovery orders. (23) The panel also emphasized that the subpoenas were not directed against Argentina itself but against commercial banks, which could not assert immunity. (24)

The Supreme Court affirmed. (25) Writing for the Court, Justice Scalia (26) held that the FSIA does not immunize foreign sovereigns against discovery orders in postjudgment execution proceedings, and thus ordinary discovery rules apply. (27) Assuming without deciding that the discovery NML had requested was within the scope of discovery ordinarily authorized by federal procedural rules, the Court focused on the narrow question of "whether the Foreign Sovereign Immunities Act specifies a different rule when the judgment debtor is a foreign state. …

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