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United States: Supreme Court Addresses Scope of Foreign Governments’ Immunity to Discovery

(June 26, 2014) The United States Supreme Court has ruled that the Foreign Sovereign Immunities Act of 1976 (FSIA) does not grant immunity to foreign governments from discovery proceedings in litigation over the execution of judgments. (Republic of Argentina v. NML Capital, Ltd., No. 12-842 (June 16, 2014), Supreme Court website.)

In 2001, the petitioner, the Republic of Argentina, defaulted on its external debt. While some creditors agreed to restructuring, respondent NML Capital, Ltd., filed several lawsuits against Argentina and prevailed. To collect on these judgments, NML commenced post-judgment litigation and sought discovery concerning Argentina’s bank accounts and transaction histories, including information on assets outside the United States. Argentina argued that its sovereign immunity under the FSIA shielded it from providing such discovery. Both the district court and the U.S. Court of Appeals for the Second Circuit rejected Argentina’s argument. (EM Ltd. v. Republic of Argentina, 695 F.3d 201 (2d Cir. 2012), U.S Court of Appeals for the Second Circuit website.) The Supreme Court accepted Argentina’s petition to hear the case and affirmed the Second Circuit. (Republic of Argentina v. NML Capital, Ltd., No. 12-842, supra.)

The Supreme Court first observed that the only forms of immunity foreign states enjoy in U.S. courts are those provided by the text of the FSIA, which established a comprehensive statutory framework that replaced the former “executive-driven, factor-intensive, loosely common-law-based immunity regime.” (Id., slip op. at 5-7.)

Turning to the categories of immunity provided by FSIA, the Court first noted that the FSIA provides jurisdictional immunity to foreign states, but that form of immunity can be waived, as Argentina did in this case. (Id. at 7.) Second, it observed that the FSIA provides immunity to a foreign state’s property in the United States from attachment and execution, subject to exceptions, such as waiver and the foreign state’s use of the property for commercial activity. (Id.) The Court stated that there is no third category of immunity in the statute that limits discovery of a foreign state’s assets in aid of execution of judgments. (Id. at 8.) The Court acknowledged policy considerations raised by both Argentina and the United States as amicus curiae, but said that those are “better directed to that branch of government with authority to amend the Act.” (Id. at 11.)