Bainbridge Fund Ltd. v. Republic of Argentina

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 12, 2024 Decided May 24, 2024

No. 23-7112

BAINBRIDGE FUND LTD.,

APPELLANT

v.

REPUBLIC OF ARGENTINA,

APPELLEE

Appeal from the United States District Court

for the District of Columbia

(No. 1:22-mc-00070)

Anthony J. Costantini argued the cause for appellant. With

him on the briefs was Drew T. Dorner.

Carmine D. Boccuzzi Jr. argued the cause for appellee.

With him on the brief was Rathna J. Ramamurthi.

Before: HENDERSON, Circuit Judge, and EDWARDS and

GINSBURG, Senior Circuit Judges.

Opinion for the Court filed by Circuit Judge HENDERSON.

KAREN LECRAFT HENDERSON, Circuit Judge: Bainbridge

Fund Ltd. (Bainbridge) seeks to attach property owned by the

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Republic of Argentina (Argentina) in partial satisfaction of a

judgment entered against Argentina in 2020. Pursuant to the

Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. § 1602

et seq., the property of a foreign sovereign cannot be attached

unless the sovereign waives immunity and the property is used

for commercial activity in the United States. The district court

denied Bainbridge’s application after evaluating Argentina’s

waiver of sovereign immunity in the bond giving rise to the

judgment and finding that the property in question is not used

for commercial activity.

Bainbridge appeals, arguing that the totality of the

circumstances shows that the property is used for commercial

activity and, alternatively, Argentina’s waiver extended to an

agreement not to invoke FSIA defenses, including the

commercial activity requirement. But the facts show only

aberrational commercial use over the last 25 years. In addition,

Argentina’s contractual waiver is subject to the FSIA’s

restrictions and does not amount to an explicit promise not to

raise FSIA defenses. As detailed infra, we affirm the district

court’s denial of Bainbridge’s application.

I. BACKGROUND

On December 1, 2020, in the Southern District of New

York, Bainbridge obtained a judgment against Argentina for

$95,424,899.38. The judgment arose out of Argentina’s

default on a bond owned by Bainbridge and remains unpaid.

The bond giving rise to the judgment contained the

following waiver of sovereign immunity by Argentina:

To the extent that the Republic or any of its

revenues, assets or properties shall be

entitled . . . to any immunity from suit . . . from

attachment in aid of execution of judgment,

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from execution of a judgment or from any other

legal or judicial process or remedy . . . the

Republic has irrevocably agreed not to claim

and has irrevocably waived such immunity to

the fullest extent permitted by the laws of such

jurisdiction and consents generally for the

purposes of the Foreign Sovereign Immunities

Act to the giving of any relief or the issue of any

process in connection with any Related

Proceeding or Related Judgment . . . .

J.A. 129.

Bainbridge now seeks to attach and execute upon the

Chancery Annex, a building owned by Argentina and located

at 2136 R Street NW, Washington, D.C. The property was

used to “house both diplomats and commercial tenants” several

decades ago but since 1997 has been “uninhabited and in a state

of disrepair.” TIG Ins. Co. v. Republic of Argentina, 967 F.3d

778, 780 (D.C. Cir. 2020) (discussing the Chancery Annex).

The property is subject to residential property taxes. The

Chancery Annex is used to store diplomatic files and access to

the building is limited to members of Argentina’s Ministries of

Foreign Affairs and Defense. It is allocated to the Argentine

Ministry of Foreign Affairs, International Trade & Worship

and displays the Argentine flag and seal.

The Chancery Annex is not currently for sale but

Argentina has listed the property twice. Both times Argentina

attempted to sell the property, creditors unsuccessfully sought

attachment. Argentina first listed the property in 2003 and

removed the listing from the market in January 2004. NML

Cap., Ltd. v. Republic of Argentina, 2005 WL 8161968, at *14

(D.D.C. Aug. 3, 2005). In August 2005, the district court

reviewed the property’s history and quashed the attempted

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attachment because it was no longer on the market and “there

[was] no evidence to support Argentina’s present intent to sell.”

Id. Argentina relisted the property in 2018 and received

multiple offers. TIG Ins. Co., 967 F.3d at 780. A creditor filed

a writ to attach the property and Argentina took the listing

down three days later. Id. The TIG Insurance proceedings are

ongoing. See TIG Ins. Co. v. Republic of Argentina, 2022 WL

3594601 (D.D.C. Aug. 23, 2022), appeal filed, No. 23-7064

(D.C. Cir.).

In July 2022, Bainbridge filed its application seeking both

attachment of the Chancery Annex to satisfy the judgment in

part and a writ of fieri facias. Pursuant to the FSIA, “property

in the United States of a foreign state shall be immune from

attachment” unless the property falls into one of the Act’s

enumerated exceptions. 28 U.S.C. § 1609. The exception at

issue here provides that property “used for a commercial

activity in the United States” is not immune from attachment if

“the foreign state has waived its immunity from attachment in

aid of execution.” 28 U.S.C. § 1610(a)(1). We look to the

totality of the circumstances at the time the application was

filed to determine whether a property is “used for a commercial

activity.” TIG Ins. Co., 967 F.3d at 782, 788.

The district court denied Bainbridge’s application. It held

that Section 1610(a)(1) contains two separate requirements for

attachment: (1) the building must be “used for a commercial

activity” and (2) the foreign state must waive immunity. The

parties agreed that Argentina had waived immunity but

disputed whether the Chancery Annex is used for a commercial

activity. The district court found that the building’s

commercial uses were in the distant past and, at the time of

filing, the building had some limited diplomatic uses and was

otherwise in a state of disrepair. Considering the totality of the

circumstances, the district court concluded that Bainbridge

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failed to meet its burden to show that the property was used for

commercial activity.

II. ANALYSIS

The determination as to whether a property is used for

commercial purposes “requires a court to both make factual

findings concerning how the property was used and to reach

legal conclusions concerning whether that particular use was

‘for commercial purposes.’” Af-Cap Inc. v. Republic of Congo,

383 F.3d 361, 368 (5th Cir.), decision clarified on reh’g, 389

F.3d 503 (5th Cir. 2004). We review the district court’s

determination for clear error with respect to factual findings

and de novo as to legal conclusions and the application of law

to fact. Id.; Price v. Socialist People’s Libyan Arab

Jamahiriya, 389 F.3d 192, 197 (D.C. Cir. 2004).

At this stage in the proceedings, Bainbridge bears the

burden of persuasion to show that the FSIA authorizes

attachment. Execution immunity is a “‘default presumption’

that the judgment creditor must defeat at the outset.” Weinstein

v. Islamic Republic of Iran, 831 F.3d 470, 482 (D.C. Cir. 2016)

(quoting Rubin v. Islamic Republic of Iran, 637 F.3d 783, 800

(7th Cir. 2011)), abrogated on other grounds by Rubin v.

Islamic Republic of Iran, 583 U.S. 202 (2018); accord TIG Ins.

Co., 967 F.3d at 781. Only after Bainbridge defeats the

presumption of execution immunity does the burden shift to the

sovereign to show by a preponderance of the evidence that the

claimed exception does not apply. Bell Helicopter Textron,

Inc. v. Islamic Republic of Iran, 734 F.3d 1175, 1183 (D.C. Cir.

2013).

A.

Bainbridge argues that under the totality of the

circumstances, the Chancery Annex satisfies the FSIA’s

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“commercial activity” requirement. Bainbridge points to two

kinds of commercial use the property has been put to. First, in

the 1980s and 1990s, Argentina leased the property to

commercial tenants, an “unquestionably commercial activity.”

NML Cap., Ltd., 2005 WL 8161968, at *14 (discussing the

Chancery Annex). Second, Argentina contracted with a real

estate agency and listed the property for sale in 2003–2004 and

2018. See Friedman v. Gov’t of Abu Dhabi, 464 F. Supp. 3d

52, 70 (D.D.C. 2020) (“Contracts for services are generally

considered commercial activities when entered into in the

United States.” (quotation omitted)). Bainbridge also claims

that the district court ignored important facts in the record: the

U.S. State Department has not considered the property

diplomatic in nature for “many years,” J.A. 184; the District of

Columbia designates the property as “residential,” J.A. 112;

and Argentina has paid residential property taxes since at least

2005.

Reviewing these facts and considering the totality of the

circumstances, we find no error in the district court’s

conclusion that the Chancery Annex was not “used for

commercial activity” at the time of filing.

As used in the FSIA, “commercial activity” means “either

a regular course of commercial conduct or a particular

commercial transaction or act.” 28 U.S.C. § 1603(d). Our

precedent instructs that the phrase “used for a commercial

activity” is “best interpreted as an adjectival phrase

characterizing the kind of property that may be attached” rather

than indicating any particular time frame for assessing the

property’s use. TIG Ins. Co., 967 F.3d at 786. The property

“retains its immunity protection where its commercial uses,

considered holistically and in context, are bona fide exceptions

to its otherwise noncommercial use.” Id. at 786 (quoting Af-

Cap Inc., 383 F.3d at 370). We must avoid “an artificially

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narrow lens” that would “allow[] one-time or aberrational uses

to dictate the fate of the property.” Id.; see also id. at 788

(“[J]ust as they need to steer clear of relying on the purely

future commercial uses . . . , district courts examining the

totality of the circumstances should avoid finding speculative

or aberrational commercial uses, or uses in the distant past,

sufficient to satisfy the ‘used for a commercial activity’

requirement.”).

When Bainbridge filed its writ in July 2022, the Chancery

Annex was allocated to an Argentine ministry, displayed the

Argentine flag and seal, restricted access to certain Argentinian

government officials, stored diplomatic files and was otherwise

in a state of disrepair. It was listed for sale briefly four years

earlier, as well as in 2003, and had not housed any tenants since

1997. The overall factual picture shows that, to the extent the

Chancery Annex is being used for any purpose, it has some

degree of diplomatic use and infrequent commercial use. There

was plainly no regular course of commercial conduct in 2022

and the only particular commercial acts were either in the

distant past (the commercial leases ending in 1997) or

aberrational (the two sales listings). Commercial leases that

ceased twenty-five years ago and two brief sale listings over a

period of twenty years fall far short of demonstrating

commercial use “considered holistically and in context.” See

TIG Ins. Co., 967 F.3d at 786 (quoting Af-Cap, Inc., 383 F.3d

at 370).

Bainbridge places weight on the U.S. State Department no

longer recognizing the Chancery Annex as diplomatic and

Argentina’s payment of residential property taxes, but those

facts show at most that the property is not diplomatic and do

nothing to show commercial use—the relevant inquiry here.

The Chancery Annex may be used for nondiplomatic and

noncommercial purposes and remain immune from attachment

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under the plain text of the statute, as execution immunity

remains intact so long as the property is not “used for a

commercial activity.” See 28 U.S.C. § 1610(a). The property

would be immune from attachment if it were residential or

unused by Argentina for any purpose. Bainbridge offers no

support for its claim that Argentina must show some level of

diplomatic use.1

Bainbridge also emphasizes Argentina’s alleged

gamesmanship in removing the sale listing in 2018 after a

judgment creditor filed suit to attach it and keeping the property

off the real estate market since then. But as the district court

explained, Argentina’s actions in 2018 are largely irrelevant to

our analysis because the Chancery Annex was not on the

market when Bainbridge filed suit. And Bainbridge provides

no evidence for its suggestion that keeping the property off-

market is a deliberate ploy to avoid attachment.

To the extent the Chancery Annex was being used at all

before Bainbridge filed its suit, Argentina used it primarily to

store diplomatic files. The handful of commercial acts took

place long before filing and do not control the holistic character

of the property. The totality of the circumstances thus shows

that the Chancery Annex is not a property “used for

commercial activity” under the FSIA.

1

Bainbridge cites for the first time in its reply brief Section

1610(a)(4)(B), a provision exempting from immunity non-

diplomatic property where the “execution relates to a judgment

establishing rights in property.” Any argument related to this

subsection is forfeited, as it was not cited by the district court,

Bainbridge’s opening brief or Argentina’s brief. See, e.g., Texas v.

United States, 798 F.3d 1108, 1115-16 (D.C. Cir. 2015). In any

event, Section 1610(a)(4)(B) is subject to the same “commercial

activity” limitation as (a)(1) so it would not change our analysis.

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B.

In the alternative, Bainbridge argues that even if the

Chancery Annex is not “used for commercial activity,”

Argentina has waived this requirement. Bainbridge reads the

relevant language in the bond as containing two distinct

clauses: (1) one clause in which Argentina “consent[ed]

generally for the purposes of the [FSIA] to the giving of any

relief . . . in connection with any . . . Related Judgment” (which

Bainbridge terms the “Consent Clause”); and (2) one clause in

which Argentina “irrevocably agreed not to claim and . . .

irrevocably waived such immunity to the fullest extent

permitted by the laws of such jurisdiction” (which Bainbridge

terms the “Waiver Clause”). J.A. 129. Bainbridge contends

that only the Waiver Clause is limited by the FSIA, while the

Consent Clause makes no reference to the laws of the

jurisdiction or other statutory restrictions and instead consents

for the purposes of the FSIA, meaning it amounts to an

agreement to forego invoking FSIA defenses.

The relevant contract language, however, shows that

Argentina did not waive the “commercial activity” requirement

under Section 1610(a). The so-called Consent Clause provides

consent “for the purposes of the Foreign Sovereign Immunities

Act.” J.A. 129 (emphasis added). The explicit incorporation

of the FSIA means that the most natural reading of the clause

is that Argentina’s consent is subject to the FSIA’s restrictions,

meaning all FSIA statutory defenses are available to Argentina

in litigation. This reading is supported by the fact that the

Consent Clause appears in the same sentence as the clause

waiving immunity “to the fullest extent permitted by the laws

of such jurisdiction,” J.A. 129, which Bainbridge admits limits

Argentina’s waiver to FSIA provisions. The two clauses are

linked by the conjunction “and” and there is no comma

separating them, suggesting they are closely related.

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Bainbridge’s reading strains credulity by insisting that two

clauses in the same sentence and in close proximity have vastly

different meanings and legal effects, despite the fact that both

clauses refer to laws limiting Argentina’s agreement to subject

itself to U.S. law.

This reading accords with how other courts have

interpreted identical contractual language. The Second Circuit

in EM Ltd. v. Republic of Argentina considered a bond in which

Argentina similarly agreed to “consent[] generally for the

purposes of the [FSIA].” 473 F.3d 463, 468 (2d Cir. 2007). In

response to EM Ltd.’s argument that certain foreign assets

should be immune because Argentina “affirmatively pledged

not to assert such immunity in proceedings to enforce the

judgment,” the court found that “the scope of [Argentina’s]

agreement not to claim immunity is coextensive with its waiver

of immunity; both reach only to the ‘extent permitted under the

laws of [the] jurisdiction.’” Id. at 481 n.19. And when

Bainbridge raised its Consent Clause argument in separate

proceedings against Argentina in the Southern District of New

York, the district court had little trouble concluding that the

language “clearly incorporat[es] the FSIA into the consent” and

so the “best reading is that this provision too remains cabined

by the statutory requirements of the FSIA.” Bainbridge Fund

Ltd. v. Republic of Argentina, 2023 WL 5747299, at *5

(S.D.N.Y. Sept. 6, 2023).

Even if Bainbridge’s reading is a possible construction of

the contractual language, any agreement not to raise FSIA

defenses is not clear enough to amount to a waiver. Foreign

states may waive immunity “either explicitly or by

implication.” 28 U.S.C. § 1605(a)(1). “[E]xplicit waivers of

sovereign immunity are narrowly construed in favor of the

sovereign and are not enlarged beyond what the language

requires” so that a “foreign state will not be found to have

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explicitly waived its immunity unless it has clearly and

unambiguously done so.” Wye Oak Tech., Inc. v. Republic of

Iraq, 24 F.4th 686, 691 (D.C. Cir. 2022) (cleaned up). Implied

waiver under the FSIA is also construed narrowly and requires

that the foreign state intended to waive its immunity. Id. The

Consent Clause is neither an explicit promise nor a clear

indication of Argentina’s intent to waive FSIA defenses. See

EM Ltd., 473 F.3d at 481 n.19 (Argentina did not make an

“explicit promise not to assert any of the non-waivable

protections of the FSIA in attachment proceedings”);

Bainbridge, 2023 WL 5747299, at *5 (same). Because the

bond does not evince an explicit promise or intent not to raise

FSIA defenses, we do not address whether the “commercial

activity” requirement of the FSIA is waivable, which is an issue

of first impression in our circuit.

***

For the foregoing reasons, we affirm the judgment of the

district court.

So ordered.