Petition — Maritime International Nominees Establishment v. Republic of Guinea
Supreme Court brief1983
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IN THE
Supreme Court of the United States
OCTOBER TERM 1982
IN THE MATTER OF THE ARBITRATION
BETWEEN MARITIME INTERNATIONAL
NOMINEES ESTABLISHMENT,
Petitioner,
¥
THE REPUBLIC OF GUINEA,
Respondent,
THE UNITED STATES OF AMERICA,
Intervenor.
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE DISTRICT GF COLUMBIA CIRCUIT
Julius Kaplan
Counsel of Record,
KAPLAN RUSSIN & VECCHI
1218 16th Street, N.W.
Washington, D.C. 20036
(202) 638-0060
Attorneys for the Petitioner
Of Counsel:
James W. Schroeder
Robert L. Bard
THE CASILLAS PRESS, INC. — 1717 K Street N.W. — Washington, D.C. — 223-1220
(1)
QUESTIONS PRESENTED
1. Whether a foreign state is collaterally estopped
from challenging the jurisdiction of a district court to en-
force an arbitral award, where the foreign state had notice
and opportunity to litigate the identical jurisdictional issue
in an earlier proceeding between the same parties in which
the district court entered an order compelling arbitration.
2. Whether a foreign state which agrees to arbitrate
disputes with a private party in the United States, before a
panel of arbitrators to be selected by an international
organization, can be compelled by a district court to ar-
bitrate before a substitute panel of arbitrators designated
by the American Arbitration Association, where the ar-
bitration as originally stipulated cannot be carried out.
The following listed parties appeared below:
The Republic of Guinea, appellant;
Maritime International Nominees Establishment (MINE), appellee;
The United States of America, intervenor.
MINE, a Lichtenstein corporation, is (or was) affiliated with the In-
ter Maritime Bank of Geneva, Switzerland; M.I.N.E., Inc. (Panama);
M.I.N.E. (Liberia); Inter Maritime Management S.A. of Geneva,
Switzerland; Global Bulk Transport, Inc., a New York corporation
(“Global”); and affiliates of Global: States Marine International, a
Delaware corporation; Isthmian Lines, Inc.; and Trans World Car-
riers, Inc.
(ili)
TABLE OF CONTENTS
Page
ae aa aaa dan he oe She Rae eo Ow Eeed 1
Neen ea ae oa bs dO Ode Nag Oe kee OR 2
Neen cane WERKE RMRCAG RM RAD 2
seve v ek veees Vey eeceneueswends 4
REASONS FOR GRANTING THE PETITION ............... 11
Teen ee hc eek bwe san eh ekee eRe ee 20
i Lis ca pbaadsveseevernusy eet la
I ERERE REA amo Ta
ee re ad ud cds ee kee ghee un ee en 44a
TABLE OF AUTHORITIES
Cases:
Barcelona Traction Light and Power Co.,
ee ee hag ee ee as ee et b48 ey eke OER 17
Birch Shipping Corp. v. Embassy of Tanzania,
WED occ eevusevcceersroreuveneus 15
Chicot County Drainage District v. Bank,
eC 11
Cook Industries, Inc. v. C. Itoh & Co. (America),
449 F.2d 106 (2d. Cir. 1971), cert. denied,
Neen en. cane see see pene’ 14
Insurance Corporation v. Compagnie des Bauxites,
U.S. eee 10, 11, 13
Ipitrade Int'l, S.A. v. Federal Republic of Nigeria,
SS a 15
(iv)
Island Territory of Curacao v. Solitron Devices, Inc.
356 F. Supp. 1 (S.D.N.Y 1973), aff'd, 489
F.2d 1313 (2d Cir. 1973), cert. denied, 416 U.S.
986 (1974)
Libyan American Oil Co. v. Libya,
482 F. Supp. 1175 (D.D.C. 1980),
vacated by stipulation, No. 80-1207
is als Gy GED 3 ves cee ecdis wsceees
Montana v. United States,
oo errr rere
Railroad Commission of Texas v. Pullman Co.,
PER RENO 6 soda casenisevedevseeedewes
Scherk v. Alberto-Culver Co.,
CET a I 8 have 8 adoe Cees ei Naeeevaews
Stoll v. Gottlieb,
ee ED oka Soke bce Nieeranencneetene
T & R Enterprises v. Continental Grain Co.,
te breris le | = errrerer Terr rr rrr
United States v. Moser,
pe PT Tee ree ee
Verlinden B.V. v. Central Bank of Nigeria,
488 F. Supp. 1284 (S.D.N.Y. 1980), aff'd on
other grounds, 647 F.2d 320 (2d Cir. 1981),
cert. granted, U.S. , 71 L.Ed.2d 291 (1982)
Constitution, Statutes and Treaties:
United States Constitution
I rs onnene speech een khdetebeerseees
Federal Arbitration Act, 9 U.S.C. § | ef seq.
SEE nb caals ne peeynentleknewdeebenieeas
eat og Jaane cee amaiareies
STHEHSFCOCPSCPEHHKCSCHVEC VERBS VR EHC RTE CeO 8
Page
,
(v)
Page
En oa, ce pe diou he eeu bh. Cees RC ORAL eNeN aR Keen WERS 5
IN ele as panes eaies Wasa tkUN ONS eEeS MONTES 6
ee oo i dove ceanecuddnavesstcerins eas ne res 19
i Le leak Gh ane a geri ee Rekieeed eaves 8,19
eas bo weap aReha wes ev Rabe ee a cece een ee 2
Foreign Sovereign Immunities Act of 1976,
28 U.S.C. §§ 1330, 1602 ef seq.
ERE SR ee ene eee ee eee passim
es Oc awh ad be eetawnsewnas eu nen 2, 6
oh ic cewe ydus ssesenneusuewss 7, 45
i os ced el ekuseyceesknsseur ened 7,10
es wea eA oad we vind dues sate eae 6
I OT EPP E TE Ty eee eT TC 6
Convention on the Settlement of Investment Disputes
between States and Nationals of Other States, done
at Washington, March 18, 1965, 17 U.S.T. 1270,
T.I.A.S. No. 6090
ches ceo eva cocneh eerie eee CAhee RHE RN ESR OM passim
RD pape para ner ae pers apace LR yr oer 16
RR ey ce eee eer Pier pera) Cree eran Ae ees rye A gear 3, 16
ooo a hae 5S eS ROR Oe ROSELLE DER EEE DED EERE 16
RLM Sacco ia ey Gee CREEL SCER EEN SOMO ER TTS EC ES OS way 44
United Nations Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, 21 U.S.T.
ae ND ig aces ee ee seueedi ones eek sen 19
International Materials:
Convention on the Settlement of Investment Disputes
between States and Nationals of Other States,
Documents Concerning the Origin and Formulation
of the Convention, Vol. II, Pt. I (1968) ..................... 17
ICSID Regulations and Rules,
i I SEE os bed waed vce sue eeeaen pe eeens 16
Law No. 66/AN/62, Journal Officiel de la
Republique de Guinee, October 1, 1962 ............0..00005: 16
(vi)
Page
Miscellaneous:
H. Rep. No. 94-1487, 94th Cong., 2d Sess .............0 ee eee 15
Tedeschi, The Determination of Corporate Nationality,
rr a eee CU agers ucwenee iweeve i7
IN THE
Supreme Court of the United States
OCTOBER TERM 1982
No.
IN THE MATTER OF THE ARBITRATION
BETWEEN MARITIME INTERNATIONAL
NOMINEES ESTABLISHMENT,
Petitioner,
Vv.
THE REPUBLIC OF GUINEA,
Respondent,
THE UNITED STATES OF AMERICA,
Intervenor.
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Petitioner, Maritime International Nominees Establish-
ment, respectfully prays that a writ of certiorari issue to
review the judgment of the United States Court of Appeals
for the District of Columbia Circuit which reversed, for
lack of subject matter jurisdiction, a judgment of the
United States District Court of the District of Columbia
confirming an arbitral award against the Respondent.
OPINIONS BELOW
The memorandum opinion of the District Court is re-
ported at 505 F. Supp. 141, and is set forth in Appendix
2
A, infra, 1a-6a. The opinion of the Court of Appeals of
November 12, 1982, is reported at 693 F.2d 1094, and is
set forth in Appendix B, infra, 7a-43a; an amendment to
that opinion of January 27, 1983, is not reported, and is
set forth in Appendix C, infra, 44a-49a.
JURISDICTION
The judgment of the Court of Appeals was entered on
November 12, 1982. A timely petition for rehearing was
denied on January 27, 1983. The jurisdiction of this Court
is invoked under 28 U.S.C. § 1254(1).
STATUTE AND TREATY INVOLVED
1. The Foreign Sovereign Immunities Act of 1976
(“FSIA”), 28 U.S.C. §§ 1330, 1602 et seg., provides in
relevant part as follows:
§ 1330. Actions against foreign states
(a) The district courts shall have original
jurisdiction without regard to amount in con-
troversy of any nonjury civil action against a
foreign state as defined in section 1603(a) of this
title as to any claim for relief in personam with
respect to which the foreign state is not entitled
to immunity either under sections 1605-1607 of
this title or under any applicable international
agreement.
(b) Personal jurisdiction over a foreign state
shall exist as to every claim for relief over which
the district courts have jurisdiction under subsec-
tion (a) where service has been made under sec-
tion 1608 of this title.
3
§ 1605. General exceptions to the jurisdictional
immunity of a foreign state
(a) A foreign state shall not be immune from
the jurisdiction of courts of the United States or
of the States in any case —
(1) in which the foreign state has waived its
immunity either explicitly or by implication,
notwithstanding any withdrawal of the
waiver which the foreign state may purport
to effect excent in accordance with the terms
of the waiver;
(2) in which the action is based upon a
commercial activity carried cn in the United
States by the foreign state; or upon an act
performed in the United States in connec-
tion with a commercial activity of the
foreign state elsewhere; or upon an act out-
side the territory of the United States in con-
nection with a commercial activity of the
foreign state elsewhere and that act causes a
direct effect in the United States; ...
2. The Convention on the Settlement of Investment
Disputes between States and Nationals of Other States,
done at Washington March 18, 1965, 17 U.S.T. 1270,
T.LA.S. No. 6090 (“ICSID Convention”), provides in Ar-
ticle 25(1) as follows:
The jurisdiction of the Centre shall extend to
any legal dispute arising directly out of an invest-
ment, between a Contracting State (or any con-
stituent subdivision or agency of a Contracting
State designated to the Centre by that State) and
a national of another Contracting State, which
the parties to the dispute consent in writing to
submit to the Centre. When the parties have
4
given their consent, no party may withdraw its
consent unilaterally.
STATEMENT OF THE CASE
In 1971, petitioner, Maritime International Nominees
Establishment (“MINE”), a Lichtenstein corporation, and
the Republic of Guinea (“Guinea”) contracted to establish
SOTRAMAR, a “mixed economy company” under the
laws of Guinea, which was to ship bauxite mined in
Guinea to Europe and the United States (“SOTRAMAR
Agreement;” !.A. 205-27)'. Chapter XVIII of the Agree-
ment prescribed binding arbitration to resolve disputes
which could not be resolved through conciliation (J.A.
226). The arbitral panel was to be selected as follows:
There shall be 3 (three) arbitrators. These will be
selected by the President of CIRDI [?] at the
joint request of the parties or failing this, at the
request of the most diligent party. (J.A. 226).
The SOTRAMAR Agreement was subsequently sup-
plemented to designate the “President of the International
Court of Settlement of International [sic] Disputes in
Washington (CIRDI)” as the person who would select the
three arbitrators (J.A. 229).
Guinea breached the SOTRAMAR Agreement (J.A.
343), and after efforts at informal conciliation failed,
MINE sought to arbitrate the dispute. Since officials of
the International Centre for the settlement of Investment
'The reference “J.A.” is to the Joint Appendix in the Court of Ap-
peals, a copy of which has been lodged with the Clerk of this Court.
2*CIRDI” is the French acronym for the international Centre for
Settlement of Investment Disputes in Washington, D.C.
5
Disputes (“ICSID”) do not designate commercial ar-
bitrators pursuant to the language of the SOTRAMAR
Agreement (J.A. 293-94), MINE and Guinea executed a
consent instrument to be submitted to ICSID to obtain an
appointment of arbitrators (J.A. 45). After execution of
the consent instrument, MINE concluded that its
Lichtenstein nationality made it ineligible to use ICSID’s
dispute resolving machinery since Lichtenstein is not a
party to the ICSID Convention. In an attempt to over-
come this jurisdictional deficiency, and because MINE’s
affiliate, MINE Inc., had been substituted as the private
party to the agreement (J.A. 232), MINE requested
Guinea to execute a revised consent instrument (J.A. 46).
Guinea, however, did not execute the revised consent and
broke off all further communications with MINE.
In January, 1978, frustrated in its efforts to have ICSID
appoint arbitrators or to obtain Guinea’s cooperation for
a valid submission to ICSID, MINE commenced an ac-
tion’ in the district court under the Federal Arbitration
Act (“FAA”), 9 U.S.C. § 1 et seq. to enforce the parties’
undertaking to arbitrate their disputes (J.A. 6-10). MINE
petitioned the district court to compel arbitration and to
name substitute arbitrators under Sections 4 and 5 of the
Federal Arbitration Act, 9 U.S.C. §§ 4, 5. Subject matter
jurisdiction and personal jurisdiction over Guinea was in-
3See also n. 11, infra.
‘Prior to the institution of the action, MINE’s new counsel address-
ed a letter to the Guinean Ambassador to the United States asking
again whether Guinea would consent to arbitration. (Exhibit F to
MINE’s Petition to Compel Arbitration; reproduced in the Adden-
dum 4 to MINE’s Brief in the Court of Appeals, D.C. Cir. No.
91-1073). The Ambassador had on previous occasions engaged in
several business-oriented contacts with MINE related to the
SOTRAMAR agreement (App. A, 6a). No response was received to
that request.
6
voked under the Foreign Soverign Immunities Act of 1976
(“FSIA”), 28 U.S.C. §§ 1330, 1604(a)(1) and (a)(3). Ser-
vice on Guinea was effected under Section 1608(a) of the
FSIA (J.A. 47). Guinea did not appear.
After a hearing, the district court issued an order com-
pelling arbitration of the dispute before a panel to be
selected by the American Arbitration Association (J.A.
48-49). In entering the order, the district court found “that
the making of the agreement for said arbitration is not an
issue,” and that “there has been a lapse in the appointment
of arbitrators and frustration of the intent to arbitrate as
provided in the said agreement because the respondent has
failed to avail itself of the method of naming arbitrators
provided for in the said agreement.” (/d). A copy of the
district court’s order was served on Guinea in accordance
with Section 1608(a) of the FSIA and governing Depart-
ment of State regulations. (J.A. 50). Guinea made no at-
tempt either to set aside or to appeal the district court’s
order.
in the ensuing two-year period, extensive arbitration
proceedings were held in Washington, D.C., before a
panel designated by the American Arbitration Associa-
tion. Through notices sent to the Guinean Ministry of
Foreign Affairs, and its Embassy in Washington, Guinea
was kept abreast of the status of the proceedings and was
repeatedly asked to appear and respond (J.A. 92-101).
Guinea, however, chose not to appear, participate, or
communicate with the arbitral panel. In June, 1980, the ar-
bitral panel rendered an award in favor of MINE (J.A.
89-90), which was again duly served upon Guinea (J.A.
101, 121-22).
In August, 1980, MINE filed a motion in the district
court under Section 9 of the FAA, 9 U.S.C. § 9, for an
order confirming the arbitral award and for entry of judg-
ment. A copy of the motion to confirm was served on
Guinea in the same manner as all previous notices (J.A.
69-71). This time, Guinea appeared and challenged both
the district court’s jurisdiction to confirm the award, as
well as its jurisdiction to compel the arbitration which
resulted in the award that MINE now sought to confirm
(J.A. 125-141).
Following extensive briefing and oral argument, the
district court found that it had subject matter jurisdiction
and in personam jurisdiction to compel arbitration and to
confirm the ensuing arbitral award, and issued an order
confirming MINE’s award (J.A. 297). In its accompanying
memorandum opinion, the court found that Guinea had
implicitly waived its sovereign immunity from suit by
agreeing to arbitration that could be expected to be held in
the United States. This waiver gave the district court the
requisite subject matter jurisdiction under Section
1605(a)(1) of the FSIA (App. A, 5a). The court also found
jurisdiction under Section 1605(a)(2) of the FSIA, based
upon Guinea’s extensive activities in the United States in
connection with this commercial contract (App. A, 6a).
Based on these jurisdictional findings, the court concluded
that “it is clear that the Order compelling arbitration was
proper, . . . and that this Court has authority to confirm
the award.”5
SAfter entry of judgment, Guinea moved in the district court for a
new trial or for relief from judgment on the ground that “newly
discovered evidence” showed that MINE’s service of process had been
defective under the FSIA. (J.A. 305). Coupled with the motion was an
application for a stay of the judgment until the district court had ruled
on the motion for a new trial. The district court denied both motions,
but allowed Guinea five days to seek a stay from the Court of Appeals
rp nding appeal. (J.A. 325). Such a stay was granted by the Court of
Appeals. (App. B, 15a).
8
The Court of Appeals reversed.* Although Guinea rais-
ed numerous issues,’ the Court disposed of the Appeal on
‘The United States was granted leave to intervene in the appeal to
submit argument in support of the constitutionality of the FSIA,
which Guinea had challenged. Adopting the rationale of the Second
Circuit in Verlinden, B.V. v. Central Bank of Nigeria, 647 F.2d 320
(1981), Guinea argued that Congress could not, consistent with Article
Ill of the Constitution, confer jurisdiction on federal courts to hear
suits by foreign corporations against foreign states. In view of the
disposition of the appeal on jurisdictional grounds, the Court of Ap-
peals did not reach the constitutional issue.
The United States also filed a “suggestion of interest,” setting forth
the background and the Executive Branch’s general position with
respect to the LCSID Convention. The United States suggested that if
a foreign state consents to ICSID jurisdiction only, such consent
should not be regarded as a waiver of sovereign immunity from suit in
the courts of the United States, other than for purposes of enforcing
an ICSID award under 22 U.S.C. § 1650a; the United States further
urged that where it is unclear whether ICSID has jurisdiction, the case
should be stayed and the matter referred to ICSID for a jurisdictional
ruling. Brief of the United States of America as Intervenor and Sug-
gestion of Interest, D.C. Cir. No. 81-1073.
’The Court of Appeals summarized the issues raised by Guinea as
follows (App. B, 1Sa-16a):
First, [Guinea] claims that the District Court lacked sub-
ject matter jurisdiction because: (1) the court erred in rul-
ing that Guinea was not immune under the FSIA; (2) even
assuming non-immunity, the FSIA does not purport to
confer subject matter jurisdiction over suits between
foreign plaintiffs and foreign states; (3) the FSIA would be
unconstitutional if read to confer such jurisdiction; and (4)
the signing by both parties of the first ICSID consent form
committed them to an ICSID arbitration and therefore
deprived the District Court of jurisdiction.
Second, Guinea claims that MINE’s service of process
upon it was inadequate under the FSIA, and therefore that
the District Court lacked personal jurisdiction under the
FSIA. Third, Guinea attacks the arbitration award itself,
contending (1) that the arbitrators exceeded their authority
by disregarding the liquidated damages provision of the
contract, (2) that the arbitrators lacked power to delegate
9
the basis of a single issue, viz., that the district court lack-
ed subject matter jurisdiction to confirm the arbitration
award because Guinea had not waived its sovereign im-
munity. (App. B, 8a).
The Court of Appeals rejected Guinea’s belated jurisdic-
tional challenge to the district court’s earlier order to com-
pel arbitration. The Court ruled that the proceeding to
compel arbitration was an independent action under the
FAA and the ensuing order to compel was a final and ap-
pealable order. Since Guinea had failed to appeal that
order within the statutory period, the order became res
judicata between the parties and “Guinea cannot now, by
way of appealing the confirmation order, obtain review of
the earlier order to compel.” (App. B, 15a n.8).
But despite the fact that Guinea’s grounds for challeng-
ing the jurisdiction of the court to confirm the award were
identical to those asserted in support of the challenge to
the district court’s power to compel arbitration, the Court
of Appeals held that Guinea’s non-appearance in the
earlier proceedings did not preclude it from challenging
the district court’s authority in the later confirmation pro-
ceedings. The Court brushed aside the doctrine of col-
lateral estoppel with the observation that “that doctrine re-
quires that... issues... [of] jurisdiction be fully
litigated before they are preclusively established” (App. B,
16a n.9).
The Court of Appeals based its decision that Guinea
had not waived its sovereign immunity from suit in the
the task of damage calculation to an accounting firm, (3)
that the award was based on evidence outside the record,
and (4) that MINE obtained an AAA arbitration by
misrepresenting before the District Court the availability
of an ICSID arbitration.
10
courts of the United States on the finding that Guinea only
agreed to arbitrate before ICSID, and that an agreement
to arbitrate before ICSID does not constitute a waiver of
sovereign immunity within the purview of the FSIA (App.
B, 18a-25a). In its original opinion, the Court rejected
MINE’s argument that the parties had not intended to sub-
mit the entire dispute to ICSID, but had intended commer-
cial arbitration in the United States before arbitrators
selected by the “President” of ICSID. The Court ruled that
because MINE had not made the argument in the district
court, it was precluded from arguing on appeal that the
SOTRAMAR Agreement committed Guinea to any ar-
bitration other than arbitration under the ICSID Conven-
tion.
The Court also reversed the districts court’s finding that
Guinea’s commercial activities in the United States in con-
nection with the SOTRAMAR agreement established sub-
ject matter jurisdiction under Section 1605(a)(2) (App. B,
27a).
MINE sought rehearing on the ground that the Court of
Appeals was demonstrably incorrect when it assumed that
MINE had failed to argue below that the arbitration clause
in the SOTRAMAR Agreement stipulated non-ICSID,
commercial arbitration (App. B, 20a). MINE further
urged that this Court’s recent decision in Jnsurance Corp.
v. Compagnie des Bauxites, ___. U.S. ___, 72 L. Ed. 2d
492 (1982), required the application of the principle of col-
lateral estoppel to Guinea’s belated attack on the district
court’s subject matter jurisdiction.
The Court of Appeals denied the rehearing petition, but
made extensive revisions in its earlier opinion (App. C,
44a-49a). The Court now held that, based upon its own ex-
amination of the circumstances surrounding the execution
1]
and implementation of the SOTRAMAR Agreement, the
district court’s waiver holding “was unquestionably” based
on the factual conclusion that the parties had con-
templated an ICSID arbitration, and it declined to disturb
that finding (App. C, 45a). As to collateral estoppel, the
Court distinguished the Compagnie des Bauxites case on
the grounds that Guinea’s immunity defense was based on
lack of personal, as well as subject matter, jurisdiction;
therefore, Guinea was not foreclosed from challenging the
district court’s jurisdiction in a collateral proceeding (App
C, 49a).
REASONS FOR GRANTING THE PETITION
If left standing, the Court of Appea!s’ decision will
seriously .compromise the principle of finality which
underlies the doctrine of collateral estoppel, which, in
turn, will limit the utility of arbitration as an alternative to
litigating commercial disputes with foreign states.
1. In an unbroken line of decisions, reaffirmed only
last Term in Jnsurance Corp. v. Compagnie des Bauxites,
supra, this Court established the rule that a party which
has challenged the subject matter jurisdiction of a federal
court, or has had the opportunity to challenge subject
matter jurisdiction, is estopped from relitigating subject
matter jurisdiction in another proceeding between the
same parties in the same or in a different forum. Chicot
County Drainage District v. Bank, 308 U.S. 371 (1940);
Stoll v. Gottlieb, 305 U.S. 165 (1938); United States v.
Moser, 266 U.S. 236 (1926). This principle applies to
governmental parties as well as private parties. Montana
v. United States, 440 U.S. 147 (1979).
The Chicot County case is especially apposite here.
There, the Court applied the rule of collateral estoppel
under circumstances where the district court had based its
12
jurisdiction in the prior proceedings upon a statute that
had been declared unconstitutional by this Court in
another suit between different parties. The jurisdiction of
the district court in the later proceedings was based on the
same invalid statute. Furthermore, the party challenging
subject matter jurisdiction had not appeared in the
original proceedings, though it had the opportunity to do
so, and the issue of subject matter jurisdiction had not
been raised in those proceedings.
The foregoing precedents clearly control this case. The
Court of Appeals’ ruling that the order to compel arbitra-
tion before a panel selected by the American Arbitration
Association was res judicata between the parties necessari-
ly implied that the district court had the requisite subject
matter and personal jurisdiction to issue that order. Since
the district court’s subject matter jurisdiction to confirm
the award rested on exactly the same legal predicate as its
subject matter jurisdiction to compel arbitration, Guinea
should have been collaterally estopped from challenging
the court’s subject matter jurisdiction to confirm the
award.
A more compelling case for the application of the doc-
trine of collateral estoppel than the present can hardly be
hypothesized. In both the 1978 action to compel arbitra-
tion and in the 1980 action to confirm the arbitral award,
the parties were the same, the court was the same, the con-
tract in dispute was identical, and the jurisdictional
predicates for the two proceedings were identical. Guinea
had repeated actual notice of the proceedings and full op-
portunity to challenge the district court’s jurisdiction to
issue the order compelling arbitration; to move to set aside
the order, once it was issued; and to seek direct review of
the district court’s order. In addition, Guinea received no
less than thirty-two notices in the follow-on arbitration
proceedings (J.A. 92-101).
13
Guinea elected not to appear in the district court, and it
likewise assumed a “wait-and-see” attitude in the arbitra-
tion proceedings. But Guinea’s abstention carried a risk
which the law imposes on all litigants — governmental and
private — under such circumstances, namely, that the trial
court would determine its jurisdiction on its own, Stoll v.
Gottlieb, supra, 305 U.S. at 171, and that such determina-
tion would become final and binding on Guinea in a subse-
quent proceeding regarding the same dispute even if the
determination was reached upon an erroneous assessment
of the facts or by an erroneous application of the law.
United States v. Moser, supra, 266 U.S. at 242.
The Court of Appeals’ attempt, in its revised opinion, to
distinguish /nsurance Corp. v. Compagnie des Bauxites,
supra, on the basis of a passing remark in that opinion
that a defendant is always free to ignore the judicial pro-
ceeding and challenge an ensuing judgment collaterally (72
L. Ed. 2d at 504), is ill-conceived. The Court’s remark ad-
dressed solely the issue of collateral attack on in personum
jurisdiction, not subject matter jurisdiction, which was the
sole basis for the Court of Appeals’ reversal of the order to
confirm the award. Other portions of the Compagnie des
Bauxites opinion leave no doubt that subject matter
jurisdiction may not be collaterally attacked so long as the
party has had the opportunity to litigate that issue —
regardless of whether it availed itself of that opportunity.
As this Court stated:
A party that has had the opportunity to litigate
the question of subject matter jurisdiction may
not, however, reopen that question in a collateral
attack upon an adverse judgment. It has long
been the rule that principles of res judicata apply
to jurisdictional determinations — both subject
matter and personal. [Citations omitted; 72 L.
Ed. 2d at 501 n. 9].
14
The Court of Appeals’ erroneous ruling on the lack of
preclusive effect of the district court’s earlier order will
also seriously undermine the utility of arbitration as an
alternative to litigation of commercial disputes with
foreign states. Where, as here, the availability ve/ non of
commercial arbitration is belatedly disputed by one party
to an arbitration agreement, rudimentary fairness and
orderly administration of justice demand that the party
resisting arbitration raise its challenge at the earliest op-
portunity, before the other party embarks upon protracted
and expensive arbitration.’ For the arbitral process to
work, the party enlisting the aid of the courts must have
some assurance that issues such as the arbitrability of the
dispute and the subject matter jurisdiction of the court to
compel arbitration are not raised for the first time years
later when, as here, proceedings to confirm the award
become necessary. But this is exactly what the Court of
Appeals has permitted Guinea to do when it disregarded
the principle — so consistently reiterated by this Court —
that subject matter jurisdiction may not be collaterally at-
tacked where a party has had the opportunity to litigate
that issue.
A strict application of the doctrine of collateral estoppel
is thus of signal importance to the policy of favoring the
8 See Island Territory of Curacao v. Solitron Devices, Inc., 356 F.
Supp. 1, 12(S.D.N.Y. 1973), aff'd, 489 F.2d 1313 (2d Cir. 1973), cert.
denied, 416 U.S. 986 (1974) (“[D]efendant was fully advised as to the
employment of the arbitrator but remained silent and made no objec-
tion to his acting.”); 7 & R Enterprises v. Continental Grain Co., 613
F.2d 1272 (Sth Cir. 1980) Cook Industries, Inc. v. Itoh & Co.
(America), 449 F.2d 106, 107-108 (2d Cir. 1971), cert. denied, 405 U.S.
921 (1972). (“[A party] cannot remain silent, raising no objection dur-
ing the course of the arbitration proceeding, and when an adverse
award to him has been handed down complain of a situation of which
he had knowledge from the first.”)
15
settlement of international and domestic disputes by ar-
bitration.
2. The Court of Appeals’ ruling undermines the prime
objective of the FSIA by frustrating a foreign investor’s
clear intent to have its disputes with a foreign state resolv-
ed by an effective form of arbitration. Subsection (a)(1) of
Section 1605 of the FSIA provides that foreign states are
not immune from the jurisdiction of the courts of the
United States in any case “[i]n which the foreign state has
waived immunity either explicitly or by implication.” The
legislative history of that provision expressly mentions as
examples of implicit waivers “cases where a foreign state
has agreed to arbitration in another country... .” H.
Rep. No. 94-1487, 94th Cong., 2d Sess., 18.9 The Court of
Appeals held that the arbitration clause in the
SOTRAMAR Agreement was not an agreement “to ar-
bitration in another country” (App. B, 24a) and,
therefore, did not constitute a waiver of sovereign im-
munity within the purview of Section 1605(a)(1) of the
FSIA. This holding ignores the manifest intent of the par-
®°Lower federal courts have placed varying and inconsistent inter-
pretations on Section 1605(a)(1)’s waiver provision. Compare,
Verlinden B.V. vy. Central bank of Nigeria, 488 F. Supp. 1284
(S.D.N.Y. 1980) aff'd on other grounds, 647 F.2d 320 (2d Cir. 1981),
cert. granted, US. , 71 L. Ed. 2d 291 (1982) (agreement by
Nigeria to arbitrate in France under Swiss law does not waive immuni-
ty in U.S. courts); with Ipitrade Int’l, S.A. v. Federal Republic of
Nigeria, 465 F. Supp. 824 (D.D.C. 1978) (agreement by Nigeria to ar-
bitrate in France under Swiss law waives immunity in U.S. courts); Li-
byan American Oil Co. v. Libya, 482 F. Supp. 1175 (D.D.C. 1980),
vacated by stipulation, No. 80-1207 (D.C. Cir. May 6, 1981) (agree-
ment by Libya to arbitrate under Libyan and international law, loca-
tion not specified, but eventually arbitrated in Switzerland, waives im-
munity in U.S. courts); and, Birch Shipping Corp. v. Embassy of Tan-
zania 507 F. Supp. 311 (D.D.C. 1981) (agreement by Tanzania to ar-
bitrate, location not specified, but eventually arbitrated in New York,
waives immunity in U.S. courts).
16
ties to have their disputes resolved by commercial arbitra-
tion.'°®
But even if the parties intended ICSID arbitration only,
they must have intended an ICSID arbitration that could
be realized, that is, arbitration proceedings consistent with
the ICSID Convention and the rules of practice of
ICSID.!!
Under Article 25(1) of the ICSID Convention, supra,
the jurisdiction of ICSID is limited to disputes in which
both the respondent state and the state of which the
private party is a national have ratified the ICSID Conven-
tion.'? MINE is a Lichtenstein corporation and Lichten-
stein has not ratified the Convention. Under the express
'0Guinea entered into the SOTRAMAR Agreement pursuant to the
Guinean law on “mixed economy companies,” which provides that the
“State in a mixed economy company is a shareholder, like any other,
and its rights and obligations are those derived from its statute [sic] as
the shareholder, rather than as the State.” (Law No. 66/AN/62, Jour-
nal Officiel de la Republique de Guinee, October 1, 1962; J.A. 300 n.1).
The Court of Appeals rejected MINE’s argument that by becoming
a participant in a commercial enterprise, and by agreeing to arbitrate
disputes involving that interprise, Guinea expressly waived its
sovereign immunity (App. B, 2).
''The ICSID Convention contemplates arbitration in accordance
with a procedural scheme set out in separate rules. See /CSID Regula-
tions and Rules, Doc. ICSID/4/Rev. 1 (1975). But ICSID itself does
not arbitrate disputes; rather, it arranges for arbitrations by maintain-
ing a list of arbitrators designated by Contracting States and by the
President of the World Bank. (ICSID Conventi. n, Arts. 12-16). The
parties to a dispute are not limited in selecting arbitrators to the ICSID
list (id., Art. 40), and they are free to stipulate alternative procedures
for the conduct of the arbitration (id., Art. 44). There are no provi-
sions for the mere appointment of commercial arbitrators.
'2In addition to meeting the Convention’s nationality requirement,
consent of the parties is an essential prerequisite for the jurisdiction of
ICSID. Jurisdiction is further limited by reference to the nature of the
dispute.
17
language of the Convention and established principles of
international law,'? MINE could not use the Convention
machinery for the arbitration of disputes.
The ICSID Convention is part of the law of the land,
and its interpretation is uniquely a function of the
judiciary. Whether the parties’ endeavor to bring the
dispute before ICSID was legally realizable could have
been ascertained with facility by the Court of Appeals.
If the dispute was ineligible for arbitration under the
auspices of ICSID, it is implausible to assume, as the
Court of Appeals did, that the parties intended arbitration
which could not be carried into effect. Since the arbitra-
tion clause in the Agreement makes arbitration the sole
method for the resolution of all disputes and claims bet-
ween the parties, MINE would be deprived of all redress
for Guinea’s breach of the SOTRAMAR Agreement. The
Court of Appeals’ ruling, thus, leads to the absurd result
that a sophisticated foreign investor who puts large sums
of money at risk in a developing country on condition that
there will be arbitration, and secures the express written
agreement of the foreign sovereign-partner to arbitration,
is denied all remedy. To foreclose the possibility of this
patently unfair and illogical result, the Court of Appeals
should have examined whether the ICSID Convention
'3Barcelona Traction Light and Power Co., [1970] I.C.J. 3. See
also, Tedeschi, The Determination of Corporate Nationality, 50
Australian L.J. 521 (1976).
An earlier draft of the ICSID Convention proposed a broader
definition of nationality including a piercing of the corporate veil.
Convention on the Settlement of Investment Disputes between States
and Nationals of Other States, Documents Concerning the Origin and
Formulation of the Convention, Vol. II, Pt. I, 230 (1968). The pro-
posal was strongly opposed, and ultimately dropped from the final
draft. Jd. at 359-61, 445-51, 537-40.
18
could accommodate an arbitration of the dispute between
the parties under the auspices of ICSID.
If, on the other hand, the Court of Appeals was not
prepared to explore the jurisdictional ramifications of the
ICSID Convention on its own, the Court should have
adopted the suggestion of the United States, stayed the
proceedings, and instructed the district court to obtain an
authoritative ruling from ICSID as to whether the dispute
was capable of arbitration under the ICSID Convention
and the Rules of ICSID.'*
The Court of Appeals’ facile conclusion that Guinea’s
consent to ICSID arbitration conclusively establishes
ICSID’s exclusive jurisdiction, and did “not foresee... a
role for United States courts” (App. B, 25a), without
regard to the effectiveness of the consent, constitutes an
erroneous interpretation of a key component of an im-
'4The United States submitted in its suggestion of interest (supra,
n.6, pp. 48-49) in relevant part as follows:
To prevent United States courts from improperly assert-
ing jurisdiction over ICSID cases, and to accord the
necessary deference to ICSID’s jurisdictional autonomy,
the United States submits that a rule of abstention should
be followed in U.S. courts. Cf., Railroad Commission of
Texas v. Pullman Co., 312 U.S. 496 (1941). Where cases
brought initially in the courts arguably come within
ICSID’s exclusive jurisdiction, the proceedings must be
Stayed to permit the party alleging ICSID’s unavailability
to obtain a definitive ruling from ICSID. Once ICSID
makes its determination, either the case would remain
Within the Centre’s exclusive jurisdiction, or, if ICSID
finds that it lacks jurisdiction, the court would be free to
address the case itself, assuming it has an independent
basis for exercising jurisdiction over the parties.
This proposed rule is similar to the procedure recently
urged by the United States to accommodate similar prin-
Ciples of exclusivity and autonomy over jurisdiction by the
Iran-U.S. Claims Tribunal.
19
portant treaty of the United States, without any analysis
of the treaty and its negotiating history. Moreover, it leads
to the untenabie result that United States courts are
unavailable to enforce the express agreement of the parties
here to arbitrate their disputes, “even though the agreed-to
arbitration would probably take place on United States
soil.” (App. B, 25a).
In the context of this case, such a holding undermines
the strong national policy of this country favoring the ar-
bitrability of transnational commercial disputes, Scherk v.
Alberto-Culver Co., 417 U.S. 506 (1974), and the enforce-
ment of arbitral awards settling such disputes. '*
The petition, we submit, presents important and recurr-
ing questions of interpretation of the Foreign Sovereign
Immunities Act of 1976 and of the ICSID Convention that
have not been, but should be, addressed by this Court.
'SSee the United Nations Convention on the Recognition and En-
forcement of Foreign Arbitral Awards, 21 U.S.T. 2517, T.1.A.S. No.
6997, and its implementing legislation, 9 U.S.C. §§ 201 ef seq. See
also the act rendering enforceable arbitration awards rendered under
the ICSID Convention, 22 U.S.C. § 1650a.
20
CONCLUSION
For the foregoing reasons, the petition for a writ of cer-
tiorari should be granted.
Respectfully submitted,
Julius Kaplan
Counsel of Record.
KAPLAN RUSSIN & VECCHI
1218 16th Street, N.W.
Washington, D.C. 20036
(202) 638-0060
Attorneys for the Petitioner.
Of Counsel:
James W. Schroeder
Robert L. Bard
APRIL, 1983.
APPENDIX
la
APPENDIX A
In the Matter of the Arbitration between
MARITIME INTERNATIONAL NOMINEES
ESTABLISHMENT, Petitioner,
V.
The REPUBLIC OF GUINEA,
Respondent.
Civ. A. No. 78-388.
United States District Court,
District of Columbia.
Jan. 12, 1981.
MEMORANDUM
GESELL, District Judge.
Petitioner in this case is seeking an order confirming an
arbitration award in excess of $25,000,000 made following
this Court’s Order of June 15, 1978, directing the parties
to arbitrate. The Republic of Guinea, after ignoring the
earlier proceedings and failing to participate in the arbitra-
tion, now comes forward at the eleventh hour contending
that this Court is without jurisdiction. Although
numerous issues have been advanced by the parties, it now
is agreed that the central issue is whether the Foreign
Sovereign Immunities Act (“FSIA”) of 1976 (principally
codified at 28 U.S.C. §§ 1330, 1602-1611 (1976)) granted
this Court jurisdiction to order Guinea to arbitrate. The
Court finds that it had jurisdiction under the FSIA and an
2a
Order now confirming the award accompanies this
Memorandum.
A brief description of the history of this litigation will
help clarify the legal issues involved. In 1971, petitioner, a
Liechtenstein corporation, and the Republic of Guinea
signed an agreement forming a company known as Societe
d’Economie Mixte de Transports Maritimes
(SOTRAMAR) to engage in the shipment of bauxite min-
ed in Guinea. SOTRAMAR was formed as a mixed-
economy company under the laws of Guinea,' and, accor-
ding to the contract, “shall have a civil personality and
financial autonomy.” Disputes under the contract forming
SOTRAMAR were to have been resolved by binding ar-
bitration conducted by three arbitrators selected by the
President of the International Centre for Settlement of In-
vestment Disputes (“ICSID”), a group affiliated with the
World Bank.
A dispute ultimately arose between petitioner and the
Republic of Guinea, and petitioner attempted to get ap-
proval from Guinea for the matter to be heard in arbitra-
tion as contemplated by the contract. Guinea refused to
give its consent, and petitioner came before this Court in
1978 seeking an order to compei arbitration pursuant to
the United States Arbitration Act, 9 U.S.C. § 1 et seq.
‘Article 91 of the Guinean !aw regarding corporate entities, adopted
September |, 1962, provides that:
The State in a mixed economy company is a shareholder,
like any other, and its rights and obligations are those
derived from its statute as the shareholder, rather than as
the State.
Petitioner’s Reply Brief, at 1.
3a
(1976).2 Despite more than adequate notice, Guinea never
appeared in the proceedings before this Court. A hearing
was held and an arbitration was ordered before the
American Arbitration Association.
Over a two-year period, extensive arbitration pro-
ceedings were held. Guinea repeatedly was made aware of
what was occurring and periodically was offered an op-
portunity to appear and respond. Guinea never answered
in any fashion. In June, 1980, the arbitration was conclud-
ed and an award was made in favor of petitioner. The peti-
tioner then filed a motion with this Court to confirm the
award and enter judgment. Shortly before a hearing on the
motion was scheduled in this Court, Guinea obtained
counsel and that counsel sought a delay in order to res-
pond. A short delay was granted, and it was then that
Guinea first advanced its argument that this Court was
without jurisdiction.
Jurisdiction under the FSIA has been discussed by
several other courts faced with situations somewhat
similar to the one now posed. See, e.g., Verlinden B. V. v.
Central Bank of Nigeria, 488 F.Supp. 1284 (S.D.N.Y.
1980); Lybian American Oil Co. v. Socialist People’s Li-
?The parties dispute whether petitioner could have proceeded to ar-
bitration in the manner contemplated by the contract despite Guinea’s
refusal to participate. The Court finds, on the basis of the affidavits
and evidence presented, that petitioner could not have proceeded
under the contract. The Arbitration Act was the only mechanism
available to the Court in view of its inability to order the President of
ICSID to appoint arbitrators.
3At hearing, counsel for Guinea was asked whether there was any
explanation for Guinea’s repeated failure — despite notice — to re-
spond either in this Court or before the American Arbitration
Association. Counsel stated he was unable to present any explanation.
4a
byan Arab Jamahirya, 482 F.Supp. 1175 (D.D.C. 1980);
Ipitrade International, S.A. v. Federal Republic of Nigeria,
465 F.Supp. 824 (D.D.C. 1978). The discussion here,
therefore, will not be extensive. The key question is
whether Guinea lost its immunity either because it has
waived that immunity, see 28 U.S.C. § 1605(a)(1) (1976),
or because of its commercial activities in the United States,
see 28 U.S.C. § 1605(a)(2) (1976). The Court finds that
under both criteria Guinea lost its immunity and the
Court accordingly had jurisdiction.
Waiver
Under 28 U.S.C. § 1605(a)(1) (1976), a foreign state
loses its immunity in any case “in which the foreign state
has waived its immunity either explicitly or by
implication.” The House Report accompanying the FSIA,
moreover, states that:
With respect to implicit waivers, the courts have
found such waivers in cases where the foreign
state has agreed to arbitration in another country
or where the foreign state has agreed that the law
of a particular country should govern a contract.
H.R.Rep.No. 94-1487, 94th Cong., 2nd Sess. 18, re-
printed in [1976] U.S. Code Cong. & Admin. News, pp.
6604, 6617. Although courts have differed on the extent to
which the House Report language should be read as con-
trolling the reach of the waiver provision, compare
Verlinden B. V. v. Central Bank of Nigeria, supra, 488
F.Supp. at 1300-02, with Ipitrade International, S.A. v.
Federal Republic of Nigeria, supra, 465 F.Supp. a: 826, it
is clear that on the facts of this case, there has been an im-
plicit waiver of immunity by Guinea sufficient to give this
Court jurisdiction.
No express provision in the SOTRAMAR contract sets
Sa
forth a place for arbitration,’ but by agreeing to arbitra-
tion before arbitrators selected by the president of ICSID,
Guinea implicitly agreed to arbitration in the United
States. ICSID is located in Washington, D.C., and under
Rule 13 of ICSID’s “Rules of Procedure for Arbitration
Proceedings,” sessions of its tribunals “shall meet at the
seat of the Centre” unless another site is agreed upon by
the parties and approved by ICS!D itself. The only fair
construction of the SOTRAMAR contract and the ICSID
rules is that the parties contemplated arbitration to be held
in the United States.’ This gives the SOTRAMAR contract
an even greater nexus with the United States than the con-
tracts in other cases where waiver has been found. See, e. g.,
Libyan American Oil Co. v. Socialist People’s Libyan Arab
Jamahirya, supra; Ipitrade International, S.A. v. Federal
Republic of Nigeria, supra; cf. Verlinen B.V. v. Central
Bank of Nigeria, supra. Counsel for Guinea has argued
that a waiver should be found only where there is both an
agreement to arbitrate in another country and an agree-
ment to be bound by the laws of another country. But that
is too constricted a view. The Court finds that by agreeing
to arbitration that could be expected to be held in the
United States, Guinea waived its immunity before this
Court within the meaning of 28 U.S.C. § 1605(a)(1)
(1976).
‘The contract does provide, however, a “law of a particular
country” to govern the contract, and that is the law of Guinea.
‘The omission of a site for the arbitration cannot be viewed as a
mere oversight by the parties. In the agreement between the Republic
of Guinea and the Harvey Aluminum Company of Delaware concern-
ing mining of the bauxite that would be carried by SOTRAMAR, the
contract expressly states that “{ajrbitration shall take place in
Geneva.”
6a
Commercial Activities
Under 28 U.S.C. § 1605(a)(2) (1976), a foreign state
also loses its sovereign immunity when it engages in com-
mercial activities within the United States or in commer-
cial activities outside the United States that have a “direct
effect” within this country. The Court finds that Guinea
engaged in activities that meet this standard.
Numerous meetings were held, including meetings in
Connecticut and in the District of Columbia, relating to
the contract. Guinea directed an American shipping group
to perform substantial activities to aid SOTRAMAR. The
Guinean ambassador to the United States engaged in
several business-oriented contacts with officials of peti-
tioner related to the project. The sum of these activities is
more than sufficient to constitute commercial activity
within the meaning of section 1605(a)(2), and to give the
district courts jurisdiction over Guinea. Venue is proper in
this Court under the express authority granted to the
District Court for the District of Columbia by 28 U.S.C.
§ 1391(f)(4) (1976).
Having established that this Court has jurisdiction over
Guinea, it is clear that the Order compelling arbitration
was proper, see 9 U.S.C. § 9 (1976), and that this Court has
authority to confirm the award, see 9 U.S.C. § 9 (1976);
cf. Marine Transit Corp. v. Dreyfus, 284 U.S. 263,
275-76, 52 S.Ct. 166, 169, 76 L.Ed. 282 (1932). The Court
is satisfied that the arbitration proceedings were con-
ducted in a regular and proper manner and the award for
damages and costs is confirmed in all respects.
Ta
APPENDIX B
Notice: This opinion is subject. to formal revision before publication
in the Federal Reporter or US. App.P.C. Reports. Users are requested
to notify the Clerk of any formal errors in order that corrections may be
made before the bound volumes go to press.
Yuited States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
No. 81-1073
IN Tris MATTER OF THE ARBITRATION BETWEEN
Manirimt INTERNATIONAL NOMINEES ESTABLISHMENT
v.
Tuk RepunLic OF GUINEA, APPELLANT
UNITED STATES OF AMERICA, INTERVENOR
Appeal from the United States District Court
for the District of Columbia
(D.C. Civil Action No. 78-00388 )
Argued January 25, 1982
Decided November 12, 1982
Stephen N. Shulman, with whom Mark C. Ellenberg
and Alary M. Kearney were on the brief, for appellant.
David Michael Cohen, Attorney, Department of Justice,
with whom Charles F. C. Ruff, United States Attorney at
the time the brief was filed, William Kanter, Linda M.
Cole, and James G. Hergen, Attorneys, Department of
Justice; and James H. Michel and Jonathan B. Schwartz,
Attorneys, Department of State, were on the brief, for
intervenor.
Mattaniah Fytan, with whom Julius Kaplan and James
I”. Schroeder were on the brief, for appellee.
tis of costs nmst be filed within 14 days after entry of judgment. The
court looks with disfaver upon motions to file bills of costs out of time.
8a
Before ROBINSON, Chief Judge, EDWARDS, Circutt
Judge, and MCGowAN, Senior Circuit Judge.
Opinion for the Court filed by Senior Circuit Judge
McGowan.
McGowan, Senior Circuit Judge: The Republic of
Guinea (“Guinea”) appeals from, and raises numerous
challenges to, the District Court’s order confirming an
arbitration award rendered by the American Arbitration
Association in favor of Marine International Nominees
Establishment (“MINE”). The District Court lacked
subject matter jurisdiction, Guinea claims, because Guinea
was immune under the Foreign Sovereign Immunities
Act of 1976 (“FSIA”), Pub. L. No. 94-583, 90 Stat.
2891: because the arbitration clause contained in the
parties’ contract precluded the exercise of jurisdiction
under the FSIA; and because the FSIA does not, and can-
not constitutionally be read to, confer subject matter
jurisdiction over suits between foreign plantiffs and for-
eign states. Guinea also contends that MINE’s service of
process upon it did not meet the requirements of the
FSIA and that the arbitration award itself was defective
and unenforceable.
We reach only the first of these arguments, because we
conclude that Guinea was immune under the FSIA and
therefore that the court lacked subject matter jurisdiction
to confirm the award. Accordingly, we reverse.
I
The following facts. unless indicated otherwise, are not
disputed by the parties. The Republic of Guinea is a for-
eign sovereign state, and MINE is a Liechtenstein corpo-
ration. On August 19, 1971, Guinea and MINE ' entered
into a contract providing for the creation of a ‘mixed
economy company” that became known as “SOTRAMAR.”
' The signatories to the contract were Guinea and the Inter
Maritime Bank, which acted “in the name and on behalf of”
MINE. Joint Appendix (“J.A.") 207.
9a
J.A. 205-27.°. The purpose of the contract, as seen
by both MINKE and Guinea, was to establish and
provide shipping services to transport Guinean baux-
ite to foreign markets. Appellant's Br. 4-5; Appel-
lee’s Br. 4; J.A. 209. The contract detailed the obli-
gations of the parties and included provisions concern-
ing capital and profits, operation, management, labor,
professional training, and tax treatment. One “special
provision” stated that the parties would make a market
study and set up a technical and economic dossier, and
that ‘‘mixed technical commissions” would stu.ly such mat-
ters as organization and finances. All these studies were
to take place before SOTRAMALR was formed. J.A. 225.
Although Guinean law was to be “applicable” to the con-
tract, the contract stated that the “law between the
parties” was the contract itself, and therefore that
“Guinean laws shall be used for the interpretation and
the implementation of this Agreement only accessorily
and only in the case where the Agreement would leave
a problem unsolved.” J.A. 222-23.
The contract also contained several provisions relating
to the settlement of disputes. When disagreements arose,
the parties were first to attempt informal conciliation. If
that effort failed, the parties were then to submit the
conflict to arbitration by means of the method described
in the contract—a panel of three arbitrators “selected by
the President of CIRDI at the joint request of the parties
or, failing this, at the request of the most diligent party.”
J.A. 226. “CIRDI” is the French acronym for the Inter-
national Centre for Settlement of Investment Disputes. A
codicil to the contract stated that the arbitrators would
be chosen by the “I’resident of the International Court of
Settlement of International Disputes |sic] in Washing-
ton ‘CIRDI).” J.A. 229.
SOTRAMAR” is an acronym for the “Societe Mixte de
Transports Maritimes,” Appellant's Brief (“Br.”) 4, or the
“Societe Guineenne de Transports Maritimes,” Appellee’s
Br. 5.
10a
Although we will discuss later the parties’ disagreement
over the exact meaning of these arbitration provisions, a
brief description of the International Centre for Settle-
ment of Investment Disputes (“ICSID") should be helpful
at this point. [CSID was established by an international
agreement, the Convention on the Settlement of Invest-
ment Disputes Between States and Nationals of Other
States, Mar. 18, 1965, 17 U.S.T. 1270, T.1.A.S. No. 6090,
575 U.N.T.S. 159 (‘the Convention’), to which the United
States and more than seventy-five foreign countries are
parties. Although ICSID is seated in Washington, D.C.,
its purpose is to provide an international conciliation and
arbitration forum. Convention art. 1(2). An ICSID ar-
bitration is not undertaken by ICSID itself, but by arbi-
tral tribunals constituted in accordance with the provi-
sions of the Convention and subject to rules promulgated
by ICSID. When two eligible parties consent to submit a
dispute to an ICSID arbitration, that course is deemed to
be their sole remedy unless they specify othewise. /d. art.
26. Following the execution of a valid consent, either
party may invoke une ICSID arbitration process, even if
the other party refuses to participate. /d. art. 36. An
ICSID award, even when rendered in such a default pro-
ceeding, is final and binding on the parties. Jd. arts. 45,
53.
Although some SOTRAMAR-related activities took
place after the contract was signed, SOTRAMAR never
became an operating commercial entity. A rift developed
between the parties, and in January 1975 the parties
signed a form purporting to present their differences to
an ICSID arbitration. Appellant's Br. 7: Appellee’s Br.
56-57; J.A. 46.
What took place next is disputed. By Guinea's account,
MINE agreed to file with ICSID the consent and a for-
mal! arbitration request: MINE took no such action but
instead determined that the consent form was technically
deficient; MINE mailed a purportedly correct rocised
form to Guinea: Guinea never received this form: and
lla
MINE made no effort to determine whether the revised
form had reached Guinea. Appellant’s Br. 7. MINE
states that it perceived a deficiency in the first consent
form and “urged” Guinea to execute a new form, but that
Guinea then “broke off all relations and refused to com-
municate further with MINE.” Appellee’s Br. 6. ICSID
files contain no record of any request for arbitration in
connection with the SOTRAMAR contract. J.A. 236 (let-
ter from Acting Secretary-General of ICSID to counsel
for Guinea (Dec. 8, 1980), Exhibit 7 to Guinea's Motion
to Dismiss and Opposition to Motion to Confirm Arbitra-
tion Award and Enter Judgment).
On January 20, 1878—some three years after the first
consent form was signed—MINE filed, in federal district
court, a petition to compel arbitration under section 4 of
the Federai Arbitration Act (“FAA”), 9 U.S.C. §4
(1976), asserting subject matter jurisdiction under the
FSIA and the FAA. J.A. 6. In essence, section 4 of the
FAA empowers a federal district court to order arbitra-
tion to proceed in accordance with the terms of an arbi-
tration agreement when adequate findings are made that
an agreement did exist and that a default under the agree-
ment did occur. Another relevant section of the FAA,
section 5, 9 U.S.C. § 5 (1976), sets forth the circumstances
when a court is additionally authorized to order arbitra-
tion before an arbitrator or arbitrators not named in the
agreement. One such instance occurs when a _ party
“fail[s| to avail himself” of the agreed-upon method for
naming arbitrators. [d.
Drawing on these provisions, the petition to compel set
forth a series of allegations, with exhibits attached, to
demonstrate that the court should order the parties to —
proceed to arbitration before the American Arbitration
Association (“AAA"). In essential part, MINE main-
tained that it had prepared the joint consent form “in
accordance with the terms” of the SOTRAMAR contract,
that it had then prepared a corrected consent form and
had mailed it to Guinea, and that Guinea had “failed and
I2a
refused either to sign the revised submission or to proceed
with arbitration.” J.A. 8-9 As a result, MINE con-
tinued, it could not initiate an ICSID aribtration. J.A. 9.
Because in MINE’s view these facts demonstrated that
Guinea intended not to abide by the agreed-upon arbitra-
tion method, id., the petition went on to assert that no
longer was that method available. 7d. An order to com-
pel arbitration was therefore proper, “since procedures
are available [under section 5] to have a court appoint an
arbitrator for the non-cooperating party.” J.A. 10.
MINE served process upon Guinea by mailing. via reg-
istered mail, copies of the relevant documents to the Min-
istry of Foreign Affairs in Conakry, Guinea. MINE also
sent. the same documents by certified mail to the Embassy
of Guinea in Washington, D. C. J.A. 47. Guinea did not
respond to these documents.
The District Court heard argument on the petition on
June 15, 1978; Guinea made no appearance. That same
day, the court entered an order granting MINE’s peti-
tion and ordering arbitration before the AAA and in ac-
cordance with the rules of the AAA. J.A. 48. The order
set forth the court’s conclusions that service had been
proper under the FSIA, that the existence of an arbitra-
tion agreement and the failure to comply therewith were
not in issue, and that Guinea’s failure to avail itself of
the agreed-upon arbitration method had frustrated the
intent of that agreement. The order did not specifically
state the basis for the court’s subject matter jurisdiction.
The clerk of the District Court served copies of the order,
by registered mail, upon the Ministry of Foreign Affairs
in Guinea and upon the Embassy of Guinea in Washing-
ton, D.C. LA. 50.
MINE then filed, on September 5, 1978, 2 demand for
arbitration before the AAA, J.A. 102, serving notice of
the demand une, Guinea by the same method it had fol-
lowed earlier, J.A. 110. The demand alleged several
13a
breaches of the SOTRAMAR agreement, including Guin-
ea's failure to give to SOTRAMAR'’s management the
necessary authority to conclude contracts for the carriage
of bauxite and the provision of services, as well as Guin-
ea's grant to another company of the bauxite rights re-
served to MINE. J.A. 105-06. Arbitration hearings took
place on February 5, 6, and 7, 1979; May 25, 1979; and
April 14, 1980. J.A. 95-100 (affidavit of James W.
Schroeder, Exhibit C to MINE’s Motion to Confirm Ar-
bitration Award and Enter Judgment). During these
proceedings, the AAA served upon Guinea various docu-
ments concerning the arbitration, id.; Guinea did not ap-
pear or file any response. On June 9, 1980, the arbitra-
tors rendered an award in excess of $25 million, which
primarily represented compensatory damages for breach
of contract. J.A. 86-87.
MINE then returned to the District Court, filing on
August 22, 1980, a motion to corfirm and enter judgment
on the arbitration award under section 9 of the FAA, 9
U.S.C. §9 (1976). J.A. 51. Accompanying the motion
was a memorandum of points and authorities, with ex-
hibits attached. Once again, MINE served process upon
Guinea by the method followed earlier.
On December 9, 1980, Guinea entered the proceedings
for the first time, filing a motion to dismiss for lack of
subject matter jurisdiction. Record (‘R.”) 21. Guinea
also filed a memorandum of points and authorities in
support of the motion to dismiss and in opposition to
MINE’s motion to confirm. J.A. 125. In brief outline,
the memorandum argued that neither the FAA, the com-
mercial rules of the AAA, nor the FSIA provided the
court with subject matter jurisdiction to entertain either
MINE’s earlier petition to compel or the motion to con-
firm. J.A. 134-40. The memorandum also contended that
the court's earlier order to compel rested on an incorrect
premise, hecause an ICSID arbitration had indeed been
available.
l4a
MINE then filed, on January 5, 1980, a memorandum
in reply to Guinea’s motion to dismiss and in further
support of its own motion to confirm. J.A. 237. Attached
to the document were supporting exhibits.
The court heard oral argument from the parties on
January 8, 1981, focusing attention on the issue of sub-
ject matter jurisdiction under the FSIA.* On January
12, 1981, the court entered an order denying Guinea's
motion to dismiss, granting MINE’s motion to confirm,
and entering judgment on the award. R. 25.' The court
also issued a four-page memorandum opinion primarily
discussing its conclusion that it had subject matter juris-
tion under the FSIA. Jn re Arbitration between Mari-
time International Nominees Establishment v. Republic
of Guinea, 505 F. Supp. 141 (D.D.C. 1981) (mem.)
“MINE wv. Guinea’.
On January 16, 1981, Guinea filed a motion for a new *
trial or, in the alternative, for relief from judgment, on
the ground that newly discovered evidence showed that
MINF’s service of process had been invalid under the
FSIA. J.A. 305. Also on that day, Guinea moved for a
stay of the judgment until the District Court had ruled
on the motion for a new trial, or, in the alternative, for
shortening the time for MINE to respond to Guinea’s
motion for a new trial. R. 28. That same day, MINE
submitted an affidavit in opposition to both motions. J.A.
322." On January 21, 1981, the District Court entered
* At the outset of the hearing, the court stated, “The issue
that concerns the Court the most and the one that seems to me
that you ought to focus your arguments on is, basically, the
jurisdictional question.” Transcript of January 8, 1981, Hear-
ing, at 3.
‘On March 11, 1981, upon motion of both parties, the
District Court corrected this with respect to the amount of
the award. J.A. 297.
"MINE sought to make a fuller reply to the contentions
advanced in Guinea’s motions by filing on January 23, 1981,
lSa
an order denying both of Guinea’s motions but allowing
Guinea five days to seek from this court a stay pending
appeal. J.A. 325. Also on January 21, Guinea filed a
notice of appeal from the January 12 order confirming
the arbitration award.® The next day, Guinea moved this
court for a stay pending appeal; on January 23 that
motion was granted and execution of judgment was
stayed until a decision on the merits or further order of
the court.’
II
Guinea’s challenges to the confirmation order fall into
three categories.* First, it claims that the District Court
lacked subject matter jurisdiction because: (1) the court
a motion for leave to complete the record. J.A. 326. The
District Court granted the motion on February 10, 1981.
R. 34.
* The same day, Guinea filed with the District Court a mo-
tion for a stay pending appeal. R. 30.
7 On September 18, 1981, this court entered an order grant-
ing the United States leave to intervene pursuant to 28 U.S.C.
§ 2403 (1976), and allowing the United States to file a sug-
gestion of interest. In addition to the regular cycle of briefing
in this case, therefore, we have received a Brief for the
United States as Intervenor and Suggestion of Interest, and
briefs from MINE and Guinea in reply to the United States’s
brief.
8 Although Guinea directs some of its arguments both to
the order to compel and the order to confirm, see, e.g., Appel-
lant’s Br. 25, it is clear that the only order on review before
us is the order to confirm. An order to compel arbitration
issued in an independent proceeding under the FAA is a final
and appealable judgment. See Chatham Shipping Co. v. Fer-
tex Steamship Corp., 352 F.2d 291 (2d Cir. 1965) ; 9 Moore’s
Federal Practice {| 110.20[4.-1] (2d ed. 1982). Cf. Goodall-
Sanford, Inc. v. United Textile Workers, 353 U.S. 550 (1957)
(order directing arbitration under section 301(a) of the
Taft-Hartley Act, 29 U.S.C. § 185(a) (1976), is appealable
as a final judgment). Guinea cannot now, by way of appealing
the confirmation order, obtain review of the earlier order to
compel.
loa
erred in ruling that Guinea was not immune under the
FSIA; (2) even assuming non-immunity, the SIA does
not purport to confer subject matter jurisdiction over
suits between foreign plaintiffs and foreign states; (3)
the FSIA would be unconstitutional if read to confer
such jurisdiction; and (4) the signing by both parties
of the first ICSID consent form committed them to an
ICSID arbitration and therefore deprived the District
Court of jurisdiction.
Second, Guinea claims that MINE’s service of process
upon it was inadequate under the FSIA, and therefore
that the District Court lacked personal jurisdiction under
the FSIA. Third, Guinea attacks the arbitration award
itself, contending (1) that the arbitrators exceeded their
authority by disregarding the liquidated damages provi-
sion of the contract, (2) that the arbitrators lacked power
to delegate the task of damage calculation to an account-
ing firm, (3) that the award was based on evidence out-
side the record, and (4) that MINE obtained an AAA
arbiiration by misrepresenting before the District Court
the availability of an ICSID arbitration.
Because we hold that the court Jacked subject matter
jurisdiction to confirm the arbitration award, we need
not address the service of process issue or the validity
vel non of the arbitration award itself. And, because
this jurisdictional holding rests on our conclusion that
the condition for subject matter jurisdiction under the
FSIA--non-immunity—was not met, we do not reach the
second, third, or fourth of Guinea’s subject matter ju-
risdiction arguments.®
“MINE has not argued that the District Court’s finding
that it had jurisdiction under the FSIA in the earlier section
A proceeding to compel bars Guinea from questioning the
District Court's exercise of jurisdiction in the section 9 pro-
ceeding to confirm now under review. Because the section 9
proceeding adjudicated a different claim from that in the
earlier proceeding, any preclusive effect would derive from
the ductrine of collateral estoppel. See Commissione: v. Sun-
17a
III
With the passage of the FSIA, Congress enacted a
comprehensive scheme setting forth “when and how par-
ties can maintain a lawsuit against a foreign state or its
entities in the courts of the United States,” and ‘when
a foreign state is entitled to sovereign immunity.” H.R.
Rep. No. 94-1487, 94th Cong., 2d Sess. 6 (1976). The
application of this scheme requires some unraveling of
the Act’s interlocking provisions governing the separate
issues of subject matter jurisdiction, sovereign immunity,
and personal jurisdiction.
Subject matter jurisdiction is addressed by section
1530(a), 28 U.S.C. $ 13830(a) (1976), which creates in
federal district courts
original jurisdiction without regard to amount in
controversy of any nonjury civil action against a
foreign state as defined in section 1603(a) of this
title as to any claim for relief in personam with
respect to which the foreign state is not entitled to
immunity either under sections 1605-1607 of this title
or under any applicable international agreement.
The Act thereby connects the issue of subject matter
jurisdiction to the issue of sovereign immunity: the ab-
sence of immunity is a condition to the presence of sub-
ject matter jurisdiction.
Personal jurisdiction is governed by section 1330(b).
id. § 1830(b):
nen, 333 U.S. 591, 597-98 (1948) ; Nasem v. Brown, 595 F.2d
801, 805 n.8 (D.C. Cir. 1979). That doctrine requires that
even issues less basic than jurisdiction be fully litigated be-
fore they are preclusively established. See McCord v. Bailey,
636 F.2d 606, 609 (D.C. Cir. 1980), cert. denied, 451 U.S. 983
(1981); 1B Moore’s Federal Practice ‘| 0.443[3] (2d ed.
1982). Guinea did not appear in the first proceeding, so the
issue was not fully litigated and may be raised at this time.
18a
Personal jurisdiction over a forcign state shall exist
as to every claim for relief over which the district
courts have jurisdiction under subsection (a) where
service has been made under section 1608 of this title.
In other words, a lack of subject matter jurisdiction also
deprives the court of personal jurisdiction under the Act.
Whether subject matter and personal jurisdiction ex-
isted under the Act, then, turns in the first instance on
whether Guinea was entitled to immunity under sections
1605 and 1607. These sections set forth the exceptions
to the general principle, stated in section 1604, id. $ 1604,
that foreign states are immune from the jurisdiction of
federal and state courts, subject to existing international
agreements to which the United States was a party at
the time of the Act’s passage. Of these exceptions, only
subsections (a)(1) and (a)(2) of section 1605 have
possible relevance to this case; the District Court found
that each supported a finding of non-immunity and,
hence, of subject matter jurisdiction.
A.
Section 1605(a)(1) states that a foreign state shall
not be immune in any case
in which the foreign state has waived its immunity
either explicitly or by implication, notwithstanding
any withdrawal of the waiver which the foreion state
may purport to effect except in accordance with the
terms of the waiver.
The SOTRAMAR codicil, we recall, stated that the
parties would arbitrate before arbitrators selected by the
“President of the International Court of Settlement of
International Disputes |sic] in Washington (CIRDI).”
S.A. 229,
Applying section 1605(a) (1) to the parties’ agreement,
the District Court began ly noting that ICSID’s Rules
of Procedure call for ICSID tribunals to meet at the
19a
seat of ICSID-—Washington, D.C.—unless another site
is agreed upon by the parties and approved by ICSID.
MINE vv. Guinea, 505 F. Supp. at i438. Therefore, the
court reasoned, the parties must have contemplated that
arbitration would take place in the United States. Be-
enuse the legislative history indicates that implicit waiver
may be found “in cases where a foreign state has agreed
to arbitration in another country,” H.R. Rep. No. 94-
1487, supra, at 18, the court concluded that the
SOTRAMAR arbitration clause constituted such a waiver.
MINE vv. Guinea, 505 F. Supp. at 143.
Guinea challenges this conclusion on the ground that
an agreement to submit future disputes to an ICSID
arbitration cannot be deemed an implied waiver of im-
munity within the meaning of the FSIA." Appellant’s
'° MINE also argues that the SOTRAMAR contract consti-
tuted an explicit waiver of immunity within the meaning of
section 1605(a) (1). Appellee’s Br. 19-20. MINE can point
to no particular provision in the contract arguably concerning
immunity: rather, MINE rests its argument on the fact that
the SOTRAMAR venture was a “mixed-economy” company
under the laws of Guinea. Participation in such a company
amounted to an explicit waiver, in MINE’s view, because
Guinean law provides that the state in a mixed economy com-
pany is a shareholder and that the state’s rights and obliga-
tions are derived from its standing as a shareholder rather
than as a state. /d.
Although a state can explicitly waive its immunity in a con-
tract with a private party, H.R. Rep. No. 94-1487, supra, at
18, MIN®’s argument falls far short of demonstrating such
a waiver. This becomes clear upon reading the House Re-
port’s comments about withdrawals of waivers:
{[I]f the foreign state agrees to a waiver of sovereign
immunity in a contract, that waiver may subsequently be
withdrawn only in a manner consistent with the expres-
sion of the waiver in the contract. Some court decisions
have allowed subsequent and unilateral rescissions of
waivers by foreign states. But the better view, and the
one followed in this section, is that a foreign state which
has induced a private person into a contract by promising
20a
Br. 26-28. MINE, however, claims that we need not read
the Districl Court as implying the proposition that
Guinea attacks. According to MINE, the SOTRAMAR
arbitration clause did not contemplate a formal ICSID
arbitration, but merely provided for a non-ICSID arbi-
tration to be undertaken by arbitrators chosen by ICSID’s
President. Appellee’s Br. 23 n.16, 56. The only question
we must decide, MINI asserts, is whether the clause,
when read this way, constitutes an implicit: waiver of
immunity,
We reject MINI’s suggested rationale. The factual
premise on which it. rests-—-that the parties contemplated
a non-ICSID arbitration—-was never argued by MINI
before the District Court. Instead, in the confirmation
proceedings MINK did not depart from the position it
had presented in the original petition to compel arbitra-
tion: that the parties had intended to submit future dis-
putes to an ICSID arbitration, and that Guinea had pre-
vented the effectuation of that intent."
not to invoke its immunity cannot, when a dispute arises,
go back on its promise and seek to revoke the waiver
unilaterally.
Id. These statements suggest that Congress contemplated
waivers of a much more specific and explicit nature than the
one MINE constructs from the operation of this Guinean law.
'' Included in the record are several exhibits filed by MINE
in connection with its motion to confirm. One of them, a
copy of the “Demand for Arbitration” that MINE presented
to the AAA, contains the following statement:
Disputes between M.I.N.E. and Guinea arose out of and
relating to the Agreement. In 1975, M.I.N.E. sought to
obtain from Guinea a proper and correct joint submission
of their dispute to ICSID. Guinea, however, failed and
refused to sign such a submission or to proceed with ar-
hitration. The refusal by Guinea to execute a revised
joint submission or otherwise cooperate with M.I.N.E.’s
efforts made unavailable the method originally agreed
upon by the parties for choosing arbitrators.
J.A. 103. A reference in another exhibit echoes the allega-
tion that the failure to sign a submission to ICSID frustrated
2la
The Distriet Court’s waiver holding, moreover, was
clearly based on the factual conclusion that the parties
had contemplated an ICSID arbitration. As stated above,
a central ingredient of that holding was the ICSID proce-
dural rule stating that ICSID arbitrations shall normally
tuke place at ICSID’s seat in Washington, D.C. From
this rule the court inferred that the parties must have
anticipated that arbitration would occur in the United
States. MINE v. Guinea, 505 F. Supp. at 143. Obviously,
the court would not have attached significance to the
ICSID rules had it not understood the SOTRAMAR
clause as contemplating an arbitration that would be
subject to those rules—an ICSID arbitration.
We will not consider on appeal an argument that rests
on a factual premise never developed before the District
Court. See Carr v. District of Columbia, 543 F.2d 917,
921-22 (D.C. Cir. 1976). Instead, we must evaluate the
proposition represented by the District Court’s holding—
that the parties’ agreement to submit future disputes to
an ICSID arbitration can be deemed an implicit waiver
of immunity within the meaning of section 1605(a) (1).'?
the method “originally agreed upon by the parties.” J.A. 93
(affidavit of MINE’s then-attorney). The clear import of
these statements is that the parties contemplated an ICSID
arbitration.
MINE tries to reconcile these earlier representations with
the theory that the parties contemplated a non-ICSID arbi-
tration by offering the following scenario: MINE “approached
ICSID to determine how and when the President might select
the three arbitrators”; ICSID personnel informed MINE that
“such a procedure is unknown to the organization”; MINE
“reluctantly concluded that the informal procedure . . . could
not be accomplished”; and only then did the parties sign the
ICSID consent form. Appellee’s Br. 55-56. These allegations
were never presented to the District Court, and we will not
now consider the argument that MINE bases on them.
' Of course, to say that the parties agreed to a future
ICSID arbitration says nothing about whether the parties
22a
Explaining this section, the House Report stated:
With respect to implicit waivers, the courts have
found such waivers in cases where a foreign state has
agreed to arbitration in another country or where a
foreign state has agreed that the law of a particular
country should govern a contract.
H.R. Rep. No. 94-1487, supra, at 18. Because the
SOTRAMAR contract expressly stated that the law of
Guinea would apply to interpretation of the contract,
J.A. 222, only the first instance mentioned in the quoted
language is relevant to the question at hand.'"* Upon
considering this phrase in light of the nature of an
ICSID arbitration. we conclude that the SOTRAMAR
agreement was not an implicit waiver of immunity within
the meaning of the FSIA.
As noted earlier, ICSID was established by the Con-
vention on the Settlement of Investment Disputes Be-
tween States and Nationals of Other States, an interna-
tional arreement to which more than seventy-five foreign
states are parties. Under the Convention, which has
heen implemented by legislation in the United States, 22
U.S.C. §§ 1650-1650a (1976), ICSID has “full interna-
tional legal personality,” Convention art. 18. ICSID’s
ever took any action that was sufficient to effect that intent.
It is the former issue that is relevant to the waiver question,
and our discussion of waiver should not be read as implying
anything about the latter.
'. Of course, an agreement to apply Guinean law is literally
an agreement to apply the law of a “particular” country.
(Courts have generally assumed, however, that Congress did
not endorse the literal wording of the House Report, for when
paraphrasing the report they say waiver is to be found when
a foreign state ayrees to apply the law of “another” country.
Scc Ohntrup v. Firearms Center Inc., 516 F. Supp. 1281, 1284
(F.1D). Pa. 1981) (mem.); Castro v. Saudi Arabia, 510
F. Supp. 399, 312 (W.D. Tex. 1980). Because MINE has not
questioned this reading of congressional intent, we see no
reason to do so at this time.
23a
purpose is to make available to “Contracting States and
nationals of other Contracting States” facilities for the
conciliation and arbitration of investment disputes. /d.
art. 1(2). ICSID arbitrations are undertaken by tribu-
nals constituted under the Convention and subject to the
rules of ICSID. /d. art. 44. In settling disputes, those
tribunals apply “such rules of law as may be agreed
by the parties”; when no such agreement exists, the law
of the “Contracting State party” and rules of interna-
tional law apply. 7d. art. 42(1).
A primary motivation for the Convention was the
recognition that international methods of dispute settle-
ment should be available in addition to national legal
processes. Jd. preamble. As stated in an ICSID general
information document, ICSID “provides means for a
Contracting State to have a dispute with an investor
internationally adjudicated without having to bring ac-
tion in a foreign court or to undertake intergovernmental
litigation with the investor’s State.” International Centre
for Settlement of Investment Disputes, Doc. ICSID/12,
reprinted in Appellant’s Addenda.
The provisions governing ICSID arbitrations give
effect to this aim. Article 26 of the Convention states:
“Consent of the parties to arbitration under this Con-
vention shall, unless otherwise stated, be deemed consent
to such arbitration to the exclusion of any other remedy.”
In addition, the ICSID processes are self-executing once a
proper request is submitted to ICSID: an arbitral tribu-
nal is constituted upon receipt of the request, the tribunal
itself decides the issue of jurisdiction, and awards ren-
dered by the tribunal are certified by ICSID as binding
and enforceable. /d. arts. 36, 41, 49, 53.
Relying on these facts, the State Department has urged
this court to find that agreements to arbitrate with
ICSID do not contemplate the involvement of domestic
courts, at Icast not before a final ICSID decision is to be
24a
enforced." Brief for the United States as Intervenor and
Suggestion of Interest 54. We need not reach this precise
question here, however. MINE has insisted, and is
estopped from denying, that United States courts were
powerless to compel an ICSID arbitration under this
particular arbitration agreement. Appellee’s Br. 57 &
n.49; Appellee’s Reply Br. to Br. for United States
23, 25; J.A. 253 (memorandum before District Court)
(“as both ICSID and its President enjoy sovereign im-
munity, this court could not compel the President of the
World Bank to appoint arbitrators in this matter’).
MINE contended that an ICSID arbitration was unavail-
able in order to induce the District Court to go beyond
the express terms of the arbitration clause and compel
arbitration before the American Arbitration Association.
Given that this point is now established for purposes of
this litigation, we have no trouble holding that this par-
ticular ICSID agreement was not an agreement “to arbi-
tration in another country” that waives sovereign im-
munity under the FSIA."* A key reason why pre-FSIA
'* At the enforcement stage, the ICSID treaty, see Conven-
tion art. 54, and a supporting United States statute, 22
U.S.C. § 1650a (1976), provide that ICSID arbitrations are
to be enforced as judgments of sister states. We need not
decide whether Guinea’s signing of the ICSID treaty would
thus waive its immunity from proceedings enforcing ICSID
awards, for this is a proceeding to confirm an AAA arbitra-
tion. We also do not express opinions (1) whether any waiver
of immunity for ICSID enforcement proceedings would also
waive immunity for suits to compel ICSID arbitrations, or
(2) whether Congress’s declaration that the Federal Arbitra-
tion Act ‘shall not apply to enforcement of awards rendered”
by ICSID, 7d., prohibits proceedings to compel ICSID arbitra-
tions. Resolution of neither point is implicit in our holding
today, for we decide that this ICSID agrcement did not con-
template the involvement of domestic courts before the en-
forcement stage only because MINE cannot contend otherwis”
in this litigation.
'S Because the ICSID arbitration was to take place in the
United States unless otherwise specified, see pp. 12-13 supra,
25a
cases found that an agreement to arbitrate in the United
States waived immunity from suit was that such agree-
ments could only be effective if deemed to contemplate a
role for United States courts in compelling arbitration
that stalled along the way. See, e.g., Victory Transport
Inc. v. Comisaria General de Abastecimientos y Trans-
portes, 336 F.2d 354, 363-64 (2d Cir. 1964) (dis-
cussing consent to in personam jurisdiction), cert.
denied, 381 U.S. 934 (1965): see also Note, Mari-
time International Nominees Establishment v. Republic
of Guinea: Effect on U.S. Jurisdiction of an Agreement
by a Foreign Sovereign to Arbitrate Before the Interna-
tional Centre for the Settlement of Investment Disputes,
16 Geo. Wash. J. Int’] L. & Econ. 451, 463-66 (1982).
As this particular ICSID agreement concededly did not
foresee such a role for United States courts, we hold that
it did not waive Guinea’s sovereign immunity even though
the agreed-to arbitration would probably take place on
United States soil.
B.
The second immunity provision relevant to this case is
section 1605(a) (2). This section sets forth, in the words
of the House Report, “probably the most important in-
stance in which foreign states are denied immunity, that
in which the foreign state engages in a commercial ac-
tivity.” H.R. Rep. No. 94-1487, supra, at 18. The section
states that a foreign state shall not be immune in any
case
we need not speculate about whether the courts of some other
country might find themselves empowered to compel an ICSID
arbitration. Thus, although other courts have found it neces-
sary to hold that only an agreement to arbitrate in this country
will waive a sovereign’s immunity in United States courts,
see Ohntrup v. Firearms Center Inc., 516 F. Supp. 1281, 1285
(E.D. Pa. 1981) (mem.); Verlinden B.V. v. Central Bank
of Nigeria, 488 F. Supp. 1284, 1301-02 (S.D.N.Y. 1980),
aff'd on other grounds, 647 F.2d 320 (2d Cir. 1981), cert.
granted, 102 S. Ct. 993 (1982), we do not settle that question
here.
26a
in which the action is based upon [1] a commercial
activity carried on in the United States by the foreign
state; or |2] upon an act performed in the United
States in connection with a commercial activity of the
foreign state elsewhere; or [3] upon an 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.
The District Court seems to have held that both the
first and third clauses of the section were satisfied. MINE
v. Guinea, 505 F. Supp. at 143. After stating this con-
clusion, the court went on to list the activities of Guinea
that supported it:
Numerous meetings were held, including meetings in
Connecticut and in the District of Columbia, relating
to the contract. Guinea directed an American ship-
ping group to perform substantial activities to
aid SOTRAMAR. The Guinean ambassador to the
United States engaged in several business-oriented
contacts with officials of petitioner [MINE] related
to the project.
MINE v. Guinea, 505 F. Supp. at 143. The sum of these
activities, the court continued, was “more than sufficient
to constitute commercial activity within the meaning of
section 1605/a)(2).” Id. To examine this holding, we
turn separately to the first and third clauses of section
1605/a)(2).""
1.
The first clause, like the remaining two, contains the
phrase “commercial activity,” which the Act defines as
follows:
‘The second clause has no relevance to this case. The
“act” on which this action is “based’”—the alleged breach of
the SOTRAMAR contract—is not claimed to have been “per-
formed in the United States.”
27a
A “commercial activity” means either a regular course
of commercial conduct or a particular commercial
transaction or act. The commercial character of an
activity shall be determined by reference to the nature
of the course of conduct or particular transaction or
act, rather than by reference to its purpose.
28 U.S.C. $ 1603(d) (1976). The first clause receives
further definition:
A “commercial activity carried oi in the United
States by a foreign state’ means commercial activity
carried on by such state and having substantial con-
tact with the United States.
Id. § 1603(e).
Part of the first clause is easily applied in this case.
The “regular course of commercial conduct” or “particular
commercial transaction” on which MINE’s action “is
based” is the SOTRAMAR contractual undertaking; that
activity clearly is of the commercial nature contem-
plated by the Act’s exceptions. See H.R. Rep. No. 94-
1487, supra, at 16. The more difficult question is whether
the SOTRAMAR venture was “carried on in the United
States by a foreign state,” that is, “carried on by such
state and having substantial contact with the United
States.” Upon examining the findings of the District
Court,'’ we must answer this question in the negative.
'T MINE adds to these findings the argument that Guinea’s
alleged breach resulted in “contact with the United States”
for purposes of the first clause: “Each ton of bauxite which
should have been carried by SOTRAMAR to destinations in
the United States was instead carried to those same destina-
tions by Afro-Bulk.” Appellee’s Br. 26. The District Court
made no such finding, and MINE supports its contention in
part with evidence outside the record. Jd.; see Fed. R. App.
P. 10. As will be clear from our discussion of the contacts
listed by the District Court, the record properly before us can-
not sustain the assertion, implicit in MINE’s argument, that
under the SOTRAMAR contract arrangements had been made
to transport bauxite to destinations in the United States.
28a
We turn first to the District Court’s conclusion that
“Guinea directed an American shipping group to perform
substantial activities to aid SOTRAMAR.” MINE ».
Guinea, 505 F. Supp. at 143. An analysis of this finding
must immediately confront the Act’s requirement that the
commercial activity be “carried on by” the foreign state.
We have no doubt that in appropriate circumstances the
activities of another may be attributed to the foreign state
for purposes of the section 1605(a) (2) exception. Espe-
cially given the realities of modern commercial under-
takings, a contrary conclusion would undermine ‘Con-
gress’s concern with providing ‘access to the courts’ to
those aggrieved by the commercial acts of a foreign
sovereign,” TJ'exas Trading & Milling Corp. v. Federal
Republic of Nigeria, 647 F.2d 300, 312 (2d Cir. 1981)
(quoting H.R. Rep. No. 94-1487, supra, at 6), cert. denied,
102 S. Ct. 1012 (1982). On the other hand, this same
principle and the words of the statute impose some limits
on when a foreign state can be deemed to have “carried
on” activities actually performed by another.
The legislative history gives some guidance in discover-
ing those limits. Although Congress did not elaborate on
the “carried on by” requirement, it stated that some ac-
tivities falling within the first clause of section 1605(a)
(2) might also satisfy the second: an “act performed in
the United States in connection with a commercial ac-
tivity of the foreign state elsewhere.” One example of
the latter, Congress went on, might be “a representation
in the United States by an agent of a foreign state that
leads to an action for restitution based on unjust enrich-
ment.” H.R. Rep. No. 94-1487, supra, at 19. This refer-
ence to “an agent of a foreign state” suggests that a
foreign state, in Congress’s view, can surrender immunity
by virtue of activities committed by an agent, and that,
consequently, the “carried on by” requirement can be
interpreted in light of broad agency principles. While we
do not suggest that those principles should be applied
29a
rigidly and in all their detail to the immunity determina-
tion, it seems evident that to throw the net of responsi-
bility much wider would be to ignore the words Congress
employed in both the statute and the legislative history.
We also think it appropriate to note the well-established
principle that, in assessing personal jurisdiction under
either a constitutional due process standard or a statutory
standard, courts may look to the contacts between the
forum and agents of the defendant. Texas Trading, 647
F.2d at 314-15; C. Wright & A. Miller, Federal Practice
and Procedure § 1069, at 251-52 (1969). This principle
is of relevance io the immunity exception because Congress
viewed that exception not only as governing the immunity
determination, but also as representing a central com-
ponent in the Act’s structure for personal jurisdiction:
For personal jurisdiction to exist under section 1330
(b), the claim must first of all be one over which the
district courts have original jurisdiction under sec-
tion 1830(a), meaning a claim for which the foreign
state is not entitled to immunity. . . . These im-
munity provisions, therefore, prescribe the necessary
contacts which must exist before our courts can
exercise personal jurisdiction.
H.R. Rep. No. 94-1487, supra, at 13. Although we do not
understand this statement to mean that the statutory
standard for determining non-immunity is coextensive
with the due process standard governing personal juris-
diction,’* see World-Wide Volkswagen Corp. v. Woodson,
18 Of course, a finding of FSIA personal jurisdiction, which
would rest in part on a finding of non-immunity, must com-
port with the demands of due process, and Congress intended
that the Act satisfy those demands, H.R. Rep. No. 94-1487,
supra, at 13. But the immunity determination involves con-
siderations distinct from the issue of personal jurisdiction,
and the FSIA’s interlocking provisions are most profitably
analyzed when these distinctions are kept in mind. See gen-
erally Texas Trading & Milling Corp. v. Federal Republic of
30a ;
444 U.S. 286 (1980); International Shoe Co. v. Washing-
ton, 326 U.S. 310 (1945), we think it relevant that view-
ing the “carried on by” requirement in light of agency
principles would be compatible with well-established due
process analysis.
Our views find support in several decisions of other
courts. In Yessenin-Volpin v. Novosti Press Agency, 443
F. Supp. 849 (S.D.N.Y. 1978), plaintiff filed a libel suit
against three defendants, two of which were Soviet Union
information agencies that claimed immunity under the
FSIA. Both were alleged to have written defamatory
articles and to have caused the publication of those arti-
cles in periodicals that were circulated to the public in
the United States. Applying the section 1605(a)(2) ex-
ception, the court rejected the relevance of the first clause,
because “the allegedly offending articles were published
outside the country and sent into the United States by
means wholly outside the control of either [defendant].”
Id. at 855. The court, in other words, properly rejected
the proposition that a foreign state “carries on” activities
performed by another entity simply because the state and
that entity, although unconnected with each othei, can
both be seen as participating in the same larger com-
mercial endeavor.
In Bankers Trust Co. v., Worldwide Transportation
Services, Inc., 587 F. Supp. 1101 (f.D. Ark. 1982), a
restitution action involving as one defendant an official
agricultural organ of the Federal Republic of Mexico, the
court held that the “commercial activity” of that de-
fendant included activities performed by a bank and a
company acting as the defendant’s agents in the United
States.
Before examining against this conceptual backdrop
the Distriet Court’s finding that “Guinea directed an
Nigeria. 617 F.2d 300 (2d Cir. 1981). cert. denied. 192 8. Ct.
1012 (1982): Kane, Suing Foreign Sovereigns: A Procedural
Compass, 34 Stan. L. Rev. 385, 402-04 (1982).
3la
American shipping group to perform substantial activi-
tics to aid SOTRAMAR,” we should examine the evidence
in the record relevant to that finding. The record dis-
closes that fairly substantial SOTRAMAR-related activi-
{ies were undertaken in the United States by a company
usually referred to as “Global.” J.A. 265, 270-72. There
is evidence that Global maintained an office in Stamford,
Connecticut. J.A. 270-71.
Glohal’s activities can be grouped under two categories.
First, there is evidence that Global played a major role
in preparing a report, termed a “feasibility” or “techni-
cal” study, in connection with the SOTRAMAR venture.
J.A. 273, 288. In connection with this report, the record
suggests, Global held meetings, expended funds, and pre-
pared route and rate computations in the United States.
J.A. 270-72. Second, the record contains evidence that
Global’s connection with SOTRAMAR went beyond the
preparation of the report, and extended also to involve-
ment in the shipping of Guinean bauxite. J.A. 275-77.
As to the connection between MINE and Global, the
record contains evidence of communication and coopera-
tion between MINE and Global on the report. J.A. 270-
72. There are also statements in the record that suggest
communication between MINE and Global with respect to
Global’s other activities. J.A. 276-78. No evidence at all
concerns the nature of Global’s corporate structure, and
the only evidence of the organizational relationship be-
tween MINI and Global are the several references to
“MINE. Global.” J.A. 231, 233.
The record casts an even dimmer light on the connec-
tion between Guinea and Global. The second codicil to the
SOTRAMAR contract contains two references to “MINE/
Global.” The first notes that delegates of Guinea and of
MINE Global met to agree upon the codicil. J.A. 231.
The second states:
In order to make it compatible with that option of
lease-sale of a part of the ships supplied by MINE/
Fad
32a
GLOBAL, the Addendum [the first codicil] of Octo-
ber 11, 1971 is added to as follows:
“The other ships shall fly a flag agreed to by both
parties, which flag in fact shall be the neutrai one of
Panama for the duration of the lease-sale.”
J.A. 233.
Finally, there is some evidence connecting Guinea with
the report. The record includes a letter, dated September
11, 1972 and written by MINFE’s then-attorney to a
Guinean representative, concerning the former’s views as
to “the problems now facing SOTRAMAR.” J.A. 288.
The letter contains the following statement:
Many different methods of obtaining ships for
SOTRAMAR have been detailed. For example, at the
request. of the Guinean partners, MINI. prepared an
extensive technical study which was presented at the
May 1972 meeting in Conakry [Guinea].
J.A. 288. Another record item suggests that MINE and
Global, while preparing the report, contemplated present-
ing it to Guinea at a future date. J.A. 272. Also deserv-
ing of mention is the provision in the SOTRAMAR con-
tract stating that the parties would make a “market
study” before SOTRAMAR was formed. J.A. 225.
Although the District Court’s conclusion that Guinea
“directed” Global to perform activities may be interpreted
several ways, it can satisfy the first clause only if read
to mean that Guinea authorized Global to perform actions
on Guinea’s or SOTRAMAR’s behalf in the United States.
See Restatement (Second) of Agency §§ 1, 26 (1958).
The record cannot sustain this reading, however, even
when analyzed with the understanding that the necessary
authorization can be conferred by a variety of means, see
id. § 26.
We note at the outset, with respect both to the prepara-
tion of the report and to other activities performed by
33a
Global, that there is no evidence of any written or other-
wise express authorization from Guinea to Global. Our
inquiry thus becomes whether anything in the record can
reasonably be read to imply authorization of Global’s
services. First, concerning activities related to the report.
we find that the record contains no evidence supporting
this implication. The statement in the letter from MINIt’s
attorney suggests only that Guinea requested MINE to
prepare a report. Although a request to one party may, by
its nature or context, necessarily imply the need to enlist
the services of another, see id. § 79, MINE has not shown
that Guinea’s request was of this sort. Similarly, MINE
has not shown that the provision in the SOTRAMAR con-
tract requiring the parties to make a “market study,”
J.A. 225, constituted an authorization by Guinea for
MINE to use Global’s services on Guinea’s behalf.
Moreover, the mention in the record that MINE and
Global eventually presented the report to Guinea does not
evidence sufficient knowledge of or acquiescence in Global’s
involvement. The record contains nothing to indicate that
Guinea monitored or received information about the re-
port during its preparation. One portion of the record, in
fact, suggests the opposite. At the arbitration hearings,
MINE’s former attorney testified as follows:
So this work [the report] was done in Stamford and
with the aid of their [Global’s] technicians, their gen-
eral counsel, me, their outside counsel, Mr. Anada ™
attended substantially all of those meetings from
Geneva, other people would come from Geneva, and
we worked out how the financing would work, what
rates were necessary and so on. Then you will also
find it was necessary to show the not too sophisticated
Guinean people when they would see this report why
it was being done this way.
J.A. 272.
'" According to MINE’s memorandum in reply to Guinea’s
motion to dismiss, Mr. Anada was a MINE official. J.A. 239
n.5.
34a
Second, with respect to any non-report-related activi-
ties, the record is likewise devoid of evidence from which
we can infer implicit authorization. The only recerd item
of any relevance is the second codicil, with its mention
that delegates of “MINE Global” met with Guinea and
that the first codicil had been amended “to make it com-
patible with that option of lease-sale of a part of the ships
supplied by MINE Global.” These references, standing
alone, are too sparse in detail to allow a conclusion that
Global was acting under authority conferred by Guinea.
We must conclude, then, that Guinea did not “carry on”
the activities performed by Global. Global, of course, was
not the only entity that acted in the United States; several
items in the above-described record suggest that MINIX
also undertook actions there. We hesitate to evaluate these
facts at length, for the District Court made no finding
that Guinea “directed” these activities. The record might
support a conclusion, however, that Guinea requested
MINE to prepare a study. supra p. 26, and that MINE
attended meetings in the United States with Global in
connection with that study. See J.A. 265, 270-71. We
cannot say with certainty that the report requested was
actually the same report MINE worked on in the United
States. But even if it was, the record does not show that
the understanding between MINE and Guinea reached
the stage at which MINI’s actions in the United States
could be deemed to be carried on by Guinea for purposes
of the FSIA. Explaining why this is so requires us to
sharpen slightly the principles that govern this inquiry.
We have said that Global’s activities in the United
States cannot waive Guinea’s immunity if Guirea cid not
authorize them. But this is not to say that every action
Guinea “authorizes” which eventually touches American
soil will waive Guinea’s immunity. We find aid in discern-
ing the far reaches of the “carried on” requirement by
35a
considering onee more principles of personal jurisdiction.?°
The Supreme Court helped clarify some of those princi-
ples in Hanson v. Denckla, 357 U.S. 235, 253 (1958) :
The unilateral activity of those who claim some rela-
Lionship with a nonresident defendant cannot satisfy
the requirement of contact with the forum State. ....
[I]t is essential in each cese that there be some act
by which the defendant purposefully avails itself of
the privilege of conducting activities within the forum
State, thus invoking the benefits and protections of
its laws.
Accord Texas Trading, 647 F.2d at 314-15 (applying
test to foreign sovereign).
In this case the record will not support the conclusion
that, through MINE’s meetings with Global in the United
States concerning the preparation of a report, Guinea pur-
posefully availed itself of the benefits of conducting busi-
ness in the United States. MINE has offered no evidence
that Guinea requested that the study be done in the
United States. Nor has it shown that preparation of a
preliminary market study is an activity necessarily, fore-
seeably, or likely to be undertaken in the United States.
And we do not find MINE’s activities in the United States
to be-so extensive that we will impute to Guinea, without
more, a purposefulness that is not otherwise found in the
record. We are concerned, of course, by the fact that
Guinea in some sense benefited from activities conducted
in the United States by MINE. But in an interdependent
world economic system many foreign states may benefit
from the acts of others in the United States but still not
be considered themselves to be conducting business in the
United States within the contemplation of Congress. We
“© We are bound in a more basic sense, of course, by con-
stitutional precepts of personal jurisdiction, but we go no
further than the statute itself to decide this particular ques-
tion. And we note once more that while personal jurisdiction
principles shed light on the immunity determination, the two
inquiries are not entirely the same. Sce supra note 18.
36a
thus find that MINE has not proved Guinea to be suffi-
ciently a part of MINE’s activities in the United States
ihat Guinea surrendered its immunity by virtue of those
activities.*!
Continuing our search for activity that might satisfy
the first clause of section 1605(a) (2), we turn to the
District. Court’s finding that “[n]umerous meetings were
held, including meetings in Connecticut and in the District
of Columbia, relating to the contract.” MINE v. Guinea,
505 F. Supp. at 143. There is evidence that meetings took
place, but, with one exception, no reference to such a meet-
ing indicates that Guinea was present. Because these
references do not contain any information that adds to
the evidence of authorization that we have already con-
sidered, these meetings cannot be seen as activity “carried
on by” Guinea.
The one exception is a meeting between MINE and a
Guinean representative or representatives, which took
place in a Washington, D.C., hotel in September 1973, and
which apparently concerned the operation of SOTRAMAR.
J.A. 278, 288. Although this meeting is mentioned in a
fairly lengthy letter from MINE’s then-attorney to a
Guinean representative, the letter primarily summarizes
the history of SOTRAMAR-related discussions, and there-
fore gives no clear sense of the scope of the Washington
meeting.*? Whether the requirement of “substantial con-
*! Because we find the link between Guinea on one hand
and MINE’s report activities in the United States on the
other to be too weak to attribute MINE’s actions here to
Guinea, we necessarily find that the path from Guinea to
MINE and then from MINE to Global stretches too far to
link Guinea with Global indirectly. We distinguish this point
from our discussion earlier, svpra pp. 26-28, showing the lack
of evidence directly linking Global with Guinea.
“: The letter begins with the following statement:
Following the meeting of Sunday, September 9, 1973, in
Washington, MINE, Inc. believes it useful to lay before
37a
tact” is satisfied requires evaluation not only of this meet-
ing, but also of the District Court’s third finding.
Although the third finding states that “[t]he Guinean
ambassador to the United States engaged in several busi-
ncss-oriented contacts with officials of [MINE] related to
the project,” MINE v. Guinea, 505 F. Supp. at 143, the
record contains a suggestion of only one such contact. A
portion of a MINE official’s arbitration testimony relates
the following:
But when we discovered about this breach or about
the negotiations with Afrobulk, we were very dis-
appointed and we asked for a meeting with the
Guineans. We came to see the ambassador in Wash-
ington also, asking him—we were sent actually to see
him by the government.
J.A. 267. This vague statement is scarcely evidence that
a meeting occurred at all, and we can only speculate as to
that meeting’s scope or nature.
An evaluation of these two contacts under the first
clause must begin with the recognition that, in Judge
Weinfeld’s words, Congress “underscore[d] the fact that
the ‘commercial activity carried on in the United States’
must be substantial to support jurisdiction.” Verlinden
B.V. v. Central Bank of Nigeria, 488 F. Supp. 1284, 1296
(S.D.N.Y. 1980), aff'd on other grounds, 647 F.2d 320
(2d Cir. 1981), cert. granted, 102 S. Ct. 997 (1982). In
choosing those words, Congress made clear that the im-
munity determination under the first clause diverges from
you for your consideration the following views of the
problems now facing SOTRAMAR.
J.A. 288. No further reference is made to the Washington
meeting until near the letter’s conclusion:
In view of the facts set forth above and the references
of Your Excellency on September 9, 1973 to the need to
change the entire basic SOTRAMAR Convention... .
J.A. 291.
38a
the “minimum contacts” due process inquiry, as well as
from jurisdictional determinations under state long-arm
statutes.7> We cannot conclude that these two isolated
meetings amounted to more than “transitory” and “in-
substantial” contact for purposes of the Act, see Verlinden,
488 F. Supp. at 1297, especially given their uncertain
scope and importance.
*3 The legislative history does not contradict the clear im-
port of the words Congress chose. Commenting on section
1330(b), which concerns personal jurisdiction under the Act,
the House Report stated that the immunity provisions “‘pre-
scribe the necessary contacts [the “minimum contacts” re-
quirement of International Shoe Co. v. Washington, 326 U.S.
310 (1945)] which must exist before our courts can exercise
personal jurisdiction.” H.R. Rep. No. 94-1487, supra, at 13.
To read “substantial contact” as demanding more than “mini-
mum contacts” is fully compatible with this statement.
Congress also noted that section 1330(b) is “in effect, a
Federal long-arm statute over foreign states... . It is pat-
terned after the long-arm statute Congress enacted for the
District of Columbia.” H.R. Rep. No. 94-1487, supra, at 13.
The phrase “patterned after” is not a clear mandate to inter-
pret the immunity exceptions in light of the District of Colum-
bia long-arm statute, and “[t]here are significant differences
in language and effect between the District’s statute and the
Act, which Congress, the author of both, could not have over-
looked,” Verlinden, 488 F. Supp. at 1295. Accord Texas
Trading & Milling Corp. v. Federal Republic of Nigeria, 647
F.2d 300, 311 (2d Cir. 1981), cert. denied, 102 S. Ct. 1012
(1982) ; Harris v. VAO Intourist, 481 F. Supp. 1056, 1963-65
(E.D.N.Y. 1979) (mem.). While these differences might not
always undermine the usefulness of referring to the District
of Columbia statute,.see VAO Intourist, 481 F. Supp. at 1064-
65, the “substantial contact” requirement has not even a
remote relative in that statute. See D.C. Code § 13-423 (a) (1)
(1981) (allows personal jurisdiction as to a claim arising
from the person’s “transacting any business in the District
of Columbia”).
“' Although case law construing the phrase “substantial
contact” is not extensive, our conclusion finds support by
way of contrast with cases that find jurisdiction. See Gemini
Shipping, Inc. v. Foreign Trade Org. for Chems. & Fuodstuffs,
39a
Having coneluded that the District Court’s three find-
ings do not satisfy the first clause of the section 1605(a)
(2) exception, we look next ** to the third clause of that
section:
A foreign state shall not be immune .. . in any
ease . . . in which the action is based upon... an
act outside the territory of the United States in con-
nection with a commercial activity of the foreign
state elsewhere and that act causes a direct effect in
the United States.
As noted earlier, the District Court may be read as con-
cluding that its three findings met the standard of this
clause. The court did not explain, however, how those
activities gave rise to a “direct effect in the United States”
within the meaning of the Act.
MINI: argued before the District Court that the third
clause applies because the contractual breach “had a di-
rect. effect on Global.” J.A. 248. On appeal, MINE re-
news and elaborates upon this argument with the following
assertions: “In the later stages” of the SOTRAMAR
venture, Global “became closely allied with MINE”; Global
“was to place many of its ships on line to implement
direct carriage of bauxite to the United States”; Global
647 F.2d 317, 319 (2d Cir. 1981) (defendant solicited bids in
U.S. and paid under a contract through a letter of credit
confirmed by a New York bank) ; Ohntrup v. Firearms Cen-
ter Inc., 516 F. Supp. 1281, 1285-86 (E.D. Pa. 1981) (mem.)
(sales agreement was between defendant and U.S. corpora-
tion; defendant agreed that U.S. corporation would be its
representative in U.S.; and agreement called for substantial
sales in U.S. within first year of contract) ; Behring Int’l, Inc.
v. Imperial Iranian Air Force, 475 F. Supp. 383, 390 (D.N.J.
1979) (contract was negotiated and executed in New York,
where defendant maintained office and picked up contracted-
for cargo).
25 Sce supra note 16.
40a
“committed substantial financial resources of its own to
the venture” and therefore “stood to realize profits as part
of the MINE group of affiliated companies participating
in the joint venture with Guinea”; and, finally, Guinea’s
breach prevented Global from realizing those profits.
Appellee’s Br. 27-28.
We note at the outset the difficulty of discerning whether
these factual allegations were found to be true by the
District Court. Before the District Court, MINE did not
offer such detailed facts to explain how the breach had a
direct effect on Global, see J.A. 55, 248, and the “substan-
tial activities” mentioned in the court’s findings might
well include both the preparation of the report and other
SOTRAMAR-related actions.
But our difficulty with MINE’s argument gues further
than the possible absence of necessary findings in support
of it. Under our reading of the third clause, even the
scenario MINE offers on appeal does not constitute a
“direct effect in the United States.” This third clause,
the House Report stated,
would embrace commercial conduct abroad having di-
rect effects within the United States which would
subject such conduct to the exercise of jurisdiction by
the United States consistent with principles set forth
in section 18, Restatement of the Law, Second, For-
eign Relations Law of the United States (1965).
H.R. Rep. No. 94-1487, supra, at 19. Section 18, which is
entitled “Jurisdiction to Prescribe with Respect to Effect
within Territory,” Restatement (Second) of Foreign Re-
lations Law of the United States 818 (1965), concerns
the extent to which a state may enact rules of law pro-
scribing conduct outside its territory to prevent the effects
of that conduct within its territory. Although section 18
is therefore concerned with legislative rather than judicial
action, Congress’s clear reference has led some courts to
find guidance in section 18’s requirement that the effect
4la
be “substantial” and “oecur[| as a direct and foreseeable
result of the conduct outside the territory.” *° See Ohn-
trup v. Firearms Center Inc., 516 F. Supp. 1281, 1286
(i.D. Pa. 1981) (mem.); Chicago Bridge & Iron Co. v.
Islamic Republic of lran, 506 F. Supp. 981, 989 (N.D. Ill.
1980) (mem.); Verlinden, 488 F. Supp. at 1298; Harris
v. VAO Intourist, 481 F. Supp. 1056 (E.D.N.Y. 1979)
(mem.); see also Note, Direct Effect Jurisdiction Under
the Foreign Sovereign Immunities Act of 1976, 13 N.Y.
U. J. Intt L. & P. 571, 609-10 (1981). But see Texas
Trading, 647 F.2d at 311 & n.32; Note, Effects Jurisdic-
tion Under the Foreign Sovereign Immunities Act and
the Due Process Clause, 55 N.Y.U. L. Rev. 474, 502-05
(1980).
Another factor favoring recourse to section 18 lies in
the scope of the FSIA’s direct effect clause. The clause
differs from the “direct effect” clauses found in many
state long-arm statutes, because the former is explicitly
intended to encompass effects resulting from commercial
as well as tortious activities. See Texas Trading, 647 F.2d
at 311; VAO Intourist, 481 F. Supp. at 1063-64; H.R.
Rep. No. 94-1487, supra, at 19. The “substantial” and
“direct and foreseeable” standards are likewise intended
26 Section 18 reads as follows:
A state has jurisdiction to prescribe a rule of law attach-
ing legal consequences to conduct that occurs outside its
territory and causes an effect within its territory, if
either
(a) the conduct and its effect are generally recognized
as constituent elements of a crime or tort under the
law of states that have reasonably developed legal sys-
tems, or
(b) (i) the conduct and its effect are constituent ele-
ments of activity to which the rule applies; (ii) the effect
within the territory is substantial; (iii) it occurs as a
direct and foreseeable result of the conduct outside the
territory; and (iv) the rule is not inconsistent with the
principles of justice generally recognized by states that
have reasonably developed legal systems.
42a
to apply in commercial contexts. See Restatement (Sec-
ond) of Foreign Relations Law of the United States,
supra, $18 comment f. In view of Conrress’s statement,
and of the not dissimilar functions of section 18 and the
third clause,*’ we consider this source of guidance a proper
one.
The direct effect scenario offered by MINE falls short
of satisfying these principles; we cannot conclude that the
alleged injury to Global was a foreseeable result of any
breach by Guinea. To explain this conclusion, it is im-
portant to note that the alleged injury to Global is not
that Global went unrecompensed for services rendered to
SOTRAMAR, but that Global lost anticipated profits. This
alleged injury occurred only because Global became in-
volved in the SOTRAMAR undertaking in such a way
that it stood to realize some of the profits of that under-
taking.
Applying the “direct effect” standard to this injury,
and without attempting to state generally the cireum-
stances when a commercial activity results in direct and
foreseeable consequences, we think that an effect cannot
be deemed direct if it occurs solely because of conduct not
reasonably contemplated by the commercial activity.**
“7 Although section 18 addresses legislative action, both sec-
tion 18 and the third clause relate to when an action having
an effect within the United States can trigger the exercise of
authority by the United States. See Restatement (Second) of
Foreign Relations Law of the United States, sapra, § 18
comment b (§ 18 concerns “the question whether the conduct
of [an] alien outside the territory had an effect within the
territory of a type which justifies the state in prohibiting or
regulating this conduct”).
“8 Explaining the application of the foreseeability require-
ment in the commercial context, the comment to section 18
states:
{T]he rule stated in this Clause does not require intent
in the subjeetive sense, and will usually deal with con-
duct which was intended to produce the effect within the
territory in the sense that those responsible for the con-
43a
Only if involvement such as Global's was reasonably con-
templated under the SOTRAMAR undertaking can we
view as “direct” the injuries resulting from that involve-
ment.
Neither the SOTRAMAR contract nor any other evi-
dence in the record demonstrates that Global's profit-
anticipating involvement was anything but the result of
conduct by MINE and Global outside the agreed-upon
bounds of the SOTRAMAR endeavor. Although the
SOTRAMAR contract appears to have envisioned a broad
market," that goal would not, in itself, necessarily entail
the substantial involvement of an American company
hoping to realize profits from the venture. Neither does
the second codicil’s reference to “ships supplied by MINE /
Global” show that Global could have been anticipated as
becoming involved in such a way that it would suffer
harm if SOTRAMAR never realized profits.
IV.
Under our reading of the FSIA, the record cannot sus-
tuin a finding that Guinea lost its sovereign immunity by
virtue of waiver or of commercial activity. Because non-
immunity is a condition to subject matter jurisdiction
under the FSTA, we reverse the District Court’s conclusion
that it had subject matter jurisdiction to confirm the
arbitration award.
It is so ordered.
duct had reason to foresee that the effect within the terri-
tory would result from the conduct outside.
Restatement (Second) of Foreign Relations Law of the
United States, supra, § 18 comment f.
“” Article II of the contract stated in part:
The COMPANY'S policy shall be to offer at all times aid
anywhere freight services at competitive international
rates. However, for political reasons, [Guinea] reserves
the right to exclude certain countries from the traffic of
the COMPANY'’S skips.
J.A. 209.
44a
APPENDIX C
UNITED STATES COURT OF APPEALS
For the District of Columbia Circuit
No. 81-1073 September Term, 1982
In the Matter of the Arbitration Civii Action No. 78-00388
between
Maritime International Nominees
Establishment
Argued 1-25-82
United States Court of Appeals
Vv. For the District of Columbia Circuit
Filed Jan 27 1983
The Republic of Guinea,
George A. Fisher
Appellant Clerk
United States of America,
Intervenor
BEFORE: Robinson, Chief Judge; Edwards, Circuit
Judge and McGowan, Senior Circuit Judge
ORDER
On consideration of appellee’s petition for rehearing, it
is
ORDERED by the Court, that the motion is denied, and
it is
45a
FURTHER ORDERED, by the Court, sua sponte, that
the opinion for the Court filed November 12, 1982 in the
above-entitled case is hereby amended in accordance with
the attachment to this order.
Per Curiam
FOR THE COURT:
George A. Fisher,
Clerk
BY: /s/ Robert A. Bonner
Robert A. Bonner
Chief Deputy Clerk
I. The first full paragraph on page 14 of the slip opinion
(beginning “We reject MINE’s suggested rationale...”); the
next two paragraphs; and notes 11 and 12 are deleted. The
following is inserted (so that after the insertion, the opi-
nion resumes with the paragraph on page 16 beginning
“Explaining this section...):
We are bound not to disturb a factual finding of the
District Court unless it is clearly erroneous. See Fed. R.
Civ. P. 52(a). In this case, the District Court’s waiver
holding was unquestionably based on the factual conclu-
sion that the parties had contemplated an ICSID arbitra-
tion. First, as stated above, a central ingredient of that
holding was the ICSID procedural rule stating that ICSID
arbitrations shall normally take place at ICSID’s seat in
46a
Washington, D.C. From this rule the court inferred that
the parties must have anticipated that arbitration would
occur in the United States. MINE v. Guinea, 505 F. Supp.
at 143. Obviously, the court would not have attached
significance to the ICSID rules had it not understood the
SOTRAMAR contract as contemplating an arbitration
that would be subject to those rules — an ICSID arbitra-
tion. Second, the District Court described MINE’s effort
to have Guinea sign a revised submission to the jurisdic-
tion of ICSID as an attempt to have the dispute heard “in
arbitration as contemplated by the contract.” Id. at 142
(emphasis added); see also id. at 142 n.2 (parties dispute
whether MINE “could have proceeded to arbitration in the
manner contemplated by the contract despite Guinea’s
refusal to participate [by refusing to sign the revised joint
submission]”) (emphasis added). Because exhibits filed by
MINE itself in connection with its motion to confirm de-
mand this very conclusion,'' we cannot say that the
District Court’s factual finding was clearly erroneous. !2
'1One exhibit, a copy of the “Demand for Arbitration” that MINE
presented to the AAA, contains the following statement:
Disputes between M.I.N.E. and Guinea arose out of and
relating [sic] to the Agreement. in 1975, M.I.N.E. sought
to obtrain from Guinea a proper and correct joint submis-
sion of their dispute to ICSID. Guinea, however, failed
and refused to sign such a submission or to proceed with
arbitration. The refusal by Guinea to execute a revised
joint submission or otherwise cooperate with M.I.N.E.’s
efforts made unavailable the method originally agreed
upon by the parties for choosing arbitrators.
J.A. 103. A reference in another exhibit echoes the allegation that the
failure to sign a submission to ICSID frustrated the method “original-
ly agreed upon by the parties.” J.A. 93 (affidavit of MINE’s then-
attorney). The clear import of these statements is that the parties con-
templated an ICSID arbitration.
'2We find an alternative reason to reject MINE’s contention that the
parties contemplated a non-ICSID arbitration in the fact that MINE
consistently seems to have urged a contrary version of events on the
47a
Thus, it is the District Court’s waiver holding that we
now evaluate — that the parties’ agreement to submit
future disputes to an ICSID arbitration can be deemed an
implicit waiver of immunity within the meaning of section
1605(a)(1).
District Court. Establishing the proper context for an understanding
of how MINE’s position changed on appeal requires us to elaborate a
few important details. As noted earlier, the contract contained a
clause calling for arbitration of disputes by a panel of three arbitrators
selected by the President of ICSID. J.A. 226; id. 229 (codicil). By its
terms alone, this arbitration clause is indeed consistent with the argu-
ment MINE now offers for the first time on appeal: that the parties
did not intend ICSID to conduct a formal arbitration, but only to
have a hand in the selection of arbitrators. The language of the con-
tract, however, is not the only evidence presented that was relevant to
the parties’ intended agreement to arbitrate. To begin with, the parties’
subsequent conduct bears out that they had initially contemplated an
ICSID arbitration: when the dispute ripened, both parties signed a
form in which they consented to submit the dispute to the jurisdiction
of ICSID. J.A. 319.
It is important to note why they found this later joint consent to be
necessary. Under the ICSID Convention, ICSID jurisdiction can only
be extended to controversies “which the parties to the dispute consent
in writing to submit to [ICSID].” Convention art. 25(1). The written
request must “contain information concerning the issues in dispute,
the identity of the parties and their consent to arbitration in accor-
dance with the rules of procedure for the institution of conciliation
and arbitration proceedings.” /d. art. 36(2). MINE contended before
the District Court that the later joint consent was necessary because
“(t]he Contract did not contain language of consent and submission in
ac[c]ordance with ICSID’s suggested clauses, or otherwise.” J.A. 252
n.9. That is, the contract did not “evidence[}” the consent of both par-
ties to submit the dispute to ICSID’s jurisdiction in a way that ICSID
could recognize. /d. at 252 (emphasis added); see id. at 251 (contract
“did not of itself constitute a mutual consent and submission to
ICSID’s jurisdiction”) (emphasis added).
None of this denies, however, that MINE and Guinea had initially
intended their arbitration clause to call for arbitration before ICSID.
Guinea was not the only side to contend that this was both parties’ in-
tent all along. Time and time again MINE affirmed before the District
Court that the original intent of the agreement was to have an ICSID
arbitration. See supra note 11. Thus, even though the language of the
contract was not technically sufficient to invoke ICSID procedures (a
4&a
Il. In footnote 9, line 8, add after the words “collateral
estoppel” but before the period”, not res judicata”. At the
end of note 9, begin a new paragraph and add the follow-
ing:
fact that led the parties to submit additional evidence of their consent
to ICSID’s jurisdiction), the conduct of the parties after the dispute
had ripened and MINE’s own representations before the District
Court make clear that the arbitration to which both parties intended
initially to agree was an ICSID arbitration.
MINE tries to reconcile these earlier representations with the theory
that the parties originally contemplated a non-ICSID arbitration by
offering the following scenario: MINE “approached ICSID to deter-
mine how and when the President might select the three arbitrators”;
ICSID personnel informed MINE that “such a procedure is unknown
to the organization”; MINE “reluctantly concluded that the informal
procedure contemplated by the agreement... could not be ac-
complished”; and only then did the parties sign the ICSID consent
form. Appellee’s Br. 55-56.
The initial problem with this scenario is that the ordering of events
it portrays conflicts with the sworn affidavit submitted to the District
Court by MINE’s attorney. According to that document, MINE’s at-
torney met with an ICSID official, not “to determine how and when
the President might select the three arbitrators,” as MINE now claims,
but “in order to determine whether it was possible to submit the
dispute between Petitioner and Respondent to JCSID for
arbitration. . . .” J.A. 293 (emphasis added). This refutes MINE’s
present claim that the parties did not contemplate an ICSID arbitra-
tion until after the discouraging revelations of this meeting.
Even ignoring evidence discrediting MINE’s newest version of
events, however, we find no effort by MINE to prove or even to argue
this scenario before the District Court. In an effort to show that the
immunity provisions of the ICSID Convention never became ap-
plicable, MINE did reiterate near the end of oral argument that the
contractual arbitration clause alone never amounted to a consent suf-
ficient to trigger ICSID jurisdiction. Transcript of January 8, 1981,
Hearing, at 25 (Immunity under the Convention “presupposes that
ICSID has jurisdiction and the parties have duly consented to ICSID.
[Yet t]he parties did not consent to ICSID. . . . the agreement merely
says that the president of ICSID would choose the arbitrator.”); id. at
25-26 (The vice-president and general counsel of ICSID “did not con-
sider that [contract] adequate consent. There has been no adequate
consent for three years.”). But we find nothing in any of MINE’s
49a
Moreover, we would almost certainly reach the same
result were we to apply the doctrine of res judicata by
somehow viewing Guinea’s raising of the jurisdictional
issue in the confirmation proceeding as a collateral attack
on the holding of the proceeding to compel. As the
Supreme Court recently reaffirmed, “A defendant is
always free to ignore the judicial proceedings, risk a
default judgment and then challenge that judgment on
jurisdictional grounds in a collateral proceeding.” In-
surance Corp. v. Compagnie des Bauxites de Guinee, 102
S. Ct. 2099, 2106 (1982). Even if this rule preserves only
personal-jurisdiction attacks, it would preserve Guinea’s
immunity defense, which addresses both personal and sub-
ject matter jurisdiction.
arguments that departs from the view it espoused until this present ap-
peal: that the parties intended an ICSID arbitration when they drafted
the contract; that the fact that the arbitration clause provided explicit-
ly only for the President of ICSID to choose arbitrators rendered it
technically insufficient to get ICSID to act; that, in an effort to carry
out this original intent, the parties attempted to submit a technically-
correct consent to ICSID; and that for one reason or another these ef-
forts never actually brought the dispute within ICSID’s jurisdiction.
Therefore, even had the District Court not found that the parties in-
itially agreed to an ICSID arbitration, we would have ample reason to
reject MINE’s contrary contention on appeal. At best the contention
rests on a factual premise that was not developed before the District
Court, see Carr v. District of Columbia, 543 F.2d 917, 921-22 (D.C.
Cir. 1976), and at worst it is contradicted by the factual record that the
parties did develop.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.