International Arbitration Practice Group
December 19, 2013
Ninth Circuit Clarifies Scope of Commercial Activity Exception
to Sovereign Immunity
On December 6, 2013, the U.S. Court of Appeals for the Ninth Circuit,
sitting en banc, issued its decision in Sachs v. Republic of Austria,1 a case
presenting important questions concerning the types of commercial
activities that can strip foreign states and state-owned entities of sovereign
immunity and subject them to the jurisdiction of U.S. courts. The Ninth
Circuit’s decision in Sachs constitutes an important decision in the
continued delineation of the “commercial activity” exception to sovereign
immunity set forth in the U.S. Foreign Sovereign Immunities Act
(“FSIA”),2 and given the Ninth Circuit’s importance to cross-border
business and its status as a key circuit in cases involving foreign state
entities, the decision should be of interest to foreign state-owned enterprises
and companies doing business with those enterprises, particularly in the
Pacific Rim.
1. Introduction: Sovereign Immunity in the U.S.
Since 1952, U.S. law has reflected a policy of “restrictive sovereign
immunity,” pursuant to which foreign states and state entities enjoy
immunity from the jurisdiction of U.S. state and federal courts for claims
arising out of governmental acts, but are not entitled to immunity, and are
subject to U.S. court jurisdiction in connection with claims arising out of
commercial activities.3 Since 1976, sovereign immunity in the United
States has been implemented through the FSIA, which reflects the policy of
restrictive immunity by affording foreign states and their agencies and
instrumentalities presumptive immunity from suit. Section 1605 of the
FSIA then sets forth a series of exceptions to immunity that, when present,
will leave the foreign state subject to U.S. court jurisdiction in largely the
same fashion as non-state defendants.4
Of the various exceptions to immunity set forth in Section 1605 of the
FSIA, arguably the most significant is the “commercial activity” exception
set forth in Section 1605(a)(2), which subjects foreign states to jurisdiction
in connection with any case:
in which the action is based upon a commercial
activity carried on in the United States by the foreign
state; or upon an act performed in the United States in
connection with a commercial activity of the foreign
state elsewhere; or upon an act outside the territory of
For more information, contact:
James E. Berger
+1 212 556 2201
jberger@kslaw.com
Charlene C. Sun
+1 212 556 2107
csun@kslaw.com
King & Spalding
New York
1185 Avenue of the Americas
New York, NY 10036
Tel: +1 212 556 2100
Fax: +1 212 556 2100
www.kslaw.com
