Exception for Suits to Confirm an Arbitral Award

Exception for Suits to Confirm an Arbitral Award

Exception For Suits to Confirm an Arbitral Award in 2011

United States views on international law (based on the document “Digest of U.S. Practice in International Law”): …In considering whether a foreign governmental entity is a “separate legal person” under the FSIA, a court should consider the entity's legal characteristics, such as its ability to litigate, contract, and hold property in its own name.…

Peru has presented reasons to believe that the Program is a separate legal person within Peru's political structure. Peru showed, for example, that its agreement with the IDB required it to establish the Program with technical, administrative, and financial independence. Peru also showed that as an “Executive Unit” pursuant to Peruvian law, the Program can assess and collect revenue, issue debt, incur expenses, and make payments, as well as enter into contracts without participation of any official outside of the Program. These are common characteristics of an “agency or instrumentality” under the FSIA rather than an inseparable part of the state, such as the role served by a military air force.

More about Exception For Suits to Confirm an Arbitral Award

In deciding whether the Program performs a core governmental function, the district court should consider that the Program's principal function—the provision of a basic public utility—is not invariably governmental. Nevertheless, the Program's apparently non-commercial nature is a relevant consideration. Under the core functions test, a commercial enterprise is more likely to be a separate agency or instrumentality, see Garb, 440 F.3d at 591, while a generally non-commercial body is more likely to be an integral part of the state. While relevant, however, the non-commercial nature of an entity is not itself determinative. Similarly, the nature of the specific activity that is the subject of suit should not be the court's primary focus in determining whether the entity being sued is the state or an agency or instrumentality of the state, as both are capable of engaging in commercial activity.

As described above, the “core functions” test is part of the determination of whether an entity is the agency or instrumentality of a state. In a separate context, the Supreme Court has applied an “alter ego” test to determine if an agency or instrumentality of a state can be liable for the state's acts, holding that it may when the entity is so controlled by the state as to create a principal-agent relationship, where corporate form has been abused, or when recognizing the putative separation between the state and the entity would work fraud or injustice. Bancec, 462 U.S. at 629; Letelier, 748 F.2d at 794. In Bancec, however, the governmental entity's status as an agency or instrumentality was not in dispute, and the issue was whether such an instrumentality could be held liable for the acts of its parent state, which was not a party to the litigation. Thus, as this Court has recognized, the alter ego test is “of little help” in determining “whether [an entity] is an instrumentality established as a juridical entity distinct and independent from the [state].” Noga, 361 F.3d at 685.


This Court and others have occasionally applied an alter ego test in the jurisdictional context to establish jurisdiction over one state entity based on the actions of a putatively separate entity. Anglo-Iberia Underwriting Mgmt. Co. v. P.T. Jamsostek, 600 F.3d 171, 179-80 (2d Cir. 2010); United States Fidelity & Guaranty Co. v. Braspetro Oil Servs Co., 199 F.3d 94, 98 (2d Cir. 1990); Foremost-McKesson, Inc. v. Islamic Republic of Iran, 905 F.2d 438, 446 (D.C. Cir. 1990); Hester Int'l Corp. v. Federal Republic of Nigeria, 879 F.2d 170, 176 (5th Cir.

1989). Under this Court's precedent, Bancec may be relevant to the jurisdictional inquiry in extraordinary circumstances, where respecting the juridical independence of an agency would work fraud or injustice. However, nothing in the present record appears to approach the high barrier imposed by the Bancec test. In particular, the district court here erred in concluding that any presumption of separateness the Program enjoys is overcome under the considerations identified in Bancec. The factors cited by the district court—that “final payment” of the award is the Ministry's responsibility and that the Program's budget is subject to authorization by the Ministry of Economy and Finance—are insufficient to establish a principal-agent relationship, abuse of the corporate form, or fraud. Therefore, absent additional evidence that recognizing the Program's separate status (if any) would be inappropriate, the “core functions” test of Garb is sufficient to determine the jurisdictional issue in this case.

For these reasons, this Court should vacate the district court's order denying the defendants' motion to dismiss, and remand for further consideration of whether the Program is an agency or instrumentality, or instead an integral part of Peru and the Ministry. If the Program is a separate agency or instrumentality, the district court will need to consider whether it had subject matter jurisdiction over the claims against Peru and the Ministry, because Figueiredo's arbitration award is against the Program alone.


See Also

  • Privileges
  • Immunities
  • Foreign Sovereign Immunities
  • Exceptions To Immunity
  • Arbitral Awards


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