Foreign Sovereign Immunities Act and United States Antitrust Chinese Inter-Agency Delegation United States Chamber of Commerce March 26, 2009 Washington, DC

Scope of Issue Governments Around World Engage in Economic Activity Outside their Borders or Which Affect Other MarketsGovernments Around World Engage in Economic Activity Outside their Borders or Which Affect Other Markets This Activity May Raise Questions of Legality Under the Competition Laws of Other NationsThis Activity May Raise Questions of Legality Under the Competition Laws of Other Nations How to Create Level Playing Field, Proper Incentives for Both Parties in Transactions, While Still Respecting Traditional Notions of Sovereign Immunity for Core Governmental FunctionsHow to Create Level Playing Field, Proper Incentives for Both Parties in Transactions, While Still Respecting Traditional Notions of Sovereign Immunity for Core Governmental Functions

United States Approach to Sovereign Immunity Traditional Approach of Absolute Immunity (Absent Waiver in Contract or Treaty Provisions)Traditional Approach of Absolute Immunity (Absent Waiver in Contract or Treaty Provisions) Replaced by Restrictive Theory of Sovereign ImmunityReplaced by Restrictive Theory of Sovereign Immunity No Immunity for Purely Commercial Activity of Government or Government Owned EnterpriseNo Immunity for Purely Commercial Activity of Government or Government Owned Enterprise Prior to 1976, Importance of United States Government Representations to Court Hearing the Particular DisputePrior to 1976, Importance of United States Government Representations to Court Hearing the Particular Dispute

Foreign Sovereign Immunities Act Congress Passed FSIA in 1976 to Codify Restrictive Theory of Immunity and Make Immunity Matter of Judicial Determination and not Executive Branch DiscretionCongress Passed FSIA in 1976 to Codify Restrictive Theory of Immunity and Make Immunity Matter of Judicial Determination and not Executive Branch Discretion If Defendant is Foreign Government, Agent, or Instrumentality then Immune from Jurisdiction Unless One of Exceptions in Act AppliesIf Defendant is Foreign Government, Agent, or Instrumentality then Immune from Jurisdiction Unless One of Exceptions in Act Applies Has Numerous Important Procedural Provisions on Service of Process, Attachment of Property, Enforcing Judgments, and Removal from State to Federal CourtsHas Numerous Important Procedural Provisions on Service of Process, Attachment of Property, Enforcing Judgments, and Removal from State to Federal Courts

Foreign Governments, Agents, Instrumentalities “foreign state” includes a political subdivision of a foreign state or an agency or instrumentality of a foreign state, 28 U.S.C. 1603a.“foreign state” includes a political subdivision of a foreign state or an agency or instrumentality of a foreign state, 28 U.S.C. 1603a. An "agency or instrumentality of a foreign state" means any entity -- An "agency or instrumentality of a foreign state" means any entity -- –(1) which is a separate legal person, corporate or otherwise, and –(2) which is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof, and –(3) which is neither a citizen of a State of the United States nor created under the laws of any third country.

Immunity Unless Exception Applies A foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case --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 except in accordance with the terms of the waiver; –(2) 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 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 Commercial Activity Exception 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).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).

Commercial Exception in Action In general, deemed commercial activity if type of activity customarily engaged in by private persons for profit.In general, deemed commercial activity if type of activity customarily engaged in by private persons for profit. Nature, not purpose, of act is critical consideration.Nature, not purpose, of act is critical consideration. –Construction contracts for embassies or infrastructure commercial in nature –Equipment contracts for armed forces commercial –Health care for key government personnel commercial –Issuance of bonds and default commercial in nature

Commercial activity key exception for most antitrust cases Price Fixing, Monopolization, Restraints on Distribution and Intellectual Property, Mergers all Typically Commercial in NaturePrice Fixing, Monopolization, Restraints on Distribution and Intellectual Property, Mergers all Typically Commercial in Nature Many Defendants, Even if Government, Agencies, or Instrumentalities, Enjoy no Special ImmunityMany Defendants, Even if Government, Agencies, or Instrumentalities, Enjoy no Special Immunity AirlinesAirlines –Current Price Fixing Litigation –Laker Case in 1980s Golf Cart ManufacturerGolf Cart Manufacturer

Greater Immunity for Regulation of Natural Resources Series of Cases Where Sovereign Immunity Found when Defendants Regulating Extraction of Natural or Human Resources in Manner Unique to GovernmentSeries of Cases Where Sovereign Immunity Found when Defendants Regulating Extraction of Natural or Human Resources in Manner Unique to Government –OPEC litigation –Government of Bangladesh and Wildlife –Government of Jamaica and Migrant Labor Regulation Matter of Characterization Since Many Private Companies Also Heavily Involved in Natural Resource ExtractionMatter of Characterization Since Many Private Companies Also Heavily Involved in Natural Resource Extraction

Still Have to Show Link to United States Must be a commercial activity in the United States by the foreign state;Must be a commercial activity in the United States by the foreign state; or an act performed in the United States in connection with a commercial activity of the foreign state elsewhere;or an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or 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.or 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.

Other Possible Bases for Jurisdiction TreatyTreaty WaiverWaiver –Express –Implied TortTort ArbitrationArbitration CounterclaimCounterclaim Expropriation of PropertyExpropriation of Property

Other Possible Defenses or Immunities ComityComity Political Question DoctrinePolitical Question Doctrine Act of State DoctrineAct of State Doctrine Foreign Sovereign Compulsion DefenseForeign Sovereign Compulsion Defense Defenses on the MeritsDefenses on the Merits

For More Information James Atwood, Kingman Brewster & Spencer Weber Waller, Antitrust and American Business Abroad Ch. 8 (3d ed Thomson/West).James Atwood, Kingman Brewster & Spencer Weber Waller, Antitrust and American Business Abroad Ch. 8 (3d ed Thomson/West). Joseph W. Delapenna, Suing Foreign Governments and Their Corporations (2003).Joseph W. Delapenna, Suing Foreign Governments and Their Corporations (2003). Section of Antitrust Law, American Bar Association, Special Defenses in International Antitrust Litigation (1995).Section of Antitrust Law, American Bar Association, Special Defenses in International Antitrust Litigation (1995).

Respectfully Submitted Spencer Weber Waller Professor and Director Institute for Consumer Antitrust Studies Loyola University Chicago School of Law trusthttp:// trust