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VERLINDEN B. v. V. CENTRAL BANK NIGERIA

decided: May 23, 1983.

VERLINDEN B. v. V. CENTRAL BANK OF NIGERIA


CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT.

Burger, C. J., delivered the opinion for a unanimous Court.

Author: Burger

[ 461 U.S. Page 482]

 CHIEF JUSTICE BURGER delivered the opinion of the Court.

We granted certiorari to consider whether the Foreign Sovereign Immunities Act of 1976, by authorizing a foreign plaintiff to sue a foreign state in a United States district court on a nonfederal cause of action, violates Article III of the Constitution.

I

On April 21, 1975, the Federal Republic of Nigeria and petitioner Verlinden B. V., a Dutch corporation with its principal offices in Amsterdam, the Netherlands, entered into a contract providing for the purchase of 240,000 metric tons of cement by Nigeria. The parties agreed that the contract would be governed by the laws of the Netherlands and that disputes would be resolved by arbitration before the International Chamber of Commerce, Paris, France.

The contract provided that the Nigerian Government was to establish an irrevocable, confirmed letter of credit for the total purchase price through Slavenburg's Bank in Amsterdam. According to petitioner's amended complaint, however, respondent Central Bank of Nigeria, an instrumentality of Nigeria, improperly established an unconfirmed letter of credit payable through Morgan Guaranty Trust Co. in New York.*fn1

[ 461 U.S. Page 483]

     In August 1975, Verlinden subcontracted with a Liechtenstein corporation, Interbuco, to purchase the cement needed to fulfill the contract. Meanwhile, the ports of Nigeria had become clogged with hundreds of ships carrying cement, sent by numerous other cement suppliers with whom Nigeria also had entered into contracts.*fn2 In mid-September, Central Bank unilaterally directed its correspondent banks, including Morgan Guaranty, to adopt a series of amendments to all letters of credit issued in connection with the cement contracts. Central Bank also directly notified the suppliers that payment would be made only for those shipments approved by Central Bank two months before their arrival in Nigerian waters.*fn3

Verlinden then sued Central Bank in the United States District Court for the Southern District of New York, alleging that Central Bank's actions constituted an anticipatory breach of the letter of credit. Verlinden alleged jurisdiction under the Foreign Sovereign Immunities Act, 28 U. S. C. ยง 1330.*fn4 Respondent moved to dismiss for, among other reasons, lack of subject-matter and personal jurisdiction.

[ 461 U.S. Page 484]

     The District Court first held that a federal court may exercise subject-matter jurisdiction over a suit brought by a foreign corporation against a foreign sovereign. Although the legislative history of the Foreign Sovereign Immunities Act does not clearly reveal whether Congress intended the Act to extend to actions brought by foreign plaintiffs, Judge Weinfeld reasoned that the language of the Act is "broad and embracing. It confers jurisdiction over 'any non-jury civil action' against a foreign state." 488 F.Supp. 1284, 1292 (SDNY 1980). Moreover, in the District Court's view, allowing all actions against foreign sovereigns, including those initiated by foreign plaintiffs, to be brought in federal court was necessary to effectuate "the Congressional purpose of concentrating litigation against sovereign states in the federal courts in order to aid the development of a uniform body of federal law governing assertions of sovereign immunity." Ibid. The District Court also held that Art. III subject-matter jurisdiction extends to suits by foreign corporations against foreign sovereigns, stating:

"[The Act] imposes a single, federal standard to be applied uniformly by both state and federal courts hearing claims brought against foreign states. In consequence, even though the plaintiff's claim is one grounded upon common law, the case is one that 'arises under' a federal law because the complaint compels the application of the uniform federal standard governing assertions of sovereign immunity. In short, the Immunities Act injects an essential federal element into all suits brought against foreign states." Ibid.

The District Court nevertheless dismissed the complaint, holding that a foreign instrumentality is entitled to sovereign immunity unless one of the exceptions specified in the Act applies.

[ 461 U.S. Page 485]

     After carefully considering each of the exceptions upon which petitioner relied, the District Court concluded that none applied, and accordingly dismissed the action.*fn5

The Court of Appeals for the Second Circuit affirmed, but on different grounds. 647 F.2d 320 (1981). The court agreed with the District Court that the Act was properly construed to permit actions brought by foreign plaintiffs. The court held, however, that the Act exceeded the scope of Art. III of the Constitution. In the view of the Court of Appeals, neither the Diversity Clause*fn6 nor the "Arising Under" Clause*fn7 of Art. III is broad enough to support jurisdiction over actions by foreign plaintiffs against foreign sovereigns; accordingly it concluded that Congress was without power to grant federal courts jurisdiction in this case, and affirmed the District Court's dismissal of the action.*fn8

[ 461 U.S. Page 486]

     We granted certiorari, 454 U.S. 1140 (1982), and we reverse and remand.

II

For more than a century and a half, the United States generally granted foreign sovereigns complete immunity from suit in the courts of this country. In The Schooner Exchange v. M'Faddon, 7 Cranch 116 (1812), Chief Justice Marshall concluded that, while the jurisdiction of a nation within its own territory "is susceptible of no limitation not imposed by itself," id., at 136, the United States had impliedly waived jurisdiction over certain activities of foreign sovereigns. Although the narrow holding of The Schooner Exchange was only that the courts of the United States lack jurisdiction over an armed ship of a foreign state found in our port, that opinion came to be regarded as extending virtually absolute immunity to foreign sovereigns. See, e. g., Berizzi Brothers Co. v. S.S. Pesaro, 271 U.S. 562 (1926); Von Mehren, The Foreign Sovereign Immunities Act of 1976, 17 Colum. J. Transnat'l L. 33, 39-40 (1978).

As The Schooner Exchange made clear, however, foreign sovereign immunity is a matter of grace and comity on the part of the United States, and not a restriction imposed by the Constitution. Accordingly, this Court consistently has deferred to the decisions of the political branches -- in particular, those of the Executive Branch -- on whether to take jurisdiction over actions against foreign sovereigns and their instrumentalities. See, e. g., Ex parte Peru, 318 U.S. 578, 586-590 (1943); Mexico v. Hoffman, 324 U.S. 30, 33-36 (1945).

Until 1952, the State Department ordinarily requested immunity in all actions against ...


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