AHPW, Inc., et al. v. State of Pohnpei, et al., No. 09-17871 (9th Cir. Jun. 2011) (unpublished), addresses several common issues that arise in the context of international litigation practice involving non-U.S. sovereigns but in an uncommon geographical and factual setting.

In this case the non-U.S. sovereign is Pohnpei, the name of one of the four states in the Federated States of Micronesia (FMA).  It is situated among the Senyavin Islands, part of the Caroline Islands.  The issue in the case related to exporting peppercorns and trochus buttons, which occurred in the FMA and “had no direct effect on the” U.S.  Pohnpei is formerly known as Ponape and is not to be confused with Pompeii, which may or may have maintained thriving markets in peppercorns and trochus buttons.

AHPW is a business evidently run in Pohnpei.  AHPW sued Pohnpei in federal court in the U.S. under a variety of statutes and treaties, including several we have not discussed before:  The Compact of Free Association and the Agreement Regarding the Investment Development Fund. The Ninth Circuit affirmed the District Court’s determination that neither instrument granted a private right of action – the same result reached by the Court when examining various (unmentioned) treaty provisions.

Additionally, the Ninth Circuit affirmed the District Court’s determination that the Foreign Sovereign Immunities Act (FSIA) would immunize Pohnpei given the allegations of the pleading. The difficulty with the pleading was that the activity at issue occurred fully within the FMA, not in the U.S.  Applying settled law, the Ninth Circuit ruled that the two exceptions to FSIA immunity – the commercial activity exception and the tortious acts exception – required more activity or direct affects than were pleaded to occur in or affect the U.S.

With respect to the commercial activities exception, there must be either “commercial activity carried on in the United States” or “commercial activity in a foreign state that causes a direct effect in the United States”.  The tortious conduct exception requires “damage to or loss or property, occurring in the United States and caused by the tortious act or omission of that foreign state”.