Peterson v. Islamic Republic of Iran (CMA CGM), 08-17756 (9th Cir. 3 Dec. 2010), considers an important but rarely seen application of the Foreign Sovereign Immunities Act (FSIA), not as it relates to defenses of a non-U.S. Sovereign to being sued in the U.S. but of having judgments enforced against it in the U.S. 

Based on the District of Columbia’s District Court’s decision against Iran stemming from the 1983 Beirut bombing (see our our prior blog discussion here), and the subsequent $2+ billion default judgment entered against Iran by the D.C. District Court, certain of the plaintiffs in that suit registered their judgment in the District Court for the Northern District of California pursuant to 28 U.S.C. § 1963.  The plaintiffs then tried to attach (and have assigned to pay for the judgment) 15 shipping companies who allegedly pay Iran or owe it money for use of the ports of Iran.  Iran did not enter an appearance to contest the assignment proceedings, but the California District Court on its own raised the sovereign immunity issue.  That district court determined that Iran, even in absentia, could assert a sovereign immunity defense – more precisely, that the shippers (the entity CMA CGM was used as an exemplar) could assert the defense.  That court further found that the property sought to be assigned was immune from assignment under the FSIA.

Affirming, the Ninth Circuit made several noteworthy comments or rulings:

  1. The Ninth Circuit followed the Fifth Circuit, which had held that “when a court is asked to attach the property of a foreign state, it must raise and decide the issue of immunity from execution on its own initiative”.  See FG Hemisphere Assocs., LLC v. Republique du Congo, 455 F.3d 575, 590-91 (5th Cir. 2006); Walker Int’l Holdings Ltd. v. Republic of Congo, 395 F.3d 229, 233 (5th Cir. 2004) (“Neither 28 U.S.C. § 1610(a) nor (b) requires the presence of the foreign sovereign”); see also Letelier v. Republic of Chile, 748 F.2d 790, 792-93 (2d Cir. 1984) (deciding whether New York assets of Chilean national airline were immune from attachment even though Chile had refused to participate in the liability and enforcement proceedings).
  2. The only pertinent exception to immunity for enforcement of a U.S. judgment against a non-U.S. sovereign is 28 U.S.C. § 1610(a)(7), providing that commercial property belonging to a foreign state that is located in the United States may be attached in aid of execution of a judgment that “relates to a claim for which the foreign state is not immune from suit under section 1605A” (i.e., under the terrorist exception to immunity from suit codified in the FSIA).
  3. Even though the FSIA is understood in some respects as an affirmative defense, the District Court was obliged nonetheless to consider if there were immunity defenses at the execution stage of the proceeding even in the absence of the non-U.S. sovereign raising the defense.  The Court of Appeals likened the obligation to the rule for immunity from suit, as to which the Ninth Circuit said:  “we require the defendant to make a prima facie case that it is a foreign state only when that fact is not obvious or uncontested”; otherwise there is a burden shifting mechanism that applied, and it was the plaintiff’s burden to prove that an exception to the FSIA exists – and therefore the District Court correctly addressed the issue sua sponte.
  4. After finding that the plaintiffs had substantially complied with the specific notice requirements of the FSIA – and that substantial compliance was sufficient – the Court of Appeals determined that the law of the state where the federal court was situated governed enforcement proceedings in deciding what was “property” for attachment/assignment purposes and what methods of enforcement were available, since there was no specific federal law on point (see our recent blog discussion describing a District Court in the Second Circuit rejection of looking to state law in the circumstances there presented for fear of nonuniformity interfering with the progress of international dispute resolution).
  5. Because the FSIA abrogated immunity in enforcement only for “commercial property [of the non-U.S. sovereign] in the United States” (§ 1610(a)(7)), California decisional law would govern the question whether payments owed by the shipping companies to Iran were property in the U.S.  The Circuit Court held that they were not – but that the property of the French corporation CMA CGM – i.e., the debt owed to Iran – “is located in France”.

The was a dissent from the Ninth Circuit majority, written by Judge N.R. Smith, which rested on the view that the District Court erred in reviewing the sovereign immunity “affirmative defense” in the first place.