When Commercial Meets Sovereign: A New Paradigm for Applying the Foreign Sovereign Immunities Act in Crossover Cases

Abstract

Lawsuits against foreign states in American courts can be a vital avenue for vindicating the plaintiffs’ rights or enforcing United States law, but inherently raise foreign relations risks. Congress and the Executive Branch attempted to balance these considerations when adopting the Foreign Sovereign Immunities Act (“FSIA”), which creates a general rule that foreign states are immune from jurisdiction in the United States, subject to various exceptions. Yet courts have differed widely in their application of the FSIA’s most important exception, which denies immunity for suits that are based on activity of a foreign state that is “commercial” (rather than “sovereign”) in nature. Courts have had particular difficulty applying this exception in “crossover” cases: disputes arising from a mix of commercial and sovereign conduct. This Article evaluates the conflicting authority and demonstrates that the approaches taken by some lower courts are undermining the balance struck by the political branches and deviating from the limited guidance offered to date by the U.S. Supreme Court. Drawing on the statutory text, legislative history, and Supreme Court jurisprudence, the author proposes a new interpretive framework for applying the commercial activity exception in crossover cases, designed to promote consistency in the case law and realize the drafters’ intent.

Keywords: FSIA, sovereign immunity, international law, litigation, international dispute resolution, antitrust, natural resources, expropriation, commercial activity

JEL Classification: K21, K23, K33, K41, K42