Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-14-07002/USCOURTS-caDC-14-07002-0/pdf.json

Parties Involved:
Belize Social Development Limited
Appellee
Government of Belize
Appellant

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued January 16, 2015 Decided July 21, 2015

No. 14-7002

BELIZE SOCIAL DEVELOPMENT LIMITED,

APPELLEE

v.

GOVERNMENT OF BELIZE,

APPELLANT

Consolidated with 14-7003, 14-7018

Appeals from the United States District Court

for the District of Columbia

(No. 1:09-cv-02170)

Creighton R. Magid argued the cause and filed the briefs 

for appellant. Marcus W. Sisk Jr. entered an appearance.

Louis B. Kimmelman argued the cause for appellee. 

With him on the brief were Dana C. MacGrath and Ryan C. 

Morris.

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Before: GARLAND, Chief Judge, TATEL, Circuit Judge, 

and SENTELLE, Senior Circuit Judge.

Opinion for the Court filed by Senior Circuit Judge

SENTELLE.

SENTELLE, Senior Circuit Judge: Belize Social 

Development Limited (“BSDL”) petitioned the district court 

to confirm an arbitration award rendered against the 

government of Belize. The arbitration award arises out of the 

alleged breach by Belize of a 2005 agreement between Belize 

and Belize Telemedia Limited, BSDL’s predecessor in 

interest. Belize had declined to participate in the arbitration 

underlying the petition and took the position in the district 

court and before us that the Prime Minister at the time of the 

entry of the agreement lacked authority to enter either the 

underlying contract or the arbitration agreement and that 

therefore, the arbitration exception to the Foreign Sovereign 

Immunities Act, 28 U.S.C. § 1602, et seq., does not apply, so 

that Belize remains immune from this action and the courts of 

the United States do not have jurisdiction over this litigation. 

Because Belize had not provided support for its claim with 

respect to the arbitration agreement, the district court rejected 

the contention and entered judgment in favor of BSDL. 

Belize Soc. Dev. Ltd. v. Gov’t of Belize, 5 F. Supp. 3d 25, 33–

34 (D.D.C. 2013). For the same reason, we affirm the 

judgment of the district court.

BACKGROUND

In 2005, Belize, acting under the direction of then-Prime 

Minister Said Musa, entered into an agreement styled “The 

Accommodation Agreement” with Belize Telemedia Limited, 

Belize’s largest private telecommunications company. Under 

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the agreement, the company contracted to purchase properties 

from Belize which the country desired to sell “in order to 

better accommodate the Government’s communication 

needs.” Belize Soc. Dev. Ltd. v. Gov’t of Belize, 668 F.3d 

724, 728 (D.C. Cir. 2012). As part of the transaction, 

Telemedia was to obtain relief from tax and regulatory 

burdens otherwise applicable to the company, and receive 

other significant benefits. The agreement, among other 

things, (1) guaranteed Telemedia a 15% rate of return on 

investments, with any shortfall to be paid by Belize; (2) gave 

Telemedia preferential tax treatment; (3) excluded Telemedia 

from import duties; and (4) committed Belize to ensuring that 

“no person other than BTL and [Speednet Communications 

Limited, BTL’s competitor,] have or will have or be granted 

any authority, permit or license in Belize to legally carry on, 

conduct, or provide telecommunication services involving or 

allowing the provision or transport of voice services.” 

Government Telecommunications Accommodation 

Agreement §§ 3.1, 6.1, 11.4, 11.3, September 19, 2005, Joint 

Appendix 129–160. The parties also agreed to an arbitration 

clause which stated:

Any dispute arising out of or in connection with this 

Agreement including any question regarding its 

existence, validity or termination, which cannot be 

resolved amicably between the parties shall be 

referred to and finally resolved by arbitration under 

the London Court of International Arbitration (LCIA) 

Rules which Rules are deemed to be incorporated by 

reference under this Section.

Id. at § 15.2.

The administration of Prime Minister Musa lasted only 

until 2008, when Prime Minister Dean Barrow took office. 

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The new prime minister renounced the Accommodation 

Agreement, asserting that it was repugnant to the laws of 

Belize and therefore invalid. Belize then ceased to honor the 

contractual obligations as asserted by Telemedia. Telemedia 

repaired to the terms of the arbitration clause and submitted 

the dispute to arbitration before the LCIA in London. Belize 

refused to participate in the arbitration proceedings, 

contending, as it contends now, that the arbitration clause was 

invalid and that the arbitrators lacked jurisdiction. On March 

18, 2009, the arbitral tribunal ruled that the Accommodation 

Agreement was valid and binding on Belize; that the tribunal 

had jurisdiction over Telemedia’s claims; and that Belize had 

breached the accommodation agreement. Belize Soc. Dev.

Ltd., 668 F.3d at 728. The arbitral tribunal granted Telemedia 

declaratory relief, and awarded over 38 million Belize dollars 

in damages. Id. Two days later, Telemedia assigned the 

monetary portion of its award to BSDL. Id.

In November 2009, BSDL brought suit in the District 

Court for the District of Columbia to confirm the arbitral 

award pursuant to section 207 of the Federal Arbitration Act 

(“FAA”), 9 U.S.C. § 207. Belize moved to stay confirmation 

of the award pending resolution of related litigation in Belize. 

The district court obliged; BSDL appealed. We reversed, 

noting that under the FAA, the stay order “was not in 

conformity with federal law and international commitments.” 

Belize Soc. Dev. Ltd., 668 F.3d at 733. We remanded and 

instructed the district court “to review and grant BSDL’s 

petition to confirm the Final Award absent a finding that an 

enumerated exception to enforcement . . . applie[s].” Id. On 

remand, Belize argued that the district court lacked subject 

matter jurisdiction over the dispute because it was entitled to 

sovereign immunity under the Foreign Sovereign Immunities 

Act (“FSIA”). Belize Soc. Dev. Ltd., 5 F. Supp. 3d at 32. The 

district court held that jurisdiction was proper under the 

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arbitration exception to the FSIA, and granted BSDL’s 

petition to confirm the award. Id. at 33. This appeal 

followed.

ANALYSIS

The Foreign Sovereign Immunities Act is “the sole basis 

for obtaining jurisdiction over a foreign state in the courts of 

[the United States].” Argentine Republic v. Amerada Hess 

Shipping Corp., 488 U.S. 428, 443 (1989). Its terms are 

absolute: Unless an enumerated exception applies, courts of 

this country lack jurisdiction over claims against a foreign 

nation. Saudi Arabia v. Nelson, 507 US. 349, 355 (1993). 

BSDL claims the arbitration exception applies to this case.

The arbitration exception provides:

A foreign state shall not be immune from the 

jurisdiction of courts of the United States or of the 

States in any case . . . in which the action is brought, 

either to enforce an agreement made by the foreign 

state with or for the benefit of a private party to submit 

to arbitration all or any differences which have arisen 

or which may arise between the parties with respect to 

a defined legal relationship, whether contractual or 

not, concerning a subject matter capable of settlement 

by arbitration under the laws of the United States, or 

to confirm an award made pursuant to such an 

agreement to arbitrate, if . . . the agreement or award is 

or may be governed by a treaty or other international 

agreement in force for the United States calling for the 

recognition and enforcement of arbitral awards.

28 U.S.C. § 1605(a)(6). 

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Where a plaintiff has asserted jurisdiction under the FSIA 

and the defendant foreign state has asserted “the jurisdictional 

defense of immunity,” the defendant state “bears the burden 

of proving that the plaintiff’s allegations do not bring its case 

within a statutory exception to immunity.” Phoenix 

Consulting Inc. v. Republic of Angola, 216 F.3d 36, 40 (D.C. 

Cir. 2000). Belize makes two arguments as to why the 

arbitration exception does not apply.

 

First, Belize argues that the arbitration exception to 

sovereign immunity does not apply because there was no 

“agreement made by the foreign state.” 28 U.S.C. 

§ 1605(a)(6). Belize syllogizes as follows: The Prime 

Minister lacks actual authority to bind the sovereign in an 

unconstitutional agreement; the Accommodation Agreement 

violates the Constitution and laws of Belize; therefore, the 

Prime Minister lacked authority to bind Belize in the 

Accommodation Agreement. Pet. Br. 9–10. Belize concludes 

that because the Prime Minister lacked actual authority to 

execute the Accommodation Agreement on behalf of Belize, 

the agreement is void ab initio, and there is no “agreement 

made by the foreign state.” Id. at 19, 22.

Essential to Belize’s analysis is the assumption that if the 

former Prime Minister lacked actual authority to execute the 

Accommodation Agreement, then every provision in the 

agreement, including the arbitration provision, is void. 

Because this assumption is incorrect, Belize’s argument fails.

 

The language of the FSIA arbitration exception makes 

clear that the agreement to arbitrate is severable from the 

underlying contract. The exception only requires a valid 

“agreement . . . to submit to arbitration,” 28 U.S.C. 

§ 1605(a)(6). It also distinguishes between the underlying 

“legal relationship” and the agreement to arbitrate disputes 

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arising from that relationship. Id. As we have previously 

noted, the agreement to arbitrate is “separate from the 

obligations the parties owe to each other under the remainder 

of the contract.” Marra v. Papandreou, 216 F.3d 1119, 1123, 

1125 (D.C. Cir. 2000). It is, for all intents and purposes, “a 

distinct contract in and of itself.” Id.; see Prima Paint Corp. 

v. Flood & Conklin Mfg. Co., 388 U.S. 395, 403–04 (1967) 

(distinguishing between the agreement to arbitrate and the 

underlying contract). In order to succeed in its claim that 

there was no “agreement made by the foreign state . . . to 

submit to arbitration,” 28 U.S.C. § 1605(a)(6), Belize must 

show that the Prime Minister lacked authority to enter into the 

arbitration agreement. This Belize has failed to do.

In the district court, Belize argued that the Prime Minister 

lacked authority to enter into the Accommodation Agreement. 

See, e.g., Respondent’s Preliminary Response to Petition to 

Confirm Arbitration Award at 30, Belize Soc. Dev. Ltd. v. 

Gov’t of Belize, No. 1:09-cv-02170 (D.D.C. Aug. 8, 2014) 

(“[T]he Accommodation Agreements are null and void, ab 

initio, because the Prime Minister had no authority to enter 

into an agreement that would exempt [Telemedia] from its tax 

liabilities under Belize law.”). Belize repeated the same 

argument in this Court. See, e.g., Pet. Br. 9 (“The 

Accommodation Agreements are void ab initio because the 

former Prime Minister lacked actual authority to execute 

them.”). But Belize presents nothing beyond its bare 

allegation in support of its argument that the Prime Minister 

lacked authority to enter the agreement to arbitrate. Without 

such support, Belize failed to carry its burden of establishing 

that BSDL’s allegations do not bring this case within the 

FSIA’s arbitration exception. 

More briefly put, this case turns on the proposition that 

Belize entered two agreements: the Accommodation 

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Agreement and the Agreement to Submit to Arbitration, albeit 

the two were entered simultaneously. The argument of Belize 

that the Accommodation Agreement was beyond the authority 

of the Prime Minister might provide a defense if we were 

considering this controversy de novo on its merits. However, 

in order to bring that argument before us, Belize must first 

establish that the arbitration provision of the contract is void, 

so that we would not be bound to honor the arbitral tribunal’s 

determinations. We cannot determine the merits of the 

defense if the arbitration clause applies. Since Belize has not 

negated the clause, we do not reach the merits defense.

This brings us to Belize’s second line of defense. Belize 

argues that the arbitration exception does not apply because 

the award is not “governed by a treaty or other international 

agreement . . . calling for the recognition and enforcement of

arbitral awards.” 28 U.S.C. § 1605(a)(6). Specifically, Belize 

contends that the relevant treaty, the New York Convention, 

does not govern the award because the award does not arise 

from a commercial transaction, as required by the treaty, but 

from a governmental transaction.

The Convention on the Recognition and Enforcement of 

Foreign Arbitral Awards (also known as the New York 

Convention) is a multilateral treaty providing for “the 

recognition and enforcement of arbitral awards made in the 

territory of a State other than the State where the recognition 

and enforcement of such awards are sought.” Convention on 

the Recognition and Enforcement of Foreign Arbitral Awards 

(“New York Convention”), art. I(1), 21 U.S.T. 2517 (1970). 

For most signatories, the New York Convention applies to all 

private arbitral agreements, regardless of the subject matter. 

Restatement (Third) of Foreign Relations Law § 487 cmt. f 

(1987). The United States, however, made a declaration, 

authorized by Article I(3) of the Convention, that the 

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Convention would be applicable “only to differences arising 

out of legal relationships whether contractual or not, which 

are considered commercial under the national law of the State 

making such declaration.” New York Convention, 21 U.S.T. 

2517. The United States implemented the Convention in the 

Federal Arbitration Act, 9 U.S.C. § 201 et seq. See id. at 

§ 202 (applying the Convention to an award that arises “out of 

a legal relationship, whether contractual or not, which is 

considered as commercial”). 

The New York Convention, as codified in the FAA, does 

not define the term “commercial.” “When a statute uses [a 

term of art], Congress intended it to have its established 

meaning.” McDermott Int’l, Inc. v. Wilander, 498 U.S. 337, 

342 (1991). In the context of international arbitration, 

“commercial” refers to “matters or relationships, whether 

contractual or not, that arise out of or in connection with 

commerce.” Restatement (Third) of U.S. Law of Int’l Comm. 

Arbitration § 1-1 (2012); see Restatement (Third) of Foreign 

Relations Law § 487 cmt. f (1987) (“That a government is a 

party to a transaction does not destroy its commercial 

character; indeed, the fact that an agreement to arbitrate is in 

the contract between a government and a private person may 

confirm its commercial character . . . .”). As the Comment to 

the Restatement on International Commercial Arbitration 

explains, “A matter or relationship may be commercial even 

though it does not arise out of or relate to a contract, so long 

as it has a connection with commerce, whether or not that 

commerce has a nexus with the United States.” Restatement 

(Third) of U.S. Law of Int’l Comm. Arbitration § 1-1 cmt. e; 

see Island Territory of Curacao v. Solitron Devices, Inc., 356 

F. Supp. 1, 13 (S.D.N.Y. 1973) (“[I]t seems clear that the full 

scope of ‘commerce’ and ‘foreign commerce,’ as those terms 

have been broadly interpreted, is available for arbitral 

agreements and awards.” (quoting Leonard V. Quigley, 

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Convention on Foreign Arbitral Awards, 58 A.B.A. J. 821, 

823 (1972))). Using the Restatement’s definition of 

“commercial,” the New York Convention applies to the 

Accommodation Agreement. 

The text of the FAA’s codification of the New York 

Convention is consistent with this conclusion. While the New 

York Convention, as codified in the FAA, does not expressly 

define “commercial,” it does expressly encompass any 

“transaction, contract, or agreement described in” 9 U.S.C. 

§ 2. 9 U.S.C. § 202. Section 2 in turn includes contracts 

“evidencing a transaction involving commerce,” 9 U.S.C. § 2 

– a term the Supreme Court has interpreted “as the functional 

equivalent of the more familiar term ‘affecting commerce’ –

words of art that ordinarily signal the broadest permissible 

exercise of Congress’ Commerce Clause power,” Citizens 

Bank v. Alafabco, Inc., 539 U.S. 52, 56 (2003). The 

Accommodation Agreement falls within that term’s broad 

compass.

The Agreement involves the sale of real property in 

exchange for certain accommodations, a transaction with a 

connection to commerce. See Holzer v. Mondadori, No. 12 

Civ. 5234, 2013 WL 1104269, at *5 (S.D.N.Y. Mar. 14, 

2013) (noting that the sale of property is commercial under 

the New York Convention). The provision of 

telecommunication services has an even more obvious 

connection to commerce. Indeed, in today’s technological 

age, telecommunication services are often a “crucial segment 

of the economy.” AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 

366, 397 (1999). The taxes Belize levies against a company 

also have a connection with commerce, see Commonwealth 

Edison Co. v. Montana, 453 U.S. 609, 614–15 (1981) (noting 

the impact taxes have on commerce), as do the duties Belize 

charges (or forgoes charging). We thus conclude that the 

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Accommodation Agreement is commercial and is governed 

by the New York Convention.

Belize seeks to avoid this result by arguing we should 

adopt the definition of “commercial” articulated by the 

Supreme Court in Republic of Argentina v. Weltover, Inc., 

504 U.S. 607 (1992). In that case, the Supreme Court, in 

examining the scope of the FSIA’s “commercial activity” 

exception, 28 U.S.C. § 1605(a)(2), held that a foreign state 

engages in commercial activities when it acts in the manner of 

a private player within the market. Weltover, 504 U.S. at 614. 

The Court reasoned that the FSIA “largely codifies the socalled ‘restrictive’ theory of foreign sovereign immunity”; 

that the word “commercial” was a “term of art”; and that 

Congress therefore intended the word to have “the meaning 

generally attached to that term under the restrictive theory at 

the time the statute was enacted,” i.e., distinguishing between 

“state sovereign acts, on the one hand, and state commercial 

and private acts, on the other.” Id. at 612–13. In this case, 

Belize argues that in granting Telemedia certain tax and duty 

exemptions, it exercised “powers peculiar to sovereigns” as 

opposed to “powers that can also be exercised by private 

citizens,” id. at 614, and thus its actions were not commercial.

Belize’s reliance on Weltover is misplaced. Unlike with 

the FSIA, Congress was not codifying the restrictive theory of 

foreign sovereign immunity when it ratified and implemented 

the New York Convention. Rather, the treaty concerns 

international arbitration. We thus recognize that: (1) the 

Convention’s purpose was to “encourage the recognition and 

enforcement of commercial arbitration agreements in 

international contracts,” TermoRio S.A. E.S.P. v. Electranta 

S.P., 487 F.3d 928, 933 (D.C. Cir. 2007); (2) the word 

“commercial” is a “term of art”; and (3) in implementing the 

Convention, Congress intended that word to have the meaning 

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generally attached to that term in the international commercial 

arbitration context. As we discussed above, “commercial” in 

the context of international arbitration refers to matters which 

have a connection to commerce. Belize’s argument to the 

contrary will not sell.

Belize raises several other arguments for why we should 

dismiss this action, including forum non conveniens, 

international comity, and lack of personal jurisdiction, as well 

as specific defenses under the Convention. These arguments 

were adequately discussed and rejected by the district court, 

and none warrant further exposition by this Court.

CONCLUSION

For the reasons stated above, the judgment below is 

affirmed.

It is so ordered.

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