07-1551-cv

Capital Ventures v. Republic of Argentina

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

_______________

August Term, 2008

(Argued: November 10, 2008 Decided: January 13, 2009

 Errata filed: March 19, 2009)

Docket No. 07-1551-cv

________________________________________________________

CAPITAL VENTURES INTERNATIONAL,

Plaintiff-Appellant,

—v.—

REPUBLIC OF ARGENTINA,

Defendant-Appellee.

________________________________________________________

B e f o r e : SOTOMAYOR, KATZMANN, and HALL, Circuit Judges.

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Appeal from a judgment of the United States District Court for the Southern District of

New York (Griesa, J.) dismissing, for lack of subject matter jurisdiction, those claims of

plaintiff-appellant Capital Ventures International that relate to bonds issued by defendantappellee Republic of Argentina under German law, and denying Capital Ventures International’s

request for statutory prejudgment interest on unpaid interest payments that would have come due

on United States dollar denominated bonds issued by the Republic after the acceleration of those

bonds. We affirm in part and vacate in part, finding that there is subject matter jurisdiction over

the claims relating to the German bonds because Argentina explicitly waived its sovereign

immunity to suit in United States courts on those claims, and that the district court correctly

determined that no interest payments became due on the United States bonds after they had been

accelerated.

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Counsel for Plaintiff-Appellant: M. NORMAN GOLDBERGER, Hangley Aronchick Segal &

Pudlin, Philadelphia, P.A.

Kenneth G. Roberts, Jennifer F. Beltrami (of counsel),

Wolf, Block, Schorr and Solis-Cohen LLP, New York,

N.Y.

Counsel for Defendant-Appellee: CARMINE D. BOCCUZZI (Jonathan I. Blackman, of counsel),

Cleary Gottlieb Steen & Hamilton LLP, New York, N.Y.

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KATZMANN, Circuit Judge:

This case calls upon us in principal part to determine whether the Republic of Argentina

explicitly waived its sovereign immunity from suit in the United States as to claims relating to

bonds issued by Argentina under German law.

Plaintiff-appellant Capital Ventures International (“CVI”) appeals from a judgment of the

United States District Court for the Southern District of New York (Griesa, J.) dismissing, for

lack of subject matter jurisdiction, those of CVI’s claims that relate to bonds issued by

defendant-appellee Republic of Argentina (“Argentina” or “the Republic”) under German law,

and denying CVI’s request for statutory prejudgment interest on unpaid interest payments that

would have come due on United States dollar denominated bonds issued by the Republic after

the acceleration of those bonds. We find that there is subject matter jurisdiction over the claims

relating to the German bonds because Argentina explicitly waived its sovereign immunity to suit

in United States courts on those claims, and that the district court correctly determined that no

interest payments became due on the United States bonds after they had been accelerated. 

Accordingly, we affirm in part and vacate in part.
 This language is taken from the Offering Circular governing the 8% Deutsche Mark

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Bonds of 1997/2009. The parties agree that every offering circular contains substantially

identical provisions, insofar as is relevant to this appeal. 

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FACTUAL BACKGROUND

CVI is the beneficial owner of certain bonds issued by the Republic of Argentina. One

group of the bonds owned by CVI is governed by German law, and these bonds are denominated

in Deutsche Marks and Euros (“the German bonds”). Each German bond was issued pursuant to

its own offering circular. Section 13 of the offering circulars provides in part:

(3) The Republic hereby irrevocably submits to the non-exclusive jurisdiction of the

District Court (Landgericht) in Frankfurt am Main and any federal court sitting in the City

of Buenos Aires as well as any appellate court of any thereof [sic], in any suit, action or

proceeding against it arising out of or relating to these Bonds. The Republic hereby

irrevocably waives – to the fullest extent it may effectively do so – the defense of an

inconvenient forum to the maintenance of such suit or action or such proceeding and any

present or future objection to such suit, action or proceeding whether on the grounds of

venue, residence or domicile. The Republic agrees that a final judgment in any such suit,

action or proceeding in the courts mentioned above shall be conclusive and may be

enforced in other jurisdictions by suit on the judgment or any other method provided by

law.

(4) To the extent that the Republic has or hereafter may acquire any immunity (sovereign

or otherwise) from jurisdiction of any court or from any legal process (whether through

service or notice, attachment prior to judgment, attachment in aid of execution, execution

or otherwise), with respect to itself or its revenues, assets or properties, the Republic

hereby irrevocably waives such immunity in respect of its obligations under the Bonds to

the extent it is permitted to do so under applicable law.

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The remainder of the bonds owned by CVI are denominated in United States dollars (“the

U.S. bonds”) and were issued pursuant to a Fiscal Agency Agreement (“FAA”). The FAA

provides that Argentina will “pay interest” on the principal of the U.S. bonds “until the principal 

. . . is paid.” It also sets forth periodic dates on which interest is due. The FAA contains an

acceleration provision, which does not specify whether or not interest is due on the periodic dates
 This provision governs the acceleration of the payment of principal upon certain events 2

of default.

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after any acceleration.2

In December 2001, Argentina declared a moratorium on the payment of principal and

interest on its foreign debt and stopped paying principal and interest on the bonds at issue here. 

In response to the default, on various dates in 2005 and 2006, CVI accelerated the bonds it

owned, making the principal immediately due. 

The instant lawsuit was filed in the Southern District on April 25, 2005. After various

preliminary proceedings, the district court granted summary judgment in favor of CVI on the

claims related to the U.S. bonds on May 17, 2006. Subsequently, on February 15, 2007, the

district court held an oral argument on various open issues, including Argentina’s motion to

dismiss the claims related to the German bonds for lack of subject matter jurisdiction and CVI’s

request for statutory prejudgment interest on certain interest payments it claimed were due after

acceleration of the U.S. bonds. 

At the oral argument, the district court ruled that it lacked subject matter jurisdiction over

the claims relating to CVI’s German bonds because Argentina was entitled to sovereign

immunity with respect to those claims; the district court accordingly dismissed the German bond

claims. Construing section 13(3) and (4) of the offering circulars, the district court concluded

that Argentina had not explicitly waived its sovereign immunity in U.S. courts in section 13. 

Instead, it held that subsection 3 was a limited submission to the jurisdiction of courts in

Frankfurt and Buenos Aires. The district court reasoned that “whatever [subsection 4] means it

should not be read as reading out of this instrument the reference to Frankfurt and the city of
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Buenos Aires.” Accordingly, while acknowledging that the language of subsection 4 was “very

broad,” the district court ultimately held that “where there is an expressed grant of jurisdiction in

specific places . . . a general waiver of sovereign immunity [such as in subsection 4] does not

mean that . . . suit can be brought any place in the world.” Having found that Argentina did not

waive its sovereign immunity to suit in U.S. courts, the district court dismissed the German bond

claims and concomitantly denied CVI’s motion for summary judgment on those claims.

As to CVI’s request for prejudgment interest, the district court found that the FAA did not

require the continued payment of interest after the principal was accelerated, because the act of

accelerating the principal so that “[i]t is due now” is inconsistent with interest that “continue[s]

to accrue quarterly” where the contract does not specifically provide that contractual interest

continues to accrue. Accordingly, the district court only awarded prejudgment interest, at the

contractual rate, for the entire amount of the principal after the date of acceleration and for

interest payments that were due but unpaid prior to acceleration. 

On March 16, 2007, the district court entered final judgment reflecting its rulings at the

February 15, 2007 oral argument. This appeal followed.

DISCUSSION

On appeal, CVI challenges both the dismissal of the claims related to the German bonds

and the denial of prejudgment interest on interest payments that would have come due after

acceleration of the U.S. bonds. 

A. Sovereign Immunity 

1. Background Law and Standard of Review
 Congress has provided that personal jurisdiction over a foreign state exists when the 3

FSIA permits a suit against that state and the service of process requirements set forth in 28

U.S.C. § 1608 have been satisfied, see 28 U.S.C. § 1330(b), although even in the FSIA context

the requirements of due process must be satisfied before a court may exercise personal

jurisdiction. See Texas Trading & Mill. Corp. v. Federal Republic of Nigeria, 647 F.2d 300, 308

(2d Cir. 1981). It should be noted, however, that this Court recently heard oral argument on the

question of whether Texas Trading remains good law. See Frontera Res. Azer. Corp. v. State Oil

Co. of the Azer. Republic, No. 07-1815-cv (2d Cir. argued Oct. 27, 2008). We need not address

the issue of personal jurisdiction here, as Argentina has not raised it before us and the district

court did not consider it. We express no opinion as to whether Argentina may raise the issue on

remand or whether Argentina has waived any objection to personal jurisdiction by failing to raise

it before the district court.

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The Foreign Sovereign Immunities Act (“FSIA”) “is the sole source for subject matter

jurisdiction over any action against a foreign state.” Kensington Int’l Ltd. v. Itoua, 505 F.3d 147,

153 (2d Cir. 2007) (internal quotation marks omitted); see 28 U.S.C. §§ 1330(a), 1604. The

FSIA provides that foreign sovereigns are immune from suit unless a specific exception to

sovereign immunity applies. Id. § 1604. One such exception is that a foreign state is not

immune from suit “in any case . . . in which the foreign state has waived its immunity either

explicitly or by implication.” Id. § 1605(a)(1). The term “explicit,” in this context, takes its

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normal meaning of “clear and unambiguous.” Libra Bank Ltd. v. Banco Nacional de Costa Rica,

S.A., 676 F.2d 47, 49 (2d Cir. 1982) (interpreting 28 U.S.C. § 1610(d)). The purpose of an

“explicit” waiver requirement “is to preclude inadvertent, implied, or constructive waiver in

cases where the intent of the foreign state is equivocal or ambiguous.” Id.

“On appeal from a dismissal for lack of subject matter jurisdiction, we review the district

court’s legal conclusions de novo . . . .” Correspondent Servs. Corp. v. First Equities Corp. of

Fla., 442 F.3d 767, 769 (2d Cir. 2006) (per curiam). The interpretation of a contract is a legal

question which is also reviewed de novo. Phillips v. Audio Active Ltd., 494 F.3d 378, 384 (2d

Cir. 2007).
 We note that the offering circulars are governed by German law. The parties have not 4

presented us with anything to suggest that German law would alter the essential analysis. Indeed,

they have not cited any German law with respect to any aspect of this case.

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2. Discussion

In the offering circulars, Argentina explicitly waived its sovereign immunity to suit in

U.S. courts on claims related to the German bonds. Section 13(4) of the offering circulars

provides that, “[t]o the extent that the Republic has or hereafter may acquire any immunity

(sovereign or otherwise) from jurisdiction of any court or from any legal process . . . , the

Republic hereby irrevocably waives such immunity in respect of its obligations under the Bonds

to the extent it is permitted to do so under applicable law.” This provision clearly and

unambiguously waives Argentina’s “immunity (sovereign or otherwise)” in “any court.” This

clear language satisfies the FSIA’s requirement of an “explicit” waiver.

Argentina advances the argument that section 13(4), read in conjunction with section

13(3), merely allows for judgments obtained pursuant to section 13(3) to be enforced in other

courts. However, the language of subsection 4 is not so limited. Subsection 4 refers to “any

legal process (whether through service or notice, attachment prior to judgment, attachment in aid

of execution, execution or otherwise),” language that contemplates actions other than those to

enforce judgments. Further, subsection 3 ends with the provision that “a final judgment in any

such suit . . . in the courts mentioned above . . . may be enforced in other jurisdictions by suit on

the judgment or any other method provided by law.” If the Republic’s interpretation of

subsection 4 were adopted, this last sentence in subsection 3 would render subsection 4

superfluous, a result that should be avoided. See United States v. Hamdi, 432 F.3d 115, 123 (2d 4

Cir. 2005). Further, if subsection 4 were intended to discuss enforcement in other jurisdictions,
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we would expect that the same terms in the last sentence of subsection 3 would be repeated in

subsection 4—but they are not. Accordingly, we do not read section 13(4) as applying only to

the enforcement of judgments. 

Argentina also argues that reading section 13(4) as a waiver of sovereign immunity in any

court renders subsection 3 superfluous, a result which, as just discussed, is disfavored. See id.

According to Argentina, under such a reading Argentina has “agree[d] to jurisdiction in Germany

and Argentina” in subsection 3 and also “agree[d] to jurisdiction everywhere” in subsection 4. 

Of course, such an interpretation of section 13(4) would render subsection 3 superfluous—but

that is not what subsection 4 says. Subsection 4 is a waiver of Argentina’s “immunity (sovereign

or otherwise),” but it does not waive other objections to suit that Argentina might have, such as

objections based on lack of personal jurisdiction, improper venue, or forum non conveniens. 

Section 13(3), on the other hand, provides that Argentina “submits to the non-exclusive

jurisdiction” of the courts in Frankfurt and Buenos Aires as well as “waives . . . the defense of an

inconvenient forum . . . and any . . . objection . . . on the grounds of venue, residence or

domicile.” It is thus clear that reading subsection 4 as a waiver of sovereign immunity in any

court does not render subsection 3 superfluous.

Argentina also presses the argument that the case law reveals a requirement that, to be

explicit, a waiver must contain a reference to the United States or a specific jurisdiction within

the United States. We do not find such a requirement in the cases. Of course, a specific

reference to the United States can be helpful in determining that a waiver meets the FSIA’s

requirement of explicitness, see, e.g., Proyecfin de Venez., S.A. v. Banco Indus. de Venez., S.A.,

760 F.2d 390, 393 (2d Cir. 1985) (finding an explicit waiver obvious where the waiver

mentioned New York courts), but the statutory requirement is only that the waiver be “explicit.” 
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There can be explicit waivers without a reference to the United States, as the waiver of immunity

in “any court” in this case illustrates. See also Walker Int’l Holdings Ltd. v. Republic of Congo,

395 F.3d 229, 234 (5th Cir. 2004) (finding an explicit waiver under the FSIA where a contract

read “[t]he Congo hereby irrevocably renounces to claim any immunity during any procedure

relating to any arbitration decision handed down by an Arbitration Court”); World Wide

Minerals, Ltd. v. Republic of Kazakstan, 296 F.3d 1154, 1162 & n.13 (D.C. Cir. 2002) (finding

an “express waiver[] of sovereign immunity” where the waiver said “[i]n respect of any

arbitration or legal action or proceedings arising out of or in connection with this Agreement, . . .

[the Kazakhstan State Committee] hereby irrevocably agrees not to claim and hereby irrevocably

waives . . . immunity for itself and the assets of the Republic of Kazakstan to the full extent

permitted by the laws of such jurisdiction”). Any other result would stray from the plain

meaning of the statutory language. See United States v. Santos, 541 F.3d 63, 67 (2d Cir. 2008)

(“Statutory interpretation always begins with the plain language of the statute, assuming the

statute is unambiguous.” (internal quotation marks omitted)). 

Despite Argentina’s argument, Argentine Republic v. Amerada Hess Shipping Corp., 488

U.S. 428 (1989), does not require a contrary result. In Amerada Hess, the Supreme Court stated

that it did not “see how a foreign state can waive its immunity under § 1605(a)(1) by signing an

international agreement that contains no mention of a waiver of immunity to suit in United States

courts or even the availability of a cause of action in the United States.” Id. at 442-43. Argentina

would have us read this language as a requirement that, for a waiver to satisfy the FSIA’s

explicitness requirement, it must mention the United States in some way. That is not the holding

of Amerada Hess. The international agreements at issue in Amerada Hess were the Geneva

Convention on the High Seas, Apr. 29, 1958, 13 U.S.T. 2312, and the Pan American Maritime
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Neutrality Convention, Feb. 20, 1928, 47 Stat. 1989—neither of which mentions waiving

sovereign immunity at all, let alone in the United States. The offering circulars at issue here,

which are contracts between Argentina and the bondholders, are far removed from multi-party

international agreements and do discuss waiver of sovereign immunity to suit in any court,

thereby indicating “waiver of immunity to suit in United States courts.” Amerada Hess, 488 U.S.

at 442-43. Accordingly, Amerada Hess does not control the outcome here. 

There is likewise no support in our cases for Argentina’s suggestion that the mention of

specific, non-United States jurisdictions in subsection 3 of the offering circulars precludes a

finding that Argentina waived its sovereign immunity to suit in the United States. Of course it is

true that there will be cases in which, when a document mentions a non-U.S. jurisdiction, there

will be no explicit waiver for FSIA purposes because it will be clear that there is no intent to

waive sovereign immunity in United States courts. See, e.g., Eaglet Corp. v. Banco Cent. De

Nicar., 839 F. Supp. 232, 234 (S.D.N.Y. 1993) (finding no explicit waiver where jurisdictional

clause stated “[t]his Agreement is governed by English law and therefore BCN submits to the

nonexclusive jurisdiction of the English High Court of Justice”); Atl. Tele-Network Inc. v.

Inter-Am. Dev. Bank, 251 F. Supp. 2d 126, 133 (D.D.C. 2003) (finding that a broad, nongeographically limited waiver of immunity, when “juxtapos[ed] immediately below a

choice-of-law selection clause (specifying the law of Guyana) and above a forum-selection clause

(specifying the courts of Guyana),” does not waive immunity in the United States). It is not true,

however, that the mere mention of a non-U.S. jurisdiction will preclude a finding of waiver,

because the statute requires only that the waiver be “explicit.” As the waiver at issue here

demonstrates, a waiver of sovereign immunity can be explicit even when other provisions of the

document are applicable only to specific, non-United States jurisdictions. 
 Because we find an explicit waiver of immunity, we do not reach CVI’s arguments that 5

other FSIA exceptions to sovereign immunity apply as well.

11

Accordingly, because we find that Argentina explicitly waived its sovereign immunity to

suits in the United States relating to the German bonds, we reverse the district court’s dismissal

of CVI’s German bond claims. In addition, because it is clear from the transcript of the 5

proceeding before the district court that CVI’s motion for summary judgment on the German

bond-related claims was denied only because the district court dismissed those claims, we vacate

the denial of CVI’s summary judgment motion, so that the district court can consider, in the first

instance, whether or not summary judgment would be appropriate on those claims.

B. Prejudgment Interest 

Under New York C.P.L.R. § 5001, a creditor is entitled to prejudgment interest on all

sums due, as of the date they became due. N.Y. C.P.L.R. § 5001; see also Spodek v. Park Prop.

Dev. Assocs., 759 N.E.2d 760, 762 (N.Y. 2001) (holding that “CPLR 5001(a) permits a creditor

to recover prejudgment interest on unpaid interest and principal payments awarded from the date

each payment became due”). While awards of interest are generally discretionary, “New York

law does not permit the trial court to exercise any discretion where a party is entitled to

[prejudgment interest] as a matter of right.” New Eng. Ins. Co. v. Healthcare Underwriters Mut.

Ins. Co., 352 F.3d 599, 602-03 (2d Cir. 2003). We review the interpretation of a contract, which

is a legal question, de novo. Phillips v. Audio Active Ltd., 494 F.3d 378, 384 (2d Cir. 2007).

 The parties agree that the district court correctly awarded CVI statutory prejudgment

interest on the contractual interest payments that Argentina failed to make prior to acceleration of

the principal of CVI’s U.S. bonds, as well as on the entire amount of the principal starting on the

date of acceleration. However, CVI argues that contractual interest payments continued to come
12

due after acceleration, and therefore that the district court should have awarded CVI statutory

prejudgment interest on the post-acceleration, unpaid interest payments. 

The normal consequence of acceleration is that interest payments that would have been

due in the future are no longer due, because, after acceleration, the entire principal is immediately

due and owing; in other words, future interest payments are “unearned” because the creditor is no

longer loaning the debtor the principal. See, e.g., Aardwoolf Corp. v. Nelson Capital Corp., 861

F.2d 46, 47 (2d Cir. 1988) (“New York legislation and judicial pronouncements demonstrate a

consistent intent to deny a creditor the right to charge or retain interest that is unearned.”); Atlas

Fin. Corp. v. Ezrine, 345 N.Y.S.2d 36, 38-39 (App. Div. 1973) (stating the “equitable principle

that the unearned part of the interest must be deducted [from the amount due] upon acceleration,”

and reasoning in part that “by acceleration of payments upon default the principal sum ceased to

be at risk some years prior to the time contemplated by the contract” (internal quotation marks

omitted)); Bostwick-Westbury Corp. v. Commercial Trading Co., 404 N.Y.S.2d 968, 973 (Civ.

Ct. 1978) (stating that at acceleration, “indebtedness encompassed the unpaid balance of the

principal and the matured interest at the time of default and does not include any unearned future

interest”); see also In re LHD Realty Corp., 726 F.2d 327, 331 (7th Cir. 1984) (“[A] lender may

abandon or waive its claim to interest payable over a period of years . . . . [T]he lender, by its

acts, may establish that it prefers accelerated payment to the opportunity to earn interest over a

period of years. . . . [The lender] has voluntarily waived the unpaid interest in the expectation of

accelerated payment of the remaining principal.”).

The FAA that governs the U.S. bonds at issue here contains nothing to demonstrate that

the parties intended to displace the normal meaning of acceleration with a concept of acceleration

that allows interest to continue to come due after the principal is accelerated. CVI argues that the
13

FAA does mandate that interest payments continue to be due after acceleration because the FAA

provides that Argentina will “pay interest” on the principal “until the principal . . . is paid.” That,

however, is merely a truism that is not specific enough to alter the traditional concept of

acceleration. In the absence of ambiguity or a provision in the FAA specifying otherwise,

acceleration should be given its normal meaning. Alexander & Alexander Servs., Inc. v. These

Certain Underwriters at Lloyd’s, London, 136 F.3d 82, 86 (2d Cir. 1998) (“If the court finds that

the contract is not ambiguous it should assign the plain and ordinary meaning to each term 

. . . .”). To hold otherwise would allow CVI to recover interest twice on the same

principal—once as statutory prejudgment interest after the date of acceleration and once as

interest payments that came due after acceleration. Such an unusual result should not be inferred

in the absence of clear intent in the FAA. 

CONCLUSION

For the foregoing reasons, we VACATE the portion of the judgment of the district court

dismissing the claims related to the German bonds and denying summary judgment on those

claims, AFFIRM the remainder of the judgment, and REMAND for further proceedings

consistent with this opinion.