1 Pemex alternatively contends that even if the commercial activities exception applies, the Act

of State doctrine renders this case non-justiciable. Pemex raised the Act of State doctrine in its

motion to dismiss, but the district court did not address this issue in its January 28, 1991 ruling.

Following that decision, Pemex moved to certify both the sovereign immunity and Act of State

questions for interlocutory appeal. 28 U.S.C. § 1292(b). The court granted Pemex's motion as

well as its request for a stay pending appeal. The appeal on the Act of State doctrine was filed

under a separate case number in this court [case No. 91–6311], but the discussion below renders

that appeal moot. United States Court of Appeals,

Fifth Circuit.

Nos. 91–2180, 91–6311.

ARRIBA LIMITED, Plaintiff-Appellee,

v.

PETROLEOS MEXICANOS, a/k/a Pemex, Defendant-Appellant.

June 11, 1992.

Appeals from the United States District Court for the Southern District of Texas.

Before DAVIS, JONES, and EMILIO GARZA, Circuit Judges.

EDITH H. JONES, Circuit Judge:

Petrol eos Mexicanos ("Pemex"), the n at io nal oil company of the United Mexican States,

appeals the district court's denial of its motion to dismiss for lack of subject matter jurisdiction under

the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. §§ 1330, 1602–11. Pemex, one of the

world's largest oil companies and crude o il exporters, was sued by Arriba, Ltd., a Bahamian

corporation with its principal place of business in the United States, for damages stemming from a

failed contract between Arriba and an arm of Pemex's union, the Petroleum Wo rkers Union of

Mexico, Sindicato de Trabajadores Petrol eros de la Republica Mexicana ("the Union"). The district

court held that Pemex failed to establish that its activities fell outside the "commercial act ivities"

exception to the FSIA's recognition of sovereign immunity. See 28 U.S.C. § 1605(a)(2). Because

we hold that Pemex is entitled to sovereign immunity, we reverse the district court's ruling and

dismiss Arriba's action with prejudice. 12 The complaint cryptically alleges that at the Union's suggestion, Arriba was incorporated in

the Bahamas "because of the Sindicato's own banking relationships there." I.

BACKGROUND

This is the latest in a series of lawsuits that Arriba has brought since 1985 against the Union,

its private contracting arm, Comision de Contratos del Sindicat o de Trabajadores Petroleros de la

Republica Mexicana ("the Commission"), and several former Union officials. Pemex is a relat ive

newcomer to the litigation, having been sued by Arriba for the first time in 1990. All these lawsuits

flow from a si ngle 1984 transaction in which several officials of the Union and its Commission

allegedly agreed to supply Arriba with Pemex's residual or "slop" oil at bargain prices—without the

need for a contract with Pemex. Arriba apparently owes its very corporate existence to this ill-starred

venture.

According to its amended complaint, Arriba was chartered in 1984 as a direct result of

negotiations between Bill Flanigan, who went on to serve as Arriba's president, and "persons who

were acting as the agents and representatives" of Pemex, the Union and its Commission. 2 As part of

a written agreement signed at Hous t on, Texas in October of that y ear ("the Agreement"), the

Commission agreed to sell Arriba a minimum of 6 millio n barrels of Pemex's residual oil. The

Agreement was signed by one Ramiro Quinones Fabela ("Quinones"), who Arriba asserts had

presented proof of his authority to act on the Commission's behalf. Relying on representations by

Quinones and his associates, Arriba co nt racted to sell the residual oil at a substantial profit.

Beginning in November 1984, however, Quinones and others demanded payments from Arriba, to

be used to bribe Pemex and Union officials to perform their part of the Agreement. Arriba refused

to pay—despite repeated protests from Quinones and his companions, who twice physically assaulted

Flanigan. Arriba never received the oil, even after Flanigan met with various Commission and Union

officials and was assured that its delivery was forthcoming.3 This circumspection may not be surprising. Although we need not decide the issue, Pemex

asserts that Arriba's agreement to purchase oil from Pemex through private intermediaries was

illegal under Mexican law. According to an opinion by Mexico's Attorney General prepared for

this litigation, an official proclamation of Mexico's then-Secretary of Budget and Planning, Carlos

Salinas de Gortari, issued on Jan. 28, 1984—nine months before the Agreement was

signed—declared all government contracts which failed to comply with certain public contracting

procedures to be null and void. This proclamation prevented Pemex from granting concessions to

the Union on oil sales. See MEX. ATTY. GEN. OP. ¶¶ 40–44 (Aug. 24, 1990). Prior to the

proclamation, a fixed percentage of Pemex contracts was granted to the Union without public

bidding. "It was contemplated," the opinion observes,

that the Union would either perform these [no-bid] contracts directly or by

subcontract, retaining some percentage as profit; the profit in either case was

expected to finance social programs for the workers. In practice, however, the

Union's leaders created the Commissions in order to keep the profit outside of the

Union, so that workers themselves did not benefit. PEMEX, in turn, was also

damaged because it did not receive the best terms when contracting.

Id. at ¶ 42. The Salinas proclamation was part of President Miguel de la Madrid

Hurtado's "moral renovation" campaign aimed at fighting corruption in the letting of

government contracts. See, e.g., Mexico Carries War on Corruption to Unions, N.Y.

TIMES A7, col. 1 (Feb. 6, 1984). Both Pemex and the United Mexican States as amicus

curiae suggest that Arriba had reason to tread lightly in the face of a high-profile

government initiative that rendered illegal the type of arrangement that Arriba now seeks

to enforce. See also ATTY. GEN. OP. at ¶¶ 44–47. Arriba admits that the Agreement was structured to avoid any direct dealings with Pemex

o fficials or any other branch of the Mexican gover nment. 3 It is therefore important to understand

who Arriba considers to be Pemex's "agents." Pemex was not a party to the Agreement, and Arriba

never negotiated with Pemex for the purchase of oil. Instead, Arriba insists that Quinones and his

associates should be considered Pemex's "agents" by impli cat ion. Pemex's activities were

"inextricably integrated" with those of the Union and its Commission, Arriba argues, so that all three

functioned as a single entity. As described in the complaint, the three entities

often serve as agents for one another. They make promises and representations for one

another. They stand behind one another's contracts. The business of each is structured so

that it is necessarily dependent upon the cooperation of the others.

Borrowing some familiar terms from American corporate law, Arriba argues that Pemex's status as

a government agency is a sham that should not be respected. The separate legal identities of Pemex,

the Union and the Commission have blurred into a single functional entity, making each of them "alter4 Thus, for instance, Arriba treats Quinones' alleged representations on behalf of the

Commission—a private entity—as if they had been made by Pemex itself. That Quinones

allegedly represented the Commission transformed him into Pemex's "agent" as well. The legal

implications of Arriba's "agency" and "alter ego" theories on Pemex's status as a government

agency asserting sovereign immunity are discussed below.

5 In a bizarre twist, Arriba and Flanigan had themselves been sued in May 1987 by what

appellant acknowledges was "[a] second, different Arriba Limited (the "Second Arriba')." Like its

namesake, the Second Arriba was incorporated in the Bahamas. Arriba's complaint asserts that

Pemex, the Union and the Commission conspired to create the Second Arriba so that this "bogus

new entity [would] sue Arriba to enjoin it from enforcing Arriba's valid judgment, which the new

entity falsely alleged belonged to it. That suit was an obvious sham, designed to mislead and

defraud the courts." Arriba and Flanigan counterclaimed against the Second Arriba in June,

renewing their allegations against the Union and the Commission stemming from the 1984

Agreement. However, the October 1987 settlement apparently ended the Second Arriba's lawsuit

against Arriba.

6 The following June, Arriba—armed with a temporary restraining order from the Harris

County court—attempted to attach the official plane of Mexican President Salinas after it had egos" of the other and permitting Arriba to "pierce the veil" to reach Pemex's assets. 4

Arriba sued the Union, its Commission, Quinones and three other Union o fficials for the first

time in June 1985, obtaining a $92 millio n default judgment in Texas state court the following April.

Attempting to satisfy that judgment, Arriba secured a writ of garnishment against Pemex in February

1987. Pemex removed the garnishment proceedings to federal court and sought to dismiss on

s o vereign immunity grounds. Meanwhile, Arriba entered into negotiations with the Union and its

Commission invo lving the creation of a new joint venture. These talks led to a settlement in October

1987 that r eleased the default judgment and dismissed the garnishment action against Pemex with

prejudice. 5

Nearly two years later, Arriba retur ned t o state court, alleging that the Union's and

Commission's refusals to abide by t he settlement terms revived its claims arising from the 1984

Agreement. In April 1989, the court granted a second default judgment against the Union, its

Commission and the private defendants—this time including punitive damages boosting the total

award to more than $273 million. Arriba again obtained a writ of garnishment against Pemex in an

attempt to execute the two default judgments, 6 and Pemex again removed to federal court. Arriba'slanded at Love Field in Dallas, Texas. This effort fizzled when Mexican authorities demonstrated

that the Boeing 757 belonged to their government.

7 The district court also ruled that because the state court judgment against the private

defendants did not involve Pemex, Arriba had failed to obtain a judgment against a foreign state

or its instrumentality within the meaning of § 1602 of the FSIA. Consequently, Arriba could not

attach Pemex's assets to satisfy that judgment unless Arriba showed that the juridical separateness

of Pemex as a government instrumentality should not be respected. The district court therefore

found Arriba's attempt to garnish Pemex solely because Pemex was allegedly indebted to some or

all of the private defendants to be meritless. However, Arriba's garnishment claim was not

dismissed in its entirety because the district court ultimately ordered additional discovery on the

question of Pemex's juridical separateness, an issue which we discuss below. amended complaint asserts that Union o fficials informed Arriba that Pemex had begun "stripping the

assets" of the Union to prevent Arriba from enforcing its judgment. Those same o fficials also

allegedly warned Flanigan that he faced criminal prosecution by Mexican authorities if he continued

to pursue legal remedies.

On May 31, 1990, while Pemex's motion to quash the writ o f garnishment was pending,

Arriba filed its first action against Pemex in the federal district court for conduct stemming from the

1984 Agreement. Among other things, Arriba accused Pemex of engaging in a pattern of

racketeering activity in M exico as well as theft by extortion under Texas law. Relying on the

Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962(a)–(d), Arriba

sought treble damages, costs of suit, attorney s fees, and other relief. The di stri ct court later

consolidated Arriba's RICO action with its applications for writs of garnishment against Pemex for

the 1986 and 198 9 default judgments. The claimed damages had now ballooned to more than $1

billio n.

Pemex moved to dismiss the consolidated action based on the FSIA, arguing in the alternative

that the case was non-justiciable under the Act of State doctrine. The district court rejected Pemex's

sovereign immunity defense, prompting this appeal. 7

II.APPELLATE JURISDICTION

We have jurisdiction to hear this appeal. This court has recent ly decided that the

interlocutory denial of a claim of foreign sovereign immunit y is appealable under the collateral order

doctrine. S tena Rederi AB v. Comision de Contratos, 923 F.2d 380, 385–86 (5th Cir.1991). Arriba

contends, however, that the district court's partial dismissal of its earlier garnishment claim was not

t imely appealed by Pemex. This is true, although in light of S tena and the following discussion, our

refusal to consider that minor aspect of Pemex's appeal yields Arriba a Pyrrhic victory. See Stena,

923 F.2d at 391–93 (garnishment immunity is subject to principles of FSIA).

III.

JURISDICTION UNDER THE FOREIGN SOVEREIGN IMMUNITIES ACT

The FS I A sets forth "the sole and exclusive standards to be used" to resolve all sovereign

immunit y issues raised in federal and state courts. S ee H.R.Rep. No. 1487, 94th Cong., 2d Sess. 12

(1976), U.S.Code Cong. & Admin.News 1976, pp. 6604, 6610. While the FSIA recognizes the

general rule that foreign states are entitled to immunit y from jurisdiction in American courts, § 1605

codifies several exceptions to that rule. Arriba principally invokes the "commercial activities"

exception, which provides that foreign states are not immune from suit in U.S. courts when the action

is based on commercial activity that has a jurisdictional nexus with the United States. 28 U.S.C. §

1605(a)(1)–(2). That Pemex is a foreign government instrumentality is undisputed. S ee Stena, 923

F.2d at 386. As defined in the Act, the term "commercial activity"

means either a regular course of commercial conduct or a particular commercial transaction

or act. The commercial character of an activity shall be determined by reference to the nature

of the course of

conduct or particular transaction or act, rather than by reference to its

purpose.

28 U.S.C. § 1603(d). The drafters of the FSIA envisioned that the courts "would have a great deal

of latitude in determining what is a "commercial activity' for purposes of this bill." House Report at

16 U.S.Code Cong. & Admin.News 1976, at 6615. However, in list ing possible examples of

"particular transactions or acts" which might fall within the exception, the House Judiciary Committeespecifically included "a single contract, if of the same character as a contract which might be made

by a private person." I

d. Arriba maintains that if attributable to Pemex, the 1984 Agreement

constitutes commercial activity within the meaning of the statute. See Stena, 923 F.2d at 387 n. 9.

Nonetheless, merely showing that a foreign state or its instrumentality has en gaged i n

"commercial activities" within the meaning of the Act is not sufficient: only those commercial

activities with a sufficient "jurisdictional nexus" to the United States fall within the exception. See

Stena, 923 F.2d at 386. Section 1605(a)(2) identifies three types of actions that are sufficiently

connected to the United States to satisfy the jurisdictional nexus requirement:

(1) a commercial activity carried on in the United States;

(2) an act performed in the United States in connection with a commercial activity carried on outside the United States; or

(3) a commercial activity carried on outside the United States that has a direct effect in the

United States.

Id.

Section 1605(a)(2) also requ ires that there be a material connection between the plaintiff's

cause of action and the commercial acts of the foreign sovereign. S tena, id. at 386–87. Thus, "[i]n

order to satisfy the commercial activities exception to sovereign immunity, the commercial activity

that provides the jurisdictional nexus with the United States must also be the activity on which the

lawsuit is based." I

d. at 387. Isolated or unrelated commercial actions by a foreign sovereign in the

United States do not authori ze the excepti on. I d. See also De Sanchez v. Banco Central de

Nicaragua, 770 F.2d 1385, 1391 (5th Cir.1985).

The parties vigorously dispute their respective burdens of proof on the commercial activity

issue, yet case law resolves such questions almost uniformly. Once the defendant alleges that it is a

"foreign state", the plaint iff must produce some facts to show that the commercial activity exception8 The district court erred in apparently saddling Pemex with the burden of proving it is not an

agent or alter ego of the Union and the Commission. to immunit

y applies, but the defendant retains the ultimate burden of proof on immunit y. S tena, 923

F.2d at 390 n. 14; F

orsythe v. Saudi Arabian Airlines Corp., 885 F.2d 285, 289 n. 6 (5th Cir.1989).

There is an exception to this general rule. Foreign instrumentalities and agencies are accorded a

presumption of independent status. S ee First Nat'l City Bank v. Banco Para El Comercio Exterior

de Cuba, 462 U.S. 611, 626–27, 103 S.Ct. 2591, 2599–2600, 77 L.Ed.2d 46 (1983) (" Bancec ").

Although Bancec 's description of the basis for disregarding the separate juridical status of foreign

agencies occurred in a discussion of substantive liability, its principles have been applied to FSIA

jurisdictional issues. S ee Foremost–McKesson, Inc. v. The Islamic Republic of Iran, 905 F.2d 438,

446 (D.C.Cir.1990); H

este r Int'l Corp. v. Federal Republic of Nigeria, 879 F.2d 170, 176 (5th

Cir.1989). Hence, where, as here, jurisdiction depends on an allegation that the particular defendant

was an agent of the sovereign, the plaintiff bears the burden of proving this relationship.

Foremost–McKesson, Inc., 905 F.2d at 447; Hester, 879 F.2d at 176. 8

Arriba contends that, having alleged jurisdiction under the commercial activity exception, it

is entitled to pursue discovery to support its allegations. S ee, e.g., Filus v. Lot Polish Airlines, 907

F.2d 1328, 1332–33 ( 2 d Cir.1990); F oremost–McKesson, Inc., 905 F.2d 448–49; G ould, Inc. v.

Pechiney Ugine Kuhlmann, 853 F.2d 445, 451–52 (6th C ir.1988), c ert. dismissed, Pechiney and

Trefimetaux v. Gould, Inc.,

––– U.S.

––––, 112 S.Ct. 1657,

––– L.Ed.2d

–––– (1992). The district

court agreed, drawing an analogy to the usual procedure for resolving contested jurisdictional issues.

See, e.g., DeMelo v. Toch e Marine, Inc., 711 F.2d 1260, 1270–71 and n. 12 (5th Cir.1983); C

.

Wright & A. Miller, Federal Practice & Procedure § 1350. The court was enticed into its discovery

order prematurely, however. Several courts have observed the tension between permitting discovery

to substantiate exceptions to statutory foreign sovereign immunit y and protecting a sovereig n's or

sovereign agency's legitimate claim to immunit y from discovery. The potential conflict is not unlike

that attendant to claims that challenge domestic government officials' qualified immunity from suit.9 Arriba did not seek to rest jurisdiction on § 1605(a)(3) of the FSIA, possibly because it could

be contended that Arriba's alleged financial losses alone are irrelevant to measuring the effect of

any commercial activities on the United States because Arriba is a Bahamian corporation. Stena,

923 F.2d at 390. See Anderson v. Creighton, 483 U.S. 635, 107 S.Ct. 3034, 97 L.Ed.2d 523 (1987). At the very least,

discovery should be ordered circumspectly and only to verify allegations of specific facts crucial to

an immunit

y determination. A necessary prerequisite to an order for limited discovery is a district

court's clear understanding of the plaint iff's claims against a sovereign entity. It is at this first step that

the district court stumbled.

Carefully read, Arriba's pleadings allege much less than they imply in the way of "commercial

activity" by or on behalf of Pemex. To be sure, Arriba has alleged a breathtakingly bold theory

according to which Pemex, its labor union, and the Commission—juridically separate

entities—combined to effect sales of Mexican gov ernment -o wned residual oil "off the books" of

Pemex and into Arriba's tanks at a much-reduced price. Presumably the goal of this alleged

arrangement was to enrich the o fficials wily and corrupt enough to have concocted this rogues'

bargain that depended for all practical purposes upon the theft of Mexico's oil products. But under

§ 1605(a)(2), Ar riba first has to plead how Pemex achieved the jurisdictional nexus necessary to

support subject matter jurisdiction in this country. Arriba has failed to allege a single Pemex activity

in or directly affecting the United States. It bears repeating that the 1984 agreement was structured

so as to avoid any direct dealings with Pemex, and that while the Agreement was allegedly executed

in Texas, Pemex was not a party to it. 9 Arriba has not alleged that Pemex negotiated, participated

or contracted with it directly in any way. The fact that Pemex has some commercial operations in or

affecting the United States is inadequate to support a finding of subject matter jurisdiction under the

FSIA. "The only relevant acts for purposes of jurisdiction under the FSIA are those acts that form

the basis of the plaintiff's complaint." Stena, 923 F.2d at 387–888.

The only alleged connection between Pemex and Arriba in the United States relevant to thiscase (and hence "material" under Stena, id. at 387) arises from the Commission's status as an agent

or alter ego of the Union and Pemex. Arriba insists that the Supreme Court's decision in B ancec

supports finding jurisdiction predicated upon the attribution to Pemex of acts by the Commission and

the Union. We wholeheartedly disagree that Arriba's theory of attribution is Bancec 's theory.

In Ba ncec, an official autonomous credit institution of the Cuban government sued First

National (subsequently known as "Citibank") to recover an unpaid letter of credit. Bancec had been

established as a separate juridical entity in 1960, with powers to hold and sell property and to sue and

be sued. After the Cuban revolution, however, Bancec was dissolved and its capital was split

between two government agencies. Citibank counterclaimed, asserting a right to set off the value of

its seized Cuban assets. At issue on appeal was whether Bancec's claim was subject to setoff for the

debts of its parent government. Answering in the affirmative, the Court held that while duly created

instrumental

it ies o f a foreign state are to be accorded a presumption of independent status, the

presumption of judicial separateness may be overcome when "a corporate entity is so extensively

controlled by its owner that a relationship of principal and agent is created." Id., 462 U.S. at 629,

103 S.Ct. at 2601. Cuba therefore could not escape liability for violations of international law simply

by retransferring assets to separate juridical entities. The Court found it inequitable to permit Cuba

to sue on a claim in an American court while ignoring its obligations under international law. I d. at

630–34, 103 S.Ct. at 2602–04.

Bancec is inapposite to this case. First, the concept of piercing the corporate veil, or alter ego

liabilit y, that underlies Bancec involves the disregard of corporate status to reach the assets of the

owners or of related corporate entities. S ee, e.g., Hester, 879 F.2d 177–78 and n. 7. No such facts

are pleaded here. Arriba wants the federal court to disregard the Commission's separate status by

lumping it with an entirely distinct entity: the Union's employer, Pemex. There is neither common10 In Bancec, both of the agencies that received assets of the former bank were government

instrumentalities. Here, only Pemex is a sovereign entity. The Commission is the private

contracting arm of the Union, which is itself a private entity.

11 Arriba did not plead conspiracy or tort as a basis for FSIA jurisdiction, see 28 U.S.C. §

1605(a)(5) (FSIA exception to immunity for tort liability). Likewise, it cannot rest on respondeat

superior, inasmuch as it asserts that the Commission's activities were outside the course and scope

of employment with Pemex. No further discussion of these issues is warranted.

12 Bancec "specifically declined to apply the law of the chartering state to determine the

separate juridical status of its instrumentality." Hester, 879 F.2d at 177. It may seem

incongruous for U.S. courts to import concepts from American corporate law to define the

relationships between foreign governments and their instrumentalities, rather than to apply

traditional choice of law principles. Indeed, one commentator has criticized this approach:

Without exception the United States cases ... have applied the United States theory

of veil piercing to determine the relationship of the foreign government and the

instrumentality. The courts have not even addressed the choice of law as a

possible issue. The law of the forum has been less a choice and more an

application without acknowledgement that a choice existed.

MICHAEL WALLACE GORDON, FOREIGN STATE IMMUNITY IN

COMMERCIAL TRANSACTIONS § 6.18 at 6–46 (1991) [hereinafter "GORDON"].

However, the Court did qualify its holding in two important respects. First, Bancec

warned against an overly mechanical application of American corporate law principles.

462 U.S. at 633–34, 103 S.Ct. at 2603. The Court did not presume to create "an

exhaustive list of criteria for disregarding the corporate form of other sovereign states'

instrumentalities." Hester, 879 F.2d at 178. More fundamentally, the Court justified its

result as "the product of the application of internationally recognized equitable principles

to avoid the injustice that would result from permitting a foreign state to reap the benefits

of our courts while avoiding the obligations of international law." Bancec, id., 462 U.S. at

633–34, 103 S.Ct. at 2603. o wnership nor any similar legal relationship between these entities. 1 0 One cannot pierce a

non-existent corporate veil. What Arriba seeks is more properly characterized as joint and several

liability for conspiracy or tort, respondeat superior, 11 or agency liability.

Second, Arriba's agency theory is deficient. Just as B ancec "freely drew from American

corporate law regarding the circumstances in which a corporati on could be held not to be a separate

entity from its owners," Hester, 879 F.2d at 177, these same concepts lead us to reject Arriba's claims

that the private defendants were "agents" and "alter egos" of Pemex. 12 Arriba has failed to allege any

manifestations by Pemex, the alleged "principal" in this agency relationship, that the private

defendants could act for Pemex. It is undisputed that Pemex was not a party to the 1984 agreement13 Hester quotes Product Promotions, Inc. v. Cousteau, 495 F.2d 483, 493 (5th Cir.1974),

overruled on other grounds, Insurance Corporation of Ireland v. Compagnie des Bauxites de

Guinee, 456 U.S. 694, 702–03, 102 S.Ct. 2099, 2104–05, 72 L.Ed.2d 492 (1982), as stated in

Burstein v. State Bar of California, 693 F.2d 511, 518 n. 12 (5th Cir.1982) (emphasis added).

14 It is true that in Hester

the flaw in the plaintiff's agency theory of liability against the Nigerian

government was determined after trial. 879 F.2d at 181. But Arriba's conclusory allegations of

an agency relationship are contradictory to the facts it pleads, which assert a misrepresentation of

the private defendants' ability to bind Pemex. with Arriba. Quinones purported to represent only the Commission, and not the Union or Pemex,

when he signed the Agreement. Arriba's insistence that corruption in the Mexican o il industry

continued despite President de la Madrid's "moral renovation" campaign, rendering moot the question

of illegalit

y under Mexican law, only undermines its a ssert ion that an agency relationship existed

between Pemex and the private defendants.

Arriba also pleads that while Union and Pemex o fficials represented info rmally to Arriba that

they could arrange for Pemex to de liver substantial volumes of residual oil, "[n]one of those

representations were true." This is a far cry from domestic agency principles, which require "some

m anifestations, written or spoken words or conduct, by the principal, communicated either to the

agent (actual authority) or to the third party (apparent authority)." Hester, 879 F.2d at 181. 13 Yet

there is here no allegation that Pemex, the "principal," participated in any of the negotiations leading

to the Agreement or stated that any of the private defendants represented Pemex. The bottom line

is that Arriba's pleadings reflect the antithesis of agency liability. Arriba cannot have it both ways.

Having structured a transaction to avoid dealing with Pemex directly, it cannot now allege that Pemex

is responsible for the acts of private parties who misrep resented their authority to act on Pemex's

behalf. 14

There is a third distinction between this case and Bancec. B ancec emphasizes "[d]ue respect

for the actions taken by foreign sovereigns and for principles of comity between nations". 103 S.Ct.

at 2600, citing Hilton v. Guyot, 159 U.S. 113, 163–64, 16 S.Ct. 139, 143, 40 L.Ed. 95 (1895). The

Bancec Court expressed the concern that freely ignoring the separa t e st atus of government15 Arriba's discovery requests in the district court prove this point. They include: (1) requests

for all Pemex financial reports, balance sheets and income statements, including those of Pemex's

subsidiaries and affiliates; (2) all documents reflecting communications between Pemex and the

private defendants, ranging from formal documents to internal memoranda; (3) all documents

reflecting any payments or transfers of funds from Pemex, any vendor of Pemex, or any officer or

director of Pemex, to the private defendants; (4) all documents in Pemex's possession reflecting

communications between any of the private defendants—or persons associated with them—and

Pemex or its vendors; (5) all documents relating to any assets of the private defendants; (6) all

documents referring to any of the activities of the private defendants; and (7) all documents

referring to any investigations of the private defendants by Pemex for any alleged misconduct,

including bribery, extortion, ultra vires acts, tax evasion, embezzlement and any other possible

violations of U.S. or Mexican law. instrumentalities could cause uncertainty over the extent of their liabilit ies and inhibit their abilit

y to

obtain credit. Hence, the separate corporate status of such entities should be disregarded only where

necessary to do equity. We would be remiss not to point out t hat equit y is not served by holding

Pemex accountable in American courts on the broad but vague attribution theory alleged by Arriba.

Not only does Arriba's theory fail to conform to the standard articulation of piercing the corporate

veil, but it cannot be proved without massive, intrusive discovery in Mexico on highly sensitive

domestic issues. 15 We would not allow such generalized conspiratorial allegations against an

American government entity to provoke massive discovery. S ee, e.g., Elliott v. Perez, 751 F.2d 1472

(5th Cir.1985); and J

acquez v. Procunier, 801 F.2d 789 (5t h Cir.1986) (vague allegations of

co nspiracy). It is unimaginable that FSIA would authorize broader exposure to suit of a foreign

government instrumentality such as Pemex than that of domestic governmental units.

For these reasons, we hold that Arriba has not alleged commercial activities by or on behalf

of Pemex, related to the Agreement, that subject it to jurisdiction in this country. While B ancec

would permit FSIA jurisdiction in American courts over a commercial activity predicated upon

principal-agent or veil-piercing all egati ons against a foreign sovereign instrumentality, s ee Hester, 879

F.2d at 181, Arriba's allegations do not meet the Bancec test. Fairly read, they are self-contradictory

on the possibility of a principal-agent relationship between Pemex and the Commission or the Union,

and they do not conform to the internationally recognized pri nciples authorizing, under limited

circumstances, disregard of corporate status. C f. Bancec, 462 U.S. at 633–34, 103 S.Ct. at 2603.16 Oliver Stone's recent movie JFK hypothesizes that President Kennedy was assassinated by a

massive conspiracy including the CIA, FBI, the U.S. military-industrial complex, and various

other government officials and businessmen.

17 Arriba incorrectly relies on cases that have allowed limited discovery before the court rules

on whether a foreign sovereign's commercial activities deprive it of immunity. In each of these

cases, there were allegations of specific facts that, if proved, sustained a nexus between

particularized commercial activity and the claims asserted by the plaintiff. The theft of trade

secrets by a French government-owned company and its subsidiary was alleged in Gould to have

been accomplished partly through negotiations in the United States with Gould's former

employee. The court ordered limited discovery to ascertain that such actions, sufficient in its view

to establish FSIA jurisdiction, had occurred. Gould, 853 F.2d at 453. In Gilson, allegations were

made by an American plaintiff against the Republic of Ireland and companies owned by it that

these defendants enticed him to go to Ireland to work for them and then stole his patent rights and

expertise for their own benefit. Gilson v. Republic of Ireland, 682 F.2d 1022 (D.C.Cir.1982).

Whether or not a Soviet entity negligently overhauled a Polish aircraft in the United States,

contributing to its crash later in Poland, and whether two Soviet entities were separate, provided

the only two fact issues pertaining to the commercial activities exception to FSIA in Filus v. Lot

Polish Airlines, 907 F.2d at 1332–33. Finally, Foremost–McKesson permitted inquiry into

whether the Iranian government's majority control of a dairy company in Iran was sufficient to

establish a principal-agent relationship under the FSIA. 905 F.2d at 447.

There was alleged to be direct involvement by the foreign sovereign

instrumentality in the commercial activity from which all of the foregoing claims arose.

Liability was sought against the sovereign defendant on account of specific misdeeds.

Arriba's allegations, as we have emphasized, posit no direct involvement of Pemex in its

contract. Its complaint relies on speculative inferences of behind-the-scenes activity by

Pemex and, through its novel use of corporate attribution theory, would hold Pemex liable

for the Union's and the Commission's misdeeds. Limited jurisdictional discovery,

consonant with the comity envisioned by FSIA, ( See Gould, 853 F.2d at 451; Foremost,

905 F.2d at 446–47 is impossible under these allegations, because they are much broader

than the basic claim of breach of the 1984 Agreement. As the other FSIA cases

demonstrate, discovery may be used to confirm specific facts that have been pleaded as a

basis for enforcing the commercial activities exception, but it cannot supplant the pleader's

duty to state those facts at the outset of the case. Stena, 923 F.2d at 386–87. Judicial comity amon g nations, an important principle acknowledged in B ancec, has become

increasingly important to today's global economy. Flouting comity, Arriba's JFK

- like 16 charges

against the defendants, if pursued in American courts, could serious ly impede our relations with

Mexico. Finally, because Arriba's allegations do no t satisfy B ancec, permitting discovery will not

cure the FSIA jurisdictional deficiency. 17 The allegations made by Arriba do not confer jurisdiction

over Pemex consistent with FSIA.

IV.

IMPLIED WAIVER OF SOVEREIGN IMMUNITY UNDER FSIA18 These are Arriba's words; the phrase "sue or be sued" does not actually appear in Article 17,

which provides that Mexico's federal courts have exclusive jurisdiction over all cases and

controversies to which Pemex is a party.

19 According to Professor Gordon, the argument that endowing a state entity with the capacity

to sue and be sued constitutes an implicit waiver of sovereign immunity is "easily rejected."

GORDON § 9.04 at 9–9 (citing Dayton v. Czechoslovak Socialist Republic, 672 F.Supp. 7

(D.D.C.1986), affirmed, 834 F.2d 203 (D.C.Cir.1987), cert. denied, 486 U.S. 1054, 108 S.Ct.

2820, 100 L.Ed.2d 921 (1988)). Section 1604 of the Act extends sovereign immunity not just to

the governments of foreign states, but to their agencies and instrumentalities. Observing that the

legislative history to § 1603(b) defines "agency or instrumentality" to include any entity which,

"under the law of the foreign state where it was created, can sue or be sued in its own name,"

Dayton held that such entities are covered by § 1604. Id. at 10–11. As another basis for jurisdiction under the FSIA, Arriba urges that Pemex implicit ly waived

its sovereign immunit y, a possibility authorized by § 1605(a)(1). It goes nearly without saying that

Pemex has not expressly waived immunity.

The gist of Arriba's implied waiver t heo ry is as follows: Article 17 of the Organic Law of

Petrol eos Mexicanos, Pemex's enabling legislation, is the equivalent of a corporate charter. Article

17 permits Pemex "to sue and be sued." 18 A long line of Supreme Court decisions, beginning with

Bank of the United States v. Planters' Bank of Georgia, 9 Wheat. (22 U.S.) 904, 6 L.Ed. 244 (1824),

have construed the "sue and be sued" provisions in corporate charters to be a waiver of sovereign

immunit y. Thus, Arriba argues, Article 17 amounts to an implied waiver of Pemex's sovereign

immunit y.

If adopted, Arriba's imaginative "sue and be sued" theory of implied waiver would presumably

deny Pemex sovereign immunit y in most if not all future actions to which it is a party. We decline

to adopt the theory. 19 As Chief Justice Marshall noted in O sborn v. Bank of the United States, 9

Wheat. (22 U.S.) 738, 6 L.Ed. 204 (1824), the companion case to Planter's Bank, the legislation

which created the Bank of the United States empowered it "to sue and be sued , plead and be

impleaded, answer and be answered, defend and be defende d

, in all state courts having competent20 See generally P. BATOR, D. MELTZER, P. MISHKIN & D. SHAPIRO, HART &

WECHSLER'S THE FEDERAL COURTS AND THE FEDERAL SYSTEM 967–84 (3d ed.

1988).

21 Planter's Bank

and Osborn did not address sovereign immunity within the context of

international law. Recently, however, the Court in Verlinden B.V. v. Central Bank of Nigeria,

461 U.S. 480, 103 S.Ct. 1962, 76 L.Ed.2d 81 (1983), raised the question whether the FSIA is

unconstitutional to the extent that it permits the federal courts to entertain substantive claims that

are not based on federal law. Relying on Osborn, the Court held that the phrase "arising under

the laws of the United States" in Article III is sufficiently broad to entitle Congress to "confer on

the federal courts jurisdiction over any case or controversy that might call for the application of

federal law." Id. at 492, 103 S.Ct. at 1971 (emphasis added). Defining the scope of federal

question jurisdiction cannot answer the separate question whether Pemex's charter amounts to an

implied waiver of its immunity from suit in U.S. courts. jurisdiction, and in any circuit court of the United States." 20 But Planter's Bank has no bearing on

the issue of whether foreign sovereigns are immune from suit in the courts of the United States. The

case, which settled a lingering dispute over the powers of the Bank of the United States, held that the

"sue and be sued" language in the Bank's charter gave it the right to sue in federal court as the bearer

of nego t iable instruments made by a state bank. P lanter's Bank turned on whether Congress had

conferred federal question jurisdiction on the Bank, not whether the particular words "sue and be

sued" amounted to a waiver of the Bank's sovereign immunity as a federally chartered institution. 21

Nor is Bancec helpful to Arriba. Arriba refers to an isolated passage in B ancec in which the

Court, citing Planter's Bank, noted that "[p]rovisions in the corporate charter stating that the

instrumentality may sue and be sued have been construed to waive the sovereign immunit y accorded

to many go vernmental activities, thereby enabling third parties to deal with the instrumentality

knowing that they may seek reli ef in the courts." 462 U.S. at 625, 103 S.Ct. at 2599. In this

particular context, however, the "waiver" of sovereign immunit y referred to the Cuban government's

willingness to allow some judicial remedies against the bank, as opposed to the more specific question

of whether Bancec should be exposed to the subject matter jurisdiction of courts in the United States.

To the extent that Article 17 provides that Pemex may be sued, it amounts to a waiver of Mexico's

sovereign immunit

y within the meaning of the above-quoted passage in Bancec. But Article 17 also

gives Mexican cour t s exclusive jurisdiction over all controversies to which Pemex is a party.22 According to the House Report that accompanied the FSIA, implicit waivers are ordinarily

found in three situations: (1) a foreign state agrees to arbitration in another country; (2) the

foreign state agrees that a contract is governed by the laws of a particular country; and (3) the

state files a responsive pleading without raising the immunity defense. See H.R.Rep. No. 1487,

94th Cong., 2d Sess. at 18. See also GORDON § 9.04 at 9–10. None of these situations is

present here. Consequently, Pemex's enabling legislation, without more, is hardly a waiver o f its soverei gn

immunity within the menaing of the FSIA. 22

V.

CONCLUSION

In view of our holding that the district court lacks subject matter jurisdiction over this dispute,

it is unnecessary to decide whether Arriba's action against Pemex is barred by the Act of State

doctrine. For all the foregoing reaso ns, the judgment of the district court is REVERSED with

instructions to DISMISS wi t h prejudice; the Act of state interlocutory appeal is DISMISSED as

m oot.

Case No. 91–2180—REVERSED with INSTRUCTIONS to DISMISS with PREJUDICE.

Case No. 91–6311—DISMISSED AS MOOT.