IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 15-10545

Cons. w/ No. 15-10548

RALPH S. JANVEY, In His Capacity as Court-Appointed Receiver for the 

Stanford International Bank, Limited, Et Al, 

 Plaintiff - Appellant

v.

LIBYAN INVESTMENT AUTHORITY, 

 Defendant - Appellee

_________________________

Cons. w/ No. 15-10548

RALPH S. JANVEY, In His Capacity as Court-Appointed Receiver for the 

Stanford International Bank, Limited, Et Al,

 Plaintiff - Appellee

v.

LIBYAN FOREIGN INVESTMENT COMPANY,

 Defendant - Appellant

Appeals from the United States District Court 

for the Northern District of Texas

United States Court of Appeals

Fifth Circuit

FILED

October 26, 2016

Lyle W. Cayce

Clerk

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Before WIENER, PRADO, and OWEN, Circuit Judges.

PER CURIAM:

Ralph S. Janvey, the court-appointed receiver (“the receiver”) for a Ponzi 

scheme orchestrated by Allen Stanford (the “Stanford scheme”), brought claims

against the Libyan Investment Authority (“LIA”) and the Libyan Foreign 

Investment Company (“LFICO”) in the district court, seeking to recover the 

proceeds of certificates of deposit (“CDs”) previously transferred to LFICO by 

the Stanford International Bank, Ltd. (“SIB”). LIA and LFICO moved to 

dismiss the receiver’s claims, insisting that they were immune from the court’s 

jurisdiction under the Foreign Sovereign Immunities Act (“FSIA”). The 

receiver opposed dismissal, asserting that the commercial activity exception to

FSIA immunity applied. After the parties conducted limited jurisdictional 

discovery, the district court ruled that LIA was immune but that LFICO was 

not. Both the receiver and LFICO timely filed appeals, which have been 

consolidated. We affirm in part and vacate and remand in part. 

I.

FACTS & PROCEEDINGS

Stanford and his associates perpetrated the Stanford scheme through a 

group of entities (collectively, the “Stanford entities”) that, inter alia, sold sham 

CDs issued by SIB to unsuspecting investors. The Stanford entities promised 

those investors that the CDs from SIB would yield extraordinarily high rates 

of return. Rather than investing the funds they received from later investors, 

however, the Stanford entities paid those funds to earlier investors, redeeming

their maturing CDs. In so doing, the Stanford entities made it appear that the 

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CDs from SIB were producing the phenomenal rates of return they

had promised.1

In early 2009, the Securities and Exchange Commission (“SEC”) filed 

suit against the Stanford entities, including SIB. The Stanford entities were

then placed in receivership, and Janvey was appointed their receiver. The 

receiver is responsible for bringing claims on behalf of the Stanford entities to 

recover assets for distribution to their defrauded investors.

The instant consolidated appeals relate to the Stanford entities’ transfer 

of funds to LFICO, an earlier investor that had redeemed some of its

maturing CDs.

In 2006, LFICO had developed relationships with SIB, a Stanford entity 

based in Antigua, and Stanford Group (Suisse) S.A. (“SGS”), a Stanford entity 

based in Switzerland. LFICO’s relationship with SIB related solely to its 

purchase of $138 million in CDs from SIB. LFICO’s relationship with SGS 

related solely to a discretionary management agreement between itself and 

SGS, under which SGS managed $100 million of LFICO’s funds in an account 

it held in Switzerland. The agreement was formed in Libya and governed by 

Swiss law. 

These relationships were ongoing when, in 2007, two SGS financial 

advisors accompanied two LFICO analysts on a training program conducted 

by SIB. The program began and ended in Switzerland but included visits to 

Antigua and the United States—in particular, to Houston, Memphis, 

Washington, and Miami. Otherwise, LFICO’s relationship with the Stanford 

entities did not include any other acts or activities in the United States.2

 

1 In addition to transferring funds to earlier investors, the Stanford entities also 

transferred funds to other persons and entities, often for divergent purposes.

2 In late 2008, the then-chairperson of LIA visited the United States for meetings of 

the International Monetary Fund (“IMF”) and, while here, met with Stanford himself. There

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In 2008, LFICO decided to divest its SIB-issued CDs, “given the size of 

[these] deposits and the problems facing the international financial market.”3

It instructed SGS in Switzerland to redeem its SIB-issued CDs as they 

matured rather than to repurchase them at that time. (In a single exception, 

LFICO instructed SGS to repurchase $50 million in CDs from SIB several 

months later.) SGS appears to have complied with these requests: As the CDs 

matured, SIB transferred their proceeds from its accounts in Canada and 

England to LFICO’s accounts in Libya and Switzerland. None of these accounts 

was held in the United States.4 When SIB entered receivership, LFICO had 

already received about $50 million in redemption proceeds, far less than it had 

paid for all of its CDs. As a result, it suffered a greater loss than any other 

investor in the Stanford scheme.

LFICO’s only shareholder is LIA, whose only shareholder is Libya. Both 

LFICO and LIA are based in Libya. Unlike LFICO, LIA never purchased SIBissued CDs, although it apparently considered doing so. LIA asserts that it was 

wholly uninvolved in LFICO’s purchases and redemptions of the SIB-issued

CDs.5 LIA is not referenced in the discretionary management agreement 

between LFICO and SGS or in the CDs themselves, which were agreements 

 

is no indication that they discussed LFICO’s purchase, repurchase, or redemption of SIBissued CDs.

3 The management committee’s decision to redeem the CDs in 2008 appears to have 

been unrelated to the analysts’ visit to the United States in 2007.

4 Although Stanford himself briefly visited Libya several days before SIB transferred 

the proceeds of these CDs to LFICO in 2009, this was months after LFICO had decided to

divest and notified SIB that it would redeem its SIB-issued CDs rather than repurchase them

as they matured. 

5 The receiver suggests that LFICO has stated that LIA was uninvolved with LFICO’s 

purchase of SIB-issued CDs but has not stated that it was uninvolved with the redemption of 

those same CDs. This too closely parses LFICO’s language, which actually states that LIA 

was uninvolved with LFICO’s investment in SIB-issued CDs; use of the term “investment” is 

sufficiently broad to encompass both LFICO’s purchase and subsequent redemption of

the CDs.

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between SIB and LFICO. After Stanford’s arrest, the then-chief investment 

officer of LIA stated that LIA itself had not purchased any SIB-issued CDs but 

that he “suspect[ed] a[n] LIA affiliate or [s]ubsidiary may have [$]150 million 

at most” invested.6

In 2009, the receiver filed suit against investors, including LFICO, that

had purchased SIB-issued CDs and later had redeemed them. He sought 

disgorgement of any proceeds of those CDs, but in Janvey v. Adams, this court 

precluded such claims, holding that the investors had a legitimate ownership 

interest in those proceeds.7 The receiver then made new claims against some 

of those investors for fraudulent transfer and unjust enrichment. Eventually, 

he asserted such claims against LFICO and LIA, too, alleging that LFICO was 

LIA’s alter ego. The receiver filed a motion for a preliminary injunction on 

those claims. The district court denied the receiver’s motion, and we affirmed 

the district court’s denial. 

LIA and LFICO eventually filed a motion to dismiss under Federal Rule 

of Civil Procedure 12(b)(1) and (2), claiming that the district court lacked 

personal and subject matter jurisdiction because (1) they had presumptive 

immunity under the FSIA as agents or instrumentalities of a foreign state and 

(2) the commercial activity exception to immunity under the FSIA did not 

apply. The parties conducted jurisdictional discovery regarding whether LIA 

and LFICO engaged in activities that fall within the scope of the commercial 

activity exception under the FSIA.

When that discovery was complete, the district court denied the motion

to dismiss as to LFICO. In so doing, it ruled that (1) LFICO had engaged in 

 

6 Notably, the Libyan-African Investment Portfolio (“LAP”), an entity similar to 

LFICO, also purchased SIB-issued CDs between 2007 and 2008. Unlike LFICO, however, it 

repurchased about $50 million in CDs from SIB as they matured in late 2008. As a result, 

SIB never transferred any proceeds to LAP.

7 588 F.3d 831, 834 (5th Cir. 2009). 

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commercial activity by purchasing, repurchasing, and redeeming the SIBissued CDs and (2) this activity, which occurred outside the United States, had 

a “direct effect” on the United States because the Stanford scheme was based 

in the United States. The court concluded that the commercial activity 

exception to immunity under FSIA gave it personal and subject matter 

jurisdiction over LFICO. 

The district court granted the motion to dismiss as to LIA. The court

concluded that LIA had not engaged in commercial activity at all and that, 

although LFICO had engaged in such activity, its acts were not attributable to

LIA. The court ruled that LFICO was not LIA’s agent or alter ego in 

purchasing, repurchasing, or redeeming the SIB-issued CDs and that the 

proceeds of those CDs were not redeemed for LIA’s benefit. Both LFICO and 

the receiver then appealed.

II.

ANALYSIS

A. STANDARD OF REVIEW

We have appellate jurisdiction over any final order that grants immunity 

under the FSIA8 and over any collateral order that denies it.9 We also have 

pendant appellate jurisdiction over any closely related issues.10 In exercising 

that jurisdiction, we review the district court’s conclusions of law de novo,11

 

8 28 U.S.C. § 1291.

9 See Stena Rederi AB v. Comision de Contratos del Comite Ejecutivo General del 

Sindicato Revolucionario de Trabajadores Petroleros de la Republica Mexicana, S.C., 923 

F.2d 380, 385 (5th Cir. 1991).

10 See Walter Fuller Aircraft Sales, Inc., v. Rep. of Phil., 965 F.2d 1375, 1387 (5th Cir. 

1992) (“In the exercise of [this Court’s] discretion and in the interest of judicial economy . . . , 

we may consider claims under our pendent appellate jurisdiction that are closely related to 

the order properly before us.”); Morin v. Caire, 77 F.3d 116, 119 (5th Cir. 1996).

11 Bd. of Regents of Univ. of Tex. Sys. v. Nippon Tel. & Tel. Corp., 478 F.3d 274, 279 

(5th Cir. 2007); see Ynclan v. Dep’t of Air Force, 943 F.2d 1388, 1390 (5th Cir. 1991).

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and, to the extent it makes any findings of fact,12 we review them for clear 

error.13 A finding of fact is clearly erroneous if it is inconsistent with the record 

in its entirety.14 Such a finding may be clearly erroneous if (1) it is not based 

on “substantial evidence,” (2) it is based on a misinterpretation of the evidence, 

or (3) it is inconsistent with “the preponderance of credible testimony.”15 If the 

district court’s conclusions of law “affected” its findings of fact, “remand is the 

proper course unless the record permits only one resolution of the [fact].”16

These appeals require us to determine whether there is any basis for 

personal and subject matter jurisdiction over LIA and LFICO. The FSIA 

provides “the sole basis for obtaining jurisdiction over a foreign state in [federal 

and state] courts.”17 It furnishes both the immunity itself, which applies to any 

“foreign state,”18 and the only exceptions to that immunity.19 If an exception 

applies, the FSIA also specifies the only basis for personal and subject matter 

jurisdiction over the foreign state. That jurisdiction extends to “any nonjury 

civil action against a foreign state . . . as to any claim for relief in 

personam . . . .”20 If no exception applies, there is no other basis for personal or 

subject matter jurisdiction over a foreign state.21

 

12 Bd. of Regents of Univ. of Tex. Sys., 478 F.3d at 279; see Moran v. Kingdom of Saudi

Arabia, 27 F.3d 169, 171–72 (5th Cir. 1994).

13 Moran, 27 F.3d at 171–72.

14 Hollinger v. Home State Mut. Ins. Co., 654 F.3d 564, 569 (5th Cir. 2011).

15 Ball v. LeBlanc, 792 F.3d 584, 592 (5th Cir. 2015) (internal quotation marks 

omitted).

16 Id. at 596 (quoting Pullman-Standard v. Swint, 456 U.S. 273, 292 (1982)).

17 Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 434 & n.2 (1989).

18 28 U.S.C. §§ 1602–11.

19 Id. § 1605(a).

20 Id. § 1330(a).

21 Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480, 489 (1983). See also Argentine 

Republic, 488 U.S. at 435 n.3 (“Subsection (b) of 28 U.S.C. § 1330 provides that ‘[p]ersonal 

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The parties claiming immunity under the FSIA—here, LIA and LFICO—

have the initial burden of persuasion that they are foreign states and therefore

entitled to a presumption of immunity.22 If they bear that burden, then the 

party opposing immunity—here, the receiver—has the burden of producing 

evidence that LIA and LFICO fall within an exception enumerated in the FSIA, 

refuting the presumption of immunity.23 If the receiver bears his burden, LIA 

and LFICO then have the ultimate burden of persuasion that the exception 

does not apply to them and that they are entitled to immunity.24

B. WHETHER LFICO AND LIA ARE “FOREIGN STATES” UNDER THE FSIA

The parties agreed that both LIA and LFICO are “foreign states” under 

the FSIA. Relying on the parties’ agreement, the district court determined that 

LIA and LFICO “qualify as foreign states.” Subject matter jurisdiction, 

however, “can never be forfeited or waived.”25 We therefore “have an 

independent obligation to determine whether [it] exists, even in the absence of 

 

jurisdiction over a foreign state shall exist as to every claim for relief over which the district 

courts have [subject-matter] jurisdiction under subsection (a) where service has been made 

under [28 U.S.C. § 1608].’ Thus, personal jurisdiction, like subject-matter jurisdiction, exists 

only when one of the exceptions to foreign sovereign immunity . . . applies.” (alterations in 

original)).

22 See United States v. Moats, 961 F.2d 1198, 1205 (5th Cir. 1992).

23 Id.

24 Id.

25 Arbaugh v. Y&H Corp., 546 U.S. 500, 514 (2006). Importantly, the subject matter 

jurisdiction inquiry under the FSIA involves determining first whether a party is a “foreign 

state” to which the Act applies, and then whether any exception to the presumption of foreign 

sovereign immunity applies under the circumstances. See Verlinden, 461 U.S. at 488–89. 

Whether the party is a “foreign state” clearly cannot be waived by the parties, just as is the 

case with any typical question regarding subject matter jurisdiction. A foreign state entitled 

to immunity under the FSIA, however, may waive its immunity. See 28 U.S.C. § 1605(a)(1) 

(providing that a party can expressly or implicitly waive its immunity from the jurisdiction 

of the United States courts). In this case, when we state that subject matter jurisdiction can 

never be waived, our statement applies only to whether a party is a “foreign state” under

the FSIA.

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a challenge from any party.”26 Accordingly, we must determine whether LIA 

and LFICO are “foreign states” under the FSIA.

In the context of the FSIA, the term “foreign state” refers not only to the 

state itself, viz., the “body politic that governs a particular territory,”27 but also 

to its “agenc[ies] or instrumentalit[ies].”28 Absent a clear distinction

between the terms “agency” and “instrumentality,”29 they are read together or 

treated interchangeably.30

An agency or instrumentality of a foreign state is a separate entity, 

“corporate or otherwise,” that is either (1) majority owned by a foreign state or 

(2) an “organ” of a foreign state.31 There is a distinction between those agencies 

or instrumentalities that qualify because they are “organs” of a foreign state 

 

26 Arbaugh, 546 U.S. at 514.

27 Samantar v. Yousuf, 560 U.S. 305, 314 (2010).

28 28 U.S.C. § 1603(a).

29 See Agency, BLACK’S LAW DICTIONARY (10th ed. 2014) (defining “agency,” in relevant 

part, as “[a]n official body, esp. within the government, with the authority to implement and 

administer particular legislation”); see Instrumentality, BLACK’S LAW DICTIONARY (10th ed. 

2014) (defining “instrumentality,” in relevant part, as “[a] means or agency through which a 

function of another entity is accomplished, such as a branch of a governing body”).

30 We have previously explained: “The use of the single term ‘agency’ for two purposes 

in the context of this case may cause some confusion. The FSIA uses it to determine whether 

an ‘agency’ of the state may potentially qualify for foreign sovereign immunity itself under 

the FSIA. This is a completely different question from . . . whether or not [such an agency] 

enjoyed an alter ego relationship with the [foreign state] so that it could bind [the foreign 

state as a result of its acts]. Although such an alter ego relationship may be described in 

terms of ‘agency,’ it is a completely different inquiry than that which might be conducted 

under [the FSIA’s ‘agency or instrumentality’ requirement]. . . . [T]he level of state control 

required to establish an ‘alter ego’ relationship is more extensive than that required to 

establish FSIA ‘agency.’” Hester Int’l Corp. v. Fed. Republic of Nigeria, 879 F.2d 170, 176 n.5 

(5th Cir. 1989).

31 28 U.S.C. § 1603(b) (“An ‘agency or instrumentality of a foreign state’ means any 

entity . . . (1) which is a separate legal person, corporate or otherwise, and . . . (2) which is an 

organ of a foreign state . . . or a majority of whose shares or other ownership interest is owned 

by a foreign state . . . .” (emphasis added)).

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and those that qualify because they are “majority owned” by one.32 In some 

instances, however, an agency or instrumentality may be both and thus qualify 

as either.

1. MAJORITY OWNED BY A FOREIGN STATE

The Supreme Court has clarified that, because “[c]ontrol and 

ownership . . . are distinct concepts,” “[m]ajority ownership by [the] foreign 

state, not control, is the benchmark.”33 As “only direct ownership” counts,34 “a 

subsidiary of an [agency or] instrumentality [of the state] is not itself entitled 

to [such] status.”35 Therefore, “[a] corporation is an [agency or an] 

instrumentality of a foreign state under the FSIA only if the foreign state itself

owns a majority of the corporation’s shares.”36 It is not an agency or 

instrumentality on the basis of majority ownership, however, if the “the foreign 

state does not own a majority of its shares but does own a majority of the shares 

of a corporate parent one or more tiers above the subsidiary.”37

LIA is majority owned by Libya itself and thus is an agency or 

instrumentality of Libya.38 LFICO, however, does not qualify on that basis 

because it is not majority owned by Libya directly, but by LIA. LFICO is merely 

a subsidiary of LIA, and that is not sufficient.

 

32 Kelly v. Syria Shell Petroleum Dev. B.V., 213 F.3d 841, 846 (5th Cir. 2000) 

(“[B]ecause we conclude that [the entity] is an organ of a foreign state, we need not consider 

[the] ownership requirements.”).

33 Dole Food Co. v. Patrickson, 538 U.S. 468, 477 (2003).

34 Id. at 474.

35 Id. at 473. The Supreme Court discusses only “instrumentalities” in this context, 

and it does not distinguish agencies from instrumentalities. As discussed above, these appear 

to be synonymous.

36 Id. at 477 (emphasis added).

37 Id. at 471.

38 As another panel noted, LIA is “an agency of the Libyan government.” Janvey v. 

Libyan Inv. Auth., 478 F. App’x 233, 236 (5th Cir. 2012).

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2. ORGAN OF A FOREIGN STATE

LFICO could qualify as an agency or instrumentality, however, if it is an 

organ of Libya. We have suggested that there is no clear test for determining

whether an entity is an organ of a state but that the following factors are 

useful: “(1) whether the foreign state created the entity for a national purpose; 

(2) whether the foreign state actively supervises the entity; (3) whether the 

foreign state requires the hiring of public employees and pays their salaries; 

(4) whether the entity holds exclusive rights to some right in the [foreign] 

country; and (5) how the entity is treated under foreign state law.”39

Considering whether an entity is an “organ” is, in some respects, similar to 

considering whether it is an “agent.” (We note that the term “agent” should

not to be confused with the term “agency” in the phrase “agency

or instrumentality.”) 

Because the parties agreed that LFICO is a “foreign state” under the 

FSIA, they did not address whether LFICO is an organ, and thus an agency or 

instrumentality, of Libya. The district court did determine, in another context, 

that LFICO was not LIA’s agent but was Libya’s agent. The court explained 

that “there is a sufficient connection between LFICO and [Libya] such that 

LFICO can be considered Libya’s agent.”40 In so doing, the court determined:

“LFICO operates solely in the national interest of Libya”; “LFICO possesses 

‘special status and is treated as an organ of . . . Libya”; “LFICO is comprised in 

large part of government representatives”; and “the Libyan legislature has the 

power to appoint members of . . . LFICO[’s board] and to fix their salaries, and 

[its board] is subordinate to the Libyan legislature.”

 

39 Bd. of Regents of Univ. of Tex. Sys., 478 F.3d at 279 (alteration in original) (quoting 

Kelly, 213 F.3d at 846–47 (5th Cir. 2000))

40 Notably, LFICO is owned by LIA, not by Libya proper. 

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The district court, however, erred by relying on a description of the act

that created LFICO initially rather than the description of the subsequent act 

that transferred LFICO to LIA. The subsequent act disentangled LFICO from 

Libya itself. As a result, LIA became—and remains—Libya’s subsidiary, and 

LFICO became—and remains—LIA’s subsidiary. This is significant because, 

as with subsidiaries, “duly created [agencies or] instrumentalities of a foreign 

state are to be accorded a presumption of independent status.”41 The party 

opposing immunity—here, the receiver—“can overcome that presumption

. . . by demonstrating that the [agency or] instrumentality is the agent or alter 

ego of the foreign state.”42 The theories underlying alter egos and agents are 

“distinct” and, for this reason, are not to be applied “as if they were 

interchangeable.”43 Alter egos are created equitably; agents are created 

contractually.44 Both, however, are bases for overcoming the presumption that 

an agency or instrumentality of a foreign state is separate from the foreign 

state itself.45

LIA is majority owned by Libya proper and therefore an agency or 

instrumentality of a foreign state. In contrast, LFICO is not majority owned by 

Libya proper. As noted above, the parties agreed that, in addition to LIA, 

LFICO is a foreign state under the FSIA, so the parties did not develop the 

record on the precise issue of whether LFICO is an organ of Libya and thus a

 

41 First Inv. Corp. of Marsh. Is. v. Fujian Mawei Shipbuilding, Ltd., 703 F.3d 742, 752 

(5th Cir. 2012) (quoting First Nat’l City Bank v. Banco Para el Comercio Exterior de Cuba, 

462 U.S. 611, 627 (1983)).

42 Dale v. Colagiovanni, 443 F.3d 425, 429 (5th Cir. 2006); see First Inv. Corp. of Marsh.

Is., 703 F.3d at 753.

43 Bridas S.A.P.I.C. v. Gov’t of Turkm., 345 F.3d 347, 358 (5th Cir. 2003).

44 Id. at 359 (“The laws of agency, in contrast, are not equitable in nature, but 

contractual, and do not necessarily bend in favor of justice.”).

45 First Nat’l City Bank, 462 U.S. at 633.

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“foreign state” under the FSIA. Accordingly, we vacate the district court’s 

ruling that it had jurisdiction over the claims against LFICO under the FSIA 

and remand for development of the factual record on this issue and for a 

determination whether LFICO is an organ, and thus an agent or 

instrumentality, of Libya under the FSIA. 

C. WHETHER THE CLAIMS AGAINST LFICO ARE SUBJECT TO THE 

COMMERCIAL ACTIVITY EXCEPTION TO THE FSIA

If we were to assume arguendo that LFICO is an agency or

instrumentality of Libya proper and therefore presumptively entitled to 

immunity under the FSIA, there would be no basis for jurisdiction over the 

receiver’s claims against LFICO under the commercial activity exception to

the FSIA. The FSIA provides an exception to sovereign immunity “in any case 

in which the action is based upon commercial activity that has a jurisdictional 

nexus with the United States.”46 The commercial activity exception contains

three clauses, each identifying a type of act that is sufficiently connected to the 

United States to satisfy the jurisdictional nexus requirement: (1) “a 

commercial activity carried on in the United States by the foreign state”; 

(2) “an act performed in the United States in connection with a commercial 

activity of the foreign state elsewhere”; and (3) “an act outside the territory of 

the United States in connection with a commercial activity of the foreign state 

elsewhere and that act causes a direct effect in the United States.”47

The parties dispute whether LFICO’s activity—purchasing, 

repurchasing, and redeeming SIB-issued CDs—fell within any of the clauses 

of FSIA’s commercial activity exception. LFICO argues that the district court 

erred in determining that it had jurisdiction to hear the receiver’s claims

 

46 Stena Rederi AB, 923 F.2d at 386 (citing 28 U.S.C. § 1605(a)(2)).

47 28 U.S.C. § 1605(a); see Stena Rederi AB, 923 F.2d at 386.

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against it under any clause of the commercial activity exception. Because the

district court based its decision on the third clause, we begin there. 

1. THIRD CLAUSE

The third clause of the exception applies when a claim “is 

[i] based . . . upon an act outside . . . of the United States [ii] in connection with 

a commercial activity”48—“either a regular course of commercial conduct or a 

particular commercial transaction or act”49—“of the foreign state elsewhere 

and [iii] that act causes a direct effect in the United States.”50 The parties do 

not dispute that the receiver’s claim is based “upon an act outside the territory 

of the United States in connection with [LFICO’s] commercial activity [outside 

the United States].”51

The district court determined, however, that the third clause applied 

because it concluded that LFICO’s acts caused a direct effect in the United 

States. An effect is “direct” if it follows as an immediate consequence of the

foreign state’s activity.52 “[A] consequence is ‘immediate’ if no intervening act 

breaks ‘the chain of causation leading from the asserted wrongful act to its 

 

48 28 U.S.C. § 1605(a).

49 Id. § 1603(d) (emphasis added) (defining “commercial activity”). 

50 Id. § 1605(a)(2).

51 Id. There is a “difference between [claims] ‘based upon’ commercial activity and 

[those] ‘based upon’ acts performed ‘in connection with’ such activity.” Saudi Arabia v. Nelson, 

507 U.S. 349, 358 (1993) (emphasis added). The third clause of the commercial activity 

exception provides that the claim must be “based . . . upon an act outside the territory of the 

United States in connection with a commercial activity of the foreign state elsewhere” and 

that the act “causes a direct effect in the United States.” 28 U.S.C. § 1605(a)(2) (emphasis 

added). In contrast, the first clause specifies that the claim must be “based upon a commercial 

activity . . . by the foreign state.” Id. (emphasis added). Because “[d]istinctions among 

descriptions juxtaposed against each other are naturally understood to be significant,” the 

first clause “calls for something more than a mere connection with, or relation to, commercial 

activity.” Nelson, 507 U.S. at 357–58.

52 Republic of Arg. v. Weltover, Inc., 504 U.S. 607, 618 (1992).

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impact in the United States.’”53 In considering the effect, we must “isolate those 

specific acts of the [agency or instrumentality] that form the basis of the 

plaintiff’s [claims].”54 As the Second Circuit has noted, “even if . . . a particular 

effect might be foreseeable,” such an effect is not “direct” if it “hinge[s] on third 

parties’ independent . . . conduct.”55 “[T]he mere fact that [an agency or 

instrumentality]’s commercial activity outside of the United States 

caused . . . financial injury to a United States citizen is not itself sufficient to 

constitute a direct effect in the United States.”56 Such an injury will constitute 

a direct effect only if the agency or instrumentality of a foreign state causes 

the injury through its failure to perform an obligation that it was required to 

perform in the United States.57

 

53 Terenkian v. Republic of Iraq, 694 F.3d 1122, 1133 (9th Cir. 2012) (quoting Lyon v. 

Agusta S.P.A., 252 F.3d 1078, 1083 (9th Cir. 2001)); see also Odhiambo v. Republic of Kenya, 

764 F.3d 31, 41 (D.C. Cir. 2014). 

54 de Sanchez v. Banco Cent. de Nicar., 770 F.2d 1385, 1391 (5th Cir. 1985); see 

Guirlando v. T.C. Ziraat Bankasi A.S., 602 F.3d 69, 75 (2d Cir. 2010) (“[T]he requisite 

immediacy is lacking where the alleged effect depends crucially on variables independent of 

the conduct of the [agency or instrumentality].” (internal quotation marks omitted)).

55 Virtual Countries v. Republic of S. Afr., 300 F.3d 230, 238 (2d Cir. 2002) (“Defining 

‘direct effect’ to permit jurisdiction when [an agency or instrumentality]’s actions precipitate 

reactions by third parties, which reactions then have an impact on a plaintiff, would foster 

uncertainty in both [agencies or instrumentalities] and private counter-parties. Neither could 

predict when an action would create jurisdiction, which would hinge on third parties’ 

independent reactions and conduct, even if in individual cases, such as the one at bar, a 

particular effect might be foreseeable. To permit jurisdiction in such cases would thus be 

contrary to the predictability interest fostered by the [FSIA].”).

56 Guirlando, 602 F.3d at 78; see also Westfield v. Fed. Republic of Ger., 633 F.3d 409, 

417 (6th Cir. 2011) (“[A]n American entity’s mere financial loss is insufficient to establish a 

direct effect in the United States.”). If financial injury to a United States citizen were 

considered a sufficiently direct effect, “the commercial activity exception would in large part 

eviscerate the FSIA’s provision of immunity for foreign states.” Antares Aircraft, L.P. v. Fed. 

Republic of Nigeria, 999 F.2d 33, 36 (2d Cir. 1993).

57 Weltover, 504 U.S. at 619; see Energy Allied Int’l Corp. v. Petroleum Oil & Gas Corp. 

of S. Afr., No. H-08-2387, 2009 WL 2923035, at *4 (S.D. Tex. Sept. 4, 2009); Voest-Alpine

Trading USA Corp. v. Bank of China, 142 F.3d 887, 896 (5th Cir. 1998) (noting that there 

was a direct effect in the United States because an agency or instrumentality of the foreign 

state failed to perform its obligation to transfer assets to an entity in the United States); 

Callejo v. Bancomer, S.A., 764 F.2d 1101 (5th Cir. 1985) (same); UNC Lear Servs., Inc. v. 

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The district court determined that LFICO’s acts, which occurred outside 

the United States, had a “direct effect” in the United States. The district court

explained that, “by doing business with SIB in Antigua, LFICO was in reality 

doing business with Stanford in [the United States].” It concluded that, “as an 

immediate consequence of LFICO’s investments [in Antigua], the [U.S.]-based 

Stanford Ponzi scheme slipped further into insolvency and received funds it 

needed to keep its scheme afloat.” This assumption is erroneous. 

LFICO purchased, repurchased, and redeemed the CDs from SIB, which 

was based in Antigua; all of LFICO’s acts occurred in Switzerland and Libya; 

and all of SIB’s acts occurred in Antigua, Canada, and England. LFICO had 

nothing to do with SIB’s transfer of funds to or from other Stanford entities as 

part of the scheme. The district court observed that “[m]oney put into and 

taken out of SIB’s coffers in Antigua was money being funneled through 

Stanford’s [U.S.]-based enterprise.” It did not state that LFICO was funneling 

that money. In fact, it did not identify who was doing the funneling but ducked 

that issue by relying on the passive voice: “[m]oney . . . was being funneled.”

LFICO acted only pursuant to its obligations under the SIB-issued CDs, 

which constituted agreements between LFICO and SIB. Those instruments did 

not require any act in the United States, much less the act of funneling money 

through the Stanford scheme or any Stanford entities in the United States. 

Accordingly, the district court erred in deciding that the third clause of the 

commercial activity exception applied to the receiver’s claims against LFICO. 

2. FIRST AND SECOND CLAUSES

The receiver asserts that the district court erred in determining that the 

first and second clauses of the commercial activity exception do not apply. 

 

Kingdom of Saudi Arabia, 581 F.3d 210, 218–19 (5th Cir. 2009) (same); Westfield, 633 F.3d 

at 415 (noting that there was no direct effect in the United States because the foreign state 

“had not obligated itself to do anything in the United States”); Peterson v. Royal Kingdom of 

Saudi Arabia, 416 F.3d 83, 90–91 (D.C. Cir. 2005).

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Those clauses provide exceptions to sovereign immunity when “the action is 

based [1] upon a commercial activity carried on in the United States by the 

foreign state . . . or [2] upon an act performed in the United States in 

connection with a commercial activity of the foreign state elsewhere . . . .”58

The receiver contends that SIB was, in fact, the Stanford scheme itself. But, as 

discussed above, LFICO’s commercial activity was limited to its obligations

and rights under the SIB-issued CDs, which were contracts between LFICO 

and SIB. The CDs did not require any activity in the United States. LFICO 

properly assumed that its relationship was with SIB and that SIB was what it 

represented itself to be, i.e., a bank based in Antigua. Even though a few of

LFICO’s analysts participated in SIB’s training program, which included a 

visit to the United States, there is nothing to suggest that this activity was 

related to LFICO’s relevant acts made pursuant to its obligations or rights 

under the SIB-issued CDs.59 Thus, if LFICO is an agency or instrumentality 

of a foreign state, the commercial activity exception would not strip it of its 

presumptive immunity under the FSIA.

D. WHETHER THE CLAIMS AGAINST LIA ARE SUBJECT TO THE COMMERCIAL

ACTIVITY EXCEPTION UNDER THE FSIA

The receiver insists that, even though LIA did not purchase, repurchase

and redeem SIB-issued CDs, or receive proceeds of such CDs itself, LFICO did 

and LFICO’s acts were attributable to LIA. He avers specifically that LFICO 

is LIA’s alter ego or agent and that LIA was the beneficiary of the transfers

from SIB to LFICO. He concludes that, as with LFICO, the FSIA’s commercial 

activity exception applies to his claims against LIA. 

 

58 28 U.S.C. § 1605(a)(2).

59 Arriba Ltd. v. Petroleos Mexicanos, 962 F.2d 528, 533 (5th Cir. 1992) (“Isolated or 

unrelated commercial actions by a foreign sovereign in the United States do not authorize 

the exception.”).

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1. AGENT OR ALTER EGO

The parties do not appear to dispute the relationship between LIA and 

Libya. Instead, they dispute the relationship between LIA and LFICO. 

Specifically, they disagree on whether LFICO’s acts are attributable to LIA. As 

we observed above, “[a] corporate parent which owns the shares of a subsidiary 

does not, for that reason alone, own or have legal title to the assets of the 

subsidiary . . . .”60 “The fact that the shareholder is [an agency or 

instrumentality of a foreign state] does not change the analysis.”61 Subsidiaries 

that are “established as juridical entities distinct and independent . . . should 

normally be treated as such.”62 In the context of the FSIA, a court must apply

“the general rules regarding corporate formalities.”63 For this reason, “duly 

created [agencies or] instrumentalities of a foreign state are to be accorded a 

presumption of independent status.”64 “A plaintiff can overcome that 

presumption, however, in certain circumstances by demonstrating that the 

instrumentality is the agent or alter ego of the foreign state.”65 Yet, the theories 

underlying alter egos and agents are “distinct” and are therefore not to be 

applied “as if they were interchangeable.”66 Again, alter egos are created 

equitably; agents are created contractually.67 Each is a basis for overcoming 

the presumption that an agency or instrumentality of a foreign state is 

 

60 Dole Food Co., 538 U.S. at 475.

61 Id.

62 First Nat’l City Bank, 462 U.S. at 626–27.

63 Dole Food Co., 538 U.S. at 476.

64 First Inv. Corp. of Marsh. Is., 703 F.3d at 752–53 (quoting First Nat’l City Bank, 

462 U.S. at 627).

65 Dale, 443 F.3d at 429; see First Inv. Corp. of Marsh. Is., 703 F.3d at 753.

66 Bridas, 345 F.3d at 358.

67 Id. at 359 (“The laws of agency, in contrast, are not equitable in nature, but 

contractual, and do not necessarily bend in favor of justice.”).

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separate from the foreign state itself.68 In both instances, the analysis is 

conducted with reference to federal law, not foreign law or state law.69

To determine if one entity is the alter ego of another, “[t]he corporate veil 

may be pierced to hold a[ parent] liable for the [acts] of its [subsidiary] only if 

(1) the [parent] exercised complete control over the [subsidiary] with respect to 

the [acts] at issue and (2) such control was used to commit a fraud or wrong 

that injured the party seeking to pierce the veil.”70 In contrast, when 

determining whether one entity is the agent of another, it is necessary to 

consider “whether the [parent] exercises day-to-day control over the 

[subsidiary].”71 In the context of the commercial activity exception, we further 

consider “whether the commercial activity is ‘of the foreign state.’”72 Thus, both 

the principal-agent and alter ego relationships require an element of control. 

A declaration provided by LIA, and which the district court 

credited, states:

LFICO has always operated independently of LIA as 

described in the [Layas and Mokhtar declarations]. 

For the avoidance of doubt: (a) LIA has no right to 

manage LFICO’s investments directly. (b) LIA has no 

right to actually own and deal directly with LFICO’s 

assets. (c) LIA has no right to hold LFICO’s assets as 

LIA’s own. (d) LIA has no right to assign LFICO’s 

personnel, choose its managers, prepare its accounts, 

 

68 First Nat’l City Bank, 462 U.S. at 633.

69 See, e.g., id. at 622 n.11 (“[M]atters bearing on the nation’s foreign relations should 

not be left to divergent and perhaps parochial state interpretations.” (internal quotation 

marks omitted)).

70 Bridas, 345 F.3d at 359.

71 Dale, 443 F.3d at 429.

72 Id.

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or determine with what third parties LFICO will 

contract for services.73

Considering this declaration offered by LIA, it is apparent that LIA and LFICO 

are entitled to the presumption that they are separate entities. There is 

nothing to indicate that LIA had or exercised any significant control over 

LFICO, either generally or with specific regard to LFICO’s purchase, 

repurchase, or redemption of the SIB-issued CDs or the receipt of proceeds 

from such CDs. Any control that LIA might have exercised was not nearly 

enough to justify disregarding the legal distinction between them. The district 

court did not err in determining that LFICO was not LIA’s agent or its

alter ego.

2. TRANSFER BENEFICIARY UNDER TUFTA

The receiver further argues that LIA is liable for the transfer from SIB 

to LFICO because, under the Texas Uniform Fraudulent Transfer Act 

(“TUFTA”), LIA was the “person” for whose benefit the transfer was made. The 

district court rejected this contention.

TUFTA provides that a transfer from a debtor to a creditor is fraudulent 

if made with actual intent to hinder, delay, or defraud any other creditor of 

that debtor.74 In relevant part, it states that either “the first transferee of the 

asset or the person for whose benefit the transfer was made” may be held liable 

for such a transfer.75 Regardless of whether LIA is a beneficiary of the transfer,

under TUFTA, we must consider whether the commercial activity exception to 

the FSIA provides a source of subject matter jurisdiction over such a claim. 

 

73 The receiver submitted his own contrary declaration, but the district court 

discredited it and its reasons for doing so were sound.

74 TEX. BUS. & COM. CODE ANN. § 24.005.

75 Id. § 24.009(b)(1).

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As discussed above, the commercial activity exception focuses on the acts 

or activities of the agency or instrumentality of the foreign state. The receiver’s 

TUFTA claim is based on SIB’s transfer of proceeds to LFICO, allegedly for the 

benefit of LIA. As alleged, LIA neither made nor received the transfer. It 

merely benefited from it. 

Notably, “[TUFTA] and the . . . Bankruptcy Code are of common 

ancestry; cases under one are considered authoritative under the other.”76 Both 

refer to the person “for whose benefit [a] transfer was made.”77 In the context 

of bankruptcy, a transfer beneficiary is typically the guarantor of a debt that 

was extinguished by the transfer.78 The obligation of the insolvent debtor in 

such a circumstance would generally be the guarantor’s obligation, as well. 

Absent the transfer from debtor to creditor, the guarantor would have had to 

make the transfer itself. As the transfer beneficiary, it avoids that obligation. 

The receiver nevertheless insists that when a debtor makes a transfer to 

a creditor, that creditor’s shareholder may also be considered a transfer 

beneficiary. The receiver relies on Esse v. Empire Energy III, Ltd.79 and 

Citizens National Bank of Texas v. NXS Construction, Inc.,80 but both are

inapplicable. The Esse court determined that shareholders were transfer 

beneficiaries because they had “‘assented to and benefitted from these 

 

76 GE Capital Commercial, Inc. v. Wright & Wright, Inc., No. 3:09-CV-572-L, 2009 WL 

5173954, at *7 n.1 (N.D. Tex. Dec. 31, 2009). 

77 11 U.S.C. § 550(a)(1); TEX. BUS. & COM. CODE ANN. § 24.009(b)(1). 

78 See, e.g., In re Finley, Kumble, Wagner, Heine, Underberg, Manley, Myerson & 

Casey, 130 F.3d 52, 57 (2d Cir. 1997); In re Columbia Data Prods., Inc., 892 F.2d 26, 29 (4th 

Cir. 1989); see also COLLIER ON BANKRUPTCY ¶ 550.02[4] (16th ed. 2011) (“Two frequently 

cited examples of an entity for whose benefit the transfer was made are (1) a third-party 

guarantor of the debtor whose liability is reduced by the debtor’s payment of the guaranteed 

debt and (2) a third party whose debt is paid by the debtor (with payment going to the third 

party’s creditor as the initial transferee).”). 

79 333 S.W.3d 166, 181 (Tex. App. 2010).

80 387 S.W.3d 74 (Tex. App. 2012).

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transfers’ and knowingly participated in the wrongdoing.”81 Those 

shareholders had also waived any argument that they were not transfer 

beneficiaries.82 The Citizens National Bank court determined that a 

shareholder was a transfer beneficiary because the shareholder was actually 

involved with the transfer.83

By contrast, LIA insists that, without more, a shareholder is not a 

beneficiary of a transfer made to the corporation. It notes, for instance, that in 

In re Hansen, a bankruptcy court held that the creditor’s majority shareholder 

was not a transfer beneficiary.84 The court explained: 

Nothing in [§] 550(a)(1) [of the Bankruptcy 

Code] indicates that corporate form can be thrust aside 

and all voidable transfers to a corporation recovered 

from its shareholders on the mere assumption that 

shareholders somehow automatically “benefit” from 

such transfers. If corporate existence is to be observed, 

transfers cannot be recovered even from a shareholder 

who by virtue of his majority ownership ostensibly 

“controls” the corporation. Something more than mere 

status as a shareholder, officer, or director must be 

shown.

The better view—and the one consistent with 

corporate law—is that shareholders, officers, and 

directors are not liable for transfers to their 

corporation unless they actually received distributions 

of the transferred property . . . or a showing can be 

made to pierce the corporate veil.85

This appears to be the right approach. When a debtor transfers assets to 

a creditor to satisfy a guaranteed debt, there are independent benefits: The 

 

81 333 S.W.3d at 174.

82 Id. at 181.

83 387 S.W.3d at 85.

84 341 B.R. 638, 644 (Bankr. N.D. Ill. 2006).

85 Id. at 645–46 (citations omitted).

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creditor, as transferee, receives the assets, and the guarantor, as the 

beneficiary, retains assets that he would otherwise have lost as a result of the 

debtor’s insolvency. Another creditor might seek to recover either the assets 

transferred by the debtor or the assets saved by the creditor, or both. This is 

because the transferee and beneficiary have independent obligations. Here, 

only LFICO, as the transferee, has an obligation. LIA’s obligation is merely 

derivative of that obligation, not independent of it. LIA did not receive an 

independent benefit as a result of the transfer from SIB to LFICO. Even if LIA 

itself owned and controlled LFICO’s assets, either LIA or LFICO would have 

received the benefit of the transfer, but not both. Further, when a debtor 

transfers assets to a creditor to satisfy a guaranteed debt, the guarantor is 

involved as a party, or at least an independent obligor, to the contract giving 

rise to the transfer. But LIA was not a party to the subject contract. 

As Collier on Bankruptcy explains, any “approach that permits recovery 

based merely on the intent of the debtor/transferor without any benefit being 

conferred on the third party results in the harsh outcome that the third party 

can be liable for the return of an avoidable transfer without having received 

any benefit, which is generally contrary to the disgorgement remedy of 

avoidance actions.”86

Because LIA was not a transfer beneficiary under TUFTA, we do not 

consider LIA and LFICO’s contention that TUFTA may not be applied 

extraterritorially. Neither do we consider whether, if LIA were a transfer 

beneficiary, its status as such would be a basis for jurisdiction under the FSIA. 

 

86 COLLIER ON BANKRUPTCY ¶ 550.02[4].

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III.

CONCLUSION

We hold that the FSIA provides no basis for jurisdiction over LIA. We 

therefore AFFIRM the district court’s holding that it had no jurisdiction over 

the claims against LIA under the FSIA. However, we VACATE the district 

court’s holding that it had jurisdiction over the claims against LFICO under 

the FSIA and REMAND to the district court for it to determine in the first 

place whether LFICO is an “organ” of Libya, and thus a “foreign state,” under 

the FSIA.

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