Simplifying the Foreign Sovereign Immunities Act: If a Sovereign Acts like a Private Party, Treat It like One

I. INTRODUCTION The Foreign Sovereign Immunities Act of 19761 ("FSIA") is confusing even in its tide. While the tide suggests that the FSIA is meant to grant immunity for foreign sovereigns, in fact the FSIA was enacted with the opposite intent. The FSIA was designed to codify when sovereign immunity is not applicable.2 The FSIA does begin with die enactment of the traditionally accepted premise that ordinarily foreign governments are immune from the jurisdiction of the United States.3 However, that general grant of immunity is then subject to crucial qualifications.4 As with so much statutory law,5 the key to the meaning and intent of the FSIA is in its exceptions.6 The most important of the exceptions to sovereign immunity is the commercial activities exception.7 The commercial activities exception basically states that a foreign sovereign is not immune from the jurisdiction of United States courts (including both federal and state courts) where: (i) such foreign sovereign engages in the kinds of commercial activities that a private party might undertake; and (ii) that activity has a sufficient connection with the United States.8 The first part of this analysis-determining when a foreign sovereign is engaged in commercial activities that a private party might undertake-has proven problematic for courts.9 The statute itself gives little guidance in this regard, stating that activities are "commercial" if they represent "either a regular course of commercial conduct or a particular commercial transaction or act."10 The circularity of this definition has vexed courts.11 The statute, however, does state that commercial activity should be evaluated with regard to the nature of the activity in question and not its purpose.12 This distinction has proved helpful in many circumstances. For example, under the "nature of the activity" analysis, government procurement would be considered commercial activity even if the procurement were for a governmental purpose such as military development.13 Still, courts seem better prepared to analyze when activity is commercial than to confront the second portion of the analysis-determining whether the activity has a sufficient connection with the United States. Ironically, the FSIA gives far more guidance on the latter point, but is still confusing.14 The FSIA states that the connection between the cause of action and the United States is sufficient for jurisdiction if the suit against the foreign sovereign is based on: (i) commercial activity of the foreign sovereign that has occurred in the United States; (ii) an act performed in the United States in connection with a commercial activity of the foreign sovereign elsewhere; or (iii) an act outside of the United States in connection with a commercial activity of the foreign state elsewhere, which causes a direct effect in the United States.15 Unfortunately, that framework has proven confusing to courts applying it.16 The first two scenarios are relatively straightforward. Suits based on actions that actually occur in the United States clearly have the requisite connection to the United States to allow courts in the United States to take jurisdiction over the matter. It is the interpretation of the third clause (the "direct effect clause") that has resulted in an unclear Supreme Court decision17 and a subsequent split among the federal courts of appeals.18 Following the Supreme Court case, several of the circuits have insisted that there must be some legally significant act in the United States in order for a "direct effect" to be felt.19 Others have stuck closer to the "direct effect" words of the statute and find a direct effect where the effect complained of is the immediate consequence of the sovereign's actions abroad.20 Further complicating the FSIA are the questions of subject matter and personal jurisdiction. The FSIA states that if an exception to immunity exists in the statute, then the courts of the United States will have subject matter jurisdiction over the suit. …