Sace S.P.A. v. Republic of Paraguay ( 2017 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUM B IA
)
SACE S.P .A., )
)
P laintiff, )
)
v. ) No. 15-cv-1042 (KBJ)
)
THE REP UBLIC OF P ARAGUAY, )
)
Defendant. )
)
M EM ORANDUM OPINION
P laintiff SACE S.p.A. (“SACE”) is an Italian joint stock corporation that has
brought the instant action seeking to enforce two foreign money judgments against
Defendant Republic of P araguay (“P araguay”). SACE claims that it holds all rights to
two Swiss money judgments that are “enforceable against P araguay under the laws of
Switzerland[,]” (Compl., ECF No. 1, ¶¶ 12, 16); it has filed the instant action pursuant
to the District of Columbia’s Uniform Foreign-Country Money Judgment Recognition
Act of 2011, (“the D.C. Recognition Act”), D.C. Code § § 15-361– 71, seeking a court
order that enters judgment against P araguay for the U.S.-dollar equivalent of the
amount of the Swiss awards, along with specified categories of interest. (See Compl.,
Relief Requested ¶ B.) Significantly for present purposes, SACE’s complaint maintains
that this Court has subject matter jurisdiction to entertain this enforcement action as
provided under the Foreign Sovereign Immunities Act (“FSIA” or “the Act”), 28 U.S.C.
§ § 1602– 11, because P araguay (a foreign state defendant) waived its sovereign
immunity with respect to the loan transactions upon which the Swiss money judgments
are based. (See Compl. ¶ 1.) S ee also 28 U.S.C. § 1605(a)(1) (authorizing jurisdiction
over a foreign state in a case “in which the foreign state has waived its immunity either
explicitly or by implication”).
Before this Court at present is P araguay’s motion to dismiss SACE’s complaint
for lack of subject matter jurisdiction under Federal Rule of Civil P rocedure 12(b)(1).
(Def.’s Mem. in Supp. of Def.’s Mot. to Dismiss (“Def.’s Mem.”), ECF No. 13-2.)
Among other things, P araguay insists that there was no valid waiver of sovereign
immunity under section 1605(a)(1) of the FSIA because SACE does not, and cannot,
allege that the P araguayan official who purportedly effected an explicit waiver of
P araguay’s sovereign immunity was actually authorized to do so. (S ee id. at 25– 35). 1
SACE responds that section 1605(a)(1) does not require actual authority to waive the
sovereign immunity of the foreign state, and that the circumstances it alleges in the
complaint are sufficient to give rise to a reasonable belief that the pertinent official had
such waiver authority—i.e., that the alleged facts demonstrate there was apparent
authority to waive sovereign immunity. (P l.’s Opp’n to Def.’s Mot. to Dismiss (“P l.’s
Opp’n”), ECF No. 16, at 23– 30.)
For the reasons explained below, this Court agrees with P araguay that the waiver
provision of the FSIA requires actual authority to waive the foreign state’s sovereign
immunity, which is indisputably lacking in this case. This Court further finds that, even
if apparent authority can suffice to trigger the FSIA’s waiver provision, any belief that
the P araguayan official at issue here had the authority to waive P araguay’s sovereign
1
Pag e-number citations t o documents t hat t he p arties have filed refer to t he p age n umbers t hat t he
Co u rt ’s electronic filin g system automatically assigns.
2
immunity was unreasonable, given the fact the official was not a duly-accredited
ambassador or otherwise vested with the power to act on P araguay’s behalf in this
regard, and was also patently engaged in self-dealing when he made the waiver
representations. Consequently, this Court concludes that it lacks subject-matter
jurisdiction to entertain SACE’s enforcement action, and as a result, P araguay’s motion
to dismiss SACE’s complaint must be GRANTED. A separate order consistent with
this Memorandum Opinion will follow.
I. B ACKGROUND
A. Factual B ack gro und
Unless otherwise noted, the following allegations of fact appear in SACE’s
complaint and the attached exhibits. (See Compl.; see also Compl. Exs. A–L, ECF Nos.
1-3 to 1-14.) In particular, the recitation below draws heavily from the two Swiss court
decisions that announce the money judgments that SACE seeks to enforce in this
lawsuit. (S ee J. of Civil Chamber of the Geneva Court of Justice, Sept. 3, 2004 (“2004
Swiss Judgment”), Compl. Ex. A, ECF No. 1-3; J. of the Tribunal of First Instance,
Sept. 30, 2010 (“2010 Swiss Judgment”), Compl. Ex. C, ECF No. 1-5; see also Compl.
¶¶ 7, 11 (incorporating by reference the facts set forth in the Swiss court decisions).)
1. The Construction P rojects That P araguay P urportedly Authorized And
Guaranteed
In the mid-1980s, two privately owned P araguayan companies—Rosi SA
(“Rosi”) and Compania Industrial Agro-forestal Lapachos de San Isidro SA
(“Lapachos”)—entered into “Construction and Supply” contracts with certain Italian
construction companies that agreed to undertake substantial building projects in
P araguay. (S ee 2004 Swiss Judgment at 3, 10.) Specifically, in May of 1986, Rosi
3
agreed to pay US $25 million for the construction of a fruit-preserve factory (id . at 3),
and in January of 1987, Lapachos agreed to pay 50 million Deutsche Marks for a
pharmaceutical plant (id. at 10). Before entering into its contract, Rosi apparently
received a letter from P araguay’s Ministries of Finance and of Industry and Trade that
indicated that the “government had deemed the establishment of the fruit preserve
factory as a high priority[.]” (2004 Swiss Judgment at 4.) 2 Both contracts specifically
stated that the multi-million dollar payments that Rosi and Lapachos owed would be
financed over a ten-year period through either a bank loan (Rosi) or a credit contract
(Lapachos) that was to be executed with specific financial institutions. (See id . at 3,
10.)
As part of the financing plan, a part-owner of both Rosi and Lapachos—a man by
the name of Gustavo Gramont Berres (“Gramont”)—became involved in the negotiation
and execution of two Notes Financing Agreements (“NFAs”) that Rosi and Lapachos
entered into with a banking syndicate that the Overland Trust Banque (“OTB”) had
organized. (Id. at 4– 5.) The NFAs were subject to Swiss law and were the primary
source of the funding for the construction contracts. (Id. at 4, 8 (explaining that the
Rosi NFA, along with subsequent addendums, covered a loan amounting to 46,700,000
SFr.); see also id . at 10, 13–14 (noting that the Lapachos NFA and supplemental credits
financed a loan in the amount of DM 54,800,000).) 3
2
Th is Co urt was not p rovided with a copy of t his commu nication.
3
“SFr.” stands for Swiss Franc. “DM” stands for Deutsche M ark, wh ich was t he official currency o f
German y until t hat country adopted the Euro in 2002.
4
Furthermore, and importantly, Gramont also signed two unconditional and
irrevocable “Guarantees” on behalf of the Republic of P araguay in order to secure the
loan agreements with the OTB banking syndicate. (See Guaranty of the Republic of
P araguay, June 5, 1986 (“Rosi Guaranty”), Decl. of Lucio Amoruso (“Amoruso Decl.”)
Ex. 1, ECF No. 16-9; Guaranty of the Republic of P araguay, Sept. 1, 1987 (“Lapachos
Guaranty”), Amoruso Decl. Ex. 2, ECF No. 16-10.) Gramont signed the Rosi guaranty
on June 5, 1986, and the Lapachos guaranty on September 1, 1987. (See Rosi Guaranty
at 4; Lapachos Guaranty at 4; see also 2004 Swiss Judgment at 5, 10.) The wording in
both guarantees was substantially similar: Gramont purported to be “duly authorized”
by the “Constitution and P araguayan law” to execute guarantees of the Rosi and
Lapachos loans “in the name of the P araguayan State[.]” (Rosi Guaranty at 2; Lapachos
Guaranty at 2.) Thus, in essence, Gramont purported to make the country of P araguay a
guarantor with respect to the repayment of any outstanding amount that Rosi or
Lapachos were obligated to pay to the OTB banking syndicate under the NFAs. (S ee
Rosi Guaranty at 2– 3; Lapachos Guaranty at 2– 3.) Moreover, in each of the guaranty
documents, Gramont specifically represented that “all disputes arising from the ‘NFA’
Agreement and the Guaranty shall be brought before the Swiss courts whose
jurisdiction [P araguay] accepts irrevocably,” and that “[P araguay] hereby expressly
waives the privileges of immunity of jurisdiction and the enforcement privilege that
may be granted to it[.]” (Rosi Guaranty at 4; Lapachos Guaranty at 4.)
With the construction contracts and financing arrangements complete, OTB then
contracted with SACE—an Italian agency that provides insurance for export risks—to
insure the banks in the syndicate against the risk of non-repayment on the part of Rosi
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and Lapachos, and the risk of nonpayment by P araguay in its capacity as guarantor.
(S ee 2004 Swiss Judgment at 6– 7, 12.) Then, in anticipation of each of Rosi’s bi-
annual repayment dates, the first of which was scheduled for March 12, 1990, OTB sent
letters to Rosi and to P araguay beginning in September of 1989, “informing [them] of
the amount of the principal and interest due on this due date” pursuant to Rosi’s NFA.
(2010 Swiss Judgment ¶ 16.) OTB likewise wrote Lapachos and P araguay regarding the
outstanding principal and interest owed by Lapachos on each of its bi-annual repayment
dates, the first of which was scheduled for April 17, 1991. (See 2004 Swiss Judgment
at 16).
When the repayment dates arrived, however, both Rosi and Lapachos failed to
“honor their [repayment] obligations[,]” and upon their default, “the banks contacted
the Republic of P araguay so that it would act on its obligations as guarantor.” (J. of the
Tribunal of First Instance, Oct. 23, 2003, Decl. of Ana C. Reyes (“Reyes Decl.”) Ex. 9,
ECF No. 13-12, at 7.) “P araguay then informed the banks . . . on September 11, 1990,
that it did not consider itself bound in any way by the commitments signed by
[Gramont] (id.) and, in turn, SACE disputed its obligation to insure P araguay’s
guarantee (see J. of the Swiss Federal Tribunal, Aug. 20, 1998, Reyes Decl. Ex. 11,
ECF No. 13-14, at 5). And because “the P araguayan companies Rosi and Lapachos did
not repay the loans granted, and neither the Republic of P araguay nor SACE honored
their guarantees,” the banks commenced “legal proceedings before the Court of First
Instance in the Canton of Geneva” against P araguay “to obtain payment of the sums
granted,” and against SACE, for a declaratory judgment establishing P araguay’s
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nonpayment, so that they could thereafter demand satisfaction of the debt from SACE
pursuant to the insurance contract. (Id.; see also Compl. ¶ 5.)
A lengthy period of litigation ensued, involving bifurcated trial-level
proceedings on jurisdictional challenges and on the merits, followed by several appeals.
On September 3, 2004, the Civil Chamber of the Geneva Court of Justice (the “Court of
Justice”) ruled in favor of the banks with respect to their claims against P araguay, and
“order[ed] P araguay to pay a total of 28,018,794 [Euros] and 36,700,000 SFr.” (Id.
¶ 7.) 4 Meanwhile, one of the banks that had participated in the loan financing but had
withdrawn its legal claims in the context of the initial litigation—BNP P aribas, London
Branch—“commenced a separate proceeding against P araguay in the Swiss [courts]” on
February 6, 2005. (Compl. ¶ 9.) On September 30, 2010, the Swiss courts awarded
judgment against P araguay and in favor of BNP P aribas in the amount of 10,000,000
SFr., plus interest. (S ee id . ¶ 11; see also 2010 Swiss Judgment at 16.)
The banks ultimately settled their claims against SACE in November of 2009,
and in the context of the settlement agreement, the banks transferred to SACE their
rights to enforce all prior and potential judgments against P araguay in connection with
the Rosi and Lapachos guarantees, including the judgments that the Swiss courts
rendered in 2004 and 2010. (S ee Settlement Agreements, Compl. Exs. D–L, ECF Nos.
1-6 to 1-14.)
4
Th e Co urt o f Just ice d ismissed the banks’ claims against SACE (2004 Swiss Judgment at 32–33), and
a Swis s appellat e t ribunal later “dismissed Paraguay’s [final] appeal and affirmed the [Court of
Ju s tice’s] ju dgment” on M ay 31, 2005. (Co mpl. ¶ 8; see a lso J. of t he Swiss Federal Tribunal, M ay 31,
2005, Co mp l. Ex. B, ECF No . 1– 4, at 13, 27.)
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2. Gramont’s Title, Role, And Alleged Authority
The motion to dismiss that P araguay has filed in the instant action relates to the
status and authority of the individual who signed the Guarantees that secured the loan
agreements upon which the Swiss money judgments are based. Notably, as suggested
above, Gramont wore several different hats with respect to the negotiation and
execution of the construction contracts and financing agreements at issue. As the
president of both Rosi and Lapachos, Gramont “owned virtually all of the shares of
these companies” along with his wife, who was the vice president of Rosi. (See J. of
the Swiss Federal Tribunal, May 31, 2005, at 9.) In addition, Gramont happened to be
the nephew-in-law of then-P araguayan P resident Alfredo Stroessner (see id. at 3), 5 and
when he signed the Rossi and Lapachos loan Guarantees on behalf of the Republic of
P araguay, Gramont apparently relied upon tokens of this relationship, including a
presidential decree and certain documents that P araguay’s Minister of Finance had
issued, as the source of his authority for doing so. (See id. at 4.)
Specifically, Gramont’s uncle-in-law had appointed him to serve as P araguay’s
“Consul” in Geneva, Switzerland, in November of 1979. (2010 Swiss Judgment ¶ 1; see
a lso Judgment of the Swiss Federal Tribunal, Aug. 20, 1998, at 15–16 (noting that the
Republic of P araguay did not have an Ambassador, embassy, or diplomatic mission to
Switzerland at that time).) In 1983, P resident Stroessner issued a decree that further
conferred upon Gramont the title of “Ambassador on special mission” (2010 Swiss
Judgment ¶ 2), and thereby entrusted him with “sufficient rank” to “facilitate[e] certain
5
St ro essner was t he President o f t he Republic o f Paraguay from 1954 u ntil 1989, wh en a milit ary coup
o u sted h im. (See 2010 Swiss Judgment ¶ 1.)
8
management [steps] related to development programs” for P araguay. (See P residential
Decree No. 39.808, May 27, 1983, Amoruso Decl. Ex. 3, ECF No. 16-11, at 2; but see
a lso 2010 Swiss Judgment ¶ 1 (emphasizing that Gramont was “never accredited as
Ambassador . . . in Switzerland since the accreditation procedures were never
completed”).)
Three years later, P araguay’s Minister of Finance, Cesar Barrientos, purportedly
clarified the scope of Gramont’s official duties and powers in two documents. First, in
a letter dated May 22, 1986, Barrientos informed any interested “national and
international institutions, organizations and individuals” that, as Ambassador on a
Special Mission based in Geneva, Gramont was endowed “with broad powers” and had
the authority “not only to promote negotiations, but to receive and sign documents and
perform operations related to the execution of programs and projects that will promote”
P araguay’s social and economic development. (Letter from the Minister of Finance,
Amoruso Decl. Ex. 4, ECF No. 16-12, at 2.) Second, the Ministry of Finance
promulgated an official resolution that entrusted Gramont “with the management,
presentation, and negotiation of financial transaction[s] to finance investment projects
for the socio-economic development” of P araguay, and that also bestowed upon
Gramont a special power of attorney to “sign for the Ministry of Finance of the
Republic of P araguay and/or its Government the necessary documentation” that such
transactions may require. (Resolution 1205 of the Ministry of Finance, Oct. 10, 1986,
Amoruso Decl. Ex. 5, ECF No. 16-13, at 3.) However, the resolution also specifically
clarified that, as a “Diplomatic Representative[,]” Gramont had to “maintain strict
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contact and constant coordination with the Ministry” and report on all pertinent
transactions. (Id.)
Ultimately, P araguayan authorities apparently determined that Gramont did not
carry out his assigned mission in an acceptable fashion because, on March 15, 1990,
prosecutors filed a criminal complaint that accused Gramont of “utilizing invalid debt
instruments to issue supposed ‘guarantees’ in favor of international financial
institutions and backed by public credit in order to pay the private debts” of Rosi and
Lapachos, and “illegal[ly] alter[ing] . . . public documents to give an air of authenticity
to the supposed guarantees signed by the defendant.” (Decision of P araguayan Criminal
Ct. of First Instance, Dec. 30, 1992, Reyes Decl. Ex. 5, ECF No. 13-8, at 6– 7.)
Gramont was convicted in 1992 in a P araguayan Criminal Court (see id.), and on
December 30, 1997, the Supreme Court of P araguay sentenced him “to a prison term of
seven years for use of forged documents and abuse of his public office[.]” (2010 Swiss
Judgment ¶ 18.) 6 Similar criminal charges were brought in Switzerland, but Gramont
was not convicted there, due in large part to the fact that he had already served the
maximum penalty allowed under Swiss law when he was incarcerated in a P araguayan
prison. (See id . ¶ 19.)
B. Pro ce dural Histo ry
As the assignee to the banks’ right to enforce the 2004 and 2010 Swiss money
judgments, SACE filed a complaint in this Court on July 1, 2015. SACE’s complaint
6
Gramo n t was “cleared o f t he charge o f fraud to t he d etriment of t he Paraguayan St ate” (2010 Swiss
Ju d gment ¶ 18), because, in t he view o f the Paraguayan Crimin al Co urt o f First Instance, “the
g o v ernment h a[d] n ot been induced in to any . . . fin ancial lo ss” b ecause t he “legal requirements for t he
Paraguayan Go vernment t o commit it self t o this guarant ee h ave not b een met ” (Decision of Paraguayan
Crimin al Ct . o f First Instance at 11–12).
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invokes the D.C. Recognition Act and requests entry of a judgment in the amount of
€ 28,018,794 and 46,715,000 SFr. (converted to U.S. dollars at present-day rates), plus
interest (calculated as of the 2010 Swiss Judgment) and post-judgment interest. (See
Compl., Relief Requested ¶¶ A– B.) 7 The complaint briefly alludes to the history of the
parties’ litigation abroad, and further notes that SACE has acquired all rights to the
monetary awards in the Swiss judgments pursuant to various settlement agreements.
(S ee id . ¶¶ 5–13.) SACE acknowledges that “Defendant P araguay is a foreign state”
and, as such, is ordinarily entitled to sovereign immunity (id . ¶ 4), but asserts that the
waiver exception in 28 U.S.C. § 1605(a)(1) “is satisfied” here; therefore, this Court has
subject matter jurisdiction over the complaint’s claims (id . ¶ 1).
1. P araguay’s Motion to Dismiss
P araguay filed a motion to dismiss SACE’s complaint pursuant to Federal Rule
of Civil P rocedure 12(b)(1) on January 21, 2016. The motion argues that SACE has
failed to carry its burden of establishing the applicability of the FSIA’s waiver
exception, and thus P araguay is entitled to sovereign immunity from suit, for several
reasons.
First, P araguay argues that Gramont could only have validly waived P araguay’s
sovereign immunity for FSIA purposes if he had actual authority to effect such a
waiver, and SACE’s complaint does not allege “that Gramont had actual authority—as
opposed to mere apparent authority—to waive P araguay’s sovereign immunity[.]” (Id .
at 26; see also id. at 30 (explaining that “the Swiss Courts did not consider whether
7
€ is t h e symbol fo r t he Eu ro, which, to d ate, is the official currency of 19 o ut o f the 28 memb er states
o f t h e European Union.
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Gramont had authority to waive P araguay’s immunity because they held that, under
Swiss law, P araguay did not have immunity for its commercial acts”). P araguay insists
that SACE’s complaint is “plainly deficient” insofar as it lacks allegations of fact
regarding Gramont’s actual authority to waive P araguay’s sovereign immunity (id. at
32), and P araguay further asserts that no such facts exist, because Gramont was not
actually authorized to waive P araguay’s sovereign immunity under P araguayan law (see
id . at 32– 35).
P araguay also maintains that, even if the FSIA permits lawsuits against foreign
sovereigns whose immunity was waived by officials with mere apparent authority to
effect such as waiver, apparent authority was not present under the circumstances
presented here, because “there was no manifestation from the principal (the
Government of P araguay) to third parties (the Banks) that Gramont had authority to
waive P araguay’s sovereign immunity[,]” which the common law of agency requires in
order to sustain a claim of apparent authority. (Def.’s Mem. at 36; see a lso id . at 36– 39
(citing Restatement (Third) of Agency § 3.03 (2006)); Def.’s Reply Mem. in Supp. of
Def.’s Mot. (“Def.’s Reply”), ECF No. 19, at 17–18.) In this regard, P araguay argues
that none of the decrees or letters that SACE highlights “authorized Gramont to bind the
P araguayan fisc to any credit agreement, much less to one in which a company owned
by Gramont himself was the primary debtor being indemnified[.]” (Def.’s Mem. at 37.)
Moreover, P araguay argues that apparent authority was lacking in any event because the
banks plainly failed to “fulfill their [heightened] duty to investigate Gramont’s
authority” to bind P araguay prior to entering into the NFAs. (Id. at 36; see also Def.’s
Reply at 13 & n.5.)
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In addition to faulting the complaint’s allegations regarding Gramont’s authority
to waive P araguay’s sovereign immunity, P araguay’s motion to dismiss also maintains
that SACE should be judicially estopped from arguing that P araguay waived its
sovereign immunity, and that the FSIA’s waiver exception does not apply in this case as
a matter of law “[b]ecause all the acts underlying the Swiss judgments occurred outside
of the United States[.]” (S ee Def.’s Mem. at 41 (asserting that it would be unfair to
allow P laintiff to “use the purported validity of the guaranties as a sword” in the present
suit to support a finding of waiver when in prior proceedings in Swiss and Italian courts
SACE was allowed to use “the invalidity of the guaranties as a shield”); see a lso id . at
42 (“Nothing in the plain language of the FSIA’s waiver exception, § 1605(a)(1),
suggests that Congress intended that exception to grant jurisdiction over extraterritorial
disputes.”).)
2. SACE’s Opposition To The Motion To Dismiss
SACE vigorously disputes that it has failed to meet its burden of demonstrating
that the waiver exception to sovereign immunity is satisfied in this case. First of all,
SACE rejects the contention that actual authority (which it concedes that Gramont did
not have) is necessary to bind a sovereign to an explicit waiver of sovereign immunity,
and argues instead that apparent authority is sufficient. (See P l.’s Opp’n at 26– 30
(citing Aq uamar, S.A. v. Del Monte Fresh Produce N.A., Inc., 179 F.3d 1279, 1298
(11th Cir. 1999); Jo ta v. Texa co, Inc., 157 F.3d 153, 163 (2d Cir. 1998)). To
demonstrate that Gramont had apparent authority, SACE maintains that the
International Law of Consular Relations is the operative legal framework (see P l.’s
Opp’n at 23– 26), and asserts that a duly accredited consul such as Gramont has
“consular duties [that ordinarily] consist of promoting the development of commercial,
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economic, cultural and scientific relations” (id . at 24 (internal quotation marks and
citation omitted); is empowered to deal with foreign nations (id.); and “may be
authorized to carry out certain diplomatic acts in countries where the sending state does
not have an embassy” (id. (citation omitted)). SACE emphasizes that the Swiss courts
applied these international principles when they concluded that Gramont had apparent
authority to execute the Guarantees, and that those same principles are equally
applicable to the question of whether Gramont had apparent authority to waive
P araguay’s sovereign immunity with respect to the obligation that the Guarantees
established. (See id. at 23– 26.)
SACE also relies heavily on the P residential Decree and the Minister of
Finance’s letter endorsements, which SACE says are cognizable evidence under
international law and are indicative of Gramont’s apparent authority to exercise valid
consular powers and sign documents for development projects, such as the Rosi and
Lapachos contracts and financing agreements. (See id. at 25– 26.) And within the
alternative framework of the common law of agency, SACE maintains, first, that the
heightened “duty to investigate” that P araguay invokes is inapposite (id . at 26– 27);
second, that if the heightened duty does apply, there would be “a potentially outcome-
determinative conflict between U.S. and Swiss law[,]” such that the “relevant choice of
law rules would require this Court to apply” Swiss law, because it is “the law of the
jurisdiction with the ‘most significant relationship to the parties and the transaction’”
(id . at 28 (quoting Restatement (Second) of Conflict of Laws § 292 (1971))); and third,
that Gramont had apparent authority to waive P araguay’s sovereign immunity under
Swiss law (id. at 29).
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As for P araguay’s claim of judicial estoppel, SACE notes that its previous
position did not prevail in any of the relevant prior proceedings save one, and that it
abandoned the position that the Guarantees were invalid after—and in response to—the
foreign courts’ final, definitive decision on the matter. (Id. at 31– 33.) SACE further
argues that the presumption against extraterritoriality does not apply to acts of Congress
that merely establish jurisdiction, like the FSIA (id . at 34); that Congress intended the
FSIA’s waiver provision to be “‘an exception to the normal pattern of the [FSIA],
which generally requires some form of contact with the United States’” (id. at 35
(alteration in original) (quoting Verlin den B.V. v. Cent. Ba nk o f Nig eria, 461 U.S. 480,
490 n.15 (1983))); and that, in any event, an implied domestic-nexus requirement is
satisfied here because “SACE has brought this action for the sole purpose of executing
the judgments of the Swiss courts against P araguay’s assets in the United States.” (Id.
at 36.)
P araguay’s motion has been fully briefed and is now ripe for this Court’s review.
(S ee Def.’s Mem.; P l.’s Opp’n; Def.’s Reply.)
II. STATUTORY FRAMEWORK AND LEGAL STANDARD
A. The Fore ign Sovereign Immunities Act
The FSIA “provides the sole basis for obtaining jurisdiction over a foreign state
in the courts of this country.” Argentine Republic v. Amerada Hess Shipping Co ., 488
U.S. 428, 443 (1988). The Act “bars federal and state courts from exercising
jurisdiction when a foreign state is entitled to immunity, and [it also] . . . confers
jurisdiction on district courts to hear suits . . . when a foreign state is not entitled to
15
immunity.” Id. at 434 (emphasis in original). 8 Due to the protections that the FSIA
secures, “the foreign sovereign has ‘immunity from trial and the attendant burdens of
litigation . . . not just a defense to liability on the merits.’” Yo u ming Jin v. M inistry o f
S ta te S ec., 475 F. Supp. 2d 54, 61 (D.D.C. 2007) (alteration in original) (quoting
Ph o enix Consulting In c. v. Repub lic of Angola, 216 F.3d 36, 39 (D.C. Cir. 2000)). “In
order to preserve the full scope of that immunity, the district court must make the
critical preliminary determination of its own jurisdiction as early in the litigation as
possible; to defer the question is to frustrate the significance and benefit of entitlement
to immunity from suit.” Ph oenix Consulting , 216 F.3d at 39 (internal quotation marks
and citation omitted).
“The FSIA establishes a specific framework for determining whether a sovereign
is immune from suit and consequently whether the district court has jurisdiction.” Id.;
see a lso Republic of Argentina v. Weltover, In c., 504 U.S. 607, 610 (1992) (“The
[FSIA] establishes a comprehensive framework for determining whether a court in this
country, state or federal, may exercise jurisdiction over a foreign state.”). In short, a
foreign state is “‘presumptively immune from the jurisdiction of United States courts
unless a specific exception applies.’” TJGEM LLC v. Rep u blic o f Gh ana, 26 F. Supp.
3d 1, 7– 8 (D.D.C. 2013) (quoting Saudi Ara bia v. Nelson , 507 U.S. 349, 355 (1993),
a f f ’d p er curiam, No. 14-7036, 2015 WL 3653187 (D.C. Cir. June 9, 2015); see also 28
U.S.C. § § 1604– 07 (providing that a “foreign state shall be immune from the
jurisdiction of the courts of the United States” except in the case of specific, statutorily-
8
“If s ervice o f p rocess h as b een made u nder [28 U.S.C.] § 1608, personal ju risdiction o ver a fo reign
s t ate exists for every claim o ver which t he court has subject matter ju risdiction[.]” Price v. S ocialist
Peo ple’s Libyan Arab Jamahi riya, 294 F.3d 82, 89 (D.C. Cir. 2002) (cit ing 28 U.S.C. § 1330(b)).
16
delineated exceptions). If a sovereign defendant files a motion to dismiss that invokes
the shield of sovereign immunity, “the plaintiff bears the initial burden to overcome
[this presumption] by producing evidence that an exception applies[.]” Bell Helicopter
Textro n, Inc. v. Isla mic Republic of Iran, 734 F.3d 1175, 1183 (D.C. Cir. 2013). Once
this burden of production is met, “the sovereign bears the ultimate burden of persuasion
to show the exception does not apply.” Id.
Here, in response to P araguay’s claim of immunity, SACE raises only the
“waiver” exception to sovereign immunity, 28 U.S.C. § 1605(a)(1), which, as relevant
here, provides that:
A foreign state shall not be immune from the jurisdiction of courts of the
United States or of the States in any case . . . in which the foreign state
has waived its immunity either explicitly or by implication,
notwithstanding any withdrawal of the waiver which the foreign state
may purport to effect[.]
Id . SACE asserts that both of the Guarantees explicitly waived sovereign immunity.
(P l.’s Opp’n at 16; see a lso Rosi Guaranty at 4; Lapachos Guaranty at 4.)
When addressing a foreign sovereign’s explicit waiver of sovereign immunity
under the FSIA, courts have been clear that “[a] foreign sovereign will not be found to
have waived its immunity unless it has clearly and unambiguously done so.” World
Wid e M in erals, Ltd. v. Republic of Kazakhstan, 296 F.3d 1154, 1162 (D.C. Cir. 2002)
(citation omitted). Furthermore, the waiver of sovereign immunity must have been
made by someone who has, or at the very least appears to have, the authority to act on
behalf of the foreign sovereign with respect to such a waiver. See Doe I v. State of
Isra el, 400 F. Supp. 2d 86, 104 (D.D.C. 2005) (“The Court is mindful that foreign
sovereigns are legal fictions to the extent that they can only act through their individual
officers.”); see a lso Oster v. Republic o f S . Af rica, 530 F. Supp. 2d 92, 100 (D.D.C.
17
2007) (“Foreign sovereigns can be held liable for the actions of an individual if that
individual acts in an official capacity and if that behavior fits within one of the FSIA’s
exceptions to immunity.”), af f ’d su b nom. Oster v. Gov’t of Republic of S. Af rica, 298
F. App’x 6 (D.C. Cir. 2008). 9
When it is undisputed that the defendant qualifies as a “foreign state” that may
be immune from suit under the Act (see, e.g., Compl. ¶ 4 (conceding that “Defendant
P araguay is a foreign state”)), “a district court must review the allegations in the
complaint, the undisputed facts, if any, placed before it by the parties, and—if the
plaintiff comes forward with sufficient evidence to carry its burden of production on
[an exception]—resolve disputed issues of fact, with the defendant foreign sovereign
shouldering the burden of persuasion[,]” Robinson v. Gov’t of M alaysia, 269 F.3d 133,
141 (2d Cir. 2001) (citation omitted).
B. M otions Under Rule 12 (b)(1) In FSIA Cas es
The established standard for evaluating a motion to dismiss under Rule 12(b)(1)
in a case that implicates the FSIA is a nuanced one. “By moving to dismiss, the
defendant may challenge either [1] the legal sufficiency” of the allegations that appear
on the face of the complaint “or [2] the factual underpinning of [the] exception” upon
which the plaintiff relies, or both. Phoenix Consulting, 216 F.3d at 40. “A facial
challenge attacks ‘the factual allegations of the complaint’ that are contained on ‘the
face of the complaint,’ while a factual challenge is addressed to the underlying facts
9
Th e D.C. Circuit has y et t o det ermine whether a ctual authority to waive sovereign immu nity is
req u ired for FSIA p urposes, as opposed t o t he mere apparent authority t o execute a s overeign immu n ity
waiv er. As exp lained b elow, t his Court agrees wit h t he majority of circuit courts t hat h ave addressed
t h e issue o f a represent ative’s authority in t he context o f an FSIA exception, and fo r t he reasons laid
o u t in Part III.A, i nfra, concludes that actual authority is required in order t o satisfy the waiver
excep tion o f the FSIA.
18
contained in the complaint.” Al-Owhali v. Ashcroft, 279 F. Supp. 2d 13, 20 (D.D.C.
2003) (quoting Loughlin v. United S tates, 230 F. Supp. 2d 26, 35-36 (D.D.C. 2002)).
Notably, how the district court addresses the motion to dismiss “depends upon
whether the motion presents a [facial or a] factual challenge.” Ph oenix Co n sulting, 216
F.3d at 40. When a defendant makes a facial challenge, “the court must accept as true
the allegations in the complaint and consider the factual allegations of the complaint in
the light most favorable to the non-moving party[,]” Erb y v. Un ited S tates, 424 F. Supp.
2d 180, 182 (D.D.C. 2006) (citations omitted), just as it would with respect to a motion
to dismiss brought under Rule 12(b)(6), see Price v. S o cialist People’s Libyan Arab
Ja ma h iriya, 294 F.3d 82, 93 (D.C. Cir. 2002) (noting that the standard for facial
challenges to subject-matter jurisdiction “is similar to that of Rule 12(b)(6)”). To
survive such a facial challenge, the complaint’s allegations, “if true, must show that the
defendant’s conduct falls within the ambit of at least one of the FSIA’s exceptions to
sovereign immunity.” Agrocomplect, AD v. Republic of Iraq, 524 F. Supp. 2d 16, 21
n.8 (D.D.C. 2007).
By contrast, when a defendant brings a factual challenge to the complaint, the
Court “may consider materials outside the pleadings” in order to determine whether it
has subject-matter jurisdiction over the challenged claims, Jerome Stevens Pharms.,
Inc. v. FDA, 402 F.3d 1249, 1253 (D.C. Cir. 2005) (citation omitted), just as it would
with respect to a motion to dismiss that is brought under Rule 12(b)(1). “[T]he plaintiff
bears the burden of establishing the factual predicates of jurisdiction by a
preponderance of the evidence[,]” Erb y, 424 F. Supp. 2d at 182 (citing Luj an v.
Def enders of Wildlife, 504 U.S. 555, 561 (1992)) (other citations omitted), and “[t]o the
19
extent that jurisdiction depends on particular factual propositions independent of the
merits, the plaintiff must, on a challenge by the defendant, present adequate supporting
evidence[,]” De Csepel v. Rep ublic of Hungary, 808 F. Supp. 2d 113, 127 (D.D.C.
2011), rev’d in part o n other g rounds, 714 F.3d 591 (D.C. Cir. 2013). However, “[f]or
purely factual matters under the FSIA . . . , this is only a burden of production; the
burden of persuasion rests with the foreign sovereign claiming immunity, which must
establish the absence of the factual basis by a preponderance of the evidence.” Id. at
127– 28 (internal quotation marks and citation omitted).
III. ANALYSIS
The briefs that SACE and P araguay have filed with respect to P araguay’s motion
to dismiss address both facial and factual challenges to SACE’s complaint. According
to P araguay, the primary facial deficiency is the fact that SACE’s complaint contains no
allegations regarding Gramont’s actual authority to waive P araguay’s sovereign
immunity; P araguay says this defect is fatal because the waiver provision of the FSIA
can only be satisfied if the agent purporting to waive the immunity of the foreign
sovereign actually has the authority to do so. (Def.’s Mem. at 26–30.) In response,
SACE does not contest that Gramont lacked actual authority to execute the Guarantees,
along with the embedded explicit sovereign immunity waivers. (See Hr’g Tr. at 46.) 10
10
SA CE co nfirmed its p osit ion at t he mo tion h earing during t he following exchange:
THE COURT: Do y ou concede t hat Mr. Gramont did n ot have actual authority
u n d er the circumstances in t his case?
PLA INTIFF’S COUNSEL: We are n ot making an argument that Mr. Gramont
Berres h ad actual authority.
Hr’g Tr. at 46. Thus, it appears t hat SACE h as accepted t he reality t hat no court—not even any o f the
Swis s courts—has concluded that Gramont actually had t he authority to execut e the Gu arantees on
b eh alf o f Paraguay. Indeed, as Paraguay n otes in it s brief in support o f the mo tion to d ismiss, the
ap p ellat e court reviewing the 2004 Swiss Judgment found t hat “it was ‘i mpossibl e to assert’ t hat
20
However, SACE contends that actual authority is not required for a waiver of sovereign
immunity under the FSIA; instead, according to SACE, apparent authority is legally
sufficient, and the record evidence in this case—specifically, the P residential Decree of
May 1983, the Minister of Finance letter of May 1986, and the Ministry of Finance
resolution of October 1986—demonstrates that it was reasonable for the banks to
believe that Gramont had the authority to bind P araguay and to waive its immunity with
respect to its payment obligations. (See P l.’s Opp’n at 23– 30.) P araguay’s factual
challenge to SACE’s complaint emerges in its response to SACE’s contention that the
record here demonstrates that Gramont had apparent authority to execute the
Guarantees: to the contrary, says P araguay, “[n]ot a single document referenced in the
Swiss judgments indicates that Gramont had been given specific authority to waive the
country’s immunity[,]” and none of the alleged facts regarding the financing of
construction projects and the execution of the Guarantees “would have provided the
Banks with any basis to believe that Gramont had authority to waive P araguay’s
immunity.” (Def.’s Mem. at 36.)
For the reasons explained fully below, this Court agrees with P araguay that
actual authority is necessary for an agent to effect a waiver of a foreign state’s
sovereign immunity in the context of the FSIA—a finding that resolves this case
because even SACE admits that actual authority is lacking here. Alternatively, even if
the FSIA permits waiver of sovereign immunity by an agent who merely has apparent
Gramo n t had actual authority ‘b ased o n t he in formation contained in t he [t rial court’s] d ecision[.]’”
(Def.’s M em. at 30 (emp hasis added; alteration in original) (quoting Swiss Federal Tribunal Judgment
at 16).) Likewise, t he 2010 Swiss Judgment recognized that the “documents . . . alleg edly giving
Gramo n t authority ‘later p roved n ot t o cover t he g uarantees at issue[.]’” (Id. (quoting 2010 Swiss
Ju d gment at 12).)
21
authority, this Court finds that SACE has failed to demonstrate that Gramont had
apparent authority to waive P araguay’s immunity under the circumstances presented in
this case. Accordingly, this Court concludes that it must dismiss SACE’s complaint
because it lacks subject-matter jurisdiction to entertain SACE’s suit against P araguay
for recognition of the Swiss money Judgments.
A. Gramo nt Ne eded (B ut Admittedly Did Not Have) Actual Autho rity To
Waive Parag uay’s Sovereign Immunity Fo r FSIA Purpo s es
As explained, P araguay argues that “an agent must have actual authority from
the foreign state—as opposed to mere[] apparent authority—to invoke an exception to
the FSIA” (Def.’s Mem at 27 (emphasis in original)), while SACE contends that
apparent authority is sufficient (P l.’s Opp’n at 29– 30). Whether the FSIA demands
actual or apparent authority is a question of statutory interpretation. S ee, e.g.,
Aso cia cion de Reclamantes v. United M exican S tates, 735 F.2d 1517, 1521 (D.C. Cir.
1984) (explaining that, when construing an exception to FSIA immunity, a court’s task
is “to determine what Congress meant by the language in this particular statute”). And
the question is a nuanced one because the relevant provision of the FSIA only provides
that “th e f o reign state” must “ha[ve] waived its immunity either explicitly or by
implication,” 28 U.S.C. § 1605(a)(1) (emphasis added); see also 28 U.S.C. § 1603(a)
(defining a “foreign state” broadly to include “a political subdivision of a foreign state
or an agency or instrumentality of a foreign state”), but does not specify whether an
individual agent of a foreign state must have the state’s authority to engage in an act
that triggers an FSIA exception to the state’s sovereign immunity, nor does it address
whether an unauthorized agent can bind the foreign state for the purpose of the FSIA’s
exceptions if such a person appears to be authorized.
22
The D.C. Circuit has yet to address the scope of the term “the foreign state” in
the waiver provision of the FSIA (section 1605(a)(1)); that is, there is no binding
precedent in this jurisdiction regarding whether that term includes only the agents,
subdivisions, and instrumentalities that the foreign state has actually authorized to
waive sovereign immunity, or whether it also includes those who merely appear to have
such waiver authority. But several other circuits have specifically addressed the actual-
versus-apparent authority question when interpreting similar “foreign state” language in
the FSIA’s “commercial activity” exception, see 28 U.S.C. § 1605(a)(2), and as
explained below, nearly all of them have held that evidence of actual authority is
necessary in order to invoke that FSIA exception.
1. The P revailing Legal Analysis Of The FSIA’s “Commercial Activity”
Exception Is Instructive
Like the waiver exception at issue here, the FSIA’s commercial activity
exception is predicated on certain conduct of “the foreign state”:
(a) A foreign state shall not be immune from the jurisdiction of courts of
the United States or of the States in any case—
...
(2) in which the action is based upon a commercial activity carried on
in the United States by the foreign state; or upon an act performed in the
United States in connection with a commercial activity of the foreign
state elsewhere; or upon 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[.]
28 U.S.C. § 1605(a)(2). When interpreting this exception, courts have drawn upon the
“well-settled” federal common law of derivative U.S. sovereign immunity, which holds
“that contractors and common law agents acting within the scope of their employment
for the United States have derivative sovereign immunity” because they are deemed to
be acting on behalf of the sovereign, and have also relied upon the corollary of that
23
rule: “the act of an agent b eyo nd what he is legally empowered to do is not binding
upon the government.” Velasco v. Gov’t of Indon., 370 F.3d 392, 399 (4th Cir. 2004)
(emphasis added; internal quotation marks and citation omitted); see a lso Larsen v.
Do mestic & Fo reign Co mmerce Corp., 337 U.S. 682, 689 (1949) (“[W]here the
officer’s powers are limited by statute, his actions beyond those limitations are
considered individual and not sovereign actions. The officer is not doing the business
which the sovereign has empowered him to do or he is doing it in a way which the
sovereign has forbidden.”).
Consequently, the Fourth, Fifth and Ninth Circuits have concluded that “the
commercial activity exception may be invoked against a foreign state only when its
officials have actual authority.” Vela sco, 370 F.3d at 400; see also Phaneuf v. Repub.
o f In d on., 106 F.3d 302, 307– 08 (9th Cir. 1997) (holding, in a case in which “[foreign]
government officers exceeded the scope of their authority in issuing and certifying the
validity of [certain promissory] notes[,]” that “[i]f the foreign state has not empowered
its agent to act, the agent’s unauthorized act cannot be attributed to the foreign state”);
Da le v. Colagiovanni, 443 F.3d 425, 429 (5th Cir. 2006) (“We agree with the Fourth
and Ninth Circuits that an agent’s acts conducted with the apparent authority of the
state is insufficient to trigger the commercial exception to FSIA.”). P ersuasive
precedent from this district likewise supports the conclusion that actual authority is
required as far as the FSIA’s commercial activity exception is concerned. See TJGEM
LLC, 26 F. Supp. 3d at 10 & nn.5– 6 (rejecting the theory of apparent authority and
finding that the FSIA’s commercial activity exception cannot apply if the plaintiff relies
on the conduct of agents who are not actually authorized); cf . Red Lake Band of
24
Ch ipp ewa In dians v. U.S. Dep ’t of In terior, 624 F. Supp. 2d 1, 19 (D.D.C. 2009)
(“[C]ontracts entered into by government personnel who lack authority to bind the
[United States] Government are unenforceable.”).
This Court sees no reason why the term “the foreign state” as it appears in the
FSIA’s waiver provision should be interpreted any differently. It is “[a] standard
principle of statutory construction” that “identical words and phrases within the same
statute should normally be given the same meaning.” Po werex Co rp. v. Reliant En ergy
S ervs., In c., 551 U.S. 224, 232 (2007); see also Samantar v. Yousuf, 560 U.S. 305, 319
(2010) (“[W]e do not . . . construe statutory phrases in isolation; we read statutes as a
whole.” (second alteration in original) (internal quotation marks and citation omitted)).
SACE has not argued that Congress intended for the term “the foreign state” to mean
something different in section 1605(a)(1) (the waiver exception) than in section
1605(a)(2) (the commercial activity exception), nor would it be easy to distinguish
these two FSIA exceptions in this regard, because the same rationale that supports the
actual authority requirement with respect to the commercial activity of a foreign
government applies to waivers, and perhaps even more so, given that a waiver of
sovereign immunity speaks directly to the foreign sovereign’s willingness to accede to
the jurisdiction of another country’s courts. P ut another way, actual authority is
especially germane when the particular act that a representative has carried out
purportedly on behalf of the foreign government is of a sovereign or public nature—
such as the act of waiving the government’s sovereign immunity, see Th emis Ca p ital,
LLC v. Dem. Rep . Congo, 881 F. Supp. 2d 508, 523 (S.D.N.Y. 2012) (explaining that
“[a]ctions that subject foreign sovereigns to the jurisdiction and authority of the courts
25
of the United States, . . . such as waivers of sovereign immunity pursuant to the FSIA,
are public acts”)—and if an express waiver is going to serve as the basis for nullifying
the presumption of sovereign immunity that the FSIA otherwise affords, it is reasonable
to expect that the binding force of that foreign agent’s waiver authority must be fully
established. Cf . World Wide M inerals, Ltd ., 296 F.3d at 1162 (requiring that a foreign
state must have “clearly and unambiguously” expressed its intent to waive its sovereign
immunity).
It is for this reason that the Second Circuit’s contrary view of the actual-versus-
apparent-authority issue is unpersuasive. To be sure, the Second Circuit has held that
mere apparent authority can suffice to bind a foreign country to an agent’s
commitments on behalf of the sovereign for the purpose of the FSIA’s commercial
activity exception. See First Fid. Ba nk, N.A. v. Go v’t o f An tigu a & Ba rbuda—
Perma n ent Mission, 877 F.2d 189, 193 (2d Cir. 1989). But that Circuit has also
acknowledged that “it is possible for the persons who comprise the government to act
without acting as the government[,]” Rep ublic o f Ira q v. ABB AG, 920 F. Supp. 2d 517,
537 (S.D.N.Y. 2013), af f ’d, 768 F.3d 145 (2d Cir. 2014), and it has narrowed the
holding of First Fidelity to “permit apparent authority to bind a sovereign engaged in
p riva te [commercial] conduct but to demand actual authority to bind a sovereign
engaged in public [commercial] conduct[,]” id. (emphasis added); see also Themis
Ca p ita l, LLC, 881 F. Supp. 2d at 523 (attempting to harmonize the Circuit’s various
decisions regarding the commercial activity exception by observing that, “where a
public act by a governmental actor is at issue,” courts require a showing of actual
authority, but “where a private act by a government actor is at issue, courts have
26
consistently enforced claims of apparent authority”). Thus, it is far from clear that the
Second Circuit would permit the apparent-authority standard to carry the day with
respect to an agent’s express waiver of sovereign immunity purportedly on behalf of the
foreign state, which unquestionably qualifies as a public act.
This all means that the weight of judicial authority regarding the FSIA’s
commercial-activity exception holds that abrogation of sovereign immunity only occurs
when the foreign state’s agent has actual authority to engage in the commercial
activities that give rise to this result per the statute. And because this Court discerns no
meaningful difference between the “foreign state” actor that Congress references in the
commercial-activity exception, see 28 U.S.C. § 1605(a)(2), and the “foreign state” actor
who must clearly and unambiguously waive the foreign state’s immunity for the
purpose of the waiver exception, id . § 1605(a)(1), the Court does not agree with
SACE’s contention that apparent authority is enough to trigger the waiver exception to
the presumption of immunity that the FSIA otherwise affords.
2. The Cases That Suggest That Apparent Authority Suffices Are Readily
Distinguishable, And Requiring Actual Authority Is Consistent With
P rinciples Of International Law
Undaunted, SACE points to the opinions of the Second and Eleventh Circuits in
Jo ta v. Texaco, 157 F.3d 153 (2d Cir. 1998), and Aquamar S.A. v. Del M onte Fresh
Pro d u ce N.A., In c., 179 F.3d 1279 (11th Cir. 1999), which analyze the apparent-versus-
actual-authority issue in the context of the FSIA’s waiver exception. (See P l.’s Opp’n
at 30.) But these cases do not support a different result. In Aquamar, the Eleventh
Circuit considered whether, absent extraordinary circumstances, an attempted waiver of
sovereign immunity made by “a duly accredited head of a diplomatic mission (such a s
a n a mb a ssador)” in the context of a j udicial proceeding should be deemed sufficient to
27
trigger the FSIA’s waiver exception. Aquamar, 179 F.3d at 1295 (emphasis added)
(footnotes omitted). Although the diplomatic official’s courtroom representations were
not authorized by the foreign state, the Eleventh Circuit concluded that, in light of the
internationally recognized powers of ambassadors, United States courts may reasonably
rely on a foreign country’s duly executed appointment of an individual to that position
as a manifestation of his or her presumptive authority to waive the sovereign’s
immunity in judicial proceedings. Id. at 1294; see also id. at 1295, 1296 (relying on the
propositions of customary international law that “a sovereign’s chief diplomatic
representative to a foreign nation possesses an extraordinary role and powers” and that
“an ambassador’s powers include the authority to present his or her country’s position
before foreign tribunals”); GDG Acq u isitio ns LLC v. Go v’t o f Belize, No. 16-12397,
2017 WL 766915, at *6 (11th Cir. Feb. 28, 2017) (holding that Aquamar did not apply
in a case that did “not involve the acts of an ambassador”). The agent who purported to
act on behalf of the foreign state in the judicial proceedings at issue in Jo ta was also an
ambassador, and due to “the traditional authority of ambassadors to represent the state’s
position before foreign courts[,]” the Second Circuit concluded that the district court
was “entitled to rely on his representations unless [it was] actually aware that he lacked
such authority[.]” S ee Jota, 157 F.3d at 163; see also Th emis Ca pital, LLC, 881 F.
Supp. 2d at 525 n.6 (explaining that Aquamar and Jo ta “found apparent authority
sufficient to support . . . waivers of sovereign immunity . . . by foreign ambassadors,
because of the traditional authority of ambassadors to represent the state’s position
before foreign courts” (internal quotation marks and citation omitted)).
28
Neither of these cases stands for the proposition that apparent authority is alwa ys
sufficient to accomplish a binding waiver of sovereign immunity in any context. Nor
do their holdings extend beyond the mere proposition that an individual who has the
rank of an ambassador reasonably appears to have the authority to represent the foreign
sovereign’s position in legal proceedings, and they certainly do not compel the
conclusion that apparent authority is all that is required to bind a foreign state to an
express waiver of sovereign immunity that is embedded in a financial guarantee signed
by an appointed consul. Thus, this Court agrees with P araguay that the few cases that
suggest that apparent authority may suffice to waive sovereign immunity in some
circumstances are not dispositive of the outcome here. (Def.’s Reply at 14– 16.)
To the contrary, the FSIA’s waiver exception plainly evinces Congress’ intent to
require “the foreign state” to act, and when that provision is considered in light of
statute as a whole, the best reading of that term is that its encompasses only those
representatives who are actually authorized to act on behalf of the state. See Phaneuf,
106 F.3d at 307–08 (reasoning, based on the plain meaning of the statute, that “[i]f the
foreign state has not empowered its agent to act, the agent’s unauthorized act” is not “o f
th e f o reign state” and, thus, “cannot be attributed to the foreign state” (emphasis in
original)); see also Tra nsamerica Leasing, Inc. v. La Repu blica de Venezuela, 200 F.3d
843, 850 (D.C. Cir. 2000) (expressing “doubt . . . that a case of merely apparent
authority” would suffice to attribute an agent’s acts to the foreign sovereign); cf . Ma r.
In t’l No minees Establishment v. Rep ublic o f Gu inea, 693 F.2d 1094, 1107 (D.C. Cir.
1982) (“We have said that [an agent]’s activities . . . cannot waive [the sovereign]’s
immunity if [the sovereign] did not authorize them.”). This is another way of saying
29
that the FSIA “unambiguously indicate[s] that only official acts, i.e., acts actually
authorized by ‘the foreign state,’ can invoke the [waiver] exception” (Defs.’ Mem. at
28), and that “if Congress had intended acts of an agent acting without actual authority
to bind the foreign state under [the waiver exception], it could, and would, have so
stated” (id. at 28–29).
Moreover, even if “the foreign state” language in the FSIA’s waiver provision is
deemed ambiguous, this Court must read that language narrowly and in a manner that
both “avoid[s] unreasonable interference with the sovereign authority of other
nations[,]” F. Hof fmann -La Roche Ltd. v. Empagran S.A., 542 U.S. 155, 164 (2004),
and also comports with established principles of international law. Indeed, when
Congress enacted the FSIA, it specifically intended to create “a statutory regime which
incorporates standards recognized under international law[.]” H.R. Rep. No. 94-1487,
at 14 (1976), reprinted in 1976 U.S.C.C.A.N. 6604, 6613. And SACE has done little to
counter this Court’s understanding that basic international-law principles, too, support
the conclusion that apparent authority is insufficient to waive sovereign immunity. S ee,
e.g., Hazel Fox, The Law of State Immunity 267 (2002) (explaining that, under
principles of international law, “[t]he consent whether express or implied must be that
of the State; consent to jurisdiction or waiver of immunity by a representative of the
State must therefore be authorized by the State”).
For all these reasons, this Court concludes that “the foreign state” as that phrase
appears in 28 U.S.C. § 1605(a)(1) encompasses only agents of the foreign state who are
a ctu ally authorized to waive sovereign immunity. It is undisputed that Gramont did not
have actual authority to act on behalf of P araguay when he executed the Guarantees of
30
his company’s private loans that contained purported waivers of sovereign immunity,
and therefore, SACE has failed to satisfy its burden of demonstrating that the waiver
exception applies in this case. Consequently, this Court lacks subject matter
jurisdiction over SACE’s claims, and the case must be dismissed.
B. Appare nt Waive r Autho rity Is Also Absent Under The Circumstances
Pre sented Here
Setting aside the requirement that an agent purporting to waive the sovereign
immunity of a foreign state for FSIA purposes must have actual authority to do so
(which resolves the instant case), it is also clear to this Court that the facts and
circumstances presented in the complaint and the accompanying documents demonstrate
that Gramont lacked even apparent authority to waive P araguay’s sovereign immunity
via the Guarantees that he executed, and thus, P araguay’s factual challenge to SACE’s
complaint would also prevail. “Apparent authority is the power held by an agent or
other actor to affect a principal’s legal relations with third parties when a third party
reasonably believes the actor has authority to act on behalf of the principal and that
belief is traceable to the principal’s manifestations.” Restatement (Third) of Agency
§ 2.03; see also Arriaga v. Fla. Pa c. Fa rms, L.L.C., 305 F.3d 1228, 1245 (11th Cir.
2002) (“When applying agency principles to federal statutes, ‘the Restatement . . . of
Agency . . . is a useful beginning point for a discussion of general agency principles.’”
(second alteration in original) (quoting Bu rlin gton In dus. v. Ellerth, 524 U.S. 742, 755
(1998))). Thus, to demonstrate that Gramont possessed apparent authority to waive
P araguay’s immunity, SACE would have to show (1) that P araguay manifested as much,
and (2) that the banks reasonably believed that Gramont had waiver authority in light of
P araguay’s manifestation. S ee, e.g., Tra nsamerica Leasing, 200 F.3d at 850.
31
In this Court’s view, neither a manifestation from P araguay nor a reasonable-
belief that Gramont had the authority to waive P araguay’s sovereign immunity exists on
the facts presented here. With respect to the manifestation requirement, “[a] person
manifests assent or intention through written or spoken words or other conduct.”
Restatement (Third) of Agency § 1.03. So, for example, a principal can manifest that
its representative is authorized to act on its behalf by expressly stating as much. S ee id .
§ 3.03 cmt. b. A principal can also manifest its intention to authorize its representative
by “placing [its] agent in a defined position” with recognized duties, “or by placing [its]
agent in charge of a [particular] transaction or situation” such that a third party could
“naturally and reasonably assume that the agent has authority to do acts consistent with
the agent’s position or role unless they have notice of facts suggesting [otherwise].” Id.
But, here, SACE has not pointed to a statement or act of P araguay that manifests that
country’s assent to confer upon Gramont the authority to offer the public fisc as a
guarantee of the loans that he was entering on behalf of his private company, much less
any conduct of P araguay that evinces its decision to permit Gramont to waive the
country’s sovereign immunity with respect to future litigation regarding defaulted
payments with respect to those loans.
The fact that P araguay may have authorized Gramont to represent the country in
certain respects is not enough: although the P residential decree of May 27, 1983, for
example, entrusts Gramont with “facilitating certain management related to
development programs for [P araguay]” (P residential Decree No. 39.808, at 2), SACE
has not provided any proof that the Rossi and Lapachos contracts were among the
particular “development programs” that P araguayan authorities considered, and the
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facts make clear that Gramont did far more than merely “facilitat[e]” the “management”
of those deals. Nor does the P residential decree purport to establish the specific powers
or duties that P araguay was conferring upon Gramont when the P resident gave him the
title of “Ambassador on a Special Mission”; indeed, the decree expressly states that the
extent of Gramont’s authority and the details of the special mission would be
communicated at a later date to Gramont and to the Ministry of Foreign Affairs. (See
id .) Thus, nothing expressed in this document demonstrates P araguay’s assent or intent
to authorize Gramont to waive the country’s sovereign immunity, in a commercial
transaction or otherwise.
The statements of the Minister of Finance issued on May 22, 1986, and October
10, 1986 likewise fall short of manifesting P araguay’s assent to Gramont’s power to
execute the Guarantees and waive P araguay’s immunity with respect to those
obligations. (S ee P l.’s Opp’n at 11– 12, 25– 26.) In referencing Gramont’s authority,
the May 22 n d letter refers solely to his ability to negotiate and sign documents in
connection with “the execution of [development] programs and projects” (Letter from
the Minister of Finance at 2), and the subsequent resolution, dated October 10, 1986,
confers only the power to “manage, present and negotiate proposals,” and to sign
“necessary documentation” for certain financial transactions (Resolution 1205 of the
Ministry of Finance at 2, 3). Thus, neither of these documents evinces P araguay’s
delegation of the authority to waive immunity with respect to a contract or proposal,
and neither document comes anywhere close to suggesting that Gramont was vested
with the authority to act independently or without prior approval of the sovereign itself.
To the contrary, by demanding “strict contact and constant coordination with the
33
Ministry of Finance,” as well as ongoing reports to the finance agency, the resolution
expressly limited Gramont’s power. (Resolution 1205 of the Ministry of Finance at 3).
Thus, the Swiss courts rightly characterized these documents as a special power of
attorney (2004 Swiss Judgment at 8), which, by their nature, conveyed only the
authority to enter into transactions as specifically authorized and assented to by the
principal. Cf . Restatement (Second) of Agency § 3 (1958) (“A special agent is an agent
authorized to conduct a single transaction or a series of transactions not involving
continuity of service.”).
It is also notable that Gramont lacked the recognized title of duly accredited
“Ambassador”—he was only an accredited “Consul”—and the fact that a consul has
limited powers to act on behalf of its sovereign is a well-established principle of
international law. S ee Constantin Economides, Consuls, in 9 Max P lanck Inst. For
Comparative P ub. Law & Int’l Law, Encyclopedia of Pub. Int’l Law 40 (Rudolf
Bernhardt ed., 1986) (explaining that “[t]he usual criterion used for the distinction
between diplomats and consuls” is the differing scope of their “representative
character” vis-à-vis the sending State; unlike an ambassador, a consul’s authority is
“specific” to “matters within their competence” and “secondary to that of diplomatic
agents”); see a lso The Anne, 16 U.S. 435, 445 (1818) (“A consul, though a public agent,
is supposed to be clothed with authority only f or commercial purposes. He . . . is not
considered as a minister, of diplomatic agent of his sovereign, intrusted, by virtue of his
office, with authority to represent him in his negotiations with foreign states, or to
vindicate his prerogatives.” (emphasis added)). That is, while ambassadors are
“diplomatic officer[s]” who broadly “represent the sovereign” inside the receiving state,
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see Black’s Law Dictionary (10th ed. 2014) (defining an “ambassador”), consuls are
mere “commercial agents of a government” who are “charged with the duty of
promoting the commercial interests of the state,” but are “not diplomatic agents,” id.
(defining “consul” (emphasis added; internal quotation marks and citation omitted); see
a lso Ho u rani v. M irtchev, 796 F.3d 1, 13 (D.C. Cir. 2015) (emphasizing that “the
Ambassador is not just any government functionary, but instead is an official whose
defining purpose is to speak for” and “[r]epresent the sending State . . . in the receiving
State” (first alteration in original) (internal quotation marks and citation omitted)).
Therefore, courts have long held that a consul “is not competent, merely by virtue of his
office, to appear [before our courts] for his government and claim immunity[,]” The Sao
Vicen te, 260 U.S. 151, 154 (1922), or, by extension, to waive it, see Fox, The Law o f
S ta te Immunity at 185 (noting that in U.S. courts, a plea of immunity or waiver
“asserted through . . . a consul . . . would not be entertained”); see also James J. Hogan,
In terna tional La w--Sovereign Immunity, 15 U. Miami L. Rev. 450, 452 (1961) (“The
authorized representative of a foreign state is the only competent person to appear and
raise the jurisdictional issue. Representations by a Consul General . . . or are
ineffectual.”). 11
11 SA CE s u ggests t hat t he fact t hat t here was no an accredited Paraguayan ambassador in Swit zerland at
t h e t ime that Gramont served as Consul should factor in to t he apparent authority analysis, because
Paraguay might have in tended fo r Gramo nt t o have the p ower to engage in certain d iplomatic acts. (See
Pl.’s Op p’n at 24–26.) Bu t a foreign consul can t ake on amb assadorial responsibilit ies o nly when t he
receiving St ate h as p reviously consented t o and authorized such performance. S ee Vienna Convention
o n Co nsular Relations and Optional Protocol o n Disputes, A pr. 24, 1963, 21 U.S.T. 77, T.I.A.S. No.
6820; see a lso The Sao Vicente, 260 U.S. at 154–55 (exp laining t hat a consul’s d uties are commercial
an d while they may b e b roadened by special authorit y to encompass d iplomatic acts, s uch enlargement
mu s t “be recognized by t he g overnment within whose domin ions [t he consul] assumes to exercise
[d ip lo matic authority]” in order t o be effective (internal q uotation marks and citation o mitted)); Uni ted
S t a tes v. Deutsches K alisyndikat Gesellschaft , 31 F.2d 199, 203 (S.D.N.Y. 1929) (“A foreign sovereign
can not authorize h is agents . . . t o perform any sovereign or g overnmental fu nctions wit hin the d omain
o f an other sovereign, without h is consent.”). And SACE h as not p rovided any evidence t hat
Swit zerland consented t o Gramont’s alleged exercise o f diplomatic authority. C f. The Anne, 16 U.S. at
35
 The final blow to any contention that apparent authority existed—i.e., that the
banks reasonably concluded that Gramont was authorized to waive P araguay’s
sovereign immunity with respect to the financial obligations the Guarantees secured—is
the fact that the Guarantees themselves, which Gramont negotiated and signed, were
plainly part of a self-interested financial transaction that benefitted Gramont personally
due to his role as a principal shareholder of both Rosi and Lapachos. This circumstance
was sufficient to put the banks on notice that Gramont’s authority to enter binding
Guarantees on behalf of P araguay was questionable. As mentioned above, a belief that
the principal has authorized its agent to act can be rendered unreasonable in the
presence of “facts suggesting that this may not be so[,]” Restatement (Third) of Agency
§ 3.03 cmt. b, and self-dealing has long been considered a fact of consequence in this
regard. Cf . Aqua mar, 179 F.3d at 1299 (declining to doubt an ambassador’s
presumptive authority to bind a foreign sovereign to a waiver, where the ambassador
had merely filed a court document on behalf of the sovereign, which the court
considered to be “the type of task a diplomat traditionally performs on behalf of his
nation, rather than a commercial transaction that [the ambassador] might have entered
for his own purposes”). In other words, it is a well-established agency law principle
that, “[i]n a transactional context, the agent’s position as a fiduciary should prompt
doubt in the mind of the reasonable third party when the agent appears to be using
446 (co n cluding t hat t he consul g eneral was “incompetent ” to assert legal d efenses o n behalf of t he
s o vereign where “[t]here [was] no suggestion, or p roof, of any such d elegation o f [d iplomatic]
au t hority” recognized by t he receiving State).
36
authority to bind the principal to a transaction that will not benefit the principal” and
benefits the agent instead. Id. § 2.03 cmt. d.
Here, the record demonstrates that the banks knew, or should have known, about
Gramont’s ownership stake in the private companies that benefitted from the
Guarantees he purported to sign on P araguay’s behalf. Gramont’s wife was the
signatory for Rosi’s NFA (Rosi NFA, ECF No. 16-16, at 14), which, in and of itself,
should have alerted the banks to Gramont’s improper personal stake in the transaction.
What is more, the Guarantees had no apparent, direct benefit for the government of
P araguay or any state-owned enterprise, and the signing of such Guarantees for the
benefit a private company was unprecedented in P araguayan history. (See Decision of
P araguayan Criminal Court of First Instance, Dec. 30, 1992, at 9; see also Restatement
(Third) of Agency § 2.03 cmt. d (noting that a transaction that is unprecedented in the
principal’s history “should strike a dissonant chord for a reasonable third party”). The
fact that Gramont also purported to execute the Guarantees by affixing the seal of a
P araguayan embassy that did not exist (see Decision of P araguayan Criminal Court of
First Instance at 16–17) was another clear red flag that should have alerted the banks to
the potential that Gramont’s conduct was unauthorized. And when all of these
questionable aspects of the Gramont’s self-interested activity with respect to signing the
Guarantees are taken into account, this Court has little doubt that these facts render the
banks’ blind reliance on Gramont’s purported authority to waive P araguay’s sovereign
immunity manifestly unreasonable. See Restatement (Third) of Agency § 2.03 cmt. d
(explaining that, where the principal will not gain an economic advantage from a
transaction, “the relevant questions for a third party who interacts with the agent are
37
whether it is reasonable to believe that the principal has authorized, consented to, or
acquiesced in the agent’s actions and whether the scope of the principal’s consent
encompasses the agent’s conduct”).
The bottom line is this: even “an ambassador’s actions under color of authority
do not, as a matter of law, automatically bind the state that he represents[,]” First
Fid elity, 877 F.2d at 193, and, thus, “[t]he facts of a given case must be [carefully]
examined[,]” id. After carefully viewing the facts of this case, this Court finds that the
vaguely worded statements of the P resident and Minister of Finance did not give rise to
a reasonable belief that P araguay intended to cloak Gramont with unlimited authority to
act on its behalf, or, more to the point, to waive its sovereign immunity with respect to
any and all commercial transactions. And if such a belief did arise, the facts regarding
Gramont’s personal interest in the transactions that the Guarantees purportedly secured
completely undermined its reasonableness. Consequently, even if the FSIA’s waiver
exception encompasses waivers executed by officials with mere apparent authority, this
Court finds that SACE has failed to demonstrate that P araguay waived its immunity for
the purpose of the FSIA under the circumstances presented here.
IV. CONCLUSION
SACE has brought the instant action in order to enforce two substantial money
judgments that the Swiss courts have issued against the Republic of P araguay.
Although there is no dispute that the Swiss tribunals are competent to adjudicate the
issues before them and are thus entitled to respect (see P l.’s Opp’n at 21– 23), the
question before this Court is the extent of its own jurisdiction to entertain SACE’s
38
action under federal law, and the Court has a duty to make its own independent factual
determinations in order to ascertain its authority under the FSIA.
Having undertaken to fulfill that duty, this Court has concluded, first and
foremost, that the FSIA permits waivers of sovereign immunity by a foreign state’s
agent only if the agent has actual authority, which Gramont admittedly did not possess
with respect to the express waiver of sovereign immunity at issue in this case. On this
basis alone, SACE has failed to meet its initial burden of showing that an exception to
the Act’s immunity applies. But there is more: based on the facts alleged in the
complaint and the record evidence presented to this Court, the Court further finds that
SACE has failed to show that P araguay manifested its assent to Gramont’s exercise of
authority in relation to the Guarantees such that the banks had a reasonable belief that
Gramont had the power to execute the Guarantees on behalf of P araguay and to waive
P araguay’s immunity from suit. Thus, P araguay’s presumptive sovereign immunity
under the FSIA stands unscathed as a matter of law and fact, and that immunity renders
this Court without subject-matter jurisdiction to entertain the present action.
Accordingly, and as set forth in the accompanying Order, P araguay’s motion to dismiss
SACE’s complaint must be GRANTED.
DATE: March 21, 2017 Ketanji Brown Jackson
KETANJI BROWN JACKSON
United States District Judge
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