Globe Nuclear Services v. AO Techsnabexport

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
GLOBE NUCLEAR SERVICES AND 
SUPPLY GNSS, LIMITED,
Plaintiff-Appellant,
v.  No. 04-1007
AO TECHSNABEXPORT,
Defendant-Appellee.

Appeal from the United States District Court
for the District of Maryland, at Greenbelt.
Deborah K. Chasanow, District Judge.
(CA-03-3339-8-DKC)
Argued: June 2, 2004
Decided: July 22, 2004
Before WILKINS, Chief Judge, LUTTIG, Circuit Judge,
and Louise W. FLANAGAN, United States District Judge
for the Eastern District of North Carolina,
sitting by designation.
Reversed by published opinion. Judge Luttig wrote the opinion, in
which Chief Judge Wilkins and Judge Flanagan joined.
COUNSEL
ARGUED: Andrew Kelly Fletcher, PEPPER HAMILTON, L.L.P.,
Pittsburgh, Pennsylvania, for Appellant. Carolyn Beth Lamm,
WHITE & CASE, Washington, D.C., for Appellee. ON BRIEF: John
2 GLOBE NUCLEAR v. AO TECHSNABEXPORT
C. Hansberry, Richard M. Weibley, PEPPER HAMILTON, L.L.P.,
Pittsburgh, Pennsylvania; Charles H. Carpenter, PEPPER HAMIL-
TON, L.L.P., Washington, D.C., for Appellant. Frank Panopoulos, R.
Shawn Gunnarson, Nicole Erb, Paul F. Stone, WHITE & CASE,
Washington, D.C., for Appellee.
OPINION
LUTTIG, Circuit Judge:
Appellant, Globe Nuclear Services and Supply, Ltd. (GNSS), a
Delaware corporation headquartered in Maryland, brought suit in the
district court seeking an injunction against appellee, AO Techsnabex-
port (Tenex), a Russian company that is wholly owned by the Russian
Federation. The catalyst for GNSS’s lawsuit was Tenex’s announce-
ment that it would no longer perform under its contract to supply
GNSS with uranium hexafluoride that Tenex received in exchange for
uranium derived from dismantled Russian nuclear warheads. The dis-
trict court dismissed GNSS’s lawsuit for lack of subject matter juris-
diction under the Foreign Sovereign Immunities Act (FSIA), 28
U.S.C. § 1602 et seq., holding in particular that Tenex’s conduct giv-
ing rise to GNSS’s lawsuit did not constitute a "commercial activity."
We hold that the district court erred in this holding. Because Tenex’s
conduct underlying GNSS’s lawsuit did constitute a "commercial
activity," Tenex cannot claim immunity under the FSIA. The case,
accordingly, must be remanded to the district court for further pro-
ceedings.
I.
In 1993, the United States and the Russian Federation entered into
an agreement "Concerning the Disposition of Highly Enriched Ura-
nium (HEU) Extracted from Nuclear Weapons." The United States’
Executive Agent under this agreement is the United States Enrich-
ment Corporation (USEC), and Russia’s is the Ministry of Atomic
Energy (MINATOM), which has appointed Tenex to discharge its
responsibilities. Under the 1993 agreement, Russia obligated itself to
extract weapons-grade HEU from dismantled nuclear warheads, dilute
GLOBE NUCLEAR v. AO TECHSNABEXPORT 3
the HEU by combining it with commercial reactor-grade Low-
Enriched Uranium (LEU), and then deliver the resulting LEU to
USEC. In exchange for this, USEC then pays Tenex partially in cash,
and partially by transferring to Tenex title to uranium hexafluoride,
which can be used to create LEU.1 Under the relevant U.S. and Rus-
sian legal framework, Tenex is then able not only to ship some of that
uranium hexafluoride back to Russia for use in further dilution of
weapons-grade HEU pursuant to the 1993 Agreement between the
United States and Russia, but also to sell portions of that uranium
hexafluoride for use in the United States.
Accordingly, in January 2000, Tenex entered into a contract with
GNSS, by which Tenex obligated itself to supply GNSS with speci-
fied quantities of uranium hexafluoride from 2001 until 2013 (the
"Tenex Contract"). In reliance on the Tenex Contract, and with full
knowledge and cooperation of Tenex, GNSS then entered into long-
term supply contracts with utility customers in the United States.
In November 2003, Tenex informed GNSS that "further sales of
[uranium hexafluoride] to GNSS are inimical to the interests of the
Russian Federation," and that it was therefore unilaterally terminating
delivery of uranium hexafluoride under the Contract beginning in Jan-
uary 2004. GNSS immediately commenced international arbitration
proceedings, as provided for in the Tenex Contract, in Stockholm,
Sweden. Additionally, GNSS brought suit in United States District
1
While natural uranium contains approximately 0.711% of the fissile
isotope U-235, HEU is uranium that has had the content of the isotope
U-235 increased to 20% or greater. The HEU derived from Russian
nuclear warheads contains more than 90% U-235. LEU, in turn, is ura-
nium that has had the content of the fissile isotope U-235 increased
beyond the natural level of 0.711% but below the 20% threshold for
HEU. Commercial fuel grade LEU contains between three and five per-
cent of the isotope U-235. The usual method for creating LEU is to "en-
rich" natural uranium by converting it to uranium hexafluoride, and then
diffusing U-235 atoms in the uranium hexafluoride until they concentrate
to approximately 5%. LEU can also be produced by diluting HEU with
uranium hexafluoride. Appellee’s Br. at 8 n.2 (redacted brief). (Because
portions of the record are under seal, we refer to the redacted versions
of the district court opinion and the parties’ briefs throughout this opin-
ion.)
4 GLOBE NUCLEAR v. AO TECHSNABEXPORT
Court in Maryland seeking an injunction requiring Tenex to continue
its delivery of uranium hexafluoride to GNSS pending the outcome
of the Stockholm arbitration. After a hearing, the district court issued
an order and memorandum opinion dismissing GNSS’s suit for lack
of subject matter jurisdiction under the FSIA, holding in particular
that Tenex was an instrumentality of the Russian Federation that is
generally immune from suit, and that Tenex’s activity relevant to this
lawsuit did not constitute a "commercial activity."2 GNSS appealed.
II.
"We review the district court’s factual findings with respect to
jurisdiction for clear error and the legal conclusion that flows there-
from de novo." Velasco v. The Government of Indonesia, 370 F.3d
392, 398 (4th Cir. 2004).
Because Tenex is wholly owned by the Russian Federation, it is an
instrumentality of the Russian Federation and is thus itself considered
to be a "foreign state" for purposes of the FSIA. See 28 U.S.C.
§ 1603(b)(2); Velasco, 370 F.3d at 398. Accordingly, it is presump-
tively immune from GNSS’s suit unless one of the specifically enu-
merated exceptions in the FSIA applies to that suit. See Saudi Arabia
v. Nelson, 507 U.S. 349, 354 (1993) ("Under the [FSIA], a foreign
state is presumptively immune from the jurisdiction of the United
States courts; unless a specified exception applies, a federal court
lacks subject-matter jurisdiction over a claim against a foreign
state.").
The only exception relevant here is the "commercial activity"
exception, which provides as follows:
2
GNSS also argued below that Tenex had waived its sovereign immu-
nity through its agreement to arbitrate disputes arising from the Tenex
Contract in Stockholm, Sweden. The district court rejected this argu-
ment, holding on the authority of Frolova v. U.S.S.R., 761 F.2d 370 (7th
Cir. 1985), that an agreement to arbitrate in another country does not
waive a foreign state’s immunity from suit in the United States, see
Globe Nuclear Serv. & Supply GNSS, Ltd. v. AO Techsnabexport, Civ.
No. DKC 2003-3339, redacted slip op. at 18-22 (D. Md. Dec. 16, 2003)
("Redacted Mem. Op."), and GNSS has abandoned this argument on
appeal.
GLOBE NUCLEAR v. AO TECHSNABEXPORT 5
(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).
To determine whether the "commercial activity" exception of sec-
tion 1605(a)(2) is applicable to GNSS’s lawsuit against Tenex, we
must engage in a two-step inquiry. First, we must precisely identify
the conduct by Tenex upon which GNSS’s lawsuit is "based." Sec-
ond, we must determine under section 1605(a)(2) whether that con-
duct constitutes "a commercial activity carried on in the United States
by the foreign state;" "an act performed in the United States in con-
nection with a commercial activity of the foreign state elsewhere;" or
"an act outside the territory of the United States in connection with
a commercial activity of the foreign state elsewhere" and which
"causes a direct effect in the United States."
A.
Our first task is to identify precisely the conduct by Tenex upon
which GNSS’s lawsuit is "based." See Nelson, 507 U.S. at 357 ("We
begin our analysis by identifying the particular conduct on which the
[plaintiffs’] action is ‘based’ for purposes of the Act."); Butters v.
Vance Int’l, Inc., 225 F.3d 462, 465 (4th Cir. 2000) (commencing the
analysis of the applicability of the "commercial activity" exception by
defining the "relevant act"). In Saudi Arabia v. Nelson, 507 U.S. 349
(1993), the Supreme Court provided the following guidance regarding
the meaning of the words "based upon," for the purposes of section
1605(a)(2): "In denoting conduct that forms the ‘basis,’ or ‘founda-
6 GLOBE NUCLEAR v. AO TECHSNABEXPORT
tion,’ for a claim, the phrase is read most naturally to mean those ele-
ments of a claim that, if proven, would entitle a plaintiff to relief
under his theory of the case." Nelson, 507 U.S. at 357.
The district court, without discussing Nelson, made the following
statement regarding Tenex’s relevant conduct:
The dispute here is where to focus on the chain of events.
If, as Plaintiff sees it, the only relevant activity occurs once
the [uranium hexafluoride] is available in Kentucky at
USEC, the activity looks more commercial. On the other
hand, if one must consider the entire course of activity, from
the blending down of the HEU in the Russian Federation to
the transport of LEU to the United States and then release
of the [uranium hexafluoride] and the return of any surplus
to Russia, the conclusion seems inescapable that the activity
is not purely commercial and remains immune.
Redacted Mem. Op. at 29-30. Having framed these two arguable
interpretations of Tenex’s relevant conduct, one narrow and one
broad, the district court then declared that it was bound to apply the
broad view:
[T]he court must look to the reality of the situation in light
of the agreements and the overall context of the contract. As
part of the HEU Agreement, the United States authorized
the Russian Federation, through its Executive Agent, to use
USEC, the American Executive Agent, as a conduit for the
processing of the uranium. To encourage the dismantling of
the nuclear warheads, the Russian Federation may distribute
the [uranium hexafluoride] through USEC. Unused quanti-
ties must be returned to Russia, however, and may not be
sold by Tenex on the open market. Thus, the contract
between Tenex and GNSS allowing GNSS to broker a por-
tion of that [uranium hexafluoride] is part of the sovereign
activity of the Russian Federation and therefore immune.
Redacted Mem. Op. at 31. In effect then, if not in explicit terms, the
district court held that the conduct upon which GNSS’s lawsuit is
"based," for the purposes of 28 U.S.C. § 1605(a)(2), is not limited to
GLOBE NUCLEAR v. AO TECHSNABEXPORT 7
Tenex’s entrance into a contract to supply GNSS with uranium hexa-
fluoride and unilateral termination of this obligation, but includes the
entire framework by which Russia has agreed to dismantle its nuclear
weapons and convert weapons-grade HEU into commercial-grade
LEU.
The district court’s capacious view of the conduct upon which
GNSS’s lawsuit is "based" cannot be reconciled with the Supreme
Court’s decision in Nelson. Under that precedent, we must turn our
attention not to "the reality of the situation in light of the agreements
and the overall context of the contract," as the district court did,
Redacted Mem. Op. at 31, but to the specific claim GNSS has
asserted against Tenex, and the elements of that claim that, "if proven,
would entitle [GNSS] to relief under [its] theory of the case." Nelson,
507 U.S. at 357; see also Weltover v. Republic of Argentina, 941 F.2d
145, 150 (2d Cir. 1991), aff’d 504 U.S. 607 (1992) (noting that courts
must "isolate the specific conduct that underlies the suit, rather than
focusing on ‘the broad program or policy of which the individual
transaction is a part’" and warning that under an "overbroad" defini-
tion of relevant conduct, "the activity would almost inevitably be
characterized as sovereign in nature").
In the district court, GNSS seeks a status quo injunction requiring
Tenex to continue delivering uranium hexafluoride pending the out-
come of arbitration proceedings in Stockholm, Sweden. J.A. 9-16. In
order to establish its entitlement to this relief, GNSS must satisfy the
high standard for a preliminary injunction. See Doran v. Salem Inn,
Inc., 422 U.S. 922, 931 (1975) ("The traditional standard for granting
a preliminary injunction requires the plaintiff to show that in the
absence of its issuance he will suffer irreparable injury and also that
he is likely to prevail on the merits."); see also Safety-Kleen, Inc.
(Pinewood) v. Wyche, 274 F.3d 846, 868 (4th Cir. 2001) (Luttig, J.,
concurring) ("The Supreme Court has consistently applied the four-
part test governing the decision on an injunction (the plaintiff’s likeli-
hood of success on the merits, the harm to the plaintiff in the absence
of the injunction, the harm to the defendant upon grant of the injunc-
tion, and public interest) without ever distinguishing among the four
parts as to analytical order, priority, or weight. And it has collectively
referred to these undifferentiated parts as ‘the traditional standard’ for
injunctions."). In particular, to establish likelihood of success on the
8 GLOBE NUCLEAR v. AO TECHSNABEXPORT
merits, GNSS will need to prove that a valid contract exists between
it and Tenex, that Tenex has unilaterally declared that it will no lon-
ger perform its obligations under the contract, and that this declara-
tion by Tenex constitutes a breach of the contract. As this analysis
shows, the entrance into the Tenex Contract and the unilateral decla-
ration of non-performance by Tenex are the only conduct that consti-
tute "elements" of GNSS’s claim, and, if proven, would entitle GNSS
to relief.
We do not deny that GNSS’s complaint includes background infor-
mation regarding the signing of the Agreement "concerning the dispo-
sition of highly enriched uranium extracted from the nuclear
weapons" between the United States and the Russian Federation in
1993. J.A. 12. But this is background information which, while factu-
ally relevant to explaining how the Tenex Contract came into exis-
tence, is not at all necessary for GNSS to prove in order to prevail in
its suit for injunctive relief. Put another way, even if the source for
the uranium hexafluoride that Tenex is obligated to deliver to GNSS
were other than it is (an agreement between the United States and the
Russian Federation in which the Russian Federation dismantles
nuclear warheads, downblends HEU into LEU, delivers the resulting
LEU to USEC, and then receives uranium hexafluoride in exchange
therefor), GNSS could still prevail. Compare Nelson, 507 U.S. at 359
("While [background] activities led to the conduct that eventually
injured the [plaintiffs], they are not the basis for the [plaintiffs’] suit.
Even taking each of the [plaintiffs’] allegations about [background
facts] as true, those facts alone entitle [plaintiffs] to nothing under
their theory of the case.").
In sum, focus on the elements of GNSS’s claim, as required by
Nelson, yields the conclusion that the district court erred by taking an
overly broad view of Tenex’s conduct relevant to GNSS’s lawsuit.
For purposes of section 1605(a)(2), GNSS’s action is "based upon"
nothing more or less than Tenex’s entrance into a contract to supply
GNSS with uranium hexafluoride and subsequent repudiation
thereof.)
B.
Having precisely identified the conduct by Tenex upon which
GNSS’s lawsuit is "based," we now consider whether this particular
GLOBE NUCLEAR v. AO TECHSNABEXPORT 9
conduct qualifies under section 1605(a)(2). In this case, our inquiry
begins and ends with the first clause of that provision, because
Tenex’s conduct, we conclude, constitutes "a commercial activity car-
ried on in the United States," and on this basis alone we must reverse
the district court’s holding that it lacked jurisdiction over the case.
Our analysis of whether Tenex’s conduct qualifies under
1605(a)(2)’s first clause proceeds in two stages. Initially, we consider
the harder question of whether this conduct meets the definition of
"commercial activity." We then proceed, albeit briefly, to consider the
much easier question of whether this conduct is "carried on in the
United States."
1.
The FSIA provides that "[a] ‘commercial activity’ means either a
regular course of commercial conduct or a particular transaction or
act," and that "[t]he commercial character of an activity shall be deter-
mined by reference to the nature of the course of conduct or particular
transaction or act, rather than by reference to its purpose." Id.
§ 1603(d) (emphases added).
In Republic of Argentina v. Weltover, 504 U.S. 607 (1992), the
Supreme Court remarked that these provisions "leave[ ] the critical
term ‘commercial’ largely undefined," but that because it was clear
that "the [FSIA] (and the commercial exception in particular) largely
codified] the so-called ‘restrictive’ theory of foreign sovereign immu-
nity," "[t]he meaning of ‘commercial’ is the meaning generally
attached to that term under the restrictive theory at the time the statute
was enacted." Id. at 612; see also Republic of Austria v. Altmann, 124
S. Ct. 2240, 2249 (2004) (noting that the FSIA "codifie[d], as a matter
of federal law, the restrictive theory of sovereign immunity"). After
reviewing the description of the restrictive theory of foreign sovereign
immunity given by the plurality in Alfred Dunhill of London, Inc. v.
Republic of China, 425 U.S. 682 (1976), less than six months before
the enactment of the FSIA, the Supreme Court provided the following
guidance regarding the meaning of "commercial":
[W]hen a foreign government acts, not as regulator of a
market, but in the manner of a private player within it, the
10 GLOBE NUCLEAR v. AO TECHSNABEXPORT
foreign sovereign’s actions are ‘commercial’ within the
meaning of the FSIA. Moreover, because the Act provides
that the commercial character of an act is to be determined
by reference to its ‘nature’ rather than its ‘purpose,’ 28
U.S.C. § 1603(d), the question is not whether the foreign
government is acting with a profit motive or instead with the
aim of fulfilling uniquely sovereign objectives. Rather, the
issue is whether the particular actions that the foreign state
performs (whatever the motive behind them) are the type of
actions by which a private party engages in ‘trade and traffic
or commerce.’ Thus, a foreign government’s issuance of
regulations limiting foreign currency exchange is a sover-
eign activity, because such authoritative control of com-
merce cannot be exercised by a private party; whereas a
contract to buy army boots or even bullets is a ‘commercial’
activity, because private companies can similarly use sales
contracts to acquire goods.
Weltover, 504 U.S. at 614 (internal citations omitted). Weltover thus
makes clear that whether conduct is "commercial" within the meaning
of the FSIA depends on whether that conduct is of the type "by which
a private party engages in ‘trade and traffic or commerce,’" regardless
of the motive that leads the foreign state to engage in the conduct. Id.
The facts of Weltover provide a helpful illustration of precisely
what the Supreme Court meant. In Weltover, Argentina had issued
bonds, known as "Bonods," designed to refinance debts it had
incurred while establishing a foreign exchange insurance contract pro-
gram to overcome the instability of the Argentine currency. In hold-
ing that this bond issuance constituted "commercial activity" under
the FSIA and that Argentina was not immune from suit for failure to
make timely payments on the Bonods, the Supreme Court stressed
that there was "nothing about the issuance of the[ ] Bonods (except
perhaps its purpose) that is not analogous to a private commercial
transaction." Id. at 615-16.
Like Argentina’s issuance of the bonds in Weltover, Tenex’s con-
duct upon which GNSS’s lawsuit is based also constitutes "commer-
cial activity." The entrance into a contract to supply a private party
with uranium hexafluoride is the very type of action by which private
GLOBE NUCLEAR v. AO TECHSNABEXPORT 11
parties engage in "trade and traffic or commerce." That this is so is
amply illustrated within the four corners of this case. GNSS, which
is undoubtedly a private party, has itself engaged in conduct that is
almost exactly identical to Tenex’s: on the strength of its supply of
uranium hexafluoride from Tenex, GNSS in turn entered into long-
term supply contracts to supply a number of utility customers in the
United States with uranium hexafluoride. J.A. 12. Thus, not only is
Tenex’s conduct generally of the type by which private parties engage
in "trade and traffic or commerce," but it is specifically of the type by
which a private party involved in the present case has already
engaged in "trade and traffic or commerce." The logic of this compar-
ison points forcefully toward the conclusion that the district court
erred when it held that GNSS’s lawsuit was not based upon "commer-
cial activity."
Urging the contrary conclusion, Tenex raises a number of argu-
ments, all of which ultimately fail.
First, Tenex argues, "the Russian Federation is not merely dealing
in uranium; it is regulating its inventory of [uranium hexafluoride]
and LEU supply in a manner that no private player can." Appellee’s
Br. at 40 (redacted brief) (emphasis added). But this stylized usage of
the term "regulation" proves far too much. Under Tenex’s usage, it
would also follow that a government which enters into a contract to
purchase bullets for its army is "regulating" its bullet supply, or that
the government of Argentina, in Weltover, was "regulating" its money
supply. But see Weltover, 504 U.S. at 614, 616-17 (unambiguously
stating that a foreign state’s contract to purchase bullets for its army
would constitute commercial activity, and holding that Argentina’s
issuance of bonds constituted commercial activity). As these exam-
ples show, acceptance of Tenex’s usage of "regulation" is not only
inconsistent with the Supreme Court’s decision in Weltover, but
would also strip the "commercial activity" exception of much, if not
all, of its meaning, for a foreign state would almost always be able
to characterize its activities as sovereign "regulation" of some subject
matter related to the conduct at issue.3
3
Aside from the general objection regarding Tenex’s misuse of the
term "regulation," there is another reason why we cannot rely on Tenex’s
12 GLOBE NUCLEAR v. AO TECHSNABEXPORT
Next, Tenex raises related arguments designed to focus attention on
the sensitive and strategically significant nature of the particular sub-
ject matter of the Tenex Contract. The district court, in addition to
accepting Tenex’s overly broad description of its conduct as dis-
cussed above, also succumbed to these arguments, emphasizing that
"[t]he case at hand does not involve a ‘garden variety’ contract for the
sale and purchase of a commodity readily available on the open mar-
ket," but that the subject matter of the contract was "the uranium that
results from the blending down of HEU to LEU as part of the process
of dismantling nuclear warheads," which the district court character-
ized as "sovereign" and as "a finite asset, belonging only to the Rus-
sian Federation, and uniquely available in this country only through
the entire relationship of the HEU/LEU agreement and other imple-
menting documents." Redacted Mem. Op. at 29.
Unlike the district court, we find unpersuasive Tenex’s arguments
based on the subject matter of this contract. Uranium hexafluoride is
not a substance to which the Russian Federation has a unique claim.
Private companies also possess, use, and conduct trade in uranium
hexafluoride, as has already been demonstrated within the four cor-
ners of this case. To be sure, the uranium hexafluoride market is a
heavily-regulated industry; but it is also an industry in which private
parties can and do engage in commerce within the bounds of the perti-
nent regulatory overlay. Even a foreign state can engage in commer-
cial activity in such a market, for a foreign state can engage in the
type of actions by which a private party engages in "trade and traffic
or commerce" even in a market that is highly regulated.
characterization of its activity as "regulation" of its supply of uranium
hexafluoride in order to ensure that the Russian Federation has a suffi-
cient quantity of this commodity on-hand in order to fulfill its down-
blending obligations under the HEU Agreement. In particular, this
characterization requires us to look to the "purpose" behind Tenex’s
repudiation of its contract with GNSS, which purpose the FSIA expressly
forecloses us from considering. 28 U.S.C. § 1603(d). We can no more
rely on Tenex’s assertions regarding the purpose of its breach (to "regu-
late" the Russian Federation’s own supply of uranium hexafluoride) than
we can rely on GNSS’s contrasting assertions regarding the purpose of
Tenex’s breach (to eliminate the middleman so that Tenex can deliver
directly to GNSS’s customers and thus turn a greater profit).
GLOBE NUCLEAR v. AO TECHSNABEXPORT 13
It does not change the analysis to emphasize that under United
States law, the uranium that USEC transfers to Tenex as part of the
overall structure of the HEU agreements is deemed to be of "Russian
origin." See 42 U.S.C. § 2297h-10(b)(3). Because our conclusion that
Tenex’s conduct constitutes "commercial activity" in no way rests
upon the practical reality that the uranium hexafluoride that comprises
the subject matter of the Tenex Contract actually appears to be of
other than Russian origin, it is not altered by a statute that commands
us nonetheless to view that uranium hexafluoride as being of Russian
origin.
Tenex further contends that, beyond viewing the uranium hexafluo-
ride as being of "Russian origin," we must view it as constituting
"natural resources" of the Russian Federation. Tenex then asserts,
while purporting to rely on the Ninth Circuit’s decision in MOL, Inc.
v. People’s Republic of Bangladesh, 736 F.2d 1326 (9th Cir. 1984),
as well as dicta from the Seventh Circuit’s decision in Rush-
Presbyterian-St. Luke’s Medical Center v. Hellenic Republic, 877
F.2d 574 (7th Cir. 1989), that because a contract involving the "natu-
ral resources" of a country must itself be viewed as "sovereign" and
not as "commercial activity," Tenex’s entrance into a contract to sup-
ply GNSS with uranium hexafluoride is also sovereign activity under
the authority of MOL and Rush-Presbyterian. See Appellee’s Br. at
40-42 (redacted brief).
The answer to Tenex’s argument is that Tenex reads MOL and
Rush-Presbyterian much too broadly. Neither MOL, nor the dicta
from Rush, can fairly be deemed to establish a rule that all contracts
involving a country’s "natural resources" or some derivation there-
from are "sovereign" and not "commercial." In MOL, the Ninth Cir-
cuit held that a government had engaged in sovereign activity and not
commercial activity when it granted a license to a private party to
operate within that government’s territory and to "capture and export
rhesus monkeys." 736 F.2d at 1327-29. And the dicta in Rush, that "a
contract whereby a foreign state grants a private party a license to
exploit the state’s natural resources is not a commercial activity, since
natural resources, to the extent they are ‘affected with a public inter-
est,’ are goods in which only the sovereign may deal," 877 F.2d at
574, did not actually extend beyond the type of circumstance pre-
sented in MOL. Together, we read the decision in MOL and the dicta
14 GLOBE NUCLEAR v. AO TECHSNABEXPORT
in Rush to stand not for the overly broad proposition that all contracts
involving "natural resources" or their derivative products constitute
sovereign activity, but for the narrower and much sounder principle
that the grant of a license to operate within sovereign territory and to
extract natural resources from within that territory is sovereign activ-
ity. See also Honduras Aircraft Registry Ltd. v. Gov’t of Honduras,
119 F.3d 1530, 1537 (11th Cir. 1997) ("The basis of [MOL] was not
the alleged breach of the government contract for the sale of mon-
keys, but its revocation of the export license. That was part of the sov-
ereign’s right to regulate its exports and was therefore immune.").
This principle has no application here, however. Tenex has not
granted GNSS a license to operate within Russian territory and to
extract Russian natural resources. Rather, Tenex has obligated itself
to supply GNSS with what can at best be characterized as derivative
products of already-extracted Russian natural resources. In undertak-
ing this obligation and then unilaterally repudiating it, Tenex has par-
ticipated in the trade of uranium hexafluoride in the manner of a
private party, and has thus engaged in "commercial activity" within
the meaning of the FSIA.
2.
We also hold that Tenex’s "commercial activity" on which GNSS’s
lawsuit is based constitutes "commercial activity carried on in the
United States" and thus satisfies the first clause of section 1605(a)(2).
The FSIA provides that "a ‘commercial activity carried on in the
United States by a foreign state’ means commercial activity carried
on by such state and having substantial contact with the United
States." Id. § 1603(e). It is readily apparent that Tenex’s conduct has
"substantial contact with the United States" and thus fits comfortably
under this definition. First, GNSS is a United States corporation. Sec-
ond, under the terms of the Tenex Contract, Tenex transfers to GNSS
title to uranium hexafluoride that is located within the United States.
Third, Tenex’s notice of termination, the catalyst for GNSS’s claim,
was served upon GNSS at GNSS’s principal place of business within
the United States, in Bethesda, Maryland. J.A. 11.
Given these ties, it is clear that Tenex’s conduct has "substantial
contact" with the United States and thus constitutes "commercial
GLOBE NUCLEAR v. AO TECHSNABEXPORT 15
activity carried on in the United States." GNSS’s lawsuit, which is
based upon Tenex’s conduct, is thus covered under the first clause of
section 1605(a)(2). Accordingly, the district court’s holding that it
lacked jurisdiction over this lawsuit under the FSIA must be reversed.
III.
Tenex argues that, even if the district court erred in holding the
"commercial activity" exception inapplicable, the district court’s dis-
missal of GNSS’s lawsuit may be affirmed on other grounds. In par-
ticular, Tenex contends that it has not been properly served, because
GNSS’s attempts at service thus far have not complied with the
requirements of 28 U.S.C. § 1608(b), which provides special rules for
service of process on an instrumentality of a foreign state. Tenex also
asserts that other provisions of the FSIA which limit the availability
of judicial process against a foreign state’s assets, see 28 U.S.C.
§ 1609, an Executive Order blocking Russian Federation assets
directly related to the HEU Agreement, see Exec. Order No. 13,159,
65 Fed. Reg. 39,279 (June 21, 2000), and justiciability doctrines such
as the Act of State doctrine, see W.S. Kirkpatrick & Co. v. Envt’l Tec-
tonics, 493 U.S. 400, 404 (1990), will ultimately bar the precise relief
GNSS seeks.
Because the district court erroneously dismissed GNSS’s lawsuit
for lack of jurisdiction under the FSIA, however, the district court has
not yet had occasion to rule on any of Tenex’s alternative arguments.4
In any case, "[t]hat a remand to the District Court may be of no avail
to [the plaintiff] is irrelevant to our task here; if the jurisdictional
requirements of the FSIA are met, the case must be remanded to the
trial court for further proceedings." Nelson, 507 U.S. at 376 (Ken-
nedy, J., concurring in part and dissenting in part).
4
The district court did include in its opinion a discussion of the parties’
arguments relating to service of process. Redacted Mem. Op. at 13-17.
But due to its conclusion that it lacked jurisdiction over the case, the
court declined to resolve these arguments.
16 GLOBE NUCLEAR v. AO TECHSNABEXPORT
CONCLUSION
The judgment of the district court is reversed and the case is
remanded for further proceedings.
REVERSED