This is excerpted from an appeal filed 21 February 2012
Robert Eringer v. Principality of Monaco
The commercial activity exception
As Monaco concedes, Eringer’s complaint sufficiently alleges a contract for employment between Eringer and Monaco. For the reasons explained in greater detail below, that relationship constitutes “commercial activity” for purposes of the FSIA.
Eringer was employed not as a member of the Monaco’s diplomatic, civil service, or military personnel, the employment of whom courts have held to be a typically sovereign activity under the FSIA, but in a non-sovereign capacity, that of a private independent contractor spy. See Holden v. Canadian Consulate, 92 F.3d 918, 921 (9th Cir. 1996). Further, Eringer’s fraud claims are based upon the employment relationship between Eringer and the Monaco, as the FSIA requires. 28 U.S.C. § 1605(a)(2). Eringer’s breach of contract and fraud causes of action against Monaco therefore fall within FSIA’s commercial activity exception.
1. The definition of “commercial activity” under the FSIA
The FSIA is often described as having codified the “restrictive” theory of sovereign immunity. See, e.g., H.R. Rep. No. 94-1487, at 7 (1976); Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480, 487 (1983). Under the restrictive theory, “a state is immune from the jurisdiction of foreign courts as to its sovereign or public acts (jure imperii), but not as to those that are private or commercial in character (jure gestionis).” Saudi Arabia v. Nelson, 507 U.S. 349, 359-60 (1993). The Supreme Court has explained that a foreign state engages in “commercial” activities when it “do[es] not exercise powers peculiar to sovereigns,” but rather “exercise[s] only those powers that can be exercised by private citizens.” Republic of Argentina v. Weltover, 504 U.S. 607, 614 (1992) (alteration in original) (internal quotation marks omitted). Clarifying the statute’s requirement that courts look not at the “purpose” of a foreign state’s actions but rather at the “nature” of its actions, 28 U.S.C. § 1603(e), Weltover explained that “the question is not whether the foreign government is acting with a profit motive or instead with the aim of fulfilling uniquely sovereign objectives,” but whether the government’s actions “are the type of actions by which a private party engages in” commerce. 504 U.S. at 614. The purposes or motives behind the foreign government’s actions are irrelevant.
Furthermore, the engaged activity need not be profitable to be considered as “commercial.” In Weltover, Argentina’s issuance of bonds to refinance its debt was held to be “commercial activity,” even though the consideration Argentina received for them was “in no way commensurate with [their] value.” Id. at 616 (alteration in original). That fact, the Court held, “ma[de] no difference,” because “[e]ngaging in a commercial act does not require the receipt of fair value, or even compliance with the common-law requirements of consideration.” Id. Applying this understanding, courts have found that non-profit organizations can engage in commercial activity. See, e.g., Malewicz v. City of Amsterdam, 362 F. Supp. 2d 298, 314 (D. D.C. 2005) (holding that the loan of artwork by a Dutch non-profit museum to non-profit museums in the United States constitutes commercial activity, because exchanging artwork is an activity in which private individuals can engage, sometimes for profit).
To summarize, a foreign state engages in commercial activity when it engages in acts that any private citizen has the power to undertake, regardless of the state’s motive or the possibility of making a profit. Applying the Weltover definition of “commercial activity,” the 9th Circuit has repeatedly held that an employment relationship between a foreign sovereign and its employee constitutes commercial activity, so long as the employee is not a civil service, diplomatic, or military employee. In Holden v. Canadian Consulate, 92 F.3d 918 (9th Cir. 1996), for example, a former “Commercial Officer” in the “Trade and Investment Section” of the Canadian Consulate in San Francisco brought an action alleging that the Canadian government illegally discriminated against her on the basis of sex and age. Id. at 919-20. Examining the FSIA’s legislative history, the court noted that the House Report listed “the employment of diplomatic, civil service, or military personnel . . . by the Foreign state in the United States” as examples of acts that are “public or governmental and not commercial in nature.” Id. at 921 (quoting H.R. Rep. No. 94-1487, at 16). In contrast, the “employment or engagement of [such other employees as] laborers, clerical staff or public relations or marketing agents would be . . . included within the definition of commercial activity.” Id. (quoting H.R. Rep. No. 94-1487, at 16). Based on this legislative history, the court held that employment “of diplomatic, civil service or military personnel is governmental and the employment of other personnel is commercial.” Id.
The Holden standard was applied to the hiring of a domestic servant for a diplomat’s residence in Park v. Shin, 313 F.3d 1138 (9th Cir. 2002). Park brought an action against the Deputy Consul General of the Korean Consulate in San Francisco, alleging that during her tenure as a domestic servant in the Deputy Consul General’s home, the Deputy Consul General withheld her pay, denied her medical care, and confiscated her passport. Id. at 1140-41. The court held that the commercial activity exception applied because “[t]he act of hiring a domestic servant is not an inherently public act that only a government could perform.” Id. at 1145. Because the plaintiff’s claims were based on an employment relationship with the defendant, the defendant was not entitled to sovereign immunity. Id.
