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Congo Refuses to Pay Bill, Wins on Sovereignty

By Brett Snider, Esq. on July 02, 2013 3:56 PM

The Sixth Circuit confirmed on Tuesday that countries like the Congo are generally immune from suit unless their commercial activities occur in or directly affect the U.S.

Triple A International, Inc. (no not the auto club, we checked) sued the Congo (formerly Zaire) for payment on military equipment Triple A had sold them in 1993.

Zaire (and now Congo) has refused to pay, and although this behavior is certainly not good for business, the Sixth Circuit confirmed that the Congo is immune from suit.

Foreign Sovereign Immunities Act

Triple A is a Michigan corporation with offices in the Congo, but they chose to sue the Congo in federal court in 2010 for breach of contract for the Congo's $14 million unpaid bill.

Under the Foreign Sovereign Immunities Act (FSIA), U.S. businesses who do business with foreign nations cannot sue them in federal court unless the suit is based on commercial activity:

  • Carried on in the U.S. by the foreign state.
  • Performed in the U.S. with connection to foreign state's affairs elsewhere.
  • Outside the U.S. that have a direct effect in the U.S.

Even when a country has been previously designated as a terrorist state, like Iraq, the courts have been reluctant to grant jurisdiction over a foreign nation.

"Commercial Activity"

Triple A argues that the Congo engaged in commercial activity in the U.S. when they contracted with them in 1993 for the military equipment because "commercial activity" is satisfied by substantial contact with the U.S. in making the contract.

The Sixth Circuit disagreed, acknowledging that a common sense reading of the three exemptions for immunity would collapse into one if Triple A was correct.

Maybe Triple A was trying to inject some personal jurisdiction language ("substantial contact" sounds like minimum contacts + substantial justice) into what is only a subject matter jurisdiction issue with FSIA.

Why Not Argue Direct Effect?

It is interesting that Triple A didn't argue that the Congo's refusal to pay had a "direct effect" on the commercial operations of the Michigan based company, despite the fact that the actual goods were never on U.S. soil.

The Triple A Int'l Court's concurrence mentions this fact, but seems to believe that Triple A failed to present any record that would support "direct effect" or "contact" with the U.S. enough to constitute jurisdiction.

Bottom Line

It is likely that Triple A already tried to sue the Congo for breach of contract in the Congo's court system and failed, and this is a case where FSIA sovereign immunity allowed a country to get millions in goods for free.

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