Verlinden B. v. v. Central Bank Of Nigeria

461 U.S. 480 (1983)

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Nature of the Case

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Facts

On April 21, 1975, Nigeria and P, a Dutch corporation with its principal offices in Amsterdam, the Netherlands, entered into a contract providing for the purchase of 240,000 metric tons of cement by Nigeria. The contract would be governed by the laws of the Netherlands and disputes would be resolved by arbitration before the International Chamber of Commerce, in Paris, France. Nigeria was to establish an irrevocable, confirmed letter of credit for the total purchase price through Slavenburg's Bank in Amsterdam. D, an instrumentality of Nigeria, improperly established an unconfirmed letter of credit payable through Morgan Guaranty Trust Co. in New York. P subcontracted to purchase the cement needed to fulfill the contract. The ports of Nigeria had become clogged with hundreds of ships carrying cement, sent by numerous other cement suppliers with whom Nigeria also had entered into contracts. D unilaterally directed its correspondent banks, including Morgan Guaranty, to adopt a series of amendments to all letters of credit issued in connection with the cement contracts. Payment would be made only for those shipments approved by D two months before their arrival in Nigerian waters. P sued D in District Court in New York, alleging D's actions constituted an anticipatory breach of the letter of credit. Jurisdiction was alleged under the Foreign Sovereign Immunities Act, 28 U. S. C. § 1330 (FISA). D moved to dismiss in part for lack of subject matter and personal jurisdiction. The Court held that a federal court may exercise subject-matter jurisdiction over a suit brought by a foreign corporation against a foreign sovereign. The court reasoned the Foreign Sovereign Immunities Act does not clearly reveal whether Congress intended the Act to extend to actions brought by foreign plaintiffs, but the language is 'broad and embracing. It confers jurisdiction over 'any nonjury civil action' against a foreign state.' The Court also held that Art. III subject-matter jurisdiction extends to suits by foreign corporations against foreign sovereigns. It held that even though P's claim is one grounded upon the common law, the case is one that 'arises under' a federal law because the complaint compels the application of the uniform federal standard governing assertions of sovereign immunity. The Immunities Act injects an essential federal element into all suits brought against foreign states. The court then dismissed on grounds that a foreign instrumentality is entitled to sovereign immunity unless one of the exceptions specified in the Act applies. The Court concluded that none applied, and accordingly dismissed the action. The Court of Appeals agreed with the Court that the Act was properly construed to permit actions brought by foreign plaintiffs. It then held that the Act exceeded the scope of Art. III of the Constitution. Neither the Diversity Clause nor the 'Arising Under' Clause of Art. III is broad enough to support jurisdiction over actions by foreign plaintiffs against foreign sovereigns. Congress was without power to grant federal courts jurisdiction in this case. P appealed.