Arch Trading Corp., Arvin Properties Inc., Hezer Holdings Inc., Madec Limited, OSIS International Corp., Plaintiffs-Appellants,
The Republic of Ecuador, a sovereign nation, Fideicomiso AGD-CFN No Más Impunidad, an agency or instrumentality of the Republic of Ecuador, Corporación Financiera Nacional, an agency or instrumentality of the Republic of Ecuador, Defendants-Appellees.
Argued: January 5, 2016
companies sue the Republic of Ecuador and two of its
instrumentalities for claims arising out of the Ecuadorean
government's alleged seizure of a number of the
companies' assets in Ecuador beginning in July 2008.
Invoking the Foreign Sovereign Immunities Act (FSIA), the
District Court (Crotty, J.) dismissed the action for
want of subject matter jurisdiction. We conclude that the
plaintiff companies cannot invoke the FSIA's takings
exception to sovereign immunity because the instrumentalities
are not "engaged in a commercial activity in the United
States, " see 28 U.S.C. § 1605(a)(3), and
that the activities of various subsidiaries and separate
entities are not imputable to them in light of the
presumption of legal separateness established in First
National City Bank v. Banco Para el Comercio Exterior de
Cuba, 462 U.S. 611 (1983) ("Bancec").
Accordingly, we AFFIRM the judgment of the District Court.
J. Martinez-Fraga (Suzanne M. Berger, James M. Altman, C.
Ryan Reetz, on the brief), Bryan Cave LLP, New York, NY, and
Miami, FL, for Plaintiffs- Appellants.
Z. Schwartz, Foley Hoag LLP, Boston, MA, for
Before: Pooler, Hall, and Carney, Circuit Judges.
L. Carney, Circuit Judge
faced here with a question of subject matter jurisdiction
over a dispute with a vanishingly thin, if any, connection to
the United States. Plaintiffs-appellants are five entities
incorporated in the British Virgin Islands. They claim that
in 2008, an agency of the Republic of Ecuador unlawfully
seized their "property in Ecuador"―
primarily, their ownership of over 100 companies located
there. Joint Appendix ("J.A.") at 12. In 2013, they
filed suit in the Southern District of New York seeking over
$1 billion in damages from defendants-appellees the Republic
of Ecuador ("Ecuador") and two of Ecuador's
instrumentalities―the Corporación Financiera
Nacional ("CFN"), and Fideicomiso AGD-CFN No
Más Impunidad (the "Trust"). The District
Court (Crotty, J.) dismissed the Complaint with
prejudice for want of subject matter jurisdiction.
Foreign Sovereign Immunities Act (FSIA) establishes a general
rule of immunity for foreign states "from the
jurisdiction of the courts of the United States and of the
States." 28 U.S.C. § 1604; see also 28
U.S.C. § 1330. Only if the action in which the foreign
state or its agency or instrumentality is named as the
defendant falls within one of the Act's several
exceptions, see 28 U.S.C. § 1605, will
jurisdiction lie. Plaintiffs here contend that their action
fits within the FSIA's "takings" or
"expropriation" exception, set forth in Section
1605(a)(3). Section 1605(a)(3) provides that a foreign state
(including its agencies and instrumentalities) is not immune
from jurisdiction in any case
in which rights in property taken in violation of
international law are in issue and  that property or any
property exchanged for such property is present in the United
States in connection with a commercial activity carried on in
the United States by the foreign state; or  that property
or any property exchanged for such property is owned or
operated by an agency or instrumentality of the foreign state
and that agency or instrumentality is engaged in a commercial
activity in the United States[.]
28 U.S.C. § 1605(a)(3) (bracketed numbers added). Both
of the two independently sufficient prongs of this subsection
(here labeled  and ) are subject to the precondition
that the dispute concern property "taken in violation of
international law[.]" Id. Once this condition
is met, the second prong then authorizes United States courts
to entertain an action against a foreign state's agency
or instrumentality where (a)either the taken property or
"any property exchanged for such property" is
(b)"owned or operated by an agency or instrumentality of
the foreign state" and (c) the agency or instrumentality
"is engaged in a commercial activity in the United
States[.]" Id. In this appeal, we focus on the
last element of this second prong: the agency or
instrumentality's engagement in commercial activity in
the United States.
do not contend that either CFN or the Trust is
itself engaged in commercial activity in the United
States. Rather, they argue primarily that we should impute to
each the United States activities of several other entities
and on that basis determine that CFN and the Trust are
subject to jurisdiction under prong . But CFN and the
Trust are entities distinct from the subsidiaries and other
Ecuadorean entities to which plaintiffs point. The
presumption of legal separateness established by the Supreme
Court in First National City Bank v. Banco Parael
Comercio Exterior de Cuba, 462 U.S. 611 (1983)
("Bancec"), and respect for international
comity compel us to treat these legally separate entities as
just that, unless plaintiffs can demonstrate that CFN and the
Trust exercise "significant and repeated control over
the [entities'] day-to-day operations." EM Ltd.
v. Banco Cent. de la República Argentina, 800
F.3d 78, 91 (2d Cir. 2015) ("EM"),
cert. dismissed, 136 S.Ct. 1731 (2016). Plaintiffs
have failed to clear this substantial bar and therefore have
not satisfied the requirements of Section 1605(a)(3).
Accordingly, Ecuador, CFN, and the Trust are protected by
sovereign immunity under 28 U.S.C. § 1604, and we need
not consider the alternative bases for dismissal relied on by
the District Court or presented by defendants. We therefore
AFFIRM the judgment of the District Court dismissing
plaintiffs' action for want of jurisdiction.
out the facts as alleged in the Complaint, amplified by the
limited jurisdictional materials submitted by the parties.
See Kensington Int'l Ltd. v. Itoua, 505 F.3d
147, 153 (2d Cir. 2007).
Trading Corp., Arvin Properties Inc., Hezer Holdings Inc.,
Madec Limited, and Osis International Corp. (together,
"plaintiffs") are entities "formed under the
laws of the British Virgin Islands, i.e., outside of Ecuador,
" and are "separate and distinct juridical
entit[ies]." J.A. at 15, Compl. ¶¶ 14, 15.
Plaintiffs assert that since he assumed power in 2007,
Ecuadorean President Rafael Correa Delgado has
"aggressively advanced an agenda of debilitating
competing interests and of concentrating power in himself and
his allies, " and that they have been victims of that
agenda. J.A. at 20, Compl. ¶ 41. Beginning in July 2008,
Ecuador's Agencia de Garantía de Depósitos
("AGD")―at the time "Ecuador's
equivalent to the Federal Deposit Insurance Corporation,
" J.A. at 17, Compl. ¶ 28―unlawfully seized
133 companies owned by plaintiffs (the "Seized
Companies") and failed to provide any compensation to
them for the taking. No legal recourse was available in
Ecuador, plaintiffs assert: Soon after the seizure,
Ecuador's Constituent Assembly issued its "Mandate
13, " which barred Ecuador's judiciary―on
penalty of criminal prosecution―from considering any
such legal challenges.
Seized Companies are now owned and controlled by defendants.
Most of the Seized Companies are currently held by the Trust,
an instrumentality of Ecuador that CFN and AGD established in
March 2009. CFN, another instrumentality of Ecuador, is the
Trust's sole trustee.
2013, plaintiffs filed the Complaint in the United States
District Court for the Southern District of New Yo r k
against Ecuador, CFN, and the Trust, seeking compensation for
the Seized Companies. Defendants moved to dismiss on a number
of grounds, including that the FSIA precluded the District
Court's exercise of jurisdiction. With respect to whether
the FSIA's "takings" exception permitted the
court's exercise of jurisdiction over them, they argued
that it did not. First, asserting that the ultimate owners of
the five plaintiff companies are Ecuadorean individuals, they
urged that the expropriations did not violate international
law because they fall within the act of state doctrine.
See, e.g., Republic of Austria v. Altmann,
541 U.S. 677, 713 (2004) (Breyer, J., concurring)
(noting "consensus view that § 1605(a)(3)'s
reference to 'violation of international law' does
not cover expropriations of property belonging to a
country's own nationals"). Second, they contended
that even if the takings violated international law,
plaintiffs still failed to satisfy Section 1605(a)(3) because
the Seized Companies are all "located in" Ecuador
(precluding jurisdiction over Ecuador under the first prong
of Section 1605(a)(3)),  and that plaintiffs do not
allege―indeed, cannot plausibly allege―that CFN
and the Trust engage in any commercial activity in the United
States (precluding jurisdiction over CFN and the Trust under
the second prong of Section 1605(a)(3)).
substantiate their position, defendants submitted
declarations from high- ranking Ecuadorean officials
discussing the activities in the United States of CFN and the
Trust, all pointing toward the conclusion that neither CFN
nor the Trust is engaged in commercial activity in the United
States. In rebuttal, plaintiffs submitted a declaration made
by Francisco Rendón Pantaleón (the
"Rendón Declaration"). Rendón
declares that he has held important managerial positions at
CFN and has served in other high-ranking positions in the
Ecuadorean government, including as its Minister of Economy
and Finance. He further outlines the commercial activities in
the United States that plaintiffs see as relevant to the
application of Section 1605(a)(3).
District Court granted defendants' motion to dismiss. It
reasoned that, although plaintiffs are incorporated in the
British Virgin Islands, they should be treated as Ecuadorean
because their ultimate individual owners―Roberto and
William Isaías Dassum (the "Isaías
brothers"), it found, see infra note
3―are of Ecuadorean nationality. Under the act of state
doctrine, therefore, the alleged takings of the Seized
Companies did not violate international law and Section
1605(a)(3) does not apply. The District Court also ruled that
plaintiffs failed to demonstrate that either CFN or the Trust
is itself engaged in a commercial activity in the United
States. This failure independently precluded plaintiffs'
reliance on Section 1605(a)(3). See Arch Trading Corp. v.
Republic of Ecuador, No. 13-CV-4445, 2015 WL 3443906
(S.D.N.Y. May 28, 2015).
latter regard, the District Court observed that
"[p]laintiffs merely outline examples of commercial
activities that CFN and [the Trust's]
subsidiaries [or other distinct legal entities]
allegedly engage in, " as opposed to activities of CFN
and the Trust themselves. Id. at *4 (emphasis
added). Because "agencies and instrumentalities of
foreign states are presumed to be separate" from other
distinct legal entities, the District Court declined to
impute the activities of those entities to CFN and the Trust
absent a showing that CFN and the Trust "exercise
day-to-day control" over them. Id. After
finding that venue in the Southern District of New York was
improper under the FSIA and also denying plaintiffs'
request for jurisdictional discovery, the District Court
dismissed the case with prejudice.