Firebird Global Master Fund II Ltd. v. Republic of Nauru

• Court: District Court, District of Columbia
• Decided: January 15, 2013
• Docket: Civil Action No. 2012-0230
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ______________________________ ) FIREBIRD GLOBAL MASTER ) FUND II LTD., ) ) Plaintiff, ) ) v. ) Civil Action No. 12-230 (RWR) ) REPUBLIC OF NAURU, ) ) Defendant. ) ______________________________)

MEMORANDUM OPINION

Plaintiff Firebird Global Master Fund II Ltd. (“Firebird”)

brings this action under the Foreign Sovereign Immunities Act

(“FSIA”), 28 U.S.C. § 1602 et seq., seeking to enforce a foreign

judgment against the defendant Republic of Nauru (“Nauru”).

After default was entered against Nauru, Firebird moved for entry

of default judgment arguing that Nauru waived sovereign immunity

and Firebird is entitled to enforce the foreign judgment against

Nauru in the United States. Because Firebird has not shown that

Nauru waived sovereign immunity as to United States courts, the

court lacks subject matter jurisdiction, the motion for entry of

default judgment will be denied, and the complaint will be

dismissed.

BACKGROUND

The Republic of Nauru Finance Corporation (“Ronfin”) issued

two series of Japanese yen bond certificates, Series B and Series

C certificates. Compl. ¶¶ 7-8. Nauru guaranteed paying - 2 -

principal and interest on the bond certificates in bond purchase

agreements. Id. ¶ 10. Nauru explicitly waived sovereign

immunity as to the courts of Japan and Nauru in the Conditions of

Guarantee annexed to the bond purchase agreements. Id., Ex. B,

Series B Bond Purchase Agreement Annex 2, ¶ 9 and Series C Bond

Purchase Agreement Annex 2, ¶ 9. On the relevant redemption

dates, Ronfin did not redeem the bond certificates. Id. ¶ 9.

Firebird currently holds the bond certificates. Id. ¶ 13.

Firebird brought an action in the Tokyo District Court against

Nauru seeking payment of the principal and interest on the bonds.

Id. ¶ 14. In 2011, the Tokyo District Court ruled in favor of

Firebird and awarded the equivalent of $37,427,658.29 in Japanese

yen to Firebird. Id. ¶¶ 15-16; see also id., Ex. A at 1, 20.

Firebird seeks to enforce that award here. The Clerk entered

default and Firebird moves for entry of default judgment.

DISCUSSION

The FSIA is “the sole basis for obtaining jurisdiction over

a foreign state in [United States] courts” and “‘must be applied

by the district courts in every action against a foreign

sovereign[.]’” Argentine Republic v. Amerada Hess Shipping

Corp., 488 U.S. 428, 434-35 (1989) (quoting Verlinden B.V. v.

Central Bank of Nigeria, 461 U.S. 480, 493 (1983)). “Under the

[FSIA], a foreign state is presumptively immune from the

jurisdiction of United States courts; unless a specified - 3 -

exception applies, a federal court lacks subject-matter

jurisdiction over a claim against a foreign state.” Saudi Arabia

v. Nelson, 507 U.S. 349, 355 (1993) (citing Verlinden B.V., 461

U.S. at 488-89); see also Kilburn v. Socialist People’s Libyan

Arab Jamahiriya, 376 F.3d 1123, 1126 (D.C. Cir. 2004) (citing 28

U.S.C. § 1604).

Default judgment may not be entered against a foreign state

under the FSIA “unless the claimant establishes his claim or

right to relief by evidence satisfactory to the court.” 28

U.S.C. § 1608(e). This provision “‘imposes a duty on FSIA courts

to not simply accept a complaint's unsupported allegations as

true, and obligates courts to inquire further before entering

judgment against parties in default.’” Wultz v. Islamic Republic

of Iran, 864 F. Supp. 2d 24, 28-29 (D.D.C. 2012) (quoting Rimkus

v. Islamic Republic of Iran, 750 F. Supp. 2d 163, 171 (D.D.C.

2010)). In evaluating whether a plaintiff has sufficiently

established its claim, courts may accept the plaintiff’s

“uncontroverted factual allegations, which are supported by . . .

documentary and affidavit evidence.” Oveissi v. Islamic Republic

of Iran, Civil Action No. 11-0849 (RCL), 2012 WL 3024758, at *2

(D.D.C. July 25, 2012) (internal quotation marks omitted).

Firebird argues that the waiver exception to sovereign

immunity in 28 U.S.C. § 1605(a)(1) is applicable in this case.

That exception denies immunity to a foreign state when - 4 -

the foreign state has waived its immunity either explicitly or by implication, notwithstanding any withdrawal of the waiver which the foreign state may purport to effect except in accordance with the terms of the waiver[.]

28 U.S.C. § 1605(a)(1). Generally, with regard to express

waivers under this provision, “[a] foreign sovereign will not be

found to have waived its immunity unless it has clearly and

unambiguously done so.” World Wide Minerals, Ltd. v. Republic of

Kazakhstan, 296 F.3d 1154, 1162 (D.C. Cir. 2002). “[E]xplicit

waivers of sovereign immunity are narrowly construed in favor of

the sovereign and are not enlarged beyond what the language

requires.” Id. (internal quotation marks omitted).

Firebird argues that Nauru’s explicit waiver in the

Conditions of Guarantee annexed to the Bond Purchase Agreement

waived any and all defenses, including sovereign immunity. Pl.’s

Mot. for Entry of Final J. by Default (“Pl.’s Mot.”) at 4-5.

Firebird also claims that the waiver is “not limited to actions

brought in Japan or Nauru, but goes to any legal action relating

to the Guarantee[.]” Id. at 5. However, the context of the

language in the Conditions of Guarantee indicates otherwise. The

relevant provision in the Conditions of Guarantee for both series

of bonds states:

Any legal action relating to the Guarantee (including the Conditions of Guarantee) may be brought against the Republic in the Tokyo District Court . . ., to the jurisdiction of which the Republic hereby expressly and irrevocably submits for purposes of any such action. Any such action may also be brought against the Republic in any competent court of the Republic. To the extent permitted by applicable law the - 5 -

Republic hereby irrevocably waives any immunity to which it might otherwise be entitled from jurisdiction, suit, attachment, judgment or execution in any such action.

Compl. Ex. B, Series B Bond Purchase Agreement Annex 2, ¶ 9 and

Series C Bond Purchase Agreement Annex 2, ¶ 9.

Firebird relies on Capital Ventures Int’l v. Republic of

Arg., 552 F.3d 289 (2d Cir. 2009). In that case, Capital

Ventures, the owner of the bonds, brought suit against Argentina,

the issuer of the bonds, after Argentina defaulted on principal

and interest payments. Id. at 291-92. The bonds in that case

were issued with an offering circular which provided: 1) a forum

selection clause which waived immunity in the District Court in

Frankfurt and any federal court in Buenos Aires, and 2) an

immunity clause which waived “any immunity (sovereign or

otherwise) from jurisdiction of any court or from any legal

process[.]” Id. at 291-92. The Second Circuit found that

despite the limited forum selection clause, Argentina had

explicitly waived its sovereign immunity to suit in the United

States because of the broad statement waiving immunity from

jurisdiction of “any court.” Id. at 293-94. The court concluded

that “a waiver of sovereign immunity [from suit in the United

States] can be explicit even when other provisions of the

document are applicable only to specific, non-United States

jurisdictions.” Id. at 296. - 6 -

However, that principle does not apply here. Nauru has not

waived sovereign immunity as to “any court” as Argentina did.

Read in context, “any such action” in the Conditions of Guarantee

refers directly to the previous sentences discussing legal

actions brought in Japan or Nauru. The plaintiff asserts no

reason to disregard the plain text of the contract and find that

the waiver of sovereign immunity, based on the Conditions of

Guarantee, goes beyond the courts of Japan and Nauru. Further,

the Bond Purchase Agreement and the Conditions of Bond restrict

the forum selection clause and Ronfin’s waiver of sovereign

immunity to the courts of Japan and Nauru. See Compl., Ex. B,

Series B Bond Purchase Agreement ¶ 8.2 and Annex 1, ¶ 28,

Series C Bond Purchase Agreement ¶ 8.2 and Annex 1, ¶ 26. In

these circumstances, the waiver of sovereign immunity cannot

sustain an action in the United States. See Atl. Tele-Network

Inc. v. Inter-Am. Dev. Bank, 251 F. Supp. 2d 126, 133 (D.D.C.

2003) (finding that Guyana’s waiver of sovereign immunity “gives

no intimation that it was ever thereby contemplating suit in the

United States, and the subsection's juxtaposition immediately

below a [limited] choice-of-law selection clause . . . and above

a [limited] forum-selection clause . . . in the only section of

the entire contract devoted to the resolution of disputes

suggests strongly to the contrary”). The limited nature of the

waivers of sovereign immunity in this case and the obligation to - 7 -

narrowly construe explicit waivers in favor of the sovereign doom

the plaintiff’s argument under 28 U.S.C. § 1605(a)(1).

Firebird asserts in a footnote that it can also proceed

under 28 U.S.C. § 1605(a)(2), the commercial activity exception

to the FSIA. Pl.’s Mot. at 4 n.1. Under this exception, the

FSIA does not recognize a foreign state’s immunity where

the action is based 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). Firebird argues merely that this

exception is applicable because Firebird “maintains its principal

place of business in New York [and] was directly harmed by

Nauru’s failure to honor its Guarantees.” Pl.’s Mot. at 4 n.1.

Firebird cites Republic of Argentina v. Weltover, Inc., 504 U.S.

607 (1992).

In Weltover, Argentina issued and later defaulted on bonds.

The Supreme Court found that Argentina’s conduct constituted a

commercial activity for the purposes of the FSIA because “when a

foreign government acts, not as regulator of a market, but in the

manner of a private player within it, the foreign sovereign's

actions are ‘commercial’ within the meaning of the FSIA.” Id. at

614. Weltover emphasized that the FSIA’s analysis is focused on

the “nature” of the activity, and Argentina creating debt

instruments was directly analogous to “a private commercial

transaction.” Id. at 615-16. Similarly, in this case, Nauru - 8 -

issuing bonds qualifies as a commercial activity. However, this

exception also requires that the act have “cause[d] a direct

effect in the United States.” 28 U.S.C. § 1605(a)(2). Firebird

attempts to satisfy this prong merely by stating that Firebird’s

principal place of business is New York and the company was

harmed by Nauru’s breach. Pl.’s Mot. at 4 n.1. Firebird

provides no evidence –- documentary, affidavit, or otherwise --

to support these assertions as is required by the FSIA. Because

Firebird has not shown that Nauru waived sovereign immunity as to

United States courts under either exception of the FSIA, Firebird

is not entitled to entry of default judgment or entitled to

proceed in this action.

CONCLUSION

Firebird has not overcome Nauru’s presumptive immunity from

suit in a United States court, and there is no subject matter

jurisdiction over this claim. The motion for a default judgment

will be denied, and the complaint will be dismissed for lack of

subject matter jurisdiction. An appropriate Order accompanies

this memorandum opinion.

SIGNED this 15th day of January, 2013.

/s/ RICHARD W. ROBERTS United States District Judge