Executive Power

Republic of Argentina v. NML Capital: Discovery and the Foreign Sovereign Immunities Act

By Ingrid (Wuerth) Brunk
Monday, June 16, 2014, 10:28 PM

The Supreme Court held today in Republic of Argentina v. NML Capital that the Foreign Sovereign Immunities Act does not limit the scope of discovery available against a foreign sovereign in a post-judgment execution action.   This case is one of many actions brought against Argentina by bondholders who did not accept debt restructuring offers, as covered extensively over at credit slips.   Today’s case involved creditors seeking to execute U.S. judgments entered against Argentina. The district court ordered broad post-judgment discovery about Argentina’s assets around the world. Argentina argued that sovereign immunity, which curtails the circumstances under which its assets can be seized or attached by U.S. courts, also limits discovery about such assets, beyond those imposed by the Federal Rules of Civil Procedure. The Foreign Sovereign Immunities Act itself does not explicitly limit discovery in this way, however. Instead, it says almost nothing about discovery. The district court thus rejected Argentina’s argument, as did the Court of Appeals. Today the Supreme Court did as well in a 7-1 decision written by Justice Scalia. So why is the case significant?

First, it is consistent with what appears to be a trend away from foreign affairs exceptionalism and deference to the Executive Branch in foreign relations cases. In Republic of Argentina, the Court rejected the U.S. government’s arguments (advanced in an amicus brief), that focused on the negative impact such discovery could have for U.S. interests, including potentially damaging U.S. relations with Argentina and making the U.S. more vulnerable to discovery in foreign courts. The Court rejected both the government’s general argument with respect to discovery against foreign sovereigns under the FSIA and the government’s case-specific argument that the discovery order in this particular case was too broad (see Brief of United States as Amicus Curiae).   Deference to the Executive Branch is contested in both contexts (general statutory interpretation and case-by-case application), as I have described here (pages 16-24). Unlike the Altmann v. Republic of Austria case, which also interpreted the FSIA without deferring to the U.S. government’s position, today’s case made no explicit suggestion that the government’s views might be entitled to case-by-case deference.

Second, the ruling calls into question discovery practices in many lower-court FSIA cases.   Discovery in FSIA cases is often different from discovery in run-of-the mill proceedings, but in ways not specifically directed by the statute. For example, the Fifth Circuit – at the urging of the U.S. government -- held in Af-Cap v. Republic of Congo, 462 F.3d 417 (5th Cir. 2006), that the district court erred in issuing a contempt order imposing sanctions against a foreign sovereign because such sanctions cannot be enforced under the terms of the FSIA. (The D.C. Circuit has disagreed). Today’s decision suggests that the Fifth Circuit (and the government’s argument) were wrong: if the FSIA does not control the issue, then the case should be treated as business-as-usual.  As another example, many lower courts have limited the scope of discovery about whether FSIA exceptions to immunity apply, based in part on the statutory presumption of immunity and on concerns that the evaluation of immunity itself could encroach on the benefits that immunity was intended to confer on foreign sovereigns. But the FSIA itself imposes no such limitation on discovery. For these cases, too, the reasoning of today’s opinion suggests that lower courts have been too generous in protecting foreign sovereigns from discovery requests, although in some cases the requirements of the FRCP (such as relevance) might lead to comparable results.

There is also footnote 6 in today's opinion.  It notes that “other sources of law” – including “comity interests” – might limit the district court judge’s discretion in ordering discovery. Foreign sovereigns and the U.S. government will rely on this language to argue that even if the FSIA itself does not impose restrictions on discovery, other doctrines do, at least in particular cases. Much of the actual impact of the opinion in future cases may rest on how lower courts interpret this footnote.  The Court emphasized that in today’s case “the single, narrow question” before it was the interpretation of the Foreign Sovereign Immunities Act – leaving open the scope and significance of those “other sources of law.”