Diag Human S.E. v. Czech Republic-Ministry of Health , 64 F. Supp. 3d 22 ( 2014 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
____________________________________
)
DIAG HUMAN S.E., )
)
Plaintiff, )
)
v. ) Civil Action No. 13-0355 (ABJ)
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CZECH REPUBLIC-MINISTRY )
OF HEALTH, )
)
Defendant. )
____________________________________)
MEMORANDUM OPINION
Plaintiff Diag Human filed this case against the Czech Republic Ministry of Health,
seeking to enforce an August 4, 2008 arbitration award related to the Ministry’s alleged
interference into a business relationship between plaintiff and a third party. Compl. ¶ 9 [Dkt.
# 1]. Plaintiff seeks to confirm the award pursuant to the Federal Arbitration Act (“FAA”),
9 U.S.C. §§ 201–08 (2012), which codifies the United Nations Convention on the Recognition
and Enforcement of Foreign Arbitral Awards (“New York Convention”), June 10, 1958, 21
U.S.T. 2518, 330 U.N.T.S. 38. Compl. ¶ 1.
Defendant moved to dismiss the complaint on numerous grounds, including failure to
state a claim under the New York Convention, the SPEECH Act of 2010, and forum non
conveniens. See Def.’s Mot. to Dismiss Compl. [Dkt. # 16] at 2–3; Mem. of P. & A. in Supp. of
Def.’s Mot. to Dismiss Compl. (“Def.’s Mem.”) [Dkt. # 17] at 11–37. But the Court cannot
address these grounds for dismissal because it has no subject matter jurisdiction in this case.
Plaintiff cites the New York Convention and two exceptions to the Foreign Sovereign
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Immunities Act (“FSIA”) as its predicates for jurisdiction, Compl. ¶ 2, but after review, the
Court finds that these provisions do not apply. Accordingly, the Court will dismiss this case sua
sponte pursuant to Rule 12(h)(3) of the Federal Rules of Civil Procedure for lack of subject
matter jurisdiction. 1
BACKGROUND
Plaintiff Diag Human is a corporation organized under the laws of the Principality of
Liechtenstein. Compl. ¶ 6. The Czech Republic is a foreign state, and the Ministry of Health for
the Czech Republic is an agency of the Czech Republic. Id. ¶ 7; Def.’s Mem. at 2. In the 1980s,
Diag Human developed a business model that allowed “currency-deficient Eastern Bloc states to
acquire modern blood plasma technology.” Pl.’s Mem. of P. & A. in Opp. to Def.’s Mot. to
Dismiss Compl. (“Pl.’s Opp.”) [Dkt. # 20] at 5. By 1989, it was one of the world’s largest blood
plasma suppliers with fourteen branches across Europe and in Canada and Singapore. Id. at 6.
After the fall of the Berlin wall, plaintiff sought to enter the Eastern European market and began
to develop its business in Czechoslovakia. Pl.’s Opp. at 6; Def.’s Mem. at 2.
One of plaintiff’s principal commercial relationships was with the Danish company Novo
Nordisk. Pl.’s Opp. at 6. Diag Human alleges that the Minister of Health for the Czech Republic
sent a letter to Novo Nordisk regarding a public bidding tender for blood plasma products
intended “to dissuade Novo Nordisk from continuing to do business with Diag.” Pl.’s Opp. at 7;
Def.’s Mem. at 29. It contends that the letter contained statements expressing concerns about
Diag Human’s business ethics and credibility, and that this letter caused Novo Nordisk to
discontinue its business relationship with Diag Human. Pl.’s Opp. at 7; Def.’s Mem. at 29.
1 Defendant raised the inapplicability of the New York Convention in its motion to dismiss
but predicated its motion on Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim,
rather than on Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction.
Def.’s Mem. at 11.
2
Plaintiff asserts that the collapse of its business in the Czech Republic was a direct result of the
termination of its relationship with Novo Nordisk. Compl. ¶ 9; Pl.’s Opp. at 8; Def.’s Mem. at 2.
In 1996, Diag Human commenced an action against defendant in the Prague Commercial
Court, claiming defamation and unfair competition, seeking damages including lost profits. Pl.’s
Opp. at 8, 38. The parties agreed to arbitrate their dispute, and on September 18, 1996, they
entered into a written arbitration agreement (“Arbitration Agreement”). Def.’s Mem. at 2; Pl.’s
Opp. at 8; Arbitration Agreement, Ex. B to Compl. [Dkt. # 1-2] at 2–3. The Arbitration
Agreement sets forth procedures for the arbitration process, covering such matters as the
selection and payment of the arbitrators and the location of the proceedings. Arbitration
Agreement at 2–3.
On August 4, 2008, the arbitration panel decided in favor of plaintiff, finding that the
Czech Republic had caused commercial loss to Diag Human. Pl.’s Opp. at 10; Def.’s Mem. at 3.
The final award (“Arbitration Award”) directed defendant to pay Diag Human approximately
$650 million in damages and interest. Pl.’s Opp. at 10. On August 22, 2008, defendant
requested review of the award pursuant to Article V of the Arbitration Agreement. Def.’s Mem.
at 4; Pl.’s Opp. at 13. A dispute concerning the composition of the arbitration review panel
lasted for more than two years, but in 2013, it was finally resolved, and a review panel was
convened. Def.’s Mem. at 4–7; Pl.’s Opp. at 13–16.
While the dispute regarding the appointment of the arbitration review panel was pending
in the Czech courts, plaintiff applied to this Court and to the courts of Austria, France, the United
Kingdom, Luxembourg, and Switzerland for orders to enforce the Arbitration Award under the
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New York Convention. Def.’s Mem. at 7; Pl.’s Opp. at 18–19. To date, it appears that no court
has ordered enforcement of the award. 2
STANDARD OF REVIEW
“Federal courts are courts of limited jurisdiction. They possess only that power
authorized by Constitution and statute, which is not to be expanded by judicial decree. It is to be
presumed that a cause lies outside this limited jurisdiction, and the burden of establishing the
contrary rests upon the party asserting jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of Am.,
511 U.S. 375, 377 (1994) (citations omitted). In addition, “‘[i]t is axiomatic that subject matter
jurisdiction may not be waived, and that courts may raise the issue sua sponte.’” NetworkIP,
LLC v. FCC, 548 F.3d 116, 120 (D.C. Cir. 2008), quoting Athens Cmty. Hosp., Inc. v. Schweiker,
686 F.2d 989, 992 (D.C. Cir. 1982). Indeed, a federal court must raise the issue because it is
“forbidden – as a court of limited jurisdiction – from acting beyond [its] authority.” Id., citing
Akinseye v. District of Columbia, 339 F.3d 970, 971 (D.C. Cir. 2003).
A district court must dismiss a complaint sua sponte when it is evident that the court
lacks subject matter jurisdiction. Fed. R. Civ. Pro. 12(h)(3) (“If the court determines at any time
that it lacks subject-matter jurisdiction, the court must dismiss the action.”); Arbaugh v. Y&H
Corp., 546 U.S. 500, 514 (2006) (“when a federal court concludes that it lacks subject-matter
2 On October 29, 2012, the Court of Appeal in Vienna dismissed the claim filed in Austria
because the Arbitration Award had not yet become final or enforceable under the New York
Convention. Def.’s Mem. at 17. The Austria Supreme Court affirmed this decision on April 16,
2013. Id.; see also Ex. W to Def.’s Mot. [Dkt. # 16-23]. The Court of Appeal of the French
Republic in Paris dismissed the claim to enforce the arbitration award because it found that the
intent of the Arbitration Agreement was to deprive the parties of a final award if an application
for review was made in the agreed upon timeframe. Def.’s Mem. at 17; see also Ex. V to Def.’s
Mot. [Dkt. # 16-22]. On March 5, 2014, the French Supreme Court dismissed Diag Human’s
complaint. Def.’s Second Suppl. to Mot. to Dismiss Compl. [Dkt. # 34]. On June 24, 2013, the
Tribunal of First Instance in Geneva, Switzerland declared the Arbitration Award unenforceable
in Switzerland. Id.; see also Ex. X to Def.’s Mot. [Dkt. # 16-24].
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jurisdiction, the court must dismiss the complaint in its entirety”); see also Evans v. Suter, No.
09-5242, 2010 WL 1632902, at *1 (D.C. Cir. Apr. 2, 2010); Scholastic Entm’t, Inc. v. Fox
Entm’t Grp., Inc., 336 F.3d 982, 985 (9th Cir. 2003); Zernial v. United States, 714 F.2d 431,
433–34 (5th Cir. 1983).
In evaluating whether a dismissal for lack of subject matter jurisdiction under Rule
12(b)(1) is appropriate, the Court treats the complaint’s factual allegations as true and must grant
the plaintiff “the benefit of all inferences that can be derived from the facts alleged.” Barr v.
Clinton, 370 F.3d 1196, 1199 (D.C. Cir. 2004). Nevertheless, the Court need not accept factual
inferences drawn by the plaintiff if those inferences are unsupported by facts alleged in the
complaint, nor must the Court accept plaintiff’s legal conclusions. Speelman v. United States,
461 F. Supp. 2d 71, 73 (D.D.C. 2006).
Under Rule 12(b)(1), the plaintiff bears the burden of establishing jurisdiction by a
preponderance of the evidence. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992);
Shekoyan v. Sibley Int’l Corp., 217 F. Supp. 2d 59, 63 (D.D.C. 2002). Because “subject-matter
jurisdiction is an ‘Art[icle] III as well as a statutory requirement . . . no action of the parties can
confer subject-matter jurisdiction upon a federal court.’” Akinseye v. District of Columbia, 339
F.3d 970, 971 (D.C. Cir. 2003), quoting Ins. Corp. of Ir., Ltd. v. Compagnie des Bauxites de
Guinee, 456 U.S. 694, 702 (1982).
When considering dismissal for lack of jurisdiction, the court “is not limited to the
allegations of the complaint.” Hohri v. United States, 782 F.2d 227, 241 (D.C. Cir. 1986),
vacated on other grounds, 482 U.S. 64 (1987). Rather, a court “may consider such materials
outside the pleadings as it deems appropriate to resolve the question of whether it has jurisdiction
to hear the case.” Scolaro v. D.C. Bd. of Elections & Ethics, 104 F. Supp. 2d 18, 22 (D.D.C.
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2000), citing Herbert v. Nat’l Acad. of Sciences, 974 F.2d 192, 197 (D.C. Cir. 1992); see also
Jerome Stevens Pharms., Inc. v. FDA, 402 F.3d 1249, 1253 (D.C. Cir. 2005).
ANALYSIS
In determining whether a district court has subject matter jurisdiction in an action
seeking to enforce a foreign arbitral award against a foreign sovereign, the D.C. Circuit has
stated that two requirements must be satisfied. “First, there must be a basis upon which a court
in the United States may enforce a foreign arbitral award; and second, [the foreign state] must
not enjoy sovereign immunity from such an enforcement action.” Creighton Ltd. v. Gov’t of
State of Qatar, 181 F.3d 118, 121 (D.C. Cir. 1999).
I. The New York Convention
Diag Human asserts that the arbitral award may be enforced under U.S. law pursuant to
the New York Convention. Compl. ¶ 2. The New York Convention is a multilateral treaty
providing for “the recognition and enforcement of arbitral awards made in the territory of a State
other than the State where the recognition and enforcement of such awards are sought.” New
York Convention, art. I.1, June 10, 1958, 21 U.S.T. 2517. The Federal Arbitration Act, 9 U.S.C.
§§ 201–08, which codifies the New York Convention into U.S. law, declares that “[a]n action or
proceeding falling under the Convention shall be deemed to arise under the laws and treaties of
the United States. The district courts . . . shall have original jurisdiction over such an action or
proceeding, regardless of the amount in controversy.” 9 U.S.C. § 203.
Section 202 of the FAA specifies the type of arbitration agreements and arbitral awards
that are covered by the Convention:
An arbitration agreement or arbitral award arising out of a legal
relationship, whether contractual or not, which is considered as
commercial, including a transaction, contract, or agreement described in
section 2 of this title, falls under the Convention.
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9 U.S.C. § 202. The Second Circuit utilizes a four-part test for when the Convention and FAA
will apply:
(1) there is a written agreement; (2) the writing provides for arbitration in
the territory of a signatory of the convention; (3) the subject matter is
commercial; and (4) the subject matter is not entirely domestic in scope.
U.S. Titan, Inc. v. Guangzhou Zhen Hua Shipping Co., 241 F.3d 135, 146 (2d Cir. 2001); see
also Nanosolutions, LLC v. Prajza, 793 F. Supp. 2d 46, 53 (D.D.C. 2011). If each requirement is
satisfied, then the agreement properly falls under the New York Convention. See Ledee v.
Ceramiche Ragno, 684 F.2d 184, 186–87 (1st Cir. 1982).
With respect to the third requirement – the commercial nature of the matter – courts have
explained that the “subject matter of the relationship between the parties must be commercial.”
JSC Surgutneftegaz v. President & Fellows of Harvard Coll., No. 04 Civ. 6069 (RCC), 2005 WL
1863676, at *2 (S.D.N.Y. Aug. 3, 2005) (emphasis added); see also Freudensprung v. Offshore
Technical Servs., Inc., 379 F.3d 327, 339 (5th Cir. 2004); Prograph Int’l Inc. v. Barhydt, 928 F.
Supp. 983, 988-89 (N.D. Cal. 1996). The Fifth Circuit has interpreted a “commercial legal
relationship” to mean “‘a transaction, contract, or agreement described in section 2 of [Title 9]’ –
that is, either a maritime transaction or a contract involving commerce.” Freudensprung, 379
F.3d at 339. Further, the FAA provides that:
“commerce”, as herein defined, means commerce among the several
States or with foreign nations, or in any Territory of the United States or in
the District of Columbia, or between any such Territory and another, or
between any such Territory and any State or foreign nation, or between the
District of Columbia and any State or Territory or foreign nation . . . .
9 U.S.C. § 1.
Here, the first, second, and fourth requirements of the Second Circuit’s test have been
satisfied: there is a written arbitration agreement, the arbitration occurred in a territory of a
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signatory to the Convention, and the dispute is not entirely domestic in scope. See Arbitration
Agreement, Ex. B to Compl. at 2–3. But the Czech Republic argued that the third requirement
has not been met, and the claims undergoing arbitration were “traditional tort-based claims,” not
commercial ones. Def.’s Mem. at 28–31. Plaintiff argues that because the award relates to a
“commercial dispute,” and damages were awarded based on the claim of unfair economic
competition, the award properly falls under the New York Convention. Pl.’s Opp. at 38–39.
The Court finds that a plain reading of the text of the treaty shows that the Convention
does not apply: the arbitration and award did not “aris[e] out of a legal relationship . . . which is
considered as commercial.” 9 U.S.C. § 202. While the arbitration concerned defendant’s
alleged interference in plaintiff’s commercial activities, and it sought compensation for economic
harm, “the subject matter of the relationship between the parties” is not commercial, JSC
Surgutneftegaz, 2005 WL 1863676, at *2, and the arbitration did not arise out of a commercial
legal relationship. Before entering into the Arbitration Agreement, plaintiff and defendant did
not have any legal relationship, let alone a commercial one. While Diag Human endeavored to
extend its business into the Czech Republic, it did not have any contract, agreement, or
transaction with the Czech Republic that could be considered to be commercial. Def.’s Mem.
at 2.; Pl.’s Opp. at 6. Plaintiff’s issue with the state arose when the Minister of Health allegedly
interfered with plaintiff’s business relationship with a private party – Novo Nordisk – by sending
the letter that plaintiff claims was defamatory. Def.’s Mem. at 2; Pl.’s Opp. at 7. But there were
no commercial dealings between plaintiff and the Czech Republic itself. Although this alleged
interference had commercial consequences for the company, and the arbitration panel ultimately
awarded damages to address commercial losses, there was no pre-existing legal relationship of
commercial subject matter between Diag Human and the Czech Republic.
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Plaintiff argues that because the award was rendered under numerous provisions of the
Czech Commercial Code that the dispute itself is commercial in nature. Pl.’s Opp. at 38.
But it is the nature of the relationship between the parties, not the nature of their dispute, that
determines whether the third requirement is satisfied. See, e.g., Freudensprung, 379 F.3d at 339
(finding a commercial legal relationship where the plaintiff had a “Consultant’s
Agreement” with the defendant to provide professional services); Bautista v. Star Cruises, 396
F.3d 1289, 1300 (11th Cir. 2005) (finding that the arbitration provisions in a cruise ship
crewmembers’ employment contracts constitutes a “commercial legal relationship[] within the
meaning of the Convention Act”). The fact that Diag Human initially brought the dispute before
a commercial court in Prague or that the arbitration was predicated upon commercial laws of the
Czech Republic does not transform the subject matter of the legal relationship between the
parties. Because the subject matter of the relationship between Diag Human and the Czech
Republic is not commercial, this action falls outside the scope of the New York Convention.
II. The Foreign Sovereign Immunities Act
The second requirement for establishing subject matter jurisdiction against an
instrumentality of a foreign government is that the foreign state must not enjoy sovereign
immunity. See Creighton, 181 F.3d at 121. “In the United States, there is only one way for a
court to obtain jurisdiction over a foreign state and it is not a particularly generous one – the
FSIA.” Peterson v. Royal Kingdom of Saudi Arabia, 416 F.3d 83, 86 (D.C. Cir. 2005).
Under the Foreign Sovereign Immunities Act, 28 U.S.C. §§ 1602–11 (2012), “a foreign
state is presumptively immune from the jurisdiction of United States courts,” and “unless a
specified 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); see also 28 U.S.C.
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§§ 1604–05. The FSIA provides “the sole basis for obtaining jurisdiction over a foreign state in
the courts of this country.” Nelson, 507 U.S. at 355, quoting Argentine Republic v. Amerada
Hess Shipping Corp., 488 U.S. 428, 443 (1989) (internal quotation marks omitted). Because
“subject matter jurisdiction in any such action depends on the existence of one of the specified
exceptions . . . [a]t the threshold of every action in a District Court against a foreign state . . . the
court must satisfy itself that one of the exceptions applies.” Verlinden B.V. v. Cent. Bank of
Nigeria, 461 U.S. 480, 493–94 (1983). In other words, U.S. courts have no power to hear a
case brought against a foreign sovereign unless one of the exceptions applies.
A “foreign state” includes “a political subdivision of a foreign state or an agency or
instrumentality of a foreign state.” 28 U.S.C. § 1603(a). An “agency or instrumentality of a
foreign state” is, in part, defined as “an organ of a foreign state or political subdivision thereof.”
Id. § 1603(b)(2). Here, the Ministry of Health is an agency of the foreign state of the Czech
Republic, and therefore properly falls within the purview of the FSIA.
Plaintiff asserts that the Court has subject matter jurisdiction in this case, in part, pursuant
to sections 1605(a)(1) and (6) of the FSIA. Compl. ¶ 2. Section 1605(a)(1) provides that a
foreign state shall not be immune in any case in which the foreign state has explicitly or
implicitly waived its immunity. Id. § 1605(a)(1). Section 1605(a)(6) provides an exception to
foreign sovereign immunity for actions to confirm certain arbitration awards. See id.
§ 1605(a)(6). Although defendant does not challenge plaintiffs’ stated basis for subject matter
jurisdiction, the Court must satisfy itself that one of the exceptions to sovereign immunity
applies, Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. at 493–94, and it finds that neither
exception applies in this case.
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A. Section 1605(a)(1) Does Not Apply Because Defendant Has Not Explicitly
or Implicitly Waived its Sovereign Immunity.
Under 28 U.S.C. § 1605(a)(1), “a state is not immune from suit in any case ‘in which the
foreign state has waived its immunity either explicitly or by implication.’” World Wide
Minerals, Ltd. v. Republic of Kaz., 296 F.3d 1154, 1161 (D.C. Cir. 2002). The U.S. Court of
Appeals for the D.C. Circuit has found implied waivers in three circumstances: when “(1) a
foreign state has agreed to arbitration in another country; (2) a foreign state has agreed that the
law of a particular country governs a contract; or (3) a foreign state has filed a responsive
pleading in an action without raising the defense of sovereign immunity.” 3 Foremost-McKesson,
Inc. v. Islamic Republic of Iran, 905 F.2d 438, 444 (D.C. Cir. 1990), citing S. Rep. No. 94-1310,
at 18 (1976); H.R. Rep. No. 94-1487, at 18 (1976), reprinted in 1976 U.S.C.C.A.N. 6604, 6617.
These three examples demonstrate that the theory of implied waiver contains an intent
requirement, and that a finding of “an implied waiver depends upon the foreign government’s
having at some point indicated its amenability to suit.” Princz v. Fed. Republic of Ger., 26 F.3d
1166, 1174 (D.C. Cir. 1994); see also Frolova v. Union of Soviet Socialist Republics, 761 F.2d
370, 377 (7th Cir. 1985) (noting that courts “rarely find that a nation has waived its sovereign
immunity . . . without strong evidence that this is what the foreign state intended”). Further,
“‘[s]ince the FSIA became law, courts have been reluctant to stray beyond these [three]
3 The D.C. Circuit has suggested that when the New York Convention is a basis for a
claim, that a foreign state has implicitly waived its immunity if it is a signatory to the New York
Convention. See Creighton, 181 F.3d at 123, quoting Seetransport Wiking Trader
Schiffarhtsgesellschaft MBH & Co., Kommanditgesellschaft v. Navimpex Centrala Navala, 989
F.2d 572, 578 (2d Cir. 1993) (“‘[W]hen a country becomes a signatory to the Convention, by the
very provisions of the Convention, the signatory state must have contemplated enforcement
actions in other signatory states.’”). As discussed above, the New York Convention does not
apply to this case and, accordingly, is not a basis for plaintiff’s claims, so defendant’s sovereign
immunity defense is not implicitly waived on the ground that it is a signatory to the New York
Convention.
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examples when considering claims that a nation has implicitly waived its defense of sovereign
immunity.’” Princz, 26 F.3d at 1174 (first edit in original), quoting Frolova, 761 F.2d at 377.
None of the bases to find an implied waiver exist in this case. First, defendant did not
agree to arbitrate in another country; the Arbitration Agreement specified that arbitration would
take place in a location determined by the arbitrators, which was the Czech Republic.
Arbitration Agreement, Ex. B to Compl. at 2–3. Second, plaintiff and defendant did not have a
contract that contained an arbitration clause or choice of law clause within it. See Pl.’s Opp. at
5–8; Def.’s Mem. at 1–2. Rather, a dispute arose between the parties, which they agreed to
arbitrate. Pl.’s Opp. at 5–8; Def.’s Mem. at 1–2. Third, the Czech Republic has not filed the sort
of “responsive pleading” that acts as a waiver by filing to contest jurisdiction on immunity
grounds. Ashraf-Hassan v. Embassy of Fr. in the U.S., No. 11-805 (JEB), 2014 WL 1493210, at
*4 (D.D.C. Apr. 17, 2014); see also Foremost–McKesson, 905 F.2d at 443.
Although the Czech Republic has filed a motion to dismiss that does not address
sovereign immunity, under the law of this Circuit, that filing does not waive sovereign immunity.
The D.C. Circuit has held that implied waiver requires “a conscious decision [by the sovereign]
to take part in the litigation and a failure to raise sovereign immunity despite the opportunity to
do so.” Foremost-McKesson, 905 F.2d at 444 (internal quotations omitted). Because a motion
to dismiss is not a responsive pleading, “a motion to dismiss that omits mention of immunity will
not provide sufficient proof of such a conscious decision.” Ashraf-Hassan, 2014 WL 1493210,
at *4; see also Gutch v. Fed. Republic of Germany, 444 F. Supp. 2d 1, 9 (D.D.C. 2006)
(overruled on other grounds) (“A motion to dismiss, however, is not a responsive pleading for
the purpose of this exception.”); Canadian Overseas Ores Ltd. v. Compania de Acero del
Pacifico S.A., 727 F.2d 274, 277 (2d Cir. 1984) (stating that because the Federal Rules of Civil
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Procedure explicitly distinguish between pleadings and motions, “[the court] refuse[s] to hold
that the filing of a variety of motions, including a motion to dismiss, automatically waives the
defense [of sovereign immunity]”).
A recent case, Ashraf-Hassan v. Embassy of France in the U.S., 2014 WL 1493210
(D.D.C. Apr. 17, 2014), illustrates the type of activity a foreign sovereign must undertake to
implicitly waive sovereign immunity. There, the court held that the FSIA’s implied waiver
exception applied because the defendant had filed a motion to dismiss that specifically conceded
the immunity question, 4 it had filed an answer and a motion for summary judgment, and it
participated in the case through the end of discovery. Id. at *4–5. The court denied the motion
to dismiss that the defendant filed on the eve of trial on immunity grounds, in part, because of the
defendant’s initial concession regarding immunity and its continued participation in the case. Id.
at *5.
Here, the Czech Republic has filed a motion to dismiss that does not specifically disclaim
immunity, and it has not filed a responsive pleading, such as an answer. Further, there have been
no proceedings beyond briefs and other motions relating to defendant’s motion to dismiss. Thus,
the Court finds that defendant has not made a “conscious decision to take part in the litigation,”
Foremost-McKesson, 905 F.2d at 444, and defendant’s mere failure to address immunity in its
motion to dismiss does not suffice as a “conscious decision” to waive sovereign immunity. See
Ashraf-Hassan, 2014 WL 1493210, at *4. For these reasons, the Court finds that defendant has
not implicitly waived sovereign immunity, and the exception found in section 1605(a)(1) does
not apply.
4 The defendant’s first motion to dismiss stated “it is conceded that [the Embassy’s]
immunity does not apply in this case.” Ashraf-Hassan, 2014 WL 1493210, at *3 (quoting
motion to dismiss).
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B. Section 1605(a)(6) Does Not Apply Because the Arbitration Award Does
Not Fall Under the New York Convention.
In the absence of a waiver, the Court cannot exercise jurisdiction over a foreign state
unless that exercise falls within one of the exceptions set forth in the FSIA. Section 1605(a)(6)
of FSIA states that foreign sovereigns are not immune from suits,
in which the action is brought, either to enforce an agreement made by the
foreign state with or for the benefit of a private party to . . . confirm an
award made pursuant to such an agreement to arbitrate, if (A) the
arbitration takes place or is intended to take place in the United States, (B)
the agreement or award is or may be governed by a treaty or other
international agreement in force for the United States calling for the
recognition and enforcement of arbitral awards, (C) the underlying claim,
save for the agreement to arbitrate, could have been brought in a United
States court under this section or section 1607, or (D) paragraph (1) of this
subsection is otherwise applicable.
28 U.S.C. § 1605(a)(6).
Subsection (a)(6)(A) does not apply here because the parties’ arbitration took place in the
Czech Republic. Id. §1605(a)(6)(A); see Arbitration Agreement, Ex. B to Compl. at 2.
Subsection (a)(6)(C) does not apply because the underlying claim could not have been brought in
a U.S. court under section 1605 or 1607 of FSIA, 5 and plaintiff does not assert that any other
sections apply. 28 U.S.C. §§ 1605, 1607; see Compl. ¶ 2. Section 1605(a)(6)(D) does not apply
because paragraph 1 of section 1605(a) sets forth the waiver exception; and, as discussed above,
defendant has not implicitly or explicitly waived sovereign immunity.
5 Section 1605(a) states a number of other exceptions to foreign state immunity, including:
where the action is based upon a commercial activity or arose in connection to a commercial
activity carried on in the United States by a foreign state, where the claim arose from property
located in the United States, and where money damages are sought for personal injury, death, or
damage to property occurring in the United States. 28 U.S.C. § 1605(a). There are also
exceptions for maritime and terrorism cases. See id. §§ 1605(b), 1605A. Section 1607 is
irrelevant, because it applies only when a foreign state brings an action in a U.S. court and the
opposing party counter-claims. 28 U.S.C. § 1607.
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Plaintiff did not specifically invoke the exception in subsection (a)(6)(B), which provides
that immunity does not attach where the arbitration agreement or award is governed by an
international agreement. But plaintiff relies on the New York Convention as a source of
jurisdiction in this case. Compl. ¶ 2. Since, as explained above, this case does not fall within the
scope of the New York Convention because the parties did not have a commercial relationship,
none of the exceptions listed in 1605(a)(6) apply, and the Court does not have subject matter
jurisdiction over this case.
CONCLUSION
For the reasons set forth above, the Court will dismiss this case sua sponte pursuant to
Rule 12(h)(3) of the Federal Rules of Civil Procedure for lack of subject matter jurisdiction.
Defendant’s motion to dismiss [Dkt. # 16] and motion to strike [Dkt. # 26], and plaintiff’s
motion for leave to file supplement to opposition to motion to dismiss [Dkt. # 35] will be denied
as moot. A separate order will issue.
AMY BERMAN JACKSON
United States District Judge
DATE: August 14, 2014
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