In recent weeks sanctions against Russia’s central bank have prompted renewed buzz around the issue of sovereign immunity.  The interpretation of the Foreign Sovereign Immunities Act (“FSIA”), specifically with relation to central banks, may become particularly important as sanctions continue to mount against Russia and its central bank.  A recent decision from a District of Columbia federal court fits a pattern of courts granting protection to central banks under FSIA.  The decision also deepened the split among federal courts regarding the authority required to waive immunity, which we previously wrote about here.

The District of Columbia federal court examined foreign sovereign immunity in the context of a retainer agreement between a lobbying and public affairs company based in Washington D.C. and the Central Bank of the Democratic Republic of the Congo.[1]  The agreement was signed by the Central Bank’s outgoing governor. The purpose of the agreement was to provide the Central Bank with government relations and strategic communications services to improve the Congo’s international image. In return, the Central Bank agreed to pay the lobbying firm $16.6 million upfront.  The Central Bank only paid $600,000, but after the Congo promised to pay the remaining balance, the lobbying firm agreed to fulfill the contract.  However, the Congo never satisfied this obligation and the balance remained unpaid.

The lobbying firm eventually filed suit for breach of contract against the Congo and the Central Bank. The lobbying firm argued that the Central Bank and Congo were not immune from suit because they had waived FSIA immunity by virtue of a forum selection clause in the retainer agreement. The firm also argued that the Central Bank’s entering into the agreement constituted “commercial activity,” which does not give rise to immunity under the FSIA.[2] Only the Central Bank appeared in the lawsuit, and it moved to dismiss arguing, among other things, that the Central Bank’s outgoing governor did not have the authority to enter into the contract on the Central Bank’s behalf.

The federal court found for the Central Bank, ruling that neither FSIA exception applied. The court held that although the agreement’s forum selection clause could serve as an implicit waiver, the Central Bank’s outgoing governor did not have the requisite authority to act unilaterally on behalf of the Central Bank. The court held that apparent authority is insufficient to waive sovereign immunity under FSIA; actual authority is required to waive immunity. The court concluded that because the Central Bank’s governor was a government official, actual authority to act on behalf of a foreign state must come from legislation or by administrative regulation. In reviewing the relevant statutes, no legislation gave the governor actual authority to unilaterally act on behalf of the Central Bank and as such, the waiver exception did not apply.

Similarly, the court found that the commercial-activity exception did not apply. The court reasoned that the lobbying firm did not produce evidence demonstrating that commercial activity conducted by the Central Bank had substantial contact with the United States. The court relied on precedent that generally deems a foreign state’s nonpayment in breach of a contractual obligation to have been conducted in the county in which the foreign state is located, not in the United States. Further, the court reasoned that although the contract was executed in Washington, the incidental connection to the United States was not the sort of “substantial contact” that would be required to apply an exception to immunity under the FSIA. Finally, the court found that the lobbying firm failed to produce “a single iota of documentary evidence that establishes that it performed any tasks provided any services under the retainer agreement.”[3]  Thus, the court held that the commercial-activity waiver also did not apply and as such, the Central Bank was protected from suit under FSIA.

This case is one of many that reinforces the statutory presumption in favor of sovereign immunity in cases against foreign central banks. For instance, the Second Circuit also ruled in favor of Argentina’s central bank in a suit brought by U.S. investment firms.[4]  A district court in New York similarly refused to award sanctions against the Laotian government for failure to obtain documents to produce in discovery from its central bank, holding that the plaintiffs were barred by the FSIA “from requesting these documents directly from the Lao Bank” because “its assets are immune from attachment.”[5]

These cases, along with the recent decision in favor of the Central Bank of Congo, show that central banks tend receive a high level of protection from federal courts under the FSIA. For parties contracting with foreign sovereigns in the District of Columbia, the Congo decision reiterates the need to show actual authority in order to demonstrate a waiver, in contrast the “apparent authority” that suffices in New York and certain other jurisdictions, as we wrote about here. Moreover, the decision indicates that for the commercial-activity exception to apply, there needs to be at least some activity conducted in the U.S.— simple nonpayment of fees will not cut it. These factors are important to keep in mind when negotiating agreements between foreign states’ instrumentalities to ensure parties are not subject to immunity.

[1] CapitalKeys, LLC v. Democratic Republic of Congo, 2021 WL 2255362 (D.D.C. June 3, 2021).

[2] The FSIA precludes US courts from exercising jurisdiction over foreign sovereigns unless: (a) the sovereign has waived its immunity, either explicitly or by implication; or (b) the subject litigation arises from one of the exceptions to the immunity, such as where the foreign sovereign is engaging in “commercial activity” in the United States and the dispute directly flows from that activity.  28 U.S.C. §§ 1602 et seq.

[3]  CapitalKeys, LLC v. Democratic Republic of Congo, No. 15-CV-2079 at *49.

[4] See EM Ltd. v. Banco Cent. De La Republica Argentina, 800 F.3d 78 (2d Cir. 2015).

[5] Thai-Lao Lignite (Thailand) Co. v. Gov’t of Lao People’s Democratic Republic, 2013 U.S. Dist. LEXIS 110353 (S.D.N.Y. Aug. 2, 2013).