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The FSIA’s Direct Effects Problem

Post authored by Lance Huckabee, JD candidate and Global Legal Scholar at the University of Pittsburgh School of Law

When a foreign sovereign breaches a commercial contract with a private entity, what recourse does the wronged party have? In the United States, the Foreign Sovereign Immunities Act (FSIA) governs such disputes, providing an exception for commercial activity that causes a “direct effect” in the U.S. Yet, the definition of “direct effect” has remained elusive, leading to decades of judicial inconsistency and a deepening circuit split.

At the heart of this legal uncertainty is the Supreme Court’s decision in Republic of Argentina v. Weltover (1992), which sought to clarify the issue but instead left room for widely divergent interpretations. Some circuits have adopted a flexible, causation-based approach, analyzing whether a foreign state’s breach had an immediate consequence in the U.S. Others, like the recent D.C. Circuit decision in Wye Oak Tech., Inc. v. Republic of Iraq, have imposed rigid bright-line rules—specifically requiring that the contract contemplate the U.S. as a place of performance. This formalistic approach creates a dangerous loophole, allowing foreign states to structure agreements in a way that insulates them from jurisdiction. As a result, a U.S. business may suffer substantial financial harm from a foreign sovereign’s breach but find itself without legal recourse simply because the contract was silent on where payments were to be made.

This restrictive interpretation undermines the FSIA’s core purpose: to hold foreign sovereigns accountable when their commercial activities impact U.S. businesses. By prioritizing contractual language over economic reality, decisions like Wye Oak erode the ability of American companies to seek redress, making sovereign breaches effectively consequence-free. A proper interpretation of the FSIA should align with Weltover’s focus on causation, ensuring that foreign states cannot exploit technicalities to evade liability. If left uncorrected, the current trend risks turning the FSIA into little more than a paper shield—one that protects sovereigns rather than those they harm.

The Wye Oak decision exacerbates both intra- and inter-circuit inconsistencies, further complicating the FSIA’s application and weakening the commercial activity exception in breach-of-contract cases. By imposing a rigid bright-line rule, it unduly narrows the scope of what qualifies as a “direct effect,” creating uncertainty for U.S. businesses engaged in international commerce. With Wye Oak’s attorneys petitioning for certiorari in January 2025, the case presents a critical opportunity for the Supreme Court to resolve the longstanding circuit split on the FSIA’s direct effects clause.

The Explosion of Private International Law in Asian Scholarship

The 21st century has witnessed a remarkable surge in academic scholarship on private international law in Asia. This is not to say that significant studies on the subject were absent before this period. However, in recent decades, Asian scholars have brought renewed vigour and depth to the field, establishing private international law as a critical area of legal inquiry on the continent.

A testament to this intellectual flourishing is Hart Publishing’s extensive series on private international law in Asia, featuring no fewer than 16 volumes with Professors Anselmo Reyes and Paul Beaumont as Series Editors. These works serve as a rich repository of comparative legal thought, offering valuable insights that extend far beyond Asia’s borders. Scholars and practitioners seeking inspiration from diverse jurisdictions will find these books to be an essential resource. Moreover, other publishers have also contributed to this growing body of literature, further amplifying Asia’s voice in the global discourse on private international law.

Having read and reviewed many of these works on the blog, I am continually struck by the depth of scholarship they offer. Each new book reveals fresh perspectives, reinforcing the notion that private international law is not merely a regional concern but a truly global conversation.

As someone deeply engaged with African private international law, I have found immense value in these Asian publications. The parallels between Asia and Africa—particularly in terms of legal pluralism and cultural diversity—make these studies both relevant and instructive. The cross-pollination of ideas between these regions has the potential to strengthen the development of private international law in both continents.

What is most striking about this surge in Asian scholarship is its outward-looking nature. No longer confined to internal discussions, private international law in Asia is now exporting ideas, influencing legal developments worldwide. This is a phenomenon that deserves both recognition and emulation. The rise of Asian scholarship in private international law is not just an academic trend—it is a pivotal force shaping the future of global legal thought.

The $24 Billion Judgment Against China in Missouri’s COVID Suit

This article was written by Prof. William S. Dodge (George Washington University Law School) and first published on Transnational Litigation Blog. The original version can be found at Transnational Litigation Blog. Reposted with permission.

On March 7, 2025, Judge Stephen N. Limbaugh, Jr. (Eastern District of Missouri) entered a default judgment for more than $24 billion against the People’s Republic of China and eight other Chinese defendants for hoarding personal protective equipment (PPE) during the early days of the COVID pandemic in violation of federal and state antitrust laws. The Eighth Circuit had previously held that the Foreign Sovereign Immunities Act (FSIA) barred most of Missouri’s claims but that the hoarding claim fell within the act’s commercial activity exception.

Missouri now has the judgment against China that it wanted. But Missouri may find that judgment hard to enforce. As discussed below, there appear to be significant procedural problems with the judgment that at least some defendants might raise. More broadly, the properties of foreign states and their agencies or instrumentalities are entitled to immunity from execution under the FSIA. Immunity from execution is broader than immunity from suit, and it is not clear that any of the defendants have property in the United States that can be used to satisfy the judgment. Read more

News

Out Now: Gridel, Financial Markets and Instruments in Private International Law. A European and French Perspective A European and French Perspective

The multiple-award-winning book by Augustin Gridel (Université de Lorraine), Marchés et instruments financiers en droit international privé (Bruylant 2023), has just been published in English under the title Financial Markets and Instruments in Private International Law. A European and French Perspective. It features a preface by Louis D’Avout and a foreword by Christine Lagarde.Financial Markets and Instruments in Private International Law

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Report of the Oxford Conference on “Characterisation in the Conflict of Laws”

The author of this report is Meltem Ece Oba (Koç University, Istanbul). The post is being published simultaneously on Conflictoflaws.net and on the EAPIL blog.

 

 On 20-21 March 2025, a conference on “Characterisation in the Conflict of Laws” was convened at St Hilda’s College, Oxford. Under the auspices of the Institute of European and Comparative Law in the Law Faculty of the University of Oxford, the conference was jointly organised by Dr Johannes Ungerer (University of Oxford and Notre Dame University in England), Dr Caterina Benini (Catholic University of Sacred Heart, Milan) and PD Dr Felix Berner (University of Tübingen). The conference brought together scholars and practitioners from several jurisdictions around the world.

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Summer School ‘Consumer and Market Law in the European Circular Economy’

Registration is now open for the Summer School ‘Consumer and Market Law in the European Circular Economy’ which will be held from 9 to 18 July 2025: 9-11 July online and 14-18 July in presence at the University of Udine, Italy.

The Summer School is organised by the University of Udine, in cooperation with a consortium of European universities, including University of Essex, De Montfort University of Leicester, University of West Timisoara, East Anglia University, University of Rijeka, University of Belgrade and University of Szeged, within the framework of the Jean Monnet Module CoME CircLE.

The 2025 Summer School will consist of 40 hours of lectures, a workshop and a moot court. Attendees will be offered a comprehensive training on the legal discipline of consumer protection and market regulation in the EU Law, with a particular reference to circular economy, taking into account the following relevant topics: Consumer protection and empowerment issues; Private international law issues; Dispute resolution and redress issues; and Market regulation.

Eligible are undergraduate students, graduatestudents and PhD students, studing Law, Economics, Political Science or International Relations. Application deadline is 31 May 2025, 12.00 pm GMT. Those who are interested in applying, need to fill in the application form and submit it to ip.europeanlaw.uniud@gmail.com.

For details see the programme and the call for application.