Verlinden B. v. v. Central Bank of Nigeria
Headline: Upheld the Foreign Sovereign Immunities Act to allow foreign companies to sue foreign governments in U.S. federal courts when the Act’s immunity rules apply, and returned the case for further review.
Holding: The Court held that Congress may constitutionally grant federal courts jurisdiction over suits by foreign plaintiffs against foreign sovereigns because such suits "arise under" the Foreign Sovereign Immunities Act and require application of federal immunity rules.
- Allows foreign companies to sue foreign governments in U.S. federal courts under the Act.
- Requires federal courts to apply uniform federal immunity rules before hearing such cases.
- Sends the case back for lower courts to decide if an immunity exception applies.
Summary
Background
A Dutch company, Verlinden B. V., contracted to sell cement to Nigeria. Verlinden says Nigeria’s Central Bank changed letters of credit and effectively broke the deal. Verlinden sued the Central Bank in a U.S. federal court in New York, invoking the 1976 Foreign Sovereign Immunities Act (the Act), which sets rules for when foreign governments can be sued in U.S. courts. The lower courts disagreed about whether the Act even allowed a foreign company to sue a foreign government in federal court and whether that was constitutional.
Reasoning
The Court addressed whether Article III of the Constitution (the part that defines federal court power) allows Congress to let foreign plaintiffs sue foreign sovereigns in federal court under the Act. The Justices found the Act’s language clearly covers suits by foreign plaintiffs. They concluded such cases “arise under” federal law because the Act creates uniform federal standards about when foreign states are immune. The Court said Congress acted on its powers over foreign commerce and foreign relations and therefore could make these immunity rules federal law that federal courts must apply.
Real world impact
The decision means foreign companies can bring suits against foreign governments in U.S. federal courts when one of the Act’s exceptions applies. The ruling is not a final win for Verlinden: the Supreme Court sent the case back so the lower courts must decide whether any statutory exception to immunity actually lets this particular lawsuit proceed. The outcome could still change on remand.
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