Republic of Argentina v. Weltover, Inc.

Background

Argentina and its central bank created a program to insure foreign-exchange risk for domestic borrowers. When Argentina lacked dollars to pay those obligations, it issued U.S.-dollar government bonds called Bonods and later unilaterally extended their payment dates. Two foreign companies and a Swiss bank holding $1.3 million in Bonods refused the rescheduling, named New York as the payment place, and sued in a U.S. federal court. Lower courts allowed the suit, and the case reached the Supreme Court to decide whether Argentina had immunity.

Reasoning

The Court focused on a part of the Foreign Sovereign Immunities Act that removes immunity for foreign states’ commercial activities that cause a direct effect in the United States. The Justices said an act is “commercial” when a government acts like a private market player, looking to the nature of the action rather than the government’s purpose. Because the Bonods functioned like ordinary tradable debt payable in dollars and could be performed in New York, issuing and rescheduling them were commercial acts. The Court also held the rescheduling had a direct effect in the United States because designated New York bank accounts were the intended place of payment and money was not delivered.

Real world impact

The decision affirms that foreign governments issuing and restructuring market-style dollar debt can be sued in U.S. courts when payments are payable in the United States. Designating U.S. payment locations and using market instruments can expose sovereigns to American jurisdiction, and courts need not require any separate “substantial” or “foreseeable” test to find a direct effect.