Bae Sys. Tech. Solution & Servs., Inc. v. Republic of Korea's Def. Acquisition Program Admin.
884 F.3d 463
4th Cir.2018Background
- Korea sought an FMS (Foreign Military Sale) upgrade of F-16 avionics; U.S. required the sale be processed as an FMS (sovereign-to-sovereign) rather than a direct commercial sale (DCS).
- Korea and BAE entered a BAE-Korea memorandum/agreement: BAE would be Korea’s preferred contractor, use its "best efforts" to secure agreed pricing in the government-to-government FMS talks, and would pay Korea $43.25 million if it failed to do so; the agreement provided that disputes "shall be resolved" in Seoul Central Court and terminated automatically once an FMS agreement executed.
- The U.S.–Korea FMS negotiations produced a preliminary government-to-government agreement but later stalled when the U.S. government raised the price well above earlier estimates; Korea demanded BAE pay under the Letter of Guarantee/Memorandum.
- BAE filed suit in U.S. district court seeking a declaratory judgment that it did not breach; Korea filed counterclaims and pursued parallel litigation in Korea. The district court granted declaratory relief to BAE, found Korea had waived FSIA immunity, but denied a permanent anti-suit injunction barring Korean litigation.
- Both parties appealed; Fourth Circuit affirmed in all respects, holding (inter alia) the forum clause was permissive, Korea impliedly waived sovereign immunity, enforcement of the BAE-Korea agreement would undermine the FMS statutory/regulatory scheme and U.S. national security interests, and an anti-suit injunction was not warranted given comity concerns.
Issues
| Issue | Plaintiff's Argument (BAE) | Defendant's Argument (Korea) | Held |
|---|---|---|---|
| Is the forum-selection clause mandatory? | Clause is permissive; Seoul is an available forum but not exclusive. | Clause is mandatory and requires dismissal in favor of Seoul. | Clause is permissive (no "exclusive/sole/only" language); traditional forum non conveniens applies; Korea failed to meet its burden. |
| Did Korea waive sovereign immunity under the FSIA? | Korea filed an answer and counterclaims without asserting FSIA immunity → implied waiver. | Korea later invoked FSIA language in an amended answer; waiver not established. | Waiver found: filing a responsive pleading without asserting immunity constitutes an implied waiver; amended answer cannot revive immunity. |
| Is the BAE-Korea agreement enforceable despite FMS structure and national security concerns? | Agreement is intimately tied to the FMS negotiation and enforcement would undermine FMS dispute/price controls and U.S. national security; thus not enforceable. | Agreement is separate from the FMS contract and does not affect U.S. national security; enforceable (similar to offsets). | Enforcement would undermine the FMS statutory/regulatory structure (dispute resolution and U.S. control of price) and thereby conflict with U.S. national security interests; agreement unenforceable in this respect. |
| Was a permanent anti-suit injunction against Korean litigation warranted? | Yes: to protect U.S. court judgment, avoid inconsistent judgments, and protect national security. | No: comity and sovereignty of Korea counsels against barring a foreign sovereign from its courts. | Denial affirmed: injunction is an extraordinary remedy; comity and the unusual intrusion on foreign sovereign litigation make injunction inappropriate despite national-security concerns. |
Key Cases Cited
- Sec'y of State for Defence v. Trimble Nav. Ltd., 484 F.3d 700 (4th Cir. 2007) (FMS-mandated transactions reflect U.S. national security and limit foreign purchaser remedies against U.S. contractors)
- M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (U.S. 1972) (forum-selection clauses presumptively enforceable when mandatory)
- Atlantic Marine Constr. Co. v. U.S. Dist. Ct., 134 S. Ct. 568 (U.S. 2013) (forum-selection clauses alter forum non conveniens/transfer analysis and shift burdens)
- Albemarle Corp. v. AstraZeneca UK Ltd., 628 F.3d 643 (4th Cir. 2010) (distinguishing mandatory vs. permissive forum clauses; "specific language of exclusion" required for mandatory clause)
- Sinochem Int'l Co. v. Malaysia Int'l Shipping Co., 549 U.S. 422 (U.S. 2007) (doctrine and standards governing forum non conveniens and related jurisdictional motions)
- Paramedics Electromedicina Comercial, Ltda. v. GE Med. Sys., 369 F.3d 645 (2d Cir. 2004) (anti-suit injunctions to protect domestic judgments are extraordinary and require strong equitable grounds)
- Lone Star Steakhouse & Saloon, Inc. v. Alpha of Virginia, Inc., 43 F.3d 922 (4th Cir. 1995) (standard of review for anti-suit injunctions and limits on their issuance)