Chettri v. Nepal Rastra Bank
2016 U.S. App. LEXIS 11070
| 2d Cir. | 2016

Background

  • Tarala Internationals (Colorado corp.) supplied military equipment to Nepal; Wu (agent) coordinated deliveries and received a $1,000,000 wire to his Nepal bank account.
  • Bangladesh Bank (Kathmandu) froze Wu’s account for insufficient documentation of the funds’ source; Rastra Bank (Nepal’s central bank/financial agent) and Nepal’s Department of Revenue Investigation later instructed/maintained the freeze while investigating potential money‑laundering.
  • Tarala and Wu sued in the SDNY seeking recovery of the $1,000,000; Rastra Bank and the Department failed to respond and a default judgment was entered for $1,000,500.
  • Rastra Bank and the Department later moved to vacate, arguing immunity under the Foreign Sovereign Immunities Act (FSIA) and defects in FSIA service; the district court vacated the default and dismissed for lack of subject‑matter and personal jurisdiction.
  • The Second Circuit affirmed, holding Nepal’s agencies are presumptively immune and neither the FSIA commercial‑activity exception nor the takings exception applied.

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Whether FSIA commercial‑activity exception (28 U.S.C. §1605(a)(2)) defeats immunity The suit is rooted in Nepal’s commercial contracts to buy goods from Tarala and the wire was part of contract performance, so the complaint is based on commercial activity The claim is based on the freezing of funds by Nepalese authorities (regulatory/law‑enforcement conduct), not on commercial contracting or acts in the U.S.; no direct U.S. effect Held: Exception does not apply; freezing was a regulatory act abroad and the causal/"based upon" nexus and direct‑effect requirements fail
Whether FSIA takings exception (28 U.S.C. §1605(a)(3)) applies Freezing of funds amounts to a taking of property in violation of international law The freeze was a routine law‑enforcement action during a money‑laundering investigation, not an expropriation without compensation violating international law Held: Exception does not apply; plaintiffs did not plausibly allege a taking in violation of international law
Whether the district court had personal jurisdiction / service under the FSIA Service and jurisdiction were sufficient (plaintiffs) Service did not comply with FSIA requirements (defendants); but court should first resolve subject‑matter jurisdiction Held: Court need not reach service/personal jurisdiction because subject‑matter jurisdiction lacking due to immunity

Key Cases Cited

  • U.S. Titan, Inc. v. Guangzhou Zhen Hua Shipping Co., 241 F.3d 135 (2d Cir.) (standard of review for FSIA jurisdictional factual findings and legal conclusions)
  • Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428 (U.S. 1989) (FSIA provides sole basis for jurisdiction over foreign states in federal court)
  • Saudi Arabia v. Nelson, 507 U.S. 349 (U.S. 1993) (states presumptively immune; ‘‘based upon’’ requires close nexus to commercial act)
  • Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480 (U.S. 1983) (FSIA subject‑matter jurisdiction prerequisite to personal jurisdiction)
  • Virtual Countries, Inc. v. Republic of S. Africa, 300 F.3d 230 (2d Cir.) (burden on defendant to make prima facie showing of foreign sovereign status)
  • Cargill Int'l S.A. v. M/T Pavel Dybenko, 991 F.2d 1012 (2d Cir.) (plaintiff must show that an FSIA exception applies after defendant shows sovereign status)
  • Garb v. Republic of Poland, 440 F.3d 579 (2d Cir.) (identify act that is basis of claim; narrow reading of "in connection with")
  • Kensington Int'l Ltd. v. Itoua, 505 F.3d 147 (2d Cir.) (requires closeness between commercial activity and gravamen)
  • Transatlantic Shiffahrtskontor GmbH v. Shanghai Foreign Trade Corp., 204 F.3d 384 (2d Cir.) ("based upon" requires more than causation; attenuated links insufficient)
  • Republic of Argentina v. Weltover, Inc., 504 U.S. 607 (U.S. 1992) (commercial act defined as state acting like a private market participant)
  • Guirlando v. T.C. Ziraat Bankasi A.S., 602 F.3d 69 (2d Cir.) (direct‑effect requirement under §1605(a)(2))
  • Zappia Middle E. Constr. Co. v. Emirate of Abu Dhabi, 215 F.3d 247 (2d Cir.) (defining ‘‘taken in violation of international law’’ for §1605(a)(3))
Read the full case