EM Ltd. v. Banco Central de la República Argentina
800 F.3d 78
2d Cir.
2015

Background

  • Argentina issued FAA bonds (1990s); the FAA included an express waiver of sovereign immunity. Argentina defaulted in 2001 and restructured most debt in 2005 and 2010; EM and NML hold non‑restructured FAA bonds and obtained U.S. judgments against Argentina (~$2.4 billion).
  • Plaintiffs sought to satisfy their judgments by attaching assets of Argentina’s central bank, Banco Central de la República Argentina (BCRA), including funds held in BCRA’s Federal Reserve Bank of New York (FRBNY) account.
  • Earlier proceedings: district court temporarily restrained BCRA funds in 2005; this was vacated and, on appeal, the Second Circuit held the FRBNY funds immune under 28 U.S.C. §1611(b)(1) and did not resolve the alter‑ego question (BCRA II).
  • Plaintiffs filed a Third Amended Complaint seeking a declaratory judgment that BCRA is Argentina’s alter ego so plaintiffs could reach BCRA assets worldwide. BCRA moved to dismiss under the FSIA (sovereign immunity), among other grounds.
  • The district court denied dismissal, concluding BCRA had waived immunity via (1) imputed waiver under the FAA because BCRA is Argentina’s alter ego, and (2) the FSIA commercial‑activity exception based on BCRA’s FRBNY account activity. The Second Circuit reviewed and reversed.

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Whether BCRA is Argentina’s alter ego so Argentina’s FAA waiver imputes to BCRA (FSIA §1605(a)(1)) FAA’s express waiver should be imputed because Argentina so extensively controlled BCRA (or recognition of separateness would work an injustice). BCRA is a separate juridical entity (statutory charter, board, powers); plaintiffs’ facts do not show control of BCRA’s day‑to‑day operations or abuse of corporate form. Reversed — plaintiffs did not rebut Bancec presumption of separateness; neither extensive control nor fraud/injustice shown, so FAA waiver cannot be imputed to BCRA.
Whether BCRA’s use of its FRBNY account constitutes "commercial activity carried on in the United States" to waive immunity (FSIA §1605(a)(2)) BCRA purchased dollars via its FRBNY account in U.S. markets; those dollars were used to make loans to Argentina that harmed plaintiffs — nexus to U.S. commercial activity. The FRBNY account activity is incidental to plaintiffs’ claim; the gravamen concerns loans and policy decisions in Argentina, not U.S. commercial acts. Reversed — no sufficient nexus; BCRA’s FRBNY transactions are too incidental to the gravamen, so the commercial‑activity exception does not apply.
Appellate jurisdiction over interlocutory denial of sovereign immunity Plaintiffs argued immunity decision intertwined with merits (alter‑ego fact inquiry) so not immediately appealable. Collateral‑order doctrine permits immediate appeal of sovereign‑immunity rulings because immunity is immunity from suit. Affirmed jurisdiction — collateral‑order exception applies; the court may review the threshold immunity ruling.
Remedy Plaintiffs sought declaratory judgment to attach BCRA assets worldwide. BCRA sought dismissal based on FSIA immunity. The complaint must be dismissed with prejudice for lack of subject‑matter jurisdiction (BCRA immune).

Key Cases Cited

  • First Nat'l City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611 (1983) (establishes presumption of separateness for foreign instrumentalities and the limited alter‑ego exceptions: extensive control or fraud/injustice)
  • NML Capital, Ltd. v. Banco Central de la República Argentina, 652 F.3d 172 (2d Cir. 2011) (BCRA II) (FRBNY funds immune under §1611(b)(1); did not decide alter‑ego question)
  • Rein v. Socialist People's Libyan Arab Jamahiriya, 162 F.3d 748 (2d Cir. 1998) (denial of sovereign immunity reviewable under collateral‑order doctrine)
  • Kensington Int'l Ltd. v. Itoua, 505 F.3d 147 (2d Cir. 2007) (commercial‑activity exception requires a close nexus; incidental U.S. acts insufficient)
  • Bridas S.A.P.I.C. v. Gov't of Turkmenistan, 447 F.3d 411 (5th Cir. 2006) (examples of piercing where state dissolved or shifted assets between instrumentalities to evade liability)
  • Letelier v. Republic of Chile, 748 F.2d 790 (2d Cir. 1984) (piercing corporate form when recognition of separateness would work fraud or injustice)
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