112 F.4th 1054
D.C. Cir.2024Background
- China and Nigeria signed a 2001 bilateral investment treaty (BIT) that (1) guaranteed protections to investors and (2) provided investor–state arbitration (Art. 9). Nigeria also is a party to the New York Convention.
- Zhongshan (a Chinese investor) invested millions to develop an industrial park in Ogun State’s free-trade zone; Ogun State later terminated agreements and Nigerian authorities ousted/arrested executives.
- Zhongshan initiated investor–state arbitration under the BIT; a London arbitral tribunal found Nigeria breached the BIT and awarded Zhongshan about $55.6 million plus fees and interest.
- Zhongshan sued in U.S. district court to confirm and enforce the award; Nigeria moved to dismiss claiming sovereign immunity under the FSIA.
- The district court denied dismissal, ruling the FSIA arbitration exception applied because the award is governed by the New York Convention; Nigeria appealed.
- The D.C. Circuit affirmed: the court held the award is governed by the New York Convention (so the FSIA arbitration exception applies) because the award arose from a legal relationship considered commercial and between “persons.”
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the FSIA arbitration exception apply (i.e., is the award governed by a treaty calling for recognition and enforcement of awards)? | The BIT created an arbitration agreement and conferred enforceable rights on Zhongshan; the award thus is governed by the New York Convention and falls within FSIA §1605(a)(6). | The New York Convention does not cover awards based on sovereign (public-law) acts; therefore FSIA immunity remains. | Held: Yes. The award is governed by the New York Convention; FSIA arbitration exception applies. |
| Is the underlying legal relationship "considered as commercial" under 9 U.S.C. §202? | Broad meaning: any relationship with a connection to commerce (investment in a free‑trade zone, tax revenue, profit motive, treaty aimed at promoting commerce). | The commercial reservation should be limited to transactions/contracts described in FAA §2 (i.e., a narrower, transactional reading). | Held: The commercial reservation is broad; the BIT/investment relationship is commercial for §202 purposes. |
| Does the Convention’s term “persons” include a sovereign state when the award arises from sovereign acts? | Yes—when a state assumes treaty obligations to investors and consents to arbitration, it qualifies as a “person” under the Convention; nothing in the text limits states to private acts only. | No—ordinary meaning and drafting history show “persons” excludes states acting in sovereign capacity; the Convention was aimed at private/commercial disputes. | Held: “Persons” can include states that assume treaty obligations to private investors; the court rejects a categorical private‑act limitation. |
| What weight should be given to the Convention’s drafting history and other post‑ratification practice? | Text and precedent control; drafting history does not show a categorical exclusion of sovereign‑act awards; Executive Branch and post‑ratification practice support enforcement. | Drafting history and context show the Convention was not meant to reach awards based on public‑law sovereign acts. | Held: Drafting history does not overcome the Convention’s plain text and other interpretive signals; court gives limited weight to travaux that would add a private‑act requirement. |
Key Cases Cited
- Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480 (Sup. Ct.) (historical background on sovereign immunity and FSIA’s purpose)
- Republic of Argentina v. Amerada Hess Shipping Corp., 488 U.S. 428 (Sup. Ct.) (FSIA is the sole basis for jurisdiction over foreign states)
- Belize Soc. Dev., Ltd. v. Government of Belize, 794 F.3d 99 (D.C. Cir.) (broad reading of the New York Convention’s commercial reservation)
- Tatneft v. Ukraine, 21 F.4th 829 (D.C. Cir.) (affirming enforcement of investor–state award implicating sovereign acts)
- Chevron Corp. v. Ecuador, 795 F.3d 200 (D.C. Cir.) (confirms enforcement of an investor–state award against a sovereign)
- BG Group PLC v. Republic of Argentina, 572 U.S. 25 (Sup. Ct.) (treaties may create rights enforceable by investors; arbitration/treaty enforcement principles)
- United States v. United Mine Workers of America, 330 U.S. 258 (Sup. Ct.) (interpretive presumption about the word “person” and sovereigns)