This suit is one of several arising from the promulgation by Mexico of exchange control regulations on August 13,1982, and from the subsequent nationalization of privately-owned Mexican banks on September 1, 1982. The exchange control regulations mandated that all deposits in Mexican banks, however denominated, be repaid in Mexican pesos at specified rates of change. Because the dollar rate of exchange was well below the market rate, the regulations constituted a Montezuma’s revenge on American investors who had dollar deposits in Mexican banks. A number of these indisposed investors, including the plaintiffs in the present suit, have brought claims against Mexican banks for breach of contract.
Thus far, the courts that have passed on these cases have been unanimous in dismissing the plaintiffs’ claims, either on the ground that the banks are immune from suit under the doctrine of sovereign immunity,
Braka v. Nacional Financiera,
No. 83-4161 (S.D.N.Y. July 9, 1984);
Frankel v. Banco Nacional de Mexico,
No. 82-6457 (S.D.N.Y. May 31, 1983), or on the ground that suit is barred by the act of state doctrine,
Braka v. Bancomer, S.A.,
We agree with the result reached by the district court, but disagree with its rationale. We believe that Bancomer is not immune from suit under the FSIA and that the case is properly analyzed in act of state terms. Because we are barred under the act of state doctrine from inquiring into the validity of acts of foreign states performed in their own territory — including the validity of Mexico’s exchange control regulations — we affirm the district court’s dismissal of the present suit.
I. FACTS
William Callejo and his wife Adelfa are United States citizens who reside in Texas. Beginning in 1979 or 1980, the Callejos purchased certificates of deposit (“CDs”) issued by Bancomer, S.A., a then privately-owned Mexican bank. 1 The record is unclear about how this business relationship originated — in particular, whether it resulted from Bancomer’s solicitations in Texas. During the course of the Callejos’ relationship with Bancomer, however, Bancomer regularly engaged in commercial activity in the United States, operating a branch office in Los Angeles and an agency in New York City. In Texas, Bancomer maintained accounts with both Republic Bank Dallas and Laredo National Bank.
The procedure used by the Callejos and Bancomer to make deposits and payments, although labyrinthine in course, is fairly clear in broad outline. To make deposits, the Callejos would direct their bank in Dallas to wire funds to Laredo National Bank in Laredo, Texas, where they would be credited to Bancomer’s account. Bancomer would then direct Laredo National to debit Bancomer’s account in the same amount, and would credit the amount to the Calle-jos’ account at Bancomer’s branch in Nue-vo Laredo, Mexico. To cover this credit by Bancomer to the Callejos’ account, Laredo National would transfer the funds (by an undisclosed mechanism) to Bancomer’s Nuevo Laredo branch. It is undisputed that Laredo National acted as a correspondent bank in effectuating these deposits, that Bancomer’s account with Laredo National did not show a net increase as a result of the transactions, and that the Callejos’ money ultimately was deposited in an account in Bancomer’s Nuevo Laredo branch, where the certificates of deposit were issued.
The means by which Bancomer paid interest and principal to the Callejos are the subject of somewhat greater dispute. The Callejos claim that Bancomer effectuated the payments by directing Laredo National to draw funds from Bancomer’s Laredo National account and to transfer them to the Callejos’ bank in Dallas. According to the Callejos, this method of payment was established specifically to ensure that they would receive the payments in Texas rather than Mexico. Bancomer, in contrast, claims that it would issue cashier’s checks in Mexico payable to the Callejos and would hold the checks at its Nuevo Laredo branch pending receipt of instructions from the Callejos as to how the funds should be remitted. Usually, the funds would be remitted by means of interbank transfers; on occasion, however, they would be redeposited in Mexico, or would be sent in the form of a cashier’s check to a third person, or would be remitted to one of the Callejos’ accounts with another Mexican bank. Although these descriptions of the method of payment differ in emphasis, they are not directly contradictory; the payments drawn on Bancomer’s account with Laredo National, which the Callejos highlight, were merely one link in a larger chain by which Bancomer transferred funds from its Nue-vo Laredo branch to the Callejos’ American accounts. As with the method of making deposits, Laredo National’s role appears to *1106 have been that merely of a correspondent bank.
The four certificates of deposit at issue in the present suit were purchased by the Callejos on May 31 and June 3, 1982. Two were renewals of prior certificates and two were new certificates; all had terms of three months, were denominated in United States dollars, and called for payment of principal and interest in United States dollars. Together, they had a value of approximately $300,000. Like the other certificates of deposit purchased by the Calle-jos, they specified on their face Mexico City as the place of payment.
In August 1982, facing a severe monetary crisis brought on by a decline in the world price of oil, the Government of Mexico promulgated exchange control regulations. These were supplemented by further regulations in September 1982. The regulations required Mexican banks to pay principal and interest on U.S. dollar-denominated certificates of deposit in pesos rather than dollars, at a specified rate of exchange. 2 The regulations also required that payment be made in Mexico and limited the number of pesos that foreigners could remove from the country. On September 1, 1982, the Government of Mexico nationalized all privately-owned Mexican banks, including Bancomer.
Pursuant to the new exchange control regulations, on August 13, 1982, Bancomer notified the Callejos that it would pay the principal and interest on the Callejos’ four certificates of deposit in pesos at a rate of exchange substantially below the market rate. To forestall this, the Callejos renewed the two certificates of deposit due to mature on August 31, 1982, and filed the present suit. 3
As amended, the Callejos’ complaint alleged breach of contract and securities act violations 4 and sought either rescission of the sale of the certificates of deposit or money damages. In response, Bancomer filed a motion to dismiss, which the district court granted on February 27, 1984. The district court held that the Callejos’ suit was not based on Bancomer’s commercial activities and that therefore Bancomer, as an instrumentality of the Mexican Government, was entitled to sovereign immunity. The Callejos then brought the present appeal.
II. SOVEREIGN IMMUNITY
Along with other privately-owned Mexican banks, Bancomer was nationalized by the Mexican Government on September 1, 1982. Consequently, Bancomer is now an “agency or instrumentality of a foreign state” within the meaning of 28 U.S.C. § 1603(b)(2), and would ordinarily be entitled to immunity from the jurisdiction of American courts under the FSIA, 28 U.S.C. § 1604. The FSIA, however, contains a number of exceptions to the jurisdictional immunity of foreign states. One of these is found in 28 U.S.C. § 1605(a)(2), which states:
(a) A foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case—
(2) in which the action is based [1] upon a commercial activity carried on in the United States by the foreign state; or [2] upon an act performed in *1107 the United States in connection with a commercial activity of the foreign state elsewhere; or [3] upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States. 5
The Callejos claim that this exception applies in the present case, since their suit is based upon a commercial activity by Ban-comer that was both carried on and caused a direct effect in the United States.
The FSIA has aptly been called a “remarkably obtuse” document, a “statutory labyrinth that, owing to the numerous interpretive questions engendered by its bizarre structure and its many deliberately vague provisions, has during its brief lifetime been a financial boon for the private bar but a constant bane of the federal judiciary.”
Gibbons v. Udaras na Gaeltachta,
In determining whether Section 1605(a)(2) applies, two questions are relevant:
(1) Is the Callejos’ suit “based upon a commercial activity” by Bancomer?
(2) If so, did this commercial activity have the required jurisdictional nexus with the United States?
In the present case, the district court answered the first of these questions in the negative and therefore never reached the second. It held that the action was “based upon” the promulgation by Mexico of exchange control regulations — a sovereign act — not upon Bancomer’s banking activities. We disagree. In our view, the Calle-jos’ action arose as a result of Bancomer’s commercial banking activities. Moreover, these banking activities had a direct effect in the United States, thus satisfying the jurisdictional-nexus requirement of Section 1605(a)(2). For these reasons, we hold that Bancomer is not entitled to sovereign immunity under the FSIA.
*1108 A. Commercial Activity
In determining whether the commercial activity exception applies, the critical question is usually whether the relevant activity is commercial or sovereign in nature — whether it is a
jure gestionis
or a
jure imperii,
a private or a public act.
6
Here, however, there is little doubt about how to characterize the activities at issue: Bancomer’s actions in selling the certificates of deposit were clearly commercial in nature,
see Schmidt v. Polish People’s Republic,
The district courts that have considered this question have given different answers. The court below followed Frankel v. Banco Nacional de Mexico, No. 82-6457 (S.D.N.Y. May 31, 1983), in finding that the relevant activity was the promulgation by Mexico of exchange control regulations. As the Frankel court noted,
[Plaintiffs allege no conduct on the part of Banco Nacional in breach of its obligations to plaintiffs other than measures taken by Banco Nacional to comply with the currency control rules and regulations promulgated by the Mexican Government. It is evident that the gravamen of the complaint, succinctly set forth in paragraph 7 thereof, is as follows (emphasis added):
____That the promulgation of the ...
[currency control] rules and the prohibition of the defendant paying plaintiffs in United States dollars represents a breach of contract between the parties as specified in the Certificate of Deposit.
At 5. In contrast, the court in Braka v. Bancomer focused on the defendant bank’s actions in selling the certificates of deposit:
Although a foreign sovereign’s internal currency regulation “is precisely the type of governmental activity that cannot be subjected to judicial scrutiny,” ... the Ministry of Treasury, not Bancomer, was responsible for the exchange controls. The issue under the FSIA is to determine whether the act of the named defendant was performed in a sovereign or a commercial capacity; analysis must focus on the named defendant’s acts which are the basis of the action and not on the separate acts of other sovereign instrumen-talities or agencies.
We agree with the conclusion of the
Braka
court rather than the conclusion
*1109
reached in
Frankel.
Under the FSIA, sovereign immunity depends on the nature of those acts of the defendant that form the basis of the suit. Here, the act complained of was Bancomer’s breach of its contractual obligations to the Callejos, not the promulgation by Mexico of exchange control regulations.
Cf. MOL, Inc. v. People’s Republic of Bangladesh,
Bancomer nevertheless' contends that the Callejos’ suit was based upon the Mexican exchange regulations since, but for these regulations, it would not have breached the terms of the CDs and the Callejos’ suit would not have arisen. We do not read Section 1605(a)(2)’s “based upon” requirement, however, to be equivalent merely to a requirement of causation. In most instances, a suit results from a variety of factors; it is no more the result of a single cause than was the Civil War. To say that the commercial activity exception does not apply whenever a suit is caused by a sovereign act would, in large measure, read the exception out of the law. We believe, instead, that the focus should be on the elements of the cause of action itself: Is the gravamen of the complaint a sovereign activity by the defendant? Here, the answer is clearly no: The activities of Bancomer that are the basis of the Callejos’ complaint — the sale of the certificates of deposit and the subsequent payments in pesos rather than dollars — were commercial in nature. 7
Nor does Bancomer acquire any derivative immunity by virtue of the fact that, in breaching the terms of the certificates of deposit, it was merely complying with the sovereign decrees of the Mexican Government. In
Arango v. Guzman Travel Advisors Corp.,
[Bancomer] was not the central bank and it had no special role in effectuating the monetary controls beyond complying with the decrees. Bancomer’s act in paying pesos instead of dollars was not ‘peculiarly within the realm of government,’ ... and its breach was no more a sovereign act than that of any other debtor, private or public, that had contracted to repay in dollars rather than pesos. That it was prevented from complying with its contract by a governmental decree flatly prohibiting the use of dollars as legal tender does not make it immune from suit as an agent of the Republic of Mexico.
Because we hold that Bancomer’s activities were neither themselves sovereign nor entitled to derivative immunity by virtue of being compelled by Mexican law, we conclude that the district court erred in dismissing the suit on the ground that the suit was based on sovereign, not commercial, activity. We therefore turn to the other prong of Section 1605(a)(2): that the commercial activity have the required jurisdictional nexus with the United States.
B. Jurisdictional Nexus
Section 1605(a)(2) grants an exception from sovereign immunity for suits based upon a commercial activity by an instrumentality of a foreign state, but only if the commercial activity had a sufficient connection with the United States. Section 1605(a)(2) identifies three such connections:
(1) commercial activity carried on in the United States;
(2) commercial activity carried on outside the United States, with acts performed in the United States in connection with that activity; and
(3) commercial activity carried on outside the United States that has direct effects in the United States.
The Callejos claim that Bancomer’s commercial activities were carried on and had direct effects in the United States, and that therefore the first and third of these jurisdictional bases exist. We agree with the latter claim — namely, that the breach of the certificates of deposit had direct effects in the United States — and therefore do not address whether Bancomer’s activities in connection with the certificates were “carried on in the United States” within the meaning of the FSIA. 8
*1111
Determining whether a commercial activity abroad has a “direct effect in the United States” is “an enterprise fraught with artifice.”
Texas Trading & Milling Corp. v. Federal Republic of Nigeria,
The legislative history of the FSIA directs us to look to Section 18 of the Restatement (Second) of Foreign Relations Law of the United States (1965), when interpreting the “direct effects” clause. House Report,
supra,
at 6618. This section governs the extent to which American law may be applied to conduct overseas, and states that the conduct must have a “substantial” effect in the United States “as a direct and foreseeable result of the conduct outside the territory” of the United States. Restatement,
supra,
at § 18(b)(ii)— (iii).
9
In several cases where an American plaintiff was injured overseas, this rule has been held to preclude recovery, since the effects in the United States, although potentially substantial, were not “direct and foreseeable.”
E.g., Australian Government Aircraft Factories v. Lynne,
However, where the effects in the United States of an activity abroad are less fortuitous, courts have been much more willing to characterize them as “direct.” For example, nonpayment of a note payable in the United States to a United States company has been held to cause a direct effect in the United States for the purposes of Section 1605(a)(2).
Texas Trading,
Here there is considerable controversy over where the certificates of deposit were payable. The Callejos claim that the place of payment was Texas, where they received the funds; Bancomer claims that it was Mexico, as specified on the certificates themselves. In the present context, however, the question of whether there was a *1112 direct effect in the United States can be resolved without reference to the place of payment. Since the Callejos were located in the United States, the effects of Ban-comer’s breach1 were inevitably felt by them there. Moreover, these effects in the United States were foreseeable. Unlike the cases where an American was injured abroad, here the fact that effects were felt in the United States was not fortuitous. Bancomer had engaged in a regular course of business conduct with the Callejos over a several-year period. It was well-aware that it was dealing with American investors — it called them in the United States, mailed the certificates to them there, and remitted payments through an American correspondent bank. Given these factors, we do not perceive any material difference whether the legal place of payment was Mexico or the United States. In either case, Bancomer’s breach was closely and foreseeably tied to the effects felt by the Callejos in the United States.
Our conclusion that the place of payment is not decisive is supported by the policies underlying the FSIA. The doctrine of sovereign immunity is one of a number of doctrines that attempt to regulate the relations between sovereign states. The essence of sovereignty is supremacy of authority — one sovereign rarely likes to be told what to do by another. Consequently, the exercise of jurisdiction over a foreign state is, as Chief Justice Marshall recognized when introducing the doctrine of sovereign immunity into American jurisprudence, a “delicate and important inquiry.”
Schooner Exchange v. McFaddon,
In weighing these competing interests, arcane doctrines regarding the place of payment are largely irrelevant. In the ever more complex world of international banking, these doctrines doubtless serve a useful function. However, in ordering relations between sovereign states, a larger perspective is appropriate. As the court in
Texas Trading
noted, “Congress in writing the FSIA did not intend to incorporate into modem law every ancient sophistry concerning ‘where’ an act or omission occurs. Conduct crucial to modern commerce — telephone calls, telexes, electronic transfers of intangible debits and credits — can take place in several jurisdictions. Outmoded rules placing such activity ‘in’ one jurisdiction or another are not helpful here.”
In the present case, we fail to perceive why jurisdiction should not be exercised. 10 Mexico’s interest is not so great — the suit is based on commercial not sovereign acts — nor America’s interest so weak — Bancomer had engaged in a longstanding business relationship with residents of the United States which caused them substantial financial harm — that the United States must defer to Mexico. Under these circumstances, we believe that Section 1605(a)(2) applies and that jurisdiction is consequently not barred by sovereign immunity.
III. ACT OF STATE 11
Like the doctrine of sovereign immunity, the act of state doctrine springs
*1113
“from the thoroughly sound principle that on occasion individual litigants may have to forgo decision on the merits of their claims because the involvement of the courts in such a decision might frustrate the conduct of the Nation’s foreign policy.”
First National City Bank v. Banco Nacional de Cuba,
The act of state doctrine received its classic expression in
Underhill v. Hernandez,
Every sovereign state is bound to respect the independence of every other sovereign state, and the courts of one country will not sit in judgment on the acts of the government of another, done within its own territory. Redress of grievances by reason of such acts must be obtained through the means open to be availed of by sovereign powers as between themselves.
Id. at 252,
In essence, the act of state doctrine operates as a super-choice-of-law rule, requiring that foreign law be applied in certain circumstances.
Occidental of Umm al Qaywayn, Inc. v. A Certain Cargo of Petroleum Laden Aboard the Tanker Dauntless Colocotronis,
rests at last upon the highest considerations of international comity and expediency. To permit the validity of the acts of one sovereign state to be re-examined and perhaps condemned by the courts of another would very certainly “imperil the amicable relations between governments and vex the peace of nations.”
Id. at 303-04,
In the present case, Bancomer claims that Mexico’s promulgation of exchange control regulations constituted an act of state, and that consideration of the Calle-jos’ claims would require us to inquire into the validity of those regulations. The Callejos argue, in response, that the act of state doctrine is inapplicable for three reasons: (1) Mexico’s promulgation of the exchange control regulations was a commercial act, not an act of state; (2) the “treaty exception” to the act of state doctrine applies, since the exchange control regulations violate Mexico’s obligations under the Articles of Agreement of the International Monetary Fund; and (3) the situs of the certificates of deposit was Texas rather than Mexico, and therefore the certificates are not governed by the Mexican decrees. We consider each of these arguments in turn.
A. The Commercial Activity Exception
In Part III of
Alfred Dunhill of London, Inc. v. Republic of Cuba,
In the present case, we need not decide whether to adopt the commercial activity exception, since Mexico’s actions were clearly sovereign and not commercial in nature.
17
For act of state (as opposed to sovereign immunity) purposes, the relevant acts are not merely those of the named defendants, but any governmental acts whose validity would be called into question by adjudication of the suit. Here, although the specific act complained of by the Callejos was Bancomer’s breach of con
*1116
tract, not Mexico’s promulgation of the exchange control regulations, adjudication of the breach of contract claim would necessarily call into question the Mexican regulations. Under these regulations, Bancomer has discharged its obligation to the Callejos by paying off the certificates in pesos at the established rate of exchange. Thus, we could require Bancomer to honor the terms of the certificates only by disregarding the regulations.
See Braka v. Bancomer, S.N.C.,
The power to issue exchange control regulations is paradigmatically sovereign in nature; it is not of a type that a private person can exercise. Unlike in
Dunhill,
where Cuba repudiated a single debt, here Mexico promulgated comprehensive, national decrees in response to a national monetary crisis. As the court noted in
Braka v. Bancomer, S.A.,
Mexico’s act in this instance cannot be construed as a simple repudiation of a government entity’s commercial debt. While the ultimate result may seem similar — i.e. Mexico has enriched itself at plaintiff’s expense — the mechanisms used by Mexico are conventional devices of civilized nations faced with severe monetary crises, rather than the crude and total confiscation by force of a private person’s assets.
Id.
at 1472. Were we to disregard the exchange regulations by enforcing the Callejos’ certificates of deposit, we would render nugatory the attempts by Mexico to protect its foreign exchange reserves. While we are doubtful of our ability to foresee what will vex the peace of nations, we have no doubt that disregarding the Mexican regulations would be very vexing indeed. We therefore reject the Callejos’ commercial activity argument.
Accord Braka v. Bancomer,
B. The Treaty Exception
The act of state doctrine is premised not only on an unwillingness to apply American public policy to invalidate foreign laws but also on a pessimism about the competence of the judiciary to ascertain norms of international law. Potentially, international law as well as American public policy could serve as a touchstone for evaluating foreign acts of state: if an act of state were contrary to international law we could treat the act as invalid and adjudicate the plaintiff’s claim. This approach would allow us to review foreign acts of state without engaging in the dubious practice of evaluating these acts against the potentially parochial norms of American public policy.
The Court, however, in large part foreclosed this avenue of review in
Banco Na-cional de Cuba v. Sabbatino,
In
Sabbatino,
however, the Court recognized that “the greater the degree of codification or consensus concerning a particular area of international law, the more appropriate it is for the judiciary to render decisions regarding it, since the courts can then focus on the application of an agreed upon principle to circumstances of fact rather than on the sensitive task of establishing a principle not inconsistent with national interest or with international justice.”
Sabbatino,
Here, the Callejos claim that the Mexican exchange control regulations violate the Articles of Agreement of the International . Monetary Fund (“Fund Agreement”), Dec. 27, 1945, 60 Stat. 1401, T.I.A.S. No. 1501, 2 U.N.T.S. 39, as amended April 30, 1976, 29 U.S.T. 2203, T.I.A.S. No. 8937, — U.N.T.S. — (amendments effective April 1, 1978), to which Mexico is a party. In particular, they claim that the regulations violate Article VIII, Section 2(a), which forbids members from imposing exchange control regulations on “current international transactions” 19 without the prior approval of the International Monetary Fund (“IMF” or “Fund”). 20 The Callejos argue that because the Fund Agreement is “a treaty or other unambiguous agreement,” the act of state doctrine does not apply. 21
*1118
In the twenty years that have elapsed since its inception in
Sabbatino,
the treaty exception to the act of state doctrine has been applied sparingly,
see, e.g., Kalamazoo Spice Extraction Co. v. Provisional Military Government of Socialist Ethiopia,
In determining whether the Fund Agreement — and Article VIII, Section 2(a) in particular — warrant application of the treaty exception, we tread upon uncharted ground. Thus far, no court has passed on this issue, and commentators have made, at best, ambiguous pronouncements. See, e.g., 2 J. Gold, The Fund Agreement in the Courts 138-39 (1982) (“The Articles of Agreement [of the IMF] could come within” the treaty exception.); Paradise, Cuban Refugee Insureds and the Articles of Agreement of the International Monetary Fund, 18 U.Fla.L.Rev. 29, 67 (1965). Initially, we note that it is unclear to what extent the Fund Agreement is unclear. Article VIII, Section 2(a) applies by its terms only to exchange control regulations governing “current international transactions” (as opposed to “capital transfers”). Under Article VI, Section 3 of the Fund Agreement, members may validly impose restrictions on international capital movements. Thus, determining whether a set of exchange control regulations requires approval by the Fund pursuant to Article VIII, Section 2(a) depends in part on determining whether they apply to “current” or “capital” transactions. Given the substantial uncertainty regarding the meanings of these terms, 23 we are doubtful that Article *1119 VIII, Section 2(a) is the type of “unambiguous agreement” referred to in Sabbatino. See Paradise, supra, at 67 (“Article VIII, section 2 of the Fund Agreement is the most complicated of the provisions of the Fund Agreement and clearly is not ‘unambiguous.’ ”). 24
In the context of the present case, however, we need not pass on this question in the abstract, since the IMF has itself clarified the meaning of the Fund Agreement as it applies to the Mexican regulations by indicating that they are consistent with the Agreement. On May 3, 1983, in response to an inquiry from Bancomer’s counsel, the Director of the Legal Department of the Fund specifically stated that “the ‘provisions of Mexico’s Currency Regulations (enacted in August and continuing in effect today) which require repayment of deposits in Mexican banks to be made in Mexican pesos regardless of the currency in which the deposits are denominated’ ... do not violate and are not inconsistent with the Articles of Agreement of the International Monetary Fund.” 2 Rec. at 428. 25 This determination at once renders the Fund Agreement unambiguous in its application to the present case, but also defeats, on the merits, the Callejos’ Article VIII, Section 2(a) claim.
We consider the Fund’s interpretations to be persuasive authority on the meaning of the Fund Agreement. 26 The Fund
*1120
Agreement is a complex regulatory document whose sense is often obscure. In interpreting it, we defer to the greater expertise of the Fund.
See
J. Gold,
supra
note 26, at 43 (Information about whether regulations are imposed consistently with the Fund Agreement is “of a kind that [is] likely to be available only to the Fund. It is virtually impossible for anyone else to make the determination of consistency, and it certainly cannot be derived from a perusal of the Articles.”). This deference is akin to the deference that we accord to an administrative agency’s interpretations of its own statutory scheme.
See Chevron, U.S.A., Inc. v. Natural Resources Defense Council,
— U.S. -, -,
The exact basis for the Fund’s conclusion that the Mexican regulations are consistent with the Fund Agreement is somewhat unclear. The Fund’s conclusion could be based (1) on its view that the Mexican regulations govern capital rather than current transactions, in which case Article VIII, Section 2(a) approval was not required, and/or (2) on its granting approval of the regulations pursuant to Article VIII, Section 2(a). If the Fund’s conclusion is based on the first ground, then, at most, we can only review the Fund’s interpretation to determine whether it is reasonable, since we consider the Fund’s interpretation to be highly persuasive authority. Here this standard is clearly met, particularly given the uncertainty that exists regarding the dividing line between current and capital transactions. If, however, the Fund’s conclusion rests on the latter ground, then we are precluded from exercising even this limited level of review. Article VIII, Section 2(a) only requires that exchange control regulations receive the approval of the Fund; once such approval is given, the regulations are by definition valid. The decision whether to approve exchange control regulations is committed to the discretion of the Fund. We have no power to review the Fund’s exercise of this discretion. Thus, even if we did not accept the Fund’s interpretation of the Fund Agreement as persuasive authority, its decision to approve exchange control regulations *1121 pursuant to Article VIII, Section 2(a) would be final.
The Callejos attempt to avoid this result by arguing that even if the Fund did approve the Mexican regulations, it failed to do so prior to their promulgation. See Reply Brief of Appellants at 15-16. While such prior approval is technically required by Article VIII, Section 2(a), we do not believe that the violation of this requirement is of a magnitude sufficient to justify disregarding the act of state doctrine, particularly where approval is later given by the Fund. 28 The treaty exception to the act of state doctrine does not penalize a foreign country for every failure to “go by the book.” The same prudential considerations that underlie the act of state doctrine apply to the treaty exception as well.
For these reasons, we hold that the treaty exception does not render the act of state doctrine inapplicable to the Callejos’ claims.
C. The Situs of the Deposits The final argument advanced by the Callejos for not applying the act of state doctrine is that the situs of their CDs was Texas rather than Mexico. The Callejos argue that under traditional choice-of-law rules pegging the choice of law to the situs of the property, Texas law should govern the certificates. Application of the act of state doctrine, they contend, would improperly give extraterritorial effect to the Mexican decrees.
In
Sabbatino,
the Court limited the act of state doctrine to takings of property “within its own territory by a foreign sovereign government.”
The theory underlying the territorial limitation to the act of state doctrine is that a foreign state is less concerned about the effects of its acts on property outside of its *1122 territory than within. As we explained in Maltina,
The obvious inability of a foreign state to complete an expropriation beyond its borders reduces the foreign state’s expectations of dominion over that property____ Consequently, the potential for offense to the foreign state is reduced, there is less danger that judicial disposition of the property will ‘vex the peace of nations,’ and there is less need for judicial deference to the foreign affairs competence of the other branches of government.
In determining whether the situs of property is the United States or a foreign state, federal rather than state law governs.
Tabacalera,
It is fundamental to our constitutional scheme that in dealing with other nations the country must speak with a united voice____ It would be baffling if a foreign act of state intended to affect property in the United States were ignored on one side of the Hudson but respected on the other; any such diversity between states would needlessly complicate the handling of the foreign relations of the United States. The required uniformity can be secured only by recognizing the expansive reach of the principle, announced by Mr. Justice Harlan in Sabba-tino, that all questions relating to an act of state are questions of federal law, to be determined ultimately, if need be, by the Supreme Court of the United States.
On a previous occasion, we noted that “[t]he situs of intangible property is about as intangible a concept as is known to the law.”
Tabacalera,
Over the years, several tests have been developed to determine the situs of intangible property. One was elaborated by this court in Tabacalera, where we stated,
[W]e think it clear that whatever efforts were made by the Cuban government dealing with Tabacalera, these acts are to be recognized under the Act of State Doctrine only insofar as they were able to come to complete fruition within the dominion of the Cuban government. As to other matters we conclude that they were not a ‘taking of property within its own territory ’ within the language used by the Supreme Court in Sabbatino.
Although the
Tabacalera
test has been applied in a number of cases,
e.g., Allied Bank International v. Banco Credito Agricola,
We do not think that
Tabacalera
intended such results. The power to collect a debt is for the benefit of the creditor, not the debtor; the fact that a debt can be enforced by the creditor in one forum should not be the basis of depriving him of his ability to enforce the debt in a different forum. Otherwise, the sword of the creditor would become a shield for the debtor. Since we do not believe that debts owed by foreign banks to American nationals are always sitused in the foreign country — and consequently do not believe that the act of state doctrine always applies to such debts — we do not apply the
Tabacalera
test here.
See Libra Bank,
Instead, for debts owed by foreign banks to American nationals, the proper test for determining situs is where the incidents of the debt, as a whole, place it. One relevant factor is the place where the deposit is carried, but this is not the only factor. In addition, we must examine the place of payment, the intent of the parties (if any) regarding the applicable law, and the involvement of the American banking system in the transaction.
31
Together,
*1124
these factors help us to determine the extent of the foreign government’s interest in the debt. They therefore help to answer the ultimate question in the act of state context: Are the ties of the debt to the foreign country sufficiently close that we will antagonize the foreign government by not recognizing its acts?
Cf. Allied Bank,
Here, the incidents of the certificates of deposit clearly place them in Mexico. The certificates of deposit were issued by Bancomer’s Nuevo Laredo branch, where the Callejos’ deposits were carried, and called for payment in Mexico. This grouping of contacts, when viewed through the gloss of the policies underlying the act of state doctrine, places the debt in Mexico and calls for the application of Mexican law. 32
The Callejos contend, however, that although the specified place of payment was Mexico, the course of conduct of the parties altered this agreement since the Callejos regularly received their payments in Texas. The Callejos, however, mistake remittances for payments. Although Ban-comer remitted its payments to the Callejos in Texas, this did not mean that the place of payment was Texas. Unlike in
Garcia,
where the certificates of deposit issued by the Cuban branch bank were guaranteed by Chase Manhattan’s New York office and payable upon presentation at any Chase Manhattan branch worldwide,
The Callejos make much of the fact that when they made deposits, the money was in the first instance transferred to Bancomer's account at Laredo National
*1125
Bank in Laredo, Texas. They contend, on this basis, that the deposits were made in Texas, where Bancomer first received control over the money,, not in Mexico. We take a less formalistic approach to the problem of determining where a deposit is made. Here, the evidence was undisputed that, after receiving the money in its account at Laredo National Bank, Bancomer promptly transferred the money to its Nue-vo Laredo branch; at the end of each business day its balance with Laredo National remained unchanged. Under these circumstances, Laredo National acted merely as a conduit for the deposits, not as their repository.
Cf. Braka v. Bancomer,
For these reasons, therefore, we reject the view that the situs of these deposits was Texas rather than Mexico. Indeed, we note that under Texas law, Ban-comer, as a foreign bank, did not even have the power to receive deposits in Texas. Texas Const, art. 16, § 16; Tex.Rev.Civ. Stat.Ann. art. 342-902 to -903 (Vernon 1973 & Supp.1985). Moreover, holding that Mexico rather than Texas was the situs of the deposits furthers the general policies of the act of state doctrine. Given Mexico’s interest in these certificates of deposit, which were issued by a Mexican bank and payable in Mexico, disregarding Mexico’s exchange regulations would be a serious affront. We decline to take this course. Instead, we apply the act of state doctrine and affirm the dismissal of the suit. 33
IV. CONCLUSION
Both the sovereign immunity and a,ct of state doctrines are rooted in principles of international comity; both involve a balancing of our interest in providing a forum to injured parties against our interest in maintaining amicable relations with other nations by respecting their sovereign acts. However, the balance struck in regard to each doctrine may be different.
Here we hold that the act of state doctrine applies but that the doctrine of sovereign immunity does not; we hold both that *1126 the case is based on commercial acts that directly affected the United States, and that it implicates sovereign acts taken by Mexico to preserve its foreign exchange reserves. At first glance, these holdings may seem inconsistent. But they reflect an underlying unity. They reflect the fact that the deposits in question have ties with both the United States and Mexico and that therefore both countries have an interest in the deposits. The interest of the United States justifies our exercise of jurisdiction under the FSIA to hear claims that the terms of the deposits have been breached; the interest of Mexico justifies the application of its exchange control decrees to the deposits.
We express no opinion as to which of these interests is greater. The act of state doctrine reserves that question for the political branches. It reflects the view that where competing sovereign interests are at stake, the delicate task of resolving disputes is best handled through diplomatic channels.
The judgment of the district court dismissing the present case is AFFIRMED.
Notes
. The CDs purchased by the Callejos included both dollar- and peso-denominated certificates. The Callejos bought these certificates on their own behalf and as trustees for undisclosed principals.
. The governmentally-established exchange rate was 70 pesos to the dollar for all non-priority transactions. According to the Callejos, the market exchange rate in August 1982 was 114 pesos to the dollar. This rate subsequently rose to more than 130 pesos to the dollar in November 1982.
. Initially, the Callejos brought this action in the 95th Judicial District Court for Dallas County, seeking money damages. On September 30, 1982, however, Bancomer removed the action, pursuant to 28 U.S.C. § 1441(d), to the United States District Court for the Northern District of Texas, on the ground that it was an "agency or instrumentality of a foreign state” as defined by the FSIA, 28 U.S.C. § 1603(b).
. The Callejos claim that Bancomer’s failure to register the certificates violated Section 12(1) of the Securities Act of 1933, 15 U.S.C. § 77/(1) (1982) and Section 33A.1 of the Texas Securities Act, Tex.Rev.Civ.Stat.Ann. art. 581-33 A.(1).
. Under the FSIA, where an exception to sovereign immunity applies, the federal courts have subject-matter jurisdiction over the dispute. 28 U.S.C. § 1330(a);
see Verlinden B.V. v. Central Bank of Nigeria,
Here, Bancomer appears to concede that, if subject matter jurisdiction exists, then personal jurisdiction also exists. Although Bancomer initially claimed that the Callejos failed to serve process in compliance with 28 U.S.C. § 1608, the Callejos re-served Bancomer by delivering a summons and a copy of their complaint both to the manager of Bancomer's New York agency and to the Subdirector/General Manager of Bancomer’s Los Angeles branch office. On appeal, Bancomer has not reiterated its claim that the Callejos failed to comply with 28 U.S.C. § 1608, nor has it raised as a separate defense the argument that the exercise of personal jurisdiction would violate due process. To the extent that Bancomer contends that there are insufficient contacts for the exercise of personal jurisdiction, see Brief for Appellee at 18 n. 12, we hold that the contacts discussed in Part 11(B) below are sufficient to satisfy the requirements of due process.
. The FSIA provides little guidance on this issue. The only discussion occurs in 28 U.S.C. § 1603(d), which states:
A "commercial activity" means either a regular course of commercial conduct or a particular commercial transaction or act. The commercial character of an activity shall be determined by reference to the nature of the course of conduct or particular transaction or act, rather than by reference to its purpose.
While this is helpful so far as it goes, it is somewhat circular, since it defines "commercial activity” in terms of "commercial conduct” and "commercial transaction" but contains no independent definition of "commercial." Generally, however, if an activity is of a type that a private person would customarily engage in for profit, it is clearly commercial.
See Letelier v. Republic of Chile,
. This interpretation is supported by the language of § 1603(d), that "[t]he commercial character of an activity shall be determined by reference to [its]
nature
... rather than by reference to its
purpose.”
(Emphasis added). Here, the nature of Bancomer’s breach of contract was commercial even though its purpose was to comply with the sovereign decrees of the Mexican Government.
Cf. Arango v. Guzman Travel Advisors Corp.,
. Although the facts necessary to determine that the breach had direct effects in the United States are undisputed, this is not true of the question of whether the activities on which the suit is based were "carried on in the United States.” The fact that Bancomer does business in the United States is insufficient to support a finding of jurisdiction under the first clause of § 1605(a)(2).
Vencedora Oceanica Navigacion v. Compagnie Nationale Algerienne de Navigation,
out of Bancomer’s commercial activities within the United States.. On the one hand, Bancomer utilized the services of American correspondent banks and the U.S. mails, and placed telephone calls to the Callejos in Texas regarding the purchase and renewal of the CDs. On the other hand, Bancomer does not appear to have advertised or otherwise solicited business in the United States in connection with the sale of the certificates.
Cf. Wolf v. Banco National de Mexico,
. Although we agree with the
Texas Trading
court that Congress’s reference to § 18 is “a bit of a
non sequitur"
since that section relates to the extraterritorial effect of American substantive law, not to the extraterritorial jurisdictional reach of American courts,
. In the sovereign immunity arena, we start from a premise of jurisdiction. Where jurisdiction would otherwise exist, sovereign immunity must be pleaded as an affirmative defense; it is not presumed.
Vencedora Oceanica,
. Although normally we do not consider issues not passed upon below,
Singleton v. Wulff,
. The exact relation between the sovereign immunity and act of state doctrines has been the source of considerable controversy. Prior to
Sabbatino,
it was often thought that the act of state doctrine was based on the doctrine of sovereign immunity.
See Oetjen v. Central Leather Co.,
. Although the act of state doctrine is not prescribed by international law,
Sabbatino,
. The act of state doctrine rests in part on separation of power principles. "It is ... buttressed by judicial deference to the exclusive power of the Executive over conduct of relations with other sovereign powers and the power of the Senate to advise and consent on the making of treaties.”
First Nat'l City Bank,
. Only four judges joined in this part of the Court’s opinion. The majority decided the case on the ground that Cuba’s actions in repudiating a commercial debt were not invested with the sovereign authority of the state and hence were not acts of state at all.
Id.
at 694-95,
. Writing for the plurality, Justice White justified the commercial activity exception by stating, "[Sjubjecting foreign governments to the rule of law in their commercial dealings presents a much smaller risk of affronting their sovereignty than would an attempt to pass on the legality of their governmental acts. In their commercial capacities, foreign governments do not exercise powers peculiar to sovereigns. Instead, they exercise only those powers that can also be exercised by private persons. Subjecting them in connection with such acts to the same rules of law that apply to private citizens is unlikely to touch very sharply on ‘national nerves.’ ”
Id.
at 703-04,
. The articulation in
Dunhill
of a commercial activity exception to the act of state doctrine has engendered considerable debate.
Compare Intemational Ass’n of Machinists & Aerospace Workers v. OPEC,
Although we have cited
Dunhill
on a number of occasions,
see Compania de Gas de Nuevo Laredo v. Entex, Inc.,
. Although the Court stated in a footnote that "[t]here are, of course, areas of international law in which consensus as to standards is greater and which do not represent a battleground for conflicting ideologies," and went on to state that “[t]his decision in no way intimates that the courts of this country are broadly foreclosed from considering questions of international
*1117
law,”
id.
at 430 n. 34,
. The term, "current international transactions” is defined in Article XXX(d) of the Fund Agreement, which states in pertinent part:
(d) Payments for current transactions means payments which are not for the purpose of transferring capital, and includes, without limitation:
(1) all payments due in connection with foreign trade, other current business, including services, and normal short-term banking and credit facilities;
(2) payments due as interest on loans and as net income from other investments;
The Fund may, after consultation with the members concerned, determine whether specific transactions are to be considered current transactions or capital transactions.
. The Callejos also argue for the first time on appeal that the exchange regulations violate Art. VIII, § 3 of the Fund Agreement. Generally, we do not consider issues that were not raised before the district court unless our failure to do so would result in grave injustice,
Masat v. United States,
. Apart from the Fund Agreement, the Mexican exchange control regulations appear to be permissible under international law. The Restatement (Second),
supra
note 12, approves such measures when "reasonably necessary ... to protect the foreign exchange resources of the state,” and notes, ”[T]he application to an alien of a requirement that foreign funds held within the territory of the state be surrendered against payment in local currency at the official rate of exchange is not wrongful under international law, even though the currency is less valuable on the free market than the foreign funds surrendered.”
Id.
at § 198 & comment b;
see also
8 M. Whiteman,
Digest of International Law
981-82, 988-90 (1967). "This is not an era ... in which there is anything novel or internation
*1118
ally reprehensible about even the most stringent regulation of national currencies and the flow of foreign exchange. Such practices have been followed, as the exigencies of international economics have required — and despite resulting losses to individuals — by capitalist countries and communist countries alike, by the United States and its allies as well as by those with whom our country has had profound differences. They are practices which are not even of recent origin but which have been recognized as a normal measure of government for hundreds of years, if not, indeed, as long as currency has been used as the medium of international exchange."
French v. Banco Nacional de Cuba,
. Significantly, the Court in Sabbatino articulated the treaty exception in negative rather than positive terms: It stated that “the Judicial Branch will not examine the validity of a [foreign act of state] ... in the absence of a treaty or other unambiguous agreement,” id., but did not state the converse, namely, that if a treaty exists then the act of state doctrine does not apply.
. Compare H. Smit, N. Galston & S. Levitsky, International Contracts § 6.06(l)(b), at 165-66 ("current transactions” include international deposits) with Evans, Current and Capital Transactions: How the Fund Defines Them, 5 Fin. & Dev. 30, 34 (1968) ("current transactions” are those arising from international trading activities). See generally F. Mann, The Legal Aspect of Money 396 (4th ed. 1982) (“extremely diffi *1119 cult” to determine meaning of " ‘current transactions’ which is only very inadequately defined” by the Fund Agreement); J. Gold, The Cuban Insurance Cases and the Articles of the Fund 37-45 (IMF Pamphlet Series no. 8, 1966) (discussing confusion surrounding terms “capital” and “current” transactions).
. The Callejos contend that the Fund Agreement need not be unambiguous to fall within the scope of the treaty exception, since the term “unambiguous” in the phrase, “treaties and other unambiguous agreements,” modifies only "other agreements” and not "treaties.” This reading of the treaty exception, however, not only strains the syntax of the sentence; it is also directly contrary to the policy considerations underlying the act of state doctrine, namely, to forestall the courts from adjudicating cases when there are no agreed upon controlling legal principles.
. Although the Callejos did not question the sufficiency of the Fund’s May 3 letter before the district court, they argue on appeal that the letter is inadequate evidence of the Fund’s position since, under Art. VIII, § 2(a) and Art. XXIX, only the Executive Board of the Fund can approve exchange regulations and offer interpretations of the Fund Agreement. In response, Bancomer attached as appendices to its brief copies of two letters, one from the Secretary of the IMF stating that the May 3 letter had been authorized by the Executive Board of the IMF, and the other from the Director of the Legal Department of the IMF stating that the Executive Board approved the Mexican exchange control regulations on December 23, 1982. Since these letters were not introduced into evidence in the court below, they cannot be considered by us on appeal.
United States v. One 1978 Piper Navajo PA-31 Aircraft,
Cir.1982); Fed.R.App.P. 10(a). By the same token, however, we cannot consider arguments raised for the first time on appeal, especially where, as here, the failure to raise them before the district court has prejudiced the other side’s ability to respond. See supra note 20.
Although the May 3 letter is not dispositive of the Fund’s position, we believe that it is prima facie evidence. Because the Callejos failed to offer any evidence to rebut or otherwise undermine the letter, we believe that they failed to raise a genuine issue of fact regarding the Fund’s approval of the Mexican regulations. This result is buttressed by the IMF's general interpretive view that currency regulations should be presumed to be in conformity with the Fund Agreement unless the Fund indicates otherwise. See 1 J. Horsefield, The International Monetary Fund, 1945-1965, at 210 (1969) (discussing the Legal Department’s opinion letter of Oct. 29, 1948). Under this view, it is the plaintiff's burden to demonstrate that the IMF disapproved the currency regulations in question, rather than the defendant’s burden to prove the converse. Here, the Callejos introduced no evidence that the Fund has disapproved the Mexican regulations.
. According to some commentators, since Art. XXIX of the Fund Agreement makes interpretations by the Fund binding on signatory nations, they are subsidiarily binding on the courts of signatory nations, including those of the United States.
See
J. Gold,
Interpretation by the Fund
31-42 (IMF Pamphlet Series No. 11, 1968) (discussing predecessor of Art. XXIX). We express no view on this question here, and employ the Fund’s interpretation merely as persuasive rather than as binding authority.
See Braka v. Bancomer, S.A.,
. Bancomer contends that if the Mexican exchange control regulations were promulgated in conformity with the Fund Agreement, we must dismiss this case under Art. VIII, § 2(b) of that Agreement, which forbids courts from enforcing "exchange contracts" involving the currency of a Fund member that violate the member’s currency regulations.
See
22 U.S.C. § 286h (1982) (incorporating Art. VIII, § 2(b) into U.S. law). In essence, § 2(b) is an internationally imposed act of state doctrine. Since we already dismiss the case under our own domestic act of state doctrine, we need not consider this additional defense.
Cf. Libra Bank Ltd. v. Banco Nacional de Costa Rica,
. The Fund itself, in recognition of the fact that it is not always possible to obtain prior approval when exchange controls are imposed to preserve national security, has adopted more flexible procedures under which members must merely give notice to the Fund of the imposition of exchange controls. Unless the Fund specifically disapproves the controls, members are entitled to assume that the Fund approves the controls. See 3 International Monetary Fund 1945-1965: Documents 257 (J. Horsefield ed. 1969).
. Even when an act of a foreign state affects property outside of its territory, however, we may still give effect to the act if doing so is consistent with United States public policy.
Maltina,
. It is unclear what result would have been reached in Tabacalera if the American debtor had had assets in Cuba, since then Cuba would have been in a position to perform a fait accom-pli by seizing these assets. Arguably, the situs of the debt might still have been the United States on the ground that the assets in Cuba were not the same assets as those owed by the American company. However, this would de- ■ pend on an independent test for locating the situs of the obligation; it would be circular to argue that Cuba could not collect the debt because the debt was not located in Cuba, if the location of the debt was itself defined in terms of where it could be collected.
. These factors have been used on a number of occasions to determine the situs of debts owed by foreign banks. In
Garcia,
for example, the court located in the United States a certificate of deposit issued by Chase Manhattan’s Cuban branch, on the ground that the certificate was guaranteed by Chase’s New York office and could be repaid by presentation at any Chase branch.
. The Callejos claim that the deposits were nevertheless sitused in Texas on the ground that this was the intent of the parties. This evidence, however, is inadmissible, given that the certificates of deposit were integrated contracts and are subject to the parol evidence rule. Where certificates of deposit clearly specify a place of payment, parol evidence that a different place of payment was intended should be disregarded in the absence of fraud, duress, or mutual mistake. See 32A C.J.S. Evidence § 895 at 254 (1964).
. In their revised complaint, the Callejos alleged violations of § 12(1) of the Securities Act of 1933, 15 U.S.C. § 77/(1) (1982), and § 33A.(1) of the Texas Securities Act, Tex.Rev.Civ.Stat. Ann. art. 581-33A.(1), as well as breach of contract. We agree with the Callejos that these securities claims are not barred by the act of state doctrine, since they are based on Bancomer’s initial failure to register the certificates of deposit, not on Bancomer’s later breach of the certificates by complying with Mexico’s exchange control regulations. Adjudicating these claims would not involve reviewing the validity of the exchange control regulations.
Cf. Arango v. Guzman Travel Advisors Corp.,