Supreme Court Imposes Jurisdictional Requirement for FSIA Expropriation Suits—a Cautionary Reminder of the Benefits of Investment-Protection Treaties

Supreme Court Imposes Jurisdictional Requirement for FSIA Expropriation Suits—a Cautionary Reminder of the Benefits of Investment-Protection Treaties

May 4, 2017, Covington Alert

Investments in developing economies offer substantial benefits for many reasons, including their growth potential. But they often come with greater economic and political risks. Investment-protection treaties are an important and relatively inexpensive tool to manage some of those risks.

Most bilateral and multilateral investment treaties provide foreign investors with substantive and procedural protections, including the right to bring a claim directly against the foreign country before an independent arbitration tribunal. That right is all the more important following the ruling this week by the Supreme Court in Bolivarian Republic of Venezuela v. Helmerich & Payne Int’l Drilling. In a unanimous opinion for the eight-Justice Court (Justice Gorsuch did not participate), Justice Breyer addressed the provisions of the Foreign Sovereign Immunities Act (FSIA) that allow for an exception to sovereign immunity when a foreign sovereign expropriates property “in violation of international law” and that property is owned or operated by an instrumentality of the foreign state engaged in a commercial activity in the United States. 28 U.S.C. § 1605(a)(3).