United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued December 5, 2005 Decided July 7, 2006
No. 05-7030
YANG RONG, ET AL.,
APPELLANTS
v.
LIAONING PROVINCE GOVERNMENT,
A SUBDIVISION OF THE PEOPLE’S REPUBLIC OF CHINA,
A FOREIGN STATE,
APPELLEE
Appeal from the United States District Court
for the District of Columbia
(No. 03cv01687)
Bert W. Rein argued the cause for the appellants. Charles
O. Verrill, Jr., John A. Hodges, Thomas W. Queen and M.
Evan Corcoran were on brief.
Craig A. Hoover argued the cause for the appellee.
Jonathan S. Franklin, Christopher T. Handman and Jessica L.
Ellsworth were on brief.
Before: HENDERSON, ROGERS and TATEL, Circuit Judges.
Opinion for the court filed by Circuit Judge HENDERSON.
Concurring opinion filed by Circuit Judge HENDERSON.
2
KAREN LECRAFT HENDERSON, Circuit Judge: Appellants
Yang Rong, Rhea Yeung and the Broadsino Finance
Company, a limited company controlled by Yang Rong and
incorporated in Hong Kong, appeal the district court’s
dismissal of their complaint brought under the Foreign
Sovereign Immunities Act (FSIA or Act), 28 U.S.C. §§ 1602
et seq., against Liaoning Province (Province), a subdivision of
China, for lack of subject matter jurisdiction. On appeal Yang
Rong,1 a Chinese national and permanent resident of the
United States, and his fellow appellants argue that the district
court erroneously found that the Province’s challenged act
was insulated from suit by sovereign immunity. He claims
jurisdiction exists under the “commercial activity” exception
set out in section 1605(a)(2) of FSIA, which provides that an
action does lie against a foreign state if it is based “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.” Id. §
1605(a)(2). We conclude that the “commercial activity”
exception is inapplicable to the Province’s act and that instead
its action was quintessentially sovereign. Accordingly, we
affirm the district court’s dismissal of the complaint.
I.
In 1991 Rong and the municipality of Shen Yang, a city
in the Liaoning Province in northeast China, entered into a
joint venture for automobile production.2 The principal
1
In discussing the facts in Part I, “Rong” refers to Yang Rong. In
Part II, however, “Rong” refers to all three appellants.
2
We take the facts from Rong’s complaint, assume them to be true
and draw all plausible inferences in his favor. Price v. Socialist
People’s Libyan Arab Jamahiriya, 294 F.3d 82, 93 (D.C. Cir. 2002).
3
partners in the venture, called Shen Yang Jin Bei Passenger
Vehicle Manufacturing Company, Ltd. (Shen Yang
Automotive), were the Broadsino Finance Company
(Broadsino), a Hong Kong-incorporated company wholly
owned by Yang Rong, and Jin Bei Automotive Shareholding
Company, Ltd. (Jin Bei Shareholding), a corporation owned
by the Shen Yang municipal government. At the venture’s
inception Jin Bei Shareholding owned 60 per cent of Shen
Yang Automotive, Broadsino owned 25 per cent and another
partner, Hainen Huayin International Trust Investment
Company (Hainen), owned 15 per cent. Broadsino
subsequently acquired Hainen’s shares to effect a 60/40
ownership split in Shen Yang Automotive, that is, Jin Bei
Shareholding had 60 per cent ownership and Broadsino had
40 per cent ownership. Compl. ¶ 19, reprinted in Joint
Appendix (JA) 12.
To expand the venture through access to American
capital the partners sought to list Shen Yang Automotive on
the New York Stock Exchange (NYSE). Yang Rong, who
served as Shen Yang Automotive’s chief executive and
manager, incorporated Brilliance Holdings Limited
(Brilliance Holdings) in Bermuda as the financing vehicle to
obtain a listing on the NYSE and transferred his 40 per cent
ownership interest to Brilliance Holdings. Jin Bei
Shareholding also transferred 11 per cent of its interest in
Shen Yang Automotive to Brilliance Holdings, thereby giving
the Bermuda-based company a 51 per cent interest in Shen
Yang Automotive. In return for transferring 11 per cent of its
interest, Jin Bei Shareholding received 21.57 per cent of
Brilliance Holdings stock, thereby reducing Rong’s interest in
Brilliance Holdings to the remaining 78.43 per cent of its
stock. Compl. ¶ 20, JA 12. In registering the stock with the
Securities and Exchange Commission (SEC), preparing the
initial public offering in the United States and listing the stock
4
on the NYSE, senior Chinese government officials informed
Rong that a Chinese entity rather than a Hong Kong private
company should be the majority shareholder of the listed
company inasmuch as the U.S. registration and listing would
be the first for a China-based company in 50 years. Rong
understood that the Chinese authorities would be satisfied if
the majority interest in the listed company was held in the
name of a Chinese non-governmental organization (NGO).
1st Am. Compl. ¶ 3, JA 24. Consequently in May 1992,
Broadsino, the People’s Bank of China and other Chinese
governmental entities created the Chinese Financial
Educational Development Foundation (Foundation), an NGO.
Shang Ming, the deputy governor of the People’s Bank of
China (Ming), served as the Foundation’s chairman while
Rong served as vice chairman.
In September 1992, Broadsino transferred its Brilliance
Holdings stock to the Foundation. Eventually, Rong and
Ming agreed “that the Foundation would hold the shares in
trust for Broadsino, in effect acting as the nominee for
Broadsino,” and that Rong was to have sole authority to
manage, control and administer the Foundation’s equity
interest in Brilliance Holdings. 1st Am. Compl. ¶ 28, JA 32-
33. The transferred Brilliance Holdings shares were held in
the Foundation’s name. As a result of this arrangement, as
well as the sale of 28.75 per cent of Brilliance Holdings
shares in October 2002, the Foundation held 55.88 per cent of
the Brilliance Holdings shares and Jin Bei Shareholding held
15.37 per cent. 1st Am. Compl. ¶ 30, JA 34. At Rong’s
direction, Broadsino paid the costs to register and list the
Brilliance Holdings stock and paid various administrative fees
to the Foundation. He also managed and directed Brilliance
Holdings’ primary holding, Shen Yang Automotive, arranging
with Toyota and General Motors to manufacture automobiles
for those companies. All of Shen Yang Automotive’s
5
manufacturing facilities were located in Liaoning Province.
Meanwhile, in early 2002 the Province formed a
“Working Committee,” headed by the Assistant to the
Governor of the Province. In March 2002 the Working
Committee declared that all equity interests held in the name
of the Foundation, including Rong’s interest in Brilliance
Holdings, were state assets and demanded that he transfer
them to the Province. Compl. ¶ 28–29, JA 14–15. After
Rong refused, the Working Committee informed Rong and
the Brilliance Holdings board of directors that the Foundation
no longer recognized Broadsino’s beneficial interest in
Brilliance Holdings. At the direction of the Province, the
Brilliance Holdings board dismissed Rong as President, CEO
and Director and placed Working Committee members in
those positions and other management positions. In October
2002 the newly installed Brilliance Holdings board ceased
paying Rong a salary, dismissed him as a director the next
month and terminated his contract. The Province also formed
Huachen Automotive Group Holdings Company Limited
(Huachen) and appointed Province officials as officers of the
new company. Approximately two months later Huachen
purchased the Brilliance Holdings shares nominally held by
the Foundation in trust for Broadsino for $18 million, about
six per cent of market price. Huachen and the Brilliance
Holdings board also made a tender offer for the remaining
Brilliance Holdings shares, including those traded on the
NYSE, resulting in the suspension of trading of Brilliance
Holdings shares on the NYSE from December 18 to
December 19, 2002. Compl. ¶ 35, JA 17.
As the Working Committee was executing the takeover,
6
Rong, acting for Broadsino, sought relief in various courts.3
Broadsino initiated proceedings against the Foundation in the
Beijing Municipal High Court seeking a determination of its
interest in the assets nominally held by the Foundation,
including the Brilliance Holdings stock the Foundation held in
trust, but was rebuffed. 1st Am. Compl ¶ 38, JA 38. Rong
also filed a complaint against the Province in the District of
Columbia district court, challenging the Province’s
“implementation of the scheme to take Plaintiffs’ shares,
other equity interests, and other property and then to maintain
control thereof for its own commercial benefit” under FSIA.
1st Am. Compl. ¶ 14, JA 27. The Province moved to dismiss
for lack of subject matter jurisdiction, asserting that neither
FSIA’s commercial activity exception, 28 U.S.C. §
1605(a)(2), nor its expropriation exception, id. § 1605(a)(3),
3
Although the history of the litigation is not set forth in Rong’s
complaint, Broadsino also brought a lawsuit in Bermuda against
Brilliance Holdings, four Brilliance Holdings board members, the
Foundation and Huachen to block the stock transfer from the
Foundation to Huachen. The Bermuda court refused to enjoin the
transfer and on appeal the Bermuda Supreme Court ruled that
Broadsino “never owned any shares in [Brilliance Holdings]” and
therefore concluded that it was “an abuse of the process of the Court
to pursue a claim that [Broadsino] transferred any shares” in Brilliance
Holdings to the Foundation. Broadsino Fin. Co. v. Brilliance China
Auto. Holdings Ltd. (Sup. Ct. of Berm., Dec. 31, 2003), JA 116. In
2005, the Court of Appeal for Bermuda affirmed, concluding that
Broadsino had no beneficial interest in Brilliance Holdings stock and
the Foundation, by extension, held no Brilliance Holdings stock in
trust for Broadsino. It also found that Brilliance Holdings had paid
Broadsino for the latter’s interest in Shen Yang Automotive. See
Broadsino Fin. Co. v. Brilliance China Auto. Holdings Ltd., (Berm.
Ct. App., Mar. 14, 2005), Appellee’s Br. Addendum 1, 7.
7
applied.4 JA 50. The district court agreed, holding that the
Province’s acquisition of the Brilliance Holdings shares was a
sovereign act and the Province was therefore immune from
suit. It dismissed the action under Rule 12(b)(1) of the
Federal Rules of Civil Procedure. Yang Rong et al. v.
Liaoning Provincial Gov’t, 362 F. Supp. 2d 83, 103 (D.D.C.
2005). This appeal followed, in which Rong challenges the
district court’s rejection of the commercial activity
exception.5
II.
We review de novo a district court order dismissing an
action brought under FSIA on the ground of sovereign
immunity. Gulf Res. Am., Inc. v. Republic of the Congo, 370
F.3d 65, 70 (D.C. Cir. 2004). FSIA is “the sole basis for
obtaining jurisdiction over a foreign state in our courts.”
Peterson v. Royal Kingdom of Saudi Arabia, 332 F. Supp. 2d
189, 195 (D.D.C. 2004) (quoting Argentine Republic v.
Amerada Hess Shipping Corp., 488 U.S. 428, 434 (1989)); see
also Foremost-McKesson, Inc. v. Islamic Republic of Iran,
905 F.2d 438, 443 (D.C. Cir. 1990). A foreign state is
4
The expropriation exception provides in part that a foreign state
may be sued in a U.S. court in a case “in which rights in property
taken in violation of international law are in issue and that property or
any property exchanged for such property is present in the United
States in connection with a commercial activity carried on in the
United States by the foreign state; or that property or any property
exchanged for such property is owned or operated by an agency or
instrumentality of the foreign state and that agency or instrumentality
is engaged in a commercial activity in the United States.” 28 U.S.C.
§ 1605(a)(3).
5
Rong does not appeal the district court’s decision regarding the
expropriation exception. See Appellant’s Br. 2 n.1.
8
immune from suit in the United States unless its challenged
action comes within one of the exceptions enumerated in the
Act. See 28 U.S.C. § 1604. “If the defendant challenges only
the legal sufficiency of the plaintiff’s jurisdictional
allegations, then the district court should take the plaintiff’s
factual allegations as true and determine whether they bring
the case within any of the exceptions to immunity invoked by
the plaintiff.” Mwani v. bin Laden, 417 F.3d 1, 15 (D.C. Cir.
2005) (quoting Kilburn v. Socialist People’s Libyan Arab
Jamahiriya, 376 F.3d 1123, 1127 (D.C. Cir. 2004)). If a
foreign state “argues that even if taken as true, the [plaintiff’s]
allegations are insufficient to come within the commercial
activity exception[, t]his amounts to a challenge to the legal
sufficiency of the allegations.” Id. “[J]urisdiction will not
obtain,” and the court may dismiss a complaint on that basis,
“if the cause of action is based on a sovereign activity.”
Millen Indus., Inc. v. Coordination Council for N. Am. Affairs,
855 F.2d 879, 885 (D.C. Cir. 1988).
FSIA’s commercial activity exception provides that a
foreign state is not immune from suit in a U.S. court if its
challenged act is “based upon a commercial activity carried
on in the United States by the foreign state; or upon an act
performed in the United States in connection with a
commercial activity of the foreign state elsewhere; or 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.” 28 U.S.C.
§ 1605(a)(2). In determining whether the “commercial
activity” exception applies, the court looks to the character of
the foreign state’s exercise of power rather than its effects.
See Saudi Arabia v. Nelson, 507 U.S. 349, 360 (1993)
(foreign state engages in commercial activity if it exercises
“only those powers that can also be exercised by private
citizens” as opposed to those “powers peculiar to sovereigns”)
9
(quotations omitted); Republic of Argentina v. Weltover, 504
U.S. 607, 614 (1992) (sovereign engages in commercial
activity if it acts “not as a regulator of a market, but in the
manner of a private player within it”; issue is whether “the
particular actions that the foreign state performs (whatever the
motive behind them) are the type of actions by which a party
engages in trade and traffic or commerce”) (emphasis in
original) (quotations omitted).
Here Rong claims that the Province’s “implementation of
the scheme to take Plaintiff’s shares, other equity interests,
and other property and then to maintain control thereof for its
own commercial benefit,” 1st Am. Compl. ¶ 14, JA 27, was
“commercial activity” under the third clause of 28 U.S.C. §
1605(a)(2), that is, 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.” In Weltover, the United States Supreme Court
declared that the analysis of the third clause of section
1605(a)(2) proceeds in three parts: 1) the lawsuit must be
based upon an act that took place outside the territory of the
United States; 2) the act must have been taken in connection
with a commercial activity, and 3) the act must have caused a
direct effect in the United States. Weltover, 504 U.S. at 611.
Here there is no dispute that the act took place outside the
U.S. The questions in dispute are (1) whether the Province’s
act was done “in connection with a commercial activity” in
China, and (2) if so, whether it caused a “direct effect in the
United States.” Because we answer the first question in the
negative, we do not reach the second.
In Weltover, the Argentine government had issued bonds,
or “Bonods,” which provided for repayment in U.S. dollars
and permitted the bondholder to specify one of four cities,
including New York City, as the location where payment was
10
to be made on the date the bonds matured. When the maturity
date arrived, Argentina was unable to meet its obligations and
attempted to reschedule the payments unilaterally. Several
bondholders balked, demanding full payment in U.S. dollars
and naming New York City as the place of payment. When
Argentina failed to make the payments, the bondholders sued,
asserting subject matter jurisdiction under the commercial
activity exception of section 1605(a)(2) of FSIA. The
Supreme Court agreed with the bondholders, concluding that
Argentina’s issuance of a “garden-variety” debt instrument
was indistinguishable from the actions of a private party
engaged in commerce. In issuing the Bonods Argentina was
participating in the market as a private actor, not as a
sovereign. Because that act underlay the bondholders’ claims
and the nonpayment of bonds to be paid in New York City
had a direct effect in the United States, the third clause of
section 1605(a)(2) applied and Argentina could be sued in
federal court under FSIA. Weltover, 504 U.S. at 612–17.
The parties here do not agree on the conduct of the
Province that forms the basis of Rong’s suit. Rong focuses on
the Province’s activities in toto—including Shen Yang City’s
initial participation in the Shen Yang Automotive joint
venture, the Working Committee’s establishment of Huachen,
the transfer of Brilliance Holdings shares from the Foundation
to Huachen and Huachen’s tender offer for the outstanding
publicly traded Brilliance Holdings shares—and claims they
are the acts of a private player participating in the
marketplace. The Province, on the other hand, focuses on
Rong’s allegation that his property “was wrongfully taken . . .
by the Liaoning Provincial Government”; the Province asserts
Rong accuses it of expropriating Broadsino’s equity interest
in Brilliance Holdings and expropriation is a quintessential
governmental act. Appellee’s Br. 17–18 (citing 1st Am.
Compl. ¶¶ 1, 37, 53, JA 23, 37, 43). According to the
11
Province, any act it committed after it gained control of the
Foundation and the Brilliance Holdings shares—including the
transfer of those shares to Huachen—relates to the ultimate
disposition of the already expropriated assets; those acts, the
Province continues, cannot transform the initial expropriation
into commercial activity. Id. 22–23. Rong contends that the
Working Committee was formed to take over Brilliance
Holdings through the Foundation; that act, maintains the
Province, forms the basis of the complaint and is one that can
be performed only by a state as sovereign.
It may be true that in some respects the Working
Committee’s takeover of the Foundation and its ownership of
the Brilliance Holdings shares seem commercial—for
example, removing Yang Rong from the Brilliance Holdings
board and placing Working Committee officials in those same
positions. But all of these acts flow from the Working
Committee’s “state assets” declaration—an act that can be
taken only by a sovereign. Rong is correct that this case has
some similarity to Foremost-McKesson, supra, where we
found the Republic of Iran’s takeover of a dairy business
commercial, in part because there was “no indication that Iran
nationalized Pak Dairy by taking it over through a process of
law,” no formal declaration by the government of Iran that a
takeover was to occur and no “statutory restrictions or
governmental decrees or directives” referring to the takeover.
Foremost-McKesson, 905 F.2d at 449–50. In Foremost-
McKesson, however, the plaintiff and various
instrumentalities of Iran entered into a formal contract for an
agreed-upon venture; the commercial activity there was the
sovereign instrumentalities’ use of their “majority position to
lock the appellee out of the management of the dairy and to
deny the appellee its share of the company’s earnings.” Id. at
439. We affirmed the district court’s conclusion that those
allegations “sound[ed] in the nature of a corporate dispute
12
between majority and minority shareholders”—allegations of
breach of contract and of the directors’ duty of care, with the
only distinction being that the majority shares were held by
the Iranian government and its subsidiaries rather than by a
private party. Id. at 449–50. Here, by contrast, there was no
contractual relationship between Yang Rong and the Province
regarding the Foundation. The Province did not assume
control over Brilliance Holdings by purchasing the majority
of Brilliance Holdings’ stock from Broadsino, as a private
party would; instead, it declared the Brilliance Holdings
shares held by the Foundation to be state assets and claimed
them as does a sovereign. A private party in the market could
not have done what the Province did here—form a committee
whose goal, as Rong’s complaint describes it, was to “assume
and exercise control over the Foundation and to acquire from
it the Brilliance Holdings shares that it held in trust for
Broadsino” by “advis[ing] Yang Rong that all equity interests
held in the name of the Foundation . . . were state assets and
demand[ing] that they be transferred to the [Province].” 1st
Am. Compl. ¶ 35, JA 36. These acts, initiated by the
Assistant Governor of the Province and put into effect by the
Working Committee, constituted a quintessentially sovereign
act, not a corporate takeover.
Despite Rong’s argument that the Province’s use of the
Brilliance Holdings shares after expropriating them
independently establishes jurisdiction, the Province’s
subsequent acts of forming Huachen and transferring the
Brilliance Holdings shares to Huachen did not transform the
Province’s expropriation into commercial activity. As the
district court pointed out, Rong’s complaint alleges that by the
time of the stock transfer to Huachen, the Province had
already wrested control of the shares; Huachen was not
established until six months after the shares belonged to the
Province. Yang Rong, 362 F. Supp. 2d at 97 (citing Compl. ¶¶
13
35, 37). Neither Yang Rong’s refusal to comply with the
Working Committee’s demand to transfer the Brilliance
Holdings shares nor the Province’s subsequent transfer of
them to Huachen at a “firesale” price makes the Province’s
expropriation commercial activity. If Rong’s interpretation of
commercial activity were correct, then almost any subsequent
disposition of expropriated property could allow the sovereign
to be haled into a federal court under FSIA. Such a result is
inconsistent with our precedent, the decisions of other circuits
and the Act’s purpose. See Price v. Socialist People’s Libyan
Arab Jamahiriya, 294 F.3d 82, 87–88 (D.C. Cir. 2002) (under
“restrictive” theory of sovereign immunity, FSIA presumes
preclusion of suit against foreign state subject to “discrete and
limited exceptions”); Jungquist v. Sheikh Sultan Bin Khalifa
Al Nahyan, 115 F.3d 1020, 1030 (D.C. Cir. 1997) (plaintiffs’
attempt to bring suit against sovereign on basis sovereign
acted commercially “confuse[s] general activity related to the
claim with the specific activity upon which the claim is
based”); Garb v. Republic of Poland, 440 F.3d 579, 587 (2d
Cir. 2006) (“subsequent commercial transactions involving
expropriated property do not give rise to subject matter
jurisdiction over claims arising from the original
expropriation”); Beg v. Islamic Republic of Pakistan, 353 F.3d
1323, 1326–27 (11th Cir. 2003) (same); De Letelier v.
Republic of Chile, 748 F.2d 790, 796 (2d Cir. 1984) (FSIA’s
legislative history makes clear courts should not deem activity
commercial simply because aspects of activity are
commercial). But see Siderman de Blake v. Republic of
Argentina, 965 F.2d 699, 708–11 (9th Cir. 1992) (Argentina’s
expropriation of hotel was commercial because government
generated revenue from American tourists and paid for
advertising in the United States).
14
For the foregoing reasons, the district court’s dismissal of
the complaint for lack of subject matter jurisdiction is
affirmed.
So ordered.
KAREN LECRAFT HENDERSON, Circuit Judge, concurring:
While not necessary to our holding, see Cicippio v. Islamic
Republic of Iran, 30 F.3d 164, 168-69 (D.C. Cir. 1994), cert.
denied, 513 U.S. 1078 (1995), I believe that the district court
can be affirmed just as soundly on the ground that the
Province’s activity had no direct effect in this country within the
meaning of the third clause of section 1605(a)(2) of FSIA. Rong
claims that the Working Committee’s taking of Brilliance
Holdings stock, his removal from executive and management
positions in Brilliance Holdings and the suspension of trading of
Brilliance Holdings shares on the NYSE deprived him of
financial assets, compensation, dividends and corporate control
and thus had a direct effect in the U.S. A mere financial loss by
a resident of the United States does not constitute a “direct
effect” in the United States. Zedan v. Kingdom of Saudi Arabia,
849 F.2d 1511, 1514 (D.C. Cir. 1988) (plaintiff’s presence in
U.S. was not direct effect because “financial hardship
fortuitously suffered in the United States is not a direct effect of
Saudi Arabia’s failure to honor a contract in Saudi Arabia”)
(emphasis in original); see also Soudavar v. Islamic Republic of
Iran, 67 F. App’x. 618, 619 (D.C. Cir. June 10, 2003)
(unpublished judgment). Unlike the allegations of direct effect
in Foremost-McKesson—not merely nonpayment but also
cessation of the “flow of capital, management personnel,
engineering data, machinery, equipment, materials and
packaging” between Iran and the United States, see Foremost-
McKesson, 905 F.2d at 451—here the direct effect involves only
the monetary loss of a Chinese national resident in the U.S. In
addition, Broadsino’s status as a foreign corporation does alter
the no “direct effect” determination. See Stena Rederi AB v.
Comision de Contratos del Comite Ejecutivo General del
Sindicato Revolucionario de Trabajadores Petroleros de la
Republicana Mexicana, 923 F.2d 380, 390 (5th Cir. 1991)
(foreign corporation’s monetary loss in U.S. insufficient for
direct effect in United States under section 1605(a)(2)).
2
As to his other claims of direct effect, Rong argues that the
direct effect in Foremost-McKesson—i.e., the interference with
the plaintiff’s right to participate in management and as an
active investor and the illegal installation of new directors by the
foreign sovereign—is on all fours with the direct effect here.
McKesson, however, was an American corporation while
Broadsino is incorporated under the laws of Hong Kong. See
Foremost-McKesson, 905 F.2d at 441; see also Int’l Hous. Ltd.
v. Rafidain Bank Iraq, 893 F.2d 8, 11 (2d Cir. 1989) (“The fact
that some or all of IHL’s principals or officers may be United
States citizens does not outweigh the facts that they organized
the company outside the United States and that its losses in the
instant transaction thus occurred elsewhere.”) Weltover is not
to the contrary. Weltover, 504 U.S. at 619 (U.S. was “place of
performance for Argentina’s ultimate contractual obligations”;
rescheduling of obligations therefore had direct effect in U.S.
because “[m]oney that was supposed to have been delivered to
a New York bank for deposit was not forthcoming”); see also
Walpex Trading Co. v. Yacimientos Petroliferos Fiscales
Bolivianos, 712 F. Supp. 383, 389-90 (S.D.N.Y. 1989) (direct
effect in United States found when commercial activity of
Bolivian government’s instrumentality occurred outside U.S.
because contract was to be performed primarily in United States
and foreign buyer utilized U.S. banking resources to facilitate
payment). In the Second Circuit’s Weltover decision
(unanimously affirmed by the Supreme Court), the court
declared that courts “often look to the place where legally
significant acts giving rise to the claim occurred” to determine
the location of a “direct effect.” Weltover, Inc. v. Argentina, 941
F.2d 145, 152 (2d Cir. 1991); see also United World Trade, Inc.
v. Mangyshlakneft Oil Prod. Ass’n, 33 F.3d 1232, 1239 (10th
Cir. 1994), cert. denied, 513 U.S. 1112 (1995) (rejecting
American citizen’s claim that his lost profits caused by foreign
state’s alleged breach of oil contract entered into by parties in
Moscow specifying delivery of oil to Sicily with payment in
Paris constituted direct effect under section 1605(a)(2):
3
“[a]ppellant would have us interpret § 1605(a)(2) in a manner
that would give the district courts jurisdiction over virtually any
suit arising out of an overseas transaction in which an American
citizen claims to have suffered a loss from the acts of a foreign
state. We think that the language of § 1605(a)(2) limiting
jurisdiction to cases where there is a ‘direct effect’ in the United
States makes it unlikely that this was Congress’ intent”)
(emphasis in original); cf. I.T. Consultants, Inc. v. Islamic
Republic of Pakistan, 351 F.3d 1184, 1190 (D.C. Cir. 2003)
(Pakistan’s failure to meet payment obligation under contract
providing for payment in Virginia had direct effect in U.S.
because “the involvement of a U.S. bank was immediate and
unavoidable”). Neither Rong’s monetary loss nor his loss of
control over Brilliance Holdings caused the necessary direct
effect in the U.S. to allow him to sue the Liaoning Province.
Zedan, 849 F.2d at 1515 (injury suffered in foreign country that
has “eventual” effect in U.S. does not constitute direct effect).
Nor is the loss allegedly suffered by third-party investors in the
United States as a result of the one-day suspension of trading on
the NYSE sufficient to establish a direct effect. See Corzo v.
Banco Central de Reserva del Peru, 243 F.3d 519, 525-26 (9th
Cir. 2001) (if cause of action arises entirely in foreign country,
“[t]he fact that United States computer companies might have
been affected by . . . breaches [resulting from Peruvian bank’s
act] is jurisdictionally irrelevant”).