Ungar v. Palestine Liberation Organization

United States Court of Appeals
For the First Circuit

No. 04-2079

EFRAT UNGAR ET AL.,
Plaintiffs, Appellees,

v.

THE PALESTINE LIBERATION ORGANIZATION ET AL.,
Defendants, Appellants.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF RHODE ISLAND

[Hon. Ronald R. Lagueux, Senior U.S. District Judge]

Before

Selya, Circuit Judge,

Campbell, Senior Circuit Judge,

and Lipez, Circuit Judge.

Ramsey Clark, with whom Lawrence W. Schilling, Deming E.
Sherman, and Edwards & Angell, LLP were on brief, for appellants.
David J. Strachman, with whom McIntyre, Tate, Lynch & Holt was
on brief, for appellees.
Daniel J. Popeo, Richard A. Samp, Joel J. Sprayregen, and
Jared M. Wayne on consolidated brief for Washington Legal
Foundation and Allied Educational Foundation, amici curiae.

March 31, 2005
 SELYA, Circuit Judge. This appeal raises exceptionally

important questions of justiciability and sovereignty, emblematic

of unsettled political conditions that have plagued the Middle East

for many years. In it, the Palestinian Authority (PA) and the

Palestine Liberation Organization (PLO) ask us to countermand the

district court's refusal to dismiss the action against them. They

contend that the case hinges on a nonjusticiable political question

and that, at any rate, the defendants enjoy sovereign immunity. In

the event that these arguments do not carry the day, the defendants

seek vacation of two $116,000,000-plus default judgments, one

entered against each of them, on the ground that they were entitled

to a binding determination of sovereign immunity (including

appellate review of any unfavorable decision) before being forced

to bear the burdens of litigation.

After careful consideration of the relevant legal

authorities and perscrutation of an amplitudinous record, we

conclude that this case is justiciable; that the defendants have

not established an entitlement to sovereign immunity; and that the

defendants' strategic litigation choices undercut their arguments

as to the sequencing of the litigation. Consequently, we affirm

the judgment below.

I. BACKGROUND

This case had its genesis in a terrorist attack that

occurred in Israel on June 9, 1996. On that date, Yaron Ungar (a

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citizen of the United States), his wife Efrat, and their infant son

Yishai were driving home from a wedding. Near Beit Shemesh, a car

approached the Ungars' vehicle and loosed a salvo of machine-gun

fire, killing both Yaron and Efrat. The three occupants of the

attacking vehicle were all members of the Hamas Islamic Resistance

Movement (Hamas), a group designated as a terrorist organization by

the United States Department of State. See 8 U.S.C. § 1189;

Redesignation of Foreign Terrorist Organizations, 68 Fed. Reg.

56,860, 56,861 (Oct. 2, 2003). The authorities apprehended the

three assailants and, soon after, arrested a fourth Hamas member as

an accessory. An Israeli court convicted all four men.

David Strachman was appointed as the administrator of the

estates of Yaron and Efrat Ungar. On March 13, 2000, Strachman and

other plaintiffs filed suit in the United States District Court for

the District of Rhode Island pursuant to the Anti-Terrorism Act

(ATA), 18 U.S.C. §§ 2331-2338. That statute provides a cause of

action in favor of any "national of the United States injured in

his or her person, property, or business by reason of an act of

international terrorism, or his or her estate, survivors, or

heirs." Id. § 2333(a). Venue for such an action may be laid in,

inter alia, "any district where any plaintiff resides," id. §

2334(a), and the plaintiff(s) may recover treble damages, costs,

and attorneys' fees, id. § 2333(a).

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 The original complaint set forth both ATA and state law

claims. It was brought by numerous plaintiffs against numerous

defendants. We need not call the roll; for all practical purposes,

the case boils down to a suit involving the estate and heirs of

Yaron Ungar as plaintiffs and the PA and the PLO as defendants.1

The centerpiece of the complaint was an allegation that the

defendants had engaged in international terrorism within the

purview of the ATA. See id. § 2331(1).

On an ensuing motion to dismiss, the district court

rejected an assertion that the PA and the PLO were immune from

service of process. Estates of Ungar ex rel. Strachman v.

Palestinian Auth., 153 F. Supp. 2d 76, 90-91 (D.R.I. 2001) (Ungar

I). However, the court dismissed the state law claims, finding

that Rhode Island choice-of-law principles favored the application

of Israeli law. Id. at 98-99.

The plaintiffs served an amended complaint on August 23,

2001, asserting one claim under the ATA and three Israeli law

claims, all on behalf of the estate and heirs of Yaron Ungar. The

1
On the plaintiffs' side, the claims brought by the estate and
heirs of Efrat Ungar were dismissed because she was not a United
States national. Estates of Ungar ex rel. Strachman v. Palestinian
Auth., 153 F. Supp. 2d 76, 97 (D.R.I. 2001). On the defendants'
side, a number of Hamas defendants were sued, but none of them
entered an appearance and, accordingly, the district court
defaulted them. See id. at 85 n.2. The court dismissed the action
as to several other defendants for want of in personam
jurisdiction. Id. at 95. For present purposes, then, it
simplifies matters to think of this case as a suit by Yaron Ungar's
estate and heirs against the PA and the PLO.

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PA and the PLO moved to dismiss the amended complaint on

essentially the same grounds as previously urged, adding only that

the claims were nonjusticiable. Alternatively, they sought to have

the district court certify, pursuant to 28 U.S.C. § 1292(b),2

various questions, including a question as to whether the

defendants were entitled to a non-specific "functional" immunity

"arising from the peculiar status of the PA as a functioning

governmental entity." At that point, the defendants were not

claiming statehood; they argued only that the policy considerations

underlying the ATA's recognition of immunity for foreign states

"appl[ied] equally" to them.

The PA and the PLO later changed their position. On

January 30, 2002 — during the pendency of their motion to dismiss

the amended complaint — they jointly moved for "leave to assert

defenses." In the memorandum accompanying that motion, they for

the first time claimed an immunity from suit based on sovereignty.

2
This statute provides in pertinent part:

When a district judge, in making in a civil action
an order not otherwise appealable . . ., shall be of the
opinion that such order involves a controlling question
of law as to which there is substantial ground for
difference of opinion and that an immediate appeal from
the order may materially advance the ultimate termination
of the litigation, he shall so state in writing in such
order. The Court of Appeals . . . may thereupon, in its
discretion, permit an appeal to be taken from such order,
if application is made to it within ten days after the
entry of the order . . . .

28 U.S.C. § 1292(b).

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They explained that they initially had chosen not to seek immunity

on the basis of statehood and suggested that emergent political

events in their region had caused a change of plan. The motion for

leave to assert defenses was a curiosity — the defendants had not

yet answered the amended complaint and were free to assert, by

motion to dismiss or otherwise, any colorable defense — and the

district court never acted on it.

In the same time frame, the defendants moved for a stay

of discovery and the plaintiffs moved for an order compelling

discovery. The court granted the requested stay pending resolution

of the motion to dismiss the amended complaint. On November 4,

2002, the district court denied the dismissal motion and dissolved

the stay. The court flatly rejected the claim of

nonjusticiability. Estates of Ungar ex rel. Strachman v.

Palestinian Auth., 228 F. Supp. 2d 40, 44-47 (D.R.I. 2002) (Ungar

II). It also determined that the amended complaint stated claims

upon which relief could be granted both under the ATA and under

Israeli law. Id. at 47-48. Finally, the court reiterated its

earlier rejection of the defendants' claim of immunity from service

of process and added that the PA, as a governmental entity, was not

a sovereign state immune from suit under the ATA. Id. at 48-49.

Finally, the court declined the defendants' invitation to certify

questions for interlocutory review. Id. at 49-51 (citing

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Klinghoffer v. S.N.C. Achille Lauro, 937 F.2d 44, 47-49 (2d Cir.

1991)).

The PA and the PLO moved for reconsideration and again

asked for a stay. Some two months later, the district court

granted the plaintiffs' outstanding motion to compel discovery,

giving the defendants additional time to respond due to their

overseas location. The defendants nonetheless moved for

reconsideration of the discovery order and submitted a letter from

Palestine's permanent observer at the United Nations, which stated

that the defendants could not be expected to respond to discovery

due to the unremitting violence in the region. The letter

suggested that the defendants should be allowed to wait until there

was a final decision on the jurisdictional question before being

forced to attend to the discovery requests.

On February 7, 2003, the plaintiffs moved for an entry of

default based on the defendants' failure to answer the amended

complaint. Six weeks later, the district court denied the

defendants' pending motion to reconsider the order compelling

discovery. On April 11, the court held a hearing on the

defendants' outstanding motion to reconsider its decision in Ungar

II. The court indicated from the bench that it would deny both

that motion and the concomitant request for a stay, but it did not

actually enter such an order until April 22, 2003. Meanwhile, a

magistrate judge entered the requested default, concluding that the

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defendants' failure to answer the amended complaint and their

refusal to participate in discovery were the result of a deliberate

strategic choice. The default was posted on the docket on April

21, 2003.

The defendants filed a notice of appeal to this court on

April 23, 2003, in which they sought interlocutory review of both

the lower court's decision in Ungar II and that court's refusal to

reconsider that decision. They averred that they had been deprived

of the opportunity to make a showing of sovereign immunity because

the district court failed to take action on their motion for leave

to assert a sovereign immunity defense, yet proceeded to determine

that the defendants had no entitlement to immunity. We summarily

affirmed the orders appealed from, noting that the defendants had

neither moved to dismiss on the ground of sovereign immunity nor

attempted, in the lower court, to make the evidentiary showing

required to sustain such a defense. Ungar v. Palestinian

Liberation Org., No. 03-1544, 2003 WL 21254790, at *1 (1st Cir. May

27, 2003) (per curiam) (unpublished). We added that the

defendants' motion for leave to assert a defense was wholly

gratuitous, as they did not need the court's permission to raise

the sovereign immunity issue at that stage of the case. See id.

We issued our order without prejudice to the defendants'

future efforts to press their newly asserted sovereign immunity

defense in an appropriate fashion. See id. (admonishing that the

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defendants "must adhere to the rules that govern all litigants").

The next pleading, however, came from the plaintiffs, who moved for

a default judgment. The defendants responded by filing their third

motion to dismiss. This time, they predicated the motion on three

bases, namely, (i) that the case centered around nonjusticiable

political questions; (ii) that the defendants were entitled to

sovereign immunity under the Foreign Sovereign Immunities Act

(FSIA), 28 U.S.C. §§ 1602-1611; and (iii) that section 2337(2) of

the ATA, which provides that a suit under section 2333 may not be

maintained against "a foreign state [or] an agency of a foreign

state," independently divested the district court of jurisdiction.

The parties were like ships passing in the night.

Pursuing the plaintiffs' path, the magistrate judge, on March 31,

2004, recommended the entry of default judgments against the PA and

the PLO in amounts exceeding $116,000,000.3 The defendants

interposed timely objections to the report and recommendation,

reasserting their nonjusticiability and sovereign immunity points

and contending, for the first time, that they were entitled to a

final determination on sovereign immunity (including appellate

review) before being required either to answer the complaint or to

submit to discovery.

3
The amounts differed slightly. The recommended judgment
against the PA was for $116,421,048 and the recommended judgment
against the PLO was for $116,415,468. The reasons for this minor
disparity are not material to the issues on appeal.

-9-
 Meanwhile, the district court had been pursuing the

course charted by the defendants. On April 23, 2004, it denied the

defendants' renewed motion to dismiss the amended complaint.

Estates of Ungar v. Palestinian Auth., 315 F. Supp. 2d 164, 187

(D.R.I. 2004) (Ungar III). The court hewed to its earlier

rejection of the defendants' nonjusticiability thesis. See id. at

173-74 (referencing Ungar II, 228 F. Supp. 2d at 44-47). Next, the

court held that the FSIA and section 2337(2) of the ATA were two

sides of the same coin with respect to sovereign immunity. Id. at

174-75. This left only a single question: "whether the PA and/or

the PLO represent or constitute a foreign State and are thus

entitled to sovereign immunity." Id. at 175. The court answered

that question in the negative. Id. at 176-87. The plaintiffs

immediately moved to amend the court's order pursuant to Fed. R.

Civ. P. 59(e), arguing that the sovereign immunity defense had been

waived. The defendants did nothing.

On July 12, 2004, the district court went down the

plaintiffs' path. It adopted the magistrate judge's "default

judgment" report and recommendation in its totality, overruled the

defendants' objections thereto, and denied the plaintiffs' motion

to amend Ungar III. See Estates of Ungar & Ungar ex rel. Strachman

v. Palestinian Auth., 325 F. Supp. 2d 15, 21-22, 26-28 (D.R.I.

2004) (Ungar IV). In the course of that decision, the court

rebuffed the defendants' claim that they were entitled to a full

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review of their sovereign immunity defense before being required to

answer the complaint or proceed further. Id. at 23-24. The court

then ordered judgment for the plaintiffs in the recommended

amounts. Id. at 28. This appeal ensued.

II. JUSTICIABILITY

The defendants maintain that the complaint against them

should have been dismissed because it presents a non-justiciable

political question. We find this argument unconvincing.

In Baker v. Carr, 369 U.S. 186 (1962), the Supreme Court

provided guidance as to the attributes of a nonjusticiable

political question. The Court explained that "it is the

relationship between the judiciary and the coordinate branches of

the Federal Government . . . which gives rise to the 'political

question.'" Id. at 210. Withal, not "every case or controversy

which touches foreign relations lies beyond judicial cognizance."

Id. at 211. Determining justiciability requires an "analysis of

the particular question posed, in terms of the history of its

management by the political branches, of its susceptibility to

judicial handling in light of its nature and posture in the

specific case, and of the possible consequences of judicial

action." Id. at 211-12. The Court then set forth six tests

designed to confirm or negate the existence of a political

question:

[1] a textually demonstrable constitutional
commitment of the issue to a coordinate

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 political department; or [2] a lack of
judicially discoverable and manageable
standards for resolving it; or [3] the
impossibility of deciding without an initial
policy determination of a kind clearly for
nonjudicial discretion; or [4] the
impossibility of a court's undertaking
independent resolution without expressing lack
of the respect due coordinate branches of
government; or [5] an unusual need for
unquestioning adherence to a political
decision already made; or [6] the potentiality
of embarrassment from multifarious
pronouncements by various departments on one
question.

Id. at 217. The Court explained, in a later case, that "[t]hese

tests are probably listed in descending order of both importance

and certainty." Vieth v. Jubelirer, 124 S. Ct. 1769, 1776 (2004).

The defendants assert with little elaboration that the

central issue in this case fails each of the six tests. Most of

their argumentation presumes that the district court intruded into

forbidden territory when it interpreted an array of United Nations

resolutions and Israeli-PLO agreements in a politically

controversial manner. To this they add that the default judgment

entered by the district court was so huge that it amounted to a

political statement.

The defendants' position rests on a misunderstanding of

the fundamental nature of this action. This is a tort suit brought

under a legislative scheme that Congress enacted for the express

purpose of providing a legal remedy for injuries or death

occasioned by acts of international terrorism. The defendants are

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organizations that allegedly violated the statute. They have

attempted to avoid liability by wrapping themselves in the cloak of

sovereign immunity. The question we must answer, then, is whether

the defendants have set forth sufficient evidence to support their

claim of immunity — no more and no less.

On this view of the case, the plaintiffs easily clear the

six Baker hurdles. To begin, the lower court's immunity decision

neither signaled an official position on behalf of the United

States with respect to the political recognition of Palestine nor

amounted to the usurpation of a power committed to some other

branch of government. After all, Congress enacted the ATA, and the

President signed it. The very purpose of the law is to allow the

courts to determine questions of sovereign immunity under a legal,

as opposed to a political, regime.4 Seen in this light, the

district court's decision denying immunity did not impede the

constitutional prerogatives of the political branches over foreign

policy. See generally Baker, 369 U.S. at 211 & n.31 (noting that

4
The FSIA operates in the same fashion. See 28 U.S.C. § 1602
("The Congress finds that the determination by United States courts
of the claims of foreign states to immunity from the jurisdiction
of such courts would serve the interests of justice and would
protect the rights of both foreign states and litigants in United
States courts."); H.R. Rep. No. 94-1487, at 7 (1976), reprinted in
1976 U.S.C.C.A.N. 6604, 6606 ("A principle purpose of [the FSIA] is
to transfer the determination of sovereign immunity from the
executive branch to the judicial branch, thereby reducing the
foreign policy implications of immunity determinations and assuring
litigants that these often crucial decisions are made on purely
legal grounds . . . .").

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the Constitution commits foreign relations to the executive and

legislative branches, thus permitting them to determine what "may

be done in the exercise of this political power").

The second and third Baker hurdles present no insuperable

obstacles here. The district court had access to judicially

manageable standards for resolving the issue before it, see infra

Part III(A), and those standards did not require the court to make

nonjudicial policy determinations. Both sides agreed that the

definition of a "state" under the relevant statutes was informed by

an objective test rooted in international law and articulated in

the Restatement (Third) of Foreign Relations. Under these

circumstances, the determination of whether the defendants have

adduced sufficient evidence to satisfy that definition is

quintessentially appropriate for a judicial body. See Kadic v.

Karadzic, 70 F.3d 232, 249 (2d Cir. 1995)

The final three hurdles need not concern us. These tests

are "relevant only if judicial resolution of a question would

contradict prior decisions taken by a political branch in those

limited contexts where such contradiction would seriously interfere

with important governmental interests." Id. Here, the political

branches have enacted a law that leaves undiminished their ability

either to recognize or withhold recognition from foreign states,

while leaving to the courts the responsibility of determining the

existence vel non of statehood for jurisdictional purposes.

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Moreover, the district court's resolution of that question is not

incompatible with any formal position thus far taken by the

political branches. By the same token, its jurisdictional decision

does not turn a blind eye to any position expressed by those

responsible for conducting the nation's foreign relations. Cf.

Republic of Austria v. Altmann, 124 S. Ct. 2240, 2255 (2004)

(noting that the State Department has retained authority to file

"statements of interest suggesting that courts decline to exercise

jurisdiction in particular cases implicating foreign sovereign

immunity"). As a result, the decision did not signify a lack of

respect for, or conflict with, the wishes of the political

branches. No more is exigible for this purpose. See Baker, 369

U.S. at 212-13 (endorsing judicial competence in matters touching

on foreign relations in the absence of any "conclusive governmental

action" or "recognizedly authoritative executive declaration")

(citation and internal quotation marks omitted).

The defendants make a number of specific arguments, but

these are largely derivative of their disagreement with the result

reached by the district court. Their unhappiness is

understandable, but legally irrelevant. The reality is that, in

these tempestuous times, any decision of a United States court on

matters relating to the Israeli-Palestinian conflict will engender

strong feelings. Be that as it may, the capacity to stir emotions

is not enough to render an issue nonjusticiable. For

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jurisdictional purposes, courts must be careful to distinguish

between political questions and cases having political overtones.

See Klinghoffer, 937 F.2d at 49.

The one remaining argument that warrants particularized

attention is the defendants' assertion that the district court made

a political statement in calibrating the size of the award. That

assertion is wholly unsupported. The judgment reflects the

wrongful death of a youthful man and includes a trebling of damages

as mandated by law. See 18 U.S.C. § 2333(a). It also includes

attorneys' fees. See id. The defendants have not challenged

either the measure of damages utilized by the lower court or the

integrity of its mathematical computations. We add, moreover, that

even if the court erred on the side of generosity — a matter on

which we take no view — a mere error in the calculation of a

damages award would not implicate the propriety of federal subject

matter jurisdiction. We therefore reject the defendants'

"political statement" assertion as meritless.

To say more on this aspect of the case would be

supererogatory. The short of it is that the political question

doctrine does not preclude judicial resolution of the plaintiffs'

case. We turn, therefore, to the merits of the sovereign immunity

defense.

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III. SOVEREIGN IMMUNITY

We divide our discussion of the defendants' sovereign

immunity defense into segments, starting with the legal framework

and historical background. We then proceed to the merits.

A. The Legal Landscape.

The FSIA, with exceptions not relevant here, provides

that "a foreign state shall be immune from the jurisdiction of the

courts of the United States." 28 U.S.C. § 1604. Although the

statute does not define the term "foreign state," it makes pellucid

that the term includes "a political subdivision of a foreign state

or an agency or instrumentality of a foreign state." Id. § 1603

(a). It also defines what constitutes an agency or instrumentality

of a foreign state. Id. § 1603(b).

The ATA contains analogous language. It provides that no

civil action thereunder may be maintained against "a foreign state,

an agency of a foreign state, or an officer or employee of a

foreign state or an agency thereof acting within his or her

official capacity or under color of legal authority." 18 U.S.C. §

2337(2). Like the FSIA, the ATA contains no definition of the term

"foreign state."

Because the two statutory regimes use language that is

similar but not identical, the first — and most obvious — question

is whether there are substantive differences in the meaning of the

term "foreign state" as used in the FSIA and the ATA, respectively.

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The district court concluded that the two statutes were to be read

in pari materia. See Ungar III, 315 F. Supp. 2d at 175. We agree

with that conclusion.

We recognize, of course, that even identical terms can

have divergent meanings when used in different statutes. See,

e.g., Hanover Ins. Co. v. United States, 880 F.2d 1503, 1504 (1st

Cir. 1989); United States v. Sterling Nat. Bank & Trust Co., 494

F.2d 919, 923 (2d Cir. 1974). Generally speaking, however, that

phenomenon occurs only when the purpose, history, and structure of

the statutes make manifest a principled basis for interpreting the

words differently. See, e.g., Perez-Arellano v. Smith, 279 F.3d

791, 794 (9th Cir. 2002). Here, however, the Supreme Court has

observed that "the text and structure of the FSIA demonstrate

Congress' intention that the FSIA be the sole basis for obtaining

jurisdiction over a foreign state in our courts." Argentine

Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 434 (1989).

Nothing in either the language or legislative history of the ATA

gives any indication that Congress intended the newer statute to

supercede, rather than to mirror, the detailed jurisdictional

framework described in the FSIA. To cinch matters, the Supreme

Court, in a post-ATA case, recently repeated its admonition that

"courts should decide claims of sovereign immunity in conformity

with the [FSIA's] principles." Altmann, 124 S. Ct. at 2249.

Consequently, we regard an assertion of sovereign immunity under

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the ATA, 18 U.S.C. § 2337(2), as being functionally equivalent to

an assertion of sovereign immunity under the FSIA, 28 U.S.C. §

1604.

This brings a second question into focus. Since neither

the FSIA nor the ATA define the term "foreign state" as it relates

to a sovereign power, we must determine the intended meaning of

that term. There is no controlling precedent in this circuit as to

the essential attributes of statehood in this context. The

parties, however, find common ground in their shared conviction

that the definition should be derived by application of the

standard set forth in the Restatement (Third) of Foreign Relations.

This standard deems a state to be "an entity that has a defined

territory and a permanent population, under the control of its own

government, and that engages in, or has the capacity to engage in,

formal relations with other such entities." Restatement (Third) of

Foreign Relations § 201 (1987). Under the Restatement standard,

political recognition — typically thought of as "a formal

acknowledgment by a nation that another entity possesses the

qualifications for nationhood," N.Y. Chinese TV Programs, Inc. v.

U.E. Enters., Inc., 954 F.2d 847, 853 (2d Cir. 1992) — is not a

prerequisite to a finding of statehood. See Restatement (Third) of

Foreign Relations § 202 cmt. b (explaining that "[a]n entity that

satisfies the requirements of § 201 is a state whether or not its

statehood is formally recognized by other states").

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 Using the Restatement standard as the rule of decision is

a colorable position. In this regard, the Restatement tracks the

historical standard found in international law. See Nat'l

Petrochem. Co. of Iran v. M/T Stolt Sheaf, 860 F.2d 551, 553 (2d

Cir. 1988); see also Convention on Rights and Duties of States

(Montevideo Convention), Dec. 26, 1933, art. 1, 49 Stat. 3097,

3100, 165 L.N.T.S. 19, 25.5 In addition, the FSIA's legislative

history is itself replete with congressional references to

sovereign immunity's roots in international law. See, e.g., H.R.

Rep. No. 94-1487, at 7 (1976), reprinted in 1976 U.S.C.C.A.N. 6604,

6605 (noting that the objective of the bill was to codify sovereign

immunity doctrine as recognized by international law and to ensure

that this international standard would be applied in federal

litigation). The legislative history goes on to recount that the

very foundation of foreign sovereign immunity in federal

jurisprudence rests on the Supreme Court's recognition of that

doctrine in The Schooner Exchange v. McFaddon, 11 U.S. (7 Cranch)

116 (1812). There, the Court established that the federal courts

generally have no jurisdiction over suits involving foreign

sovereigns with whom the United States is at peace, deriving such

an immunity from the custom and practice of international law. Id.

at 135-46.

5
The Montevideo Convention is still in effect and the United
States is a party to it. See United States Dep't of State,
Treaties in Force 480 (2004).

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 Over time, the federal courts came to rely less on

international law and more on the actions of the State Department

in determining whether to grant immunity in individual cases. H.R.

Rep. No. 94-1487, at 8, reprinted in 1976 U.S.C.C.A.N. at 6606.

The committee report that accompanied the FSIA noted that this

practice was generally at odds with the views of the international

community; indeed, in "virtually every country . . . sovereign

immunity is a question of international law to be determined by the

courts." Id. at 9, reprinted in 1976 U.S.C.C.A.N. at 6607-08. To

that end, Congress endeavored to bring the United States back into

conformity with the world community by taking immunity decisions

out of the hands of the executive branch and depositing them in the

judicial branch. Id. at 12, reprinted in 1976 U.S.C.C.A.N. at

6610. The committee report unequivocally restates the "central

premise of the bill" as being that "decisions on claims by foreign

states to sovereign immunity are best made by the judiciary on the

basis of a statutory regime which incorporates standards recognized

under international law." Id. at 14, reprinted in 1976

U.S.C.C.A.N. at 6613 (emphasis supplied).

This legislative history offers strong support for the

proposition that courts should look to international law to

determine statehood for purposes of the FSIA. The case law that

has evolved in the lower federal courts, while scanty, pushes in

the same direction. See, e.g., Morgan Guar. Trust Co. v. Republic

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of Palau, 924 F.2d 1237, 1243-47 (2d Cir. 1991) (using Restatement

standard to determine whether Palau qualified as a foreign state);

Klinghoffer, 937 F.2d at 47-49 (same with respect to PLO).

Consequently, for purposes of this case, we accept the parties'

agreement that the Restatement standard controls the statehood

question.6

B. The Historical Background.

Following World War I, the League of Nations placed the

region of Palestine, formerly a part of the Ottoman Empire, under

a mandate. The mandate system grew out of the idea that some

former colonies of nations defeated in World War I were "not yet

able to stand by themselves" and should be placed under the

tutelage of "advanced nations." League of Nations Covenant art.

22, paras. 1, 2. Palestine was among those territories deemed to

"have reached a stage of development where their existence as

6
We caution that the Restatement standard, though embraced by
both sides in this case, is not inevitably correct. It may be
argued that a foreign state, for purposes of the FSIA, is an entity
that has been recognized as a sovereign by the United States
government. See, e.g., Ungar III, 315 F. Supp. 2d at 186-87
(alternate holding); cf. 13B Charles Alan Wright, Arthur R. Miller,
& Edward H. Cooper, Federal Practice & Procedure § 3604 (2d ed.
1984) (noting that for purposes of former 28 U.S.C. §
1332(a)(2)(1970) — a statute modified by the FSIA — federal courts
generally had held that a foreign state was one that had been
recognized as such by the United States government, in either a de
jure or de facto capacity (collecting cases)). Here, however, all
roads lead to Rome. The defendants' sovereign immunity defense
fails the Restatement test. See infra Part III(C). If recognition
were the test, the result would be the same. After all, the United
States has not recognized Palestine as a sovereign nation. Thus,
we need not probe the point too deeply.

-22-
independent nations [could] be provisionally recognized," subject

to "administrative advice and assistance" from more mature

governments. Id. at para. 4. The United Kingdom held the mandate

over Palestine. Rather than "advice and assistance," however, the

powers conferred were more akin to rule. Subject to implicit

limitations not relevant here, the mandate gave the United Kingdom

"full powers of legislation and of administration" over the region,

as well as "control of the foreign relations of Palestine."

Mandate for Palestine arts. 1, 12, League of Nations Doc. C.529

M.314 1922 VI (1922). The mandate also made the United Kingdom

responsible for "placing [Palestine] under such political,

administrative and economic conditions as will secure the

establishment of the Jewish national home." Id. art. 2.

Heavy Jewish immigration to the region followed, owing in

large part to the persecution of Jews in Europe. Tension between

the Jewish and Arab populations led to violence and civil unrest.

See United Nations Dep't of Pub. Info., The Question of Palestine

& The United Nations at 3, U.N. Doc. DPI/2276, U.N. Sales No.

04.I.15 (2003) (Question of Palestine). By 1947, the United

Kingdom's patience had worn thin. It took steps to divest itself

of the mandate and dump the problem into the lap of the United

Nations. Id.

The United Nations rose to the occasion. It formulated

a plan that involved the creation of two independent states within

-23-
the mandate territory: one Jewish, the other Arab. This plan also

purposed to make Jerusalem an international enclave administered by

the United Nations. See Future Gov't of Palestine, G.A. Res.

181(II), U.N. GAOR, 2d Sess., at 131, U.N. Doc. A/519 (1947). The

plan delineated the boundaries of the two states and the Jerusalem

enclave, id. at 142-46; established a timetable for the withdrawal

of British forces; and proposed to end the existing mandate no

later than August 1, 1948. Id. at 132-33. As the British

withdrew, power would temporarily vest in a United Nations

commission pending the establishment of provisional governments by

each of the two putative states. Id. at 133. At that point, the

provisional governments would "progressively receive" full

administrative responsibility. Id. at 134. When the independence

of a state had "become effective," that state would be accorded

"sympathetic consideration" for admission to the United Nations.

Id. at 142.

The plan never took effect. Although Jewish leaders

accepted it, Palestinian leaders did not. See Question of

Palestine at 10. The Palestinians, still representing two-thirds

of the population of the affected territory, argued vociferously

against partition. Id. at 7, 10. Faced with a steadily

deteriorating situation, the British abandoned the mandate and

withdrew from the region. Id. at 11. On the same date — May 14,

1948 — Jewish leaders announced the establishment of the State of

-24-
Israel, using the territorial boundaries delineated in G.A. Res.

181(II) to demarcate its borders. Id.

The next day, armed forces of the surrounding Arab states

entered the former mandate territory. Id. The Arab League

notified the U.N.'s Secretary-General that they intended to fill

the vacuum left by the abrupt departure of the British forces and

to restore law and order in the region. See United Nations, The

Origins and Evolution of the Palestine Problem 137-38 (1990).

The Arab invasion precipitated the first Arab-Israeli

war. Question of Palestine at 11. During the conflict, nearly

three-quarters of a million Palestinian refugees fled Israeli-

controlled territory. Id. at 81. By the time of the eventual

armistice, Egypt had taken control of the Gaza Strip, Jordan was in

control of the West Bank (including East Jerusalem), and Israel had

taken control of the remainder of the former mandate territory.

Id. at 12.

This division persisted until 1967, when war again broke

out between Israel, on the one hand, and Egypt, Jordan, and Syria,

on the other hand. Id. at 18. Israel prevailed. Its spoils

included occupation of the Gaza Strip and the West Bank, as well as

the Sinai peninsula (previously under Egyptian rule) and the Golan

Heights region of Syria. Id.

The U.N.'s Security Council attempted to undo these gains

by diplomatic means. It issued a resolution that called for the

-25-
"[w]ithdrawal of Israeli armed forces from territories occupied in

the recent conflict" and beseeched the protagonists to respect and

acknowledge "the sovereignty, territorial integrity and political

independence of every State in the area." S.C. Res. 242, U.N.

SCOR, 22d Sess., Resolutions and Decisions, at 8, U.N. Doc.

S/INF/22/Rev.2 (1967). The document did not directly address the

question of Palestine. The PLO, which had been formed in 1964,

strongly criticized the resolution for that reason. Question of

Palestine at 19.

In 1968, the PLO declared that the international

community had failed to secure the rights of Palestinian Arabs and

vowed to take up the struggle. Id. at 31. In 1973, a third Arab-

Israeli war led the Security Council to renew its call for

implementation of the terms of Resolution 242. See S.C. Res. 338,

U.N. SCOR, 28th Sess., Resolutions and Decisions, at 10, U.N. Doc.

S/INF/29 (1973). The following year, the United Nations General

Assembly adopted two resolutions: one affirming the rights of

Palestinians to "self-determination without external interference"

and to "national independence, and sovereignty," and the other

granting the PLO observer status at the United Nations. G.A. Res.

3236 & 3237, U.N. GAOR, 29th Sess., Supp. No. 31, at 4, U.N. Doc.

A/9631 (1974).

Over the next decade, the PLO provided municipal services

to Palestinians in the West Bank and other refugee-dominated areas.

-26-
By the early 1980s, these activities had put into place "an

extensive rival bureaucratic structure." 25 Encyclopaedia

Britannica 423 (15th ed. 2003). PLO attacks against Israel grew in

intensity, eventually leading to Israel's invasion of Lebanon and

the expulsion of a large PLO contingent. Question of Palestine at

26-28.

On July 31, 1988, Jordan gave up its claims to the West

Bank. See Jordan: Statement Concerning Disengagement from the

West Bank and Palestinian Self-Determination, 27 I.L.M. 1637

(1988). Within a few weeks thereafter, the PLO, speaking from

exile in Algeria, issued a "Declaration of Independence" that

proclaimed the "establishment of the State of Palestine in the land

of Palestine with its capital at Jerusalem." Palestine Nat'l

Council: Political Communique & Decl. of Indep., 27 I.L.M. 1660,

1670 (1988). In response, the United Nations decided to use the

term "Palestine" instead of "Palestine Liberation Organization"

within the United Nations system, but expressly stated that this

redesignation did not enhance the group's observer status. G.A.

Res. 43/177, U.N. GAOR, 43d Sess., Supp. No. 49, at 62, U.N. Doc.

A/43/49 (1988).

In 1993, the United States helped to broker the first

agreement between Israel and the PLO. Under its terms, Israel

accepted the PLO as the representative of the Palestinian people

and the PLO acknowledged Israel's statehood. Question of Palestine

-27-
at 47. This rapprochement culminated in the signing of the first

of the Oslo Accords: the Declaration of Principles on Interim

Self-Government Arrangements (DOP), Sept. 19, 1993, Isr.-P.L.O., 32

I.L.M. 1525. The DOP's stated purposes included the establishment

of a Palestinian interim self-governing authority (the PA) as a

precursor to a permanent arrangement based on Security Council

Resolutions 242 and 338. Id. art. I, 32 I.L.M. at 1527. The DOP

treated the West Bank and the Gaza Strip as a single territorial

unit and stated that, when certain conditions had been achieved,

Israel would transfer authority over "education and culture,

health, social welfare, direct taxation, and tourism" in those

areas to the PA. Id. art. VI, 32 I.L.M. at 1529. The DOP also set

forth a framework for negotiating the structure of the PA. Id.

art. VII, 32 I.L.M. at 1530-31. And, it specified that while the

PA, when created, would be responsible for self-policing, Israel

would remain responsible for external security (including the

overall safety of Israelis), in the affected territory. Id. art.

VIII, 32 I.L.M. at 1531.

The protagonists reached agreement as to the structure of

the PA in 1994, and the PA then became a reality. See Agreement on

the Gaza Strip and the Jericho Area, May 4, 1994, Isr.-PLO, art.

IV, 33 I.L.M. 622, 628. On September 28, 1995, Israel and the PLO

signed the interim agreement called for in the DOP, aspiring to

reach a permanent agreement within five years. See Interim

-28-
Agreement on the West Bank & the Gaza Strip, Sept. 28, 1995, Isr.-

P.L.O., pmbl., 36 I.L.M. 551, 558. The interim agreement

enumerated those powers and responsibilities to be transferred to

the PA. For example, it granted executive responsibility to the PA

with respect to "all matters within its jurisdiction," including

the formulation of policies, the issuance of rules and regulations,

and the making of contracts. Id. art. IX, 36 I.L.M. at 560-61.

The PA was, however, denied authority over foreign relations,

including the establishment of embassies, the hiring of diplomatic

staff, and the exercise of diplomatic functions.7 Id. Moreover,

the interim agreement took pains to note that Israel would

"continue to exercise powers and responsibilities not so

transferred." Id. art. I, 36 I.L.M. at 558.

The drafters of the interim agreement considered the West

Bank and the Gaza Strip as a single territorial unit.

Nevertheless, they subdivided the land within that unit into three

main zones, each under a different level of PA control. Id. art.

XI, 36 I.L.M. at 561-62. The overall framework required the PA to

police the Palestinian populace but continued Israeli

responsibility over external threats and border defense. Id. arts.

7
The interim agreement permitted the PLO to conduct limited
foreign affairs activities on behalf of the PA. Those activities
pertained only to economic, cultural, scientific, and educational
matters. Interim Agreement on the West Bank & the Gaza Strip art.
IX, 36 I.L.M. at 560-61.

-29-
XII-XIV, 36 I.L.M. at 562-63. Israel also retained jurisdiction

over all Israeli settlers living in the territory. Id.

The PA's legislative powers were similarly restricted.

The interim agreement specified that any law that "amends or

abrogates existing laws or military orders, which exceeds the

jurisdiction of the Council or which is otherwise inconsistent with

the provisions of the DOP, this Agreement, or of any other

agreement that may be reached between the two sides during the

interim period, shall have no effect and shall be void ab initio."

Id. art. XVIII, 36 I.L.M. at 564-65.

In January of 1996, the PA held an election. Question of

Palestine at 51. Negotiations on a permanent settlement began

shortly thereafter, but terrorist attacks stalled the process. Id.

at 51-52. The events giving rise to this case occurred during this

period.

In August of 1998, the United Nations enhanced the PLO's

observer status, granting it the right to participate in General

Assembly debate, albeit without a vote. G.A. Res. 52/250, U.N.

GAOR, 52d Sess., Supp. No. 49, at 4, U.N. Doc. A/52/49 (1998).

That October, Israel and the PLO signed the Wye River Memorandum (a

document expressly subject to the terms of both the DOP and the

interim agreement). See Wye River Memorandum (Interim Agreement),

Oct. 23, 1998, Isr.-P.L.O., 37 I.L.M. 1251. This marked a

restarting of the peace process. The following year, the parties

-30-
negotiated a similar sort of interim agreement. See Sharm El-

Sheikh Memorandum, Sept. 4, 1999, Isr.-P.L.O., 38 I.L.M. 1465. In

2000, however, the two sides failed in an effort to reach a final

agreement. Question of Palestine at 54. A firestorm of

Palestinian attacks and Israeli reprisals ensued. Id. at 55.

In 2003, the Quartet — a group comprised of

representatives of the United States, the European Union, the

Russian Federation, and the United Nations — presented a "road map"

setting forth a series of aspirational steps designed to break the

impasse and move toward a permanent two-state solution in the

region. See Letter Dated 7 May 2003 from the Secretary-General

Addressed to the President of the Security Council, U.N. Doc.

S/2003/529 (2003).

To date, Israel and the PLO have not traveled down the

newly mapped road. Peace negotiations have been virtually non-

existent since 2000, and the violence continues. There is,

however, a glimmer of hope: the recent election of a new PA

president has thawed relations between the two sides and created a

sense of anticipation that a meaningful peace process will resume.

See Steven Erlanger, Abbas Declares War With Israel Effectively

Over, N.Y. Times, Feb. 14, 2005, at A1.

C. The Merits.

We now reach the merits of the sovereign immunity

defense. In scrutinizing a district court's resolution of a

-31-
foreign sovereign immunity issue, we review factual findings for

clear error and legal conclusions de novo. Karaha Bodas Co. v.

Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 313 F.3d 70, 80

(2d Cir. 2002). Here, the defendants' claim to sovereign immunity

derives from their assertion that Palestine is a state, and the

evidence presented to the district court in support of that

assertion consisted entirely of indisputably authentic

international legal documents. The district court's determination

that Palestine was not a state was premised on a legal conclusion:

the court determined that the defendants' documentary proffer did

not satisfy the legal standard derived from international law. Our

review of that decision is de novo. Id.

International law defines a state as "an entity that has

a defined territory and a permanent population, under the control

of its own government, and that engages in, or has the capacity to

engage in, formal relations with other such entities." Restatement

(Third) of Foreign Relations § 201. This definition derives from

the Montevideo Convention of 1933. See supra Part III(A). In

applying this definition, some courts have subdivided the analysis

into four parts, asking whether the putative state (i) has a

defined territory and (ii) a permanent population, which (iii) is

under the control of its own government, and (iv) has the capacity

to engage in foreign relations. See, e.g., Klinghoffer, 937 F.2d

at 47-48.

-32-
 In practice, the third element is the most salient factor

in the statehood calculus. See Knox v. PLO, 306 F. Supp. 2d 424,

434 (S.D.N.Y. 2004); see also James Crawford, The Creation of

States in International Law 42 (1979) (Creation of States). The

Restatement's explanation of this element is rather sparse; it

notes only that "[a] state need not have any particular form of

government, but there must be some authority exercising

governmental functions and able to represent the entity in

international relations." Restatement (Third) of Foreign Relations

§ 201 cmt. d. To satisfy these requirements, a state's government

must, at a bare minimum, be independent and in general control of

its territory, maintaining at least a modicum of law and order.8

See Creation of States at 45-46; see also Nii Lante Wallace-Bruce,

Claims to Statehood in International Law 54 (1994) (explaining that

what is required "is a coherent system of authority structures

regulating . . . the territory under that government's control").

In short, the existence of a state demands a community integrated

and organized as a political unit. See 1 Robert Jennings & Arthur

Watts, Oppenheim's International Law 122 (9th ed. 1992). Its

government must speak for the state as a whole; the mere presence

of independent tribes or factions within a territory, lacking

8
Of course, if statehood exists at a finite point in time, it
is not terminated by belligerent occupation, without more. See
Restatement (Third) of Foreign Relations § 201, reporter's note 3
(explaining that "[m]ilitary occupation, whether during war or
after an armistice, does not terminate statehood").

-33-
common institutions, cannot constitute a government in control.

See Western Sahara, 1975 I.C.J. 12, 63 (Oct. 16).

The first, second, and fourth elements are dependent on

(or, sometimes, subsumed by) the third. As to the first — defined

territory — the "only requirement is that the State must consist of

a certain coherent territory effectively governed." Creation of

States at 40. As such, this element is merely a function of

independence and governmental control. Id. So too the second

element, which typically is satisfied by showing a permanent

population within the defined territory. See id. at 40-42. The

relationships of these elements with the all-important third

element is readily evident. As one court put it, the question is

essentially whether the entity claiming statehood has a "defined

territory under its control" and a "permanent population under its

control." Knox, 306 F. Supp. 2d at 434 (emphasis in original).

The fourth element — "capacity to engage in foreign

relations" — focuses on "competence, within [a state's] own

constitutional system, to conduct international relations with

other states, as well as the political, technical, and financial

capabilities to do so." Restatement (Third) of Foreign Relations

§ 201 cmt. e. Again, this is a function of independence and

effective government control. See Creation of States at 47-48. In

that sense, then, it too is dependent on the third element.

-34-
 We add that the party who alleges sovereign immunity has

the burden of proving that status. See Drexel Burnham Lambert

Group, Inc. v. Comm. of Receivers, 12 F.3d 317, 325 (2d Cir. 1993);

Alberti v. Empresa Nicaraguense de la Carne, 705 F.2d 250, 253 (7th

Cir. 1983). With this in mind, we move from the general to the

specific.

The defendants argue that the state of Palestine exists;

that they constitute core elements of that state; and that,

therefore, they are immune from suit under the FSIA (and, thus,

under the ATA). This argument has a quicksilver quality: it is

hard to pin down exactly when or how the defendants assert that

Palestine achieved statehood. At various points in their briefs,

they hint at three possibilities: (i) the period from the

beginning of the mandate through the 1967 Arab-Israeli war; (ii)

the period from the end of that war up until the creation of the

Palestinian Authority (1994); and (iii) the period from 1994

forward. In an abundance of caution, we consider whether the

defendants have made a prima facie showing of statehood at any such

juncture.

For each of the three periods, the defendants' proffer is

much the same anent the first and second elements of the test for

statehood. With respect to the first, the defendants consistently

claim that Palestine comprises the territory defined by Security

Council Resolution 242, that is, those portions of the once and

-35-
former mandate territory occupied by Israel during the 1967 war

(including the West Bank, the Gaza Strip, and East Jerusalem).

With respect to the second element, the defendants asseverate that

this territory has had a permanent population from time immemorial

(and, thus, that it had such a population throughout the three

periods with which we are concerned). Assuming, arguendo, the

accuracy of these averments, the focus shifts to the third prong of

the test for statehood. At that stage, the question becomes

whether the defendants have shown that the identified territory and

population are self-governing. In answering this question, we look

separately at each period.

1. The Initial Period. As to the pre-1967 period, the

defendants' argument seems to be that the territory that comprised

the Palestinian portion of the mandate was a state prior to,

during, and after the mandate. Their support for this thesis is

very weak; they assert only that throughout this interval there

were local governmental institutions in place that catered to the

Palestinian populace.

This assertion is manifestly insufficient to make the

defendants' prima facie case of statehood. The third element of

the test requires governmental independence and control of a

defined territory. That element plainly was not satisfied while

the defined territory was part of the Ottoman Empire; even if the

Palestinian people exercised operating control over domestic

-36-
governmental functions in the region — and the defendants offer

nothing to support such a claim — that would not be sufficient to

show the existence of an independent political unit that controlled

the territory.

The same is true for the latter portions of the period.

During the currency of the mandate, the United Kingdom exercised

suzerainty over the administration and laws of the defined

territory. See Klausner v. Levy, 83 F. Supp. 599, 600 (E.D. Va.

1949). Following the United Kingdom's relinquishment of the

mandate and the onset of the 1967 Arab-Israeli war, the Israelis

occupied much of the land designated for a future Arab state, and

the Egyptians and Jordanians seized the rest. The net result is

that, at all times, other states had control over the defined

territory.

The defendants resist the obvious conclusion. In

particular, they rely upon United Nations General Assembly

Resolution 181(II), noting that it called for an independent Arab

state to come into existence no later than October 1, 1948, and

that this became a reality in the sense that "Palestinian

government institutions continued to function under Egyptian and

Jordanian occupation much as they had under the Mandate."

Appellants' Br. at 21. These assertions are insufficient to show

that a political unit was in control of the defined territory and

populace. The mere fact that the United Nations conceived an

-37-
aspirational plan for Palestinian statehood does not establish the

existence of a state. Nor does the fact that the Egyptians and

Jordanians occupied and controlled a significant portion of the

defined territory immediately following the end of the mandate aid

the defendants' cause. To the contrary, the fact is a stark

reminder that no state of Palestine could have come into being at

that time. See Knox, 306 F. Supp. 2d at 437 (noting that under

"international law, a state will maintain its statehood during a

belligerent occupation . . . but it would be anomalous indeed to

hold that a state may achieve sufficient independence and statehood

in the first instance while subject to and laboring under the

hostile military occupation of a separate sovereign").

2. The Middle Period. The interval following the

occupation of the West Bank and the Gaza Strip by Israel in 1967 is

no more promising. With respect to this time span, the defendants

rely heavily on Security Council Resolution 242 and its hortatory

call for Israeli withdrawal from "territories occupied in the

recent conflict" and for all states to respect and acknowledge "the

sovereignty, territorial integrity and political independence of

every State in the area." That reliance is mislaid. There is a

vast difference between what should be and what is; the fact that

some political leaders recognize that particular territory should

comprise a state does not make that territory a state under the

prevailing principles of international law.

-38-
 What counts is that the defendants have not presented any

evidence indicating that Palestine actually became a state

following Israel's conquest of the lands previously occupied by

Jordan and Egypt. The one circumstance to which the defendants

advert — that the Israelis did not dismantle the local governmental

institutions in the region — is wholly inadequate to show that

there was a Palestinian state underlying the Israeli occupation.

The territory went directly from Jordanian/Egyptian control to

Israeli control, thus undermining the defendants' statehood

argument. See id.

To be sure, the defendants point proudly to the U.N.'s

1974 recognition of the PLO. We do not minimize the political

significance of that event. The fact remains, however, that

neither political recognition of the PLO nor United Nations support

for self-governance is sufficient to signify that the Restatement's

conditions for statehood have been met. See Klinghoffer, 937 F.2d

at 48 (noting that the PLO did not satisfy the objective

requirements for statehood despite its political recognition by

some foreign states).

3. The Most Recent Period. The defendants' argument for

current statehood posits that Palestine's changing status over the

last decade marked the emergence of the defined territory from

Israeli control and the establishment of a Palestinian government

in its place. The PLO's 1988 declaration of independence

-39-
adumbrated the inception of this period. The period itself

commenced, however, in 1994, the signal event being the creation of

the PA as an entity having some lawful authority in the West Bank

and Gaza. The defendants suggest that this development signified

the birth of a government sufficiently in control of the defined

territory to satisfy the third element of the Restatement test. We

reject the suggestion.

Undoubtedly, the agreements to which the defendants

allude vested some autonomy in the newly created PA. But the

authority so transferred was limited and, during and after that

transition, Israel explicitly reserved control over all matters not

transferred. See Interim Agreement art. I, 36 I.L.M. at 558.

Several of these reserved powers are incompatible with the notion

that the PA had independent governmental control over the defined

territory. To illustrate, the interim agreement expressly denied

the PA the right to conduct foreign relations, id. art. IX, 36

I.L.M. at 561; left Israel with an undiminished ability to defend

and control the territorial borders, id. art. XII, 36 I.L.M. at

562; denied the PA the right to create or maintain either an army

or a navy,9 id. art. XIV, 36 I.L.M. at 563; retained Israeli

control over the territorial airspace, id. at Annex I, art. XIII,

9
The PA was permitted to organize a police force, but this
force had no jurisdiction over Israeli citizens within the
territory. See Interim Agreement at Annex I, art. XI, 36 I.L.M. at
585.

-40-
36 I.L.M. at 586; and placed severe restrictions on the PA's

lawmaking ability (declaring, inter alia, that any laws passed in

contravention of the DOP would be void ab initio), id. art. XVIII,

36 I.L.M. at 565. These restrictions remain in effect. It is,

therefore, transparently clear that the PA has not yet exercised

sufficient governmental control over Palestine to satisfy the third

element of the Restatement test. See Geoffrey R. Watson, The Oslo

Accords 68-72 (2000) (concluding that "there was no Palestinian

state at the time of the signing of the Interim Agreement"); D.J.

Harris, Cases and Materials on International Law 226 (5th ed. 1998)

(concluding that the interim agreement "fall[s] short of

[achieving] statehood for the Palestinian people"); United Nations

Comm'n on Human Rights, Question of the Violation of Human Rights

in the Occupied Arab Territories, Including Palestine at 12, U.N.

Doc. E/Cn.4/2001/121 (2001) (noting that, as of 2001, Palestine

"still falls short of the accepted criteria of statehood").10

The defendants do not deny that these limitations are

incompatible with statehood, but, rather, contend that they were

imposed by force and that the Israeli occupation is all that is

10
Indeed, this conclusion dovetails with the conclusion reached
by a prominent legal advisor to the PLO during the 1999-2000 peace
talks. See Omar M. Dajani, Stalled Between Seasons: The
International Legal Status of Palestine During the Interim Period,
26 Denv. J. Int'l L. & Pol'y 27, 86 (1997) (remarking that "the
interim character and extraordinarily limited powers of the PA make
it impossible to characterize that body as the 'effective
government' of the [territory]"; see also Omar Dajani, On a Better
Road This Time in the Mideast?, Wash. Post, May 4, 2003, at B1.

-41-
preventing the full exercise of the prerogatives of statehood. The

problem with this contention is that it presupposes that Palestine

was a state before the Israeli occupation — and the defendants have

not shown that it was. See Knox, 306 F. Supp. 2d at 437.

We recognize that the status of the Palestinian

territories is in many ways sui generis. Here, however, the

defendants have not carried their burden of showing that Palestine

satisfied the requirements for statehood under the applicable

principles of international law at any point in time. In view of

the unmistakable legislative command that sovereign immunity shall

only be accorded to states — a command reflected in both the FSIA

and the ATA — the defendants' sovereign immunity defense must fail.

IV. THE DEFAULT JUDGMENT

We come now to the defendants' protest that they were

entitled to a final determination on the sovereign immunity

question (including appellate review) before they could be required

to bear any of the burdens of litigation. In mounting this

protest, the defendants place great weight on In re Papandreou, 139

F.3d 247 (D.C. Cir. 1998). There, the Greek governmental entities

and officials moved to dismiss claims against them on grounds of

lack of in personam jurisdiction, forum non conveniens, and

sovereign immunity. Id. at 249. The plaintiffs sought discovery

for the limited purpose of determining whether FSIA's "commercial

activity" exemption applied. See 28 U.S.C. § 1605(a)(2). The

-42-
defendants objected and asked the district court to adjudicate

their other non-merits-based defenses before allowing any

discovery. Papandreou, 139 F.3d at 254. The district court

authorized the jurisdictional discovery, including the depositions

of several Greek cabinet ministers. Id. at 249. The defendants

petitioned for a writ of mandamus and the court of appeals obliged.

The court held (i) that there were less intrusive ways of

determining the applicability of the FSIA exemption, and (ii) that

the trial court should have grappled with the non-merits-based

defenses before subjecting the defendants to jurisdictional

discovery. Id. at 254.

We do not lightly dismiss the reasoning behind

Papandreou. Had the defendants in this case raised their sovereign

immunity defense in a timely manner, their argument that they were

entitled to adjudication of that defense before proceeding with the

merits of the litigation might have some force. After all, a

district court's denial of a motion to dismiss a complaint on the

ground of foreign sovereign immunity is immediately appealable

under the collateral order doctrine. See Price v. Socialist

People's Libyan Arab Jamahiriya, 389 F.3d 192, 196 (D.C. Cir.

2004); S & Davis Int'l, Inc. v. Republic of Yemen, 218 F.3d 1292,

1295 (11th Cir. 2000); Transatlantic Shiffahrtskontor GmbH v.

Shanghai Foreign Trade Corp., 204 F.3d 384, 387 (2d Cir. 2000);

Jungquist v. Sheikh Sultan Bin Khalifa Al Nahyan, 115 F.3d 1020,

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1025 (D.C. Cir. 1997). And such an appeal ordinarily divests the

district court of jurisdiction to proceed with the litigation

pending its resolution. See Rivera-Torres v. Ortiz Velez, 341 F.3d

86, 93 (1st Cir. 2003); Apostol v. Gallion, 870 F.2d 1335, 1338

(7th Cir. 1989); see also Eckert Int'l, Inc. v. Gov't of Sovereign

Democratic Republic of Fiji, 834 F. Supp. 167, 175 (E.D. Va. 1993)

(noting that foreign state's non-frivolous interlocutory sovereign

immunity appeal divests district court of jurisdiction).

These principles are not absolute. None of the cited

cases stand for the proposition that sovereign immunity is a trump

card that may be held in reserve until a defendant sees fit to play

it, thus enabling the defendant to stop the litigation in its

tracks at a time of its choosing. That is simply not the law. As

we have explained in a related context, "in exchange for the

defendant's right to interrupt the judicial process, the court may

expect a reasonable modicum of diligence in the exercise of that

right." Guzmán-Rivera v. Rivera-Cruz, 98 F.3d 664, 668-69 (1st

Cir. 1996) (quoting Kennedy v. City of Cleveland, 797 F.2d 297, 301

(6th Cir. 1986)). Demanding such diligence is "virtually essential

to orderly judicial management of the vexing procedural problems"

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that accompany assertions of immunity.11 Fisichelli v. City Known

as Town of Methuen, 884 F.2d 17, 19 (1st Cir. 1989).

The defendants, for whatever reason, elected not to

assert sovereign immunity in either of their first two motions to

dismiss. By the time that the district court ordered the entry of

a default, the defendants still had not moved to dismiss on the

ground of sovereign immunity. The district court found, and the

defendants' own words appear to confirm, that this recalcitrance

was intentional and designed to accomplish some obscure strategic

aim. See Ungar IV, 325 F. Supp. 2d at 23-24.

Given this sequence of events, the defendants' arguments

are unpersuasive. Here, as contemplated in Papandreou, discovery

was stayed until the defendants had a full determination of the

non-merits-based defenses that they initially chose to assert

(including insufficiency of process, forum non conveniens, and lack

of in personam jurisdiction). After rejecting those defenses and

denying two motions to dismiss, the district court in effect

11
Of course, an entity alleging an entitlement to sovereign
immunity may choose to ignore an action or court order directed at
it, accept a default, and then assert its immunity at a later state
of the litigation. But such a choice represents a rather risky
gamble. If the assertion of immunity is valid, the defendant wins
the entire pot (i.e., it walks away from the suit unscathed) but if
the assertion of immunity fails, the defendant loses outright
(i.e., it must live with the default). There is no need to engage
in such high-stakes wagering. A defendant may both assert
sovereign immunity and defend on the merits. See MCI Telecomm.
Corp. v. Alhadhood, 82 F.3d 658, 662 (5th Cir. 1996); Practical
Concepts, Inc. v. Republic of Bolivia, 811 F.2d 1543, 1547 (D.C.
Cir. 1987).

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ordered the litigation to proceed. The defendants — who to that

point had not raised a sovereign immunity defense — nonetheless

refused either to answer the amended complaint or to comply with

the court's discovery orders. In view of this history, we believe

that the district court acted well within the encincture of its

discretion in entering the default. See Compania Interamericana

Export-Import, S.A. v. Compania Dominicana de Aviacion, 88 F.3d

948, 951-52 (11th Cir. 1996) (permitting entry of default against

foreign state due to its willful failure to comply with court

orders). The defendants deliberately chose to hold off on

asserting a sovereign immunity defense — and they must live with

the consequences of that choice.12

V. CONCLUSION

We need go no further. The defendants have not shown

that this case involves nonjusticiable political questions. By

like token, they have not shown that Palestine is a state and, as

a consequence, they do not have available to them the buckler of

sovereign immunity. Consequently, they cannot set aside the

12
We recognize, of course, that the existence vel non of
foreign sovereign immunity implicates federal subject matter
jurisdiction. Thus, the failure to raise the defense in a timely
manner cannot result in a waiver. See, e.g., Haven v. Polska, 215
F.3d 727, 733 (7th Cir. 2000). Nevertheless, a failure of that
kind can appropriately affect the trial court's management of the
litigation. See, e.g., Bolduc v. United States, ___ F.3d ___, ___
(1st Cir. 2005) [No. 03-2081, slip op. at 9] (explaining that "the
belated filing of a motion to dismiss for want of subject matter
jurisdiction can have consequences in terms of a court's case-
management decisions"). That is the situation here.

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judgment on that ground. And, finally, they have failed to show

that the district court acted precipitously either in entering a

default or in reducing the default to judgment. Accordingly, we

reject their appeal.

Affirmed.

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