The Government of Antigua and Barbuda appeals from a decision of the United States District Court for the Southern District of New York, Louis L. Stanton, Judge, which denied its motion for relief under Rule 60(b) of the Federal Rules of Civil Procedure. First Fidelity Bank had secured a default judgment against Antigua in a suit on a note signed by Antigua’s ambassador to the United Nations and had then entered into a consent order also executed by the ambassador purportedly on his country’s behalf. Antigua requested the court to set aside the default judgment and dismiss the complaint or, in the alternative, to vacate the consent order. The issue is the extent to which Antigua is bound by the actions of its ambassador to the *191United Nations. We conclude that the default judgment should have been set aside and therefore reverse the decision and remand the case to the district court for further proceedings.
BACKGROUND
In November 1983, First Fidelity’s predecessor, First National State Bank of New Jersey, loaned $250,000 to Lloydstone Jacobs, Antigua’s ambassador to the United Nations. Jacobs signed for the loan as ambassador, representing the “Government of Antigua & Barbuda — Permanent Mission.” The stated purpose of the loan was to pay for the renovation of Antigua’s Permanent Mission to the United Nations in New York. Repayment of the loan ceased in mid-1985. In September 1985, the bank contacted government officials in Antigua, seeking repayment. The following month, the bank wrote to Jacobs and to Prime Minister Vere C. Bird’s permanent secretary, threatening legal action. According to an officer of the bank, the permanent secretary told the officer by telephone in November that Jacobs and Robert Healy, in-house counsel for Antigua’s Permanent Mission, were authorized to negotiate a settlement, but this is now disputed by Antigua.
No settlement was reached, and in July 1986 First Fidelity sued Antigua for repayment. Antigua did not answer the complaint, although it concedes that it was properly served. Representatives of the bank met with Jacobs and Healy. According to the bank, Jacobs and Healy acknowledged that Antigua had no defense against the action and revealed that the proceeds from the loan had in fact been invested in a casino. There was still no settlement, however, so the bank sought a default judgment. The bank decided, “[a]fter a review of Mr. Healy’s involvement and appearance in this action,” to obtain the default judgment by formal motion. The district court granted the default judgment on December 19, 1986.
First Fidelity’s efforts to levy upon Antigua’s bank accounts in New York provoked a response from Jacobs. He wrote to the district court in September 1987, acknowledging the debt and seeking a settlement. The following month, the bank and Jacobs agreed to a settlement and signed a consent order. The consent order included a complete waiver of Antigua’s sovereign immunity from jurisdiction, attachment, and execution; it was signed on behalf of the Government of Antigua and Barbuda by Lloydstone Jacobs, “Ambassador Extraordinary and Plenipotentiary,” and by Robert Healy as the Government’s attorney.
First Fidelity received $70,000 pursuant to the consent order, but in January 1988 payments ceased again. The bank executed upon a New York account of Antigua’s Permanent Mission but obtained only $500. First Fidelity then sought to attach bank accounts maintained by Antigua’s embassy in Washington, D.C. The Government of Antigua, sitting in the capital city of St. John’s, then took its first direct action in this case: it moved in the district court to dismiss First Fidelity’s complaint for lack of subject matter jurisdiction or, alternatively, to vacate the consent order. Antigua claimed that it was not bound by Jacobs’ actions because he had acted without authority in borrowing the money and in consenting to the settlement. Since Antigua was not responsible for Jacobs’ fraudulent activities, the argument ran, it retained its sovereign immunity. Judge Stanton denied the motion; in a brief memorandum, he applied agency law to hold Antigua responsible for Jacobs’ actions. Antigua could not interpose sovereign immunity, he decided, because the loan fell within the Foreign Sovereign Immunity Act’s commercial activity exception. Antigua then filed this appeal.1
DISCUSSION
First Fidelity asserts that Jacobs possessed the actual authority to bind Antigua. The bank goes on to claim that, even *192if Jacobs lacked that actual authority, under applicable agency law he nevertheless had ample apparent authority to bind Antigua. In this context, First Fidelity emphasizes the power inherent in an ambassador’s position: the bank claims that, as “Ambassador Extraordinary and Plenipotentiary,” Jacobs occupied the highest rank in diplomacy, as established by the Congresses of Vienna (1815) and Aix-la-Cha-pelle (1818). Under the Headquarters Agreement with the United Nations, an ambassador to the U.N. possesses the same privileges and immunities as diplomatic envoys accredited to the United States. See Agreement Between the United Nations and the United States of America Regarding the Headquarters of the United Nations, June 26, 1947, art. V, § 15, 61 Stat. 3416, 3427-28, T.I.A.S. No. 1676, at 13-15, authorized by S.J. Res. of Aug. 4, 1947, Pub.L. No. 80-357, 61 Stat. 756, set out in 22 U.S.C. § 287 note (1982).
The powers of an ambassador may include the authority to conclude international agreements. See Restatement (Third) of Foreign Relations § 311 (1987). “Heads of diplomatic missions and representatives accredited to international organizations are regarded as possessing powers to negotiate agreements on matters within their jurisdiction.” Id. comment b. An ambassador thus may have the power to bind the state that he represents. Normally, of course, a state authorizes a representative to act on its behalf. However, a state can be bound by the representative’s unauthorized actions where the lack of authority is not obvious. Id. § 311(3) & Reporters’ Note 4. Legal Status of Eastern Greenland (Den. v. Nor.), 1933 P.C.I.J. (ser. A/B) No. 53 (Apr. 5), is an example of this. There, the Permanent Court of International Justice held that Norway was bound by an oral declaration of its foreign minister that his country would not contest Danish sovereignty over Eastern Greenland. Id. at 71. First Fidelity argues that this application of the principles of agency law of developed states in international law supports its claim against Antigua here.
The implication of First Fidelity’s argument is that Antigua is bound by Jacobs’ actions solely because he was Antigua’s ambassador to the U.N. In effect, First Fidelity is telling us: “L’état, c’est lui.” If it were true, as a matter of law, that an ambassador’s actions under color of authority automatically bind the state that he represents, then we must affirm the decision below: Antigua would be bound by Jacobs’ settlement of this lawsuit. We do not believe, however, that a person’s position as ambassador, and nothing more, should be dispositive in this case, let alone all cases.
The authority to conclude international agreements, described in Restatement (Third) of Foreign Relations § 311, does not support an automatic rule binding the state in any transaction with non-sovereign third parties. The issue here is not whether Jacobs, as ambassador, possessed the authority to borrow money or to waive Antigua’s sovereign immunity in a settlement of the lawsuit. Assuming that he had that authority does not lead inevitably to the conclusion that his actions here must be attributed to Antigua. Put another way, the possession of authority does not, ipso facto, validate every exercise of it. In the Eastern Greenland case, it was not simply the Norwegian minister’s position or title that made his declaration binding upon Norway. The Court carefully examined the context in which the declaration was made. See 1933 P.C.I.J. (ser. A/B) No. 53, at 71-73. International agreements have considerably more dignity than Jacobs’ purely commercial transactions with First Fidelity. See Restatement (Third) of Foreign Relations § 301(1) (defining international agreement). Even so, an ambassador’s signature does not make an international agreement automatically binding upon the state. Coercion of a state’s representative, for example, renders an agreement signed by that representative void, id. § 331(2)(a), and corruption of the representative permits the state to invalidate its consent to the agreement, id. § 331(l)(c). If the circumstances surrounding an ambassador’s signature of a treaty may be grounds for invalidating that treaty, then surely a state cannot automatically be *193bound by its ambassador’s settlement of a lawsuit by a non-sovereign third party arising from a commercial transaction.
The conduct of an ambassador may be attributed to his state under other circumstances. In the words of the Restatement (Third) of Foreign Relations, “[a] state is responsible for any violation of its obligations under international law resulting from action or inaction by ... any ... official, employee, or other agent of a government or of any political subdivision, acting within the scope of authority or under color of such authority.” Id. § 207(c). This rule would apply even if the act were unauthorized by the responsible national authorities and even if it were forbidden by law. Id. comment d. However, by its own terms, section 207 applies only to violations of international law. A breach of a commercial contract, such as that alleged by First Fidelity in this case, is not a violation of international law unless the breach is discriminatory, or it occurs for governmental rather than commercial reasons and the state is not prepared to pay damages for the breach. Restatement (Third) of Foreign Relations § 712(2) comment h & Reporters’ Note 8. Moreover, an assessment under section 207 of the scope and color of authority introduces elements of agency law: one must “consider all the circumstances.” These include matters that are relevant in this case: “whether the affected parties reasonably considered the action to be official, [and] whether the action was for public purpose or for private gain.” Id. comment d. Thus, we cannot derive from section 207 a broader rule making every action by an ambassador binding upon his government.
We conclude that an ambassador’s actions under color of authority do not, as a matter of law, automatically bind the state that he represents. The facts of a given case must be examined, and the agency law of developed states, here our own, provides the proper framework for that examination. Cf. Restatement (Third) of Foreign Relations § 311 Reporters’ Note 4 (noting that provision concerning apparent authority to conclude international agreements is analogous to national laws on the authority of agents).2
The question here would be whether Jacobs, as Antigua’s ambassador to the United Nations, in the circumstances of this case possessed the apparent authority to borrow the money and to waive Antigua’s sovereign immunity. See Restatement (Second) of Agency § 8 (1958) (defining apparent authority). Under the Restatement (Second) of Agency, a principal causes his agent to have apparent authority by conduct which, reasonably interpreted, causes third persons to believe that the principal consents to have an act done on his behalf. Id. § 27. The appointment of a person to a position with generally recognized duties may create apparent authority. Id. comment a; § 49 comment c. A decision whether apparent authority exists thus requires a factual inquiry into the principal’s manifestations to third persons. General Overseas Films, Ltd. v. Robin Int’l, Inc., 542 F.Supp. 684, 689 (S.D.N.Y.1982), aff'd, 718 F.2d 1085 (2d Cir.1983). *194In addition, under New York law,3 the circumstances of the transaction must be examined to determine whether the person relying on the apparent authority fulfilled his “duty of inquiry.” Id.; cf. Restatement (Third) of Foreign Relations § 456 comment b (party relying on waiver of sovereign immunity had burden of showing that person waiving had authority to bind the state).
Thus, agency law is flexible enough so that the fact that a person is an ambassador can be given its appropriate weight in determining the extent of his apparent authority. The fact that Jacobs was Antigua’s ambassador to the U.N. does not make his settlement of the lawsuit binding upon Antigua, but that fact is relevant in deciding whether First Fidelity’s reliance upon his authority was reasonable.
Antigua claims that Jacobs exceeded his authority (both actual and apparent) in borrowing the money and, later, in waiving Antigua’s sovereign immunity. Jacobs may have acted, the argument runs, but Antigua did nothing. Antigua claims that it therefore retains its sovereign immunity despite the fact that the loan itself was commercial activity within the meaning of the Foreign Sovereign Immunity Act (FSIA). See 28 U.S.C. §§ 1603(d), 1605(a)(2) (1982) (defining commercial activity exception). The default judgment, Antigua concludes, was void for want of subject matter jurisdiction. This would entitle Antigua to relief from the default judgment under Rule 60(b)(4).
First Fidelity responds that Antigua cannot present its substantive defense when seeking relief under Rule 60(b)(4). The bank cites Meadows v. Dominican Republic, 628 F.Supp. 599 (N.D.Cal.1986), aff'd, 817 F.2d 517 (9th Cir.), cert. denied, — U.S. -, 108 S.Ct. 486, 98 L.Ed.2d 485 (1987), in support of this argument. In Meadows, the Dominican Republic sought relief from a default judgment under Rule 60(b)(4), arguing that its codefendant, the Instituto de Auxilios Y Viviendas, was a separate juridical entity under Dominican law and that the Institute’s acts were not attributable to the Republic. Hence, the Republic was not properly joined as a defendant, and its contacts with the forum were not a basis for personal jurisdiction over the Institute. The district court rejected this argument. The issue under Rule 60(b)(4), the district court said, is whether the default judgment is void. Under First National City Bank v. Banco Para el Comercio Exterior de Cuba, 462 U.S. 611, 103 S.Ct. 2591, 77 L.Ed.2d 46 (1983), juridical separateness is a question of substantive law, not of subject matter jurisdiction. An error of substantive law, unlike an erroneous determination that jurisdiction exists, is not a ground for vacating a default judgment as void. The court therefore concluded that the issue of juridical separateness was “not open for consideration” in determining whether the default judgment was void. 628 F.Supp. at 608. See also Gregorian v. Izvestia, 658 F.Supp. 1224, 1236 (C.D.Cal.1987) (“An error in interpreting material facts is not equivalent to acting with total lack of jurisdiction.”).
Meadows and Gregorian are relevant to our case, but they are not dispositive. Closer analysis of sovereign immunity and subject matter jurisdiction under the FSIA shows that the distinction between substance and procedure is not so clear-cut. Congress viewed sovereign immunity as an “affirmative defense.” See H.R.Rep. No. 1487, 94th Cong., 2d Sess. 17, reprinted in 1976 U.S.Code Cong. & Admin.News 6604, 6616. However, the Supreme Court has recognized that a district court’s subject matter jurisdiction depends upon the existence of an exception to foreign sovereign immunity. Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 493 & n. 20, 103 S.Ct. 1962, 1971 & n. 20, 76 L.Ed.2d 81 *195(1983). It is not surprising, then, that a decision concerning subject matter jurisdiction under the FSIA may require the resolution of substantive issues.
For example, in Carl Marks & Co. v. USSR, 665 F.Supp. 323 (S.D.N.Y.1987), aff'd per curiam, 841 F.2d 26 (2d Cir.), cert. denied, — U.S. -, 108 S.Ct. 2874, 101 L.Ed.2d 909 (1988), the Soviet Union moved under Rule 60(b) to vacate two default judgments. Judge Brieant distinguished between 60(b)(1) and (b)(6) motions, which require a court to examine the merits of a case, and 60(b)(4) motions, which are jurisdictional. Id. at 332-33. He noted, however, that a 60(b)(4) dismissal in an FSIA case can look like a decision on the merits. The FSIA begins with a presumption of immunity which the plaintiff must overcome by showing that the defendant sovereign’s activity falls under one of the statutory exceptions. “Thus, ... ‘[i]n many cases a resolution of the substantive immunity law issues will be required in order to reach a decision on subject matter jurisdiction_ [A] court may have to interpret the substantive principles embodied in §§ 1605-1607 before deciding whether to take jurisdiction.’ ” Id. at 333 (quoting Corporacion Venezolana de Fomento v. Vintero Sales Corp., 629 F.2d 786, 790-91 n. 4 (2d Cir.1980), cert. denied, 449 U.S. 1080, 101 S.Ct. 863, 66 L.Ed.2d 804 (1981)); see also Upton v. Empire of Iran, 459 F.Supp. 264, 265 (D.D.C.1978) (FSIA “creates an identity of substance and procedure”), aff'd, 607 F.2d 494 (D.C.Cir.1979).
In Carl Marks, Judge Brieant had to consider the merits of the case in order to determine whether his court had jurisdiction over the case: he found that the defendant’s actions that were the basis for the suit occurred before the effective date of the FSIA. The default judgments were therefore void for want of jurisdiction under Rule 60(b)(4), and the complaints wére dismissed. 665 F.Supp. at 349. Thus, Carl Marks seems to open the way for a consideration of the substantive issues here — i.e., the extent of Jacobs’ authority and the validity of the waiver in the consent order —and indeed, Judge Stanton did examine the merits in denying Antigua’s 60(b) motion.
The facts in our record are susceptible of two opposing interpretations. First Fidelity has alleged facts sufficient to show Jacobs’ and Healy’s apparent authority under New York law. See Hallock v. State, 64 N.Y.2d 224, 231, 474 N.E.2d 1178, 1181, 485 N.Y.S.2d 510, 513 (1984) (apparent authority exists where principal’s conduct leads third party reasonably to believe that agent has authority). If Jacobs and Healy acted within their apparent authority in their transactions with the bank, then Antigua would be liable. See Restatement (Second) of Agency § 159 (liability created by actions within apparent authority). However, there is also evidence that First Fidelity mistrusted Jacobs’ and Healy’s bona fides, which raises questions about the reasonableness of First Fidelity’s reliance upon their apparent authority. See Ford v. Unity Hosp., 32 N.Y.2d 464, 472, 299 N.E. 2d 659, 664, 346 N.Y.S.2d 238, 244 (1973) (“One who deals with an agent does so at his peril, and must make the necessary effort to discover the actual scope of authority.”); General Overseas Films, Ltd. v. Robin Int’l, Inc., 542 F.Supp. 684, 690 (S.D.N.Y.1982) (extraordinary nature of transaction should have altered plaintiff to danger of fraud), aff'd, 718 F.2d 1085 (2d Cir.1983); Restatement (Third) of Foreign Relations § 456 comment b (party relying on waiver has burden of showing that person waiving had authority to bind state); Restatement (Second) of Agency § 165 (principal is not liable for agent’s improper actions if third party knows that agent is not acting for principal’s benefit).
Thus, it may be that Antigua is the innocent victim of its ambassador’s fraud and the bank’s willful ignorance of the ambassador’s lack of authority. If so, Antigua would retain its sovereign immunity, and the default judgment against it would be void for want of subject matter jurisdiction. On the other hand, Antigua may simply be trying to renege on a loan by disowning its agent who borrowed the money. In that case, the FSIA’s commercial activity exception would strip Antigua of its sovereign immunity, and the district court would have *196subject matter jurisdiction. The default judgment would be valid, and the consent order would be enforceable. As in Carl Marks, it is impossible to make a decision concerning subject matter jurisdiction without considering the merits.
A decision that a default judgment is void for want of jurisdiction must be accompanied by dismissal of the action. See Thos. P. Gonzalez Corp. v. Consejo Nacional de Produccion de Costa Rica, 614 F.2d 1247, 1256 (9th Cir.1980) (per curiam); Gregorian, 658 F.Supp. at 1229. In this case, however, since subject matter jurisdiction is interwoven with the merits, dismissal of the suit before trial would leave both the substantive and the jurisdictional issues unexplored. We find that there are enough doubts about the facts in this case (where disputed affidavits from First Fidelity comprise vital parts of the record) to justify setting aside the default judgment. Yet these same doubts about the facts weigh against declaring the default judgment void and dismissing the complaint under Rule 60(b)(4); we cannot assess the validity of the default judgment because we know too little about the interwoven jurisdictional and substantive issues. We turn, then, to Rule 60(b)(6), under which a judgment may be set aside for “any other reason justifying relief.”
Relief under Rule 60(b)(6) is appropriate only in cases presenting “extraordinary” circumstances. See Ackermann v. United States, 340 U.S. 193, 202, 71 S.Ct. 209, 213, 95 L.Ed. 207 (1950). Litigants may not use this clause simply to circumvent the time limits of other provisions of Rule 60(b). Serzysko v. Chase Manhattan Bank, 461 F.2d 699, 702 (2d Cir.), cert. denied, 409 U.S. 883, 93 S.Ct. 173, 34 L.Ed. 2d 139 (1972). However, default judgments are disfavored, especially those against foreign sovereigns. Restatement (Third) of Foreign Relations § 459 comment c & Reporters’ Note 1. Courts go to great lengths to avoid default judgments against foreign sovereigns or to permit those judgments to be set aside. See, e.g., Jackson v. People’s Republic of China, 794 F.2d 1490, 1494-96 (11th Cir.1986), cert. denied, 480 U.S. 917, 107 S.Ct. 1371, 94 L.Ed.2d 687 (1987); Carl Marks, 665 F.Supp. at 329-30. In this case, the fusion of substantive and jurisdictional issues also militates in favor of setting aside the default judgment under Rule 60(b)(6); the parties must proceed to discovery and possibly to trial before a court can rule on either substance or jurisdiction. We conclude that it was an abuse of discretion not to set aside the default judgment under Rule 60(b)(6). See Bankers Mortgage Co. v. United States, 423 F.2d 73, 77 (5th Cir.) (Rule 60(b) should be interpreted “to preserve the delicate balance between the sanctity of final judgments ... and the incessant command of the court’s conscience that justice be done in light of all the facts”), cert. denied, 399 U.S. 927, 90 S.Ct. 2242, 26 L.Ed.2d 793 (1970); Radack v. Norwegian American Line Agency, Inc., 318 F.2d 538, 542 (2d Cir.1963) (Rule 60(b)(6) “should be liberally construed when substantial justice will thus be served”).
Antigua should, then, have an opportunity to defend this case on its merits. Cf. Practical Concepts, Inc. v. Bolivia, 811 F.2d 1543, 1551-52 (D.C.Cir.1987) (vacating district court’s decision to set aside default judgment and dismiss case; nonetheless declining to reinstate default judgment for policy reasons, instead remanding for consideration of defendant’s substantive defenses). At the same time, First Fidelity’s rights must be protected, for there is some evidence that Antigua responded to this lawsuit only when First Fidelity began to grasp its assets. Rule 60(b) provides for relief “upon such terms as are just.” See, e.g., Bennett v. Circus U.S.A., 108 F.R.D. 142, 149 (N.D.Ind.1985). The default judgment is vacated and the case is remanded to the district court for further proceedings on the condition that Antigua post a bond covering the amount claimed by First Fidelity, including interest.
Judgment in accordance with opinion; costs to neither party.
. Antigua asked the United States Department of State to file an amicus curiae brief on its behalf in its appeal to this court. In response, the Legal Advisor declined to file a brief and informally took a position favorable to First Fidelity.
. The dissent asserts that, in view of the inherent authority of an ambassador, a foreign state should be bound when the ambassador acts "in the context of purporting to obtain goods and services for his country’s diplomatic mission.” Dissenting op. at 199. Yet the dissent also recognizes that the state should not automatically be bound if the ambassador collusively entered into an obligation with a third party for the third party’s benefit or if the transaction concerned something “far removed from the routine functioning of a diplomatic mission.” Id. at 198. These exceptions would swallow the rule of inherent authority proffered by the dissent. Examples that combine both the procedural and the substantive irregularities that the two exceptions guard against are easy to imagine: An ambassador might use embassy funds to purchase cocaine from a drug trafficker — and label the drugs "medical supplies for the embassy." Or an ambassador might borrow money from a bank to invest in a casino — and, with the bank’s connivance, secure a favorable rate of interest by pretending that the money would be used to refurbish the embassy.... In other words, there cannot really be a rule of inherent authority that automatically binds a foreign government whenever its ambassador purports to obtain goods and services for the embassy. It must always be possible to look behind the deal.
. The Supreme Court has held that the Foreign Sovereign Immunity Act does not affect the substantive law determining the liability of a foreign state. First National City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611, 620-21, 103 S.Ct. 2591, 2597, 77 L.Ed.2d 46 (1983). We shall assume without deciding here that New York law governs Jacobs’ transactions with the bank, although we do not believe that the federal common law rule, were we to follow the suggestion in Judge Newman’s dissent, would be any different.