El-Hadad, Mohamed v. United Arab Emirates

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 19, 2000 Decided June 16, 2000

No. 99-7220

Mohamed Salem El-Hadad,
Appellee

v.

United Arab Emirates and
The Embassy of the United Arab Emirates,
Appellants

Appeal from the United States District Court
for the District of Columbia
(No. 96cv01943)

James M. Johnstone argued the cause for appellant. John
P. Szymkowicz was on the brief for appellant.

Sylvia J. Rolinski argued the cause and filed the brief for
appellee.

 Before: Ginsburg, Tatel, and Garland, Circuit Judges.

Opinion of the court filed by Circuit Judge Garland.

Garland, Circuit Judge: Plaintiff Mohamed Salem El-
Hadad is a citizen of Egypt and a former employee of the
Embassy of the United Arab Emirates located in Washington,
D.C. After his employment was terminated, El-Hadad sued
both the Embassy and the United Arab Emirates (collective-
ly, "the U.A.E.") for alleged breach of contract and defama-
tion.1 The U.A.E. moved to dismiss, asserting immunity from
suit under the Foreign Sovereign Immunities Act (FSIA), 28
U.S.C. ss 1602 et seq. The district court denied the U.A.E.'s
motion on the pleadings, holding that the employment rela-
tionship between the U.A.E. and El-Hadad came within the
"commercial activity" exception to sovereign immunity be-
cause El-Hadad was not a national of the U.A.E. The court
also rejected the U.A.E.'s contention that even if plaintiff's
suit fell within the "commercial activity" exception, the FSIA
contains an "exception to that exception" for defamation
claims.

The U.A.E. appeals from the denial of its motion to dismiss.
We conclude that there are factual questions that must be
resolved before the relationship between El-Hadad and the
U.A.E. can be characterized as commercial rather than gov-
ernmental, and we therefore reverse in part and remand for
further proceedings. We agree with the district court, how-
ever, that if El-Hadad's action is based upon commercial
activity, the U.A.E. is not immune from his claim for defama-
tion.

I

The denial of a foreign state's motion to dismiss on the
ground of sovereign immunity is subject to interlocutory
appeal under the collateral order doctrine. See Trans-

__________
1 The complaint also named three individuals acting in their
official capacities. The district court granted the individuals' mo-
tion to dismiss for lack of personal jurisdiction, see El-Hadad v.
Embassy of U.A.E., 69 F. Supp. 2d 69, 76-79 (D.D.C. 1999), and
that decision is not at issue in this appeal.

america Leasing, Inc. v. La Republica de Venezuela, 200
F.3d 843, 847 (D.C. Cir. 2000). Because the district court
decided the motion on the pleadings, our standard of review is
de novo. See id.

The FSIA provides the sole avenue by which American
courts can obtain jurisdiction over foreign states. See Repub-
lic of Argentina v. Weltover, Inc., 504 U.S. 607, 611 (1992).
Under the FSIA, a foreign state is immune from the jurisdic-
tion of our courts unless certain statutory exceptions are met.
See 28 U.S.C. ss 1604-1605. The principal exception at issue
here is that for "commercial activity." The Act provides that
a "foreign state shall not be immune from the jurisdiction of
courts of the United States or of the States in any case-- ...
(2) in which the action is based upon a commercial activity
carried on in the United States by the foreign state...." Id.
s 1605(a).

Our precedent makes clear that the employment of person-
nel by a foreign state is not per se commercial activity under
the FSIA.2 In Broadbent v. Organization of American
States, applying an analysis based on the FSIA, we held that
the firing of staff members of the General Secretariat of the
Organization of American States (OAS) was not commercial
activity and therefore that the OAS was immune from suit for
improper discharge. See 628 F.2d 27, 35 (D.C. Cir. 1980). In
support, we cited the House Report on the FSIA, which

__________
2 The FSIA provides that: "The commercial character of an
activity shall be determined by reference to the nature of the course
of conduct or particular transaction or act, rather than by reference
to its purpose." 28 U.S.C. s 1603(d). As the Supreme Court
recognized in Weltover, however, this definition "leaves the critical
term 'commercial' largely undefined." 504 U.S. at 612. The sen-
tence "merely specifies what element of the conduct determines
commerciality (i.e., nature rather than purpose), but still without
saying what 'commercial' means." Id. The Court concluded that
the defining "issue is whether the particular actions that the foreign
state performs (whatever the motive behind them) are the type of
actions by which a private party engages in trade and traffic or
commerce." Id. at 614 (internal quotation marks and citation
omitted).

states in part: "Also public or governmental and not commer-
cial in nature, would be the employment of diplomatic, civil
service, or military personnel...." H.R. Rep. No. 94-1487, at
16 (1976).3 The words replaced by the ellipses in this quota-
tion will soon become important, but for now it is enough to
note that, as we concluded in Broadbent, the "report clearly
marks employment of civil servants as noncommercial for
purposes of restrictive immunity." 628 F.2d at 34.4

The U.A.E. contends that El-Hadad was a civil servant of
the U.A.E., and that his firing is therefore noncommercial
and immune from suit in our courts. Although El-Hadad is
an Egyptian citizen, it is uncontested that he worked for the
government of the U.A.E. for sixteen years.5 For the first
thirteen of those years, he worked in the U.A.E. as an
auditor. Beginning in January of 1993, El-Hadad worked as
an auditor in the Cultural Division of the U.A.E.'s Embassy
in Washington. The U.A.E. terminated El-Hadad's employ-
ment in February 1996. El-Hadad alleges that he was
terminated after he uncovered misappropriation of U.A.E.
public funds. The U.A.E. disputes this allegation, but con-
tends that even if it were true, the auditing function El-
Hadad performed is the work of a civil servant and the
U.A.E. is therefore immune from suits arising from such
activity.

__________
3 The Senate Report contains the same language, both on this
point and on the others quoted below. See S. Rep. No. 94-1310, at
16 (1976); see also id. at 20-21.

4 That point distinguishes Broadbent from Janini v. Kuwait
University, 43 F.3d 1534 (D.C. Cir. 1995), in which we held that the
firing of teachers at Kuwait University came within the commercial
activity exception. There was no claim in that case that the
teachers were civil servants of the government of Kuwait.

5 The district court decided the motion to dismiss on the plead-
ings, and we therefore assume that this and the following facts,
taken from p 9 of the complaint, are true. See Saudi Arabia v.
Nelson, 507 U.S. 349, 351 (1993). In any event, except where noted,
the U.A.E. does not contest their validity.

 The district court held that regardless whether El-Hadad
was a member of the U.A.E.'s civil service, his employment
would nonetheless constitute commercial activity because he
is not a U.A.E. national. The court based that conclusion on
language in our Broadbent opinion, which stated that there is
"an exception from the general rule" that civil service employ-
ment is noncommercial "in the case of employment of Ameri-
can citizens or third country nationals by foreign states."
Broadbent, 628 F.2d at 34. The district court did note,
however, that other circuits have not invoked such an excep-
tion. Instead, those courts examine the specifics of the
employment relationship for indicia of civil service, treating
the employee's nationality--if they consider it at all--as a
non-dispositive factor. See Holden v. Canadian Consulate,
92 F.3d 918, 920-22 (9th Cir. 1996) (examining details of
American's employment with Canadian Consulate to deter-
mine whether Consulate was immune on ground that plaintiff
was member of civil service); Segni v. Commercial Office of
Spain, 835 F.2d 160, 165 & n.7 (7th Cir. 1987) (noting that
nationality can be a factor, but deciding the case by reference
to specifics of employment relationship rather than fact of
third country nationality).

We cannot fault the district court for its legal conclusion,
resting, as it did, on the language of Broadbent. But that
language was plainly dictum, not necessary to decide the case
and therefore not binding upon us. See, e.g., United States v.
Torres, 115 F.3d 1033, 1036 (D.C. Cir. 1997). While Broad-
bent did opine that third country nationality would be disposi-
tive in a case involving a sovereign state, Broadbent itself
involved an international organization. Notwithstanding that
some of the plaintiffs were Americans, the court declined to
apply a "third country nationality" exception to the civil
service rule in that case, reasoning that since an international
organization has no nationals of its own, applying such an
exception in the context of international organizations would
"swallow up the rule of immunity for civil service employment
disputes." Broadbent, 628 F.2d at 34.

Now that we are squarely faced with the question, we
conclude that a per se rule of non-immunity for a foreign

state's employment of third country nationals is inconsistent
with Congress' intent to immunize foreign governmental ac-
tivity from suit in American courts. Indeed, when pressed at
oral argument, both sides appeared to agree. Both con-
curred, for example, that if El-Hadad had been the U.A.E.'s
ambassador to the United States, the U.A.E. would have
immunity for firing him despite his Egyptian nationality.
Nor, apparently, is this scenario particularly far-fetched.
Both parties agreed that small countries such as the U.A.E.
do, at times, employ nationals of other countries (and particu-
larly citizens of regional neighbors) in high governmental
positions.6

We now return to the ellipses noted above. The full
quotation from the House Report is as follows: "Also public
or governmental and not commercial in nature, would be the
employment of diplomatic, civil service, or military personnel,
but not the employment of American citizens or third country
nationals by the foreign state in the United States." H.R.
Rep. No. 94-1487, at 16. Broadbent read the language begin-
ning with "but not" (for which we substituted the ellipses
above) as creating a per se exception from the general rule
that civil service employment is governmental rather than
commercial. See Broadbent, 628 F.2d at 34. That is surely a
reasonable interpretation. But we think it at least as likely
that Congress was attempting to contrast civil service (and
diplomatic and military employment, not at issue here) with
non-civil service employment, operating on the assumption
that it was unlikely a country would employ an American or
third country national in such a position. This view of the
legislative history is bolstered by the next paragraph of the
House Report, which lists, as additional examples of commer-
cial activity, a foreign government's "employment or engage-
ment of laborers, clerical staff or public relations or market-
ing agents," H.R. Rep. No. 94-1487, at 16--job categories

__________
6 An estimated 75% of the U.A.E.'s population between the ages
of 15 and 64 consists of non-nationals. See CIA, The World Fact
Book 1999, at 504 (available at ).

which Congress apparently also thought unlikely to be occu-
pied by members of a government's civil service.

In any event, the language that must control our decision is
that of the statute rather than of the somewhat muddy
legislative history. Under the FSIA, the immunity exception
depends solely on whether the action is based upon a "com-
mercial activity," without any mention of the nationality of the
participants. See 28 U.S.C. s 1605(a)(2). We have no war-
rant, therefore, for formulating a test that turns solely on
nationality. To the contrary, because under the usual under-
standing of the terms a foreign state can engage in non-
commercial (i.e., governmental) activity through third country
nationals, the statutory language dictates that the inquiry
cannot end with the fact that the employee is not a citizen of
the employing state. At oral argument, both parties agreed.

II

Because defendants' motion was dismissed on the plead-
ings, we remand the case to the district court to undertake a
further inquiry. The ultimate question to be answered is
whether El-Hadad's employment constituted commercial ac-
tivity. As we held in Broadbent, the employment of civil
servants is noncommercial for purposes of the FSIA. See
Broadbent, 628 F.2d at 34-36. Hence, the operative question
is whether El-Hadad was a member of the U.A.E.'s civil
service. In order to guide the proceedings on remand, we
suggest some questions that appear relevant to making that
determination in this case. We do not regard them as an
exclusive list, nor as necessarily applicable in all cases.

First, how do the U.A.E.'s own laws define its civil service,
and do El-Hadad's job title and duties come within that
definition?

Second, what was the nature of El-Hadad's employment
relationship with the U.A.E.? Did he have a true contractual
arrangement, or is his "contract" claim instead based, as the
U.A.E. contends, solely upon the civil service laws of the
U.A.E.?

 Third, what was the nature of El-Hadad's employment
relationship when he worked in the U.A.E., and how did his
subsequent employment at the Embassy relate to that prior
tenure? The U.A.E. contends that El-Hadad was a long-time
resident and member of its domestic civil service, who was
merely "transferred" to Washington to perform the same
functions (governmental audits) he had been performing at
home. El-Hadad contends, on the other hand, that he quit
his position in the U.A.E. and began a "new" job in the
United States, "separate from his previous employment."

Fourth, what was the nature of El-Hadad's work? As
noted above, Congress indicated that the "employment or
engagement of laborers, clerical staff or public relations or
marketing agents" would come within the definition of com-
mercial activity. H.R. Rep. No. 94-1487, at 16.

Fifth, what is the relevance of El-Hadad's Egyptian nation-
ality on the facts of this case? Is the U.A.E. a country in
which, as the House Report assumed, non-nationals are un-
likely to be employed as governmental officers? Or does the
U.A.E. often employ non-nationals in governmental positions?

We appreciate that this multi-factor inquiry is not analyt-
ically precise. That is a consequence of Congressional prefer-
ences, however, rather than our own. Congress expressly
concluded that it was "unwise to attempt an excessively
precise definition" of "commercial activity," and chose instead
to give the "courts ... a great deal of latitude in determining
what is a 'commercial activity' for purposes of" the FSIA,
providing only a few (sometimes conflicting) examples of the
kinds of employment it regarded as falling within that catego-
ry. Id. at 16. Although the Supreme Court has repeatedly
lamented this situation, see Saudi Arabia v. Nelson, 507 U.S.
349, 359 (1993) (noting that the FSIA "leaves the critical term
'commercial' largely undefined") (quoting Weltover, 504 U.S.
at 612), it has also noted that courts "do not have the option
to throw up [their] hands" and must instead accept "judicial
responsibility to determine what a 'commercial activity' is for
purposes of the Act." Id.

 III

The U.A.E. contends that even if its termination of El-
Hadad were regarded as coming within the "commercial
activity" exception to sovereign immunity, plaintiff's claim
that he was defamed in connection with that termination
would nonetheless have to be dismissed under a "defamation"
exception to that exception. As the district court correctly
held, however, defamation is not an "exception to the excep-
tion" for commercial activity, but rather an exception to a
separate FSIA exception for noncommercial torts.

The FSIA provides that a "foreign state shall not be
immune from the jurisdiction of courts of the United States
... in any case" in which one of several exceptions applies.
28 U.S.C. s 1605(a). The second exception, contained in
paragraph (2) of s 1605(a), is the one considered above: any
case "in which the action is based upon commercial activity
carried on in the United States by the foreign state." Id.
s 1605(a)(2). Paragraph (2) does not contain a defamation
exception to its commercial activity exception. There is,
therefore, no indication that defamation arising out of a
commercial activity is immune from suit.

It is the fifth exception to immunity, contained in para-
graph (5) of s 1605(a), that is implicated by the U.A.E.'s
argument here. That paragraph applies to any case "not
otherwise encompassed in paragraph (2) above, in which
money damages are sought against a foreign state for ...
damage to or loss of property occurring in the United States
and caused by the tortious act or omission of that foreign
state." Id. s 1605(a)(5). Unlike the exception for commer-
cial activity, this tort exception does contain an exception for,
inter alia, defamation: "[T]his paragraph," the FSIA states,
"shall not apply to ... any claim arising out of ... libel, [or]
slander...." Id. s 1605(a)(5), (a)(5)(B).

The U.A.E. contends that the defamation exception to
paragraph (5) is applicable not only to the torts covered by
that paragraph, but also to the commercial activity covered by
paragraph (2). That reading, however, is expressly contra-
dicted by the language of the statute. As just quoted,

paragraph (5) begins by stating that it applies only to cases
"not otherwise encompassed in paragraph (2) above," i.e., only
to those tort cases not encompassed by the commercial
activity paragraph. And in subsequently introducing its own
exceptions, paragraph (5) goes on to state that "this para-
graph"--i.e., paragraph (5)--"shall not apply to" libel or
slander. Id. s 1605(a)(5), (a)(5)(B) (emphasis added). The
language therefore makes clear that paragraph (5) and its
defamation exception are inapplicable to tort cases based
upon commercial activity.

This reading is confirmed by the legislative history, which
repeatedly refers to the category encompassed by paragraph
(5) as "noncommercial torts." H.R. Rep. No. 94-1487, at 20,
21 (emphasis added); see Argentine Republic v. Amerada
Hess Shipping Corp., 488 U.S. 428, 439 (1989) (referring to
s 1605(a)(5) as the "noncommercial torts exception"); cf.
Nelson, 507 U.S. at 361-62 (finding that the tortious activity
alleged in that case, wrongful arrest by Saudi police, failed to
qualify as commercial activity because it was "not the sort of
action by which private parties can engage in commerce").
Paragraph (5), the House Report states, "is directed primari-
ly at the problem of traffic accidents but is cast in general
terms as applying to all tort actions for money damages, not
otherwise encompassed by section 1605(a)(2) relating to com-
mercial activities." H.R. Rep. No. 94-1487, at 20-21 (empha-
sis added). Its "purpose," the Report continues, "is to permit
the victim of a traffic accident or other noncommercial tort to
maintain an action against the foreign state to the extent
otherwise provided by law." Id. at 21.

This reading is also consistent with the case law. This
circuit has previously stated that the exceptions to paragraph
(5) do not limit the commercial activity exception. See Gilson
v. Republic of Ireland, 682 F.2d 1022, 1028 n.27 (D.C. Cir.
1982) (stating that 28 U.S.C. s 1605(a)(5)(B) "does not limit
id. s 1605(a)(2)"). Those of our sister circuits that have
considered the question have reached the same conclusion.
See Southway v. Central Bank of Nigeria, 198 F.3d 1210,
1219 (10th Cir. 2000); Export Group v. Reef Industries, Inc.,
54 F.3d 1466, 1473-77 (9th Cir. 1995); see also Letelier v.
Republic of Chile, 748 F.2d 790, 795 (2d Cir. 1984) (noting

that the statutory language "suggests that the commercial
activity exception to jurisdictional immunity under paragraph
(2) and the tort exception under (5) are mutually exclusive").
Accordingly, we affirm the district court's decision that activi-
ty encompassed by the waiver of sovereign immunity con-
tained in 28 U.S.C. s 1605(a)(2) does not become subject to
suit by virtue of the provisions of s 1605(a)(5)(B).7

IV

The decision of the district court is reversed in part and the
case is remanded for further proceedings consistent with this
opinion.

__________
7 We reject the U.A.E.'s argument that foreign sovereigns
should be immune from actions for defamation under the FSIA
because the United States is immune from such actions under the
Federal Tort Claims Act (FTCA), 28 U.S.C. s 2680(h). Although
both statutes contain defamation exceptions, see H.R. Rep. No. 94-
1487, at 21, the analogy becomes inapposite when applied in the
context of the FSIA's commercial activity exception because there
is no comparable immunity exception under the FTCA. See Export
Group, 54 F.3d at 1476 (describing FSIA's commercial activity
exception as "ha[ving] no counterpart in the FTCA").