FSIA : expropriation and arbitration issues.
At the State Department, Mark Feldman managed expropriation cases, negotiated claims agreements, established the Iran Claims Tribunal and was one of the principal drafters of the Foreign Sovereign Immunities Act of 1976. In private practice, I have advised clients on political risk, litigated expropriation claims in federal court and ICSID arbitration, and chaired the ABA committee that drafted the 1988 amendments to the FSIA and the Federal Arbitration Act. The history of the FSIA and the drafters’ intent are described in my Publications and Congressional testimony. My recent expert testimony in Mezerhane v. Republica Bolivariana de Venezuela (2013) is posted on a separate page.
Expropriation Exception – Section 1605(a)(3)
Section 1605(a)(3), the “expropriation exception,” was included in the 1976 Act to provide a remedy in U.S. courts for victims of foreign takings without just compensation. The expropriation exception worked well for my client in Kalamazoo Spice Extraction Company v. Ethiopia, but doubts have been raised by recent judicial dicta and State Department positions that do not reflect the intent of the drafters or developments in human rights law. Questions pending judicial decision include the following:
(1) What international law standard for compensation applies under section 1605(a)(3)?
(2) Does the act of state doctrine apply in cases brought under section 1605(a)(3)?
(3) If the action is brought under the second prong of section 1605(a)(3) – in cases where the seized property is not brought into the United States – does the court have subject matter jurisdiction over the foreign government as well as its agency or instrumentality?
(4) Can international law apply to the confiscation of property owned by a national of the host country?
(5) Is there a requirement to exhaust local judicial remedies before bringing a claim under this provision?
I have addressed some of these issues as an expert witness in Mezerhane v. Venezuela and in Cultural Property Litigation and the Foreign Sovereign Immunities Act of 1976: ABA Section of International Law, Art & Cultural Heritage Law Committee Newsletter, Vol. III, Issue No. 2, pp 9-13, summer 2011. In my view, the requirement imposed in Abelesz v. Magyar Nemzeti Bank, 692 F.3d 661 (7 Cir. 2012) to exhaust local remedies contradicts the intent of the expropriation exception and weakens its purpose.
Foreign Arbitral Awards
For many years, U.S. foreign policy has promoted impartial dispute settlement to limit political risk, to encourage capital flows to developing countries and to avoid international conflicts arising out of uncompensated expropriations. To that end, the U.S. has become party to numerous agreements providing for binding arbitration of investment disputes and to several treaties obligating the parties to enforce foreign arbitral awards. The main ABA proposals adopted by Congress in 1988 were intended to ensure enforcement of foreign arbitral awards. Section 1605(a)(6) was added to the FSIA to prescribe jurisdiction to enforce foreign arbitral awards covered by U.S. treaties, and section 15 was added to the Federal Arbitration Act to preclude application of the act of state doctrine in actions brought to enforce arbitration agreements or awards.
Still, courts continue to raise unexpected obstacles to enforcement of foreign arbitral awards. In my view, refusal to enforce a foreign arbitral award on grounds of forum non conveniens, as in the Monde Re case,  undermines the 1988 amendments and contravenes U.S. obligations under the New York Convention.
 Kalamazoo Spice Extraction Co. v. Provisional Military Government of Socialist Ethiopia, 616 F. Supp. 660 (1985); See also Kalamazoo Spice Extraction Co. v. Provisional Military Government of Socialist Ethiopia, 729 F.2d 422 (6th Cir. 1984).
 See, Garb v. Republic of Poland, 440 F.3d 579 (2d Cir. 2004).
 “Enforcement of arbitral agreements, confirmation of arbitral awards, and execution upon judgments based on orders confirming such awards shall not be refused on the basis of the Act of State doctrine” Title 9 U.S.C. , section 15.
 See Monegasque De Reassurances S.A.M (Monde Re) v. Nak Naftogaz of Ukraine and State of Ukraine, 311 F. 3d 488 (2 Cir. 2002)
 UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 330 UNTS 38; 21 UST 2517; 7 ILM 1046 (1968).