In Iraqi Oil for Food Program Dispute, Court Rules Foreign Sovereign Immunities Act Applies

From Cadwalader’s Louis Solomon, a look at a recent appeals court ruling that a dispute involving Iraq’s Oil for Food program is subject to the Foreign Sovereign Immunities Act and outside of U.S. federal jurisdiction:

“The case concerned alleged breaches of contracts between Cyprus-based oil brokerage companies and the Iraqi State Oil Marketing Organization (SOMO), which had been selling oil through the Oil for Food Program.  Although the original contract provided for arbitration in accordance with ICC rules and designated the place of arbitration as Baghdad, the plaintiff argued that this was impossible because Terenkian faced death threats in Iraq, and also argued that the district court could not compel arbitration because Iraq was not a signatory to the New York Convention…

The plaintiff argued that Iraq was the actual defendant in the suit and that it was not entitled to sovereign immunity… Iraq (the new government) moved to dismiss for lack of subject matter jurisdiction, arguing that it was not a party to the contracts (rather SOMO was) and that the alleged breaches did not have direct effect on the U.S. because the place of performance was Iraq and that there was no evidence that any oil would go to U.S. customers.”

Read the full update, Ninth Circuit Reverses FSIA Exception; No Commercial Activity in the U.S. in Iraq’s Oil for Food Program – Cadwalader»