CC/Devas (Mauritius) Limited v. Antrix Corp.: International Arbitration and Constitutional Avoidance

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I suspect that CC/Devas (Mauritius) Limited v. Antrix Corp. Ltd. caught the eye of the Supreme Court because of an interesting constitutional question: Does the Due Process Clause of the Fifth Amendment apply in civil suits brought against foreign states in U.S. courts? More than thirty years ago, Justice Scalia, writing for a unanimous Court in Republic of Argentina v. Weltover, Inc.,  signaled a negative answer: The Court regards the states of the United States as outside the scope of that clause, and why should foreign states fare any better?

Since Scalia dropped that hint, no court of appeals has held that foreign states enjoy constitutional protection, but several have held that state-owned firms do, at least if they don’t qualify as the alter ego of their state. To answer the question, the Court would have to engage deep structural issues about the constitution and inter-sovereign relations and the purposes and values of due process, topics that delight many law professors. But perhaps the Court picked the wrong case.

Antrix, an Indian company wholly owned by the Indian state, entered into an arbitration agreement with Devas, a private Indian company, in the course of their business relationship. Devas brought a claim under the agreement and prevailed in arbitration, although the Indian courts later annulled the award. Devas nevertheless sought to confirm the award in the United States, hoping to find assets in our country against which it might collect.

Antrix argued that it and its agreement with Devas lack any connection to the United States, thus barring an assertion of personal jurisdiction over it. It had never done any business, maintained any presence, or owned any property in the United States. The district court ruled that the Foreign Sovereign Immunities Act (FSIA) deems personal jurisdiction to exist in all suits against foreign states, including state-owned companies, no matter what, as long as an exception to immunity applies. It further held that the Due Process Clause does not extend to foreign states and therefore imposes no other jurisdictional requirements. The Ninth Circuit reversed, relying on its earlier decisions holding that the FSIA requires a plaintiff relying on an exception to sovereign immunity to prove minimum contacts between the United States and the defendant, making it unnecessary to reach any constitutional issues.   A motion for rehearing en banc drew a strong dissent, flagging the case for the Court’s attention.

The problem for fans of constitutional civil procedure is that, as my amicus brief for the Court argues, a fair reading of the FSIA knocks the constitutional question out of the case. To be fair, the earlier Ninth Circuit decisions on which the lower court relied did not involve Section 1605(a)(6), the provision regarding confirmation of arbitral awards that governs this case. As originally enacted in 1976, the FISA adopted five exceptions to sovereign immunity applicable to both states and the companies they own, in each instance building a minimum-contacts nexus to the United States into the definition of the exception. The legislative history expresses a belief that the statutory nexus requirements satisfied whatever limits the Due Process Clause imposed on the assertion of person jurisdiction. As to the original five exceptions, the belief was reasonable, even compelling. For Section 1605(a)(6), added in 1988, a nexus requirement of minimum contacts is there too, but admittedly not as explicitly as in the original five. The Ninth Circuit did not dwell on this point, which also may explain the grant of certiorari.

My brief makes the case for reading Section 1605(a)(6) as limiting the grant of jurisdiction with restrictions that satisfies the Fifth Amendment, whether the constitution compels this result or not. I won’t belabor the point in this post, because the brief for respondent Antrix also does a fine job in developing the statutory argument. The gist is that Congress in 1988 wanted to limit sovereign immunity so that state-owned firms would not enjoy greater protection from suits than do private companies, foreign or domestic. Symmetrically, Congress did not want to give plaintiffs seeking confirmation of an arbitral award more favorable treatment when suing a state-owned firm, rather than a private company. The language adopted supports a nondiscrimination outcome, and the amendment’s legislative history clinches the point.

What motivated my decision to file an amicus brief was not only the merits of this statutory argument, strong though it seems to me. The virtues of constitutional avoidance seem especially compelling here. As a general matter, I worry that the political and cultural malaise in our society finds expression too easily in arguments about constitutional law, which take on the character of sacral disputes that make normal politics impossible, or at least, for many, impermissible. I think law serves society best when it organizes contestable issues into bite-sized chunks, rather than always putting first principles into play.

The merits of my general position aside, foreign relations law seems an area where hardening the law into definite and specific constitutional rules can do particular harm. Curtis Bradley’s new book, Historical Gloss and Foreign Affairs, captures the point beautifully. The foreign relations of the United States are dynamic and contingent, shaped by economic, technological, and strategic conditions in a constant state of flux. Conclusive and hard-to-change law, which rules based on the constitution aspire to be, can cut short the process of experimentation and adaption that forms historical gloss. Too much settled constitutional law would confound the incremental and pragmatic accretion of established practices. As the world changed, we too often would face the dilemma of living within an uncomfortable straitjacket or undertaking a constitutional revolution, at the cost of degrading the legitimacy of constitutional law. Deliberately leaving constitutional questions unresolved, when that option is open, can leave foreign relations law more resilient.

One might object that the lower courts already have developed a body of constitutional law for these cases, one that distinguishes foreign states from state-owned companies for purposes of applying the general constitutional standards for personal jurisdiction. Yet nothing like a clear nation-wide consensus has emerged, and some of the lower courts’ moves, particularly the standards the use to distinguish “real” state-owned firms from those that function as the alter ego of a state, seem problematic. Thus, this argument would go, the Court might as well resolve the constitutional issues, even if the FSIA cases do not require it to do so.

This objection invites two responses. First, if a proper interpretation of the FSIA’s various nexus limits demands all the minimum contacts that the Constitution requires for personal jurisdiction, the decisions of the lower courts fall by the wayside. Because the lion’s share of cases address this question, and because under current law all personal jurisdiction over a foreign sovereign or its companies depends entirely on the FSIA, the lower court decisions lose much of their precedential effect. The resolution of the constitutional due process rights of states then becomes a much-needed gap.

Of course, the question of constitutional rights of foreign states and their companies might arise in other contexts. My second response acknowledges this point but maintains that, at the present stage of jurisprudential development, the problem is mostly theoretical. Hypothetically, a foreign sovereign or a wholly owned company – perhaps a Central Bank? – might use the Fifth Amendment’s Taking Clause to demand compensation for confiscation of its property. After all, the Supreme Court has held that private foreign companies do have this right as to property located in the United States. But, to my knowledge, no actual case has arisen to test the point. Last year’s REPO Act, which gave the President the authority to take over Russian state assets for the benefit of Ukraine, left open a path for Russia or its Central Bank to adjudicate any takings claims that might arise, rather than barring the courthouse door.

Other opportunities to tests non-Fifth Amendment constitutional claims might come along in the future. The lower courts will take a first stab at the questions raised and might very well make a mess of the doctrine. But this is how constitutional development proceeds in the United States. In advance of the issue arising in a case where it can’t be avoided, the Court should give the lower courts a chance to expose the hard questions and propose different solutions. If the FSIA does make irrelevant all constitutional rules governing personal jurisdiction, the Court should accept the opportunity to remain silent on the issue.

To be clear, were the court to reject the statutory arguments I have championed, I have no specific disagreements with Ingrid Brunk’s treatment – in  her amicus brief, and her scholarship – of the constitutional issues implicated by Devas. My claim is that their resolution would involve judgments and commitments that may have unintended and unfortunate consequences.

First, if states are outside the protection of the Due Process Clause, does it follow that state-owned firms also are? Many Supreme Court decisions take it for granted that foreign companies, if drawn into the U.S. legal system, enjoy Fifth Amendment protection. What is it about the composition of a foreign firm’s ownership that might require an exception? If we were to draw a line based on function rather than form, what are the functions that might justify treating a state-owned firm as equivalent to a state? I agree with Brunk that the veil-piercing test used by the lower courts is not fit for purpose, but I do not know what the standard should be.

If the Due Process Clause does not regulate the imposition of personal jurisdiction over states or state-owned firms, does it afford any constitutional protections? The Fifth Amendment’s Takings Clause requires just compensation for property expropriated for a public purpose, even if the government accords due process to the owner. Do states or their legally separate firms have this right or not? The Takings Clause draws a line between punitive forfeitures, which do not require compensation, and expropriations, which do. Should the property within the United States of foreign states and their proxies be generally subject to forfeit?

If the Due Process Clause does apply to assertions of personal jurisdiction over states and the companies they own, does this regulation necessarily require the same level of minimum contacts between the United States and the person sued? Might the standard for acceptable contacts apply differently to states and their companies? States engage in a wide range of interactions with each other. They, for example, participate in the creation of international law through the making of treaties and the formation of custom, something that companies as such do not (or so most theories of international law would hold). Does lawmaking by mutual consent result in a constitutionally qualifying contact? Does the conduct of foreign relations through negotiations, which may occur even when diplomatic relations as such are suspended, count? What about the acceptance of an international obligation, such as not employing terrorism? A FSIA exception from sovereign immunity applies to tort suits based on material support for terrorism that targets people affiliated with the United States. Does a state’s entry into treaty relations with the United States to outlaw terrorism provide a sufficient contact for purposes of personal jurisdiction over these cases?

Wading into deeper territory, is the minimum contacts standard for personal jurisdiction necessarily a requirement of the Fifth Amendment? Fuld v. PLO, another case pending before the Court, opens the door to letting Congress decide what process is due when the United States (as distinguished from the several states) asserts personal jurisdiction through its courts. I wonder. Can Congress assign whatever process it chooses for designated persons without bumping into the Bill of Attainder Clause, a provision that seems to bar the legislature from doling out punishment on a retail basis?

The Court could take up the constitutional issue in Devas without necessarily resolving all of these questions, at least some of which seem fraught. It always has the option of writing a narrowly cabined decision, good for the case at hand and not much else. But if it is going to write a minimalist opinion, why make it a constitutional one, especially if good statutory arguments are available? Perhaps constitutional contests make for a more interesting spectator sport. But sometimes our society needs careful answers to finite questions, ones to which the political actors can return as the world changes. Devas is such a case.