Second Circuit Expands Scope of Anti-Terrorism Act Suits Against Foreign States
April 8, 2025
On February 4, 2025, in Schansman v. Sberbank, the U.S. Court of Appeals for the Second Circuit ruled that foreign states and their agencies and instrumentalities may be sued under the Anti-Terrorism Act (ATA) for acts of international terrorism, provided that one of the enumerated exceptions to sovereign immunity in the Foreign Sovereign Immunities Act (FSIA) applies. The decision is significant because the ATA previously was understood to prohibit suits against foreign states or their agencies unless the alleged act of terrorism took place in the United States. This new decision thus substantially expands the risks of suit and liability for foreign sovereigns based on alleged violations of the ATA that occur anywhere in the world.
Before the Second Circuit’s decision, foreign states could be sued for the international terrorism-related acts in U.S. courts in just two ways. First, Section 1605A of the FSIA strips immunity from foreign states designated as “State Sponsors of Terrorism” by the U.S. State Department. The current list of state sponsors of terrorism includes Syria, Iran, North Korea, and Cuba. Second, under the Justice Against Sponsors of Terrorism Act, codified in Section 1605B of the FSIA, any U.S. national could sue a foreign government under the ATA for acts of international terrorism that occurred inside the United States.
The Second Circuit’s decision offers a third and broader way to bring terrorism-related civil actions against a foreign state or its agency or instrumentality in U.S. courts.
Background
On July 17, 2014, a pro-Russian separatist group, the so-called Donetsk People’s Republic (DPR), shot down Malaysia Airlines Flight 17 over eastern Ukraine. Plaintiffs are the surviving relatives of a dual citizen of the United States and the Netherlands, Quinn Lucas Schansman, who was killed in the attack. Plaintiffs brought ATA claims against one of the largest Russian banks, Sberbank. They alleged that Sberbank provided material support and financing to the DPR’s terrorist activities by facilitating money transfers from donors to the DPR via correspondent accounts in the United States. For example, in one blog post, the DPR’s self-proclaimed governor shared account details to donate to a Sberbank bank card. In another YouTube video, the DPR’s commander-in-chief held up a piece of paper listing the full account number for that same account at Sberbank. Several DPR’s fundraisers instructed donors to route U.S. dollars through Sberbank’s correspondent accounts in New York. Plaintiffs alleged that at least two wire transfers from Maryland and New Jersey (totaling $300) were ultimately used to procure lethal weapons for the DPR, including the missile that brought down the MH17 airplane. Plaintiffs also alleged that Sberbank had actual knowledge that it was providing material support and financing to the DPR based on news articles circulated at that time.
The lawsuit against Sberbank raised complicated questions of foreign sovereign immunity because Sberbank is majority-owned by the Russian state and thus qualifies as an “instrumentality” of a foreign state under the FSIA. Foreign states and their agencies and instrumentalities enjoy presumptive immunity under the FSIA from suit in U.S. courts, unless a statutory exception to immunity applies. Likewise, the ATA provides that plaintiffs may not bring an action against “a foreign state, an agency of a foreign state, or an officer or employee of a foreign state or an agency thereof.” Sberbank moved to dismiss the complaint arguing that it was immune under both the FSIA and the ATA. Plaintiffs disputed Sberbank’s presumptive entitlement to immunity and argued that, in any event, their claims fell within the FSIA’s commercial activity exception. The district court sided with plaintiffs and denied Sberbank’s motion to dismiss.
Ruling
On appeal, the Second Circuit held that Sberbank was not immune and that the lawsuit could move forward to the merits. Judge Joseph Bianco, writing for the two-judge majority (including Judge José Cabranes), addressed four questions, two of which presented novel questions of law that will have far-reaching implications for foreign sovereigns in future ATA litigation.
Sberbank Is an Agency or Instrumentality of a Foreign State
First, the Second Circuit held that Sberbank was Russia’s “agency or instrumentality” and thus it was presumptively immune under the FSIA. The court explained that because the Russian Ministry of Finance owned a majority stake in Sberbank, Sberbank fell within the FSIA’s textbook definition of an “agency or instrumentality” of a foreign state. Although the court did not decide in this part of its analysis whether Sberbank was an “agency” or “instrumentality,” the court later referred to Sberbank as an “instrumentality.”
Relying on the Second Circuit’s recent decision in Bartlett v. Baasiri (2023), the court further noted that it did not matter whether Sberbank was owned by Russia’s Central Bank at the time the lawsuit was filed, because any post-filing changes in ownership would still confer immunity under the FSIA. The Second Circuit also dismissed as conclusory plaintiffs’ assertions of “gamesmanship” and that the Russian Ministry of Finance had acquired Sberbank to “engineer a sovereign immunity defense” in this litigation.
But the FSIA’s Commercial Activity Exception Applies
Second, having decided that Sberbank was presumptively immune under the FSIA, the court held that Sberbank’s commercial conduct in the United States abrogated any FSIA immunity. One of the exceptions to immunity under the FSIA is for suits that are “based upon a commercial activity carried on in the United States by a foreign state.” An action is “based upon” the commercial activity in the United States when such commercial activity constitutes the “gravamen” of the lawsuit. Sberbank argued that the gravamen of the plaintiffs’ lawsuit was the DPR’s attack on MH17 because that was the conduct that actually injured the plaintiffs. The court disagreed. It explained that the gravamen of the plaintiffs’ lawsuit was Sberbank’s material support allegedly provided to the DPR in the form of money transfers and use of correspondent accounts in the United States. “[F]acilitating money transfers,” the court explained, is a “quintessentially commercial activity” that can abrogate foreign sovereign immunity.
The ATA Incorporates the FSIA’s Definition of Foreign State
Third, the Second Circuit turned to the novel question of whether an ATA lawsuit could be brought against a foreign state’s instrumentality, like Sberbank. The panel noted that this was a question of first impression in the circuit. The ATA permits U.S. nationals or their heirs to sue for any injury to their “person, property, or business by reason of an act of international terrorism.” The ATA provides that an ATA action may not be brought against a “foreign state or an agency thereof,” but the ATA does not mention “instrumentalities.” Plaintiffs accordingly argued that the ATA’s silence about instrumentalities is intentional—because instrumentalities are not included on the list of parties that cannot be sued, they may be targeted in ATA suits. Sberbank, by contrast, argued that the FSIA’s definition of a foreign state, which includes instrumentalities, is incorporated by reference into the ATA’s use of the term “foreign state” and that Sberbank is therefore not a proper defendant under the ATA as an instrumentality of the Russian government.
The Second Circuit sided with Sberbank on this narrow question. The court explained that a “foreign state” must mean the same thing in both the FSIA and the ATA. Relying on broad language in the Supreme Court’s Amerada Hess and Altmanndecisions about the FSIA’s scope, the Second Circuit emphasized the comprehensiveness, exclusivity, and general applicability of the FSIA statutory scheme to all civil lawsuits implicating foreign sovereign immunity. “The text, structure, purpose, and history of the FSIA,” the court reasoned, required it to read the FSIA’s definition of a foreign state (which includes instrumentalities) into the ATA’s prohibition on suits against “foreign state[s].” And although the Court acknowledged the Supreme Court’s admonition in Turkiye Halk Bankasi A.S. v. United States (2023) against this exact type of overreliance on the Supreme Court’s broad and general language about the FSIA, it concluded that such warning applied only to criminal cases at issue in that case and not to the ATA, which provides civil remedies to victims of international terrorism.
The Second Circuit noted that the First Circuit reached a similar conclusion almost 20 years ago in Ungar v. Palestine Liberation Organization (2005). In Ungar, the family of an American citizen killed by terrorists in Israel sued the Palestinian Authority under the ATA. One of the questions before the First Circuit was whether Palestine was a foreign state within the ATA’s meaning and thus exempt from the lawsuit. To answer that question, the court incorporated the definition of a foreign state from the FSIA into the ATA, reasoning that “[n]othing in either the language or legislative history of the ATA gives any indication that Congress intended the [ATA] to supersede, rather than to mirror, the detailed jurisdictional framework described in the FSIA.” Therefore, the First Circuit concluded, “an assertion of sovereign immunity under the ATA” is “functionally equivalent to an assertion of sovereign immunity under the FSIA.” Relying in part on Ungar, the Second Circuit concluded that because instrumentalities like Sberbank are immune under the FSIA, they are not suable under the ATA.
But the FSIA’s Commercial Activity Exception Also Applies to the ATA
This proved a pyrrhic victory for Sberbank, however, because the Second Circuit went on to hold that the FSIA’s commercial activity exception also applies to the ATA. Relying on its earlier conclusion that the FSIA’s commercial activity exception applied to Sberbank in this case, the court concluded that Sberbank’s commercial conduct in the United States had opened the door to a suit against it under the ATA.
The Second Circuit’s decision is the first of its kind. No other circuit has previously addressed whether the FSIA’s exceptions to immunity may overcome the ATA’s bar on suits against foreign sovereigns. And to the extent that plaintiffs attempted to rely on the ATA to sue foreign governments in the past, courts strictly enforced the ATA’s bar against such lawsuits.
Judge John Walker wrote an opinion concurring in part and concurring in the judgment, in which he explained that Sberbank was not entitled to the ATA’s protections, but for different reasons. According to Judge Walker, the “plain text” of the ATA only prevents suits against foreign states and their agencies, not instrumentalities like Sberbank. Judge Walker argued that the FSIA’s general applicability to civil claims cannot override the specific textual differences between the FSIA and the ATA’s immunity provision. Finally, Judge Walker would have treated the ATA statutory regime as more akin to the criminal law regime in Turkiye Halk Bankasi to which, as the Supreme Court held, the FSIA does not apply.
Implications
The Second Circuit’s decision may open the door to a wave of ATA suits against foreign states and their agencies and instrumentalities.
Prior to this decision, the ATA was understood to include an express textual bar on suits brought against foreign states and their agencies, except for acts of terrorism in the United States. Consistent with the FSIA’s framework, foreign states could typically be sued for acts of international terrorism in only one of two ways. First, Section 1605A of the FSIA strips immunity from foreign states designated as “State Sponsors of Terrorism.” Second, Section 1605B of the FSIA strips immunity from foreign states for acts of international terrorism that occurred in the United States. Section 1605B also overrides the ATA’s categorical bar on suits brought against foreign states and extends the statute’s cause of action to cover such suits.
The Second Circuit’s decision creates a third and much broader way to sue foreign states for acts of terrorism. Even though the text of the ATA categorically bars suits against foreign states except pursuant to Section 1605B’s narrow exception, the Second Circuit held that the ATA implicitly allows suits against foreign states whenever any one of the FSIA’s exceptions to immunity applies. In so holding, the Second Circuit effectively read the ATA’s near-categorical prohibition on suits against foreign states out of the statute, potentially opening the door to a new era of litigation against foreign states and their agencies and instrumentalities. Such suits are not guaranteed to succeed; plaintiffs will still need to show that their claims fall within one or more of the FSIA’s exceptions to immunity and that their claims are otherwise cognizable under the ATA. But the ATA has expanded from being applicable against foreign states only in cases of terrorism on U.S. soil to being applicable in any case in which any exception to FSIA immunity applies.
Sberbank stated that it disagrees with the decision and will continue to fight the case.