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CHICAGO BRIDGE v. ISLAMIC REPUBLIC OF IRAN

November 12, 1980

CHICAGO BRIDGE & IRON COMPANY, PLAINTIFF,
v.
THE ISLAMIC REPUBLIC OF IRAN ET AL., DEFENDANTS.



The opinion of the court was delivered by: Grady, District Judge.

MEMORANDUM OPINION

Plaintiff Chicago Bridge & Iron Company filed suit against twelve Iranian and American defendants alleging breach of contract, lost profits, conversion of equipment and expropriation of funds. Plaintiff has now filed a motion to attach the American assets of the Islamlic Republic of Iran and seven Iranian-controlled corporations-National Iranian Oil Company, Shahpur Chemical Company, Iran-Japan Petrochemical Co., Lavan Petroleum Company, Iran Pan American Oil Co., Iran Carbon Co. and Bank Melli Iran (collectively, "Iranian defendants".*fn1 The motion was made prior to the Iranian defendants' appearance in this action, and we have asked plaintiff to file a memorandum on the issue of personal jurisdiction.*fn2 The defendants have now appeared by counsel and have filed their own briefs on this question.

The starting point for our analysis is 28 U.S.C. § 1330,*fn3 which was added to the United States Code in 1976 by enactment of the Foreign Sovereign Immunities Act ("FSIA" or "the Act"), 28 U.S.C. § 1602 et seq. It gives federal district courts subject matter and personal jurisdiction over nonjury civil claims against foreign states, provided they are not entitled to sovereign immunity under 28 U.S.C. § 1605-1607 or pre-existing international agreements. The transactions excepted from sovereign immunity by the Act "for the most part concern commercial activities by a foreign state having a nexus with the United States." Verlinden B. V. v. Central Bank of Nigeria, 488 F. Supp. 1284, 1293 (S.D.N.Y. 1980); Carey v. National Oil Corp., 453 F. Supp. 1097, 1101 (S.D.N.Y. 1978) (requirements of minimum jurisdictional contacts and adequate notice embodied in the Act), affirmed, 592 F.2d 673, 676 (2d Cir. 1979).

The substantive element of sovereign immunity and the procedural element of personal jurisdiction are closely related under the FSIA. As explained by Judge Tenney in Yessenin-Volpin v. Novosti Press Agency, 443 F. Supp. 849, 851 (S.D.N.Y. 1978):

  The Act's central feature is its specification of
  categories of actions for which foreign states
  are not entitled to claim the sovereign immunity
  from American court jurisdiction otherwise
  granted to such states. These exceptions are
  contained not in the sections of the Act which
  describe the grounds on which jurisdiction may be
  obtained, however, but are phrased as substantive
  acts for which foreign states may be found liable
  by American courts. This effects an identity
  between substance and procedure in the Act which
  means that a court faced with a claim of immunity
  from jurisdiction must engage ultimately in a
  close examination of the underlying cause of
  action in order to decide whether the plaintiff
  may obtain jurisdiction over the defendant.

As a threshold matter, we note that Iran is a "foreign state" within the meaning of the Act, 28 U.S.C. § 1603(a), and that the other defendants, Iranian-controlled corporations, constitute "agencies or instrumentalities of a foreign state" under § 1603(b).

Plaintiff asserts four discrete bases for personal jurisdiction over the Iranian defendants in this case:

  (1) A waiver of sovereign immunity clause in the
  Treaty of Amity, Economic Relations and Consular
  Rights Between the United States of America and
  Iran, signed August 8, 1955, 8 U.S.T. 899,
  T.I.A.S. 3853 ("Treaty of Amity"), provides
  implied consent to jurisdiction.
  (2) The arbitration clauses in many of the
  construction and supply contracts which form the
  basis of Counts I and II of the complaint
  evidence waiver of sovereign immunity and consent
  to jurisdiction of United States courts.
  (3) By virtue of the Iranian defendants'
  presence" in the United States and their "doing
  business" generally in this country, personal
  jurisdiction may be asserted over them.
  (4) Significant and substantial commercial
  contacts by the defendants with the United States
  forum (as opposed to the Illinois forum) relating
  to the instant transactions support jurisdiction.

We reject the first three theories of personal jurisdiction. We will discuss them in turn.

United States-Iran Treaty of Amity

Plaintiff argues initially that this court need not engage in a minimum contacts analysis because the Iranian defendants' waiver of sovereign immunity in the Treaty of Amity constitutes implied consent to jurisdiction. Article XI, Section 4 of the Treaty provides:

  No enterprise of either High Contracting Party,
  including corporations, associations and
  government agencies and instrumentalities, which
  is publically owned or controlled shall, if it
  engages in commercial, industrial, shipping or
  other business activities within the territories
  of the other High Contracting Party, claim or
  enjoy, either for itself or its property,
  immunity therein from taxation, suit, execution
  of judgment or other liability to which privately
  owned and controlled enterprises are subject
  therein.

8 U.S.T. 909.

The FSIA, 28 U.S.C. § 1604, in turn, provides:

  Subject to existing international agreements to
  which the United States is a party at the time of
  enactment of this Act a foreign state shall be
  immune from the jurisdiction of the courts of the
  United States and of the States ...

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