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CHICAGO BRIDGE v. ISLAMIC REPUBLIC OF IRAN

United States District Court, Northern District of Illinois, E.D


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 except as
  provided in sections 1605 to 1607 of this
  chapter.

See also 28 U.S.C. § 1605(a)(1).
*fn4

A few preliminary observations on the scope and import of the waiver clause in the United States-Iranian Treaty of Amity are in order. First, there is substantial doubt whether the waiver of immunity clause covers acts of the Islamic Republic of Iran (and its instrumentalities) within its own borders. The complaint alleges that the acts of conversion and expropriation occurred in Iran. Complaint at ¶¶ 65-69, 75-77. Judicial opinions and comments of American treaty draftsmen interpreting identical waiver clauses in thirteen other Friendship, Commerce and Navigation Treaties have concluded that these clauses were designed to put American companies in an equal competitive position with foreign state-owned enterprises expanding their operation into the United States-not to transform U.S. courts into international courts of claims for extra-territorial suits against these foreign enterprises. See Victory Transport, Inc. v. Comisaria General de Abastecimientos y Transportes, 336 F.2d 354, 357-358 (2d Cir. 1964); Brief of the United States as Amicus Curiae, Electronic Data Systems Corp. v. The Social Security Organization of the Government of Iran et al., 79-7696 (2d Cir. October 1979), pp. 12, 19 (discussing US-Iran Treaty of Amity), filed as Appendix to Defendant Islamic Republic of Iran's Memorandum on Personal Jurisdiction ("Appendix"); Memorandum from the Legal Advisor of the Department of State to the Department of Justice, "Sovereign Immunity Clauses in Friendship, Commerce and Navigation Treaties," August 13, 1957, p. 2, filed as Exhibit A to Defendant's Appendix; Declassified Annotations on the Draft Treaty of Friendship, Commerce and Navigation between the United States of America and the Republic of Portugal, April 1949 (excerpt), pp. 33 et seq., filed as Exhibit D to Defendant's Appendix. See generally, Setser, "The Immunity Waiver of State-Controlled Business Enterprises in United States Commercial Treaties," Proceedings of Am. Society of Int'l.L. 89 (1961); Walker, "Modern Treaties of Friendship, Commerce and Navigation," 42 Minn.L.Rev. 805, 806 et seq. (1958).

Second, courts have differed over whether the United States-Iranian Treaty of Amity waives sovereign immunity from prejudgment attachment. Compare e.g., American International Group, Inc. v. Islamic Republic of Iran, 493 F. Supp. 522, 525-526 (D.D.C. 1980) (discussing court's earlier opinion of December 19, 1979); Behring International v. Imperial Iranian Air Force, 475 F. Supp. 383, 393-395 (D.N.J. 1979) (finding an implicit waiver from prejudgment attachment based on "execution of judgment" and "or other liability" clauses of Article XI, Section 4 of the Treaty) with New England Merchants National Bank v. Iran Power Generation and Transmission Co., 502 F. Supp. 120, 126-127 (S.D.N.Y. 1980); E-Systems, Inc. v. Islamic Republic of Iran, 491 F. Supp. 1294, 1299-1301 (N.D.Tex. 1980) (finding no waiver from prejudgment attachment). Although a few courts have discounted its significance, see e.g., Behring International v. Imperial Iranian Air Force, supra, 475 F. Supp. at 392 et seq., Section 1610(d) of the FSIA provides that a foreign state must explicitly waive its immunity from prejudgment attachment.

Third, the waiver provision contained in the Treaty of Amity does not necessarily confer personal jurisdiction. Significantly, at the time the Treaty was signed the law required a plaintiff to demonstrate an independent basis for personal jurisdiction aside from any waiver of sovereign immunity. See e.g., Petrol Shipping Corp. v. Kingdom of Greece, et al., 360 F.2d 103, 106 (2d Cir. 1965) (only after jurisdiction is acquired may sovereign immunity defense be raised), cert. denied, 385 U.S. 931, 87 S.Ct. 291, 17 L.Ed.2d 213. Under these circumstances there is no basis for assuming that the contracting parties to the Treaty, by their silence, intended to consent to personal jurisdiction. Because the Treaty of Amity does not cover personal jurisdiction, the Foreign Sovereign Immunities Act, 28 U.S.C. § 1605(a)(2), must control for purposes of establishing jurisdiction. H.R.Rep.No. 94-1487, 94th Cong., 2d Sess. 18, reprinted in [1976] U.S.Code Cong. & Admin.News, pp. 6604, 6616 (where a treaty is silent, FSIA controls). Under this provision, the minimum contacts requirements of International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), must be satisfied before this court can exercise jurisdiction over the Iranian defendants. Id. at 6612.

Aside from these questions of interpretation, there is a more fundamental objection to the exercise of personal jurisdiction on the basis of a waiver of sovereign immunity. In light of Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977), World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980), and other International Shoe descendants, we believe the fiction of implied consent cannot obviate the need for establishing minimum contacts with a forum.

Plaintiff argues otherwise:

  Minimum contacts between non-resident defendants
  and a forum have long been regarded as at best a
  secondary consideration where jurisdiction could
  be upheld on the basis of implied consent to suit
  in the particular forum. Hess v. Pawlowski
  [Pawloski], 274 U.S. 352 [47 S.Ct. 632, 71 L.Ed.
  1091] (1927).

Plaintiff's Supplemental Memorandum in Support of Attachment, p. 7. We reject this reasoning as irreconcilable with the aforementioned personal jurisdiction decisions and the Due Process Clause.

Shaffer v. Heitner, supra, perhaps more than any other case, refutes plaintiff's argument. That decision made clear that International Shoe minimum contacts analysis governs all exercises of personal jurisdiction. 433 U.S. at 204, 212, 97 S.Ct. at 2579-2580, 2584 (". . . all assertions of state-court jurisdiction must be evaluated according to the standards set forth in International Shoe and its progeny"), 216, 97 S.Ct. 2586 (opinion of the Court); at 217, 97 S.Ct. at 2586-2587 (Powell, J., concurring); at 220, 97 S.Ct. at 2588 ("The primary teaching . . . of today's decision is that a State, in seeking to assert jurisdiction over a person located outside its borders, may only do so on the basis of minimum contacts among the parties, the contested transaction, and the forum State."), 227, 97 S.Ct. 2591-2592 (Brennan, J., concurring in part, dissenting in part).*fn5 See also The Supreme Court, 1976 Term, 91 Harv.L.Rev. 70, 160 (1977) (". . . Shaffer removes any doubt that International Shoe governs all exercises of jurisdiction. . . .). In addition, Justice Marshall, writing for the majority, declared that decisions like Hess v. Pawloski, supra, implying consent to jurisdiction from certain conduct or admissions, rest upon a "legal fiction":

  The advent of automobiles, with the concomitant
  increase in the incidence of individuals causing
  injury in States where they are not subject to in
  personam actions under Pennoyer [Pennoyer v. Neff,
  5 Otto 714, 95 U.S. 714, 24 L.Ed. 565 (1878)],
  required further modification of the territorial
  limits on jurisdictional power. This
  modification . . . was accomplished by use of a
  legal fiction that left the conceptual structure
  established in Pennoyer theoretically unaltered.
  The fiction used was that of the out-of-state
  motorist, who it was assumed could be excluded
  altogether from a State's highways, had by using
  those highways appointed a designated state
  official as his agent to accept process. See Hess
  v. Pawloski, 274 U.S. 352 [47 S.Ct. 632, 71 L.Ed.
  1091] (1927).

433 U.S. at 202, 97 S.Ct. at 2578-2579 (citation omitted). Shaffer, of course, overruled what remained of Pennoyer and its "conceptual structure" for establishing jurisdiction. 433 U.S. at 212 and n. 39, 97 S.Ct. at 2584 and n. 39. Justice Marshall's reasoning places in doubt the constitutionality of all `consent to jurisdiction' provisions, especially those which are implicit. See generally 433 U.S. at 206-217, 97 S.Ct. at 2580-2587 and the illustration at 216, 97 S.Ct. at 2586: "[I]t strains reason . . . to suggest that anyone buying securities in a corporation formed in Delaware `impliedly consents' to subject himself to Delaware's . . . jurisdiction on any cause of action." Compare 91 Harv.L.Rev. at 161 (questioning validity of statutes deeming acceptance of corporate directorship to be consent to jurisdiction (in the state of incorporation) after Shaffer).*fn6

The implied consent to jurisdiction concept as applied to the United States-Iranian Treaty of Amity waiver clause is no less a fiction. It is surely a leap in logic to suggest that because Iran signed a friendship treaty with the United States some 25 years ago waiving sovereign immunity for certain limited acts*fn7 that it impliedly consented to personal jurisdiction over any future claim brought in the United States irrespective of any contacts in or even with that forum. We are not the first court to question the use of waiver as a substitute for due process fairness in the exercise of jurisdiction over foreign sovereigns. Judge Weinfeld recognized the overbreadth of the FSIA waiver provision:

  If the language of the Act is applied literally,
  the result is that a foreign sovereign which has
  waived its immunity can be subjected to the
  personal jurisdiction of the United States courts
  regardless of the nature or quality of its contacts
  with this country.*fn8

Verlinden B. V. v. Central Bank of Nigeria, 488 F. Supp. 1284, 1302 (S.D.N.Y. 1980) (emphasis added). He regarded this approach as a "problem" which "Congress did not anticipate" (id. at n. 88):

  On the one hand the legislative history indicates
  that Congress intended the courts to exercise
  personal jurisdiction only over foreign states
  having sufficient contacts with the United
  States. See House Report, supra note 7, at 13-14;
  reprinted [1976 U.S.Code Cong. & Admin.News 6604]
  at 6612. On the other hand, the statute it wrote
  permits the assertion of jurisdiction either when
  there are sufficient contacts (i.e., when one of
  the commercial activity exceptions [of §
  1605(a)(2)] have been met) or when there has been a
  waiver.

Id. at n. 88 (emphasis in the original). Although not addressing the precise waiver issue presented here, Judge Weinfeld concluded: "Because the Act's waiver provision is written as broadly as it is, it is incumbent upon the Court to narrow that provision's scope." Id. at 1302 (Dutch choice of law clause in Nigerian government-Dutch corporation contract does not result in Nigeria's implicit waiver of immunity to jurisdiction of U.S. courts). Other courts have also been troubled by congressional ambivalence in the application of due process principles to foreign state personal jurisdiction. See e.g., Hanis v. VAO Intourist, Moscow, 481 F. Supp. 1056, 1060 (E.D.N.Y. 1979) (Weinstein, J.):

  Although the waiver provision, as a rough analogy
  to consent, apparently incorporates that
  traditional basis of jurisdiction, the draftsmen
  of the Immunities Act concentrated on the bases
  incorporated in the newer forms of long-arm
  jurisdiction. These modern long-arm statutes
  require a link between the "contact" with the
  local jurisdiction which is the basis for in
  personam jurisdiction in the suit and the facts
  upon which the particular cause of action-in
  federal parlance the claim for relief-is based.

It is to be noted that the "primary" purpose of the Foreign Sovereign Immunities Act of 1976 was to strip foreign states of their immunity from suit when they engaged in private commercial conduct,
*fn9 thereby placing them on the same footing as nongovernmental enterprises. Cf. Carey v. National Oil Corporation, supra, 453 F. Supp. at 1102. See also Behring International v. Imperial Iranian Air Force, supra, 475 F. Supp. at 395-396 (U.S.-Iranian Treaty of Amity treats foreign state like "any private person" in the other's courts). Eliminating the need to establish personal jurisdiction over those governmental enterprises, however, through the fiction of consent puts them in a far worse position.

For the foregoing reasons, we will not exercise personal jurisdiction over the Iranian defendants based on the waiver of sovereign immunity clause in the Treaty of Amity.

Arbitration Clauses

Plaintiff argues, in addition, that the arbitration clauses in the contracts with the Iranians provide implicit consent to jurisdiction in the United States Courts. We requested plaintiff to file copies of these clauses. Having now reviewed them, we categorically reject the arbitration clauses as a basis for jurisdiction.

None of the arbitration clauses in these contracts contain U.S. choice of law or choice of forum provisions. In fact, those contracts which address the question, stipulate that Iranian law or the Iranian courts shall resolve disputes in the event of the breakdown of informal arbitration. We agree with Judge Weinfeld's precise holding in Verlinden B. V. v. Central Bank of Nigeria, supra, that the presence of third-party nation choice of law and forum clauses does not in any sense implicitly consent to United States jurisdiction:

  Plaintiff's view, if adopted, would presage a
  vast increase in the jurisdiction of federal
  courts in matters involving sensitive foreign
  relations: whenever a foreign sovereign had
  contracted with a private party anywhere in the
  world, and

  chose to be governed by the laws or answer in the
  forum of any country other than its own, it would
  expose itself to personal liability in the courts
  of the United States. Verlinden [plaintiff] and
  Nigeria [defendant bank] could scarcely have
  foreseen this untoward result when they signed the
  contract; and it is unlikely that Congress could
  have intended it.

488 F. Supp. at 1302 (emphasis added).

The Commercial Activity Exceptions to Sovereign Immunity Under the FSIA, 28 U.S.C. § 1605(a)(2), and the "Doing Business" Concept

The House report accompanying the FSIA describes § 1330(b), the personal jurisdictional component of the Act, and § 1605(a)(2), the commercial activities exceptions to sovereign immunity, as creating a "federal long-arm statute over foreign states." H.R.Rep.No. 94-1487, 94th Cong., 2d Sess., reprinted in [1976] U.S.Code Cong. & Admin.News, pp. 6604, 6612 ("House Report"). The Act's long-arm statute was patterned after the District of Columbia's long-arm statute, the legislative history indicating that the International Shoe requirements of minimum contacts and adequate notice were embodied in the Act. Id. See also Thos. P. Gonzalez Corp. v. Consejo Nacional de Produccion De Costa Rica, 614 F.2d 1247, 1255 (9th Cir. 1980) ("[p]ersonal jurisdiction under the Act requires satisfaction of minimum contacts standard"); Verlinden B. V. v. Central Bank of Nigeria, supra, 488 F. Supp. at 1293 (discussing § 1605 of FSIA); Carey v. National Oil Corp., supra, 453 F. Supp. at 1101. However, the FSIA's bases of jurisdiction are "less comprehensive than those found in the usual jurisdictional statutes of the states and the District of Columbia." Harris v. VAO Intourist, Moscow, supra, 481 F. Supp. at 1059. Notwithstanding plaintiff's arguments to the contrary, the Act has clearly rejected the "doing business" or "mere presence in the forum" concept for the exercise of jurisdiction. Verlinden B. V. v. Central Bank of Nigeria, supra, 488 F. Supp. at 1295; Harris v. VAO Intourist, Moscow, supra, 481 F. Supp. at 1059-1060. Oblique contacts with the United States wholly unrelated to the instant suit may not be considered. We will therefore not allow plaintiff to pursue any discovery directed to the Iranian defendants' general commercial activities in the United States.

The three "commercial activity" situations in which personal jurisdiction may be exercised over a foreign state and its instrumentalities, 28 U.S.C. § 1605(a)(2), remain to be considered. The provision states in relevant part:

  A foreign state shall not be immune from the
  jurisdiction of courts of the United States or of
  the States in any case-in which the action is
  based

  -upon a commercial activity carried on in the
  United States by the foreign state; or

  -upon an act performed in the United States in
  connection with a commercial activity of the
  foreign state elsewhere; or

  -upon an act outside the territory of the United
  States in connection with a commercial activity
  of the foreign state elsewhere and that act
  causes a direct effect in the United States;

Before analyzing these independent bases, we note that the FSIA speaks only in terms of contacts with the United States, not any particular state or subdivision. 28 U.S.C. § 1605(a)(2), 1605(a)(3). See also East Europe Domestic International Sales Corp. v. Terra, 467 F. Supp. 383, 387 et seq. (S.D.N.Y. 1979).

Commercial Activity Carried on in the United States

To prevail under this standard, plaintiff must identify "a regular course of commercial conduct or a particular commercial transaction or act." 28 U.S.C. § 1603(d). The activity must involve "substantial contact with the United States," § 1603(e), and the cause of action must be "based upon" that commercial activity. See 28 U.S.C. § 1605(a)(2). Congress never intended to bestow jurisdiction under the FSIA where the only contact with this country is the U.S. citizenship or residency of the plaintiff. House Report at 17, reprinted at 6616. Accord, Verlinden B. V. v. Central Bank of Nigeria, supra, 488 F. Supp. at 1296 ("[t]he crucial question is whether [the activity] involves `substantial contact' with the United States . . ."). Ultimately, it is "for the courts to determine whether a particular commercial activity has been performed in whole or part in the United States." House Report at 17, reprinted at U.S.Code Cong. & Admin.News 1976, p. 6616.

Political acts by a foreign state obviously do not constitute commercial undertakings. See e.g., Carey v. National Oil Corp., supra, 453 F. Supp. at 1102 (cutback on oil production by Libya during Middle East tensions). The commercial activity providing the jurisdictional basis must involve more than the mere transmission of telex messages between a foreign state and the United States. See East European Domestic International Sales Corp. v. Terra, supra. Numerous visits by agents of a foreign instrumentality, on the other hand, to review and "active[ly]" inspect the progress made on a contract has been held to constitute sufficient minimum contacts. Electronic Data Systems Corp. v. Social Security Organization of the Government of Iran, CA3-79-218-F (N.D.Tex. June 21, 1979), Slip Op. at 5-6. These cases, of course, are merely illustrative of the contacts questions under this first branch of § 1605(a)(2).

Act Performed in the United States in Connection with a Commercial Activity of the Foreign State Elsewhere

This part of § 1605(a)(2) "looks to conduct of the foreign state in the United States which relates either to a regular course of commercial conduct elsewhere or to a particular commercial transaction concluded or carried out in part elsewhere." House Report at 19, reprinted at U.S.Code Cong. & Admin.News 1976, p. 6617. There must, however, be some "specific" act performed in the United States by the foreign entity in order to invoke jurisdiction. Id. at 19, reprinted at 6618; East Europe Domestic International Sales Corp. v. Terra, supra, 467 F. Supp. at 388. The acts covered by this subsection are limited to those which independently "form the basis of a cause of action." House Report at 19, reprinted at U.S.Code Cong. & Admin.News 1976, p. 6618. Thus, an act by a foreign state in the United States that violates United States securities laws or the wrongful discharge of a foreign state employee employed in the United States in connection with overseas commercial activity satisfies the requirements. Id. at 19, reprinted at 6617.

An Act Outside the United States Which Causes a Direct Effect in the United States

Although this section has been principally applied to tortious conduct, the legislative history of the FSIA indicates that it has a broader scope. Congress adopted by reference the principles of § 18, Restatement of the Law, Second, Foreign Relations Law of the United States (1965), which cover conduct "whether tortious or otherwise." House Report at 19, reprinted at 6618. Courts have applied this exception only where there has been a "substantial effect within the territory" as a result of "direct and foreseeable" conduct outside the territory." Verlinden B. V. v. Central Bank of Nigeria, supra, 488 F. Supp. at 1298 (emphasis in original) (refusing to apply exception in commercial banking context); Harris v. VAO Intourist, Moscow, supra, 481 F. Supp. at 1062-1063.

The direct effect intended by the FSIA "is one which has no intervening element, but rather flows in a straight line without deviation or interruption." Upton v. Empire of Iran, 459 F. Supp. 264, 266 (D.D.C. 1978), affirmed without opinion, 607 F.2d 494 (D.C. Cir. 1979). For example, in Carey v. National Oil Corp., supra, the leading case discussing the "direct effect" standard, breaches of petroleum contracts and excessive payment charges by a Libyan-owned corporation against the Bahamian subsidiaries of an American parent corporation were held not to have a sufficient direct effect in the United States. 453 F. Supp. at 1101. The court conceded that these subsidiaries may have been "merely . . . conduits to supply [the parent company]" and noted that the 1974 Libyan oil embargo was "designed to have a direct effect of a sort on the United States," but still refused to find the requisite minimum contacts. Id. at 1101. The Court of Appeals affirmed.*fn10 Similarly, mere injurious consequences within the United States based on an act or omission outside the country have not resulted in jurisdiction over foreign defendants. Upton v. Empire of Iran, supra, (collapse of Iranian airport terminal roof causing deaths of several Americans does not have "direct effects" in the United States).

In summary, we do not exercise personal jurisdiction over the Iranian defendants based on the waiver of sovereign immunity provision in the United States-Iranian Treaty of Amity or the arbitration clauses in the contracts pleaded in this action. We also find that the FSIA long-arm provisions do not provide for jurisdiction based on defendants' mere presence in the United States. Jurisdiction may, however, be grounded upon the Iranian defendants' contacts with the United States relating to the instant transactions and claims, provided that the threshold requirements of 28 U.S.C. § 1605(a)(2) are satisfied. Discovery may proceed along these lines.

We reserve ruling on the dismissal of the suit or the denial of the prejudgment attachment motion, based on lack of proper jurisdiction over the parties, until the factual record is completed.


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