ARGUMENT ANALYSIS

Court set to reverse heightened requirement for arbitration awards under FSIA

Monday’s argument in CC/Devas (Mauritius) Limited v. Antrix Corp. was an odd one: The justices asked no questions at all about the question on which they’d granted review, because the parties agree that the lower court’s answer to that question was incorrect. So almost all of the discussion at the argument focused on what, if anything, the court should decide before sending the case back to the court of appeals.

CC/Devas arises under the Foreign Sovereign Immunities Act. When the law was adopted in 1976, Congress abandoned a two-century practice of federal courts determining, case by case based on the views of the State Department, whether a foreign country could be sued in the federal courts. Instead, it substituted a specific statutory framework that generally recognizes sovereign immunity for governmental activities but provides much more limited immunity for commercial activities. The provision relevant to this case, one of the exceptions to the recognition of immunity, calls for the exercise of jurisdiction in cases seeking to enforce arbitral awards.

To understand the context of the provision, the dispute involves a government contract in India between two Indian companies sharing the name of Devas and Antrix Corp, the commercial arm of India’s space research efforts, wholly owned by the Indian government,. Under the contract, the Devas entities were to launch satellites that would provide telecommunication services in India. Later, when the Indian government decided to exploit the relevant spectrum for itself, it had Antrix cancel the contract.

Because the contract called for arbitration, the Devas entities commenced an ICC arbitration seeking damages for the termination, in which they received an award of about $500 million. Devas then filed suit in federal court in the United States seeking to confirm the arbitration award. They relied on the New York Convention (a treaty to which the United States is a party, which calls for the enforcement of these sorts of arbitration awards). Although the district court agreed to confirm the award, the U.S. Court of Appeals for the 9th Circuit disagreed, concluding that confirmation was inappropriate because Antrix lacked adequate contacts with the Western District of Washington, where Devas brought its suit.

As the case comes to the justices, Antrix (which has retained new counsel) does not defend the reasoning of the lower court. Rather, it presents a variety of new arguments – most of which it failed to raise or disclaimed in the lower courts. For example, it argues that the arbitration exception of the FSIA is not satisfied because that provision applies only when the relevant commerce took place in part in the United States. Similarly, it argues that Antrix, as a corporation, has distinct rights under the due process clause even if India as a sovereign nation does not.

When it came to the argument, the three justices who spoke the most – Elena Kagan, Sonia Sotomayor, and Neil Gorsuch — all seemed to agree that the court should reverse the lower court ruling that the arbitration exception depends on proof of minimum contacts and send the case back to let the court of appeals consider all the other arguments presented by Antrix. First, talking with Aaron Street, representing one of the Devas companies, Sonia Sotomayor asked: “Why can’t we just answer the question presented, which was whether the FSIA requires minimum contacts statutorily, and let … the court below on remand address the issues that weren’t addressed below, the arbitration issue and the minimum contacts issue?”

In the same vein, talking with Carter Phillips,representing the India-owned defendant, Elena Kagan first tried to confirm that he was unwilling to defend the lower court’s decision: “Have you given up on that?” When Phillips agreed, Kagan responded: “So why isn’t the right thing to do just to say everybody agrees that the Ninth Circuit was wrong, we toss it back to the Ninth Circuit for everything else?”

Phillips, though, insisted that his argument about the meaning of the statute was a jurisdictional one, which the court should consider in the first instance. At that point, Gorsuch stepped in (agreeing with Kagan just as he would later in the morning in the argument in BLOM) to ask, “why wouldn’t the Ninth Circuit be the appropriate forum for that argument in the first instance?” To Phillips’ insistence that the court had the power to decide the jurisdictional question, Gorsuch retorted: “My question is this is an argument that you disclaimed in the district court, you disclaimed in the court of appeals, and you’re making for the first time here.” Why, he asked, shouldn’t the court simply throw out the lower court’s ruling and send the case back to the 9th Circuit? “I’m looking for a legal impediment to the course that Justice Kagan outlined, and I’m not hearing one.”

Kagan then returned to the debate, explaining that in her view “[w]e wouldn’t be ignoring the subject matter jurisdiction, Mr. Phillips. We’d just be saying, as to the view of subject matter jurisdiction that was taken by the Ninth Circuit, that’s incorrect, nobody defends it, so try again and see whether there’s subject matter jurisdiction in this case.” She went on to explain: “I would think it would be strange to do the opposite given that neither the Ninth Circuit nor, as far as I’m aware, any circuit has evaluated the theory that you’re raising now. … We’re not the people to evaluate that in the first instance when neither the Ninth Circuit nor any other circuit has done so.”

Like the other case argued on Monday morning (BLOM Bank SAL v. Honickman), the argument suggests a straight and simple path to a disposition, with not a whisper of disagreement. I’d look for a succinct opinion before the first of May.