By Louis M. Solomon
First Investment Corp of the
Marshall Islands v. Fujian Mawei Shipbuilding, Ltd. et al., Civil Action No. 09-3663 (E.D. La. June 2011) [enhanced version available to lexis.com subscribers ], addresses the interesting international practice question
under what circumstances may a non-sovereign assert a sovereign immunity
defense. In this case, the international litigation issues are even more
deserving of consideration, since the sovereign had defaulted.
The Fujian Respondents were
non-sovereign entities. The People's Republic of China is also a
defendant/respondent. Earlier in the case the Court had confirmed a final
arbitral award against the Fujian Respondents and China. Default judgments had
been entered against all Defendant-Respondents, and the parties agreed to set
aside the default of the Fujian Respondents. China did not appear, and the
question was whether the Fujian Respondents could assert the sovereign immunity
defense that China would or might have to confirmation or enforcement of the
The Court held that, typically,
parties "other than a foreign sovereign ordinarily lack standing to raise the
defense of sovereign immunity" (quoting Aquamar S.A. v. Del Monte Fresh
Produce N.A., 179 F.3d 1279 (11th Cir. 1999) [enhanced version ]). Where, however, the court's jurisdiction rests on the
presence of the sovereign, the court "may address the issue independently".
In this case, the Court had federal
question jurisdiction under the Federal Arbitration Act since the
Plaintiff-Petitioner was seeking to enforce an non-U.S. arbitral award under 9
U.S.C. § 203. That would ordinarily mean that the Fujian Respondents could not
raise China's sovereign immunity defense. However, reasoned the Court, in the
case of a sovereign, a default judgment could not be entered on the same basis
as a court could enter a default judgment against a non-sovereign entity; among
other things, 28 U.S.C. § 1608(e) provides that a default judgment cannot be
entered against a non-U.S. sovereign "unless the claimant establishes his claim
or right to relief by evidence satisfactory to the court". It is this provision
that we have observed several times as requiring the court to hold independent
evidentiary proceedings and make findings of fact and conclusions of law (we
have posted several times on such independent evidentiary proceedings being undertaken by the
District of Columbia District Courts before entering defaults against non-U.S.
Accordingly, since the Fujian
Respondents had expressed their intent to challenge the validity of the
arbitration award itself, the Court found that a default against China was
inappropriate and that any default judgment proceeding would have to done in
accordance with 28 U.S.C. § 1608(e).
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