Republic of Argentina v. Weltover, Inc.
504 U.S. 607 (1992)
Argentina was having some
money problems and so issued some bonds (called Bonods).
The Bonods said that
Argentina would pay their value, plus interest at a specified date, and
that bondholders could ask for the payment to be made in New York,
Frankfurt, Zurich, or London.
The bonds came due, and some
of the bondholders asked for their money to be delivered to New York.
Unfortunately, Argentina was still having money problems and couldn't pay
the bonds on time.
extended the date the bonds were due, to give them more time to come up
with the money.
Some US bondholders (including
Weltover) sued in US court for their money.
Argentina argued that US
courts did not have jurisdiction because the bonds were covered by sovereign
Weltover argued that the
bonds were a commercial activity, and not a public act, and were
therefore not covered by sovereign immunity based on the Foreign Sovereign Immunities Act of 1976
(FSIA) (28 U.S.C. 1602).
FSIA says that foreign States can be sued in US
Courts for acts taken "in connection with a commercial
activity" that have "a direct effect in the US."
The Trial Court found that the
US had jurisdiction. Argentina appealed.
The Trial Court found that FSIA gave the US jurisdiction.
The US Supreme Court affirmed.
The US Supreme Court found
that the issuance of bonds was a commercial activity.
Basically, the Court found
that it was a commercial activity because Argentina had acted as a
private player within a market and not as a regulator of that market.
The nature of the activity (to make money) was
commercial even though the purpose of the activity was to support government functions.
The Court found that the
rescheduling of the bonds had a direct effect on the US because they had
designated New York as a place for receiving payments.