Argentina v. Weltover, Inc.
Citation and Court
504 U.S. 607 (1992), Supreme Court of the United States
Facts
Argentina issued bonds (Bonods) as part of a debt-rescheduling program and later unilaterally extended the maturity dates. Weltover and other bondholders, who had designated New York banks as payment sites, sued Argentina in U.S. federal court alleging breach of contract.
Issue
Whether Argentina’s issuance of bonds and subsequent default constituted “commercial activity” with a “direct effect” in the United States under the Foreign Sovereign Immunities Act, thereby stripping Argentina of sovereign immunity.
Holding
Argentina’s issuance of and default on the bonds was commercial activity, and the direct effect in the United States — nonpayment at New York banks — satisfied the FSIA’s commercial activity exception, so Argentina was not immune from suit.
Rule / Doctrine
Under the FSIA’s commercial activity exception, a foreign state is not immune when it acts as a private actor would in the marketplace (commercial activity), and the activity causes a “direct effect” in the United States. A legally significant act that occurs in the U.S. satisfies “direct effect” even if it is not substantial.
Significance
Weltover clarified what “direct effect” means under 28 U.S.C. § 1605(a)(2), holding that financial consequences felt in U.S. banks can suffice. The decision made sovereign debt litigation in U.S. courts more accessible to foreign creditors.