The Ansary case1 is novel because it seeks to use an FCN treaty as a hook to sue in a U.S. court, claiming that the violation of an FCN treaty creates jurisdiction under Section 1605(a)(3) of the Foreign Sovereign Immunities Act, or FSIA, which grants jurisdiction when "rights in property taken in violation of international law are in issue."2 If successful, this case could open up a new avenue for U.S. federal court litigation over alleged breaches of international law by foreign governments that harm investors' rights abroad.
Friendship, Commerce and Navigation Treaties
According to Andreas Paulus at the University of Göttingen, nations originally negotiated and signed FCN treaties "to facilitate commerce, navigation, and investment between the State parties" and to protect individuals and businesses of those states.4
U.S. participation in FCN treaties boomed after World War II, when the U.S. sought to protect U.S. investors abroad in a period of increased international cooperation, signified by the General Agreement on Tariffs and Trade and the creation of the United Nations.5 Today, the U.S. is party to over 40 FCN treaties, with the last FCN treaty negotiated by the U.S. enacted in 1968.6
In more recent decades, bilateral investment treaties and free trade agreements have
replaced FCN treaties as the primary method of investment protection by the U.S. and many other countries around the world.[7] Nevertheless, many FCN treaties are still in force today,
FCN treaties provide an extensive list of substantive rights and protections that are similar to modern bilateral investment treaties and free trade agreements, including:
- A foreign investor's right to compensation for expropriation of foreign property;
- A host states' fair and equitable treatment of investors;
- An investor's right to receive full or constant protection and security;
- An investor's protection from unreasonable or discriminatory treatment;
- A foreign Investor's right to be treated at least as favorably as domestic investors, or national treatment; and
- A foreign investor's right to be guaranteed treatment that is at least as favorable as
investors from other states — also known as most-favored-nation treatment.8
Compared to modern-day investment treaties, FCN treaties lack investor-state dispute settlement provisions.[9] Instead, the treaties often allow for state-to-state arbitration before the International Court of Justice.
However, in Ansary the plaintiff seeks to use the FCN treaty between the U.S. and the Netherlands as the basis for federal court jurisdiction to claim damages based on harm caused by a foreign government to a U.S. person who was investing abroad.
Ansary
Nina Ansary, a U.S. citizen, brought suit in the D.C. district court against the Central Bank of Curaçao and St. Maarten, alleging harms to her investments in Curaçao in violation of the U.S.-Netherlands FCN treaty.
Ansary is the owner of a 15.9% stake in Parman International BV.
According to Ansary's complaint, in July 2018, the Central Bank of Curaçao and St. Maarten took emergency control over PIBV's insurance business "on grounds of non-compliance with regulatory requirements concerning PIBV's capital."9 The Central Bank announced its intention to restructure these activities, but after securing sufficient funds to do so, the Central Bank did not follow through and is instead holding on to shareholder assets.10
Ansary claims that the D.C. district court has jurisdiction under Section 1605(a)(3) of the FSIA, which grants jurisdiction when "rights in property taken in violation of international law are in issue."11
Ansary argues that because Curaçao and St. Maarten are part of the Kingdom of the Netherlands, the U.S.-Netherlands FCN treaty applies, and that Section 1605(a)(3) of FSIA applies because her property was allegedly taken in violation of the U.S.-Netherlands FCN treaty.12
Specifically, Ansary claims that the Central Bank violated the fair and equitable treatment, full protection and security, nonimpairment, national treatment, and most favored nation standards of the U.S.-Netherlands FCN treaty.13
In the complaint, she stresses that the Central Bank violated her legitimate expectations and that "PIBV and its subsidiaries are the only companies in the industry who have suffered ... discriminatory and harmful treatment, and no similarly situated domestic companies have been subject to seizure of their companies or assets."14
These claims are similar to the types of claims frequently levied by investors in investor-state disputes under bilateral investment treaties or free trade agreements.
Ansary is hoping to find relief in the U.S. court system, assessing her losses at a minimum of $110 million.15
FCN Treaties and Federal Court Jurisdiction
Ansary's case is novel, but not entirely unprecedented. In McKesson Corp. v. Islamic Republic of Iran, a U.S. investor filed suit in the D.C. district court, claiming that the government of Iran had expropriated its interest in an Iranian dairy corporation.16
McKesson argued that the commercial-activities exception in FSIA Section 1605(a)(2) provided a cause of action under customary international law.17
McKesson also argued that Iran was liable for expropriation under the 1955 Treaty of Amity, Economic Relations and Consular Rights Between the United States of America and Iran — not an FCN treaty, but a similar agreement with nondiscrimination, fair and equitable treatment, full protection and security, and most favored nation provisions.18
In its 2012 McKesson decision, the U.S. Court of Appeals for the District of Columbia Circuit held that the FSIA did not provide a cause of action under customary international law, but the U.S.-Iran Treaty of Amity, as construed under Iranian law, provided McKesson with a private right of action against Iran in U.S. court.
The opinion cited the language in the Treaty of Amity that granted parties "access to the courts ... within the territories of the other High Contacting Party."19 The D.C. Circuit interpreted this clause as allowing the parties to choose where they brought their claims and where jurisdiction existed, rather than mandating use of a particular court.20
Therefore, because Iranian law allowed for a cause of action under the Treaty of Amity, the D.C. Circuit granted the plaintiff in McKesson access to U.S. courts.21 The U.S.-Iran Treaty of Amity contains substantive protections similar to those in the U.S.-Netherlands FCN treaty, which are frequently also found in other bilateral investment treaties and free trade agreements.
In a 2021 decision in The James Madison Foundation for the Promotion and Protection of the U.S. Constitution v. U.S. Government, in contrast, the U.S. District Court for the Northern District of California held that the Treaty of Amity did not create federal court jurisdiction.22
In that case, it was alleged that the U.S. government's policy and engagement with Iran violated their rights. The plaintiffs' claims in part relied on sanctions imposed under the Treaty of Amity.
The Northern District of California concluded that the Treaty of Amity did not create a private right of action under either Iranian or U.S. law based on the facts of that case. The court distinguished McKesson by first acknowledging that the Treaty of Amity was no longer in effect,23 and second noting that McKesson relied on an expropriation claim that created a private right of action under Iranian law and allowed access to U.S. courts.24
Ansary and U.S. Investors Abroad
The Ansary case is still in its early stages, and the outcome remains uncertain. However, Ansary's suit — and earlier litigation in McKesson — demonstrate that plaintiffs may seek to establish federal court jurisdiction through an FCN treaty.
If the court rules in Ansary's favor and holds that the violation of a FCN treaty can create jurisdiction in a U.S. federal court, U.S. investors in foreign markets may be able to enforce their rights under FCN treaties in U.S. courts against foreign governments and government-owned entities.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of their employer, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
References
1 Compl., Ansary v. Central Bank of Curaçao & St. Maarten, 1:23-cv-00134 (D.D.C. Jan. 17, 2023).
2 The Foreign Sovereign Immunities Act, 28 U.S.C. § 1605(a)(3).
3 Andreas Paulus, Treaties of Friendship, Commerce and Navigation, Oxford Pub. Int'l L., https://opil.ouplaw.com/display/10.1093/law:epil/9780199231690/law-9780199231690-e1482
4 John F. Coyle, The Treaty of Friendship, Commerce and Navigation in the Modern Era, 51 Colum. J. Transnat'l L. 302, 304, 308 (2012).
5 Coyle, supra note 5, at 329 ("The U.S. is currently a party to FCN treaties with Argentina, Austria, Belgium, Bolivia, Bosnia and Herzegovina, Brunei, Colombia, Costa Rica, Croatia, Denmark, Estonia, Ethiopia, Finland, France, Germany, Greece, Honduras, Iran, Ireland, Israel, Italy, Japan, Korea, Kosovo, Latvia, Liberia, Luxembourg, Macedonia, Montenegro, the Netherlands, Norway, Oman, Pakistan, Paraguay, Serbia, Slovenia, Spain, Suriname, Switzerland, Taiwan, Thailand, Togo and the United Kingdom. See 22 U.S.C. § 503 (2006) (giving formal legislative citations for many of the treaties, some of which are no longer in force)").
6 Id. Trade and Investment Framework Agreements (TIFAs) are another type of treaty the U.S. has entered into "to meet and discuss issues of mutual interest with the objective of" improving "opportunities for trade and investment" with other nations. See Trade & Investment Framework, Off. U.S. Trade Representative, https://ustr.gov/trade-agreements/trade-investment-framework-agreements
7 John F. Coyle & Jason W. Yackee, Reviving the Treaty of Friendship: Enforcing International Investment Law in U.S. Courts, 54 Arizona State L.J. 61, 67-68 (2017).
8 Id. at 64; Wolfgang Alschner, Americanization of the BIT Universe: The Influence of Friendship, Commerce and Navigation Treaties on Modern Investment Treaty Law, 5 Goettingen J. of Int'l L. 455, 463 (2013).
9 See Ansary Compl. at 2; Damien Charlotin, Central Bank of Curaçao and St. Maarten in Sued in U.S. Courts, Under USA-Netherlands Treaty of Friendship and Commerce, Inv. Arb. Rep. (Jan. 18, 2023).
10 See Ansary Compl. at 2; Damien Charlotin, Central Bank of Curaçao and St. Maarten in Sued in U.S. Courts, Under USA-Netherlands Treaty of Friendship and Commerce, Inv. Arb. Rep. (Jan. 18, 2023), https://www.iareporter.com/articles/central-bank-of-curacao-and-sint-maarten-are-sued-in-us-courts-under-usa-netherlands-treaty-of-friendship-and-commerce/
11 28 U.S.C. § 1605(a)(3).
12 Treaty of Friendship, Commerce and Navigation between the Kingdom of the Netherlands and the U.S. of America (1956), available at: https://www.navigator.nl/document/id3da08d740be947700756708dc82d99e5/treaty-of-friendship-commerce-and-navigation-between-the-kingdom-of-the-netherlands-and-the-united-states-of-america-article-xxii-05-12-1957-tot-?ctx=59b4c93afba0f4fb3dd2e1e653138e92
13 Treaty of Friendship, Commerce and Navigation between the U.S. of America and the Kingdom of the Netherlands, Dec. 4, 1957; Charlotin, supra note 10.
14 Ansary Compl. at 54.
15 Charlotin, supra note 10.
16 McKesson Corp. v. Islamic Republic of Iran, 672 F.3d 1066 (D.C. Cir. 2012). See also McKesson Corp. v. Islamic Republic of Iran, No. CIV.A. 82-220 TAF, 1997 WL 361177, at *1 (D.D.C. June 23, 1997), rev'd in part sub nom. McKesson HBOC, Inc. v. Islamic Republic of Iran, 271 F.3d 1101 (D.C. Cir. 2001), vacated in part,320 F.3d 280 (D.C. Cir. 2003).
17 28 U.S.C. § 1605(a)(2).
18 Treaty of Amity, Economic Relations, and Consular Rights Between the U.S. of America and Iran (1957), available at https://www.state.gov/wp-content/uploads/2019/05/Treaty-of-Amity-Economic-Relations-and-Consular-Rights-between-the-United-States-of-America-and-Iran-Aug.-15-1955.pdf
19 McKesson, 672 F.3d at 1112; Treaty of Amity, supra note 18.
20 McKesson, 672 F.3d at 1112.
21 Id. at 1080.
22 James Madison Found. for Promotion & Prot. of U.S. Const. v. U.S. Gov't, No. 19-CV-06323-JSW, 2021 WL 1726890, at *3 (N.D. Cal. Jan. 29, 2021).
23 Edward Wong & David E. Sanger, U.S. Withdraws From 1955 Treaty Normalizing Relations With Iran, Washington Post (Oct. 3, 2018), https://www.nytimes.com/2018/10/03/world/middleeast/us-withdraws-treaty-iran.html
24 Id.
