When foreign states engage in commercial transactions in the United States, either themselves or through directly owned entities, they are subject to the limitations on their sovereign immunity set out in the Foreign Sovereign Immunities Act (FSIA), 28 USC 1601 et seq. Among other things, that act denies immunity from lawsuits to a foreign state to the extent that it engages in commercial activity in the United States. The Supreme Court recently rejected, by denying certiorari in Odhiambo v. Republic of Kenya (14-1206, cert. denied June 27, 2016), the opportunity to clarify how extensive that activity has to have been for immunity to be denied to a foreign state. We discuss below how the courts have dealt with what is the most frequently invoked of the commercial activity exceptions and how they have established a higher hurdle for a plaintiff under the FSIA than under the due process “minimum contacts” standard.

This exception to sovereign immunity under the FSIA is embodied in the first clause of 28 USC §1605(a)(2), which permits an action against a foreign state that is “based upon a commercial activity carried on in the United States by the foreign state.” Under a separate provision of the FSIA, 28 USC §1603(d), such commercial activity is defined as “either a regular course of commercial conduct or a particular commercial transaction or act” and, under §1603(a), as “commercial activity…having substantial contact with the United States” (emphasis added).

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