Second Circuit Rules That FSIA Does Not Provide Execution Immunity to a Foreign Sovereign’s Extraterritorial Assets

On November 21, 2017, the Second Circuit Court of Appeals issued Peterson v. Islamic Republic of Iran, holding that the Foreign Sovereign Immunities Act (the “FSIA”) does not “by its terms provide execution immunity to a foreign sovereign’s extraterritorial assets.”

In deciding whether such assets can be recalled to the United States, the court provided a two-part test: first, a district court should determine whether it has personal jurisdiction over the third party holding the assets, and second, it should consider whether any relevant state law, federal law, or principle of international comity serves as a barrier to turnover. Peterson complicates the jurisdictional primacy of the FSIA and potentially introduces alternative legal sources of authority when executing on sovereign assets. Nevertheless, its practical effects remain somewhat uncertain: first, the opinion is potentially subject to further review, either by the Second Circuit en banc or the Supreme Court; and second, under the ruling, even recalled assets will not ultimately be subject to turnover if upon arrival in the United States—where the FSIA’s protections unquestionably apply—the FSIA would preclude their turnover or execution.