Vanderbilt Journal of Transnational Law

First Page



The Foreign Sovereign Immunities Act of 1976 (FSIA) grants an "agency or instrumentality" of a foreign state substantially the same immunities that are provided to the state itself under the Act. An agency or instrumentality of a foreign state is defined in section 1603(b) of the FSIA. Section 1603(b) lists the following three criteria that must be met by an entity in order to qualify as an agency or instrumentality for sovereign immunity purposes: (1) the entity must be a legally independent person under the laws of the foreign state in which it was created; (2) the entity must be either an organ of the foreign state or primarily owned by the foreign state; (3) the entity cannot be a citizen of the United States or a third country. Prior to the enactment of the FSIA, the law concerning whether an agency or instrumentality would be treated as a foreign state for purposes of granting or withholding sovereign immunity was unsettled. Congress resolved this uncertainty by providing the agency or instrumentality with the privilege to invoke the immunity provisions of the FSIA. In solving this problem, however, Congress created another issue for the courts. In order to determine if the entity is an agency or instrumentality of the foreign state, courts now must determine whether the foreign state has a majority ownership interest in the organization or whether the entity is an organ of the foreign state. This problem becomes particularly confusing when the courts have to apply the 1603(b)(2) ownership requirement to socialist countries. Difficulty arises because public ownership is the foundation of most socialist economic systems, whereas capitalistic systems are based upon private ownership.