Foreign Sovereign Immunity: Second Circuit Issues New Ruling on Central Bank Immunity Under the Foreign Sovereign Immunities Act

Sullivan & Cromwell LLP - September 1, 2015

In an important sovereign immunity decision, the United States Court of Appeals for the Second Circuit ruled yesterday that plaintiffs seeking to establish that foreign central banks or other foreign government instrumentalities are alter egos of their parent government must meet a high standard.  They must show that the parent government controls the day-to-day operations of the central bank or other instrumentality or that, for example, the central bank’s commercial activities in the United States (such as the purchase of dollars) are not merely incidental to the alter-ego claims.  The Second Circuit emphasized that, “[g]iven New York’s role as a financial center, . . . weakening the immunity from suit or attachment traditionally enjoyed by the instrumentalities of foreign states” could lead to withdrawal of central bank reserves from the United States, to the detriment of the U.S. economy and the global financial system.  The Second Circuit reversed a decision by the United States District Court for the Southern District of New York denying a motion to dismiss a complaint seeking a declaratory judgment that the Central Bank of Argentina (known by its initials in Spanish as “BCRA”) is the alter ego of the Republic of Argentina, and is therefore liable for Argentina’s debts.  EM Ltd. v. Banco Central de la República Argentina, No. 13-3819-cv (2d Cir. Aug. 31, 2015).  Sullivan & Cromwell LLP represented BCRA in the case.