Foreign Sovereign Immunities Act (FSIA case)

Federal District Court Opinions

IDAS RESOURCES N.V. v. EMPRESA NACIONAL DE DIAMANTES, (D.C. 10-26-2006) IDAS RESOURCES N.V., CURACAO; PABECO B.V., ADASTRA MINERALS, INC. f/k/a AMERICA MINERAL FIELDS, INC. Plaintiffs, v. EMPRESA NACIONAL DE DIAMANTES DE ANGOLA E.P.; NOFAR MINING B.V. Defendants. Civil Action No. 06-00570 (ESH). United States District Court, D. Columbia. October 26, 2006

MEMORANDUM OPINION

ELLEN HUVELLE, District Judge

The dispute in this case arises from contracts to conduct
diamond prospecting and mining in Angola. All of the parties
are foreign companies, and one of the defendants, Empresa
Nacional de Diamantes de Angola E.P. (“ENDIAMA”), is owned
and controlled by the Angolan government. Given the
citizenship of the parties and ENDIAMA’s status as an
instrumentality of the Angolan government, the only
possible basis for this Court’s jurisdiction is the Foreign
Sovereign Immunities Act of 1976 (“FSIA”), 28 U.S.C.
§§ 1602 et seq. Both defendants contend that
neither FSIA’s “expropriation exception” nor its
“commercial activity exception” defeats ENDIAMA’s sovereign
immunity. Defendant NOFAR Mining B.V. (“NOFAR”) further
contends that the Court lacks diversity jurisdiction
pursuant to 28 U.S.C. § 1332(a) and personal
jurisdiction pursuant to the District of Columbia’s
long-arm statute. For the reasons explained herein, the
Court will grant defendants’ motions to dismiss, will deny
plaintiffs’ request to conduct jurisdictional discovery,
and will dismiss the above-captioned case without prejudice
for Page 2 lack of subject matter jurisdiction.

BACKGROUND

Plaintiff IDAS is a Dutch Antilles company with its
principal place of business in the United Kingdom. (Cmpl.
§ 1.) IDAS is a wholly owned subsidiary of plaintiff
Adestra Minerals, Inc. (“AMI”), a Canadian company with its
principal place of business in the United Kingdom. (Id.
§§ 3, 14.) Prior to AMI’s acquisition of
IDAS, plaintiff Pabeco B.V. (“Pabeco”) was a shareholder in
IDAS. (Id. § 12 & n. 2.) Thereafter, Pabeco
“retained a net profits interest” in IDAS. (Id. §
14.)

According to the complaint, in 1995 IDAS procured two
licenses for diamond prospecting and mining in the Luanda
Norte and Malange regions of Angola. (Id. § 10.)
IDAS then contracted with ENDIAMA and a third party, Twins
Limited (“Twins”), to form a joint venture to develop the
licensed areas. (Id.) It is undisputed that ENDIAMA has its
principal place of business in Luanda, Angola, and that
ENDIAMA is owned and controlled by the Angolan government.
(See id. § 4; Def. ENDAMA’s P. & A. at 3.) The
parties also agree that Twins is a company formed in the
Cook Islands. (See, e.g., Pls.’ Resp. to Def. NOFAR’s Mot.
to Dismiss [“Pls.’ NOFAR Resp.”] at 5; Def. ENDIAMA’s Reply
at 4 n. 3.) Plaintiffs allege that Twins has its principal
place of business and “nerve center of operations” in the
District of Columbia, and that each of the company’s two
“principals” maintains a residence or part-time residence
there. (E.g., Pls.’ NOFAR Resp. at 5.)

In 1999, IDAS, ENDIAMA, and Twins agreed to terminate
their original joint venture agreement. (Cmpl. §
17.) They did so because a change in Angolan law set new
limits upon the total area of diamond concessions that any
single company could hold. (Id.) Under the new law, Page
3 IDAS’s original concessions were too large. (See id.
§§ 17, 19.) In anticipation of receiving new,
smaller concessions from the Angolan government, IDAS and
ENDIAMA executed a “Memorandum of Understanding” (“MOU”)
providing for a new joint venture among IDAS, ENDIAMA, and
Twins. (Id. § 18.)

After Angola’s Government Council of Ministers officially
granted IDAS and ENDIAMA new concessions, the joint
venturers executed two contracts formalizing the structure
of their enterprise. (Id. §§ 18, 19.) In
August 2002, they executed a “Heads of Agreement” that
detailed relative shareholdings and a plan for reimbursing
shareholder loans. (Id. § 21.) In December 2002, the
joint venturers executed an agreement in which they
“detailed the composition of the Board of Directors, the
management structure of the joint venture company, the
minimum investment to be made by IDAS, and details
governing the payment of a signing bonus to ENDIAMA and the
repayment of shareholder loans to IDAS.” (Id. § 22.)
The agreement allegedly specified that IDAS would own 51
percent of the company until all shareholder loans were
repaid, while ENDIAMA would own 38 percent and Twins 11
percent. (Id.) Consistent with this ownership structure,
IDAS would choose three of the five board members. (Id.)
After capital recoupment, IDAS’s ownership would fall to 49
percent, Twins would own a 13 percent share, ENDIAMA’s
share would remain unchanged, and IDAS would maintain
three representatives on the board of directors. (Id.)

Plaintiffs allege that, soon after these agreements were
reached, ENDIAMA began negotiating for changes to the joint
venture’s structure. (Id. §§ 23-24.) When
ENDIAMA asked to revise some of the terms of the Heads of
Agreement, IDAS agreed. (Id. § 23.) IDAS did not
agree, however, when ENDIAMA proposed reducing IDAS’s
ownership from 51 to 43 percent Page 4 and limiting IDAS
to one representative on the board of directors. (Id.
§ 24.)

According to plaintiffs, IDAS learned in mid-2004 that
ENDIAMA had been negotiating for several months with NOFAR,
a Netherlands company, to replace IDAS as ENDIAMA’s joint
venture partner. (Id. § 25.) On May 18, 2004,
ENDIAMA, NOFAR, and Twins executed a contract to explore
and exploit most of the concession area that ENDIAMA and
Twins had previously agreed to explore and exploit with
IDAS. (Id. § 25; Pls.’ Reply to ENDIAMA’s Resp. to
Pls.’ Mot. for Leave to Supp. [“Pls.’ Supp. Reply”] Ex. 1 at
0, 30.) In July 2004, ENDIAMA informed IDAS that ENDIAMA
would no longer honor its contractual obligations under the
joint venture agreements with IDAS. (Cmpl. § 26.)

As alleged in the complaint, plaintiffs claim that
ENDIAMA’s actions “have caused a direct effect in the
United States, including a loss of income to the principals
in Twins” and “losses to the United States shareholders of
AMI.” (Id. § 27.) Plaintiffs seek to hold ENDIAMA
liable for breach of contract, breach of duty of good
faith, fraudulent misrepresentation, and discrimination
between investors and cancellation of licenses in violation
of Angolan law, and they accuse NOFAR of tortious
interference with contractual relations. Plaintiffs request
compensatory and punitive damages in excess of $529
million. (Id. §§ 60-63.)

ANALYSIS

I. Legal Standard Governing Defendants’ Motions to Dismiss

When defendants file motions to dismiss pursuant to
Federal Rule of Civil Procedure 12(b)(1), plaintiffs bear
the burden of establishing subject matter jurisdiction. See
Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). A
court may dismiss a complaint for lack of subject matter
jurisdiction only if “it appears beyond doubt that the
plaintiff can prove no set of Page 5 facts in support of
his claim which would entitle him to relief.” Richardson v.
United States, 193 F.3d 545, 549 (D.C. Cir. 1999) (quoting
Caribbean Broad. Sys., Ltd. v. Cable & Wireless PLC, 148
F.3d 1080, 1086 (D.C. Cir. 1998)). In considering the
sufficiency of a plaintiff’s allegations for this purpose,
a court may consider materials outside the pleadings.
Herbert v. Nat’l Acad. of Scis., 974 F.2d 192, 197 (D.C.
Cir. 1992).

II. This Court Lacks Subject Matter Jurisdiction over
Plaintiffs’ Claims against ENDIAMA

A. Jurisdiction under FSIA

FSIA “establishes a comprehensive framework for
determining whether a court in this country, state or
federal, may exercise jurisdiction over a foreign state.”
Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 610
(1992). FSIA permits suits in U.S. courts against foreign
states (or their political subdivisions, agencies, or
instrumentalities) even when all plaintiffs are themselves
foreign citizens. See Verlinden B.V. v. Cent. Bank of
Nigeria, 461 U.S. 480, 490-91 (1983) (explaining that, if
FSIA’s substantive standards are satisfied, an action “may
be brought in federal court regardless of the citizenship
of the plaintiff”). Foreign states are immune from suit in
U.S. courts, however, “unless one of several statutorily
defined exceptions [to sovereign immunity] applies.”
Weltover, 504 U.S. at 610. Thus, unless one of FSIA’s
exceptions applies, claims against foreign states are
beyond a U.S. court’s subject matter jurisdiction. Id.

Foreign defendants challenging a U.S. court’s subject
matter jurisdiction bear the ultimate burden of proving
immunity. E.g., Global Index., Inc. v. MKAPA, 290 F. Supp.
2d 108, 111 (D.D.C. 2003). When, as here, a defendant
“challenges . . . the legal sufficiency of the plaintiff’s
jurisdictional allegations, then the . . . court should
take the plaintiff’s factual allegations as true Page 6
and determine whether they bring the case within any of the
exceptions to immunity invoked by the plaintiff.” Id.
(quoting Phoenix Consulting, Inc. v. Republic of Angola,
216 F.3d 36, 40 (D.C. Cir. 2000)).

B. The “Expropriation Exception”

Plaintiffs argue that their allegations meet the
requirements of FSIA’s expropriation exception:

(i) [that] rights in property are at issue; (ii) [that]
those rights were taken in violation of international law;
and (iii) [that] the property . . . is [either] present in
the United States in connection with a commercial activity
carried on in the United States by the foreign state, or .
. . owned or operated by an agency of the foreign state
engaged in a commercial activity in the United States.

Peterson v. Royal Kingdom of Saudi Arabia, 332 F. Supp. 2d
189, 196 (D.D.C. 2004); see 28 U.S.C. § 1605(a)(3)
(2006). Defendants argue that plaintiffs have failed to
meet the first and third of these requirements, and the
Court agrees. Moreover, it is premature for plaintiffs to
allege a taking “in violation of international law.”

1. Rights in Property

Section 1605(a)(3) does not define “rights in property.”
Brewer v. Socialist People’s Republic of Iraq, 890 F.2d 97,
100 (8th Cir. 1989). This Court and others, however, have
repeatedly construed the term to include only “tangible
rights,” not “intangible rights” such as contract rights.
See, e.g., id. at 101 (“Some courts have interpreted
[§ 1605(a)(3)] to exclude claims involving
intangible property, such as contracts.”); Nemariam v. Fed.
Democratic Republic of Ethiopia, 400 F. Supp. 2d 76, 82-83
(D.D.C. 2005) (concluding that FSIA’s expropriation
exception “is not implicated when intangible property is
the object of the dispute”).

Here, plaintiffs have repeatedly underscored ENDIAMA’s
alleged failure to “honor its Page 7 contractual
obligations.” (Cmpl. §§ 26, 30-32; see id.
§ 47 (“ENDIAMA . . . discriminated against IDAS by
terminating its contractual relationship with IDAS. . .
.”).) Such a breach of contract cannot satisfy the
expropriation exception’s “rights in property” requirement.
See, e.g., Peterson, 332 F. Supp. 2d at 197 (“[T]angible
property is `physical’ and does not include contract rights
or the right to receive payments.”).

In the face of such well-established law regarding
intangible rights, plaintiffs have changed their approach
and, in their last of three memoranda of law,[fn1] they
argue for the first time that ENDIAMA deprived them of
tangible rights in property by appropriating IDAS’s
“licenses” to conduct diamond prospecting and mining.[fn2]
(See Pls.’ Supp. Reply at 4.) The crux of plaintiffs’
argument is that, because IDAS’s licenses concerned the use
of parcels of land, which are tangible, the licenses
themselves must be tangible. (See id.) But the two cases
plaintiffs cite in support of their argument are inapposite.
See Peterson, 332 F. Supp. 2d at 196-97 (explaining the
rule that rights in property must be tangible and
concluding that the plaintiff’s expectation interest in
repayment for contributions to a retirement-benefits fund
in Saudi Arabia was not a tangible right); Canadian
Overseas Ores Ltd. v. Compania de Acero del Pacifico S.A.,
Page 8 528 F. Supp. 1337, 1346-47 (S.D.N.Y. 1982)
(explaining that the expropriation exception reaches only
tangible property, and that because the plaintiff’s
“complaint rest[ed] on a breach of contract claim . . . its
claim [was] not within the purview of [the expropriation
exception]”), aff’d, 727 F.2d 274 (2d Cir. 1984).

The Court is aware of no case in any jurisdiction that
addresses whether a license constitutes tangible property
for purposes of FSIA’s expropriation exception.[fn3] In
analogous contexts, however, licenses are regularly treated
as intangible property. See, e.g., Members of Peanut Quota
Holders Ass’n, Inc. v. United States, 421 F.3d 1323, 1330
(Fed. Cir. 2005) (describing, as part of a Fifth Amendment
analysis, “government issued permits and licences” such as
grazing and fishing permits as “intangible property”); 73
C.J.S. § 15 (2004) (classifying property rights in
the practice of a profession as “intangible”); see also
Atl. Tele-Network, Inc. v. Inter-Am. Dev. Bank, 251 F.
Supp. 2d 126, 128 (D.D.C. 2003) (describing the plaintiff’s
“exclusive license from the government of Guyana to operate
[a telecommunications] system” as a “contractual right”).
The definition of “license” supports such treatment. See
Black’s Law Dictionary 938 (8th ed. 2004) (defining a
license as “a permission” or “an authority” to do an
otherwise unlawful act on the licensor’s land (emphasis
added)).

Accordingly, the Court rejects plaintiffs’ belated attempt
to recast their allegation that Page 9 ENDIAMA did not
honor its contractual obligations into a claim that ENDIAMA
deprived IDAS of tangible rights. Even if ENDIAMA did
deprive IDAS of its licenses to conduct diamond prospecting
and mining, ENDIAMA did not take “rights in property” within
the meaning of § 1605(a)(3).

2. Takings in Violation of International Law

Also, it is premature for the Court to consider whether
ENDIAMA took IDAS’s licenses in violation of international
law. “[A] claimant cannot complain that a `taking’ or other
economic injury has not been fairly compensated, and hence
violates international law[,] unless the claimant has first
pursued and exhausted domestic remedies in the foreign
state that is alleged to have caused the injury.” Millicom
Int’l Cellular, S.A. v. Republic of Costa Rica, 995 F.
Supp. 14, 23 (D.D.C. 1998). Here, plaintiffs allege they
“were in no way compensated for ENDIAMA’s taking of their
licenses and concessions,” without alleging they have ever
pursued remedies in Angola.[fn4] (Pls.’ Resp. to Def.
ENDIAMA’s Mot. to Dismiss [“Pls.’ ENDIAMA Resp.”] at 17.)
For this additional reason, FSIA’s expropriation exception
does not confer subject matter jurisdiction over the claims
against ENDIAMA.

3. Commercial Activity in the United States

Finally, plaintiffs cannot satisfy the third prong of the
expropriation exception because they have not alleged facts
sufficient to show ENDIAMA “is engaged in a commercial
activity in Page 10 the United States.” 28 U.S.C.
§ 1605(a)(3).[fn5]

To support their contention that ENDIAMA is engaged in at
least one commercial activity in the United States,
plaintiffs allege that “ENDIAMA has a long history of
commercial dealings with U.S. based entities.” (Pls.’
ENDIAMA Resp. at 18.) For example, plaintiffs emphasize
that ENDIAMA has entered into multiple contracts with Twins
— a company that plaintiffs characterize as “U.S.
based” despite its incorporation in the Cook Islands. (Def.
ENDIAMA’s P. & A. at 4 n. 3.) Similarly, plaintiffs
highlight two agreements for the purchase, export, and
marketing of rough diamonds that ENDIAMA (or its
subsidiary) formed with a U.S. corporation — Lazare
Kaplan International, Inc. (“LKI”). (Pls.’ ENDIAMA Resp. at
18-19.) One of the LKI agreements spanned five years, and
the other allegedly “secured the Angolan export of [rough
diamonds worth] over $110 million dollars.” (Id. at 19.)

As ENDIAMA correctly observes, however, none of
plaintiffs’ pleadings or supporting exhibits alleges that
ENDIAMA ever performed any act within the United
States.[fn6] (Def. ENDIAMA’s Reply at 11.) For example,
plaintiffs do not allege that any representative of ENDIAMA
ever transacted business in the United States with Twins;
instead, plaintiffs have Page 11 furnished an affidavit in
which a former chief operating officer of AMI states that
on two occasions he and another employee of AMI traveled to
the District of Columbia to meet with Twins. (See Pls.’
ENDIAMA Resp. Ex. 8 [“Pryor Decl.”] § 10.)
Similarly, plaintiffs do not identify any actions ENDIAMA
took in the United States regarding the LKI contracts. The
documents plaintiffs have offered regarding these
agreements show, at most, that LKI has made efforts to
broaden “its purchasing capabilities throughout Africa,”
that it has procured “a license to purchase rough diamonds
from local Angolan miners and export such rough diamonds,”
and that it has five buying offices in Angola. (See Def.
ENDIAMA’s Reply at 11 (quoting from the LKI contracts).)

Thus, even accepting all of plaintiffs’ allegations as
true, this Court cannot exercise subject matter
jurisdiction over the claims against ENDIAMA based on
FSIA’s expropriation exception, because plaintiffs fail to
satisfy even one of the exception’s three requirements.

C. The “Commercial Activity Exception”

Plaintiffs also argue that this Court may exercise subject
matter jurisdiction over their claims against ENDIAMA
pursuant to FSIA’s commercial activity exception.
Specifically, plaintiffs invoke the third clause of 28
U.S.C. § 1605(a)(2), thus requiring the Court to
determine whether plaintiffs’ suit is “(1) `based . . .
upon an act outside the territory of the United States’;
(2) that was taken `in connection with a commercial
activity’ of [the defendant] outside this country; and (3)
that `cause[d] a direct effect in the United States.'”
Weltover, 504 U.S. at 611 (first and third alterations in
original) (quoting 28 U.S.C. § 1605(a)(2)). Because
defendants concede the first two requirements, the only
issue before the Court is whether ENDIAMA’s acts “cause[d]
a direct effect in the United States.” 28 U.S.C. §
1605(a)(2). Page 12

As the Supreme Court clarified in Weltover, “an effect is
`direct’ if it follows `as an immediate consequence of the
defendant’s . . . activity.'” 504 U.S. at 618 (alteration
in original) (quoting Weltover, Inc. v. Republic of
Argentina, 941 F.2d 145, 152 (2d Cir. 1991)). Although the
effect need not be substantial or foreseeable, it must be
more than “purely trivial.” Id.

Here, plaintiffs claim a direct effect based on two
allegations. First, they allege that ENDIAMA’s acts caused a
loss of income to Twins and its “principals” —
Robert Cabelly and Antonio dos Santos Franca (known as
General Ndalu). (See Cmpl. § 27; Pls.’ Supp. Reply
at 2.) Second, they allege that ENDIAMA’s acts have caused
“losses to the United States shareholders of AMI.” (Cmpl.
§ 27.) Even accepting these allegations as true,
plaintiffs have failed to establish that ENDIAMA’s acts had
any direct effect in the United States.

1. Losses to Nonplaintiffs

Plaintiffs adopt a novel approach to proving that
ENDIAMA’s acts caused a direct effect in the United States.
Rather than focusing on any losses to themselves,
plaintiffs attempt to satisfy the direct effect requirement
by alleging losses to nonparties — Twins and AMI’s
U.S. shareholders. Plaintiffs’ reliance on alleged losses
to Twins is particularly curious, given that plaintiffs
themselves admit Twins is aligned with the defendants.[fn7]
(See Pls.’ Supp. Reply at 3 (“[I]f Twins [were] a proper
party, it would be as a co-defendant, not a plaintiff.”).)

ENDIAMA argues that allegations of losses to nonparties
cannot establish a direct effect. Page 13 (Def. ENDIAMA’s
P. & A. at 5.) At least one case in this district, TermoRio
S.A.E.S.P. v. Electrificadora del Atlantico S.A., 421 F.
Supp. 2d 87 (D.D.C. 2006), lends support to ENDIAMA’s
contention. In TermoRio, two plaintiffs (TermoRio and
LeaseCo) sued the Republic of Colombia and a corporation
owned by the Colombian government for breach of contract
and to enforce an arbitration award. Id. at 88-89. Seeking
to establish subject matter jurisdiction over their breach
of contract claim, the plaintiffs alleged that the
defendants’ acts had caused a loss to LeaseCo. Id. at 95.
In concluding that the plaintiffs had failed to establish
subject matter jurisdiction under the commercial activity
exception, the Court noted: “LeaseCo lacks standing and is
no longer a plaintiff in this proceeding, and accordingly
any proposed effect on LeaseCo is irrelevant.” Id.

Nonetheless, although there appears to be no case directly
on point, plaintiffs are correct that the plain language of
FSIA does not limit direct effects to effects suffered by
plaintiffs. (See Pls.’ Supp. Reply at 3.) At least the
Tenth Circuit has considered the possibility of finding a
direct effect based on losses to nonparties. See United
World Trade, Inc. v. Mangyshlakneft Oil Prod. Assoc., 33
F.3d 1232, 1236-38 (10th Cir. 1994) (rejecting the
plaintiff’s argument that lost commissions to a U.S. bank
resulting from the defendant’s breach of a contract that
required payments to the plaintiff in U.S. dollars
constituted a direct effect, not because the U.S. bank was
not a plaintiff, but because the money transfers on which
it would have earned commissions were not required under
the breached contract).

The Court, however, does not need to decide whether FSIA
could ever confer subject matter jurisdiction based on
alleged losses to nonparties, because it is clear for other
reasons that the losses alleged here were not direct
effects of acts by ENDIAMA. Page 14

2. Performance “Supposed to” Occur in the United States

Plaintiffs contend they have established a direct effect in
the United States because, in breaching the joint venture
agreement, ENDIAMA deprived Twins of payments that Twins
was supposed to receive in U.S. bank accounts. More
specifically, plaintiffs allege that Twins lost payments
for consulting services it would have provided, and related
expenses it would have incurred, to promote IDAS’s joint
venture.[fn8] (See Pls.’ ENDIAMA Resp. at 15.) Plaintiffs
do not allege that any of the agreements among ENDIAMA,
IDAS, and Twins expressly provided that Twins would receive
such payments in a U.S. bank account. Instead, plaintiffs
urge the Court to find a direct effect in the United States
based on allegations that IDAS made three payments to Twins
executive Cabelly into U.S. bank accounts that Cabelly had
designated in letters to IDAS or AMI.[fn9] (See Pryor Decl.
at §§ 8-9; Pls.’ ENDIAMA Resp. Ex. 7 at 1, 6
(directing AMI to transfer travel-expense reimbursements to
a First Union Bank account); id. at 2 (designating a
Nations Bank account number for payment of a consulting
fee); id. at 13-15; Pls.’ Supp. Reply at 2.)

a. Failure to Allege an Immediate Consequence of ENDIAMA’s
Activity

A direct effect must follow “as an immediate consequence
of the defendant’s [not the Page 15 plaintiff’s] . . .
activity.” Weltover, 504 U.S. at 618 (emphasis added)
(quoting Weltover, Inc. v. Republic of Argentina, 941 F.2d
145, 152 (2d Cir. 1991)); see Millicom, 995 F. Supp. at 22
(“A contract claim based upon a breach constitutes a
`direct effect’ if the foreign state breached obligations
that the foreign state itself was required to perform in
the United States.”). Here, plaintiffs nowhere allege that
ENDIAMA was obligated under the joint venture agreements to
make consulting and expense payments to Twins (let alone to
make such payments in the United States). IDAS’s own failure
to make payments cannot have been an immediate consequence
of ENDIAMA’s activity. See id.

Plaintiffs attempt to evade this obstacle by alleging, for
the first time in their supplemental response, that IDAS
made payments to Cabelly on behalf of both IDAS and
ENDIAMA. (See Pls.’ Mot. for Leave to Supp. [“Pls.’ Supp.
Resp.”] at 2 (“ENDIAMA ignores the fact that these payments
were made by IDAS on its own behalf and on behalf of
ENDIAMA because the parties agreed that IDAS would make
these payments for itself and ENDIAMA.”); see also Pls.’
Supp. Reply at 2 (“Twins was reimbursed for its expenses by
IDAS because IDAS was contractual[ly] obligated to carry
the interests of Twins and ENDIAMA, which was an obligation
imposed by ENDIAMA.”).)[fn10] This allegation does not,
however, cure plaintiffs’ Page 16 failure to allege that
“[ENDIAMA] breached obligations that [ENDIAMA] itself was
required to perform in the United States.” Millicom, 995 F.
Supp. at 22.

b. Failure to Allege a Consistent, Longstanding History of
Payment in the United States

Moreover, even assuming arguendo that plaintiffs’
allegations could be construed as allegations that ENDIAMA
breached its own performance obligations, the Court would
still find that IDAS’s payments to Cabelly’s accounts were
insufficient to establish a direct effect.

Prior to Weltover, the D.C. Circuit required plaintiffs
attempting to establish direct effects in the United States
based on nonpayments to U.S. bank accounts to allege the
existence of an express agreement to make payments to a
location within the United States. See, e.g., Zedan v.
Kingdom of Saudi Arabia, 849 F.2d 1151, 1514-15 (D.C. Cir.
1988) (rejecting the plaintiff’s theory that Saudi Arabia’s
failure to pay him for work performed in Saudi Arabia
constituted a direct effect because “[n]o allegation [was]
made that the [employment] contract . . . required that the
money be forwarded to a specific address in the United
States, or even to a particular city”). This requirement
was borne out of an understanding that, to be “direct”
within the Page 17 meaning of the commercial activity
exception, an “effect in the United States” needed to be
“substantial” and “foreseeable.” See id. at 1515 n. 2
(“[W]e think the terms of such a contract would, at the
very least, have to specify a particular location in the
United States, even perhaps the particular bank through
which payment was to be made, before the breach could be
said to cause a substantial, direct, and foreseeable effect
in the United States.”).

In post-Weltover cases, the D.C. Circuit, unlike other
circuits,[fn11] has not imposed a per se rule requiring
plaintiffs to allege an express agreement to make payments
in the United States. Global Index, 290 F. Supp. 2d at 113;
see, e.g., Goodman Holdings v. Rafidain Bank, 26 F.3d 1143,
1146-47 (D.C. Cir. 1994) (stopping short of endorsing such
a rule, but distinguishing Weltover on the ground that the
defendant in Weltover had expressly agreed to make payments
in New York if the plaintiffs so chose); see id. at 1147
(Wald, J., concurring) (“I write separately to emphasize
that, for an act to have a `direct effect’ in the United
States, there is no prerequisite that the United States be
contractually designated as the place of performance.”).
But see TermoRio, 421 F. Supp. 2d at 95-96 (“[T]he direct
effect test is interpreted to require a clause in a
contract mandating the fulfillment of contractual
obligations in the United States.”) (alteration in
original) (quoting Atl. Tele-Network, 251 F. Supp. 2d at
134 (emphasis omitted)); Atl. Tele-Network, Page 18 251
F. Supp. 2d at 134 (citing additional cases, including
Goodman Holdings, in support of an “express designation”
requirement). Instead, “the D.C. Circuit follows the same,
more general approach set forth in Weltover. There is no
direct effect unless payment was `supposed’ to have been
made in the United States.” Global Index, 290 F. Supp. 2d
at 113.

“By following the Weltover `supposed to’ approach, the
cases in this circuit have left open the possibility that a
court could find a `direct effect’ based upon a non-express
agreement to pay in the United States.” Id. at 114. “As a
factual matter, however, in almost every case, in this
circuit and others, involving the direct effect exception,
the existence or absence of an expressly designated place
of payment has been decisive.” Id. Therefore, absent an
expressly designated place of payment, the only possible
way of establishing a direct effect by nonpayment “that
courts of this circuit have even considered” is a
“consistent history of payment in the [United States].” Id.
at 114 n. 8 (emphasis added); see, e.g., Goodman Holdings,
26 F.3d at 1147 (Wald, J., concurring) (“Moreover, even
absent a contractual provision mandating the involvement of
U.S. banks, if the longstanding consistent customary
practice between [the defendant] and [the plaintiff] had
been for [the defendant] to pay [the plaintiff] from its
New York accounts, the breach of the letters of credit
might well have had a direct and immediate consequence in
the United States.” (emphasis added)); see Global Index,
290 F. Supp. 2d at 115; see also Croesus EMTR Master Fund
L.P. v. Federative Republic of Brazil, 212 F. Supp. 2d 30,
37 (D.D.C. 2002) (“[P]laintiffs are not entitled to
discovery on the issue of `direct effect,’ as plaintiffs
present no facts suggesting that Brazil has recently made
payments in the United States. . . .”).

Here, there is no allegation that ENDIAMA expressly agreed
that Twins should receive Page 19 payments in U.S. bank
accounts. Even interpreting plaintiffs’ pleadings
liberally, plaintiffs appear to contend that the three
payments IDAS made to U.S. bank accounts designated by
Cabelly constitute evidence of ENDIAMA’s implicit (as
opposed to contractual) agreement that Twins would receive
payments in the United States. (See Pls.’ Supp. Resp. at 2
(“ENDIAMA ignores the fact that these payments were made by
IDAS on its own behalf and on behalf of ENDIAMA because the
parties agreed that IDAS would make payments for itself and
ENDIAMA.”).) On the facts presented by plaintiffs, however,
even if the three payments IDAS made to Twins could somehow
be ascribed to ENDIAMA, the Court is unwilling “to be the
first to find direct effects based on an implied or
constructive agreement” to make payments in the United
States. Global Index, 290 F. Supp. at 114-15.

According to plaintiffs, IDAS made at most three payments
to U.S. bank accounts over the nine-year duration of the
joint venture relationship involving IDAS, ENDIAMA, and
Twins. (See Cmpl. §§ 10, 26 (alleging that
the original joint venture was formed in 1995, and that
ENDIAMA repudiated the joint venture agreements in July
2004).) The time between the first payment and the second
two payments was more than five years. (See Pls.’ ENDIAMA
Resp. Ex. 7 at 1, 6 (showing payments in December and
November 2003); id. Ex. 6 at 1 (acknowledging payment of
funds to Cabelly in 1998).) Not only do plaintiffs fail to
allege the payments were made pursuant to a regular
schedule, but plaintiffs have submitted evidence that
clearly shows Cabelly and IDAS arranged the payments on an
ad hoc basis. (See id. Ex. 7 at 1; id. Ex. 5 at 1-2.) Thus,
although it may theoretically be possible to establish a
direct effect in the United States by alleging a
consistent, longstanding history of payments to U.S. bank
accounts, plaintiffs have alleged no such history here.
Page 20

In sum, plaintiffs have failed to satisfy the direct
effect requirement on the theory that ENDIAMA was supposed
to perform contractual obligations in the United States.

3. Losses to a U.S. Company or U.S. Shareholders

In the alternative, plaintiffs claim to have established a
direct effect in the United States by alleging losses to a
U.S. entity (Twins) and individual U.S. citizens (the AMI
shareholders). (Pls.’ ENDIAMA Resp. at 14-15.)

Several opinions from this district explain that
allegations of financial loss to a U.S. person or company
cannot, taken alone, establish “a direct effect in the
United States” within the meaning of 28 U.S.C. §
1605(a)(2). See, e.g., Global Index, 290 F. Supp. 2d at 115
(“The fact that a U.S. citizen or entity suffers a loss
does not suffice to prove a direct effect in the United
States.”); BPA Int’l, Inc. v. Kingdom of Sweden, 281 F.
Supp. 2d 73, 81 (D.D.C. 2003) (“A financial loss in the
United States, when all the acts giving rise to the claim
occurred outside this country, is insufficient to show the
`direct effect in the United States that FSIA requires.”);
Croesus, 212 F. Supp. 2d at 37 n. 5 (“Plaintiffs have not
identified any precedent in this Circuit supporting . . . a
position [that a direct effect occurred merely because U.S.
entities allegedly suffered losses], and the Court sees no
basis for extending the meaning of a `direct effect’ that
far.”).

The Court has discovered a single case, Virtual Defense
and Development International v. Republic of Moldova, 133
F. Supp. 2d 1 (D.D.C. 1999), in which a direct effect in the
United States was found based solely on alleged losses to a
U.S. corporation. In Virtual Defense, the plaintiff alleged
it had a contract with the defendant under which it “would
receive a commission of fifteen percent upon successfully
negotiating the sale of . . . MiG-9 planes.” Id. at 2.
Page 21 Negotiations took place in Moldova, and the
plaintiff did not allege that the defendant had expressly
agreed to make payments to U.S. bank accounts. See id. at
6-7. Nevertheless, the Court concluded that, “[b]ecause
[the plaintiff was] solely a United States corporation and
the alleged contract contemplated that [the plaintiff]
would receive compensation from the profits of the sale of
the MiG-29 planes, . . . the alleged breach of contract had
a direct effect in the United States.” Id. at 7.

To the extent Virtual Defense cannot be reconciled with
the more recent District of Columbia cases that uniformly
hold that losses to a U.S. citizen or entity cannot, taken
alone, constitute direct effects, Virtual Defense is
unpersuasive. The only D.C. Circuit authority Virtual
Defense cites for its conclusion that such losses can
constitute direct effects is Goodman Holdings. But even
interpreting Goodman Holdings expansively, that case merely
permits the possibility that nonpayments to a U.S.
corporation might constitute direct effects in the United
States where there was a consistent, longstanding history
of payment to U.S. bank accounts. See 26 F.3d at 1147
(Wald, J., concurring). Moreover, because Congress used the
phrase “direct effect” in place of “effect,” this Court is
unwilling to adopt a rule that “would give the district
courts jurisdiction over virtually any suit arising out of
an overseas transaction in which an American citizen claims
to have suffered a loss from the acts of a foreign state.”
United World Trade, 33 F.3d at 1239.

In any event, the present case is factually
distinguishable from Virtual Defense. For one, in Virtual
Defense the alleged losses were losses to the plaintiff.
Here, the alleged losses were suffered by nonparties. In
addition, it was significant to the decision in Virtual
Defense that the injured plaintiff was “solely a United
States corporation.” 133 F. Supp. 2d at 7 (emphasis Page
22 added). Here, by contrast, if Twins could generously be
characterized as a “U.S. corporation” at all — which
the Court need not decide — Twins is not solely a
U.S. corporation because it was incorporated in the Cook
Islands. (E.g., Pls.’ Supp. Reply at 2.)

Thus, whether under a theory that performance was supposed
to occur in the United States, or under the theory that a
U.S. company and U.S. citizens suffered losses, the
commercial activity exception does not establish subject
matter jurisdiction over plaintiffs’ claims against
ENDIAMA.[fn12]

D. Jurisdictional Discovery

Plaintiffs contend that, if they have so far failed to
establish this Court’s subject matter jurisdiction over
their claims against ENDIAMA, the Court should at least
permit them to conduct limited jurisdictional discovery.
(Pls.’ ENDIAMA Resp. at 19-20; Pls.’ Supp. Resp. at 3; Pls.
Supp. Reply at 5.) Jurisdictional discovery is not
warranted when plaintiffs’ allegations, even if
supplemented or verified, would remain insufficient to
establish a FSIA exception. See, e.g., Goodman Holdings, 26
F.3d at 1147 (“Under the circumstances, we do not see what
facts additional discovery could produce that would affect
our jurisdictional analysis above and therefore conclude
the district court did not abuse its discretion in
dismissing the action when it did.”); Crist v. Republic of
Turkey, 995 F. Supp. 5, 12-13 (D.D.C. 1998) (citing cases
and denying jurisdictional discovery). Moreover, “the
discretion of a district court to allow Page 23
jurisdictional discovery in FSIA cases is limited to those
instances where the facts sought are peculiarly within the
knowledge of the party against whom discovery is sought.”
Id. at 12.

Here, plaintiffs have not alleged facts that, if
supplemented or verified, could establish either the
expropriation or the commercial activity exception. In
addition, perhaps the strongest evidence they could provide
for the commercial activity exception — evidence of
the joint venture agreements among IDAS, ENDIAMA, and Twins
— is not “peculiarly within the knowledge of”
ENDIAMA. Id. Under these circumstances, awarding plaintiffs
even limited jurisdictional discovery would “frustrate the
significance and benefit of [ENDIAMA’s] entitlement to
immunity from suit.” Id. (quoting El-Fadl v. Cent. Bank of
Jordan, 75 F.3d 668, 671 (D.C. Cir. 1996)).

III. This Court Lacks Subject Matter Jurisdiction over
Plaintiffs’ Claims against NOFAR

Plaintiffs initially alleged this Court had subject matter
jurisdiction over their claims against NOFAR based on
diversity of citizenship. (See Cmpl. § 9
(“Jurisdiction and venue for all other Defendants
[excluding ENDIAMA] are founded on 28 U.S.C. §
1332(a)(2) and 1391(b) & (d).”).) As NOFAR has correctly
argued, diversity cannot be the basis for a court’s subject
matter jurisdiction when there are foreign corporations on
both sides. See Saadeh v. Farouki, 107 F.3d 52, 61 (D.C.
Cir. 1997) (“We . . . conclude that the 1988 amendment to
§ 1332 did not confer diversity jurisdiction over a
lawsuit between an alien on one side, and an alien and a
citizen on the other side, regardless of the residence
status of the aliens.”).

Perhaps realizing, with the benefit of NOFAR’s motion to
dismiss, that it would be impossible to establish subject
matter jurisdiction based on diversity of citizenship,
plaintiffs’ Page 24 response to NOFAR’s motion advances a
new argument. No longer claiming diversity jurisdiction,
plaintiffs instead now argue that the Court has
supplemental subject matter jurisdiction incident to its
alleged federal question jurisdiction over the claims
against ENDIAMA. (See Pls.’ NOFAR Resp. at 2-4.) For the
reasons already explained, the Court lacks subject matter
jurisdiction over the claims against ENDIAMA. Accordingly,
the Court lacks supplemental subject matter jurisdiction
over the claims against NOFAR. See 28 U.S.C. §
1367(a) (2006).

Because the Court lacks subject matter jurisdiction over
the claims against NOFAR, there is no need to consider
whether the Court has personal jurisdiction over NOFAR. See
Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 587 (1999)
(holding that, although courts may address a plaintiff’s
challenges to subject matter jurisdiction and personal
jurisdiction in either order, “in most instances
subject-matter jurisdiction will involve no arduous
inquiry” and courts should decide that issue first).
Moreover, because the Court cannot conceive what additional
facts would create subject matter jurisdiction, there is no
need to conduct jurisdictional discovery. See Goodman
Holdings, 26 F.3d at 1147.

CONCLUSION

For the foregoing reasons, this Court lacks subject matter
jurisdiction over plaintiffs’ claims. Because plaintiffs
have not presented allegations that, even if verified,
would establish subject matter jurisdiction, jurisdictional
discovery is unwarranted. These conclusions obviate the
need to consider whether the Court has personal
jurisdiction over NOFAR. The Court will Page 25 grant
defendants’ motions to dismiss, deny plaintiffs’ request to
conduct jurisdictional discovery, and dismiss this case for
lack of subject matter jurisdiction.

[fn1] To permit consideration of plaintiffs’ written
supplemental response and written supplemental reply to
ENDIAMA’s motion, the Court will grant in part plaintiffs’
“Motion for Leave to Supplement Response, Oral Argument,
and Limited Jurisdictional Discovery.” As explained herein,
however, the Court will deny the motion insofar as
plaintiffs request oral argument and jurisdictional
discovery.

[fn2] Plaintiffs’ original response to ENDIAMA’s motion to
dismiss makes a passing reference to “ENDIAMA’s taking of
their licenses and concessions.” (Pls.’ Resp. to Def.
ENDIAMA’s Mot. to Dismiss [“Pls.’ ENDIAMA Resp.”] at 17.)
Nowhere in this response, however, do plaintiffs argue that
IDAS’s licenses constituted tangible rights, as opposed to
intangible contract rights. (See id. at 16-18.) Nor do
plaintiffs raise such an argument in their motion for leave
to supplement their initial response. (See Pls.’ Mot. for
Leave to Supp. [“Pls.’ Supp. Resp.”] at 1 § 4.)

[fn3] At least one other case in this circuit has presented
such a claim. See Marra v. Papandreou, 216 F.3d 1119, 1124
n. 4 (D.C. Cir. 2000) (noting that, in addition to invoking
FSIA’s commercial activity exception, “the suit [against
the Greek government for revoking the plaintiff’s casino
license] also include[d] an expropriation count”). The
facts of Marra, however, did not require discussion of the
expropriation claim. See id. (“Since Marra’s expropriation
claim is wholly derivative of the Greek government’s
alleged breach of the Flisvos license, it certainly
presents a dispute `concerning a license’ that is covered
by the forum-selection provision [and so must be enforced
in Greece by the terms of the contract at issue].”).

[fn4] Moreover, plaintiffs do not allege that the remedies
available in Angola are clearly inadequate, or that ENDIAMA
“firmly denies responsibility” for taking plaintiffs’
licenses. Millicom Int’l Cellular, S.A. v. Republic of
Costa Rica, 995 F. Supp. 14, 23 (D.D.C. 1998) (quoting
Restatement (Third) of the Foreign Relations Law of the
United States § 713 cmt. f).

[fn5] Defendants do not contest that ENDIAMA is an “agency
or instrumentality” of Angola or that ENDIAMA “own[s] or
operate[s]” IDAS’s former licenses. 28 U.S.C. §
1605(a)(3) (2006). Plaintiffs do not, and could not, argue
that the property allegedly taken from IDAS is “present in
the United States in connection with a commercial activity
carried on in the United States” by Angola. Id.

[fn6] Plaintiffs do not even allege that ENDIAMA took
actions from abroad aimed at attracting business from U.S.
entities. Cf., e.g., Altmann v. Republic of Austria., 142
F. Supp. 2d 1187, 1204-05 (C.D. Cal. 2001) (concluding that
an Austrian museum engaged in “commercial activity in the
United States” when it published a guidebook in English
available for purchase to U.S. citizens, advertised in the
United States, lent a painting to the United States, and
received visits by thousands of U.S. citizens each year),
aff’d, 327 F.3d 1246 (9th Cir. 2003).

[fn7] According to plaintiffs, Twins would be a defendant
because, together with ENDIAMA, it abandoned the joint
venture with IDAS to participate in the new joint venture
with NOFAR. (Pls.’ Supp. Reply at 3.) In light of this
fact, plaintiffs’ allegation that Twins suffered losses
from ENDIAMA’s breach of contract is highly dubious. In
deciding the question of subject matter jurisdiction,
however, the Court will treat plaintiffs’ allegation as
true. See Global Index, Inc. v. MKAPA, 290 F. Supp. 2d 108,
111 (D.D.C. 2003).

[fn8] Plaintiffs also suggest that the Court could find a
direct effect based on lost profit distributions to Twins.
(See Pls.’ ENDIAMA Resp. at 15.) Because plaintiffs focus
their arguments on the lost consulting and expense
payments, however, the Court will not separately address
the allegation of lost profit distributions. The Court’s
reasoning about lost consulting and expense payments
applies with equal, if not greater, force to any claim of
lost profit distributions to Twins.

[fn9] For the sake of simplicity, the Court will refer to
payments by IDAS’s parent company, AMI, as payments by IDAS.

[fn10] This allegation is suspect, not only because
plaintiffs failed to raise it in their complaint and
initial response to ENDIAMA, but because plaintiffs have
introduced no substantiating evidence — neither the
joint venture agreements themselves, nor any sworn
declaration regarding relevant content of those agreements.
(The declaration of former AMI executive Bernard Pryor, for
example, is silent as to what, if anything, the agreements
provided about IDAS’s consulting services.) In fact, the
only evidence plaintiffs have introduced strongly suggests
that the payments Cabelly received in designated U.S. bank
accounts were for consulting services rendered to IDAS
under agreements to which ENDIAMA was not a party. (See,
e.g., Pryor Decl. at § 9 (“Twins also received
compensation in Washington, D.C. for work related to its
efforts to assist IDAS under the 1995 Agreement.” (emphasis
added)); id. at § 9 (“As of the date of ENDIAMA’s
repudiation of the 2002-2003 Agreements, Twins had not
advised IDAS that future payments, whether for expenses,
services rendered, or profit distribution were not to be
made to Twins in Washington D.C., as prior payments had
been made.”); Pls.’ ENDIAMA Resp. Ex. 7 at 1, 6
(designating a First Union Bank account number for
reimbursement of travel expenses in a letter to AMI); id.
Ex. 5 at 2 (specifying that payment would “complete[]
IDAS’s commitment” and enable Cabelly “to assist IDAS”
(emphasis added)).) An allegation that IDAS failed to make
payments to Twins under side contracts to which ENDIAMA was
not a party would be insufficient to satisfy the direct
effect requirement. Cf. Millicom, 995 F. Supp. at 21-22
(rejecting the plaintiffs’ theory that Costa Rica’s breach
of contract caused a direct effect in the United States
simply because, in reliance on the contract, the plaintiffs
had incurred “separate contractual obligations” by
borrowing money that had to be repaid to a New York bank
account). Nonetheless, the Court must credit plaintiffs’
allegation as true and will limit its ruling to whether, as
a matter of law, ENDIAMA enjoys sovereign immunity under
FSIA. See Global Index, 290 F. Supp. 2d at 111.

[fn11] Courts in other jurisdictions apply a “legally
significant act” test that requires a plaintiff to allege
the existence of a contract provision expressly requiring
payment in the United States (or, at a minimum, a contract
provision authorizing the designation of a specific place
of payment at some later date). See Global Index, 290 F.
Supp. 2d at 112 (“The Second Circuit’s `legally significant
act’ test requires express provision of payment in the
U.S.” (footnote omitted)); Hanil Bank v. PT. Bank Negara
Indon., 148 F.3d 127, 132-33 (2d Cir. 1998) (recognizing a
direct effect when, “[a]lthough the letter of credit did
not itself specify New York as the place of payment, it
authorized the negotiating bank to designate the place of
payment”); United World Trade, Inc. v. Mangyshlakneft Oil
Prod. Assoc., 33 F.3d 1232, 1239 (10th Cir. 1994) (applying
the Second Circuit’s “legally significant act” test).

[fn12] In concluding that plaintiffs have failed to
establish the Court’s subject matter jurisdiction over the
claims against ENDIAMA, the Court has not relied on the
declaration of Manuel Arnaldo de Sousa Calado, as to which
plaintiffs have raised several objections. (See Pls.’
ENDIAMA Resp. at 4-10.) Accordingly, the Court will deny as
moot ENDIAMA’s “Motion to File Declaration,” in which they
ask for leave to file de Sousa Calado’s amended
declaration. Page 1