USA – NEW YORK Trends and Developments Contributed by: Alex Loomis and Gregg Badichek, Quinn Emanuel Urquhart & Sullivan, LLP
Asset Recovery Against Foreign States: Overcoming Sovereign Immunity Creditors seeking to collect against foreign states face particular hurdles for enforcement because foreign state assets located abroad are immune from execution and attachment. But enforcement is not impossible. Under the US Foreign Sovereign Immunities Act (FSIA), foreign states can be sued when, among other things, they have waived sovereign immunity, agreed to arbitrate, or engaged in commercial activity in the United States. Additionally, so long as they have waived immunity or agreed to arbitrate, foreign state commercial property is subject to execution. New York courts have fleshed out these legal requirements for decades. Several cases from the past year should be of particular interest for those seeking to collect against foreign states. The Williams case, discussed above, made clear that the FSIA’s waiver exception is a broad one. Williams ruled that Nigeria had waived its sov - ereign immunity even though it had purported to revoke its prior waiver. Under the FSIA’s plain terms, the court explained, a waiver of sover - eign immunity is irrevocable unless that waiver contains advance procedures allowing for the waiver to be revoked. Williams is not an outlier, but rather the third New York district court to endorse this broad understanding of the FSIA’s waiver exception. Schansman v Sberbank of Russia PJSC, 128 F.4th 70 (2d Cir. 2025), in turn, expanded the FSIA’s commercial activity exception. Schans - man held, as a matter of first impression, that a Russian state-owned bank could be sued under the commercial activity exception for materially supporting terrorism. The form of its material support – facilitating money transfers to terror -
Argentina’s property interest in approximately USD60 million in Eurobonds held in Germany. This was so, the court explained, because the bonds were held in a German bank account belonging to the Federal Reserve Bank of New York (FRBNY), which then had a contractual duty to pay Argentina from these accounts. Because Argentina’s rights to the Eurobonds flowed from the FRBNY, the FRBNY was the proper garnish - ee of Argentina’s property rights, and, as a New York-based company, was subject to jurisdiction and turnover of funds located outside the United States. Similar cross-border enforcement issues arose in Peterson v Bank Markazi, 121 F.4th 983 (2d Cir. 2024), where judgment creditors injured by Iranian state-backed terrorism sued the Luxem - bourg financial institution Clearstream Banking seeking turnover of USD1.68 billion in a blocked financial account belonging to Iran’s central bank. Although the account was located and Clearstream was based abroad, the Second Cir - cuit held that the judgment creditors had specific personal jurisdiction over Clearstream to compel turnover of the blocked account. Critically, the court explained, the blocked account received payments from a correspond - ent banking account that Clearstream main - tained in New York. Peterson thus stands for the broad proposition that a foreign financial insti - tution can be compelled to turn over the pro - ceeds of a foreign bank account so long as that account received some of those proceeds from a US bank account. That holding will expand global collection efforts significantly.
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