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Mol, Inc. v. The Peoples Republic of Bangladesh

Court of Appeals for the Ninth Circuit
1984 U.S. App. LEXIS 20862, 14 Envtl. L. Rep. (Envtl. Law Inst.) 20, 736 F.2d 1326 (1984)
ELI5:

Rule of Law:

A foreign state's act of granting or revoking a license to export its own natural resources is a sovereign act, not a commercial one, and thus the state is entitled to immunity from suit in U.S. courts under the Foreign Sovereign Immunities Act (FSIA).


Facts:

  • In 1977, a division of the Bangladesh Ministry of Agriculture granted MOL, Inc., an Oregon corporation, a ten-year license to capture and export rhesus monkeys.
  • The agreement required that the monkeys be used exclusively for medical and scientific research for the benefit of humanity and that MOL build a breeding farm in Bangladesh in 1978.
  • The agreement allowed Bangladesh to terminate without notice if MOL failed to fulfill its obligations.
  • In November 1977, India banned the export of its rhesus monkeys, making Bangladesh a key supplier and increasing world prices while MOL's contract price remained fixed.
  • In May 1978, Bangladesh threatened to cancel the agreement, alleging that MOL had not built the required breeding farm.
  • In September 1978, MOL delivered some of the monkeys to the United States armed services for radiobiological research.
  • On January 3, 1979, Bangladesh terminated the agreement, citing MOL's failure to build the farm and its sale of monkeys for 'neutron bomb radiation experiments,' which Bangladesh claimed violated the humanitarian use clause.

Procedural Posture:

  • MOL, Inc. sued Bangladesh in U.S. District Court for $15 million.
  • Bangladesh did not appear, and MOL moved for a default judgment.
  • An amicus curiae, Attorneys for Animal Rights, filed a motion to dismiss for lack of jurisdiction under the Foreign Sovereign Immunities Act (FSIA).
  • The district court (court of first instance) denied the default judgment and dismissed the action, finding it barred by both the FSIA and the act of state doctrine.
  • MOL, Inc., as appellant, appealed the dismissal to the U.S. Court of Appeals for the Ninth Circuit.

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Issue:

Does a foreign government's unilateral termination of a licensing agreement for the export of its natural resources constitute a 'commercial activity' under the Foreign Sovereign Immunities Act, thereby stripping the government of sovereign immunity from suit in U.S. courts?


Opinions:

Majority - Wright

No, a foreign government's termination of a licensing agreement for the export of its natural resources is a sovereign act, not a commercial one, and does not fall under the commercial activity exception to the FSIA. The court reasoned that the crucial step is to define the 'act complained of.' Here, the act was not merely a breach of contract but the termination of a license to export a natural resource. The court determined that the nature of this act was inherently sovereign because it concerned Bangladesh's right to regulate its imports, exports, and natural resources—prerogatives unique to a sovereign state. A private party could not grant or revoke such a license. The court explicitly distinguished this analysis from looking at the purpose of the act, which is forbidden by the FSIA, stating that focusing on the elements of an export license and natural resource control pertains to the nature of the act itself. Therefore, because the revocation was a sovereign act, Bangladesh is entitled to sovereign immunity.



Analysis:

This decision reinforces a narrow interpretation of the 'commercial activity' exception to the Foreign Sovereign Immunities Act. It clarifies that when a foreign state engages in activities that only a sovereign can perform, such as regulating the export of natural resources, those actions retain their sovereign character even if they are executed through a commercial-style contract. This precedent makes it more difficult for private entities to sue foreign governments for disputes arising from the regulation of natural resources, as courts will look past the contractual form to the underlying nature of the governmental power being exercised. The ruling solidifies the principle that controlling national borders and resources is a core sovereign function protected by immunity.

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