504 U.S. 607 (U.S. Supreme Court 1992)
Republic of Argentina v. Weltover, Inc.
Whether Argentina is immune from suit in U.S. courts under the FSIA for defaulting on and rescheduling dollar-denominated bonds, or whether the FSIA's commercial activity exception applies because Argentina engaged in commercial conduct that caused a direct effect in the United States.
Under the Foreign Sovereign Immunities Act, a foreign state is presumptively immune from the jurisdiction of U.S. courts unless a statutory exception applies. 28 U.S.C. § 1604. The "commercial activity" exception removes immunity in any case: - in which the action is based upon a commercial activity carried on in the United States by the foreign state; or - upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or - upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere that causes a direct effect in the United States. 28 U.S.C. § 1605(a)(2). "Commercial activity" is defined by the nature of the conduct, not its purpose; a state acts commercially when it exercises powers that can also be exercised by private parties engaging in trade or commerce. 28 U.S.C. § 1603(d). If an exception applies, 28 U.S.C. § 1330(a) confers subject-matter jurisdiction, and § 1330(b) provides personal jurisdiction with proper service of process; the Court in Weltover assumed, without deciding, that due process may apply and found sufficient contacts on the facts.
Argentina was not immune under the FSIA. Its issuance and rescheduling of the bonds were commercial activities, and its failure to make payment in New York caused a direct effect in the United States within the meaning of § 1605(a)(2). Therefore, U.S. courts had subject-matter jurisdiction under the FSIA; personal jurisdiction was proper upon service, and, assuming due process applies, Argentina had sufficient contacts with the United States.
Weltover is the Supreme Court's touchstone for the FSIA's commercial activity exception. It cements two critical propositions: (1) sovereigns are subject to suit in U.S. courts when they act as ordinary market participants, regardless of the public policy objectives motivating their transactions; and (2) a missed payment in New York on a dollar-denominated obligation creates a "direct effect" in the United States, even if the investors are foreign. The case underpins modern sovereign debt litigation and influences the drafting of cross-border financial instruments, which often specify New York as the place of payment to anchor U.S. jurisdiction. It also presaged later disputes involving Argentina and other sovereigns by confirming that FSIA immunity does not shield commercial defaults from adjudication in U.S. courts.