VERLINDEN B.V., PETITIONER V. CENTRAL BANK OF NIGERIA No. 81-920 In the Supreme Court of the United States October Term, 1981 On Writ of Certiorari to the United States Court of Appeals for the Second Circuit Brief for the United States as Amicus Curiae TABLE OF CONTENTS Interest of the United States Statement A. The statutory context B. Proceedings in the district court C. The decision of the court of appeals Summary of argument Argument All suits brought against foreign states under the Foreign Sovereign Immunities Act are suits arising under federal law and fall within the federal judicial power defined in Article III of the Constitution I. Congress has power to confer jurisdiction on federal district courts to hear suits brought by foreign plaintiffs against foreign states under the FSIA because such suits raise substantive issues of federal law A. The federal judicial power extends to every case that potentially requires interpretation or application of a federal statute B. The present case arises under federal law because it includes a federal law ingredient requiring judicial resolution C. Decisions restrictively construing the scope of jurisdictional statutes are not applicable when delineating powers granted to Congress by the Constitution II. Congress has power to confer jurisdiction on federal district courts to hear suits brought by foreign plaintiffs against foreign states under the FSIA because federal court jurisdiction is essential to safeguard important statutory policies A. Controversies "arise under" federal law when Congress determines that their resolution by federal courts is essential to give full effect to a statutory program B. In the exercise of its Article I power over foreign affairs and international commerce, Congress reasonably determined that federal courts must be available to adjudicate suits brought against foreign states Conclusion QUESTION PRESENTED Whether the Foreign Sovereign Immunities Act of 1976 violates Article III of the Constitution to the extent that it permits an alien plaintiff to sue a foreign government in federal district court on a non-federal cause of action. INTEREST OF THE UNITED STATES The United States has a substantial interest in defending the constitutionality of the Foreign Sovereign Immunities Act of 1976, 28 U.S.C. 1330 et seq. This interest is discussed in the government's brief as amicus curiae in support of the petition for a writ of certiorari in this case. STATEMENT A. The Statutory Context In 1976 Congress enacted the Foreign Sovereign Immunities Act (FSIA), /1/ a comprehensive statute designed to set forth both substantive and procedural standards for suits brought against foreign nations in state and federal courts in the United States. The statute provides that judicial, rather than executive, authorities must henceforth determine claims of foreign states to sovereign immunity, and must do so "in conformity with the principles set forth in this chapter" (28 U.S.C. 1602). The principles prescribed by Congress in the FSIA embody the "restrictive" doctrine of sovereign immunity (see Alfred Dunhill of London, Inc. v. Cuba, 425 U.S. 682, 698=705, 711-715 (1976)), under which foreign nations are subject to suit "insofar as their commercial activities are concerned" (28 U.S.C. 1602). To achieve its goals, the FSIA broadly provides that federal district courts "shall have original jurisdiction without regard to amount in controversy of any non-jury civil action against a foreign state * * * as to any claim * * * with respect to which the foreign state is not entitled to immunity" under the terms of the statute or any applicable international agreement (28 U.S.C. 1330(a)). The FSIA further provides that "(a)ny civil action brought in a State court against a foreign state * * * may be removed by the foreign state" to federal district court (28 U.S.C. 1441(d)). The FSIA announces detailed standards for determining when immunity is to be accorded. Foreign states are "immune from the jurisdiction of the courts of the United States and of the States" unless an exception is found in the statute or applicable international agreement (28 U.S.C. 1604). Statutory exceptions from this general grant of immunity exist when immunity has been waived (28 U.S.C. 1605(a)(1)), when the claim arises from specified commercial activities of the sovereign state (28 U.S.C. 1605(a)(2)), when certain rights in property taken in violation of international law are at issue (28 U.S.C. 1605(a)(3)), when rights in specified property situated in the United States are at issue (28 U.S.C. 1605(a)(4)), and when rights arising from certain tortious injuries to person or property occurring within the United States are at issue (28 U.S.C. 1605(a)(5)). The FSIA also denies sovereign immunity in certain admiralty proceedings based on specified commercial activities of the foreign state (28 U.S.C. 1605(b)). The FSIA also delineates the scope of liability to be imposed on sovereign defendants. Generally, sovereign defendants are subject to the same liability as individual defendants, but "a foreign state except for an agency or instrumentality thereof shall not be liable for punitive damages" (28 U.S.C. 1606). And in wrongful death actions, in which controlling law provides for punitive damages only, the FSIA vests the plaintiff with a right to "actual or compensatory damages" (ibid). The statute further prescribes the circumstances under which the property of the sovereign defendant may be subjected to attachment or execution (28 U.S.C. 1609-1611). Finally, the FSIA sets forth procedural rules for litigation commenced against foreign sovereigns, including special rules governing venue (28 U.S.C. 1391(f)), jury trial (28 U.S.C. 1330(a)), service of process (28 U.S.C. 1608), answers to complaints (28 U.S.C. 1608), and counterclaims (28 U.S.C. 1607). In addition, the FSIA provides that "(n)o judgment by default shall be entered by a court of the United States or of a State against a foreign state * * * unless the claimant establishes his claim of right to relief by evidence satisfactory to the court" (28 U.S.C. 1608(e)). B. Proceedings in the district court Petitioner Verlinden B.V. ("Verlinden"), a Dutch corporation, brought suit in the United States District Court for the Southern District of New York against respondent Central Bank of Nigeria ("Central Bank") under 28 U.S.C. 1330(a). The gist of Verlinden's claim against Central Bank is that Central Bank breached its contractual obligations under an irrevocable letter of credit. As the court of appeals noted, "Central Bank does not seriously dispute" that it violated its payment obligations under the unconditional agreement with Verlinden (see Pet. App. 4a & n.7, 3a & n.5; see also id. at 23a-24a). Central Bank moved to dismiss Verlinden's complaint in the district court on several theories, including lack of subject matter jurisdiction. In contesting subject matter jurisdiction, Central Bank attacked the constitutionality of the FSIA as applied to suits between aliens on non-federal causes of action. The district court rejected the challenge to its subject matter jurisdiction (Pet. App. 25a-34a). It first concluded that the "broad and inclusive" language of the statute embraces the present suit. It then explained why a suit under the FSIA is a suit "arising under" federal law (id. at 34a; footnote omitted): (The statute) incorporates into the concept of jurisdiction substantive, federal criteria for determining the validity of assertions of sovereign immunity. It imposes a single, federal standard to be applied uniformly by both state and federal courts hearing claims brought against foreign states. In consequence, even though the plaintiff's claim is one grounded upon common law, the case is one that "arises under" a federal law because the complaint compels the application of the uniform federal standard governing assertions of sovereign immunity. In short, the Immunities Act injects an essential federal element into all suits brought against foreign states. The district court subsequently concluded, however, that it lacked personal jurisdiction over Central Bank and dismissed Verlinden's complaint (id. at 34a-54a). C. The decision of the court of appeals The court of appeals agreed with the district court that the FSIA authorizes the present action in federal court. It determined, however, that the Act is unconstitutional to the extent that it permits a foreign plaintiff to sue a foreign government in federal court on a non-federal cause of action (Pet. App. 20a). In reaching that conclusion, the court characterized the Act as merely a jurisdictional or procedural statute and asserted that a federal case or controversy could not "arise under" such a law (id. at 18a-19a). In so holding, the court refused to "be deterred" (id. at 19a) by the decision of this Court in the seminal case of Osborn v. Bank of the United States, 22 U.S. (9 Wheat.) 738 (1824), in which Chief Justice Marshall, writing for the Court, afforded a broad interpretation to the "arising under" jurisdiction of the federal courts. In the view of the court of appeals, Osborn should be limited to its facts; indeed, a subsequent decision of this Court extending Osborn beyond its facts (Pacific R.R. Removal Cases, 115 U.S. 1 (1885)) was dismissed by the court below as a "sport" (Pet. App. 20a n.26). Rather than relying on this Court's decisions construing Article III, the court of appeals concluded that Congress' power under the Constitution should be delineated by reference to other decisions narrowly construing the "aris(ing) under" language appearing in 28 U.S.C. 1331 (Pet. App. 10a, 15a), and by reliance on "history, good sense, and sound concepts of judicial administration" (id. at 20a). The court of appeals reached these striking conclusions without the benefit of briefing by any party on the important issues that it decided. Moreover, the court proceeded without discharging its duty under 28 U.S.C. 2403(a) to notify the Attorney General of the pendency of this constitutional question and without allowing the United States to intervene to seek rehearing once it had rendered its judgment. SUMMARY OF ARGUMENT 1. A case "aris(es) under" federal law within the meaning of Article III of the Constitution whenever resolution of the case requires the court to "expound()" a federal law, whenever an issue of federal law forms an "ingredient" of a cause of action or defense, or whenever a "title or right" belonging to either party "may be defeated by one construction of the * * * law * * * and sustained by the opposite construction." Osborn v. Bank of the United States, 22 U.S. (9 Wheat.) 738, 818-824 (1824). Cases brought under the FSIA plainly meet the alternative tests set forth in Osborn. In every case brought under the FSIA, including cases such as this in which a foreign plaintiff sues a foreign state, the federal district court must determine, at the very threshold of the litigation, whether sovereign immunity should be recognized pursuant to detailed criteria prescribed by Congress. 28 U.S.C. 1330(a), 1602-1607. Thus, cases brought under the FSIA are cases "arising under" federal law because the FSIA imposes a duty on the district courts to expound and apply federal standards, because the issue of sovereign immunity forms an essential ingredient of every such case, and because the defendant's right to immunity will be defeated by one construction of the FSIA and sustained by the opposite construction. The court of appeals nonetheless believed that the present suit could not arise under federal law because the FSIA is "jurisdictional" and does not prescribe "substantive rules of decision" (Pet. App. 17a, 19a). That characterization, however, does not advance the constitutional inquiry. As this Court recognized in Osborn, the federal judicial power is "co-extensive" with the federal legsilative power. 22 U.S. (9 Wheat.) at 818. Accordingly, federal courts may receive power from Congress to adjudicate any case that requires the construction or application of any federal law. Beyond this, moreover, there is no basis for viewing the FSIA as merely a procedural statute. The FSIA codifies standards defining the elements of the defense of sovereign immunity -- standards that, as this Court has recognized, embody an "overriding principle of substantive law." Ex parte Peru, 318 U.S. 578, 588 (1943). The court of appeals also sought to justify its restrictive constitutional ruling by reference to decisions construing 28 U.S.C. 1331. However, the court lost sight of the fact that it is the Constitution that must be interpreted in this case, not a jurisdictional statute. And "the many limitations which have been placed on jurisdiction under Sec. 1331 are not limitations on the constitutional power of Congress to confer jurisdiction on the federal courts." Romero v. International Terminal Operating Co., 358 U.S. 354, 379 n.51 (1959). 2. Although the decision below can be reversed on the simple ground that all suits brought under the FSIA raise substantive issues of federal law, and therefore fall within the "arising under" jurisdiction granted in Article III, the result would not be different even if such suits did not present substantive federal law issues. Under the principle of "protective jurisdiction" (Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 460 (1957) (Burton, J., concurring)), Congress may open the doors of the federal courts to hear cases that raise only non-federal questions if federal court jurisdiction is needed to safeguard legislative policies embodied in a federal enactment. See, e.g., Schumacher V. Beeler, 293 U.S. 367, 374-375 (1934); Lathrop v. Drake, 91 U.S. 516, 518 (1875). In enacting the FSIA, Congress determined that federal court jurisdiction was essential to assure uniform treatment of foreign sovereigns and to reduce tensions in international relations that have resulted from assertions of jurisdiction by state courts over the objection of foreign sovereigns. Because Congress reasonably concluded that federal court jurisdiction was needed to give effect to important legislative policies embodied in the FSIA, suits under the FSIA are properly viewed as suits "arising under" federal law. ARGUMENT ALL SUITS BROUGHT AGAINST FOREIGN STATES UNDER THE FOREIGN SOVEREIGN IMMUNITIES ACT ARE SUITS ARISING UNDER FEDERAL LAW AND FALL WITHIN THE FEDERAL JUDICIAL POWER DEFINED IN ARTICLE III OF THE CONSTITUTION The district court and the court of appeals agreed that the FSIA encompasses suits brought by foreign plaintiffs against foreign states if the standards prescribed in the statute are satisfied. Section 2(a) of the FSIA, 28 U.S.C. 1330(a), broadly vests the district courts with jurisdiction over "any nonjury civil action against a foreign state * * * as to any claim * * * with respect to which the foreign state is not entitled to immunity" under the statute. In view of this unequivocal language, both lower courts correctly concluded (Pet. App. 8a, 34a) that "the words of the statute control." Congress has permitted foreign plaintiffs to sue foreign states in federal district court if statutory prerequisites are met. /2/ Despite its finding that Congress intended to permit foreign plaintiffs to sue foreign states under the FSIA, the court of appeals concluded that Congress lacks constitutional power to authorize such suits in federal district court. That conclusion is wrong for two separate reasons. First, every suit brought against a foreign state under the FSIA raises for adjudication substantive issues of federal law. Accordingly, every such suit "aris(es) under" federal law within the meaning of Article III of the Constitution. Second, even if suits under the FSIA did not raise substantive issues of federal law, it would not follow, as the court of appeals assumed, that Congress lacks power to confer federal court jurisdiction. Under the principle of "protective jurisdiction," Congress may open the doors of the federal courts whenever that is necessary to safeguard important statutory policies, as it sought to do under the FSIA. I. CONGRESS HAS POWER TO CONFER JURISDICTION ON FEDERAL DISTRICT COURTS TO HEAR SUITS BROUGHT BY FOREIGN PLAINTIFFS AGAINST FOREIGN STATES UNDER THE FSIA BECAUSE SUCH SUITS RAISE SUBSTANTIVE ISSUES OF FEDERAL LAW The court of appeals adopted a grudging view of Congress' power to confer federal question jurisdiction on the district courts. It asserted (Pet. App. 15a) that Congress has only "narrow" power to enlarge the grant of jurisdiction made by statutes such as 28 U.S.C. 1331. In adopting this restrictive approach, the court of appeals lost sight of the fact that "it is a constitution we are expounding." M'Culloch v. Maryland, 17 U.S. (4 Wheat.) 316, 407 (1819) (emphasis in original). The decisions of this Court leave no doubt that Article III of the Constitution generously endows Congress with authority to vest federal question jurisdiction in the district courts. Congress did not exceed that broad power here. A. The Federal Judicial Power Extends To Every Case That Potentially Requires Interpretation Or Application Of A Federal Statute 1. Although Article III of the Constitution is not unrestricted in its delineation of federal judicial power, there can be little dispute that the framers intended a comprehensive grant of jurisdiction suitable to the present and future needs of the nation. As Justice Story, writing for the Court in Martin V. Hunter's Lessee, 14 U.S. (1 Wheat.) 304, 326-327 (1816), observed long ago, the powers granted by the Constitution were "not intended to provide merely for the exigencies of a few years, but * * * to endure through a long lapse of ages * * *. Hence (constitutional) powers are expressed in general terms, leaving to the legislature, from time to time, to adopt its own means to effectuate legitimate objects * * * ." Article III, Section 2 broadly extends the federal judicial power to "all Cases," at law or in equity, "arising under this Constitution, the Laws of the United States, and Treaties made, or which shall be made, under their Authority." /3/ From the beginning, this Court has construed the "arising under" grant expansively. Thus, in Osborn V. Bank of the United States, 22 U.S. (9 Wheat.) 738 (1824), this Court held that any suit brought by a bank created pursuant to federal statute was a suit "arising under" federal law, because questions of federal law potentially could arise in such a proceeding. Chief Justice Marshall explained that the federal judicial power extends not only to cases in which federal issues actually are litigated, but also to all cases in which such issues might be litigated. For example, if the plaintiff bank sued to enforce a right recognized under state law, a federal claim would not likely be asserted by either party. Nonetheless, because federal law issues "may" arise (id. at 824), a federal question "forms an original ingredient in every cause" (ibid.). For this reason, it is immaterial that "a suit brought by the bank may depend in fact altogether on questions unconnected with any law of the United States" (id. at 826). The Court applied these principles the same day that it decided Osborn by ruling in Bank of the United States v. Planters' Bank, 22 U.S. (9 Wheat.) 904 (1824), that a federally chartered bank could bring suit in federal court to enforce an ordinary contract claim. Osborn also established that the legislative and judicial powers of the federal government are "co-extensive" (22 U.S. (9 Wheat.) at 818). Thus, the "judicial department may receive * * * the power of construing every * * * law" enacted by Congress. The Court stressed that "(a)ll governments which are not extremely defective in their organization, must possess, within themselves, the means of expounding, as well as enforcing, their own laws" (id. at 818-819). Accordingly, the "arising under" jurisdiction of the federal judiciary "enables the judicial department to receive jurisdiction to the full extent of the constitution, laws and treaties of the United States, when any question respecting them shall assume such a form that the judicial power is capable of acting on it" (id. at 819). The Court added that it is "a sufficient foundation for jurisdiction, that the title or right set up by the party, may be defeated by one construction of the constitution or law of the United States, and sustained by the opposite construction" (id. at 822). The principles set forth in Osborn have been reaffirmed by this Court on many occasions. See, e.g., Pacific RR. Removal Cases, 115 U.S. 1, 11-14 (1885); /4/ Federal Intermediate Credit Bank v. Mitchell, 277 U.S. 213, 214 (1928). Osborn stands today as the authoritative exposition of the scope of Congress' power under the federal question clause of Article III. /5/ 2. Osborn also establishes that the "arising under" jurisdiction that Congress may confer on federal trial courts is co-extensive with the appellate jurisdiction of this Court. Osborn v. Bank of the United States, supra, 22 U.S. (9 Wheat.) at 821 ("We perceive, then, no ground on which the proposition can be maintained, that congress is incapable of giving the circuit court original jurisdiction, in any case to which the appellate jurisdiction extends"). It follows that Congress may confer upon federal district courts jurisdiction to decide cases in which a federal "ingredient" is raised in any form, whether by complaint or answer. See Cohens v. Virginia, 19 U.S. (6 Wheat.) 264, 379 (1821), holding that assertion of a federal defense produces a case "arising under" federal law within the meaning of Article III. The Court observed that it is unnecessary that the case "be one in which a party comes into Court to demand something conferred on him by the constitution or a law * * * . A case in law or equity consists of the right of the one party, as well as of the other, and may truly be said to arise under the constitution or a law of the United States, whenever its correct decision depends on the construction of either." Subsequent decisions of this Court reaffirm that assertion of a defense, predicated on federal law, gives rise to a case falling within the judicial power defined in Article III. See, e.g., The Mayor v. Cooper, 73 U.S. (6 Wall.) 247, 252-253 (1867) (the rule prescribed in Osborn "applies with equal force where the plaintiff claims a right, and where the defendant claims protection, by virtue of" a federal law or the Constitution. In either case, it "is the right and the duty of the national government to have its Constitution and laws interpreted and applied by its own judicial tribunals"); Tennessee v. Davis, 100 U.S. 257, 264 (1879); Railroad Co. v. Mississippi, 102 U.S. 135, 141 (1880); Patton v. Brady, 184 U.S. 608, 611 (1902); Wheeldin v. Wheeler, 373 U.S. 647, 652 (1963). See also Textile Workers Union v. Lincoln Mills, supra, 353 U.S. at 475 n.5 (Frankfurter, J., dissenting on other grounds) (Article III power exists when Congress puts "federal law in the forefront as a defense"). In short, a case arises under federal law within the meaning of Article III in any instance in which a potential federal law ingredient exists by virtue of Congress' exercise of its legislative powers under Article I. That is true in cases in which the federal ingredient is injected by either the plaintiff or the defendant. As we demonstrate below, every case brought under the provisions of the FSIA against a foreign nation is a case "arising under federal law" within these constitutional standards. B. The Present Case Arises Under Federal Law Because It Includes A Federal Law Ingredient Requiring Judicial Resolution 1. Every case filed in the district court under the FSIA raises -- at the very threshold of the litigation -- a substantial federal law "ingredient" within the meaning of Osborn. 28 U.S.C. 1330(a) provides that the district courts shall have jurisdiction over actions against a foreign state for "any claim for relief in personam with respect to which the foreign state is not entitled to immunity either under sections 1605-1607 of this title or under any applicable international agreement." 28 U.S.C. 1605-1607, in turn, set forth the specific standards that Congress adopted as a matter of national policy to determine whether a foreign nation is entitled to invoke the defense of sovereign immunity. /6/ Thus, in every case, the district court must render a ruling at the outset of the litigation that requires it to determine whether the criteria specified by Congress for permitting claims against foreign states are satisfied. /7/ These general observations are fully applicable to the present case. As the district court correctly concluded (Pet. App. 34a), this case "is one that 'arises under' a federal law because the complaint compels the application of the uniform federal standard governing assertions of sovereign immunity. In short, the Immunities Act injects an essential federal element into all suits brought against foreign states." The court of appeals went even further (Pet. App. 12a-13a) in acknowledging the substantiality of the federal "ingredient" in this case: Undoubtedly, the FSIA, an act of Congress, will be construed if Verlinden's suit is permitted beyond the courthouse door. Delicate questions of sovereign immunity, which Congress in the Act made wholly federal * * * will be the fulcrum of considerable controversy. If decided adversely to plaintiff, * * * they will determine the outcome of the litigation. Having reached that conclusion, the court of appeals should have ruled that the case falls within the federal judicial power delineated in Article III. See Note, Suits by Foreigners Against Foreign States in United States Courts: A Selective Expansion of Jurisdiction, 90 Yale L. J. 1861, 1868 (1981) (footnotes omitted): Suits against foreign states * * * should be considered to raise a federal question that, like that incorporation of the Bank in Osborn, forms an "ingredient of the original cause." * * * An essential question * * * in every suit against a foreign state is whether federal sovereign immunity standards permit the suit. This implicit federal question is made explicit by section 1330; accordingly, that section should be considered within the federal question jurisdiction for Article III. /(8)/ 2. The court of appeals nonetheless concluded that the present case does not "arise under" federal law because the FSIA is merely "a jurisdictional statute" (Pet. App. 19a), which does not prescribe "substantive rules of decision" (id. at 17a). The labels relied on by the court of appeals, however, do not advance the constitutional inquiry. If the court of appeals were correct in concluding that those characterizations prevent a suit like the present one from falling within the Article III judicial power, then it would follow that such suits would have to be litigated in state court (see 28 U.S.C. 1602). And if the court of appeals' construction of Article III were correct, then it also would appear to follow that this Court -- which, like the district court, is an Article III tribunal -- would lack authority to review decisions rendered by state courts in such cases. This would be true even though the highest state court had rendered a final judgment applying the provisions of the FSIA, which otherwise would be reviewable in this Court under 28 U.S.C. 1257(a). This illustrates, we submit, the fundamental error in the reasoning of the court of appeals. The federal judicial power is co-extensive with the legislative power: as this Court held in Osborn, both federal appellate courts and courts of original jurisdiction may receive power from Congress to adjudicate any case that requires the construction or application of any federal law. See pages 9-13, supra. Beyond this, however, there simply is no basis for characterizing the FSIA as merely a procedural statute without "substantive" content. The "principal purpose of the FSIA was to codify contemporary concepts concerning the scope of sovereign immunity" (Dames & Moore v. Regan, No. 80-2078 (July 2, 1981), slip op. 27). The concept of sovereign immunity, which defines the circumstances in which foreign states may invoke a federal law defense, has uniformly been described as "an overriding principle of substantive law." Ex parte Peru, 318 U.S. 578, 588 (1943); see Mexico v. Hoffman, 324 U.S. 30, 36 (1945) (sovereign immunity is an "accepted rule of substantive law"); National Bank v. China, 348 U.S. 356, 362 (1955) (the doctrine of sovereign immunity derives "from standards of public morality, fair dealing, reciprocal self-interest, and respect for the 'power and dignity' of the foreign sovereign"). In short, sovereign immunity is a substantive defense that the federal government, in consideration of national policy and international custom, confers on foreign states that satisfy governing legal standards. /9/ Prior to passage of the FSIA, sovereign immunity questions were resolved by the courts in accordance with "suggestions of immunity" filed by the Attorney General on behalf of the Department of State (Ex parte Peru, supra), or, in the absence of any such suggestion, in conformity with principles accepted by the Department of State (Mexico v. Hoffman, supra). After 1952, the Department of State applied the so-called "restrictive" theory of sovereign immunity that had gained acceptance in most civil law jurisdictions instead of the traditional absolute theory of sovereign immunity. See Alfred Dunhill of London, Inc. v. Cuba, 425 U.S. 682, 698-705, 711-715 (1976). The FSIA was intended to "codify the so-called 'restrictive' principle of sovereign immunity, as presently recognized in internationl law" (H.R. Rep. No. 94-1487, 94th Cong., 2d Sess. 7 (1976)) and to place on the judiciary the duty to decide whether, in a given case, a sovereign was entitled to immunity under the standards that Congress prescribed. See id. at 6-8. Congress believed that "decisions on claims by foreign states to sovereign immunity are best made by the judiciary on the basis of a statutory regime which incorporates standards recognized under international law." Id. at 14. And while Congress believed that it had set forth "comprehensive rules governing sovereign immunity" (id. at 12), it fully recognized that courts applying its rules would be required to develop a supplemental body of case law through the litigation process. /10/ It is not difficult to apply the teaching of Osborn to cases such as this, raising immunity issues under the FSIA. Osborn establishes that Congress may confer federal court jurisdiction whenever a federal law must be "expounded," whenever a federal law forms an "ingredient" of a cause of action or defense, or whenever a "title or right" belonging to either party "may be defeated by one construction of the * * * law * * * and sustained by the opposite construction" (22 U.S. (9 Wheat.) at 818-824). Lawsuits brought under the FSIA satisfy these alternative tests because the FSIA imposes a duty on the courts to "expound" and apply its statutory criteria, because the question of sovereign immunity forms an essential "ingredient" of every such case, and because the foreign state's "right" to immunity will be "defeated by one construction of (the Act) and sustained by the opposite construction" (ibid.). /11/ C. Decisions Restrictively Construing The Scope Of Jurisdictional Statutes Are Not Applicable When Delineating Powers Granted To Congress By The Constitution The court of appeals stated (Pet. App. 10a) that, "in exploring whether Verlinden's suit 'arises under' federal law for purposes of Article III," it is appropriate to "first turn" to the "huge body" of case law interpreting 28 U.S.C. 1331. Under that statute, which grants the district courts general federal question jurisdiction over any case that "arises under the * * * laws * * * of the United States," numerous restrictive rules have been formulated to prevent an inundation of litigation in the federal judicial system. Applying those restrictive rules -- in particular, the rule requiring that a substantial federal law issue appear on the face of a well pleaded complaint -- the court of appeals found that the complaint in this case could not be upheld under 28 U.S.C. 1331. /12/ In support of that conclusion, the court relied (Pet. App. 13a-14a) on decisions such as Louisville & N.R.R. v. Mottley, 211 U.S. 149 (1908); Gully v. First National Bank, 299 U.S. 109 (1936); and Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667 (1950). Having thus "established that Verlinden's suit does not 'arise under' federal law by principles developed in cases construing Sec. 1331" (Pet. App. 15a), the court drew the further conclusion that the present case could not be brought within Article III because the scope of Article III exceeds that of Section 1331 by only a "narrow" margin (ibid.). Both the major and minor premise of this analysis are in error. 1. The decisions of this Court clearly establish that the "arising under" clause of Article III is not circumscribed by restrictive rules developed under jurisdictional statutes such as 28 U.S.C. 1331. As Justice Frankfurther observed in his opinion for the Court in Romero v. International Terminal Operating Co., 358 U.S. 354, 379 (1959), Section 1331 is properly construed in a restrictive manner because it "is a statute, not a Constitution, we are expounding." Justice Frankfurter was quick to point out, however, that the very restrictions relied on by the court of appeals here -- and, indeed, the very precedents relied on by the court below -- are irrelevant in construing the scope of Article III (id. at 379 n.51): Of course the many limitations which have been placed on jurisdiction under Sec. 1331 are not limitations on the constitutional power of Congress to confer jurisdiction on the federal courts. See * * * Louisville & Nashville R. Co. v. Mottley, 211 U.S. 149; Gully v. First National Bank, 299 U.S. 109; Skelly Oil Co. V. Phillips Petroleum Co., 339 U.S. 667 * * * . Thus, "the grant of jurisdiction in Sec. 1331(a), while made in the language used in Art. III, is not in all respects co-extensive with the potential for federal jurisdiction found in Art. III." Powell v. McCormack, 395 U.S. 486, 515 (1969); accord, Shoshone Mining Co. v. Rutter, 177 U.S. 505, 506 (1900); National Mutual Insurance Co. v. Tidewater Transfer Co., 337 U.S. 582, 614 (1949) (Rutledge, J., concurring). /13/ In view of these authorities, the court of appeals plainly erred when it turned "first" (Pet. App. 10a) to decisions under Section 1331 when attempting to delineate Congress' power under Article III. Congress' constitutional power is described in Osborn and its progeny, not in cases decided under Section 1331. And, as discussed on pages 9-18, supra, Congress acted well within its constitutional power in authorizing federal district courts to hear suits like the present suit brought under the FSIA. /14/ 2. Even though it is not necessary for the present complaint to survive scrutiny under pleading rules developed by the courts under Section 1331, we observe that Verlinden's complaint would in fact be sufficient even if those rules did apply. Section 1331 is satisfied if "the right to relief depends upon the construction or application of the Constitution or laws of the United Sates * * * ." Smith v. Kansas City Title & Trust Co., 255 U.S. 180, 199 (1921); see also Assocation of Salaried Employees v. Westinghouse Corp., 348 U.S. 437, 450 (1955). The complaint in this case plainly meets that standard. In every suit brought under the FSIA, the plaintiff must plead facts sufficient to show that the sovereign defendant is not entitled to immunity under federal criteria, for otherwise the district court would lack jurisdiction. The legislation is structured to provide for immunity in all cases unless a statutory exception is applicable. See 28 U.S.C. 1604. And under 28 U.S.C. 1330 (a), the district court has "jurisdiction" only in cases "with respect to which the foreign state is not entitled to immunity" under the provisions of the Act. /15/ Accordingly, Verlinden's complaint necessarily contained an allegation of jurisdiction under Section 1330(a) (see C.A. App. 325a), including an allegation of facts sufficient to establish non-immunity under 28 U.S.C. 1604-1605. /16/ Thus, the court of appeals clearly erred in asserting (Pet. App. 13a) that "the issue of sovereign immunity is not disclosed by Verlinden's well-pleaded complaint." II. CONGRESS HAS POWER TO CONFER JURISDICTION ON FEDERAL DISTRICT COURTS TO HEAR SUITS BROUGHT BY FOREIGN PLAINTIFFS AGAINST FOREIGN STATES UNDER THE FSIA BECAUSE FEDERAL COURT JURISDICTION IS ESSENTIAL TO SAFEGUARD IMPORTANT STATUTORY POLICIES As we have demonstrated above, Congress has constitutional power to confer jurisdiction on Article III courts to entertain suits brought against foreign sovereigns under the FSIA because every such suit raises substantive federal law issues requiring adjudication. Under Osborn v. Bank of the United States, supra, this in itself is a sufficient basis for upholding Congress' grant of jurisdiction. But even if this Court were to disagree with that submission, the FSIA still would be constitutional as applied to this case. That is so because Congress has constitutional power to vest federal courts with "protective jurisdiction" (Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 460 (1957) (Burton, J., concurring)) to hear certain types of cases that do not involve any substantive issue of federal law. This Court has not yet settled how far Congress may go in vesting Article III tribunals with power to entertain such cases. In National Mutual Insurance Co. v. Tidewater Transfer Co., 337 U.S. 582, 600 (1949), Justices Jackson, Black and Burton concluded that Congress has constitutional power to extend federal court jurisdiction to every subject over which it has power to legislate under Article I: "We conclude that where Congress in the exercise of its power under Art. I finds it necessary to provide those on whom its power is exerted with access to some kind of court or tribunal for determination of controversies that are within the traditional concept of the justiciable, it may open the regular federal courts to them regardless of lack of diversity of citizenship." /17/In the present case, there is no need to pursue this principle to its limit -- i.e., the situation before the Court in Tidewater, where Congress opened the doors of the federal district courts solely to safeguard the interests of a particular class of litigants. In enacting the FSIA, Congress determined, in the exercise of its powers under Article I of the Constitution, that federal court jurisdiction is essential to safeguard the vital interests of the entire nation in the field of foreign relations. Congress conceived of federal court jurisdiction as a tool to pursue specific statutory policies: uniform treatment of sovereign nations and avoidance of conflicts in foreign affairs. The decisions of this Court leave little doubt that Congress may confer federal court jurisdiction when it is essential to give effect to such a statutory plan. "The protective forum in such circumstances is then, principally, a shield for federal legislation. In a very real sense do all such cases 'arise under' the laws establishing the congressional plan, within the meaning of Article III." Mishkin, The Federal "Question" in the District Courts, 53 Colum. L. Rev. 157, 196 (1953) (emphasis in original). A. Controversies "Arise Under" Federal Law When Congress Determines That Their Resolution By Federal Courts Is Essential To Give Full Effect To A Statutory Program The principle that federal courts may entertain controversies raising non-federal issues in order to protect federal statutory policies has its origin in Osborn v. Bank of the United States, supra. Although this Court noted in Osborn that every action involving a federally chartered bank raises a potential question of federal law, it did not limit its holding to cases where such issues were present. It broadly ruled that Congress can open the doors of the federal courts to all controversies involving the legal rights of national banks. See Bank of the United States v. Planters' Bank, 22 U.S. (9 Wheat.) 904, 905 (1924). As Professor Mishkin has observed, "(t)he Osborn case indicates that there are situations in which Congress may, within the 'arising under' clause of Article III, use the 'inferior' federal courts as a means of protecting interests around which it proposes to throw its cloak." Mishkin, The Federal "Question" in the District Courts, supra, 53 Colum. L. Rev. at 188. The need for conferring this form of protective jurisdiction shortly after the formation of the federal government was sufficiently clear: "The Bank (of the United States) was the object of great popular hatred and of measures of reprisal by many state legislatures. It was sadly in need of a federal haven for its litigation." Shulman & Jaegerman, Some Jurisdictional Limitations on Federal Procedure, 45 Yale L. J. 393, 405 (1936). Subsequently, in Schumacher v. Beeler, 293 U.S. 367 (1934), this Court held that Congress may vest jurisdiction in the federal district courts to hear claims asserted by bankruptcy trustees, even though those claims rest solely on state law and even though "diversity of citizenship" is absent. The Court concluded that "Congress, by virtue of its constitutional authority over bankruptcies, could confer or withhold jurisdiction to entertain such suits and could prescribe the conditions upon which the federal courts should have jurisdiction." Id. at 374. The Court reached the same result in Williams v. Austrian, 331 U.S. 642, 658 (1947), where it noted that Congress intended under the bankruptcy laws to "establish the jurisdiction of federal courts to hear plenary suits brought by a reorganization trustee, even though diversity or other usual ground for federal jurisdiction is lacking." See also Lathrop v. Drake, 91 U.S. 516, 618 (1875), holding that an assignee in bankruptcy may sue in federal court regardless of citizenship: "a uniform system of bankruptcy, national in its character, ought to be capable of execution in the national tribunals, without dependence upon those of the States in which it is possible that embarrassments might arise." As Justice Jackson later observed in National Mutual Insurance Co. v. Tidewater Transfer Co., supra, 337 U.S. at 599, these bankruptcy cases "called for a determination of no law question except those arising under state laws. The only way in which any law of the United States contributed to the case was in opening the district courts to the trustee, under Art. I. powers of Congress * * * ." In later years, plurality opinions of the Court have addressed the scope of Congress' power to vest Article III courts with jurisdiction to entertain controversies raising non-federal issues. In National Mutual Insurance Co. v. Tidewater Transfer Co., supra, 337 U.S. at 600, this Court upheld a federal statute that conferred jurisdiction on federal district courts to hear civil actions between citizens of the District of Columbia and citizens of the several states. The claims in those cases rested solely on state law; moreover, this Court previously had held that such cases did not fall within the diversity of citizenship clause of Article III. Hepburn v. Ellzey, 6 U.S. (2 Cranch) 445 (1805). Justice Jackson's plurality opinion nonetheless concluded that federal jurisdiction could be asserted as an incident of Congress' legislative power over the District of Columbia under Article I. The Court returned to these issues in Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 456-457 (1957), which upheld the constitutionality of Section 301 of the Labor Management Relations Act, 29 U.S.C. 185. Section 301 empowers federal district courts to adjudicate collective bargaining disputes "without regard to the citizenship of the parties." The Court found that Congress intended federal courts to "fashion federal law" under this provision (353 U.S. at 457) and that cases arising under the provision therefore were cases arising under federal law within the meaning of Article III. Justices Burton and Harlan, however, disagreed that "the substantive law to be applied in a suit under Sec. 301 is federal law." Id. at 460. Nonetheless, they concurred in the Court's judgment because they believed that "the constitutionality of Sec. 301 can be upheld as a congressional grant to Federal District Courts of what has been called 'protective jurisdiction.'" Ibid. And while Justice Frankfurter, in his dissenting opinion in Lincoln Mills, criticized the broad view of "protective jurisdiction" endorsed by Justices Burton and Harlan (id. at 469-484), he too recognized the propriety of granting federal courts jurisdiction over non-federal claims based on "the presence of some substantial federal interest" on "the presence of some substantial federal interest" (id. at 483-484). Justice Frankfurter acknowledged that protective jurisdiction was appropriate in bankruptcy cases such as Beeler and Williams because "the whole purpose of the congressional jurisdiction * * * " (id. at 484). These decisions confirm that Congress may open the doors of the federal courthouse to suits raising only non-federal issues if that is essential to facilitate a statutory program enacted pursuant to Article I of the Constitution. In summarizing this line of cases, Professor Mishkin has observed (The Federal "Question" in the District Courts, supra, 53 Colum. L. Rev. at 195): In the net analysis, the function served by the federal judicial "haven" in such cases is not so much the defense of the specific interests concerned, as the protection of the congressional legislative program in the area. And that will be the situation in any area of active national regulation. Regardless of the source of the law applicable to a particular case, an uninformed or hostile attitude on the part of the tribunal deciding cases in such an area might well constitute a significant stumbling block in the way of effectuating federal policy. Even in cases where no specific statutory provision is itself involved, the overall federal policy thus may nonetheless be better protected if all connected litigation is adjudicated by courts well versed in, and receptive to, the national policies established by the legislation. Accordingly, when it is necessary to centralize a category of litigation in the fedral district courts to achieve the objectives of a statutory program, such litigation is properly said to "arise under" the laws establishing the congressional plan. This is true regardless of the source of substantive law to be applied. Id. at 195-196. /18/ As we demonstrate below, cases arising under the FSIA are cases in which weighty statutory policies depend on an invocation of the jurisdiction of the federal district courts. Thus, even under the most restrictive view of the "protective jurisdiction" principle, as articulated by Justice Frankfurter in his dissenting opinion in Lincoln Mills (353 U.S. at 484), Congress may confer jurisdiction because "the whole purpose of the congressional legislative program * * * require(s) the availability of federal jurisdiction * * * ." B. In The Exercise Of Its Article I Power Over Foreign Affairs And International Commerce, Congress Reasonably Determined That Federal Courts Must Be Available To Adjudicate Suits Brought Against Foreign States As this Court has observed, the provisions of the Constitution, giving the federal government pervasive power over international commerce and foreign affairs (see United States Constitution, Article I, Section 8, Clauses 3, 10; Article II, Sections 2, 3; Article III, Section 2), reflect "a concern for uniformity in this country's dealings with foreign nations and * * * a desire to give matters of international significance to the jurisdiction of federal institutions. Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 427 n.25 (1964). /19/ Assertions of state authority in matters of international importance "may disturb foreign relations." Zschernig V. Miller, 389 U.S. 429, 441 (1968). Such assertions have "a direct impact upon foreign relations and may well adversely affect the power of the central government to deal with those problems." Ibid. These observations are particularly germane to assertions of judicial power. "Every judicial action exercising or relinquishing jurisdiction over * * * a foreign government has its effect upon our relations with that government." Mexico v. Hoffman, 324 U.S. 30, 35 (1945). See also Ex parte Peru, 318 U.S. 578, 588-589 (1943). Indeed, a foreign sovereign may perceive a particular assertion of jurisdiction as "an affront to its dignity," with profound implications for the foreign relations of the nation. Mexico v. Hoffman, supra, 324 U.S. at 35-36. /20/ As described on pages 1-3, supra, the FSIA represents an exercise by Congress of its Article I power to establish guidelines for the conduct of litigation against foreign nations that will safeguard the vital policy interests of the United States. In enacting this statute, Congress carefully reviewed the scope of its constitutional authority (H.R. Rep. No. 94-1487, 94th Cong., 2d Sess. 12 (1976)): Constitutional authority for enacting such legislation derives from the constitutional power of the Congress to prescribe the jurisdiction of Federal courts (art. I, sec. 8, cl. 9; art. III, sec. 1); to define offenses against the "Law of Nations" (art. I, sec. 8, cl. 10); to regulate commerce with foreign nations (art. I, sec. 8, cl. 3); and "to make all Laws which shall be necessary and proper for carrying into Execution * * * all * * * Powers vested * * * in the Government of the United States * * * ." In the exercise of this authority, Congress determined that reliance on the jurisdiction of the federal district courts was essential to achieve its regulatory objectives. The jurisdictional grant was needed "to encourage the bringing of actions against foreign states in Federal courts" (id. at 13), and thus to promote uniform treatment of foreign states and avoid harmful consequences to our international relations. As the House Report explains (id. at 12-13): Section 1330 provides a comprehensive jurisdictional scheme in cases involving foreign states. Such broad jurisdiction in the Federal courts should be conducive to uniformity in decision, which is desirable since a disparate treatment of cases involving foreign governments may have adverse foreign relations consequences. See also 122 Cong. Rev. 17466 (1976) (analysis of proposed legislation by Sen. Hruska). From the beginning of the development of the proposed legislation, the drafters stressed the importance of federal court jurisdiction to achievement of statutory policies (119 Cong. Rec. 2219 (1973)): Original jurisdiction is accorded to the federal courts because certain actions against foreign states, no longer possessed of absolute immunity, may be politically sensitive and may impinge in an important way on the conduct of foreign relations. Moreover, original jurisdiction in the federal courts should be conducive to uniformity of decision, and the federal courts may be expected to have a greater familiarity with international law and with the trend of decision in foreign states than would be true of courts of the States. These concerns were deemed implicated even when causes of action rest on "state law" (ibid.). Congress' belief that federal court jurisdiction under the FSIA is essential to serve the foreign policy interests of the United States also appears in its determination that every suit commenced in state court may be removed by the foreign state to federal court. 28 U.S.C. 1441(d). The House Report explains the need for removal jurisdiction as follows (H.R. Rep. No. 94-1487, supra, at 32): In view of the potential sensitivity of actions against foreign states and the importance of developing a uniform body of law in this area, it is important to give foreign states clear authority to remove to a Federal forum actions brought against them in the State courts. New subsection (d) of section 1441 permits the removal of any such action at the discretion of the foreign state, even if there are multiple defendants and some of these defendants desire not to remove the action or are citizens of the State in which the action has been brought. See 122 Cong. Rev. 17471 (1976) (analysis of the bill introduced by Senator Hruska); see also the colloquy between Rep. Danielson and Bruno Ristau of the Department of Justice (Immunities of Foreign States: Hearings Before the Subcomm. on Claims and Governmental Relations of the House Comm. on the Judiciary, 93d Cong., 1st Sess. 30 (1973)): Mr. Ristau. * * * Now there have been repeated attempts to subsume foreign sovereign governments to the jurisdiction of State courts and, on occasion, by means of attachment, litigants have succeeded in bringing suits in State courts. * * * Mr. Danielson. What we are simply doing here would be to try to provide certainty that these can be removed at the request of the foreign state to the U.S. district court? Mr. Ristau. Yes, sir, we feel the question of the suability of a foreign government in the courts of the United States is inextricably intertwined with one aspect of foreign relations. As a result of this, we feel and we are convinced that the Congress has absolute authority to legislate in this area. As these passages demonstrate, Congress reasonably believed that a broad grant of original and removal jurisdiction was essential "to minimize irritations in foreign relations" (H.R. Rep. No. 94-1487, supra, at 45). Thus, in passing the FSIA, Congress defined with precision a narrow class of cases that necessarily implicate the strong federal interest in foreign relations and international commerce. /21/ Cases of this kind are precisely the type that logically fall within the jurisdiction of the national government. /22/ They are cases in which the government must speak consistently, impartially, and with a clear regard for the role of the United States in the community of nations. /23/ In view of Congress' careful consideration of its constitutional authority, and its express findings on the need to utilize the jurisdiction of the federal district courts to give effect to the statutory plan, this Court's decisions recognizing the principle of "protective jurisdiction" (see pages 21-27, supra) have direct application. "Congress, after careful consideration, determined that it preferred, and had the power to utilize" this jurisdictional scheme. Palmore v. United States, 411 U.S. 389, 409 (1973). Congress' judgment that invocation of federal court jurisdiction is essential to the success of the statutory program, and therefore to the exercise of its powers under Article I, is entitled to great respect. See Rostker v. Goldberg, No. 80-251 (June 25, 1981), slip op. 6. Fullilove v. Klutznick, 448 U.S. 448, 472 (1980). Indeed, as this Court has stated with regard to jurisdictional statutes challenged under Article III: "Every doubt is to be resolved in favor of the constitutionality of the law." The Mayor v. Cooper, supra, 73 U.S. (6 Wall.) at 251. Such deference is appropriate here. Instead of relying on its own notions of "history, good sense, and sound concepts of judicial administration" (Pet. App. 20a), the court of appeals should have deferred to Congress' reasonable judgment on the necessity for the jurisdictional scheme that it selected. See National Mutual Insurance Co. v. Tidewater Transfer Co., supra, 337 U.S. at 603 (opinion of Jackson, J.). CONCLUSION The judgment of the court of appeals should be reversed. Respectfully submitted. REX E. LEE Solicitor General J. PAUL MCGRATH Assistant Attorney General KENNETH S. GELLER STEPHEN M. SHAPIRO Deputy Solicitors General WILLIAM KANTER ELOISE DAVIES KAREN CZAPANSKIY Attorneys MARCH 1982 /1/ Act of October 21, 1976, Pub. L. No. 94-583, 90 Stat. 2891-2898. The FSIA is codified at 28 U.S.C. 1330, 1332(a) (2)-(4), 1391(f), 1441(d), and 1602-1611. /2/ Given the unambiguous language used in the statute, reference to the legislative history for evidence of congressional intent is unnecessary. See 1 Moore's Federal Practice Sec. 0.66(4) at 700.178-700.179 (2d ed. 1980) ("the plain intention is to confer on the district court jurisdiction of an action by an alien against a foreign state if the action otherwise meets the requirements of that section"). Congress is not required "to state in committee reports or elsewhere in its deliberations that which is obvious on the face of a statute." Harrison v. PPG Industries, Inc., 446 U.S. 578, 592 (1980). In any event, the legislative history confirms that Congress fully intended the "naturally broad and inclusive meaning" of the words that it selected. Pfizer Inc. v. India, 434 U.S. 308, 312 (1978). See Pet. App. 5a-8a. Closing the doors of the federal courts to foreign plaintiffs who bring suit against foreign sovereigns in this country would defeat a major purpose of the statute. As discussed on pages 27-33, infra, Congress believed that federal court jurisdiction must be available in all suits brought against foreign nations because assertions of jurisdiction by state tribunals, over the objection of a foreign government, would produce serious irritations in international relations. See also page 15 of our brief as amicus curiae at the certiorari stage. /3/ See The Mayor v. Cooper, 73 U.S. (6 Wall.) 247, 251 (1867): "The broadest language is used. 'All cases' so arising are embraced. None are excluded." /4/ Contrary to the suggestion of the court of appeals (Pet. App. 20a n.26), this Court's decision in the Pacific RR. Removal Cases "has been limited by statute but never by subsequent constitutional construction." National Mutual Insurance Co. v. Tidewater Transfer Co., 337 U.S. 582, 615 (1949) (Rutledge, J., concurring). /5/ See 13 C. Wright, A. Miller & E. Cooper, Federal Practice & Procedure Sec. 3562 at 400 (1975) ("The very expansive reading Marshall gave to the 'cases arising under' language of the Constitution is appropriate in dealing with a constitution. It leaves room for Congress to grant such particular jurisdiction as may in the future be seen to be necessary"); American Law Institute, Study of the Division of Jurisdiction Between State and Federal Courts 482 (1969); Chadbourn & Levin, Original Jurisdiction of Federal Questions, 90 U. Pa. L. Rev. 639, 649 (1942). See also Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 471 (1957) (Frankfurter, J., dissenting on other grounds ("federal jurisdiction under the 'arising' clause of the Constitution, though limited to cases involving potential federal questions, has such flexibility that Congress may confer it whenever there exists in the background some federal proposition that might be challenged, despite the remoteness of the likelihood of actual presentation of such a federal question"). /6/ Foreign sovereign immunity, unlike, for example, the sovereign immunity of the states, is a federally-created defense wholly dependent upon the details of federal common law or governing statute. /7/ The statute forbids the entry of a default judgment against a foreign state "unless the claimant establishes his claim or right to relief by evidence satisfactory to the court." 28 U.S.C. 1608(e). Accordingly, even if the foreign state does not appear to assert its immunity defense, the district court still must verify that immunity is unavailable and that the criteria prescribed by Congress have been satisfied. See, e.g., International Association of Machinists v. OPEC, 649 F.2d 1354, 1356-1358 (9th Cir. 1981), cert. denied, No. 81-645 (Jan. 11, 1982) (conducting a full hearing to determine if a defaulting sovereign was entitled to assert the defense of sovereign immunity); Ipitrade International, S.A. v. Nigeria, 465 F. Supp. 824, 827 (D.D.C. 1978). And even if a foreign state waives its immunity, the trial judge still must decide that the terms of the waiver comport with the federal standard prescribed in 28 U.S.C. 1605(a)(1). In the absence of such a finding, the court cannot proceed with the case under 28 U.S.C. 1330(a). /8/ The FSIA also prescribes the "extent of liability" in every suit, and thus injects an additional federal law "ingredient." See 28 U.S.C. 1606; see also Kane, Suing Foreign Sovereigns: A Procedural Compass, 34 Stan. L. Rev. 385, 391 (1982). /9/ Congress declined to give the FSIA retroactive effect (see 90 Stat. 2898; H.R. Rep. No. 94-1487, 94th Cong., 2d Sess. 33 (1976)) because it recognized that the statute is "not only procedural" but also "substantive" (Immunities of Foreign Sates: Hearings Before the Subcomm. on Claims and Governmental Relations of the House Comm. on the Judiciary, 93d Cong., 1st Sess. 21 (1973)). /10/ Thus, Congress believed that courts construing the FSIA would be required to "fashion federal law where federal rights are concerned." Textile Workers Union v. Lincoln Mills, supra, 353 U.S. at 457. For example, while the Act withholds immunity for commercial acts, "(t)he courts would have a great deal of latitude in determining what is a 'commercial activity' for purposes of this bill." H.R. Rep. No. 94-1487, supra, at 16. /11/ The court of appeals apparently was of the view that the federal standards prescribed by Congress in the FSIA are beyond the scope of the federal judicial power because they "do not regulate() conduct outside the courtroom" (Pet. App. 18a n.24; see also id. at 14a). In fact, however, the conduct of parties outside the courtroom is regulated by the FSIA in the same sense that all substantive legal provisions affect conduct: if a foreign state wishes to structure its business transactions to permit, or to preclude, litigation and subsequent liability in this country, it must attend to the provisions of the FSIA. Thus, whether a foreign state waives its defense of immunity by agreeing to arbitrate here, or subjects itself to damages by engaging in commercial activity with a direct effect in the United States, it will be the substantive provisions of the FSIA that will guide its conduct and govern its liability. /12/ The court remarked that "the issue of sovereign immunity is not disclosed by Verlinden's well-pleaded complaint" (Pat. App. 13a). /13/ See also 13 C. Wright, A. Miller & E. Cooper, Federal Practice & Procedure, supra, at 400; Mishkin, The Federal "Question" in the District Courts, 53 Colum. L. Rev. 157, 162 (153). /14/ The court of appeals also found support for its restrictive constitutional ruling (Pet. App. 16a-18a) in this Court's opinions in Mossman v. Higginson, 4 U.S. (4 Dall.) 12 (1800), and Hodgson v. Bowerbank, 9 U.S. (5 Cranch) 303, 304 (1809). However, those cases dealt only with Article III's grant of judicial power over controversies "between a state, or the citizens thereof, and foreign states, citizens or subjects." They correctly rejected the claim that this limited grant of diversity jurisdiction encompasses suits between two aliens. Neither Mossman nor Hodgson addressed the question presented here: whether a case brought under a statute enacted by Congress pursuant to its Article I powers, which sets forth comprehensive standards for adjudicating the immunity and scope of liability of foreign nations, is a case "arising under" a federal statute within the meaning of Article III. /15/ See Weber, The Foreign Sovereign Immunities Act of 1976: Its Origin, Meaning, and Effect, 3 Yale Studies in World Public Order 1, 14 (1976): "if the action at hand is in federal court and its sole jurisdictional basis is the foreign public character of the defendant, the plaintiff must plead * * * an absence of immunity * * * since the existence of immunity will be a jurisdictional question." The legislative history confirms that the statute "starts from a premise of immunity." H.R. Rep. No. 94-1487, supra, at 17. Although the House Report refers to immunity as an "affirmative defense" (ibid.), the statute is drafted in such a way that absence of immunity must be pleaded by the plaintiff as a predicate for federal court jurisdiction. /16/ The complaint alleges that Central Bank engaged in "large-scale commercial activity carried on in the United States" and also engaged in "acts performed in the United States * * * in connection with a commercial activity of said defendant elsewhere" (C.A. App. 329a). The complaint supports these general allegations with considerable factual detail (see id. at 326a-328a, 330a-331a). The complaint therefore pleads facts sufficient to show non-immunity under the standards prescribed in 28 U.S.C. 1605(a)(2). /17/ "In other words if Congress can validly legislate concerning a matter it may constitutionally confer jurisdiction upon the federal courts of any claim arising within the ambit of that legislative power." Moore's Commentary on the U.S. Judicial Code Paragraph 0.03(22) at 138 (1949). Other distinguished commentators have formulated the principle in similar terms. See Wechsler, Federal Jurisdiction and the Revision of the Judicial Code, 13 Law & Contemp. Prob. 216, 224-225 (1948); Bickel & Wellington, Legislative Purpose and the Judicial Process: The Lincoln Mills Case, 71 Harv. L. Rev. 1, 20 (1957); see also P. Bator, P. Mishkin, D. Shapiro & H. Wechsler, The Federal Courts and The Federal System 415-417, 866-870 (2d ed. 1973) (hereinafter cited as Hart & Wechsler). /18/ In The Propeller Genesee Chief v. Fitzhugh, 53 U.S. (12 How.) 443, 451-452 (1951), the Court stated in dictum that Congress could not use its power to regulate interstate commerce to expand the admiralty jurisdiction of federal district courts in the absence of some legislation having regulatory purpose or effect. The Court observed that the statute in question "merely confers a new jurisdiction on the district courts; and this is its only object and purpose." As noted on pages 13-15, supra, and 28-37, infra, that dictum has no application to the FSIA, whatever its correctness. The FSIA is a comprehensive enactment setting forth a statutory program to assure uniform treatment of foreign sovereigns and to harmonize international relations. In the words of Professor Mishkin, Congress has "established and affirmatively enacted (a statute) expressing a national policy in the area concerned * * * ." Mishkin, The Federal "Question" in the District Courts, supra, 53 Colum. L. Rev. at 195. /19/ "That the national government should have exclusive power to deal with foreign nations was common ground at the (Constitutional) Convention." Hart & Wechsler, supra, at 15-16. See also Dickinson, The Law of Nations as Part of the National Law of the United States, 101 U. Pa. L. Rev. 26, 55 (1952). /20/ In The Federalist No. 80 at 534, 536 (Cooke ed. 1961), Alexander Hamilton stressed the importance of federal jurisdiction over cases "which involve the Peace of the Confederacy," including those which concern "the intercourse between the United States and foreign nations." He observed that "(t)he union will undoubtedly be answerable to foreign powers for the conduct of its members. And the responsibility for an injury ought ever to be accompanied with the faculty of preventing it." At the time the Constitution was adopted, foreign sovereigns enjoyed absolute immunity. The Schooner Exchange v. McFadden, 11 U.S. (7 Cranch) 116 (1812). However, to the extent that foreign nations were amenable to suit -- i.e., through their diplomatic officers -- Article III left no doubt about the necessity for federal jurisdiction. Under Article III, Section 2, the federal judicial power extends to "all Cases affecting Ambassadors, other public Ministers and Consuls." /21/ The FSIA is drafted in such a way that only cases having a substantial "connection" with the United States will be litigated in federal court. See H.R. Rep. No. 94-1487, supra, at 13. This requirement was intended to "insure that only those idsputes which have a relation to the United States are litigated in the courts of the United States, and that our courts are not turned into small 'international courts of claims.'" Jurisdiction of U.S. Courts in Suits Against Foreign States: Hearings Before the Subcomm. on Administrative Law and Governmental Relations of the House Comm. on the Judiciary, 94th Cong., 2d Sess. 31 (1976) (remarks of Mr. Ristau). /22/ See Jurisdiction of U.S. Courts in Suits Against Foreign States: Hearings Before the Subcomm. on Administrative Law and Governmental Relations of the House Comm. on the Judiciary, supra, at 35-36 (1976) (remarks of Mr. Ristau): "we have a somewhat incongruous situation right now. * * * (T)he constitution itself and the Judicial Code provide that foreign ambassadors who are but representatives of foreign states * * * may be sued only in Federal courts. The Federal courts have exclusive jurisdiction. Yet * * * their principal, the foreign government itself, under existing law * * * can be sued in any municipal court anywhere in the United States." /23/ "For local interests the several States of the Union exist, but for national purposes, embracing our relations with foreign nations, we are but one people, one nation, one power." The Chinese Exclusion Case, 130 U.S. 581, 606 (1889). Thus, to the extent that Congress provides that suits against foreign sovereigns may be adjudicated in federal court, it is exercising power of a kind traditionally vested in the national government and is not encroaching on the authority of the states.