S & Davis International, Inc. v. Republic of Yemen

American company S and Davis International, Inc. (Davis) (plaintiff) filed suit to enforce an arbitration award against the General Corporation for Foreign Trade and Grains (General Corporation) and the Ministry of Supply and Trade of the Republic of Yemen (Ministry) (defendants). General Corporation contracted with Davis to purchase wheat using a letter of credit to be issued by the Bank of Yemen. The contract was also signed by and under the authority of the Ministry and contained an arbitration clause that provided that any dispute arising from the contract would be arbitrated by the Grain and Feed Trade Association (GAFTA) in London, England. When the Bank of Yemen declined to issue the letter of credit, Davis initiated a GAFTA arbitration for breach of contract against both General Corporation and the Ministry, arguing that the Ministry was the principal in the transaction because General Corporation was not an independent entity that could contract without the Ministry’s authority. The original GAFTA panel held that General Corporation was in breach of contract, and an appellate arbitration panel affirmed the finding of breach and also awarded Davis $17 million in damages. Davis then filed suit in federal district court to enforce the arbitration award and bring other claims against General Corporation and the Ministry. The Ministry moved to dismiss the lawsuit on the grounds of sovereign immunity under the Foreign Sovereign Immunities Act (FSIA). Davis opposed the Ministry’s motion, claiming that jurisdiction extended over the Ministry per the arbitration exception to immunity in Section 1605(a)(6)(B) of FSIA and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (convention). Yemen was not a signatory to the convention. The Ministry’s motion to dismiss was denied, and the Ministry appealed.