Verlinden B.V. v. Central Bank of Nigeria

The Federal Republic of Nigeria contracted with Verlinden B. V. (plaintiff), a Dutch corporation principally located in Amsterdam, The Netherlands, for 240,000 metric tons of cement. The contract required an irrevocable letter of credit payable through Slavenburg’s Bank in Amsterdam. However, the Central Bank of Nigeria (defendant), an instrumentality of the Nigerian government, executed an unconfirmed letter of credit payable through Morgan Guaranty Trust Company in New York. The cement’s delivery was delayed in the Nigerian ports, which were jammed with hundreds of other ships carrying cement from other suppliers. The Central Bank of Nigeria subsequently ordered Morgan Guaranty Trust Company to amend the letter of credit to state that payment would be made only to suppliers whose shipments were approved two months before they entered Nigerian waters. Verlinden sued the Central Bank of Nigeria in the United States District Court for the Southern District of New York, alleging subject-matter jurisdiction under an exception to sovereign immunity codified in the Foreign Sovereign Immunities Act. The district court held that a federal court has subject-matter jurisdiction to hear a suit by a foreign corporation against a foreign sovereign but nevertheless dismissed the suit, holding that the Central Bank of Nigeria, a foreign instrumentality, enjoyed sovereign immunity, and none of the act’s exceptions applied. Verlinden appealed. The Court of Appeals for the Second Circuit affirmed that a foreign plaintiff could sue in a US court under the act but held that dismissal was proper because suit pursuant to the act exceeded diversity and federal-question jurisdiction under Article III. Verlinden appealed. The United States Supreme Court granted certiorari.