Verlinden B.V. v. Central Bank of Nigeria

Supreme Court of the United States · 1983 · Federal Courts

461 U.S. 480 (1983)

Updated August 1, 2026

Federal Courtsprotective jurisdictionFSIAforeign sovereign immunityArticle IIIarising underdiversitysubject-matter jurisdiction

Facts

Nigeria contracted with Verlinden B.V., a Dutch corporation, for the purchase of cement, with Dutch law governing and arbitration in Paris. The contract contemplated an irrevocable, confirmed letter of credit through a bank in Amsterdam, but the Central Bank of Nigeria allegedly established an unconfirmed letter of credit payable through Morgan Guaranty in New York. After Nigeria's ports became clogged with cement shipments, the Central Bank directed amendments to letters of credit and notified suppliers that payment would be made only for shipments approved two months before arrival. Verlinden sued in the Southern District of New York under the FSIA, alleging anticipatory breach of the letter of credit.

Issue

Whether Congress, through the Foreign Sovereign Immunities Act of 1976, may constitutionally authorize a foreign plaintiff to sue a foreign state in a United States district court on a nonfederal cause of action. More specifically, the question was whether such jurisdiction falls within Article III.

Rule

Congress may not expand federal jurisdiction beyond Article III, but Article III's Arising Under Clause permits Congress to confer jurisdiction over FSIA suits against foreign sovereigns, including suits by foreign plaintiffs, because every such action necessarily requires application at the threshold of the FSIA's substantive federal standards governing sovereign immunity. Diversity jurisdiction alone does not support suits by a foreign plaintiff against a foreign sovereign, because a foreign plaintiff is not a State or citizen thereof within Article III.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Nordhaven Steel A/S, a Danish company based in Copenhagen, files a nonjury contract action in federal district court in Chicago against the Ministry of Transport of the Republic of Arkania, a foreign state. The contract is governed by Danish law, and the ministry argues that Article III is absent because the plaintiff is foreign and the merits claim sounds only in foreign contract law.

Assuming Congress has authorized this category of suit through the FSIA, is Article III satisfied?

Explanation. Article III is satisfied. The majority held that suits against foreign sovereigns under the FSIA arise under federal law for Article III purposes because, at the threshold of every such action, the court must determine whether a federal exception to sovereign immunity applies. That is true even when the plaintiff is foreign and the underlying merits claim is supplied by nonfederal law. The Court rejected the view that Article III depends on the well-pleaded complaint rule or on a federal cause of action appearing on the face of the complaint. (Derived from Verlinden B.V. v. Central Bank of Nigeria (1983).)