Exxon v. CIMEX and the Erosion of Foreign Sovereign Immunity

In law, as in life, actions have consequences. Sometimes these consequences happen immediately; other times the law takes a more circuitous route to final judgment. When foreign countries are defendants, that route can be particularly lengthy, because foreign states enjoy substantial protections from ordinary legal action. Still, eventually, time catches up—as Cuba recently discovered in Exxon Mobil Corp. v. Corporacion CIMEX, S.A. But the real significance of Exxon lies beyond Cuba, because in Exxon, the Court held that Congress could strip a foreign sovereign of its immunity by implication without ever stating this explicitly. That holding further weakens an increasingly fragile conception of sovereign immunity, and, as foreign governments will surely soon notice, unsettles the safety of the assets they hold in the United States.

The controversy at the heart of Exxon began in 1959, when Cuban revolutionaries overthrew the American-friendly Batista government. As part of a series of economic reforms, the new government nationalized extensive assets, including those owned by Esso Standard Oil S.A. (Essosa), a wholly owned corporate subsidiary of Standard Oil.

Corporations around the world were affected by the Cuban nationalizations, but perhaps because the Batista government had particularly close economic ties with the United States, and perhaps because Havana was so geographically close to American corporations based in Florida and the American Southeast, the United States was particularly motivated to pursue economic compensation. After pursuing diplomatic negotiations unsuccessfully for many years, in 1964 the United States passed the Cuban Claims Act to help address the issue. Pursuant to the Cuban Claims Act, the United States directed the Foreign Claims Settlement Commission to determine the validity of claims for losses resulting from nationalization.

In 1969, the commission certified Standard Oil’s claim for approximately $72 million. This claim was subject to further damages multipliers as well as interest that continued to compound annually. Exxon’s certified claim is now valued at over $5 billion, one of the largest certified and unsettled claims on the record.

But there is an old proverb that possession is nine-tenths of ownership. So too in the Exxon saga. Following certification, Exxon held an on-paper claim for a substantial sum of money. But there was no private cause of action to pursue the claim, because American law did not contain a cause of action for a suit against Cuba

Then, in 1996, a Cuban expatriate nonprofit flew one of a series of humanitarian missions over Cuba. The Cuban government, fearing that the overflight was hostile, shot down two planes, killing four aviators. The U.S. Congress was outraged; the Cuban government, in its view, had just intentionally murdered humanitarian volunteers trying to help alleviate poverty in Cuba. Congress then turned that outrage into legislation: the Helms-Burton Act of 1996.

The Helms-Burton Act contained dozens of legislative provisions, including Title III, which created, for the first time, a private cause of action that allowed lawsuits against the Cuban government or any Cuban state-owned entity to enforce a commission award. Title III was originally scheduled to take effect in 1997. However, Congress recognized that the diplomacy between the United States and Cuba was ever-changing, particularly considering the collapse of the Soviet Union. Accordingly, Congress permitted the president to suspend Title III and prevent it from taking effect through a simple executive declaration.

From 1996 to 2019, every president suspended Title III every six months, precluding Exxon and all other parties from filing claims. But then, in 2019, President Trump decided not to suspend Title III, hoping to put economic pressure on Cuba by reducing foreign investment, and Title III has remained in effect ever since. Pursuant to Title III, on May 2, 2019, Exxon filed a complaint at the U.S. District Court for the District of Columbia, seeking enforcement of the commission award—the same day that Title III took effect.

Exxon identified several Cuban entities as potentially relevant defendants, most notably CIMEX, a sprawling Cuban state-owned conglomerate. Exxon alleged that CIMEX continued to traffic and utilize Exxon’s expropriated property, and that therefore Exxon was entitled to secure a judgment against the corporation and, potentially, to seize any assets in the United States.

Predictably, CIMEX immediately responded to Exxon’s complaint by invoking foreign sovereign immunity. CIMEX argued that, pursuant to the Foreign Sovereign Immunities Act (FSIA), it enjoyed immunity from civil lawsuits seeking to enforce private damages awards.

The FSIA developed from the principle of comity, itself based on the international law principle of equality between sovereigns. Comity extended the near-absolute courtesy from diplomatic history that almost always dismissed outright suits against foreign states. The principle of comity has been recognized since the earliest days of the American republic, when courts recognized that the vessels of friendly sovereigns were beyond the reach of American courts. But the 1976 Foreign Sovereign Immunities Act formalized this doctrine into a distinct form of immunity that foreign sovereigns could assert in response to lawsuits in the United States. Still, FSIA immunity comes with several limitations. Particularly relevant to Exxon v. CIMEX, the FSIA conceptualizes foreign sovereign immunity as codified through an act of Congress, albeit one based on international law. In other words, through the FSIA, Congress took over responsibility for amending American law to protect the legal status of foreign states. In so doing, Congress created the immunity statutorily, rather than relying on an international doctrine of law inherent to the existence of states qua states. Accordingly, the FSIA squarely makes foreign sovereign immunity philosophically (at least for U.S. domestic law purposes) a privilege granted by Congress. What Congress giveth, Congress can take away. The FSIA recharacterization was itself a narrowing, and now Exxon has constrained foreign sovereign immunity even more.

^{The question in Exxon was whether the FSIA precluded suits brought under Title III of the Helms-Burton Act. When Congress passed Title III, it unquestionably sought to create a private cause of action for companies like Exxon. But did Congress also intend to abrogate foreign sovereign immunity? Was the intent of Title III to allow private challenges that might succeed? Or was the intent to allow private challenges, but to allow Cuban entities to continue to assert sovereign immunity—at least for now?}

Exxon argued that the purpose of Title III was clearly to give companies like itself that hold certified claims the right to sue and the possibility to collect. Because foreign sovereign immunity is so broad, if a defendant could assert foreign sovereign immunity in response to any lawsuit brought under Title III, then Title III would have very little practical impact. Accordingly, Exxon argued that it is most reasonable to construe Title III as also abrogating foreign sovereign immunity.

CIMEX argued instead that the clear statement rule requires Congress to state plainly and clearly why and when it abrogates immunity. Although Congress created a private cause of action through Title III, it did not expressly state that it intended to abrogate the FSIA with respect to Cuba. Accordingly, Cuba should still be able to invoke foreign sovereign immunity as a defense to lawsuits brought under Title III.

The U.S. District Court for the District of Columbia initially ruled, in Exxon v. CIMEX, that Title III did abrogate the FSIA and that accordingly CIMEX was not permitted to raise the FSIA as a defense.

At the U.S. Court of Appeals for the D.C. Circuit, a three-judge panel reviewed the holding that Title III abrogated the FSIA. In a 2-1 decision, with Judge A. Raymond Randolph dissenting, the D.C. Circuit held that the district court had erred, and, in fact, Title III did not abrogate the FSIA. In reaching this conclusion, the circuit court relied heavily on prior cases invoking the clear statement rule, and on the canon of constitutional avoidance. The panel held that the canon favors construing Title III and the FSIA so that they are not in conflict by creating a private cause of action but maintaining the viability of a FSIA defense. In a sharp dissent, Judge Randolph held that this approach privileged form over substance. In Randolph’s view, the intent of Congress in Title III was clear: Congress sought to allow private parties to sue and, because a private suit could have a meaningful chance of recovery only if a FSIA defense was precluded, Congress must have intended to abrogate FSIA immunity as well.

Responding to the 2-1 decision, Exxon sought appeal to the Supreme Court. While there was no circuit split to remedy in this case, Exxon successfully persuaded the Court to grant cert by arguing first that the case was extremely important because it (arguably) involved invalidating an act of Congress (Title III), because billions of dollars were at stake, and because the case involved foreign policy. Second, Exxon argued that, while no circuit split had occurred, no circuit split would ever occur, because no circuit split was possible due to the venue requirements of Title III that require cases to be brought at the district court in D.C. The solicitor general, unsurprisingly reflecting recent foreign policy discussions in the Trump administration and the administration’s renewed emphasis on enforcing American priorities in the Western Hemisphere, called upon the Supreme Court to grant cert in the case after Exxon phrased the issue in such a way as to invite the solicitor general’s input.

At oral argument, Exxon counsel Morgan Ratner argued that Congress had already declared that immunity had been abrogated by authorizing lawsuits against “any person” trafficking in confiscated property and explicitly defining “person” to include agencies and instrumentalities of foreign states.

The justices, however, seemed more interested in whether Congress had spoken with sufficient precision to unsettle the established jurisdictional rule of sovereign immunity. Counsel for CIMEX argued that Congress had not, and that Title III did not contain sufficiently explicit language to remove sovereign immunity. If Congress wished to create another exception to the FSIA, it knew perfectly well how to do so. Courts should not infer an abrogation merely because Congress created a cause of action, CIMEX argued.

The Court’s eventual decision, siding with Exxon, suggested that a majority concluded Congress had spoken clearly enough after all. Still, the oral argument revealed genuine unease over how explicit Congress must be before long-settled assumptions about sovereign immunity give way.

Writing for a six-justice majority, Justice Brett Kavanaugh approached the case as one of ordinary statutory interpretation, with little focus on potential inconsistency with international law. Kavanaugh’s opinion begins with the statutory text. Title III authorizes American nationals whose property was confiscated by Cuba to sue “any person” trafficking in that property. Crucially, the statute defines “person” to include agencies and instrumentalities of foreign states. For the majority, that definition does much of the work. Justice Kavanaugh repeatedly invoked a familiar interpretive principle: Statutes should be read as coherent wholes. Numerous provisions of the Helms-Burton Act contemplate litigation against Cuban instrumentalities, calculate damages recoverable from them, and regulate the conduct of such suits. Those provisions, the Court reasoned, make little sense if Congress expected plaintiffs first to satisfy one of the FSIA’s existing immunity exceptions.

The majority rejected the argument that Congress must expressly amend the FSIA whenever it wishes to withdraw sovereign immunity. The FSIA remains the statute governing suits against foreign sovereigns, Justice Kavanaugh acknowledged. But Congress remains free to enact more specific statutes that carve out additional exceptions. Nothing in the FSIA requires Congress to use any particular verbal formula. What matters is whether the later statute speaks with sufficient clarity. In the majority’s view, the Helms-Burton Act does.

The opinion also gave considerable weight to statutory structure and historical context, including an important amicus filed by legislators who actually voted on Title III. This context, in the majority’s view, indicated that Congress enacted Title III precisely because earlier legal remedies had proved inadequate for Americans whose Cuban property had been confiscated. Interpreting the statute to preserve immunity would therefore undermine the legislation’s central purpose. Courts, the majority suggested, should hesitate before adopting an interpretation that leaves so much congressional drafting without practical consequence.

The ruling does not determine whether Exxon ultimately recovers damages, and numerous merits questions remain, along with other legal issues. But it removes what the Court regarded as an unwarranted jurisdictional barrier. More broadly, the decision reinforces a recurring theme in the Roberts Court’s statutory jurisprudence: Where Congress has spoken clearly, judges should enforce the legislative bargain as written, even when doing so carries significant consequences for international relations.

Justice Elena Kagan’s dissent, joined by Justices Sonia Sotomayor and Ketanji Brown Jackson, argued that the Court had answered the wrong question. The issue was not whether Congress wished to create a cause of action under the Helms-Burton Act, but whether it had spoken clearly enough to override the long-standing grant of foreign sovereign immunity created by the FSIA.

For the dissent, the FSIA occupies a unique place in American law. Congress is free to create exceptions, Justice Kagan acknowledged, but only if it does so expressly. Nothing in Title III of the Helms-Burton Act states that the FSIA no longer applies or that Cuban state-owned enterprises lose their immunity. That omission, she argued, should have been dispositive.

The majority, in the dissent’s view, conflated liability with jurisdiction. Congress may authorize lawsuits against a broad class of defendants, but that does not necessarily mean courts possess jurisdiction to hear those claims. The Helms-Burton Act created substantive rights; the FSIA governs whether those rights may be enforced against foreign sovereigns. Reading one statute to impliedly amend the other disregards the careful structure Congress established.

Justice Kagan also warned against weakening the clear statement rule that traditionally protects sovereign immunity. Immunity is not simply a procedural technicality but an important feature of international comity, reflecting the reciprocal respect nations extend to one another’s courts. The Court, according to the dissent, now risks encouraging future litigants to argue that sovereign immunity has been abrogated whenever Congress creates a new cause of action that authorizes a claim against a foreign sovereign.

In a Supreme Court term packed with major highlights, including the most important international trade dispute in 50 years, Exxon v. CIMEX is unlikely to really stand out. But the case has important implications and is emblematic of long-term changes in American law.

Specifically, billions of dollars in judgment will be determined by the Court’s decision. CIMEX and related entities will now owe Exxon approximately $5.3 billion, and it is highly likely Exxon will be able to secure a judgment. Enforcing that judgment may come with its own challenges—the Court addressed only jurisdictional immunity, leaving open whether the FSIA’s separate execution-immunity provisions will limit plaintiffs’ ability to attach Cuban assets—but Exxon will very likely now be in a better place to recover some money.

Zooming out, there are thousands of certified claims against CIMEX and other entities. With foreign sovereign immunity stripped as a defense, the wave of litigation that was initially anticipated when Title III took effect will likely now become a reality. Some of these claims are substantial: One amicus brief filed in Exxon v. CIMEX came from King Ranch, for instance, a corporation that asserts that it is the proper owner of another claim worth billions of dollars. And some of these claims are personal: Families holding individual claims often have strong feelings of opposition to the Cuban government and may choose to maximally litigate their rights, particularly if they can retain quality representation on a contingency basis.

Doctrinally, the decision in Exxon v. CIMEX weakens the clear statement rule requirement and could become an important precedent for litigants challenging foreign sovereign immunity. While few other statutes share Title III’s structure, American plaintiffs routinely sue foreign state-owned enterprises, for instance under RICO and antitrust law (e.g. China’s state-owned Irico Group currently faces a multibillion-dollar judgment in cathode-ray-tube price-fixing litigation), and those cases have often turned on whether the plaintiff fits an exception with the FSIA structure. After Exxon, these plaintiffs will be able to make the additional argument that the statute authorizing their private cause of action itself removes immunity, particularly if the statute was passed by Congress after the FSIA was passed. This argument may not work, but it will have to be litigated, meaning that a sovereign wealth fund or state bank can no longer gauge its exposure in American courts simply by reading the FSIA’s exceptions.

More philosophically, the decision in Exxon v. CIMEX represents a developing trend in American law. The move from a doctrine of comity based on international law to foreign sovereign immunity based on a congressional statute already represented a significant step away from nearly bulletproof immunity for foreign states and toward a more restrictive, if still very powerful, procedural defense to jurisdiction. The clear statement rule and other limiting precedents helped smooth this transition, because even if the FSIA was grounded in different philosophical principles it continued to result in the same consequence: When the challenged act was public, such as in a nationalization, the foreign sovereign nearly always prevailed.

With Exxon, the Court has held that Congress can abrogate foreign sovereign immunity without specifically clarifying that it intends to do so. In this way, foreign sovereign immunity is just another legislative privilege, albeit a very strong one based on a special category of international legal recognition.

This philosophical attitude has consequences. Although the United States has been the most powerful country in the world for many decades, following World War II the United States has historically tried to wield its legal leadership through multilateral institutions, when possible, rather than through unilateral demands.

Recent years and recent presidential administrations have seen the United States move away from these commitments. Against this global background, the move in American law from a principle of comity based on customary international law to a constrained doctrine under the FSIA, and the continuing move to constrain even that already-constrained immunity is best seen as part of a broader trend. The United States seems content to head down a road of increasingly viewing international legal norms as either codified into American law or as fundamentally unenforceable in the United States. And, again, what Congress giveth, Congress can take away.

But there is a push and pull to transnational law. As the United States extends fewer benefits to other countries that are grounded in international law or based on diplomacy, other countries are likely to put up sharper barriers to enforcement. Enforcement of American judgments is often easier for U.S.-based litigants because so many countries keep so many assets with American financial institutions. One response to changing American law will likely be for countries to withdraw these assets to limit their exposure. And another response could be for the principle of comity to begin to cut against the United States: As U.S. courts limit the protections other sovereigns receive, they invite the same erosion of immunity in suits against the U.S. abroad.

It may take years or even decades for the full impact of Exxon v. CIMEX to play out. But what is already clear is that the case is important—for the thousands of litigants who will now bring claims, for Cuba and other states doing business in the United States, and for the way that American law interprets the rights of sovereigns, and the place of the United States and its courts in the world.