Second Circuit Decision Opens the Door To Anti-Terrorism Act Suits Against Foreign States

On February 4, 2025, the U.S. Court of Appeals for the Second Circuit effectively ruled that foreign states and their agencies and instrumentalities may be sued under the Anti-Terrorism Act (ATA), provided one of the enumerated exceptions to sovereign immunity in the Foreign Sovereign Immunities Act (FSIA) applies. The decision is significant because it removes a statutory protection for foreign states and their agencies from being sued under the ATA. By crafting an exception to an otherwise unambiguous prohibition on such lawsuits, the Second Circuit’s decision has increased the litigation exposure of foreign states and their agencies and instrumentalities under the ATA.

Background

In 2014, a pro-Russian separatist organization, the so-called Donetsk People’s Republic (DPR), shot down Malaysia Airlines Flight 17 over eastern Ukraine. Plaintiffs are the surviving relatives of an American citizen, Quinn Lucas Schansman, who was killed in the attack. Plaintiffs brought ATA claims against one of the largest Russian banks, Sberbank, for allegedly providing material support to the DPR by facilitating money transfers from donors to the DPR via correspondent accounts in the United States. Plaintiffs alleged that those transfers were used to procure lethal weapons for the DPR.

The lawsuit against Sberbank raised sensitive questions of foreign sovereign immunity because Sberbank is majority-owned by the Russian state and thus qualifies as an “instrumentality” of a foreign state under the FSIA. Foreign states and their agencies and instrumentalities enjoy presumptive immunity under the FSIA from suit in U.S. courts, unless an exception to immunity applies. Likewise, the ATA on its face bars suits against foreign states and their agencies (but not instrumentalities). Sberbank moved to dismiss the complaint arguing that it was immune under both the FSIA and the ATA. Plaintiffs disputed Sberbank’s presumptive entitlement to immunity and argued that, in any event, their claims fell within the commercial activities exception to immunity under the FSIA. The district court sided with plaintiffs and denied Sberbank’s motion to dismiss.

Ruling

On appeal, the Second Circuit held that Sberbank was not immune and that the lawsuit could move forward to the merits. Judge Joseph Bianco, writing for the two-judge majority (including Judge José Cabranes), addressed four questions, two of which presented novel questions of law that will have far-reaching implications for foreign sovereigns in future ATA litigation.

First, the Second Circuit held that Sberbank was Russia’s “agency or instrumentality” and thus it was presumptively immune under the FSIA. The court explained that because the Russian Ministry of Finance owned a majority stake in Sberbank, Sberbank fell within the FSIA’s textbook definition of an agency or instrumentality of a foreign state. Relying on recent Second Circuit precedent, the court further noted that it did not matter whether Sberbank was owned by Russia’s Central Bank at the time the lawsuit was filed (as the parties disputed whether ownership by the Central Bank conferred the instrumentality status on Sberbank), because any post-filing changes in ownership are controlling for purposes of the FSIA analysis. The Second Circuit also dismissed as conclusory plaintiffs’ assertions of “gamesmanship” and that the Russian Ministry of Finance had acquired Sberbank to “engineer a sovereign immunity defense” in this litigation.

Second, having decided that Sberbank was an instrumentality presumptively immune under the FSIA, the court held that Sberbank’s commercial conduct in the United States abrogated any FSIA immunity. One of the exceptions to immunity under the FSIA is for suits that are “based upon a commercial activity carried on in the United States by a foreign state.” Here, the court explained that commercial activities exception applied because plaintiffs’ claims were “based upon” the material support allegedly provided by Sberbank to the DPR in the form of money transfers and use of correspondent accounts in the United States. “[F]acilitating money transfers,” the court explained, is a “quintessentially commercial activity” that can abrogate foreign sovereign immunity.

Third, the Second Circuit turned to the novel question of whether an ATA lawsuit could be brought against a foreign state’s instrumentality, like Sberbank. The ATA permits U.S. nationals or their heirs to sue for any injury to their “person, property, or business by reason of an act of international terrorism.” But the ATA also provides that plaintiffs may not maintain a suit under that cause of action against “a foreign state, an agency of a foreign state, or an officer or employee of a foreign state or an agency thereof.” Conspicuously omitted from that list are the instrumentalities of a foreign state, which together with the foreign state itself are normally entitled to sovereign immunity. Plaintiffs accordingly argued that the ATA’s silence about instrumentalities is significant — because instrumentalities are not included on the list of parties that cannot be sued, they may be targeted in ATA suits. Sberbank, by contrast, argued that the FSIA’s definition of a foreign state, which includes instrumentalities, is incorporated by reference into the ATA’s use of the term “foreign state” and that Sberbank is therefore not suable under the ATA as an instrumentality of the Russian government.

The Second Circuit sided with Sberbank. The court explained that a “foreign state” must mean the same thing in both the FSIA and the ATA. Relying on previous Supreme Court decisions’ broad language about the FSIA’s scope, the Second Circuit emphasized the comprehensiveness, exclusivity, and general applicability of the FSIA statutory scheme to all civil lawsuits implicating foreign sovereign immunity. “The text, structure, purpose, and history of the FSIA,” the court reasoned, require it to read the FSIA’s definition of a foreign state (which includes instrumentalities) into the ATA’s prohibition on suits against “foreign state[s].”

Finally, the Second Circuit addressed a second novel question — whether the ATA’s prohibition on suits against foreign states is implicitly limited by the exceptions to immunity in the FSIA. The court concluded that it is. The court held that the FSIA’s commercial activities exception applied with equal force to ATA cases due to the FSIA’s applicability to all civil cases implicating sovereign immunity. Consistent with its earlier FSIA ruling, the court thus concluded that Sberbank’s commercial conduct in the United States had opened the door to a suit against it under the ATA.

The Second Circuit’s decision is the first of its kind. No other circuit has previously addressed the question of whether the FSIA’s exceptions to immunity may overcome the ATA’s bar on suits against foreign sovereigns. And to the extent plaintiffs attempted to rely on the ATA to sue foreign governments in the past, courts strictly enforced the ATA’s bar on such lawsuits.

Judge John Walker wrote an opinion concurring in part and concurring in the judgment, in which he explained that Sberbank was not entitled to the ATA’s protections but for different reasons. According to Judge Walker, the “plain text” of the ATA only prevents suit against foreign states and their agencies, not instrumentalities like Sberbank. Judge Walker argued that the FSIA’s general applicability to civil claims against foreign states’ instrumentalities cannot override the specific textual differences between the FSIA and the ATA.

Implications

The Second Circuit’s decision may open the door to a wave of ATA suits against foreign states and their agencies and instrumentalities.

Prior to this decision, the ATA included a near-categorical bar on suits brought against foreign states and their agencies. Consistent with the FSIA’s framework, foreign states could typically be sued for acts of international terrorism in only one of two ways. First, Section 1605A of the FSIA strips immunity from foreign states designated as “States Sponsors of Terrorism” while simultaneously creating a cause of action against such states for certain potential plaintiffs, including U.S. nationals. Second, Section 1605B of the FSIA strips immunity from foreign states for acts of international terrorism that occurred in the United States; Section 1605B also overrides the ATA’s categorical bar on suits brought against foreign states and extends the statute’s cause of action to cover such suits.

The Second Circuit’s decision creates a third and much broader way to sue foreign states for acts of terrorism. Even though the text of the ATA categorically bars suits against foreign states except pursuant to Section 1605B’s narrow exception, the Second Circuit held that the ATA implicitly allows suit against foreign states whenever any one of the FSIA’s exceptions to immunity applies. In so holding, the Second Circuit effectively read the ATA’s near-categorical prohibition on suits against foreign states out of the statute, potentially opening the door to a new era of litigation against foreign states and their agencies and instrumentalities. Such suits are not guaranteed to succeed; plaintiffs will still need to show that their claims fall within the scope of one or more of the FSIA’s exceptions to immunity and that their claims are otherwise cognizable under the ATA. But the ATA has gone from being applicable against foreign states only in cases of terrorism on U.S. soil to being applicable in any case in which any exception to FSIA immunity applies.

Sberbank has already stated that it disagrees with the decision and will continue to appeal the case. In the meantime, foreign states — as well as their agencies and instrumentalities like banks and financial institutions — should be aware that they may now be subject to suit under the ATA for commercial activities in the United States.

© Arnold & Porter Kaye Scholer LLP 2025 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.