UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


EL-HADAD, MOHAMED

v.

UNITED ARAB EMIRATES


99-7220a

D.C. Cir. 2000


*	*	*


Garland, Circuit Judge: Plaintiff Mohamed Salem El- Hadad is a citizen
of Egypt and a former employee of the  Embassy of the United Arab
Emirates located in Washington,  D.C. After his employment was
terminated, El-Hadad sued  both the Embassy and the United Arab
Emirates (collective- ly, "the U.A.E.") for alleged breach of contract
and defama- tion.1 The U.A.E. moved to dismiss, asserting immunity
from  suit under the Foreign Sovereign Immunities Act (FSIA), 28 
U.S.C. ss 1602 et seq. The district court denied the U.A.E.'s  motion
on the pleadings, holding that the employment rela- tionship between
the U.A.E. and El-Hadad came within the  "commercial activity"
exception to sovereign immunity be- cause El-Hadad was not a national
of the U.A.E. The court  also rejected the U.A.E.'s contention that
even if plaintiff's  suit fell within the "commercial activity"
exception, the FSIA  contains an "exception to that exception" for


The U.A.E. appeals from the denial of its motion to dismiss.  We
conclude that there are factual questions that must be  resolved
before the relationship between El-Hadad and the  U.A.E. can be
characterized as commercial rather than gov- ernmental, and we
therefore reverse in part and remand for  further proceedings. We
agree with the district court, how- ever, that if El-Hadad's action is
based upon commercial  activity, the U.A.E. is not immune from his


I


The denial of a foreign state's motion to dismiss on the  ground of
sovereign immunity is subject to interlocutory  appeal under the
collateral order doctrine. See Trans-




__________

n 1 The complaint also named three individuals acting in their 
official capacities. The district court granted the individuals' mo-
tion to dismiss for lack of personal jurisdiction, see El-Hadad v. 
Embassy of U.A.E., 69 F. Supp. 2d 69, 76-79 (D.D.C. 1999), and  that
decision is not at issue in this appeal.


america Leasing, Inc. v. La Republica de Venezuela, 200  F.3d 843, 847
(D.C. Cir. 2000). Because the district court  decided the motion on
the pleadings, our standard of review is  de novo. See id.


The FSIA provides the sole avenue by which American  courts can obtain
jurisdiction over foreign states. See Repub- lic of Argentina v.
Weltover, Inc., 504 U.S. 607, 611 (1992).  Under the FSIA, a foreign
state is immune from the jurisdic- tion of our courts unless certain
statutory exceptions are met.  See 28 U.S.C. ss 1604-1605. The
principal exception at issue  here is that for "commercial activity."
The Act provides that  a "foreign state shall not be immune from the
jurisdiction of  courts of the United States or of the States in any
case-- ...  (2) in which the action is based upon a commercial
activity  carried on in the United States by the foreign state...."


Our precedent makes clear that the employment of person- nel by a
foreign state is not per se commercial activity under  the FSIA.2 In
Broadbent v. Organization of American  States, applying an analysis
based on the FSIA, we held that  the firing of staff members of the
General Secretariat of the  Organization of American States (OAS) was
not commercial  activity and therefore that the OAS was immune from
suit for  improper discharge. See 628 F.2d 27, 35 (D.C. Cir. 1980). In
 support, we cited the House Report on the FSIA, which 




__________

n 2 The FSIA provides that: "The commercial character of an  activity
shall be determined by reference to the nature of the course  of
conduct or particular transaction or act, rather than by reference  to
its purpose." 28 U.S.C. s 1603(d). As the Supreme Court  recognized in
Weltover, however, this definition "leaves the critical  term
'commercial' largely undefined." 504 U.S. at 612. The sen- tence
"merely specifies what element of the conduct determines 
commerciality (i.e., nature rather than purpose), but still without 
saying what 'commercial' means." Id. The Court concluded that  the
defining "issue is whether the particular actions that the foreign 
state performs (whatever the motive behind them) are the type of 
actions by which a private party engages in trade and traffic or 
commerce." Id. at 614 (internal quotation marks and citation 


states in part: "Also public or governmental and not commer- cial in
nature, would be the employment of diplomatic, civil  service, or
military personnel...." H.R. Rep. No. 94-1487, at  16 (1976).3 The
words replaced by the ellipses in this quota- tion will soon become
important, but for now it is enough to  note that, as we concluded in
Broadbent, the "report clearly  marks employment of civil servants as
noncommercial for  purposes of restrictive immunity." 628 F.2d at


The U.A.E. contends that El-Hadad was a civil servant of  the U.A.E.,
and that his firing is therefore noncommercial  and immune from suit
in our courts. Although El-Hadad is  an Egyptian citizen, it is
uncontested that he worked for the  government of the U.A.E. for
sixteen years.5 For the first  thirteen of those years, he worked in
the U.A.E. as an  auditor. Beginning in January of 1993, El-Hadad
worked as  an auditor in the Cultural Division of the U.A.E.'s Embassy
 in Washington. The U.A.E. terminated El-Hadad's employ- ment in
February 1996. El-Hadad alleges that he was  terminated after he
uncovered misappropriation of U.A.E.  public funds. The U.A.E.
disputes this allegation, but con- tends that even if it were true,
the auditing function El- Hadad performed is the work of a civil
servant and the  U.A.E. is therefore immune from suits arising from




__________

n 3 The Senate Report contains the same language, both on this  point
and on the others quoted below. See S. Rep. No. 94-1310, at  16
(1976); see also id. at 20-21.


4 That point distinguishes Broadbent from Janini v. Kuwait  University,
43 F.3d 1534 (D.C. Cir. 1995), in which we held that the  firing of
teachers at Kuwait University came within the commercial  activity
exception. There was no claim in that case that the  teachers were
civil servants of the government of Kuwait.


5 The district court decided the motion to dismiss on the plead- ings,
and we therefore assume that this and the following facts,  taken from
p 9 of the complaint, are true. See Saudi Arabia v.  Nelson, 507 U.S.
349, 351 (1993). In any event, except where noted,  the U.A.E. does
not contest their validity.


The district court held that regardless whether El-Hadad  was a member
of the U.A.E.'s civil service, his employment  would nonetheless
constitute commercial activity because he  is not a U.A.E. national.
The court based that conclusion on  language in our Broadbent opinion,
which stated that there is  "an exception from the general rule" that
civil service employ- ment is noncommercial "in the case of employment
of Ameri- can citizens or third country nationals by foreign states." 
Broadbent, 628 F.2d at 34. The district court did note,  however, that
other circuits have not invoked such an excep- tion. Instead, those
courts examine the specifics of the  employment relationship for
indicia of civil service, treating  the employee's nationality--if
they consider it at all--as a  non-dispositive factor. See Holden v.
Canadian Consulate,  92 F.3d 918, 920-22 (9th Cir. 1996) (examining
details of  American's employment with Canadian Consulate to deter-
mine whether Consulate was immune on ground that plaintiff  was member
of civil service); Segni v. Commercial Office of  Spain, 835 F.2d 160,
165 & n.7 (7th Cir. 1987) (noting that  nationality can be a factor,
but deciding the case by reference  to specifics of employment
relationship rather than fact of  third country nationality).


We cannot fault the district court for its legal conclusion,  resting,
as it did, on the language of Broadbent. But that  language was
plainly dictum, not necessary to decide the case  and therefore not
binding upon us. See, e.g., United States v.  Torres, 115 F.3d 1033,
1036 (D.C. Cir. 1997). While Broad- bent did opine that third country
nationality would be disposi- tive in a case involving a sovereign
state, Broadbent itself  involved an international organization.
Notwithstanding that  some of the plaintiffs were Americans, the court
declined to  apply a "third country nationality" exception to the
civil  service rule in that case, reasoning that since an
international  organization has no nationals of its own, applying such
an  exception in the context of international organizations would 
"swallow up the rule of immunity for civil service employment 


Now that we are squarely faced with the question, we  conclude that a
per se rule of non-immunity for a foreign 


state's employment of third country nationals is inconsistent  with
Congress' intent to immunize foreign governmental ac- tivity from suit
in American courts. Indeed, when pressed at  oral argument, both sides
appeared to agree. Both con- curred, for example, that if El-Hadad had
been the U.A.E.'s  ambassador to the United States, the U.A.E. would
have  immunity for firing him despite his Egyptian nationality.  Nor,
apparently, is this scenario particularly far-fetched.  Both parties
agreed that small countries such as the U.A.E.  do, at times, employ
nationals of other countries (and particu- larly citizens of regional
neighbors) in high governmental  positions.6


We now return to the ellipses noted above. The full  quotation from the
House Report is as follows: "Also public  or governmental and not
commercial in nature, would be the  employment of diplomatic, civil
service, or military personnel,  but not the employment of American
citizens or third country  nationals by the foreign state in the
United States." H.R.  Rep. No. 94-1487, at 16. Broadbent read the
language begin- ning with "but not" (for which we substituted the
ellipses  above) as creating a per se exception from the general rule 
that civil service employment is governmental rather than  commercial.
See Broadbent, 628 F.2d at 34. That is surely a  reasonable
interpretation. But we think it at least as likely  that Congress was
attempting to contrast civil service (and  diplomatic and military
employment, not at issue here) with  non-civil service employment,
operating on the assumption  that it was unlikely a country would
employ an American or  third country national in such a position. This
view of the  legislative history is bolstered by the next paragraph of
the  House Report, which lists, as additional examples of commer- cial
activity, a foreign government's "employment or engage- ment of
laborers, clerical staff or public relations or market- ing agents,"
H.R. Rep. No. 94-1487, at 16--job categories 




__________

n 6 An estimated 75% of the U.A.E.'s population between the ages  of 15
and 64 consists of non-nationals. See CIA, The World Fact  Book 1999,
at 504 (available at ).


which Congress apparently also thought unlikely to be occu- pied by
members of a government's civil service.


In any event, the language that must control our decision is  that of
the statute rather than of the somewhat muddy  legislative history.
Under the FSIA, the immunity exception  depends solely on whether the
action is based upon a "com- mercial activity," without any mention of
the nationality of the  participants. See 28 U.S.C. s 1605(a)(2). We
have no war- rant, therefore, for formulating a test that turns solely
on  nationality. To the contrary, because under the usual under-
standing of the terms a foreign state can engage in non- commercial
(i.e., governmental) activity through third country  nationals, the
statutory language dictates that the inquiry  cannot end with the fact
that the employee is not a citizen of  the employing state. At oral
argument, both parties agreed.


II


Because defendants' motion was dismissed on the plead- ings, we remand
the case to the district court to undertake a  further inquiry. The
ultimate question to be answered is  whether El-Hadad's employment
constituted commercial ac- tivity. As we held in Broadbent, the
employment of civil  servants is noncommercial for purposes of the
FSIA. See  Broadbent, 628 F.2d at 34-36. Hence, the operative question
 is whether El-Hadad was a member of the U.A.E.'s civil  service. In
order to guide the proceedings on remand, we  suggest some questions
that appear relevant to making that  determination in this case. We do
not regard them as an  exclusive list, nor as necessarily applicable


First, how do the U.A.E.'s own laws define its civil service,  and do
El-Hadad's job title and duties come within that  definition?


Second, what was the nature of El-Hadad's employment  relationship with
the U.A.E.? Did he have a true contractual  arrangement, or is his
"contract" claim instead based, as the  U.A.E. contends, solely upon
the civil service laws of the  U.A.E.?


Third, what was the nature of El-Hadad's employment  relationship when
he worked in the U.A.E., and how did his  subsequent employment at the
Embassy relate to that prior  tenure? The U.A.E. contends that
El-Hadad was a long-time  resident and member of its domestic civil
service, who was  merely "transferred" to Washington to perform the
same  functions (governmental audits) he had been performing at  home.
El-Hadad contends, on the other hand, that he quit  his position in
the U.A.E. and began a "new" job in the  United States, "separate from
his previous employment."


Fourth, what was the nature of El-Hadad's work? As  noted above,
Congress indicated that the "employment or  engagement of laborers,
clerical staff or public relations or  marketing agents" would come
within the definition of com- mercial activity. H.R. Rep. No. 94-1487,


Fifth, what is the relevance of El-Hadad's Egyptian nation- ality on
the facts of this case? Is the U.A.E. a country in  which, as the
House Report assumed, non-nationals are un- likely to be employed as
governmental officers? Or does the  U.A.E. often employ non-nationals
in governmental positions?


We appreciate that this multi-factor inquiry is not analyt- ically
precise. That is a consequence of Congressional prefer- ences,
however, rather than our own. Congress expressly  concluded that it
was "unwise to attempt an excessively  precise definition" of
"commercial activity," and chose instead  to give the "courts ... a
great deal of latitude in determining  what is a 'commercial activity'
for purposes of" the FSIA,  providing only a few (sometimes
conflicting) examples of the  kinds of employment it regarded as
falling within that catego- ry. Id. at 16. Although the Supreme Court
has repeatedly  lamented this situation, see Saudi Arabia v. Nelson,
507 U.S.  349, 359 (1993) (noting that the FSIA "leaves the critical
term  'commercial' largely undefined") (quoting Weltover, 504 U.S.  at
612), it has also noted that courts "do not have the option  to throw
up [their] hands" and must instead accept "judicial  responsibility to
determine what a 'commercial activity' is for  purposes of the Act."


III


The U.A.E. contends that even if its termination of El- Hadad were
regarded as coming within the "commercial  activity" exception to
sovereign immunity, plaintiff's claim  that he was defamed in
connection with that termination  would nonetheless have to be
dismissed under a "defamation"  exception to that exception. As the
district court correctly  held, however, defamation is not an
"exception to the excep- tion" for commercial activity, but rather an
exception to a  separate FSIA exception for noncommercial torts.


The FSIA provides that a "foreign state shall not be  immune from the
jurisdiction of courts of the United States  ... in any case" in which
one of several exceptions applies.  28 U.S.C. s 1605(a). The second
exception, contained in  paragraph (2) of s 1605(a), is the one
considered above: any  case "in which the action is based upon
commercial activity  carried on in the United States by the foreign
state." Id.  s 1605(a)(2). Paragraph (2) does not contain a defamation
 exception to its commercial activity exception. There is,  therefore,
no indication that defamation arising out of a  commercial activity is
immune from suit.


It is the fifth exception to immunity, contained in para- graph (5) of
s 1605(a), that is implicated by the U.A.E.'s  argument here. That
paragraph applies to any case "not  otherwise encompassed in paragraph
(2) above, in which  money damages are sought against a foreign state
for ...  damage to or loss of property occurring in the United States 
and caused by the tortious act or omission of that foreign  state."
Id. s 1605(a)(5). Unlike the exception for commer- cial activity, this
tort exception does contain an exception for,  inter alia, defamation:
"[T]his paragraph," the FSIA states,  "shall not apply to ... any
claim arising out of ... libel, [or]  slander...." Id. s 1605(a)(5),
(a)(5)(B).


The U.A.E. contends that the defamation exception to  paragraph (5) is
applicable not only to the torts covered by  that paragraph, but also
to the commercial activity covered by  paragraph (2). That reading,
however, is expressly contra- dicted by the language of the statute.
As just quoted, 


paragraph (5) begins by stating that it applies only to cases  "not
otherwise encompassed in paragraph (2) above," i.e., only  to those
tort cases not encompassed by the commercial  activity paragraph. And
in subsequently introducing its own  exceptions, paragraph (5) goes on
to state that "this para- graph"--i.e., paragraph (5)--"shall not
apply to" libel or  slander. Id. s 1605(a)(5), (a)(5)(B) (emphasis
added). The  language therefore makes clear that paragraph (5) and its
 defamation exception are inapplicable to tort cases based  upon
commercial activity.


This reading is confirmed by the legislative history, which  repeatedly
refers to the category encompassed by paragraph  (5) as "noncommercial
torts." H.R. Rep. No. 94-1487, at 20,  21 (emphasis added); see
Argentine Republic v. Amerada  Hess Shipping Corp., 488 U.S. 428, 439
(1989) (referring to  s 1605(a)(5) as the "noncommercial torts
exception"); cf.  Nelson, 507 U.S. at 361-62 (finding that the
tortious activity  alleged in that case, wrongful arrest by Saudi
police, failed to  qualify as commercial activity because it was "not
the sort of  action by which private parties can engage in commerce").
 Paragraph (5), the House Report states, "is directed primari- ly at
the problem of traffic accidents but is cast in general  terms as
applying to all tort actions for money damages, not  otherwise
encompassed by section 1605(a)(2) relating to com- mercial
activities." H.R. Rep. No. 94-1487, at 20-21 (empha- sis added). Its
"purpose," the Report continues, "is to permit  the victim of a
traffic accident or other noncommercial tort to  maintain an action
against the foreign state to the extent  otherwise provided by law."


This reading is also consistent with the case law. This  circuit has
previously stated that the exceptions to paragraph  (5) do not limit
the commercial activity exception. See Gilson  v. Republic of Ireland,
682 F.2d 1022, 1028 n.27 (D.C. Cir.  1982) (stating that 28 U.S.C. s
1605(a)(5)(B) "does not limit  id. s 1605(a)(2)"). Those of our sister
circuits that have  considered the question have reached the same
conclusion.  See Southway v. Central Bank of Nigeria, 198 F.3d 1210, 
1219 (10th Cir. 2000); Export Group v. Reef Industries, Inc.,  54 F.3d
1466, 1473-77 (9th Cir. 1995); see also Letelier v.  Republic of
Chile, 748 F.2d 790, 795 (2d Cir. 1984) (noting 


that the statutory language "suggests that the commercial  activity
exception to jurisdictional immunity under paragraph  (2) and the tort
exception under (5) are mutually exclusive").  Accordingly, we affirm
the district court's decision that activi- ty encompassed by the
waiver of sovereign immunity con- tained in 28 U.S.C. s 1605(a)(2)
does not become subject to  suit by virtue of the provisions of s
1605(a)(5)(B).7


IV


The decision of the district court is reversed in part and the  case is
remanded for further proceedings consistent with this  opinion.




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n 7 We reject the U.A.E.'s argument that foreign sovereigns  should be
immune from actions for defamation under the FSIA  because the United
States is immune from such actions under the  Federal Tort Claims Act
(FTCA), 28 U.S.C. s 2680(h). Although  both statutes contain
defamation exceptions, see H.R. Rep. No. 94- 1487, at 21, the analogy
becomes inapposite when applied in the  context of the FSIA's
commercial activity exception because there  is no comparable immunity
exception under the FTCA. See Export  Group, 54 F.3d at 1476
(describing FSIA's commercial activity  exception as "ha[ving] no