 

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued.
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Lumber Co., 200 U. S. 321, 337.

SUPREME COURT OF THE UNITED STATES

          Syllabus

REPUBLIC OF ARGENTINA et al. v. WELTOVER,
             INC., et al.
certiorari to the united states court of appeals for
          the second circuit
No. 91-763.   Argued April 1, 1992"Decided June 12, 1992

As part of a plan to stabilize petitioner Argentina's currency, that
country and petitioner bank (collectively Argentina) issued bonds,
called ``Bonods,'' which provided for repayment in U. S. dollars
through transfer on the market in one of several locations, including
New York City.  Concluding that it lacked sufficient foreign exchange
to retire the Bonods when they began to mature, Argentina unilater-
ally extended the time for payment, and offered bondholders substi-
tute instruments as a means of rescheduling the debts.  Respondent
bondholders, two Panamanian corporations and a Swiss bank, de-
clined to accept the rescheduling and insisted on repayment in New
York.  When Argentina refused, respondents brought this breach-of-
contract action in the District Court, which denied Argentina's motion
to dismiss.  The Court of Appeals affirmed, ruling that the District
Court had jurisdiction under the Foreign Sovereign Immunities Act
of 1976 (FSIA), 28 U.S.C. 1602 et seq., which subjects foreign
states to suit in American courts for, inter alia, acts taken ``in
connection with a commercial activity'' that have ``a direct effect in
the United States,'' 1605(a)(2).
Held:The District Court properly asserted jurisdiction under the FSIA.
Pp.3-12.
(a)The issuance of the Bonods was a ``commercial activity'' under
the FSIA, and the rescheduling of the maturity dates on those
instruments was taken ``in connection with'' that activity within the
meaning of 1605(a)(2).  When a foreign government acts, not as a
regulator of a market, but in the manner of a private player within
that market, its actions are ``commercial'' within the meaning of the
FSIA.  Cf. Alfred Dunhill of London, Inc. v. Republic of Cuba,
425 U.S. 682, 695-706 (plurality opinion).  Moreover, because
1603(d) provides that the commercial character of an act is to be
determined by reference to its ``nature'' rather than its ``purpose,'' the
question is not whether the foreign government is acting with a
profit motive or instead with the aim of fulfilling uniquely sovereign
objectives.  Rather, the issue is whether the government's particular
actions (whatever the motive behind them) are the type of actions by
which a private party engages in commerce.  The Bonods are in
almost all respects garden-variety debt instruments, and, even when
they are considered in full context, there is nothing about their
issuance that is not analogous to a private commercial transaction.
The fact that they were created to help stabilize Argentina's currency
is not a valid basis for distinguishing them from ordinary debt
instruments, since, under 1603(d), it is irrelevant why Argentina
participated in the bond market in the manner of a private actor.  It
matters only that it did so.  Pp.4-9.
(b)The unilateral rescheduling of the Bonods had a ``direct effect
in the United States'' within the meaning of 1605(a)(2).  Respon-
dents had designated their accounts in New York as the place of
payment, and Argentina made some interest payments into those
accounts before announcing that it was rescheduling the payments.
Because New York was thus the place of performance for Argentina's
ultimate contractual obligations, the rescheduling of those obligations
necessarily had a ``direct effect'' in this country:  money that was
supposed to have been delivered to a New York bank was not forth-
coming.  Argentina's suggestion that the ``direct effect'' requirement
cannot be satisfied where the plaintiffs are all foreign corporations
with no other connections to this country is untenable under Verlin-
den B. V. v. Central Bank of Nigeria, 461 U.S. 480, 489.  Moreover,
assuming that a foreign state may be a ``person'' for purposes of the
Due Process Clause of the Fifth Amendment, Argentina satisfied the
``minimum contacts'' test of International Shoe Co. v. Washington, 326
U.S. 310, 316, by issuing negotiable debt instruments denominated
in U. S. dollars and payable in New York and by appointing a
financial agent in that city.  Pp.9-12.
941 F.2d 145, affirmed.

Scalia, J., delivered the opinion for a unanimous Court.




NOTICE: This opinion is subject to formal revision before publication in the
preliminary print of the United States Reports.  Readers are requested to
notify the Reporter of Decisions, Supreme Court of the United States, Wash-
ington, D.C. 20543, of any typographical or other formal errors, in order that
corrections may be made before the preliminary print goes to press.


           SUPREME COURT OF THE UNITED STATES--------
                       No. 91-763
                        --------
         REPUBLIC OF ARGENTINA and BANCO CENTRAL
              DE LA REPUBLICA ARGENTINA, PETITIONERS
                     v. WELTOVER, INC., et al.
        on writ of certiorari to the united states court of
                  appeals for the second circuit
                          [June 12, 1992]

       Justice Scalia delivered the opinion of the Court.
       This case requires us to decide whether the Republic of
Argentina's default on certain bonds issued as part of a
plan to stabilize its currency was an act taken  in connec-
tion with a commercial activity that had a  direct effect in
the United States so as to subject Argentina to suit in an
American court under the Foreign Sovereign Immunities
Act of 1976, 28 U. S. C. 1602 et seq.
                                 I
       Since Argentina's currency is not one of the mediums of
exchange accepted on the international market, Argentine
businesses engaging in foreign transactions must pay in
U. S. dollars or some other internationally accepted cur-
rency.  In the recent past, it was difficult for Argentine
borrowers to obtain such funds, principally because of the
instability of the Argentine currency.  To address these
problems, petitioners, the Republic of Argentina and its
central bank, Banco Central (collectively Argentina), in
1981 instituted a foreign exchange insurance contract
program (FEIC), under which Argentina effectively agreed
to assume the risk of currency depreciation in cross-border
transactions involving Argentine borrowers.  This was
accomplished by Argentina's agreeing to sell to domestic
borrowers, in exchange for a contractually predetermined
amount of local currency, the necessary U. S. dollars to
repay their foreign debts when they matured, irrespective
of intervening devaluations.
       Unfortunately, Argentina did not possess sufficient
reserves of U. S. dollars to cover the FEIC contracts as they
became due in 1982.  The Argentine government thereupon
adopted certain emergency measures, including refinancing
of the FEIC-backed debts by issuing to the creditors
government bonds.  These bonds, called  Bonods, provide
for payment of interest and principal in U. S. dollars;
payment may be made through transfer on the London,
Frankfurt, Zurich, or New York market, at the election of
the creditor.  Under this refinancing program, the foreign
creditor had the option of either accepting the Bonods in
satisfaction of the initial debt, thereby substituting the
Argentine government for the private debtor, or maintain-
ing the debtor/creditor relationship with the private
borrower and accepting the Argentine government as
guarantor.
       When the Bonods began to mature in May 1986, Argen-
tina concluded that it lacked sufficient foreign exchange to
retire them.  Pursuant to a Presidential Decree, Argentina
unilaterally extended the time for payment, and offered
bondholders substitute instruments as a means of resched-
uling the debts.  Respondents, two Panamanian corpora-
tions and a Swiss bank who hold, collectively, $1.3 million
of Bonods, refused to accept the rescheduling, and insisted
on full payment, specifying New York as the place where
payment should be made.  Argentina did not pay, and
respondents then brought this breach-of-contract action in
the United States District Court for the Southern District
of New York, relying on the Foreign Sovereign Immunities
Act of 1976 as the basis for jurisdiction.  Petitioners moved
to dismiss for lack of subject-matter jurisdiction, lack of
personal jurisdiction, and forum non conveniens.  The
District Court denied these motions, 753 F. Supp. 1201
(1991), and the Court of Appeals affirmed, 941 F. 2d 145
(CA2 1991).  We granted Argentina's petition for certiorari,
which challenged the Court of Appeals' determination that,
under the Act, Argentina was not immune from the
jurisdiction of the federal courts in this case.  502 U. S. ___
(1992).
                                II
       The Foreign Sovereign Immunities Act of 1976, 28
U. S. C. 1602 et seq. (FSIA), establishes a comprehensive
framework for determining whether a court in this country,
state or federal, may exercise jurisdiction over a foreign
state.  Under the Act, a  foreign state shall be immune from
the jurisdiction of the courts of the United States and of the
States unless one of several statutorily defined exceptions
applies.  1604 (emphasis added).  The FSIA thus provides
the  sole basis for obtaining jurisdiction over a foreign
sovereign in the United States.  See Argentine Republic v.
Amerada Hess Shipping Corp., 488 U. S. 428, 434-439
(1989).  The most significant of the FSIA's exceptions"and
the one at issue in this case"is the  commercial exception
of 1605(a)(2), which provides that a foreign state is not
immune from suit in any case
 in which the action is based upon a commercial
activity carried on in the United States by the foreign
state; or upon an act performed in the United States in
connection with a commercial activity of the foreign
state elsewhere; or upon an act outside the territory
of the United States in connection with a commercial
activity of the foreign state elsewhere and that
act causes a direct effect in the United States.
1605(a)(2).
    In the proceedings below, respondents relied only on the
third clause of 1605(a)(2) to establish jurisdiction, 941
F. 2d, at 149, and our analysis is therefore limited to
considering whether this lawsuit is (1)  based . . . upon an
act outside the territory of the United States; (2) that was
taken  in connection with a commercial activity of Argen-
tina outside this country; and (3) that  cause[d] a direct
effect in the United States.  The complaint in this case
alleges only one cause of action on behalf of each of the
respondents, viz., a breach-of-contract claim based on
Argentina's attempt to refinance the Bonods rather than to
pay them according to their terms.  The fact that the cause
of action is in compliance with the first of the three require-
ments"that it is  based upon an act outside the territory
of the United States (presumably Argentina's unilateral
extension)"is uncontested.  The dispute pertains to
whether the unilateral refinancing of the Bonods was taken
 in connection with a commercial activity of Argentina, and
whether it had a  direct effect in the United States.  We
address these issues in turn.
                                 A
       Respondents and their amicus, the United States, contend
that Argentina's issuance of, and continued liability under,
the Bonods constitute a  commercial activity and that the
extension of the payment schedules was taken  in connec-
tion with that activity.  The latter point is obvious enough,
and Argentina does not contest it; the key question is
whether the activity is  commercial under the FSIA.
       The FSIA defines  commercial activity to mean:
 [E]ither a regular course of commercial conduct or a
particular commercial transaction or act.  The commer-
cial 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. 1603(d).
This definition, however, leaves the critical term  commer-
cial largely undefined: The first sentence simply estab-
lishes that the commercial nature of an activity does not
depend upon whether it is a single act or a regular course
of conduct, and the second sentence merely specifies what
element of the conduct determines commerciality (i. e.,
nature rather than purpose), but still without saying what
 commercial means.  Fortunately, however, the FSIA was
not written on a clean slate.  As we have noted, see
Verlinden B. V. v. Central Bank of Nigeria, 461 U. S. 480,
486-489 (1983), the Act (and the commercial exception in
particular) largely codifies the so-called  restrictive theory
of foreign sovereign immunity first endorsed by the State
Department in 1952.  The meaning of  commercial is the
meaning generally attached to that term under the restric-
tive theory at the time the statute was enacted.  See
McDermott Int'l, Inc. v. Wilander, 498 U. S. ___, ___ (1991)
( [W]e assume that when a statute uses [a term of art],
Congress intended it to have its established meaning);
NLRB v. Amax Coal Co., 453 U. S. 322, 329 (1981);
Morissette v. United States, 342 U. S. 246, 263 (1952).
       This Court did not have occasion to discuss the scope or
validity of the restrictive theory of sovereign immunity until
our 1976 decision in Alfred Dunhill of London, Inc. v.
Republic of Cuba, 425 U. S. 682.  Although the Court there
was evenly divided on the question whether the  commer-
cial exception that applied in the foreign-sovereign-immu-
nity context also limited the availability of an act-of-state
defense, compare id., at 695-706 (plurality) with id., at
725-730 (Marshall, J., dissenting), there was little disagree-
ment over the general scope of the exception.  The plurality
noted that, after the State Department endorsed the
restrictive theory of foreign sovereign immunity in 1952,
the lower courts consistently held that foreign sovereigns
were not immune from the jurisdiction of American courts
in cases  arising out of purely commercial transactions, id.,
at 703, citing, inter alia, Victory Transport, Inc. v. Comi-
saria General, 336 F. 2d 354 (CA2 1964), cert. denied, 381
U. S. 934 (1965), and Petrol Shipping Corp. v. Kingdom of
Greece, 360 F. 2d 103 (CA2), cert. denied, 385 U. S. 931
(1966).  The plurality further recognized that the distinction
between state sovereign acts, on the one hand, and state
commercial and private acts, on the other, was not entirely
novel to American law.  See 425 U. S., at 695-696, citing,
inter alia, Parden v. Terminal R. Co., 377 U. S. 184,
189-190 (1964) (Eleventh Amendment immunity); Bank of
the United States v. Planters' Bank of Georgia, 9 Wheat.
904, 907-908 (1824) (same); New York v. United States, 326
U. S. 572, 579 (1946) (opinion of Frankfurter, J.) (tax
immunity of States); and South Carolina v. United States,
199 U. S. 437, 461-463 (1905) (same).  The plurality stated
that the restrictive theory of foreign sovereign immunity
would not bar a suit based upon a foreign state's participa-
tion in the marketplace in the manner of a private citizen
or corporation.  425 U. S., at 698-705.  A foreign state
engaging in  commercial activities  do[es] not exercise
powers peculiar to sovereigns; rather, it  exercise[s] only
those powers that can also be exercised by private citizens.
Id., at 704.  The dissenters did not disagree with this
general description, see id., at 725.  Given that the FSIA
was enacted less than six months after our decision in
Alfred Dunhill was announced, we think the plurality's
contemporaneous description of the then-prevailing restric-
tive theory of sovereign immunity is of significant assis-
tance in construing the scope of the Act.
       In accord with that description, we conclude that when a
foreign government acts, not as regulator of a market, but
in the manner of a private player within it, the foreign
sovereign's actions are  commercial within the meaning of
the FSIA.  Moreover, because the Act provides that the
commercial character of an act is to be determined by
reference to its  nature rather than its  purpose, 28
U. S. C. 1603(d), the question is not whether the foreign
government is acting with a profit motive or instead with
the aim of fulfilling uniquely sovereign objectives.  Rather,
the 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, Black's Law Dictionary 270 (6th
ed. 1990).  See, e.g., Rush-Presbyterian-St. Luke's Medical
Center v. Hellenic Republic, 877 F. 2d 574, 578 (CA7), cert.
denied, 493 U. S. 937 (1989).  Thus, a foreign government's
issuance of regulations limiting foreign currency exchange
is a sovereign activity, because such authoritative control of
commerce cannot be exercised by a private party; whereas
a contract to buy army boots or even bullets is a  commer-
cial activity, because private companies can similarly use
sales contracts to acquire goods, see, e.g., Stato di Rumania
v. Trutta, [1926] Foro It. I 584, 585-586, 589 (Corte di Cass.
del Regno, Italy), translated and reprinted in part in 26
Am. J. Int'l L. 626-629 (Supp. 1932).
       The commercial character of the Bonods is confirmed by
the fact that they are in almost all respects garden-variety
debt instruments: they may be held by private parties; they
are negotiable and may be traded on the international
market (except in Argentina); and they promise a future
stream of cash income.  We recognize that, prior to the
enactment of the FSIA, there was authority suggesting that
the issuance of public debt instruments did not constitute
a commercial activity.  Victory Transport, 336 F. 2d, at 360
(dicta).  There is, however, nothing distinctive about the
state's assumption of debt (other than perhaps its purpose)
that would cause it always to be classified as jure imperii,
and in this regard it is significant that Victory Transport
expressed confusion as to whether the  nature or the
 purpose of a transaction was controlling in determining
commerciality, id., at 359-360.  Because the FSIA has now
clearly established that the  nature governs, we perceive
no basis for concluding that the issuance of debt should be
treated as categorically different from other activities of
foreign states.
       Argentina contends that, although the FSIA bars consid-
eration of  purpose, a court must nonetheless fully consider
the context of a transaction in order to determine whether
it is  commercial.  Accordingly, Argentina claims that the
Court of Appeals erred by defining the relevant conductin what
Argentina considers an overly generalized, acontextual manner
and by essentially adopting a per se rule
that all  issuance of debt instruments is  commercial.  See
941 F. 2d, at 151 ( `[I]t is self-evident that issuing public
debt is a commercial activity within the meaning of [theFSIA]'),
quoting Shapiro v. Republic of Bolivia, 930 F. 2d
1013, 1018 (CA2 1991).  We have no occasion to consider
such a per se rule, because it seems to us that even in full
context, there is nothing about the issuance of these Bonods
(except perhaps its purpose) that is not analogous to a
private commercial transaction.
       Argentina points to the fact that the transactions in
which the Bonods were issued did not have the ordinary
commercial consequence of raising capital or financing
acquisitions.  Assuming for the sake of argument that this
is not an example of judging the commerciality of a transac-
tion by its purpose, the ready answer is that private parties
regularly issue bonds, not just to raise capital or to finance
purchases, but also to refinance debt.  That is what Argen-
tina did here: by virtue of the earlier FEIC contracts,
Argentina was already obligated to supply the U. S. dollars
needed to retire the FEIC-insured debts; the Bonods simply
allowed Argentina to restructure its existing obligations.
Argentina further asserts (without proof or even elabora-
tion) that it  received consideration [for the Bonods] in no
way commensurate with [their] value, Brief for Petitioners
22.  Assuming that to be true, it makes no difference.
Engaging in a commercial act does not require the receipt
of fair value, or even compliance with the common-law
requirements of consideration.
      Argentina argues that the Bonods differ from ordinary
debt instruments in that they  were created by the Argen-
tine Government to fulfill its obligations under a foreign
exchange program designed to address a domestic credit
crisis, and as a component of a program designed to control
that nation's critical shortage of foreign exchange.  Id.,at
23-24.  In this regard, Argentina relies heavily on
De Sanchez v. Banco Central de Nicaragua, 770 F. 2d 1385
(CA5 1985), in which the Fifth Circuit took the view that
 [o]ften, the essence of an act is defined by its purpose;
that unless  we can inquire into the purposes of such acts,
we cannot determine their nature; and that, in light of its
purpose to control its reserves of foreign currency, Nicara-
gua's refusal to honor a check it had issued to cover a
private bank debt was a sovereign act entitled to immunity.
Id., at 1393.  Indeed, Argentina asserts that the line
between  nature and  purpose rests upon a  formalistic
distinction [that] simply is neither useful nor warranted.
Reply Brief for Petitioners 8.  We think this line of argu-
ment is squarely foreclosed by the language of the FSIA.
However difficult it may be in some cases to separate
 purpose (i.e., the reason why the foreign state engages in
the activity) from  nature (i.e., the outward form of the
conduct that the foreign state performs or agrees to
perform), see De Sanchez, supra, at 1393, the statute
unmistakably commands that to be done.  28 U. S. C.
1603(d).  We agree with the Court of Appeals, see 941
F. 2d, at 151, that it is irrelevant why Argentina partici-
pated in the bond market in the manner of a private actor;
it matters only that it did so.  We conclude that Argentina's
issuance of the Bonods was a  commercial activity under
the FSIA.
                                 B
       The remaining question is whether Argentina's unilateral
rescheduling of the Bonods had a  direct effect in the
United States, 28 U. S. C. 1605(a)(2).  In addressing this
issue, the Court of Appeals rejected the suggestion in the
legislative history of the FSIA that an effect is not  direct
unless it is both  substantial and  foreseeable.  941 F. 2d,
at 152; contra, America West Airlines, Inc. v. GPA Group,
Ltd., 877 F. 2d 793, 798-800 (CA9 1989); Zernicek v. Brown
& Root, Inc., 826 F. 2d 415, 417-419 (CA5 1987), cert.
denied, 484 U. S. 1043 (1988); Maritime Int'l Nominees
Establishment v. Republic of Guinea, 224 U. S. App. D. C.
119, 135-136, 693 F. 2d 1094, 1110-1111 (1982), cert.
denied, 464 U. S. 815 (1983); Ohntrup v. Firearms Center
Inc., 516 F. Supp. 1281, 1286 (ED Pa. 1981), aff'd, 760 F. 2d
259 (CA3 1985).  That suggestion is found in the House
Report, which states that conduct covered by the third
clause of 1605(a)(2) would be subject to the jurisdiction of
American courts  consistent with principles set forth in
section 18, Restatement of the Law, Second, Foreign
Relations Law of the United States (1965).  H. R. Rep. No.
94-1487, p. 19 (1976).  Section 18 states that American
laws are not given extraterritorial application except with
respect to conduct that has, as a  direct and foreseeable
result, a  substantial effect within the United States.
Since this obviously deals with jurisdiction to legislate
rather than jurisdiction to adjudicate, this passage of the
House Report has been charitably described as  a bit of a
non sequitur, Texas Trading & Milling Corp. v. Federal
Republic of Nigeria, 647 F. 2d 300, 311 (CA2 1981), cert.
denied, 454 U. S. 1148 (1982).  Of course the generally
applicable principle de minimis non curat lex ensures that
jurisdiction may not be predicated on purely trivial effects
in the United States.  But we reject the suggestion that
1605(a)(2) contains any unexpressed requirement of
 substantiality or  foreseeability.  As the Court of Appeals
recognized, an effect is  direct if it follows  as an immedi-
ate consequence of the defendant's . . . activity, 941 F. 2d,
at 152.
       The Court of Appeals concluded that the rescheduling of
the maturity dates obviously had a  direct effect on
respondents.  It further concluded that that effect was
sufficiently  in the United States for purposes of the FSIA,
in part because  Congress would have wanted an American
court to entertain this action in order to preserve New
York City's status as  a preeminent commercial center.
Id., at 153.  The question, however, is not what Congress
 would have wanted but what Congress enacted in the
FSIA.  Although we are happy to endorse the Second
Circuit's recognition of  New York's status as a world
financial leader, the effect of Argentina's rescheduling in
diminishing that status (assuming it is not too speculative
to be considered an effect at all) is too remote and attenu-
ated to satisfy the  direct effect requirement of the FSIA.
Ibid.
       We nonetheless have little difficulty concluding that
Argentina's unilateral rescheduling of the maturity dates on
the Bonods had a  direct effect in the United States.
Respondents had designated their accounts in New York as
the place of payment, and Argentina made some interest
payments into those accounts before announcing that it was
rescheduling the payments.  Because New York was thus
the place of performance for Argentina's ultimate contrac-
tual obligations, the rescheduling of those obligations neces-
sarily had a  direct effect in the United States: Money that
was supposed to have been delivered to a New York bank
for deposit was not forthcoming.  We reject Argentina's
suggestion that the  direct effect requirement cannot be
satisfied where the plaintiffs are all foreign corporations
with no other connections to the United States.  We
expressly stated in Verlinden that the FSIA permits  a
foreign plaintiff to sue a foreign sovereign in the courts of
the United States, provided the substantive requirements
of the Act are satisfied, 461 U. S., at 489.
       Finally, Argentina argues that a finding of jurisdiction in
this case would violate the Due Process Clause of the Fifth
Amendment, and that, in order to avoid this difficulty, we
must construe the  direct effect requirement as embodying
the  minimum contacts test of International Shoe Co. v.
Washington, 326 U. S. 310, 316 (1945).  Assuming, with-
out deciding, that a foreign state is a  person for purposes
of the Due Process Clause, cf. South Carolina v. Katzen-
bach, 383 U. S. 301, 323-324 (1966) (States of the Union
are not  persons for purposes of the Due Process Clause),
we find that Argentina possessed  minimum contacts that
would satisfy the constitutional test.  By issuing negotiable
debt instruments denominated in U. S. dollars and payable
in New York and by appointing a financial agent in that
city, Argentina  `purposefully avail[ed] itself of the privilege
of conducting activities within the [United States],' Burger
King Corp. v. Rudzewicz, 471 U. S. 462, 475 (1985), quoting
Hanson v. Denckla, 357 U. S. 235, 253 (1958).
                           *     *     *
       We conclude that Argentina's issuance of the Bonods was
a  commercial activity under the FSIA; that its reschedul-
ing of the maturity dates on those instruments was taken
in connection with that commercial activity and had a
 direct effect in the United States; and that the District
Court therefore properly asserted jurisdiction, under the
FSIA, over the breach-of-contract claim based on that
rescheduling.  Accordingly, the judgment of the Court of
Appeals is Affirmed.










