Article: Foreign Nations Have to Post Bond, Too

Article: Foreign Nations Have to Post Bond, Too

U.S. courts must treat foreign nations differently than other litigants in several circumstances, as set forth in the Foreign Sovereign Immunities Act. But foreign states should not count on being treated specially in all circumstances just because they are nation states.

One circumstance where U.S. courts may treat foreign states the same as other litigants is when it comes to posting a supersedeas bond pending appeal.

A supersedeas bond ensures that there is money available to satisfy a judgment in the event the judgment is upheld on appeal. Once the losing party with a money judgment against it files a notice of appeal, that judgment is automatically “stayed” if the losing party posts the supersedeas bond. Such a stay relieves the losing party of the obligation to pay the other side the sum of money awarded unless and until the appellate court upholds the judgment. See Federal Rule of Civil Procedure 62.

In one recent case, Venezuela unsuccessfully asked a federal court to stay the judgment against it (which was for more than $1 billion) while at the same time relieving it of the obligation to post a supersedeas bond.

The district court held, however, that Venezuela should be treated the same as any other litigant, and that its status as a foreign state did not justify different treatment in this instance. (See Dkt. 44, Crystallex Int’l Corp. v. Venezuela, 1:16cv661, D.D.C.). Moreover, the court rejected application of any “blanket rule” that foreign states need not post bond, referring to several court decisions in which foreign countries were in fact required to post bond. (Id.)

Although in some circumstances, federal courts will grant the losing party an “unsecured stay” – meaning the losing party need not pay the judgment pending appeal AND need not post a supersedeas bond to guarantee payment – those circumstances were not present for Venezuela. Specifically, the court found there was sufficient evidence in the record that Venezuela might not be able satisfy the judgment (if upheld on appeal) given its precarious financial condition. The court also found that Venezuela did not seem to have any intent to pay a final judgment. Finally, the court noted that, even though the amount to be posted was large, posting a bond would not be impractical for Venezuela.

Sometimes, U.S. courts permit unsecured stays for foreign countries because they assume nations are generally solvent and will be able to satisfy any judgment upheld on appeal. But, as this recent decision shows, foreign states should not count on that presumption to apply in all circumstances and need to understand that they may well be required to post bond pending appeal.

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