Counterclaims and Set-Offs against Sovereigns

A comprehensive term for the vulnerability of a foreign government to retaliatory suits against it arising out of a lawsuit that it commences against a party.

The Federal Foreign Sovereign Immunities Act (28 U.S.C.A. § 1602 et seq. [1976]) provides that, in any action initiated by a foreign state or in which a foreign state intervenes, such a state is not afforded IMMUNITY regarding any counterclaim for which no immunity would have been granted if such a claim had been brought in a separate action against the foreign state. In addition, a foreign state is not entitled to immunity in cases involving counterclaims that arise out of the transaction that is the subject matter of the foreign state's claim, or to the extent that the counterclaim does not seek relief that is in excess of, or different from, the type sought by the foreign state.

The Foreign Sovereign Immunities Act codified the general rule that when a foreign government brings suit, it is deemed to have submitted to the court's jurisdiction and waives its immunity to the extent that a counterclaim arising out of the same transaction or to the extent that the counterclaim, when used defensively in the form of a SET-OFF, is not in excess of the amount of the foreign state's claims.

A foreign nation that is a plaintiff in an action brought before a court of another nation is not barred in appropriate cases from invoking the act of state doctrine to preclude a counterclaim against it. This doctrine provides that, as a general rule, the acts of one foreign state committed within its own boundaries or territories are not reviewable by the courts of another nation.