National City Bank of NY v. Republic of China
99 L. Ed. 2d 389 · Supreme Court of the United States · 1955
Facts
The Republic of China (ROC) sued National City Bank (NCB) to recover a $200,000 deposit. NCB filed two counterclaims totaling over $1.6 million based on defaulted Treasury Notes of the ROC. The District Court and Court of Appeals dismissed the counterclaims, asserting sovereign immunity because they were not based on the subject matter of the original suit.
Issue
Does a foreign sovereign, by initiating a lawsuit in U.S. courts, implicitly waive its sovereign immunity from counterclaims that are not directly related to the subject matter of its original suit, but seek to reduce its recovery?
Holding
Yes. The Supreme Court reversed the lower courts' decisions, holding that when a foreign sovereign invokes the jurisdiction of U.S. courts as a plaintiff, it implicitly waives its immunity from counterclaims, even if those counterclaims are not based on the subject matter of the original suit, to the extent of the sovereign's claim.
Rule
When a foreign sovereign voluntarily brings suit in a U.S. court, it waives its sovereign immunity with respect to counterclaims that seek to reduce its recovery, even if those counterclaims do not arise from the same transaction or subject matter as the sovereign's original claim. The doctrine of sovereign immunity is not absolute and must yield to considerations of fairness when the sovereign acts as a plaintiff.
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