## Facts

- Triad Financial Establishment, a Liechtenstein entity controlled by Adnan Khashoggi, acted as a marketing and consulting agent focused on international ventures tied to Saudi Arabia.
- The Tumpane Company (Tumco), a New York corporation with its principal place of business in Washington, provided support services for large military projects.
- In connection with the U.S.-Saudi “Peace Hawk” program to modernize the Royal Saudi Air Force, Tumco sought a sole-source subcontract from Northrop (the prime contractor) for support services to be performed in Saudi Arabia.
- On December 1, 1971, Triad and Tumco entered into written agency agreements under which Triad would use its contacts and influence to help Tumco obtain and maintain the Peace Hawk support-services subcontract.
- Although the agreements contained New York choice-of-law and forum provisions, the subcontract work and the transactions’ primary operational focus were in Saudi Arabia.
- After the agreements were underway, Saudi Arabia issued a decree aimed at corruption in military procurement that prohibited commissions to agents on arms-related contracts and directed termination of ongoing commission agreements upon notice.
- Relying on the decree, Tumco stopped paying commissions and asserted it owed no further commissions; it also sought return of commissions already paid.
- Triad sued for breach of contract seeking more than $3.5 million in unpaid commissions.

## Issues

1. Whether and to what extent a Saudi decree prohibiting agent commissions on arms-related contracts rendered continued commission payments unlawful or unenforceable despite New York choice-of-law and forum clauses.
2. Whether foreign sovereign public policy and governmental action could excuse nonperformance or limit contractual remedies under doctrines such as illegality, impossibility, or frustration.
3. Whether Triad could obtain summary judgment for unpaid commissions and whether Tumco could obtain summary judgment eliminating liability and/or requiring restitution of commissions already paid.

## Decision

- Triad’s motion for summary judgment was denied.
- Tumco’s motion for summary judgment was granted in part and denied in part.
- The court held that Tumco could not be required, as a matter of law, to pay commissions that would place it in violation of the Saudi decree or perpetuate an arrangement the Saudi government ordered terminated.
- The court declined to give Tumco complete relief because factual and legal disputes remained, including whether some commissions were earned before the decree or were outside the decree’s scope.

## Legal Principles

- Contractual choice-of-law and forum clauses are relevant but do not necessarily control when a foreign sovereign with the strongest regulatory interest enacts a measure directly governing the transaction’s performance.
- A supervening governmental act that makes performance unlawful, or that orders termination of a particular compensation practice, can limit or excuse contractual obligations under doctrines tied to illegality and related performance defenses.
- On summary judgment, a party seeking enforcement of commission rights must show entitlement as a matter of law; where the legality and scope of performance are affected by foreign law and unresolved facts, summary judgment is inappropriate.
- Restitution or recovery of previously paid commissions may depend on timing and scope questions (including whether payments were made before the prohibitory decree applied), making broad, categorical relief unsuitable on the existing record.

## Conclusion

The court refused to award Triad unpaid commissions as a matter of law and partially accepted Tumco’s defenses based on a Saudi anti-commission decree, holding that commissions could not be compelled where payment would violate Saudi law, while leaving remaining commission and repayment disputes for further proceedings.


Triad Fin. Establishment v. Tumpane Co., 611 F. Supp. 157 (N.D.N.Y. 1985)