## Facts

- Victory Transport, Inc., a U.S. shipowner, chartered the S.S. *Hudson* to Comisaría General de Abastecimientos y Transportes, an agency within Spain’s Ministry of Commerce.
- The charter was a voyage charter to carry surplus U.S. wheat purchased under a U.S.-Spain agricultural commodities program from Mobile, Alabama to one or two Spanish ports.
- The charter party included a New York arbitration clause requiring disputes to be decided by three arbitrators in New York, with the award enforceable in court.
- During discharge in Spain, the vessel was delayed and sustained hull damage allegedly because the designated ports were unsafe for a ship of the vessel’s size.
- Victory sought damages for breach of the charter’s safe-port obligation; Comisaría General did not pay and did not proceed to arbitration.
- Victory petitioned in the Southern District of New York under § 4 of the Federal Arbitration Act to compel arbitration; the court authorized service by registered mail to Comisaría General’s Madrid office.
- Comisaría General appeared specially and moved to vacate service and dismiss for lack of jurisdiction, asserting sovereign immunity and invoking the act of state doctrine.
- The district court denied the motions, found jurisdiction, rejected immunity defenses, and compelled arbitration; Comisaría General appealed.

## Issues

1. Whether Comisaría General, as an instrumentality of Spain, was immune from suit in U.S. courts for claims arising out of a voyage charter containing a New York arbitration clause.
2. Whether the chartering and performance of ocean carriage for wheat constituted commercial activity rather than sovereign public acts for immunity purposes.
3. Whether the act of state doctrine barred the dispute because it involved the selection or use of Spanish ports alleged to be unsafe.
4. Whether the district court had in personam jurisdiction and whether service by registered mail to Madrid was authorized and sufficient.
5. Whether the court could compel arbitration in New York under § 4 of the Federal Arbitration Act despite the asserted defenses.

## Decision

- The Second Circuit affirmed the order compelling arbitration and denying the motions to vacate service and dismiss.
- It held that sovereign immunity did not apply because the challenged conduct—chartering a vessel to transport goods under a charter party—was commercial in nature.
- It rejected the act of state defense because the dispute concerned contractual performance (including the safe-port obligation), not the validity of a sovereign governmental act.
- It upheld in personam jurisdiction and concluded that the court-authorized service by registered mail to Madrid provided adequate notice in the circumstances.
- With immunity and jurisdictional objections rejected, the arbitration agreement was enforceable according to its terms, requiring arbitration in New York.

## Legal Principles

- Under the restrictive theory of foreign sovereign immunity, immunity is limited to public/governmental acts (jure imperii) and does not extend to commercial acts (jure gestionis).
- A foreign state instrumentality that enters a commercial contract containing a New York arbitration clause may be treated as engaging in commercial activity for immunity analysis.
- The act of state doctrine does not bar resolution of ordinary commercial contract disputes merely because performance occurs within a foreign sovereign’s territory.
- Service of process methods that provide actual notice can be upheld where reasonably calculated to inform the foreign respondent of the proceeding.
- Once jurisdiction exists and no immunity applies, § 4 of the Federal Arbitration Act permits a court to compel arbitration in the contractually selected forum.

## Conclusion

The Second Circuit required Spain’s commercial agency to arbitrate in New York under the charter party, holding that restrictive sovereign immunity did not protect a foreign sovereign instrumentality from disputes arising out of commercial shipping contracts and that neither act of state principles nor the challenged service defeated jurisdiction.


Victory Transp., Inc. v. Comisaría Gen., 336 F.2d 354 (2d Cir. 1964)