## Facts

- Zappia Middle East Construction Co. Ltd. (ZMEC) entered eight public-works construction contracts with the Emirate of Abu Dhabi from 1979–1982, which required periodic progress payments.
- ZMEC alleged that beginning in 1982 the Emirate delayed or refused payments and required work beyond contract specifications, causing severe financial distress.
- To remain solvent, ZMEC borrowed from Emirates Commercial Bank (ECB) on unfavorable terms and reached its credit limit.
- In 1983, ZMEC and ECB executed a restructuring agreement that transferred day-to-day management to a third-party contractor (Bovis International) and placed ZMEC under a management committee dominated by ECB representatives, with limits on additional indebtedness.
- ZMEC alleged the 1983 agreement was executed under duress, including coercion tied to seizure of Joseph Zappia’s passport.
- ECB later merged into Abu Dhabi Commercial Bank (ADCB); Abu Dhabi Investment Authority (ADIA), wholly owned by the Emirate, held a majority interest in ADCB.
- ZMEC sued the Emirate, ADIA, and ADCB in federal court, alleging its contract and corporate control rights were “rights in property” taken in violation of international law, invoking the FSIA expropriation exception as the basis for jurisdiction.

## Issues

1. Whether ZMEC established a “taking” of “rights in property” in violation of international law sufficient to invoke the FSIA expropriation exception, 28 U.S.C. § 1605(a)(3).
2. Whether ECB/ADCB could be treated as alter egos or instrumentalities whose conduct should be attributed to the Emirate as a sovereign expropriation rather than private commercial conduct.
3. Whether the district court abused its discretion by resolving the FSIA jurisdictional challenge without an evidentiary hearing.

## Decision

- The Second Circuit affirmed dismissal for lack of subject-matter jurisdiction under the FSIA.
- The court held that the Emirate’s alleged payment delays/refusals and alleged extra-work demands reflected a commercial contract dispute, not a sovereign expropriation in violation of international law.
- The court held ZMEC failed to overcome the presumption that ECB/ADCB were separate juridical entities; their restructuring conduct was consistent with a private creditor’s actions and was not shown to be an act of the Emirate as sovereign.
- The court held the district court did not abuse its discretion in denying an evidentiary hearing where ZMEC did not proffer specific facts likely to establish the expropriation exception.

## Legal Principles

- Foreign states are presumptively immune under the FSIA, and the plaintiff bears the burden to show a statutory exception applies.
- FSIA § 1605(a)(3) requires a “taking” of “rights in property” in violation of international law; breach or manipulation of a commercial contract, without more, does not constitute an expropriation.
- Government ownership or majority shareholding in a bank or corporation does not, by itself, justify attributing the entity’s acts to the sovereign; separate juridical status is presumed absent substantial evidence of extensive control or misuse of the corporate form.
- District courts may decide FSIA jurisdiction on written submissions and need not conduct an evidentiary hearing absent a concrete proffer that further evidence would establish a jurisdictional exception.

## Conclusion

The Second Circuit held that ZMEC’s allegations described commercial nonpayment and creditor-driven restructuring rather than a sovereign taking in violation of international law, and ZMEC did not show the banks acted as the Emirate’s alter egos; the FSIA therefore barred the suit for lack of subject-matter jurisdiction.


Zappia Middle East Constr. Co. Ltd. v. Emirate of Abu Dhabi, 215 F.3d 247 (2d Cir. 2000)