D.C. Circuit Concludes That IMF Did Not Waive Immunity by Agreeing to Arbitration

The D.C. Circuit recently affirmed the dismissal of a suit against the International Monetary Fund (IMF) that sought to modify or vacate an arbitration award after concluding that the IMF did not waive its immunity from judicial process in the agreement that authorized the arbitration.

The IMF enjoys broad “immunity from every form of judicial process except to the extent that it expressly waives its immunity for the purpose of any proceedings or by the terms of any contract.” The IMF hired Leonard A. Sacks & Associates, P.C. to negotiate disputes it had with several contractors related to renovations of the IMF’s headquarters. The agreement between the IMF and Sacks incorporated the IMF’s immunity “from every form of judicial process” and explained that, in accordance with the IMF’s broad immunity, disputes concerning the agreement were “to be resolved not by litigation, but by arbitration.” The agreement’s arbitration clause concluded by stating: “It is understood and agreed that the submission of a claim or dispute to arbitration ... shall not be considered to be a waiver of the immunities of the IMF.”

A dispute arose between Sacks and the IMF regarding Sacks’ fee. The parties submitted that dispute to arbitration and an arbitration panel awarded Sacks a small increase in its fee. Sacks was displeased with the result of the arbitration, however, and sued the IMF in D.C. Superior Court seeking a modification or vacatur of the arbitration award, as generally allowed by D.C. law.

The IMF moved to dismiss Sacks’ action based on its immunity. The district court granted the IMF’s motion and Sacks appealed to the D.C. Circuit, which affirmed.

The D.C. Circuit compared the agreement between Sacks and the IMF to the contract in C & L Enterprises Inc. v. Citizen Band Potawatomi Indian Tribe of Oklahoma, in which the U.S. Supreme Court held that a Native American tribe had waived its immunity to suit in state court under the terms of an agreement with a construction contractor that included an arbitration clause that the Supreme Court held established that the tribe had consented to the enforcement of arbitration awards under the arbitration clause in Oklahoma state court.

Unlike the contract in C & L Enterprises, the “IMF contract contain[ed] express preservations of immunity.” The IMF-Sacks agreement viewed “resolution of disputes by arbitration as part and parcel of preserving [the IMF’s] immunity from judicial process.” The IMF-Sacks agreement’s arbitration clause also concluded by noting “that the submission of a claim or dispute to arbitration ... shall not be considered to be a waiver of the immunities of the IMF.”

Based on this language, which distinguished the IMF-Sacks agreement from the agreement at issue in C & L Enterprises, the D.C. Circuit concluded that it could not say that the IMF explicitly waived immunity. The D.C. Circuit therefore affirmed the dismissal of Sacks’ suit.

Leonard A. Sacks & Associates, P.C. v. International Monetary Fund, No. 21-7034 (D.C. Cir. Feb. 25, 2022)