Compatible Process, Conflicting Result : The Foreign Sovereign Immunities Act May Preempt the Uniform Commercial Code When Security Entitlements are Sold Abroad

The Uniform Commercial Code (UCC) protection of intermediary financial institutions may obstruct a Foreign Sovereign Immunities Act (FSIA) goal. The FSIA intends to restrict sovereign immunity when a foreign government participates in commercial activities with direct effects in the United States. The UCC protects intermediaries by forcing creditors to seek judgments abroad when the security entitlements were purchased abroad. If the UCC compels creditors to sue in a nation that will not treat an individual investor and a foreign sovereign equally, then its effect conflicts with the objective of the FSIA, and the FSIA preempts the UCC. This Article uses the facts in the pending lawsuit of Peterson v. Islamic Republic of Iran to illustrate the preemption arguments and demonstrate why courts should preempt the UCC when enforcing judgments against foreign governments that purchase certain security entitlements