South-Western Legal Studies in Business

Courts Lack Jurisdiction Over U.S. Citizen Dispute Over Foreign Retirement Benefits
Description Appeals court held that U.S. courts do not have jurisdiction to hear a case in which a U.S. citizen, who paid taxes to the Saudi social security for years while working there, contended he should receive a larger refund. There was no expropriation of property, so no basis for jurisdiction.
Topic International Law
Key Words Sovereign Immunity; Expropriation; Tax Contributions; Employment
C A S E   S U M M A R Y
Facts From 1969 to 1987, Saudi Arabia required employees, regardless of citizenship, to pay a 13% tax similar to Social Security taxes in the U.S. After 1987, non-Saudi workers were excluded from having to pay those taxes and were excluded from benefits. Later, the government decided to return some payments made by non-Saudi employees. Peterson had worked in Saudi Arabia from 1979 to 1990. The Saudi government refunded 5% of the 13% he had contributed. He pressed for the other 8% but did not receive it. He sued the Saudi government in U.S. federal court for a refund of the remainder of the taxes he paid. The district court held that it lacked jurisdiction and dismissed the suit. Peterson appealed.
Decision

Affirmed. The termination of the retirement benefits for foreign workers did not have a direct effect on the United States so as to warrant application of the commercial activity exception to the Foreign Sovereign Immunities Act (FSIA). The only way for a court to obtain jurisdiction over a foreign state is through the FSIA. Since it does not apply to this instance, U.S. courts lack jurisdiction. The tax contributions made by Peterson were not a right in property, so the termination of those rights was not an expropriation of property by the Saudi government.

Citation Peterson v. Royal Kingdom of Saudi Arabia, 416 F.3d 83 (D.C. Cir. Ct. App., 2005)

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