Problem
FirstDraw, Inc., was an Arizona arms dealer. The armed forces of Nicaragua contracted to purchase weapons from FirstDraw over an 8-year period. After the government was replaced and a democracy installed, the Honduran government sought to reduce the size of its military, and its relationship with FirstDraw deteriorated. Nicaragua refused to honor the contract and purchase the inventory of arms, which FirstDraw could sell only at a much lower price. FirstDraw filed a suit in a federal district court in the United States to recover damages for this breach of contract by the government of Nicaragua.
A. Should the Foreign Sovereign Immunities Act (F S I A) preclude this lawsuit? Why or why not?
B. Does the act of state doctrine bar FirstDraw from seeking to enforce the contract? Explain.
C. Suppose that prior to this lawsuit, the new government of Nicaragua had enacted a law making it illegal to purchase weapons from foreign arms dealers. What doctrine of deference might lead a U.S. court to dismiss FirstDraw's case in that situation?