The US Court of Appeals for the District of Columbia Circuit dismissed a lawsuit filed by Wye Oak Technology, Inc. against Iraq and the Iraqi Ministry of Defense, ruling that Iraq is protected by sovereign immunity.

The case stemmed from a 2003 contract where Wye Oak agreed to help rebuild the Iraqi army, funded by Iraq. After traveling to Iraq to collect a payment, Wye Oak’s owner was killed by unknown assailants, leading to the company ceasing operations in the country.

Years later, Wye Oak filed a lawsuit in a US federal court, which awarded the company over $120 million in damages.

The Appeals Court, however, found that Iraq is immune from the suit under the Foreign Sovereign Immunities Act (FSIA), which protects foreign states from civil lawsuits in the US unless specific exceptions apply. 

The court emphasized that the commercial activity exception to the FSIA, which would strip Iraq of immunity, did not apply in this case.

In its ruling on Tuesday, the Appeals Court stated, “whatever the merits of the damages dispute, we cannot reach it. Iraq is immune from suit, so we have no jurisdiction. We accordingly reverse the district court's judgment and remand for dismissal of the case."

Wye Oak had initially filed its lawsuit in the Eastern District of Virginia, which was later transferred to the federal court in the District of Columbia. The trial court ruled in favor of Wye Oak, concluding that Iraq had failed to pay the amounts due under three invoices.

Iraq appealed the decision, arguing that the commercial activity exception did not apply because the actions took place outside the US and did not have a direct effect within the US.

The Appeals Court agreed, stating, "Iraq loses its immunity to this lawsuit only if its breach of contract caused a direct effect in the United States. It did not. Iraq was the center of Wye Oak's entire commercial relationship with the Ministry, and Iraq is where the breach's direct effects occurred. As a result, the district court lacked jurisdiction over this suit, and so its judgment is vacated, and the case remanded with instructions to dismiss."