No. 533, Docket 93-7552.United States Court of Appeals, Second Circuit.Argued November 19, 1993.
Decided January 19, 1994.
Brian T. Murnane, New York City (Richards O’Neil, Edward L. Powers, of counsel), for defendants-appellants.
Robert Penchina, New York City (Rogers Wells, Donald F. Luke, Dawn M. Conry, of counsel), for plaintiff-appellee.
Appeal from the United States District Court, Southern District of New York.
Before: FEINBERG, PIERCE and MINER, Circuit Judges.
FEINBERG, Circuit Judge:
 Defendants Rafidain Bank and Central Bank of Iraq (respectively, Rafidain and CBI; collectively the Iraqi Banks or appellants) appeal from a judgment dated May 5, 1993 in the United States District Court for the Southern District of New York, Leonard B. Sand, J., granting the motion of plaintiff-appellee Commercial Bank of Kuwait (Commercial) for a default judgment. Commercial seeks recovery on certain “garden-variety” commercial obligations owed to it by the Iraqi Banks. This appeal requires us to examine the “commercial activity” exception to sovereign immunity contained in the Foreign Sovereign Immunities Act, 28 U.S.C. §§ 1330, 1602-1611 (FSIA); the requirements for obtaining a default judgment under the FSIA; and the application of the “good cause shown” standard of Fed.R.Civ.P. 55(c) to a foreign sovereign’s opposition to entry of a default judgment. For the reasons given below, we affirm the judgment of the district court.
 I. Background A. Commercial’s Allegations Against the Iraqi Banks
 This controversy stems in part from the situation in the Middle East that started with Iraq’s invasion of Kuwait in August 1990 and led to open hostilities between the United States and Iraq in early 1991. Iraq suspended its payments under various obligations, including those at issue in this litigation.
 Rafidain is a commercial bank wholly owned by the Republic of Iraq. CBI is the central banking authority in Iraq, analogous to the Federal Reserve in the United States. Both entities are therefore “agenc[ies] or instrumentalit[ies] of a foreign state” under the FSIA, 28 U.S.C. § 1603. In the 1980s, Rafidain entered into numerous loan and letter of credit transactions involving international banks. CBI guaranteed some of Rafidain’s payment obligations to facilitate Rafidain’s access to loans.
 This litigation involves loan agreements, guarantees, supplementary agreements and letters of credit with a total value of more than $1.1 billion. Commercial participated in syndicates formed by lending banks to spread the risks of these transactions with Rafidain. As a member of the lending syndicates, Commercial’s share of the outstanding payment obligations was approximately $33 million. Commercial’s claims against CBI are based on CBI’s guarantees of Rafidain’s
obligations and on a letter of credit under which Commercial paid more than $7.4 million.
 B. Proceedings in the District Court
 Commercial started this litigation in September 1991 by filing a complaint consisting of 11 counts. Commercial had difficulty serving the summons and complaint on the Iraqi Banks, and in December 1991 the district court directed an alternative method of service.
 In January 1992, Commercial advised the district court that it had achieved service. Pursuant to 28 U.S.C. § 1608(d),
appellants had 60 days to file their responses. Appellants failed to comply with this requirement. In May 1992, Commercial moved for default judgment on the eight counts of the complaint then remaining. The Iraqi Banks first appeared after the motion was filed. The district court granted appellants’ counsel an extension of time to file papers in opposition to Commercial’s motion. Appellants’ counsel filed a memorandum in opposition to the motion on July 22, 1992, one day before a scheduled hearing in the district court.
 At the July 23 hearing, the district court indicated that it would not enter a default judgment against the Iraqi Banks if there were meritorious defenses to Commercial’s claims. The district court granted appellants’ counsel additional time to file papers demonstrating the existence of meritorious defenses, and referred the case to a magistrate judge for a report and recommendation on Commercial’s motion for default judgment.
 On August 31, 1992 Magistrate Judge James C. Francis IV issued his Report, finding that (1) the Iraqi Banks’ default was willful; (2) denial of Commercial’s motion would prejudice Commercial; and (3) the Iraqi Banks presented no meritorious defenses. Accordingly, the magistrate judge concluded that the Iraqi Banks had failed to show good cause under Fed.R.Civ.P. 55(c) why the court should deny the motion for default judgment. On September 18, 1992, over the Iraqi Banks’ objections, the district court adopted the magistrate’s Report. In May 1993, the district court entered final judgment for Commercial on its motion for default judgment. The Iraqi Banks timely filed their joint notice of appeal in June 1993.
 II. Discussion
 On appeal, the Iraqi Banks argue: (1) the district court lacked jurisdiction to hear several of the counts in the complaint because the Iraqi Banks enjoyed sovereign immunity; (2) Commercial did not satisfy the requirement of § 1608(e) of the FSIA that a party seeking a default judgment present “evidence satisfactory to the court”; and (3) the district court abused its discretion in finding that the Iraqi Banks failed to show good cause why the motion for default judgment should be denied under Fed.R.Civ.P. 55(c). We consider these arguments mindful that “default judgments are disfavored, especially those against foreign sovereigns.” First Fidelity Bank, N.A. v. Government of Antigua Barbuda, 877 F.2d 189, 196 (2d Cir. 1989).
 A. Jurisdiction Under the FSIA
 The Iraqi Banks contend that the district court erred in applying the FSIA’s “commercial activity” exception to sovereign immunity to Counts V-VII of the complaint, and therefore lacked jurisdiction to consider those counts.
 The FSIA provides the “sole basis” for obtaining jurisdiction over a foreign sovereign in the United States. Argentine Republic v. Amerada Hess Shopping Corp., 488 U.S. 428, 439, 109 S.Ct. 683, 690, 102 L.Ed.2d 818 (1989). Under the FSIA, a “foreign state shall be immune from the jurisdiction of the courts of the United States and of the states” unless one of several statutory exceptions
applies. 28 U.S.C. § 1604. We review de novo the district court’s conclusions of law regarding jurisdiction under the FSIA Shapiro v. Republic of Bolivia, 930 F.2d 1013, 1016-17 (2d Cir. 1991).
 The “commercial activity” exception to sovereign immunity provides, in relevant part, that a foreign sovereign or its agencies and instrumentalities:
shall not be immune from the jurisdiction of the courts of the United States or of the States in any case . . . in which the action is based . . . upon an act outside the territory of the United States in connection with a commercial activity of the foreign sovereign elsewhere and that act causes a direct effect in the United States.
 28 U.S.C. § 1605(a)(2). See also 28 U.S.C. § 1603(d) (defining “commercial activity” as “either a regular course of commercial conduct or a particular commercial transaction or act”); Texas Trading Milling Corp. v. Federal Republic of Nigeria, 647 F.2d 300, 307-08 (2d Cir. 1981), cert. denied, 454 U.S. 1148, 102 S.Ct. 1012, 71 L.Ed.2d 301 (1982).
 The Supreme Court has recently clarified the “direct effect” language of § 1605(a)(2). Republic of Argentina v. Weltover,
___ U.S. ___, ___-___, 112 S.Ct. 2160, 2168-69, 119 L.Ed.2d 394 (1992). Weltover held that Argentina’s unilateral rescheduling of bond payments had a “direct effect” within the meaning of § 1605(a)(2) because New York was the place of payment. Id.
 Similarly, the agreements at issue in Counts V-VII require the Iraqi Banks to make payments in U.S. dollars into accounts in New York City. The Iraqi Banks concede that these transactions constitute “commercial activity” under § 1603(d). Nevertheless, they argue that the “commercial activity” exception does not apply because the payments were to be made not directly to Commercial but to New York bank accounts held by the lead banks of the various lending syndicates. The Iraqi Banks thus contend that, because the United States is not the place of performance of any contractual obligations owed to this plaintiff, there is no “direct effect in the United States” within the meaning of § 1605(a)(2).
 We reject appellants’ attempt to limit the Court’s opinion i Weltover. The “commercial activity” exception of the FSIA withdraws immunity in cases involving essentially private commercial activities of foreign sovereigns that have an impact within the United States. This reflects the “restrictive” theory of sovereign immunity that underlies the FSIA. See Jackson v. People’s Republic of China, 794 F.2d 1490, 1493 (11th Cir. 1986), cert. denied, 480 U.S. 917, 107 S.Ct. 1371, 94 L.Ed.2d 687 (1987); H.R.Rep. No. 1487, 94th Cong., 2nd Sess. 7 (1976), reprinted in 1976 U.S.C.C.A.N. 6604, 6605; Joseph W. Dellapenna, Suing Foreign Governments and Their Corporations § 1.2, at 3-8 (1988). The focus of § 1605(a)(2) is the activity of the sovereign. If the sovereign’s activity is commercial in nature and has a direct effect in the United States, then the jurisdictional nexus is met, no immunity attaches, and a district court has the authority to adjudicate disputes based on that activity.
 The failure of the Iraqi Banks to remit funds in New York, as they were contractually bound to do, had a direct effect in the United States under Weltover. Furthermore, the requisite “material connection” between Commercial’s cause of action and the “commercial activity” that is the jurisdictional basis is met despite Commercial’s reliance on an agent to collect the sums due. Cf. Arriba Ltd. v. Petroleos Mexicanos, 962 F.2d 528, 533 (5th Cir.), cert. denied, ___ U.S. ___, 113 S.Ct. 413, 121 L.Ed.2d 337 (1992). Thus, the district court had jurisdiction to hear Commercial’s claims. The Iraqi Banks may still argue, as they do, that Commercial does not have standing to complain of that breach of duty. That contention is discussed below.
 Therefore, we agree with the district court that it had jurisdiction under the “commercial activity” exception, and that the Iraqi Banks do not enjoy sovereign immunity from any part of this action.
 B. Default Judgments Under the FSIA
 The Iraqi Banks argue that Commercial failed to satisfy the requirements of the FSIA for obtaining a default judgment. The FSIA provides:
No judgment by default shall be entered by a court of the United States or of a State against a foreign state, a political subdivision thereof, or an agency or instrumentality of a foreign state, unless the claimant establishes his claim or right to relief by evidence satisfactory to the court. . . .
 28 U.S.C. § 1608(e). The Iraqi Banks contend that Commercial did not present sufficient evidence to support its claims and that the district court failed to make findings before entering the default. Specifically, the Iraqi Banks argue that Commercial could not have satisfied the evidentiary burden as to Counts I-IV of the complaint because the loans underlying those counts were never properly accelerated as required by the loan agreements, and that Commercial failed to establish its standing to sue on Counts V-VII of the complaint.
 Congress promulgated § 1608(e) to provide foreign sovereigns with the same protections from default judgments that the federal government enjoys under Fed. R.Civ.P. 55(e). House Report 1487 at 26, 1976 U.S.C.C.A.N. at 6625; Amernational Indus., Inc. v. Action-Tungsram, Inc., 925 F.2d 970, 975-76 (6th Cir.), cert. denied, ___ U.S. ___, 111 S.Ct. 2857, 115 L.Ed.2d 1024 (1991) (noting the “identical wording” of § 1608(e) and Rule 55(e)). Rule 55(e) reflects Congress’ recognition “that the government is sometimes slow to respond and that the public fisc should be protected from claims that are unfounded but would be granted solely because the government failed to make a timely response.”Marziliano v. Heckler, 728 F.2d 151, 157-58 (2d Cir. 1984). However, neither Rule 55(e) nor § 1608(e) relieves the sovereign from the duty to defend cases and to obey court orders Amernational Indus., 925 F.2d at 975-76 (citing Alameda v. Secretary of Health, Educ. Welfare, 622 F.2d 1044, 1047-48 (1st Cir. 1980)).
 Thus, when the United States or a foreign sovereign defaults, the district court must determine whether the plaintiff’s allegations are supported by evidence. While in some cases this will require a hearing, we have held that Rule 55(e) does not “require an evidentiary hearing if one would ordinarily not have been held, nor [does the Rule] require the court to demand more or different evidence than it would ordinarily receive in order to make its decision.” Marziliano, 728 F.2d at 158. Further, we have said that Rule 55(e) does not require explicit findings, and that the district court’s decision should be affirmed so long as “there is an adequate basis in the record for inferring that the district court . . . was satisfied with the evidence submitted” in support of the plaintiff’s claims. Id. Likewise, we do not believe that § 1608(e) requires evidentiary hearings or explicit findings where the record shows that the plaintiff provided sufficient evidence in support of its claims.
 The record shows that the loans involved in Counts I-IV were properly accelerated and that the Iraqi Banks were notified, as required by the agreements. This evidence, in the form of affidavits and exhibits, was submitted well before the district court entered the May 1993 default judgment under attack. Because the record contains sufficient evidence to support Commercial’s claims as to Counts I-IV, we believe the district court correctly applied § 1608(e) with respect to those counts.
 As indicated above, the Iraqi Banks also assert that Commercial failed to establish that it had standing to sue on Counts V-VII. They contend that Commercial does not have standing because Commercial lacks privity with the Iraqi Banks, and because the participation agreements authorize only the lead banks to sue and only after obtaining the approval of the majority of the participating banks.
 The district court rejected these challenges to Commercial’s standing. The magistrate’s Report noted that the lead banks entered into each of these agreements as agent of the participating banks. Under English law, which governs here pursuant to express provisions
of the agreements, an undisclosed principal has standing to sue on a contract. Moto Vespa S.A. v. MAT (Brittania Express) Ltd.,  1 Lloyd’s Rep. 175, 178-79; Teheran-Europe Co. v. S T Belton (Tractors),  2 QB 545 (“It is a well-established rule of English law that an undisclosed principal can sue and be sued on a contract, even though his name and even his existence is undisclosed, save in those cases when the terms of the contract expressly or impliedly confine it to the parties to it.”); Ford v. Williams, 62 U.S. (21 How.) 287, 289, 16 L.Ed. 36 (1858).
 The terms of the agreements here do not “expressly or impliedly” preclude Commercial from bringing this action. While the participation agreement at issue in Counts V and VI authorizes the “Confirming Bank” to sue “only if requested to do so by the Majority Banks,” this provision does not abrogate the rights of participating banks to sue on their own. Indeed, the agreement points the other way, providing that the rights of the parties “under the general law” are expressly reserved. We believe that this includes the right to sue as undisclosed principal as allowed under the governing English law. Provisions in the relevant agreements for distributing proceeds recovered by participating banks support this reading of the agreements.
 Further, it is hard to believe that the Iraqi Banks did not know that the loans were the subject of participation agreements and that they, as borrowers, were potentially liable to the participants. Such loan participations are common practice, as appellants’ counsel conceded at oral argument.
 We are satisfied that the record contains “evidence satisfactory to the court” that Commercial had standing to sue on these agreements as either a known or an undisclosed principal, and that the district court correctly applied § 1608(e) to Counts V-VII as well as to Counts I-IV.
 C. Opposition to Entry of Default Judgment — The Rule 55(c) Standard
 The district court evaluated appellants’ opposition to the motion for a default judgment under the “good cause shown” standard of Fed.R.Civ.P. 55(c). Meehan v. Snow, 652 F.2d 274, 276 (2d Cir. 1981). Under Rule 55(c), the factors to be considered in deciding whether to relieve a party of a default are “whether the default was willful, whether setting it aside would prejudice the adversary, and whether a meritorious defense is presented.” Id. at 277. The district court must consider all of these factors. See Information Sys. Networks Corp. v. United States, 994 F.2d 792, 796 (Fed.Cir. 1993) (noting that the majority rule is to consider all three factors). We review the district court’s decision to grant the default judgment for abuse of discretion, Davis v. Musler, 713 F.2d 907, 912 (2d Cir. 1983).
 1. Willfulness of the Iraqi Banks’ Default
 By adopting the magistrate’s Report, the district court accepted his findings, including the finding that the default of the Iraqi Banks was willful. The Report notes that “[t]he Iraqi Banks have never stated that they failed to receive actual notice of the claims against them, nor have they alleged facts that would prove that the war in early 1991 against Iraq prevented response in January, 1992, to Commercial Bank’s summons and complaint. Therefore, an inference of willful default is justified.”
 The Iraqi Banks contend that the default was caused by the effects of the Gulf War, and was therefore not willful. In support of this assertion they point to the devastation resulting from the war, the economic sanctions imposed on Iraq and the freeze of Iraqi assets. Appellants claim that these circumstances made it impossible for them to obtain foreign currency. Appellants further assert that they were under the mistaken impression that the freeze of their assets precluded lawsuits against them from going forward.
 We agree with the district court’s finding that the Iraqi Banks’ default was willful. It
is true that a relatively short period passed between the time appellants’ response to the complaint was due and the time Commercial moved for default judgment. However, Commercial alleged in the district court — and there was no persuasive reason for the district court to have doubted the charge — that the Iraqi Banks purposely evaded service for months before alternative service was authorized. Moreover, we see no reason to disturb the district court’s finding that the Middle East hostilities did not prevent the Iraqi Banks from responding to the complaint. For example, as Rafidain itself made clear in the district court, it did not default in involuntary liquidation proceedings commenced against it in England in February 1991, when the Gulf War was on.
 Finally, we do not think that a defendant’s mistaken belief that it enjoys sovereign immunity automatically precludes a finding of willfulness. In support of this proposition, appellants rely on two cases: Jackson, 794 F.2d at 1496-97; an Carl Marks Co. v. U.S.S.R., 665 F. Supp. 323 (S.D.N.Y. 1987), aff’d, 841 F.2d 26 (2d Cir.), cert. denied, 487 U.S. 1219, 108 S.Ct. 2874, 101 L.Ed.2d 909 (1988). While the district court i Carl Marks Co. noted that “the Soviet Union’s willful default is tempered by its genuine but unfounded belief that it enjoys
sovereign immunity,” id. at 332, the court went on to find that the defendant had presented meritorious defenses. Id. Moreover, our affirmance in that case rested solely on lack of jurisdiction because of the nonretroactivity of the FSIA. 841 F.2d at 27. I Jackson, which of course is not binding upon us, the 11th Circuit similarly held that the FSIA did not apply retroactively Jackson, 794 F.2d at 1497-99. It is true that the opinion there did refer to “the misconception by an ancient and proud sovereign [China],” id. at 1496, in affirming the district court’s discretionary decision to set aside a default. But here the Iraqi Banks in effect ask us to hold that if there is such a misconception and the district court nevertheless refuses to set aside a default, we must reverse. We see no persuasive reason to so limit the district court’s exercise of its discretion.
 2. Lack of Meritorious Defenses
 The Iraqi Banks raise several defenses. We have already discussed at some length the defense of sovereign immunity and other defenses in connection with consideration of §§ 1605(a)(2) and 1608(e). None of the remaining defenses urged upon us require further discussion. The district court dealt with all of them in satisfactory fashion.
 3. Prejudice
 The district court found that setting aside the default judgment would prejudice Commercial because unfrozen Iraqi assets have diminished with the passage of time and because the delay has caused problems in the prosecution of this action. While the record does not strongly support a finding of prejudice, we need not scrutinize this factor further because the Iraqi Banks’ willful default and the absence of meritorious defenses were sufficient to support the district court’s disposition of the case. Cf. SONY Corp. v. Elm State Elec., Inc., 800 F.2d 317, 320-21 (2d Cir. 1986) (“Good cause to reopen was not established because [defendant] had failed to demonstrate that it possessed a meritorious defense.”); Marziliano, 728 F.2d at 157 (no abuse of discretion where willful default and lack of meritorious defenses clearly established).
 In sum, we are satisfied that the district court adequately considered the relevant factors in entertaining the Iraqi Banks’ opposition to the default judgment, and that there was no abuse of discretion.
 The judgment of the district court is affirmed.
In any action brought in a court of the United States or of a State, a foreign state, a political subdivision thereof, or an agency or instrumentality of a foreign state shall serve an answer or other responsive pleading to the complaint within sixty days after service has been made under this section.
No judgment by default shall be entered against the United States or an officer or agency thereof unless the claimant establishes a claim or right to relief by evidence satisfactory to the court.
For good cause shown the court may set aside an entry of default and, if a judgment by default has been entered, may likewise set it aside in accordance with Rule 60(b).