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United States: Foreign Sovereign Immunities Act and Prejudgment Attachment*

Published online by Cambridge University Press:  20 March 2017

Abstract

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Type
Judicial and Similar Proceedings
Copyright
Copyright © American Society of International Law 1979

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Footnotes

*

[The Introductory Note was prepared for International Legal Materials.

[The Opinions of the District Court for the District of New Jersey in Behring International v. Imperial Iranian Air Force appear at I.L.M. pages 1370 and 1389. The Opinion of the District Court for the Southern District of New York in Reading & Bates v.National Iranian Oil Company appears at I.L.M. page 1398. All are reproduced from copies provided by the Courts.]

References

page 1371 note 1. Defendant filed these notions on April 26 and May U, 1979. A hearing was held on Kay 9, 1979- At that time the parties requested that the matter be decided expeditiously, and indicated their willingness to accept an order disposing of the matter to be followed by an opinion at a later date. Rather than simply enter an order, however, I issued a Summary Opinion, filed Kay 11, 1979, outlining in broad brushstrokes the basis for my decision.This opinion constitutes ray formal opinion in this matter and supersedes the Summary Opinion in all respects.

page 1371 note 2. Defendant claims only that sovereign immunity bars the prejudgment attachment of its property. It does not claim that it is immune from suit in this Court. See n.13 and text at page infra.

page 1371 note 3. Verified Complaint, filed February 28, 1979, Jurisdiction &¶ &¶ (ii) and (iii).

page 1372 note 4. Service has been completed since the hearing date. See n.8, infra.

page 1372 note 5. The contract between Behring and I.I.A.F. is appended to the Verified Complaint, supra, n.3, as Exhibit B. Since only I.I.A.F. successor has appeared and moved in. this-natter, I omit any discussion with respect to Behring's dealings with I.A.C.I.

page 1373 note 6. This Court may take judicial notice of the recent upheaval in Iran and the contiiviirif, political uncertainties which it has occasioned. E.g_, Stromberg-Carslon Corn, v. Bank Melli Iran, 467 F. Supp. 530, 532 n.2 (S.D.N.Y.1979).

page 1374 note 7. The Order to Show Cause, Temporary Restraining Order, and Summons, filed February 28, 1979, at pp. 2-3 reads in pertinent part :

* * *

2. That pending determination of said Show Cause Order, defendants, … , are-hereby restrained and enjoined from transferring, removing, sequestering, dismantling, hypothecating or in any other way acting with respect to said material in any manner inconsistent with plaintiff's interest therein; [and]

3. That pending determination of said Show Cause Order, defendants, . .. . , are hereby restrained and enjoined from revoking the letter of credit (Exhibit A to Affidavit of Attachment) written in favor of plaintiff and/or from removing any of defendant's property or property in which defendant has an interest from the Jurisdiction of this Court and/or the United Stales to the extent and the amount necessary to satisfy plaintiff's liquidated f.nd unliquidated claims total 1 inf. approximately two million dollars; … .

page 1374 note 8 Service upon Iran was originally attempted in accord with 28 U.S.C. § 1608(a)(3) by service by a form of mail requiring a signed receipt upon the Ministry of Foreign Affairs of Iran. Service upon the agencies was attempted in accord with 28 U.S.C. § 1603(b)(3)(B), also by a form of mail requiring a signed receipt, upon the agencies themselves in Teheran, Iran. Upon learning that the United States Postal Service had suspended all mail service to Iran, see Affidavit of Georga A. Murphey, filed March 12, 1979, H 3, service was again attempted upon Iran, this time pursuant to 28 U.S.C. § 1608(a)(4) through the Director of Special Consular Services. An Order for Alternative Method of Service was entered pursuant to 28 U.S.C. § 1608(b)(3)(c) authorizing service upon the agencies to also be made through the Director of Special Consular Services. A diplomatic note was filed with the Clerk of the Court on July 9, 1979 indicating that the transmittal date of the papsrs was Kay 9, 1979. Service was therefore completed on Kay 9, 28 U.S.C. § 1608(c)(1), and the defendants have sixty (60) days from that date to respond to the Complaint.

page 1375 note 9 9. In its moving papers, I.R.I.A.F. urged four grounds in support of its motion for the release of the restraints. They are:

1. Any attachment of the property of a foreign state or its agencies for jurisdiction purposes attempted after the effective date of the [Immunities] is void.

2. Under § 1610(d) of the [Immunities Act] IRIAF property is immune from attachment prior to judgment.

3. The I.R.I.A.F. property is immune from attachment under § 1611(b)(2)(B) of the [Immunities Act] because it is intended to be used in connection with a military activity and is under the control of a military authority or defense agency.

4. In the alternative, I.R.I.A.F. reserves, until further investigation is completed, the right to establish that the material in the Edison warehouse are “of a military character” and, therefore, immune from attachment under § 1611(b)(2)(A) of the Act.

I.R.I.A.F. Motion for Release of Restraints On All I.R.I.A.F. Property, filed April 26, 1979, K 9-12.

The .last of these arguments is expressed in the alternative, and counsel for I.R.I.A.F. did not argue that it supports the immediate release of the property restrained. Indeed, no proof was offered as to the military character of the property to be attached. I therefore express no opinion as to the merits of I.R.I.A.F.'s final argument.

As will be seen, because of the nature of the record before the Court at the time this decision was rendered, I am not required to respond at this time to all of the remaining arguments raised by I.R.I.A.F.

page 1376 note 10. See generally Note: Sovereign Immunity of States Engaged in Commercial Activities, 65 Colum. L. Rev. 1086 (1965), about the difference between the traditional absolute immunity principle and the modern “restrictive” theory, as well as a discussion of the United States courts' prior practice of deferring to recommendations of the State Departnent regarding the propriety of claims of sovereign immunity, rather than determining such claims for themselves. See also H.R. Rep. No. 94-1487, supra, at 6-9 [1976] U.S. Code Cong. & Admin. N. at 660′l-08.

page 1377 note 11. Section 1603(a) defines a “foreign state” to include agencies or instrumentalities of a foreign state. Section 1603(b) defines an “agency or instrumentality of a foreign state” to mean any entity —

(1) which is a separate legal person, corporate or otherwise, and

(2) which is an organ of a foreign state or political subdivision- thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or a political subdivision thereof, and

(3) which is neither a citizen of a state or of the United States as defined in section 1332(c) and (d) of [Title 28], nor created under the laws of any third party.

28 U.S.C. § 1603(b). All parties agree that Iran and I.R.I-.A.F: are foreign states as that term is defined above. Cf. Ed_lqw_ International Co. v. Nuclearna Electrarna Krsko, M l F. Supp. 827 (D.D.Ci 1977) (holding that the defendant was not an agency or instrumentality of a foreign state).

page 1377 note 12. This Court has no doubt that this action is a proceeding in personam against the defendants, and not one in rem or quasi irT~ rem. See infra, n.26.

page 1377 note 13 - It.is important to note that the Immunities Act deals both with a foreign state's immunity from the jurisdiction of United States courts, see 28 U.S.C. §§ 160*1-1607, and with the immunity a foreign state's property enjoys from attachment and execution. See 28 U.S.C. §§ 1609-1611.. In this case it is the second form of immunity which is the source of the controversy. It is the first form of immunity, however, which is determinative of this Court's subject matter jurisdiction under 28 U.S.C. § 1330(a).

page 1377 note 14. Section 1330(b) reads:

(b) Personal Jurisdiction over a foreign state shall exist as to every claim for relief over which the district courts have jurisdiction under subsection (a) where service has been made under section 1608 of this title.

page 1377 note 15. In addition to service upon I.R.I.A.F. pursuant to 28 U.S.C. § 1608(b)(3)(C) and (a)(*l), see n.8, supra, service was also attemoted upon the I.R.I.A.F. representative in Hew York City, Colonel Khatami, at his home. See 28 U.S.C. § 1608(b)(2).

page 1378 note 16. Under the Immunities Act sovereign immunity is an affirmative defense which must be specifically pleaded. The burden is upon the foreign state to “produce evidence of its claim of immunity”. H.R. Rep. No. 94-1487, supra, at 17; [1976] U.S. Code Cong. & Admin. H. 6616.

page 1378 note 17. Id.

page 1379 note 18. The survival of the Treaty of Amity is crucial to the central dispute about whether pre-judgment attachment of I.R.I.A.F. property is authorized in this case. See discussion in text, infra, at 18-21.

page 1379 note 19. No party has argued, and I have found no other indication, that the Treaty of Amity has been abrogated by the recent political upheaval in Iran. This opinion is, therefore, based upon the assumption that the Treaty is still valid.

page 1380 note 20. These questions have become the focus of this opinion only by the process of argument and counterargument by the parties. When Behring first sought a writ of attachment pursuant to Fed.RlCiv.P. 61) and N.J.S.A. 2A:26-1, et seq. , it recognized the possible existence of a defense of sovereign immunity. It anticipated and countered the defense by arguing that the Immunities Act, 28 U.S.C. § 1610(b)(1) and (2), waived any immunity from pre-judgment attachment of property. See Plaintiff's Brief in Support of its Order to Show Cause and Verified Complaint, at 26-29- I.R.I.A.F. disputed Behring's interpretation of the Act and argued that the Act waives immunity from pre-judgment attachment of a foreign state's property only in the limited circumstances described in 28 U.S.C. § 1610(d), circumstances, it argued, which were not present. See Memorandum of Lav; In Support of Motion For Release of Restraints From All I.R.I.A.F. Property, at 9-H- Behring's response was twofold.First, it argued, assuming the correctness of I.R.I.A.F.'s interpretation of section 1610(b), that the requirements of section 1610(d) were met. Second, it argued that the Treaty of Amity survived the enactment of the Immunities Act and that the Treaty authorized the use of pre-judgment attachments as a provisional remedy. See Memorandum of Law In Opposition to I.R.I.A.F.'s Motion For Release of Restraints From All I.R.I.A.F. Property and For Turnover Order, at 7-12 and 25-33- I.R.I.A.F. in turn disputed both of these contentions.

page 1381 note 21. Both the Immunities Act and the Treaty of Amity are acts of the domestic sovereign entitled to equal weight under the Constitution. The later of the two acts will, therefore, supply the governing rule of law in the event that the two acts conflict.K.C.., Ah Ins v. United States, 551 ?.?d 1222, 3229-30 (C.C.P.A. 1977). In “this cVise the “jiFununlties Act is the; more recent sovereign net. See generally 1A Sands, Sutherland Statutory Construction, §§ 32.01 I 32.06 at 378(4th-ed. 2972).

page 1381 note 22. Historically, unless otherwise waived, the property of a foreign state was immune from attachment in any form, except as a basis for obtaining In rem or quasi In rem jurisdiction over the foreign state. Even then, however, the property attached for the purpose of obtaining jurisdiction could not be executed r.oon to satisfy a Judgment. H.R. ROD. Ko. 94-1487, supra, at 26, 27-28; [1976] U.S. Code Cong. & Ac-ln. JI. at 6625-26. Section 1609 is not mi-rely a codification of this rule. It also modifies it by prohibiting'the pre-Judgement attachment of property in aid of jurisdiction. Id/See n. 26, Infra.

page 1382 note 23. 28 U.S.C. § 1610(a) and (b) reads:

§ 1610. Exceptions to the immunity, from attachment or execution

(a)The property in the United States of a foreign state, as defined in section 1603(a) o.f this chapter, used for a commercial activity in the United States, shall not be immune from attachment in aid of execution, or from execution, upon a judgment entered by a court of the United States or of a State after the effective date of this Act, if —

(1)the foreign state has waived its immunity from attachment in aid of execution or from execution either explicitly or by implication, notwithstanding any xvithdrawal of the waiver the foreign state may purport to effect except in accordance with the terms of the waiver, or

(2)the property is or was used for the commercial activity upon which the claim is based, or

(3)the execution relates to a judgment establishing rights in property which has been taken in violation of international lav; or which has been exchanged for property taken in violation of international law, or

(4)CO the” execution relates to a judgment establishing rights in property —

(A)which is acquired by succession or gift, or

(B)which is immovable and situated in the United States: Provided, That such property is not used for purposes of maintaining a diplomatic or consular mission or the residence of the Chief of such mission, or

(5)the property consists of any contractual obligation or any proceeds from such a contractual obligation to indemnify or hold harmless the foreign state or its employees under a policy of automobile or other liability or casualty insurance covering the claim which merged into the judgment,

(b)In addition to subsection (a), any property in the United States of an agency or instrumentality of a foreign state engaged in commercial activity in the United States shall not be immune from attachment in aid of execution, or from execution, upon a Judgment entered by a court of the United States or of a State after the effective date of this Act if —

(1)the agency or instrumentality has waived its immunity from attachment in aid of execution or from execution either explicitly or implicitly, notwithstanding any withdrawal of the waiver the agency or instrumentality may purport to effect except in accordance with the terms of the waiver, or

(2)the judgment relates to a claim for which the agency or instrumentality is not immune by virtue of section 1605(a)(2), (3), or (5), or 1605(b) of this chapter, regardless of whether the property is or was used for the activity upon which the claim is based.

page 1383 note 24. By interpreting section 1610(a) and (b) in this manner I need not consider whether the other conditions imposed by those subsections are met.

page 1383 note 25. 28 U.S.C. § 1610(d) reads:

(d)The property of a foreign state, as defined in section 1603(a) of this chapter, used for a commercial activity in the United States, shall not be immune from attachments prior to the entry of judgment in any action brought in a court of the United States or of a State, or prior to the elapse of the period of time provided in subsection (c) of this section, if —

(1)the foreign state has explicitly waived its immunity from attachment prior, to judgment, notwithstanding any withdrawal of the waiver the foreign state may purport to effect except in accordance with the terms of the waiver, and

(2)the purpose of the attachment is to secure satisfaction of a judgment that has been or may ultimately be entered against the foreign state, and not to obtain jurisdiction.

page 1384 note 26. A careful reading of sections 1609 and 1610 reveals that I.R.I.A.F. is correct in its assertion, see n.9 11 1, supra, that the Immunities Act does not authorize pre-judgment attachment of property as a device for obtaining jurisdiction. H.R. Rep. No. 94-1487, supra, at 26; [1976] U.S. Code Cong. & Admin. N. at 6625 states: “i[N]either section 1610 nor 1611 would permit an attachment for the purpose of obtaining jurisdiction over a foreign state or, its property.” See National American Corp., supra, M 8 F. Supp. 622. The Immunities Act's provisions for in personam jurisdiction eliminates, to a large degree, any need for attachments in aid of jurisdiction.

Agreeing with I.R.I.A.F. does not, however, help it obtain the relief sought. True, the Immunities Act does not authorize attachment in’ aid of jurisdiction, but that is not what occurred here. Behring's attachment is designed to Insure the payment of a judgment which may be rendered in its favor in the future. Jurisdiction was in fact obtained in conformity with the Immunities Act. I therefore need not address the difficult question of whether jurisdictional attachments, if authorized by the Treaty of Amity, would survive the Act and still be an acceptable method of commencing suit against this particular foreign state.

page 1385 note 27. In explaining the savings clause of section 1604, the House Report states:

All immunity provisions .… are made subject to “existing” treaties and other international agreements to which the United States is a party. In the event an international agreement conflicts with this bill, the international agreement would control ….

Treaties of friendship, commerce and navigation and bilateral air transport agreements often contain provisions relating to the immunity of foreign states. Many provisions in such agreements are consistent with but do not go as far as, the current bill. To the extent such international agreements are silent on a question of immunity the bill would control; the international agreement would control only where the conflict is manifest.

H.R. Reo. No. 94-1487,supra, at 17-18; [1976] U.S. Code Cong. 6 Admin. N. at 6616. See also 28 U.S.C. § 1330(a) and H.R. Rep. No. 94-1487, suora, at 13; [1976J U.S. Code Cong. & Admin. N. at 6611; 28 U.S.C.-?” 1J09 and H.R. Rep. No. 94-1487, sup_ra, at 26; [1976] U.S. Code Cong. & Admin. N. at 6625. And, although the House Report gives as an example treaties which do not go as far as the Immunities Act in waiving immunity, it v/ould seem that treaties containing greater waivers of immunity would also be given full force and effect.

page 1385 note 28. Three other bilateral treaties to which the United States is a party have come to the Court's attention containing substantially Identical waivers of sovereign immunity. They are the Treaty of Friendship, Commerce and Navigation Between the United States of America and the Republic of Korea, November 28, 1956, Art. XVIII, par. 2 [1957] U.S.T. 2217; T.I.A.S. 3947; the Treaty of Friendship, Commerce and Navigation Between the United States of America and Japan, April 2, 1953, Art. XIX, par. 2; [19533 2 U.S.T. 2063; T.I.A.S. 2863, and the Treaty of Friendship, Commerce and Navigation Between the United States of America and the Italian Republic, February 2, 19′8, Art. XXIV, par. 6; [19′I93 63 STAT 2255, T.I.A.S. 1965. However, none of these treaties' waivers of immunity clauses have been authoritatively construed by the courts. 1386

page 1387 note 29 Pfizer involved the Government of Iran's attempt to bring an anti-trust action against an American corporation to collect damages on behalf of Iranian citizens on a parens patrie theory. It is well settled under the anti-trust laws that a state of the United States could not bring such an action. See Hawaii v. Standard Oil Co^, 405 U.S. 251 (1972). Relying in part upon Art. Ill, par. 2 of the Treaty of Amity, the Court of Appeals held that the plaintiff did not have “the right to press their citizens' claims in a manner barred to domestic states vic-a-vis their citizens ...” 522 F.2d at 618 & n.9- Although certainly not directly apposite to the case before me, Pfi/zer indicates that a foreign state's rights ui:\"r the Treaty are no different than those of a domestic state. ‘:'y analogy I can reason that the United States and Iran desired that their status would be similar to that of other litigants, whether as plaintiff, or defenfsr.t, in the other's courts.

page 1388 note 30. As was previously stated, see n., supra, I have not felt it necessary to address all other arguments raised by I.R.I.A.F. in its moving papers. Most importantly, this opinion leaves unresolved the applicability of I.R.I.A.F.'s third argument, regarding 28 U.S.C. § 1611(b)(2)(B), which states:

(b) Notwithstanding the provisions of section 1610 of this chapter, the property of a foreign state shall be immune from attachment and from execution, if —

* * *

(2) the property is, or is intended to be, used in connection with a military activity, and

* * *

(B) is under the control of a military authority or defense agency.

Although this third argument raises serious questions about whether section 1611 governs in spite of prior international agreements, or is merely a codification of prior law, I need not resolve them now because there has been an utter failure of proof on the issue of who controls the property restrained by I.R.I.A.F. in support of this motion. The Verified Complaint alleges that all of the property nov; restrained in its warehouse is under Behring's control and that Behring is neither a military authority nor a defense agency. See Verified Complaint,’ supra, IjH 11, 13. I.R.I.A.F.,

which has the burden of proving a defense of immunity, see n.16, supra, has offered no testimony or any other form of proof that contradicts these verified allegations. Even if the law is as I.R.I.A.F. claims, it would not be entitled to the release of all restraints on its property on the basis of the record before ma. Since I.R.I.A.F. desires the resolution of this motion expeditiously, but a ruling in its favor cannot aid it, I decline to answer the question at present. See national American Corp., supra, kk8 F. Supp. at 641-42

page 1390 note 1. On April 20, 1979 the parties, with the Court's approval, entered into a consent order entitled “Third Order Partially Releasing Restraints” [“Third Order“]. That order established a procedure whereby one planeload of equipment at a time would be released in exchange for a cash payment of $150,000.00. The cash payment was to be made directly to Behring to the extent that I.R.I.A.F. acknowledged its debts and-any payment in excess of that amount was to be paid into a Trust Account to be established pursuant to that order. The order anticipated a later decision as to the total amount to be placed into the account, in exchange for the release of all restraints upon I.R.I.A.F. property. The I.R.I.A.F. consented to the order only upon the stipulation that it did so without prejudice to its rights with respect to the property. See Third Order, ¶ 2(c).

page 1391 note 2. See Order, filed June 13, 1979.

page 1391 note 3. If the application for a writ of attachment is denied the monies in the Trust Account must be returned to I.R.I.A.F. See Jet Line Services, Inc. v. M/V Marsa El Hariga, 162 F. Supp. 1I53” (D. Md. 197b).

page 1392 note 9. I.R.I.A.F. has the burden of proving a defense of sovereign immunity. H.R. Rep. No. 94-1487, 94th Cong., 2d Sess. 17 reprinted in [1976] U.S. Code Cong. & Admin. N. 6604, 6616 [hereinafter H.R. Rep. No.- 94-1487]. See Opinion Maintaining Restraints, supra,at 10 n. 16.

page 1392 note 10. I am aware that, based upon my summary opinion, filed May 11,1979 the parties entertained the misconception that I have already ruled upon this question, holding that section 1611 is inapplicable to this case. See Plaintiff's Letter Memorandum of Law in Response to Order to Show Cause Why a Writ of Attachment Should Not Issue, at 2-3. My failure to address this issue in that summary opinion was not meant to be taken as an implied ruling on the issue. This misconception has since been clarified. See Opinion Maintaining Restraints, supra, at 22 n. 30.

page 1392 note 11. 28 U.S.C. § 1609 provides:

Subject to existing international agreements to which the United States is a party at the time of the enactment of this Act the property in the United States of a foreign state shall be immune from attachment, arrest or execution except as provided in sections 1610 and 1611 of this chapter.

page 1393 note 12. I.R.I.A.P. argues that section 1611(b) applied“notwithstanding any of the [Immunities Act*s] exceptions to the immunity of the property of a foreign state”. See I.R.I.A.F. Responsive Memorandum at 2. As the text reveals, I believe that section 1611 applies notwithstanding only the exception to immunity set out within the act in section 1610. Section 1611 standing alone has no effect on those exceptions from without the Act by virtue of the savings clause of section 1609.

page 1393 note 13. See Opinion Maintaining Restraints, supra, at 18 & n. 27.

page 1394 note 14. My Opinion Maintaining Restraints discusses the legislative history of the Immunities Act. That history shows quite clearly that Congress intended the Immunities Act to govern notwithstanding the savings clause of sections 1604 and 1609 whenever an international agreement was silent upon an issue which the Act addresses. See H.R.Rep. No. 94-1187, supra, at 13, 17-18, 26; [1976] U.S. Code Cong. & Admin. N. at 6611, 6616, 6625. See also Opinion Maintaining Restraints, supra, at 18 & n. 27.

page 1396 note 15. See Verified Complaint, supra, H 11; Affidavit of Attachment of George A. Murphy, supra, 1 12.

page 1396 note 16. Affidavit of Colonel Khatami, filed May 4, 1979, at 1 2,states:

2. All of the [goods covered by the Behring Contract] purchased by the [I.R.I.A.F.] or its predecessor [I.I.A.F.] in the United States have been purchased for use by [I.R.I.A.F.] in connection with military activities and not for resale or any non-military use.

page 1410 note 2/ A foreign-state is defined by the FSlA as including... a political subdivision of a foreign state or an agency or instrumentality of a. foreign state as defined in subsection (b)

(b) An “agency or instrumentality of a foreign state” means any entity

(1) which is a separate legal person, corporate or otherwise, and

(2) which is sn organ of a foreign, state or political subdivision thereof, or a majority of whose shares or, other ownership interest is-owned by a foreign state or political subdivision thereof/ and

(2) which is neither fc citizen of a State of the United States as defined in section 1332(c) and (d) of this title,nor crested under the l&ws ©f any third country.

28 U.S,C. S 16D3U), (b) (West Supp. 1975). Even plaintiff concedes that KIOC is a foreign agency to which foreign sovereign immunity would apply but for the alleged weiver, subject, of course, to the exceptions in Sections 1605-7.Plaintiffs Memorandum in Support of Application for Order of Attachment at 4.