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H.R.11315—The Revised State-Justice Bill on Foreign Sovereign Immunity: Time for Action

Published online by Cambridge University Press:  27 February 2017

Timothy Atkeson ,
Samuel Perkins  and
Michael Wyatt
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Extract

The commercial contacts of foreign governments and their agencies with the American economy are steadily growing in number and importance. In addition to the numerous foreign government-owned airlines and shipping concerns doing business in the United States, foreign government ownership of, or participation in, industrial, banking, and trading corporations doing business here is substantial. Furthermore, in more and more instances U.S. petroleum and other imports are purchased from foreign governmental entities whose contacts with the United States will probably become more extensive. Foreign governments, directly or through purchasing entities, are making huge annual purchases of American agricultural exports. The U.S. capital market continues to handle substantial volumes of borrowing by foreign governments and their instrumentalities.

Type
Research Article
Information
American Journal of International Law , Volume 70 , Issue 2 , April 1976 , pp. 298 - 321
Copyright
Copyright © American Society of International Law 1976

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References

1 The volume of trade conducted between American businesses and foreign states, or their instrumentalities has increased sharply. To the extent these wholly or partially foreign government-owned commercial entities do business in the United States through American subsidiaries, they are, of course, U.S. “citizens” not entitled to sovereign immunity. See Amtorg Trading Corp. v. U.S., 71 F.2d 524 (C.C.P.A. 1934). Agencies or instrumentalities of foreign governments which are incorporated in the United States or under the laws of any third country would be denied sovereign immunity under proposed 28 U.S.C. §1603(b)(3) of the State-Justice bill discussed herein. Foreign airlines doing business in the United States must appoint agents for service of process. §1005(b) of the Federal Aviation Act, 49 U.S.C. §1485(b) (1970). See also 14 C.F.R. §399.13(b) (1975) (CAB regulation requiring that permits issued to foreign air carriers must provide for waiver of sovereign immunity from suits arising out of the carriers’ operations under the permit). The Convention on the Territorial Sea and the Contiguous Zone, done April 29, 1958, [1964] 15 UST 1606, TIAS No. 5639, 516 UNTS 205, 52 AJIL 834 (1958), Art. XXI, to which the United States is a party, provides that measures of execution or arrest may be taken against government vessels operated for commercial purposes to the same extent as against private vessels. As indicated in footnote 46, infra, the United States has numerous treaties of friendship, commerce, and navigation which contain clauses denying immunity from suit or execution to government instrumentalities if they engage in “commercial, manufacturing, processing, shipping or other business activities within the territories of the other party.“

2 Remedies for private American parties against foreign governmental entities are the most deficient. In the reverse situation, where a foreign governmental entity is the complaining party, there is generally no restraint against its bringing suit against private parties in the United States, although it may open itself to counterclaims by so doing. See, e.g., National City Bank v. Republic of China, 348 U.S. 356, 363 (1955).

3 See 2 D. P. O'conneix, International Law 841 (2d ed. 1970); Restatement (Second) of the Foreign Relations Law of the United States §69 (1965) [hereinafter Restatement]. For a survey of previous international efforts to arrive at a consensus respecting state immunity, see Sinclair, The European Convention on State Immunity, 22 INT'L & COMP. L. Q. 254, 261-62 (1973).

4 Fensterwald, Sovereign Immunity and Soviet State Trading, 63 HARV. L. REV. 614 (1950); see Chou Keng-Sheng, Trends in the Thought of Modern English and American International Law (1963), quoted in 1 Cohen & Chiu, People's China and International Law 891-93 (1974).

5 Isbrandtsen Tankers, Inc. v. President of India, 446 F.2d 1198 (2d Cir. 1971), cert, denied, 404 U.S. 985 (1971). This result was all the more egregious in light of the express waiver of immunity in India's contract with the plaintiff. 446 F.2d at 1199, n. 3.

6 Letter from Jack B. Tate, Acting Legal Adviser of the Department of State, to Philip B. Perlman, Acting Attorney General, May 19, 1952, 26 DEPT. STATE BULL. 984 (1952).

7 See, e.g., Rich v. Naviera Vacuba, S.A., 197 F.Supp. 710 (E.D. Va. 1961), aff d, 295 F.2d 24 (4th Cir. 1961); Chemical Natural Resources, Inc. v. Venezuela, 420 Pa. 134, 215 A.2d 864 (1966), cert, denied, 385 U.S. 822 (1966). For criticism of these cases, see Leigh & Atkeson, Due Process in the Emerging Foreign Relations Law of the United States-II, 22 Bus. LAWYER 3, at 15-23 (1966).

8 The authors of the Restatement conclude that the “restrictive theory” of sovereign immunity as outlined in the Tate letter would be applied by American courts, although they concede there is no Supreme Court authority for their conclusion. Restatement, Reporters’ Notes on §69, at 211.

9 See, e.g., Lowenfeld, Claims Against Foreign States: A Proposal for Reform of United States Law, 44 N.Y.U. L. REV. 901 (1969); Note, Jurisdictional Immunities of Foreign States, 23 Depaul L. REV. 1225, 1232-34 (1974).

10 See Lowenfeld, supra note 9; Lowenfeld, Litigating a Sovereign Immunity Claim— The Haiti Case, 49 N.Y.U. L. REV. 377 (1974).

11 Done, May 16, 1972. For text, see 11 INT'L LEGAL MATERIALS [hereinafter ILM] 470 (1972). See also Sinclair, supra note 3; Comment, Sovereign Immunity from Judicial Enforcement: The Impact of the European Convention on State Immunity, 12 Colum. J. Transnat'l L. 130 (1973).

12 “X” v. Kaiserreich Iran, 16 Entscheidungen des Bundesverfassungsgerichts [Ent. BVerfG] 27 (Const. Ct. 2nd Sen., April 30, 1963); see 6 M. Whtteman, Digest of International Law 566-69 (1968).

13 Philippine Admiral v. Wallem Shipping, Privy Council Appeal No. 13 of 1974 (Judicial Committee of the Privy Council, November 5, 1975). Text in 15 ILM 133 (1976); excerpted infra p. 364.

14 S.566, H.R.3493, 93d Cong., 1st Sess. (1973). For text, see 12 ILM 118 (1973). Hearings were held on June 7, 1973 before a subcommittee of the House Judiciary Committee. Hearings on H.R.3493 Before the Subcomm. on Claims and Governmental Relations of the House Comm. on the Judiciary, 93d Cong., 1st Sess. (1973) [hereinafter Hearings], See Delaume, , “Public Debt and Sovereign Immunity: Some Considerations Pertinent to S.566, 67 AJIL 745 (1973)Google Scholar; Sklaver, , Sovereign Immunity in the United States: An Analysis of S.566, 8 INT'L Lawyer 408 (1974)Google Scholar; Comment, Proposed Legislation on the Sovereign Immunity of Foreign Governments: An Attempt to Revest the Courts with a Judicial Function, 69 Nw. U. L. REV. 302 (1974); Note, Jurisdictional Immunities of Foreign States, supra note 9; Comment, The Impact of S.S66 on the Law of Sovereign Immunity, 6 LAW & POL. INT'L BUS. 179 (1974); Note, Sovereign Immunity: Proposed Statutory Elimination of State Department Role, 15 HARV. INT'L L. J. 157 (1974).

15 On December 19, 1975, the bill was introduced in the House by Reps. Rodino and Hutchinson by request as H.R.11315, 94th Cong., 1st Sess., and referred to the House Committee on the Judiciary. H.R.11315 is reproduced as an Annex to this article, infra p. 313. As of this writing, no companion Senate bill has been introduced. Section 4 of the bill sets forth a proposed new chapter 97 to Title 28 of the United States Code, consisting of proposed §§1602-1611. For convenience, these proposed provisions will be referred to herein as, e.g., “proposed §1608.” H.R.11315 and its accompanying Section-by-Section Analysis are reprinted in 15 ILM 102 (1976).

16 This practice existed before the Tate letter. See, e.g., Ex Parte Peru, 318 U.S. 578, 589 (1943); Republic of Mexico v. Hoffman, 324 U.S. 30, 35 (1945): “[I]t is therefore not for the courts to deny an immunity which our government has seen fit to allow, or to allow an immunity on new grounds which the government has not seen fit to recognize.” For criticism of such judicial deference to the Department of State, see Jessup, , Has the Supreme Court Abdicated One of its Functions?, 40 AJIL 168 (1946)CrossRefGoogle Scholar; Timberg, , Sovereign Immunity, State Trading, Socialism and Self Deception, 56 Nw. U. L. REV. 109, 127-28 (1961)Google Scholar; McDougal, , The Impact of International Law Upon National Law: A Policy-Oriented Perspective, 4 S.D.L. REV. 25 (1959).Google Scholar

17 See, e.g., Victory Transport Inc. v. Comisaria Gen., 336 F.2d 354, 358-62 (2d Cir. 1964), cert, denied, 381 U.S. 934 (1965).

18 Proposed §§1604 (immunity of a foreign state from jurisdiction); 1605 (general exceptions to such immunity).

19 Proposed §§1609 (immunity from attachment and execution of property of a foreign state); 1610 (exceptions to immunity from attachment or execution); 1611 (certain property immune from execution).

20 Proposed §§1605 (general exceptions to the jurisdictional immunity of a foreign state); 1608 (service of process; time to answer; default judgments).

21 See proposed §1608(a).

22 Proposed § 1608(b). This effectively incorporates the existing provisions of FED. R. Crv. P. 4(d)(3) for service on foreign governmental agencies and instrumentalities.

23 Proposed § 1608(a)(3)(c) also provides in part that the Secretary of State “shall maintain and publish in the Federal Register a list of foreign states upon which service may be made under subparagraphs (B) and (C) of this paragraph.” The Secretary's list will be conclusive as to the existence of those two preconditions. Id.

24 Proposed § 1608 (d).

25 Proposed § 1608 (e).

26 Proposed §1609.

27 S.566, 93d Cong., 1st Sess. (1973), proposed §1608 (service of process in United States courts).

28 Done, April 18, 1961, [1972] 23 UST 3227, TIAS No. 7502, 63 AJIL 875 (1969). According to the Section-by-Section Analysis accompanying H.R.I 1315, at 26: “Subsequent to the introduction of S.566 and H.R.3493, 93d Cong., 1st Sess., several foreign governments brought to the attention of the Department of State that the drafters of the Vienna Convention had construed Article 22 as prohibiting the service of any process or writ, ‘even by post, within the premises of a diplomatic mission.’ The United States has formally acknowledged this view. See 71 DEFT. STATE BULL. 458-59 (1974). Service on an embassy by mail would be precluded under this [1975] bill.“

29 See, e.g., N.Y. Bus. Corp. L. §§304(a), 305(b), 307, 6 N.Y. Consol. Laws §§304(a), 305(b), 307 (McKinney Supp. 1975) (service on authorized and unauthorized foreign corporations); N.Y. Ins. L. §§59, 59-a, 27 N.Y. Consol. Laws §§59, 59-a (McKinney Supp. 1975) (service on authorized and unauthorized insurance companies). Such state law provisions would be enforced under proposed §1608(b)(2) absent a special service arrangement.

30 Section-by-Section Analysis, supra note 15, at 11-13. Examples of implicit waivers include agreements to arbitrate, inclusion of choice-of-law clauses in contracts, and the filing of responsive pleadings without raising the sovereign immunity defense. Id. at 12.

31 This scope of jurisdiction is reinforced by proposed § 1603(e), newly added to the revised bill, which separately defines “commercial activity carried on in the United States by a foreign state” (see §1605(a)(2)) to mean “commercial activity carried on by such foreign state and having substantial contact with the United States.” (emphasis added.)

32 See Sklaver, supra note 14, at 410-12; Comment, The Impact of S.S66, supra note 14, at 184-86. See also Comment, The Jurisdictional Immunity of Foreign Sovereigns, 63 YALE L.J. 1148 (1954).

33 Section-by-Section Analysis, supra note 15 at 8-10 (discussing proposed §1603(d), (e)), which cites as examples of “commercial’ activity” “a foreign government's sale of a service or a product, its leasing of property, its borrowing of money, its employment or engagement of laborers, clerical staff or public relations or marketing agents, or its investment in a security of an American corporation… .” Id. at 9. For a recent case similarly applying a liberal interpretation under current law, see ADM Milling Co. v. Bolivia, C.A. No. 75-946 (D.D.C. Aug. 8, 1975), 14 ILM 1279 (1975).

34 Supra note 6.

35 These two exceptions-to-the-exception parallel those with respect to which the U.S. Government is immune under the Federal Tort Claims Act, 28 U.S.C. §§2671- 2680 (1970). See 28 U.S.C. §2680(a), (h).

36 But see proposed 1605(c), second subparagraph.

37 Proposed §1605(b). 46 U.S.C. §§741 et seq. (1970) provide for similar in personam actions in maritime lien suits against the United States.

38 See Section-by-Section Analysis, supra note 15, at 19-20. The Analysis makes clear that, in cases involving borrowing by a foreign central bank for general governmental purposes, immunity under §1606(b) would apply only to the obligations of the foreign government and not to those of the central bank itself. Id. at 19. Unfortunately, the Section-by-Section Analysis gives no example or other clear guidance respecting the meaning of the term “debt obligations incurred for general governmental purposes.” Thus, it is not clear, for example, whether immunity would apply under §1606(b) in a case involving foreign debt incurred by a developing country for the purchase of railroad equipment to ship that country's principal mineral export from the mining site to an ocean port.

39 Delaume, supra note 14.

40 348 U.S. 356 (1955).

41 One such agreement would be the Convention on the Recognition and Enforcement of Foreign Arbitration Awards, done June 10, 1958, [1970] 21 UST 2517, TIAS No. 6997, 53 AJIL 420 (1959). The enforcement of arbitration awards, arising out of legal relationships which are considered commercial under U.S. law, is provided for (on a basis of reciprocity with other signatories of the Convention) by 9 U.S.C. §§201- 208 (1970). Within three years after any award covered by the Convention, any party to the arbitration may move for the enforcement of the award against any other party in any court having jurisdiction. §207. See Island Territory of Curaçao v. Solitron Devices, Inc., 356 F.Supp. 1 (S.D.N.Y. 1973), afd, 489 F.2d 1313 (2d Cir. 1973), cert, denied, 416 U.S. 986 (1974).

42 22 U.S.C. §§288 et seq. (1970).

43 See, e.g., N.Y. C.P.L.R. §6201, 7B N.Y. Consol. Laws §6201 (McKinney Supp. 1975) (attachment for purposes of security). This concern about loss of protective attachment has been raised previously in commentary on the 1973 State-Justice bill. Note, Sovereign Immunity: Proposed Statutory Elimination of State Department Role, supra note 14, at 164.

44 See Section-by-Section Analysis, supra note 15, at 27. See, e.g., Letter from Legal Adviser to Attorney General in Weilamann v. Chase Manhattan Bank, 21 Misc. 2d 1086, 192 N.Y.S. 2d 469 (Sup. Ct. 1959), quoted in 6 M. WHTTEMAN, supra note 12, at 709-14 (1968). See also Stephen v. Zivnostenska Banka, 15 App. Div. 2d 111, 222 N.Y.S. 2d 128 (1961), affd, 12 N.Y.S. 2d 781, 186 N.E. 2d 676 (1962).

45 See notes 46 and 47, infra.

46 See Sester, The Immunity Waiver For State-Controlled Business Enterprises in United States Commercial Treaties, 1961 PROC. ASIL 89. See also Treaty of Friendship, Commerce and Navigation with Italy, Feb. 2, 1948, 63 Stat. 2255 (1949), TIAS No. 1965 (effective July 26, 1949); Treaty of Friendship, Commerce and Navigation with Ireland, Jan. 21, 1950, [1950] 1 UST 785, TIAS No. 2155 (effective September 14, 1950); Treaty of Friendship, Commerce and Navigation with Israel, Aug. 23, 1951, [1954] 5 UST 550, TIAS No. 2948 (effective April 3, 1954); Treaty of Friendship, Commerce and Navigation with Denmark, Oct. 1, 1951, [1951] 12 UST 908, TIAS No. 4797 (effective July 30, 1961); Treaty of Friendship, Commerce and Navigation with Japan, April 2, 1953, [1953] 4 UST 2063, TIAS No. 2863 (effective Oct. 30, 1953); Treaty of Friendship, Commerce and Navigation with the Federal Republic of Germany, Oct. 29, 1954, [1956] 7 UST 1839, TIAS No. 3593 (effective July 14, 1956); Treaty of Amity, Economic Relations, and Consular Rights with Iran, [1957] 8 UST 899, TIAS No. 3853 (effective June 16, 1957); Treaty of Friendship, Commerce and Navigation with Nicaragua, Jan. 21, 1956, [1959] 9 UST 449, TIAS No. 4024 (effective May 24, 1958); Treaty of Friendship, Commerce and Navigation with The Netherlands, Mar. 27, 1956, [1957] 8 UST 2043, TIAS No. 3942 (effective Dec. 5, 1957).

47 Treaty of Friendship, Commerce and Navigation with Japan, supra note 46, Art. XVII, para. 2; Treaty of Friendship, Commerce and Navigation with the Federal Republic of Germany, supra note 46, Art. XVIII, para. 2. The relevant language reads: No enterprise of either Party, including corporations, associations and government agencies and instrumentalities, which is publicly owned or controlled shall, if it engages in commercial, industrial, shipping or other business activities within the territories of the other Party, claim or enjoy, either for itself or its property, immunity therein from taxation, suit, execution of judgment, or other liability to which privately owned and controlled enterprises are subject therein.

48 See Section-by-Section Analysis, supra note 15, at 14-15.

49 Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964); First National City Bank v. Banco Nacional de Cuba, 406 U.S. 759 (1972).

50 Deference to directions from Congress was shown in the application of the “Sabbatino Amendment” to the Sabbatino case on remand, Banco Nacional de Cuba v. Farr, 383 F.2d 166 (2d Cir. 1967); deference to the Executive Branch was endorsed by at least three Justices in First National City Bank v. Banco Nacional de Cuba, 406 U.S. 759 (1972), although apparently rejected by a majority of the Court in that case. Id. at 776-77. The views of the Supreme Court in this area are rendered uncertain by its request in the Dunhill case (Alfred Dunhill of London, Inc. v. Republic of Cuba, No. 73-1288, — U.S. — , 95 S. Ct. 2624 (1975), for argument on whether the Sabbatino decision should be reconsidered.

51 22 U.S.C. §2370(e)(2) (1970).

52 In a letter appended to the Solicitor General's amicus brief to the Supreme Court in the Dunhill case, the Legal Adviser of the Department of State has taken the position that “foreign relations considerations do not require application of the act of state doctrine to bar adjudications under international law.” Brief for the United States at 47. He further states: In general the Department's experience provides little support for a presumption that adjudication of acts of foreign states in accordance with relevant principles of international law would embarrass the conduct of foreign policy. Thus, it is our view that if the court should decide to overrule the holding in Sabbatino so that acts of state would thereafter be subject to adjudication in American courts under international law, we would not anticipate embarrassment to the conduct of the foreign policy of the United States. Id. at 49

53 A/RES/3281 (XXIX), Dec. 12, 1974; 69 AJIL 484 (1975); 14 ILM 251 (1975).

54 See Section-by-Section Analysis, supra note 15, at 14.

55 See Hearings at 15. See also Comment, The Impact of S.S66, supra note 14, at 203, n. 147.

56 Transmittal letters accompanying 1975 bill to President of the Senate and Speaker of the House from Robert S. Ingersoll, Deputy Secretary of State, and Harold R. Tyler, Jr., Deputy Attorney General. 15 ILM 88 (1976).

57 See, e.g., Federal Tort Claims Act, 28 U.S.C. §§2671 et seq.

58 The State-Justice proposal breaks new ground in its limitation on state immunity from execution of judgments. Article 26, an optional provision in the 1972 European Convention, permits execution only on assets used exclusively in connection with the activity from which the claim arose.

59 See notes 11-13, supra. See also Asian-African Legal Consultative Committee, 3d Sess. (Colombo, 1960).

60 From Thomas Jefferson (“[T]he law of nations makes an integral part … of the laws of the land,” quoted in 1 J. MOORE, INTERNATIONAL LAW DIGEST §2 at 10 (1906)), to Justice Gray, in The Paquete Habana v. The Lola, 175 U.S. 677, 700 (1900) (“International Law is part of our law, and must be ascertained and administered by the courts of justice of appropriate jurisdiction… .“), U.S. jurists have assigned domestic courts a primary role in determining and applying international law.