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Published online by Cambridge University Press: 18 May 2017
[Reproduced from the U.S. Supreme Court Slip Opinion.]
[A list of U.S. friendship, commerce and navigation treaties,in force as of December 1980, appears at 20 l.L.M. 565 (1981).]
1 General trading companies have been a unique fixture of the Japanese economy since the Meiji era. These companies each market large numbers of Japanese products, typically those of smaller concerns, and also have a large role in the importation of raw materials and manufactured products to Japan. In addition, the trading companies play a large part in financing Japan's international trade. The largest trading companies-including Sumitomo's parent company-in a typical year account for over 50% of Japanese exports and over 60% of imports to Japan. See Krause & Sekiguchi, Japan and the World Economy, in H. Patrick & H. Rosovsky, Asia's New Giant: How the Japanese Economy Works 383, 389-397 (1976).
2 Respondents have also filed a cross-petition in this case. Thus, the past and present secretaries, generally referred to as respondents, are the respondents in 80-2070 and the cross-petitioners in 81-24.
3 Sumitomo is the petitioner in 80-2070 and the cross-respondent in 81-24. 'Prior to bringing this suit, respondents each filed timely complaints with the Equal Employment Opportunity Commission. The EEOC issued "right to sue" letters to the respondents on October 27, 1977. This suit was filed on November 21, 1977, well within the statutory ninety-day period allowed for filing suits after receipt of an EEOC notice of right to sue. 42 U. S. C. S2000e-5(f)(l).
4 Sumitomo argued in the District Court that discrimination on the basis of national citizenship, as opposed to national origin, was not prohibited by Title VII. The District Court disagreed, however. It relied on Espinoza v. Farah Manufacturing Co., 414 U. S. 86, 92 (1973), in which we noted that "Title VII prohibits discrimination on the basis of citizenship whenever it has the purpose or effect of discriminating on the basis of national origin." Although discussed at length in the briefs, this issue is not properly before the Court and we do not reach it. It was not included in the question certified for interlocutory review by the Court of Appeals under 28 U. S. C. § 1292(b), was not decided by the Court of Appeals, and was not set forth or fairly included in the questions presented for review by this Court as required by Rule 21.1(a).
5 In a nearly identical case, a divided panel of the Court of Appeals for the Fifth Circuit came to somewhat contrary results. Spiess v. C. Itoh & Co., 643 F. 2d 353 (1981), cert, pending, No. 81-1496. The Fifth Circuit majority agreed with the Second Circuit decision that a locally-incorporated subsidiary of a Japanese corporation is covered by Article VIII(l) of the Treaty, but disagreed with the latter court's decision on the effect of the Treaty on Title VII. The court held that the Treaty provision did protect the subsidiary's practices from Title VII liability.
In dissent, Judge Reavely disagreed with the majority's initial conclusion. He would have held that under the plain language of the Treaty, locally-incorporated subsidiaries are to be considered domestic corporations and are thus not covered by Article VIII(l).
6 Similar provisions are contained in the Friendship, Commerce and Navigption Treaties between the United States and other countries. See, e. g., Article XII(4) of the Treaty with Greece, supra; Article VIII(l) of the Treaty with Israel, supra; Article VIII(l) of the Treaty with the Federal Republic of Germany, supra.
These provisions were apparently included at the insistence of the United States; in fact, other countries, including Japan, unsuccessfully fought for their deletion. See, e. g., State Department Airgram No. A-453, dated January 7, 1952, at 1 & 3, reprinted in Joint Appendix at 130a, 131a & 133a (discussing Japanese objections to Article VIII(D); Foreign Service Despatch No. 2529, dated March 18, 1954, reprinted i)i Joint Appendix at 181a 182a (discussing German objections to Article VIII(l)).
According to Herman Walker, Jr., who at the time of the drafting of the Treaty served as Adviser on Commercial Treaties at the State Department, Article VIII(l) and the comparable provisions of other treaties were intended to avoid the effect of strict percentile limitations on the employment of Americans abroad and "to prevent the imposition of ultranationalistic policies with respect to essential executive and technical personnel." Walker, Provisions on Companies in United States Commercial Treaties, 50 Am. J. Int'l. L. 373, 386 (1956); Walker, Treaties for the Encouragement and Protection of Foreign Investment: Present United States Practice, 5 Am. J. Comp. L. 229, 234 (1956). According to the State Department, Mr. Walker was responsible for formulation of the postwar form of the Friendship, Commerce and Navigation treaty and negotiated several of the treaties for the United States. Department of State Airgram A-105, dated January 9, 1976, reprinted in Joint Appendix at 157a.
See also Foreign Service Despatch No. 2529, supra, Joint Appendix at 182a. (Purpose of Article VIII(l) of Treaty with Germany “is to preclude the imposition of 'percentile' legislation. It gives freedom of choice as among persons lawfully present in the country and accoupationally qualified under local law.”)
7 The issues raised by this contention are clearly of widespread importance. As we noted in Part II, supra, treaty provisions similar to that invoked by Sumitomo are in effect with many other countries. In fact, some treaties contain even more broad language. See, e. g.. Article XII(4), Treaty of Friendship, Commerce and Navigation with Greece, supra, 5 U. S. T., at 1857-1858. (“Nationals and companies of either party shall be permitted to engage, within the territories of the othern Party, accountants and other technical experts, executive personnel, attorneys, agents and other employees of their choice. . . .”) (Emphasis added.) As of 1979, United States affiliates of foreign corporations employed over 1.6 million workers in this country. Howenstine, Selected Data on the Operations of U. S. Affiliates of Foreign Companies, 1978 and 1979, in Survey of Current Business, May, 1981, at 35, 36.
8 The clear language of Article VII(l) and Article XXII(3) is consistentwith other Treaty provisions. For example, Article XVI(2) accords national treatment to “[a]rticles produced by national and companies of either Party within the territories of the other Party, or by companies of the latter Party controlled by suck nationals and companies. . . .” This provision obviously envisions that companies of one Party may be controlled by companies of the other Party. If the nationality of a company were determined by the nationality of its controlling entity as Sumitomo proposes, rather than by the place of its incorporation, this provision would make no sense. Several other Treaty provisions would make little sense if American subsidiaries were considered companies of Japan. Articles VII(l), VII(4), and XVI(2) contain clauses dealing with companies or enterprises controlled by companies of either party. If those companies or enterprises were themselves companies of the country of the their parents, this separate treatment would be unwarranted.
9 State Department Cable No. 026490, dated February 26, 1982 (cable from the United States Embassy in Tokyo to the Secretary of State relaying the position of the Ministry of Foreign Affairs of Japan). See also Diplomatic communication from the Embassy of Japan in Washington to the United States Department of State, dated April 21, 1982. ("The Government of Japan reconfirms its view that a subsidiary of a Japanese company which is incorporated under the laws of New York is not itself covered by article 8., paragraph 1 of the Treaty of Friendship, Commerce and Navigation between Japan and the United States (the FCN Treaty) when it operates in the United States.")
10 Brief for the United States as Amicus Curiae, at 8-22; Letter of James R. Atwood, Deputy Legal Adviser, United States Department of State, to Lutz Alexander Prager, Assistant General Counsel, Equal Employment Opportunity Commission, dated September 1, 1979, reprinted in Joint Appendix at 307a. (“On further reflection on the scope of application of the first sentence of Paragraph 1 of Article VIII of the U. S.-Japan FCN, we have established to our satisfaction that it was not the intent of the negotiators to cover locally-incorporated subsidiaries, and that therefore U. S. subsidiaries of Japanese corporations cannot avail themselves of this provision of the treaty.”)
The Court of Appeals and Sumitomo dimiss the Atwood letter as incorrect, and point to a letter written by a previous State Department Deputy Legal Adviser as taking the contrary view. Letter of Lee R. Marks, Deputy Legal Adviser, United States Department of State, to Abner W. Sibal, General Counsel, Equal Employment Opportunites Commission, dated October 17, 1978, reprinted in Joint Appendix at 94a. However neither of these letters is indicative of the state of mind of the Treaty negotiators, they are merely evidence of the later interpretation of the State Department as the agency of the United States charged with interpreting and enforcing the Treaty. However ambiguous the State Department position may have been previously, it is certainly beyond dispute that the Department now interprets the Treaty in conformity with its plain language, and is of the opinion that Sumitomo is not a company of Japan and is not covered by Article VIII(l). That interpretation, and the identical position of the Government of Japan, is entitled to great weight. Kolovrat v. Oregon, supra.
11 Determining the nationality of a company by its place of incorporation is consistent with prior treaty practice. See Walker, Provisions on Companies in United States Commercial Treaties, supra, at 382-383. The place of incorporation rule also has the advantage of making determination of nationality a simple matter. On the other hand, application of a control test could certainly make nationality a subject of dispute.
12 We express no view, of course, as to the interpretation of other Friendship, Commerce and Navigation Treaties which, although similarly worded, may have different negotiating histories.
13 See, e. g., Treaties of Friendship, Commerce and Navigation with China, 63 Stat. 1299, T.I.A.S. No. 1871 (1946); Italy, 63 Stat. 2255, T.I.A.S. No. 1965 (1948); Israel, 5 U. S.T. 550 (1951); Greece, 5 U. S. T. 1829 (1951); Japan, 4 U. S.T. 2063 (1953); Federal Republic of Germany, 7 U. S. T. 1839 (1954); The Netherlands, 8 U. S. T. 2043 (1926); and Nicaragua, 12 U. S. T. 110 (1956). The provisions of several of the treaties are compared in tabular form in Commercial Treaties: Hearing on Treaties of Friendship, Commerce and Navigation with Israel, Ethiopia, Italy, Denmark, Greece, Finland Germany, and Japan, Before the Subcommittee of the Senate Committee on Foreign Relations, 83d Cong., 1st Sess., at 7-17 (1953).
14 See, e. g., Treaty of Amity and Commerce with France, 8 Stat. 12, T.S. No. 83 (1778); Treaty of Amity, Commerce and Navigation with Great Britain, 8 Stat. 116, T.S. No. 105 (1794); Treaty of Commerce and Friendship with Sweden and Norway, 8 Stat. 232, T.S. No. 347 (1816); Treaty of Commerce and Navigation with the Netherlands, 8 Stat. 524, T.S. No. 251 (1839); Treaty of Commerce and Navigation with Belgium, 8 Stat. 606,T.S. No. 19 (1945); Treaty of Commerce and Navigation with Italy, 17 Stat. 845, T.S. No. 177 (1871); Treaty of Commerce with Spain, 23 Stat. 750, T.S. No. 337 (1884); Treaty of Commerce with Germany, 31 Stat.1935, T.S. No. 101 (1900); Treaty of Commerce with China, 33 Stat. 2208, T.S. No. 430 (1903).
15 See Walker, Provisions on Companies in United States Commercial Treaties, supra, at 374-378.
16 Treaty of Commerce and Navigation with Japan, 37 Stat. 1504, T.S. No. 558 (1911); Treaties of Friendship, Commerce and Navigation with Germany, 44 Stat. 2131, T.S. No. 725 (1923); Estonia, 44 Stat. 2132, T.S. No. 736 (1925); Hungary, 45 Stat. 2618, T.S. No. 748 (1925); El Salvador, 46 Stat. 2817, T.S. No. 827 (1926); Honduras, 45 Stat. 2618. T.S. No. 764 (1927); Latvia, 45 Stat. 2641, T.S. No. 765 (1928); Austria, 47 Stat. 1876,T.S. No. 838 (1928); Norway, 47 Stat. 2135, T.S. No. 852 (1928); Poland, 48 Stat. 1507, T.S. No. 862 (1931); Finland, 49 Stat. 2659, T.S. No. 868 (1934); Treaties of Friendship, Commerce and Navigation with Siam, 53 Stat.1731, T.S. No. 940 (1937); Liberia, 54 Stat. 1739, T.S. No. 956 (1938). These rights given to corporations by these treaties were quite limited. For example, Article VII of the the 1911 Treaty with Japan provided:
“Limited liability and other companies and associations . . . already or hereafter to be organized in accordance with the laws of either High Contracting Party and domiciled in the territories of such party, are authorized,in the territorioes of the other, to exercise their rights and appear in the courts either as plaintiffs or defendants,subject to the laws of such other party.The foregoing stipulation has no bearing upon the question whether a company or association organized in one of the two countries will or will not be permitted to transact its business or industry in the other, this permission remaining always subject to the laws and regulations enacted or established in the respective countries or in any part thereof.” A similarly limited provision was contained in the other treaties.
17 The significance of this advance was emphasized in the Senate hearings on an early set of postwar Friendship, Commerce and Navigation Treaties:
“Perhaps the most striking advance of the postwar treaties is the cognizance taken of the widespread use of the corporate form of business organization in present-day economic affairs. In the treaties antedating World War II American corporations were specifically assured only small protection against possible discriminatory treatment in foreign countries. In the postwar treaties, however, corporations are accorded essentially the same treaty rights as individuals in such vital matters as the right to do business, taxation on a nondiscriminatory basis, the acquisition and enjoyment of real and personal property, and the application of exchange controls. Furthermore, the citizens and corporations of one country are given substantial rights in connection with forming local subsidiaries under the corporation laws of the other country and controlling and managing the affairs of such local companies.”
Commercial Treaties: Hearing on Treaties of Friendship, Commerce and Navigation Between the United States and Colombia, Israel, Ethiopia, Italy, Denmark and Greece Before a Subcommittee of the Senate Committee on Foreign Relations, 82d Cong., 2d Sess., at 4-5 (1952) (Opening Statement of Harold Linder, Deputy Assistant Secretary of State for Economic Affairs).
18 “National treatment” is defined in Article XXII(l) of the Treaty:
“The term 'national treatment' means treatment accorded within the territories of a Party upon terms no less favorable than the treatment accorded therein, in like situations, to nationals, companies, products, vessels or other objects, as the case may be, of such Party.”
In short, national treatment of corporations means equal treatment with domestic corporations. It is the highest level of protection afforded by commercial treatues. In certain areas treaty parties are unwilling to grant full national treatment; in those areas the parties frequently grant“most-favored-nation treatment,” which means treatment no less favorable than that accorded to nationals or companies of any third country. See Article XXII(2) of the Treaty. “The most-favored-nation rule can now, therefore, imply or allow the status of alien disability rather than of favor. In applicable situations nowadays, the first-class treatment tends to be national treatment; that which the citizens of the country enjoy.” Walker, Modern Treaties of Friendship, Commerce and Navigation, 42 Minn. L. Rev. 805, 811 (1958).
19 We express no view as to whether Japanese citizenship may be a bonafide occupational qualification for certain positions at Sumitomo or as to whether a business necessity defense may be available. There can be little doubt that some positions in a Japanese controlled company doing business in the United States call for great familiarity with not only the language of Japan, but also the culture, customs, and business practices of that country. However, the Court of Appeals found the evidentiary record insufficient to determine whether Japanese citizenship was a bona fide occupational qualification for any of Sumitomo's positions within the reach of Article VIII(l). Nor did it discuss the bona fide occupational qualification exception in relation to respondents' sex discrimination claim or the possibility of a business necessity defense. Whether Sumitomo can support its assertion of a bona fide occupational qualification or a business necessity defense is not before us. See note 4, supra. We also express no view as to whether Sumitomo may assert any Article VIII(l) rights of its parent.