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By Louis M. Solomon
v. Industrial and Commercial Bank of China, Ltd, et al., Dkt. No. 10-806-cv (2d. Cir. July
2011) [enhanced version available to lexis.com subscribers / unenhanced version available from lexisONE Free Case Law] , reiterates the clear and narrow
bases for attaching non-U.S. sovereign property in execution of a judgment and
also articulates new holdings applicable in this important area of
international litigation and dispute resolution. Any practitioner,
corporate of litigator, whether drafting legal documents or trying to enforce
judgments, should read this lucid primer in the law. (See generally our e-book treatment of sovereign immunity in International
Practice: Topics and Trends.)
For over a decade Petitioners here
have been trying to enforce a default judgment against China entered by a
District Court in the Western District of Missouri. The lawsuit arose out
of the death allegedly arising from defects in a rifle. The Court
entering the default judgment did so on the basis of a finding of immunity from
suit under the Foreign Sovereign Immunities Act. The decision by the
Second Circuit accepts that earlier determination but step-by-step demonstrates
why that earlier determination does not bind - indeed is not even relevant to -
the determinations that must be made to enforce the default judgment against
the assets of either China or its instrumentalities.
The noteworthy international
practice rulings in the decision include:
First, the Court rules that the
standard of review applied to a District Court's decision to grant or deny a
petition for an order of attachment or execution under the FSIA is one of abuse
Second, after reaffirming both the
narrowness and the "restrictive" view taken by the FSIA to attachment
jurisdiction, the Court adheres to the settled law that jurisdiction over a
non-U.S. sovereign for purposes of adjudicating a dispute and jurisdiction over
a non-U.S. sovereign for purposes of enforcing a judgment are distinct and
independent issues requiring different predicate findings and
determinations. The Court also recognizes that special protection is
given to execution of judgments on assets of non-U.S. sovereigns because, "at
the time the FSIA was passed, the international community viewed execution
against a foreign state's property as a greater affront to its sovereignty than
merely permitting jurisdiction over the merits of the action". The Court
recognized that that may lead to a case where there is a right without a remedy
- the non-U.S. sovereign may be sued, but judgment cannot be executed on even
if there are assets of the non-U.S. sovereign in the U.S.
Third, District Court's have
independent obligations to consider the sovereign immunity issue, even if
not raised. A fortiori, says the Court, the FSIA immunity issues may be
raised by non-sovereign entities - here the banks. In this holding the
Court said it was following the uniform determinations made by all other
Circuits to have addressed the issues.
Fourth, in interpreting Section 1609
of the FSIA, which is the independent statute that governs immunity
from attachment and execution, the Court finds that the specific exceptions to
immunity set forth in Sections 1610 and 1611 must be met in order to
qualify for such immunity. For purposes of this appeal, the property
of the non-U.S. sovereign that is subject to execution must satisfy either the
"waiver" or "commercial activity" exceptions and "must not only be (1) used
generally for commercial activity in the United States, but it must also be (2)
subject to a waiver of immunity, or (b) used for the specific commercial
activity upon which the underlying claim was based".
Fifth, the Court found that there
was no waiver of immunity either by reason of the immunity found to justify the
default judgment or by any inactivity of China in appearance or contesting the
enforcement proceedings. The FSIA's reference to waiver "either
explicitly or by implication" still required intentional activity by the
Sixth, the Court upheld the District
Court's finding that, in all events, property to be seized or executed on
needed to be specifically identified, and the District Court was obliged to
make a particularlized finding that the property was not immune from attachment
or execution, and this the Petitioners had also failed to do.
Seventh, the Court discussed the
immunity of instrumentalities of non-U.S. sovereigns and demonstrated the
protection accorded the assets of such instrumentalities. The Court
of Appeals was willing to permit District Court's to entertain enforcement
proceedings against such assets, but only if the Petitioner overcame the
"presumption that assets of a foreign government instrumentality" were
independent and could not be executed on unless the "instrumentality's separate
juridical status [i]s not entitled to recognition".
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