2014 International Law Update, Volume 20, Number 2 (April - May - June)

2014 International Law Update, Volume 20, Number 2 (April - May - June)

Legal Analyses published by Mike Meier, Attorney at Law. Copyright 2017 Mike Meier. www.internationallawinfo.com. 

EXTRADITION

First Circuit rejects argument that U.S. citizen should not be extradited to the UK because it might exacerbate his mental health problems and possibly lead to suicide, and thus violate the Fifth Amendment right to due process

Alexander Hilton is a U.S. citizen who studied in Scotland from September 2009 through March 2011. Authorities in the UK charged him with attempted murder after he spiked a bottle of wine with methanol and encouraged a fellow student to drink it. The fellow student survived thanks to medical intervention, but suffers from ill effects to this day.

In October 2012, the British Embassy transmitted an extradition request. In February 2013, the U.S. filed a complaint in the U.S. District Court in Massachusetts, seeking an arrest warrant for Hilton and his extradition.

Hilton claimed that he is suffering from mental health problems, and extradition to the UK would put him at risk for suicide. Furthermore, the Scottish jury system only requires a simple majority for a conviction, which would violate his U.S. constitutional rights.

The magistrate judge issued a Certificate of Extraditability (see 18 U.S.C. Section 3184), and Hilton petitioned for a writ of habeas corpus (see 28 U.S.C. Section 2241). The District Court denied Hilton’s petition, and this appeal ensued.

The U.S. Court of Appeals for the First Circuit affirms. Hilton’s challenge to the conditions that await him in Scotland is barred by the rule of non-inquiry. So is his claim that the Scottish jury system allows simple majority jury verdicts. While the Secretary of State may consider humanitarian grounds in making extradition determinations, this Court will not bar extradition on the grounds presented by Hilton.

The Court first explains how the federal Extradition Statute works, and how the Rule of Non-Inquiry applies.

The Extradition Statute, 18 U.S.C. Section 3184, establishes a two-step procedure which divides responsibility between a judicial officer and the Secretary of State. After a formal complaint is filed, the judicial officer must determine whether there is an extradition treaty between the U.S. and the relevant foreign country, and whether the crime is covered by that treaty. 18 U.S.C. Section 3184. If both questions are answered affirmatively, the judicial officer issues a warrant for the arrest of the individual sought for extradition (“relator”). The judicial officer must then conduct a hearing to determine whether the evidence is sufficient to sustain the charge under provisions of the treaty. If yes, the judicial officer must certify to the Secretary of State that a warrant for the surrender of the individual may issue. The judicial officer will provide copies of all testimony and evidence from the hearing to the Secretary of State.

The Secretary of State has discretionary authority whether to extradite, and may decline to surrender the individual on grounds such as humanitarian and foreign policy considerations. See Section 3186.

The “rule of non-inquiry” limits the role of the judiciary in the extradition process. Courts must not evaluate the fairness and humaneness of another country’s criminal justice system. This rule serves international comity by letting political officials make foreign policy judgments in deciding extradition requests.

The Court then turns to the issue of mental illness and whether the increased risk of suicide violates Hilton’s Fifth Amendment right to due process.

“Hilton argues that his extradition to Scotland would result in an increased risk of suicide and would thereby involve deliberate indifference on the part of the United States officials authorizing the extradition. Hilton’s argument fails under the rule of non-inquiry. Hilton emphasizes that doubts about the ability of the United States authorities to keep him from committing suicide during the period leading up to the Secretary’s decision whether to extradite substantiates his claim that he should not be extradited at all. Such doubts, however, rest on speculation.”

“Hilton’s core argument is that his extradition to Scotland would result in his suffering from an increased risk of suicide and, for that reason, that United States officials would infringe upon his due process rights by authorizing the extradition. It rests upon on a ‘state created danger’ theory of due process. …. The argument is squarely foreclosed by the rule of non-inquiry. Whether the conditions Hilton would face would have deleterious effects on his mental health so as to constitute a bar to extradition (or require conditions on extradition) is a question for the Secretary of State and not for this court.”

“Hilton contends that the rule of non-inquiry has no application here because his allegations are directed at United States officials as opposed to officials from the requesting state. On Hilton’s theory, any challenge to the conditions awaiting an individual upon extradition could be recast as a challenge to the conduct of United States officials on the basis of but-for causation. The rule of non-inquiry is not so easily circumvented.”

“….Hilton’s challenge is based only on the fact of extradition itself and seeks to block it.

As the district court explained:”

“‘No case law suggests that courts have the authority to go beyond the limited statutorily prescribed inquiry when the extradition itself is the only action challenged. Instead, the case law clearly shows that when humanitarian concerns surrounding the extradition are raised, including those involving danger to the relator’s life, they are for the Secretary of State to consider.’ …”

“In an effort to avoid this outcome, Hilton invokes Gallina v. Fraser, 278 F.2d 77 (2d Cir. 1960). In that case, the Second Circuit expressed some hesitation toward the rule of non-inquiry, opining that it could ‘imagine situations where the relator, upon extradition, would be subject to procedures or punishment so antipathetic to a federal court’s sense of decency as to require reexamination of the principle [of non-inquiry].’ Id. at 79. This court expressed a similar possible caveat … (‘None of these principles, including non-inquiry, may be regarded as an absolute.’). No court has yet applied such a theoretical Gallina exception. … It does not help Hilton here and we decline to apply such an exception.”

“These arguments may be made to the Secretary. In addition, Hilton may request that the Secretary of State, in an exercise of discretion, attach conditions to Hilton’s extradition ensuring his safety in Scotland. It is not the role of this court to supplant the Secretary’s authority to respond to such a request. ….. The United Kingdom delegates consideration of humanitarian concerns to the judiciary while, in contrast, the United States delegates such considerations to the executive. That difference is not evidence of lack of reciprocity. …” [Slip op. 5-6]

The Court then turns to Hilton’s argument about the adverse effects of the Scottish jury system.

“Hilton argues that extradition for trial in Scotland — where a simple majority of jurors is sufficient to return a guilty verdict — would violate his constitutional rights because the Senate was not aware of this aspect of Scottish criminal procedure when it consented to the United States-United Kingdom extradition treaty. In effect, Hilton asks this court to declare that the Senate’s ‘[c]onsent’ to the treaty was not sufficiently informed for purposes of Article II, § 2, cl. 2. Hilton’s claim evinces a fundamental misunderstanding of our Constitution’s separation of powers.”

“Hilton’s argument is built on two premises. First, citing Burch v. Louisiana, 441 U.S. 130, 139 (1979) (holding that conviction on the basis of a five-to-one majority of a six person jury was inconsistent with the Sixth Amendment right to a jury trial), Hilton says that, as a legal matter, conviction on the basis of a simple majority of a fifteen person jury would conflict with the Sixth Amendment’s jury trial requirement. Second, Hilton asserts that, as a historical matter, the Senate was not informed of Scotland’s jury trial practice prior to consenting to the treaty. From this, Hilton infers that his extradition would be violative of his Sixth Amendment right to a jury trial.”

“As to Hilton’s first premise, it is well settled that ‘surrender of an American citizen required by treaty for purposes of a foreign criminal proceeding is unimpaired by an absence in the foreign judicial system of safeguards in all respects equivalent to those constitutionally enjoined upon American trials.’ Holmes v. Laird, 459 F.2d 1211, 1219 (D.C. Cir. 1972) … The rule of non-inquiry could not stand otherwise … (‘Under the rule of non-inquiry, courts refrain from ‘investigating the fairness of a requesting country’s judicial system’ . . . .’ …). Here too Hilton invokes the Gallina exception. This argument plainly fails. … [F]or example, this court found that extradition of a relator to Hong Kong was consistent with its ‘sense of decency,’ reasoning that the relator was ‘wanted for. . . activities whose criminality is fully recognized in the United States. His extradition [was] sought by . . . a colony of Great Britain, which . . . is one of this country’s most trusted treaty partners.’ … For similar reasons, we find no occasion to apply the Gallina exception here where extradition is sought by a country within the United Kingdom.”

“As to Hilton’s second premise, the suggestion that this court may sit in judgment of the Senate in its performance of its advice and consent duties is without basis. Hilton cites no case in support of his ambitious conception of the judicial role. This lack of support is unsurprising. For ‘[t]he conduct of the foreign relations of our government is committed by the Constitution to the executive and legislative — ‘the political’ — departments of the government, and the propriety of what may be done in the exercise of this political power is not subject to judicial inquiry or decision.’ Oetjen v. Cent. Leather Co., 246 U.S. 297, 302 (1918) ….”

“Hilton concedes that the crime charged is covered by the treaty. He does not contest that the Senate consented to the treaty with the requisite number of votes. See U.S. Const. art. II, § 2, cl. 2 (requiring that ‘two thirds of the Senators present concur’). As to the adequacy of the Senate’s consent, that is the end of the matter.” [Slip op. 7]

The Court therefore affirms the District Court’s denial of the writ of habeas corpus.

Citation: Hilton v. Holder, No. 13-2444 (1st Cir. June 12, 2014).

FREEDOM OF INFORMATION ACT

Where an informal British caucus requested U.S. government documents pursuant to Freedom of Information Act (FOIA), District of Columbia Circuit finds that “representatives” of foreign government entities who have authority to file such requests would fall under the Foreign Government Entity Exception; as a matter of first impression, explains the scope of “representative” of a foreign government in the context of a FOIA request

The following case concerns the request of an informal caucus of the British Parliament for U.S. intelligence records. The Freedom of Information Act (FOIA) authorizes record requests from U.S. federal agencies. U.S. intelligence agencies, however, are prohibited from releasing records to foreign government agencies or their representatives. See 5 U.S.C. Section 552(a)(3)(E).

Andrew Tyrie is a member of the British Parliament and co-chair of the “All Party Parliamentary Group on Extraordinary Rendition” (APPG), an informal parliamentary caucus. APPG sought information about the UK’s involvement in so-called “extraordinary renditions” of persons to U.S. government agencies. “Extraordinary rendition” (or “irregular rendition”) is the government-sponsored abduction and transfer of a person from one country to another without due process of law.

The U.S. intelligence agencies, including the CIA, the Department of Defense, and the Department of Homeland Security, denied APPG’s requests because the requests were made by “representatives” of the British government. APPG sued to obtain the records.

The U.S. District Court for the District of Columbia dismissed the lawsuit to compel disclosure because it found that all plaintiffs—Tyrie, his U.S.-based attorney, and APPG (jointly “FOIA requesters”)—qualify as “representatives” of a foreign government. The FOIA requesters appeal.

The U.S. Court of Appeals for the District of Columbia Circuit reverses.

First, the Court clarifies that this case will not open the floodgates for any and all information to be released to anybody.

“At the outset, we think it important to place this case in its proper context. For one thing, contrary to the intelligence agencies’ suggestion that interpreting ‘representative’ to mean ‘agent’ would expose government secrets to terrorists, national security is not at issue here. Because one of FOIA’s traditional exemptions prevents disclosure of classified records, no classified information will see the light of day regardless of how we decide this case. See 5 U.S.C. § 552(b)(1) (precluding disclosure of records ‘specifically authorized under criteria established by an Executive order to be kept secret in the interest of national defense or foreign policy’). Moreover, whatever the Foreign Government Entity Exception’s ‘representative’ provision means, it is unlikely to pose a serious barrier to the release of unclassified records. Since the exception does not apply to FOIA requests filed by any person, foreign or domestic, other than foreign government entities and their representatives, a requester concerned about the exception can steer clear of it simply by waiting for a likeminded requester to seek the same information. Cf. Oral Arg. Rec. 21:10-:40 (noting that several FOIA requesters who fall well outside the Foreign Government Entity Exception have recently filed requests identical to those at issue here). But because [the FOIA requesters] these requests themselves, prompting the intelligence agencies to invoke the Foreign Government Entity Exception, we must determine the scope of the exception’s ‘representative’ provision—a question of first impression in this or any circuit.” [Slip op. 2]

“… To begin with, consider the meaning of the word ‘representative.’ The Oxford English Dictionary defines ‘representative,’ in part, as ‘[o]ne who represents another, as agent, delegate, substitute, successor, or heir.’ XIII OXFORD ENGLISH DICTIONARY 660 (J.A. Simpson & E.S.C. Weiner eds., 2d ed. 1989); see also WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 1926 (Philip Babcock Gove ed., 3d. ed. 1993) (defining ‘representative,’ in part, as ‘constituting the agent for another esp. through delegated authority’). Indeed, this Court recently observed as much with respect to the same word in a different statute: ‘‘representative’ is traditionally and commonly defined as an agent with authority to bind others.’ Loving v. I.R.S., 742 F.3d 1013, 1016 (D.C. Cir. 2014) (citing various dictionaries, including specialized legal dictionaries, and various statutory definitional provisions). Given that ‘agent’ is a traditional and common definition of ‘representative,’ and given that reading ‘representative’ of a foreign government entity to mean ‘agent’ of a foreign government entity makes perfect sense, we suspect that Congress would have used a different word—perhaps ‘official,’ ‘employee,’ or ‘affiliate’—had it wanted to avoid incorporating agency principles into the Foreign Government Entity Exception.”

“The structure of the Foreign Government Entity Exception reinforces this conclusion. Recall that the exception first precludes intelligence agencies from considering FOIA requests filed by foreign government entities and immediately thereafter precludes such agencies from considering requests filed by ‘representatives’ of such entities. The U.S. Code is chock-full of provisions that first mention some entity and then refer to that entity’s ‘representatives’ in order to ensure that the provision applies not only to the entity itself but also to that entity acting through others. …. Granted, many of these provisions refer to an entity and its representatives in a single phrase whereas FOIA section 552(a)(3)(E) splits entities and their representatives into separate subsections, but the lengthy definition of foreign government entity in subsection 552(a)(3)(E)(i) likely required Congress to employ separate subsections here. See 5 U.S.C. § 552(a)(3)(E)(i) (referring to ‘any government entity, other than a State, territory, commonwealth, or district of the United States, or any subdivision thereof’). We therefore think it reasonable to infer that Congress included the ‘representative’ provision in order to prevent foreign government entities from evading the Foreign Government Entity Exception by filing FOIA requests through agents, not to create a separate and independent class of disfavored FOIA requesters.” [Slip op. 3]

The Court concludes that FOIA requesters who have authority to file requests on behalf of foreign government entities are “representatives” of such entities when they file requests that they have governmental authority to file. In this case, the FOIA requesters are not such “representatives” and the requested records must be released.

Citation: All Party Parliamentary Group on Extraordinary Rendition v. United States Department of Defense, No. 13-5176 (D.C. Cir., June 17, 2014).

SOVEREIGN IMMUNITY

Where European Community alleges private U.S. company’s participation in international money laundering, Second Circuit finds that the European Community is an organ and agency of a foreign state, and thus there is diversity jurisdiction under 28 U.S.C. Section 1332; RICO applies extraterritorially if liability or guilt could attach to extraterritorial conduct under the relevant RICO predicate

The European Community and 26 of its member states (“Plaintiffs”) sued RJR Nabisco, Inc. and related entities (jointly “RJR”) in the U.S. District Court for the Eastern District of New York. Plaintiffs alleged that RJR directed, managed and controlled a global money laundering scheme in violation of the “Racketeer Influenced and Corrupt Organizations” (RICO) Statute, 18 U.S.C. Section 1961.

Simply put, Plaintiffs claim that Colombian and Russian crime groups smuggle drugs into Europe, sell them in Euros, and then sell the Euros at discounted rates to cigarette importers to purchase RJR cigarettes. RJR allegedly took an active role in this scheme by concealing the true purchasers of the cigarettes, for example by shipping cigarettes through Panama to take advantage of Panama’s secrecy laws and by filing fraudulent documents with the U.S. Customs Service.

The District Court concluded that RICO has no extraterritorial application. Further, the District Court dismissed the related state law claims because the European Community is not an organ of a foreign state under 28 U.S.C. Sections 1332, 1603. Thus, its participation in the lawsuit destroyed complete diversity and deprived the District Court of jurisdiction over the state law claims.

Plaintiffs appeal the dismissal of their Second Amended Complaint (“Complaint”). The main issues on appeal are: (1) Whether the Plaintiffs’ claims under RICO are impermissibly extraterritorial, and (2) whether the European Community qualifies as an organ of a foreign state for purposes of diversity jurisdiction under 28 U.S.C. Sections 1332, 1603.

The U.S. Court of Appeals for the Second Circuit reverses. While there is a presumption against extraterritorial application of a U.S. statute (unless Congress clearly indicated that the statute applies extraterritorially), Congress has clearly intended extraterritorial application for the offenses at issue in this case. Also, the European Community qualifies as an organ and agency of a foreign state under Section 1332(a)(4), so that the lawsuit against “citizens of a State or of different States” creates diversity jurisdiction.

The Court first reviews the extraterritorial application of RICO.  Because the alleged RICO enterprise was located outside the U.S., the District Court failed to find an actionable RICO claim. The Court disagrees.

“… We now confront an argument about the extraterritorial reach of RICO … Congress manifested an unmistakable intent that certain of the federal statutes adopted as predicates for RICO liability apply to extraterritorial conduct. This appeal requires us to consider whether and how RICO may apply extraterritorially in the context of claims predicated on such statutes.”

“We conclude that RICO applies extraterritorially if, and only if, liability or guilt could attach to extraterritorial conduct under the relevant RICO predicate. Thus, when a RICO claim depends on violations of a predicate statute that manifests an unmistakable congressional intent to apply extraterritorially, RICO will apply to extraterritorial conduct, too, but only to the extent that the predicate would. Conversely, when a RICO claim depends on violations of a predicate statute that does not overcome [the] presumption against extraterritoriality, RICO will not apply extraterritorially either.”

“Our conclusion is compelled primarily by the text of RICO. Section 1961(1), which defines ‘racketeering activity’ for purposes of RICO, incorporates by reference various federal criminal statutes, which serve as predicates for RICO liability. Some of these statutes unambiguously and necessarily involve extraterritorial conduct. They can apply only to conduct outside the United States. As examples, § 2332 of Title 18 criminalizes killing, and attempting to kill, ‘a national of the United States, while such national is outside the United States.’ 18 U.S.C. § 2332(a) ... Section 2423(c) criminalizes ‘[e]ngaging in illicit sexual conduct in foreign places.’ Id. § 2423(c) …. As the conduct which violates these two statutes can occur only outside the United States, Congress unmistakably intended that they apply extraterritorially. By explicitly incorporating these statutes by reference as RICO predicate offenses, Congress also unmistakably intended RICO to apply extraterritorially when § 2332 or § 2423(c) form the basis for RICO liability. Indeed, it is hard to imagine why Congress would incorporate these statutes as RICO predicates if RICO could never have extraterritorial application.”

“Other statutes that serve as RICO predicates clearly state that they apply to both domestic and extraterritorial conduct. For example, § 1203(b), which criminalizes hostage taking, explicitly applies to conduct that ‘occurred outside the United States’ if the offender or the hostage is a U.S. national, the offender is found in the United States, or the conduct sought to coerce the government of the United States; sections 351(i) and 1751(k) expressly provide ‘extraterritorial jurisdiction’ for their criminalization of assassination, kidnapping, or assault of various U.S. government officials; a provision of § 1512 criminalizes extraterritorial tampering with witnesses, victims, or informants; and § 2332b(e) expressly asserts ‘extraterritorial Federal jurisdiction’ as to its criminalization of various ‘conduct transcending national boundaries’[3] including attempts, threats, or conspiracies to kill persons within the United States or damage property within the United States. Here too, Congress has not only incorporated into RICO statutes that overcome the presumption against extraterritoriality, it has also provided detailed instructions for when certain extraterritorial conduct should be actionable.”

“By incorporating these statutes into RICO as predicate racketeering acts, Congress has clearly communicated its intention that RICO apply to extraterritorial conduct to the extent that extraterritorial violations of those statutes serve as the basis for RICO liability. Thus, a RICO complaint predicating the defendants’ liability on their having engaged in a pattern of attempting, while ‘outside the United States,’ to kill the plaintiff, ‘a national of the United States,’ as prohibited by 18 U.S.C. § 2332(b), would state an actionable violation of RICO notwithstanding the extraterritorial conduct because RICO incorporates Congress’s express statement that § 2332(b) applies to whomever ‘outside the United States attempts to kill . . . a national of the United States.’ Id. (emphasis added). When, and to the extent that, a RICO charge is based on an incorporated predicate that manifests Congress’s clear intention to apply extraterritorially, the presumption against extraterritorial application of U.S. statutes is overcome. The district court was mistaken in interpreting our Norex decision as holding that RICO can never apply extraterritorially.”

“… In our view, the [district] court erred … for two principal reasons.”

“First, the district court’s approach necessarily disregards the textual distinctions in the statutes incorporated by reference as RICO predicates. For example, the money laundering statute explicitly applies to extraterritorial conduct ‘if (1) the conduct is by a United States citizen . . . and (2) the transaction or series of related transactions involves funds or monetary instruments of a value exceeding $10,000.’ 18 U.S.C. § 1956(f). The district court’s reading of RICO would preclude extraterritorial applications of RICO where they are explicitly permitted under the money laundering statute. By contrast, some RICO predicates do not mention any extraterritorial application, see, e.g., 18 U.S.C. § 1511 (criminalizing the obstruction of state or local law enforcement), while others clearly apply to extraterritorial conduct, but under different circumstances than the money laundering statute, see, e.g., id. § 1203(b) (criminalizing a subset of extraterritorial hostage-taking). The district court would presumably have RICO apply extraterritorially in the same manner when claims are brought under these different predicates, effectively erasing carefully crafted congressional distinctions.”

“Nothing in RICO requires or even suggests such an erasure of statutory distinctions. Rather, RICO prohibits, roughly speaking, investing in, acquiring control of, working for, or associating with an ‘enterprise’ if the defendant’s conduct involves (in a variety of potential fashions) a ‘pattern of racketeering activity.’ 18 U.S.C. §§ 1962(c), 1964(c). RICO does not qualify the geographic scope of the enterprise. Nor does RICO contain any other language that would suggest its extraterritorial application differs from that specified in its various predicates. Without any congressional instruction to the contrary, we see no reason to adopt a construction of RICO that would permit a defendant associated with a foreign enterprise to escape liability for conduct that indisputably violates a RICO predicate, but that could impose liability on a defendant associated with a domestic enterprise for extraterritorial conduct that does not fall within the geographic scope of the relevant predicate.”

“Second, the district court’s requirement that the defendant be, loosely speaking, associated with a domestic enterprise in order to sustain RICO liability seems to us illogical. Under that standard, if an enterprise formed in another nation sent emissaries to the United States to engage in domestic murders, kidnappings, and violations of the various RICO predicate statutes, its participants would be immune from RICO liability merely because the crimes committed in the United States were done in conjunction with a foreign enterprise. Surely the presumption against extraterritorial application of United States laws does not command giving foreigners carte blanche to violate the laws of the United States in the United States. …”

“… An important value of the presumption against extraterritoriality is predictability. An interpretation of RICO that depends on the location of the enterprise would undermine, rather than promote, that value.”

“We think it far more reasonable to make the extraterritorial application of RICO coextensive with the extraterritorial application of the relevant predicate statutes. This interpretation at once recognizes that ‘RICO is silent as to any extraterritorial application’ and thus has no extraterritorial application independent of its predicate statutes. See [Norex Petroleum Ltd. v. Access Industries, Inc., 631 F.3d 29, 33]. At the same time, it gives full effect to the unmistakable instructions Congress provided in the various statutes incorporated by reference into RICO. This approach has the benefit of simplifying the question of what conduct is actionable in the United States and permitting courts to consistently analyze that question regardless of whether they are presented with a RICO claim or a claim under the relevant predicate. It also avoids incongruous results, such as insulating purely domestic conduct from liability simply because the defendant has acted in concert with a foreign enterprise.” [Slip op. 4-6] (footnotes omitted)

The alleged racketeering activity includes (1) money laundering, 18 U.S.C. Sections 1956-57; (2) providing material support to foreign terrorist organizations, 18 U.S.C. Section 2339B; (3) mail fraud, 18 U.S.C. Section 1341; (4) wire fraud, 18 U.S.C. Section 1343; and (5) violations of the Travel Act, 18 U.S.C. Section 1952. Of these, “money laundering” and “material support to terrorism” both apply extraterritorially under certain circumstances.

“The money laundering predicates apply extraterritorially ‘if (1) the conduct is by a United States citizen . . . and (2) the transaction or series of related transactions involves funds or monetary instruments of a value exceeding $10,000.’ 18 U.S.C. § 1956(f). Section 1956(f) expressly states that ‘[t]here is extraterritorial jurisdiction over the conduct prohibited by this section.’ Section 1957 similarly criminalizes knowingly engaging ‘in a monetary transaction in criminally derived property of a value greater than $10,000 . . . derived from specified unlawful activity,’ id. § 1957(a), if the offense takes place outside the United States . . ., but the defendant is a United States person,’ id. § 1957(d) (emphasis added). The predicate act criminalizing material support for terrorism similarly states that it applies extraterritorially. It covers ‘knowingly provid[ing] material support or resources to a foreign terrorist organization,’ id. § 2339B(a)(1), and adds that ‘[t]here is extraterritorial Federal jurisdiction over an offense under this section,’ id. § 2339B(d)(2).”

“The claims of the Complaint asserting RICO liability for a pattern of violations of these predicates meet the statutory requirements for extraterritorial application of RICO. The district court erred in dismissing, as impermissibly extraterritorial, the RICO claims based on these predicates.” [Slip op. 6-7] (footnotes omitted)

While “mail fraud,” “wire fraud” and “Travel Act” violations do not overcome the presumption against extraterritoriality, they are predicates for domestic RICO violations.

The Court then addresses the dismissal of the state law claims, which turns on whether the European Community is an organ of a foreign state.

“Section 1332(a)(4) grants the federal courts jurisdiction over suits where the amount in controversy exceeds $75,000 and the suit is between ‘a foreign state . . . as plaintiff and citizens of a State.’ 28 U.S.C. § 1332(a)(4). A ‘foreign state’ is defined for purposes of § 1332(a)(4) by § 1603, which is part of the Foreign Sovereign Immunities Act (‘FSIA’).”

“This latter section provides:

(a) A ‘foreign state’ . . . includes 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 an organ of a foreign state or political subdivision thereof

. . . and

(3) which is neither a citizen of a State of the United States . . . nor created under the laws of any third country. Id. § 1603.”

“The European Community is therefore a ‘foreign state’ for purposes of § 1332(a)(4) if it is an ‘agency or instrumentality of a foreign state.’ Whether it is an agency or instrumentality of a foreign state, in turn, depends on whether it conforms to the definition in subsection (b). There is no doubt that the European Community satisfies the first and third elements of the definition of ‘agency or instrumentality’ provided in § 1603(b). It is clear also that the European Community is not a political subdivision of a foreign state. The question is whether the European Community is ‘an organ of a foreign state.’ Id.”

“For the reasons discussed below, we conclude that the European Community is an organ of a foreign state, and thus an agency or instrumentality of a foreign state. As a result, the continued participation of the European Community in this suit does not destroy complete diversity.”

“… The FSIA does not include a definition of the term ‘organ.’ A number of dictionaries we have consulted include definitions of ‘organ’ that are altogether compatible with the European Community in its relationship to the states that formed it. See Organ Definition, Oxford English Dictionary, http://www.oed.com/view/Entry/ 132421 (last visited July 10, 2013) (‘A means of action or operation, an instrument; (now) esp. a person, body of people, or thing by which some purpose is carried out or some function is performed.’) … The European Community was formed by its member nations to serve on their collective behalf as a body exercising governmental functions over their collective territories. We see no reason why it is not properly described as an organ of each nation.”

“In Filler v. Hanvitt Bank, 378 F.3d 213, 217 (2d Cir. 2004), this court set forth five factors to guide a court in determining whether a party is an ‘organ’ under the FSIA. The factors are:

(1) whether the foreign state created the entity for a national purpose; (2) whether the foreign state actively supervises the entity; (3) whether the foreign state requires the hiring of public employees and pays their salaries; (4) whether the entity holds exclusive rights to some right in the [foreign] country; and (5) how the entity is treated under foreign state law.” Id. … We have stated that these factors invite a balancing process, and that an entity can be an organ even if not all of the factors are satisfied. … The European Community satisfies four of these factors and, very likely, also the fifth: it was created by the European nations for national purposes; it is supervised by the foreign countries; it has public employees whose salaries are paid, at least indirectly, by the member nations, which continue to bear collectively the expenses of operation; it holds exclusive rights in the foreign countries; and the foreign countries treat it as a government entity under their laws. We discuss each of these factors briefly below.”

“… It seems beyond doubt that the member states that founded the European Community did so for a ‘national purpose.’ Filler, 378 F.3d at 217. Their purpose was to establish governmental control on a collective basis over various national functions previously performed by each of the member states on an individual basis, such as by establishing a common market and a monetary union, and by coordinating economic activities throughout the community. EC Treaty, arts. 1-4. The management of a common currency and the maintenance of economic stability are quintessential national purposes.”

“… We have said that a foreign state actively supervises an organ when it appoints the organ’s key officials and regulates some of the activities the organ can undertake. …. Member states exercise supervisory responsibility over the European Community by appointing representatives to serve on the Council of Ministers, which is the European Community’s ‘primary policy-making and legislative body.’ … Each member of the Council is the appointed representative of one member state (although the individual representative will change depending on the subject matter to be discussed by the Council). … Additionally, each member state selects commissioners to serve on the European Commission, which administers the Community’s various departments. …”

“It is true that these entities are just two of the five basic institutions of the European Community. However, this factor does not require the foreign state to micro-manage every aspect of the organ’s activities. The Council of Ministers is the European Community’s primary policy-making and legislative body. Therefore, the member states’ supervision of this entity enables the member states to supervise the most significant policy decisions made by the European Community.”

“…. The third factor asks ‘whether the foreign state requires the hiring of public employees and pays their salaries.’ Filler, 378 F.3d at 217. The EC Treaty, enacted by the member states, requires the creation of particular positions, which are to be filled by public officials. … Service as a European Community official satisfies the European Court of Justice’s definition of ‘public service’ because such officials exercise ‘powers conferred by public law and duties designed to safeguard the general interests of the state or of other public authorities.’...  The member states indirectly pay the salaries of the public employees. In 2000, for example, they contributed 78.4% of the European Community’s budget, 5.5% of which goes to administrative expenses, which include salaries and pensions. See European Commission, EU Budget 2008 Financial Report, 82, 88 (2009).”

“RJR argues that the European Community does not satisfy this factor because its employees are not public employees of the member states. … This fact seems to us of small importance at best. Given that the European Community exercises governmental functions delegated to it by the member states, and does so through public employees whose pay is financed largely by the member states, it seems to make little or no difference for the question whether the European Community serves as an organ of its member states that its employees are not employees directly of the member states. Nevertheless, as noted above, our precedent makes clear that the five Filler factors are merely issues to be considered in the decision, and there is no requirement that all five be satisfied to support the conclusion that an entity is an organ of a foreign state. We would reach the same conclusion even if precedent compelled us to decide that the European Community fails to satisfy this factor. …”

“… Fourth, we consider ‘whether the entity holds exclusive rights to some right in the foreign country.’ Filler, 378 F.3d at 217 (alteration omitted). This factor has been given a broad meaning. … The European Community holds the exclusive right to exercise a number of significant governmental powers, which include the right to ‘authori[z]e the issue of banknotes within the Community’ and ‘to conclude the Multilateral Agreements on Trade in Goods.’”

“… Finally, the fifth factor asks ‘how the entity is treated under foreign state law.’ Filler, 378 F.3d at 217. … Neither party cites to European law that clearly addresses this question. The member states that are parties to this suit have identified the European Community as an organ. Plaintiffs informed the district court in their briefing that they consider the European Community to be a governmental entity, and the United States Department of State has advised that it accepts this representation. … Therefore, … the European Community appears to satisfy this factor.” […]

“RJR argues that the text and legislative history of the FSIA, along with the common law at the time of the FSIA’s enactment, demonstrate that an ‘organ’ of a foreign state cannot include an international organization created by multiple states. We disagree.”

“First, we turn to the text of § 1603. The fact that § 1603(b)(2) uses the term ‘organ of a foreign state’ in the singular does not necessarily negate application to the European Community, which serves numerous foreign states. 28 U.S.C. § 1603(b)(2) (emphasis added). There is no logic to the proposition that an entity that serves as an organ of one foreign state cannot also serve as the organ of another. The Dictionary Act furthermore states that ‘[i]n determining the meaning of any Act of Congress, unless the context indicates otherwise[,] words importing the singular include and apply to several persons, parties, or things.’ 1 U.S.C. § 1. Context ‘means the text of the Act of Congress surrounding the word at issue, or the texts of other related congressional Acts.’ … The context here gives no indication that the phrase ‘a foreign state’ must be interpreted to exclude an organ that serves as an agency of several states. Our interpretation finds support in the law of other circuits dealing with the pooling of shares to determine the status of commercial entities. … In these ‘share pooling’ cases, courts have repeatedly held that corporations owned by several foreign states are covered by the FSIA, even though the statute uses the singular.”

“RJR argues that because some dictionaries define ‘organ’ as a smaller unit of a larger entity, an ‘organ’ cannot be a larger international organization created by multiple foreign states. … While the member states ceded to the European Community primacy as to certain specified governmental functions, they retained the vast majority of governmental control. Each member state continued to exist as a sovereign state, notwithstanding having voluntarily ceded portions of its authority to the European Community, and, through the Treaty of Lisbon, the member states dissolved the European Community and incorporated it into the European Union. Thus, in certain senses, the European Community exercised its powers by the sufferance of the member states, and was both subordinate to and smaller than the aggregate of the nation states that created it.”  [Slip op. 8-12] (footnotes omitted)

Therefore, the European Community qualifies as an organ and agency of a foreign state, and diversity jurisdiction exists. The Court remands for further proceedings.

Citation: European Community v. RJR Nabisco, Inc., No. 11-2475-cv (2d Cir. April 29, 2014).

SOVEREIGN IMMUNITY

In context of Argentina’s default on external debt, U.S. Supreme Court decides whether the Foreign Sovereign Immunities Act (FSIA) limits the scope of discovery for a judgment creditor

In the following case, the U.S. Supreme Court outlines the scope of discovery available to a judgment creditor in a federal post-judgment execution proceeding against a foreign sovereign. See Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. Sections 1330, 1602.

Argentina defaulted on its external debt in 2001 and subsequently offered creditors new securities to swap for the defaulted ones. Most creditors agreed, but the Respondent, NML Capital, Ltd. (“NML”), did not.

NML filed several lawsuits in the U.S. District Court for the Southern District of New York in regard to the approximately $2.5 billion owed by Argentina. NML prevailed in all lawsuits and sought to execute against Argentina’s property. NML began with trying to ascertain Argentine property by serving subpoenas upon Bank of America (BOA) and the Banco de la Nacion Argentina (BNA) in New York.

Argentina and BOA moved to quash the BOA subpoena, but the District Court granted a motion to compel. The District Court explained that that extraterritorial asset discovery did not offend Argentina’s sovereign immunity. The District Court also expected the parties to negotiate further regarding reasonable limits on discovery.

Argentina appealed to the U.S. Court of Appeals for the Second Circuit, claiming that the order violates the FSIA by permitting discovery of Argentina’s extraterritorial assets. The Second Circuit affirmed the District Court.

The U.S. Supreme Court granted certiorari and now affirms. As for discovery in postjudgment execution proceedings, the general rule in federal courts is that the parties may obtain discovery regarding any non-privileged matter that is relevant to any party’s claim or defense. Fed.R.Civ.P. 26(b)(1).

The Court first clarifies the scope of its review in this case.

“In the Court of Appeals, Argentina’s only asserted ground for objection to the subpoenas was the Foreign Sovereign Immunities Act. … And Argentina’s petition for writ of certiorari asked us to decide only whether that Act ‘imposes [a] limit on a United States court’s authority to order blanket post-judgment execution discovery on the assets of a foreign state used for any activity anywhere in the world.’ … We thus assume without deciding that, as the Government conceded at argument …, and as the Second Circuit concluded below, ‘in a run-of-the-mill execution proceeding . . . the district court would have been within its discretion to order the discovery from third-party banks about the judgment debtor’s assets located outside the United States.’ … The single, narrow question before us is whether the Foreign Sovereign Immunities Act specifies a different rule when the judgment debtor is a foreign state.” [Slip op. 2-3] (footnote omitted)

The Court then summarizes the FSIA grants of immunity.

“The text of the Act confers on foreign states two kinds of immunity. First and most significant, ‘a foreign state shall be immune from the jurisdiction of the courts of the United States . . . except as provided in sections 1605 to 1607.’ §1604. That provision is of no help to Argentina here: A foreign state may waive jurisdictional immunity, §1605(a)(1), and in this case Argentina did so … Consequently, the Act makes Argentina ‘liable in the same manner and to the same extent as a private individual under like circumstances.’ §1606.”

“The Act’s second immunity-conferring provision states that ‘the property in the United States of a foreign state shall be immune from attachment[,] arrest[,] and execution except as provided in sections 1610 and 1611 of this chapter.’ §1609. The exceptions to this immunity defense (we will call it ‘execution immunity’) are narrower. ‘The property in the United States of a foreign state’ is subject to attachment, arrest, or execution if (1) it is ‘used for a commercial activity in the United States,’ §1610(a), and (2) some other enumerated exception to immunity applies, such as the one allowing for waiver, see §1610(a)(1)-(7). The Act goes on to confer a more robust execution immunity on designated international-organization property, §1611(a), property of a foreign central bank, §1611(b)(1), and ‘property of a foreign state . . . [that] is, or is intended to be, used in connection with a military activity’ and is either ‘of a military character’ or ‘under the control of a military authority or defense agency,’ §1611(b)(2).” [Slip op. 3-4]

The Court permits broad post-judgment discovery, tempered by the District Court’s review of which assets are immune and which are not. It is for Congress to impose limitations on such discovery against foreign sovereigns, not this Court.

“… Argentina maintains that, if a judgment creditor could not ultimately execute a judgment against certain property, then it has no business pursuing discovery of information pertaining to that property. But the reason for these subpoenas is that NML does not yet know what property Argentina has and where it is, let alone whether it is executable under the relevant jurisdiction’s law. If, bizarrely, NML’s subpoenas had sought only ‘information that could not lead to executable assets in the United States or abroad,’ then Argentina likely would be correct to say that the subpoenas were unenforceable—not because information about nonexecutable assets enjoys a penumbral ‘discovery immunity’ under the Act, but because information that could not possibly lead to executable assets is simply not ‘relevant’ to execution in the first place, Fed. Rule Civ. Proc. 26(b)(1); N. Y. Civ. Prac. Law Ann. §5223. But of course that is not what the subpoenas seek. They ask for information about Argentina’s worldwide assets generally, so that NML can identify where Argentina may be holding property that is subject to execution. To be sure, that request is bound to turn up information about property that Argentina regards as immune. But NML may think the same property not immune. In which case, Argentina’s self-serving legal assertion will not automatically prevail; the District Court will have to settle the matter.”

“Today’s decision leaves open what Argentina thinks is a gap in the statute. Could the 1976 Congress really have meant not to protect foreign states from postjudgment discovery ‘clearinghouses’? The riddle is not ours to solve (if it can be solved at all). It is of course possible that, had Congress anticipated the rather unusual circumstances of this case (foreign sovereign waives immunity; foreign sovereign owes money under valid judgments; foreign sovereign does not pay and apparently has no executable assets in the United States), it would have added to the Act a sentence conferring categorical discovery-in-aid-of execution immunity on a foreign state’s extraterritorial assets. Or, just as possible, it would have done no such thing. Either way, ‘[t]he question . . . is not what Congress ‘would have wanted’ but what Congress enacted in the FSIA.’ Republic of Argentina v. Weltover, Inc., 504 U. S. 607, 618 (1992).”

“Nonetheless, Argentina and the United States urge us to consider the worrisome international-relations consequences of siding with the lower court. Discovery orders as sweeping as this one, the Government warns, will cause ‘a substantial invasion of [foreign states’] sovereignty,’ Brief for United States as Amicus Curiae 18, and will ‘[u]ndermin[e] international comity,’ id., at 19. Worse, such orders might provoke ‘reciprocal adverse treatment of the United States in foreign courts,’ id., at 20, and will ‘threaten harm to the United States’ foreign relations more generally,’ id., at 21. These apprehensions are better directed to that branch of government with authority to amend the Act …” [Slip op. 4-5] (footnotes omitted)

The Dissent by Justice Ginsburg would limit discovery to assets that are used in connection with “commercial activity.”

“The Foreign Sovereign Immunities Act of 1976, 28 U. S. C. §§1330, 1602 et seq., if one of several conditions is met, permits execution of a judgment rendered in the United States against a foreign sovereign only on ‘property in the United States . . . used for a commercial activity.’ §1610(a). Accordingly, no inquiry into a foreign sovereign’s property in the United States that is not ‘used for a commercial activity’ could be ordered; such an inquiry, as the Court recognizes, would not be ‘`relevant’ to execution in the first place.’ Ante, at 10 (citing Fed. Rule Civ. Proc. 26(b)(1)). Yet the Court permits unlimited inquiry into Argentina’s property outside the United States, whether or not the property is ‘used for a commercial activity.’ By what authorization does a court in the United States become a ‘clearinghouse for information,’ ante, at 3 (internal quotation marks omitted), about any and all property held by Argentina abroad? NML may seek such information, the Court reasons, because ‘NML does not yet know what property Argentina has [outside the United States], let alone whether it is executable under the relevant jurisdiction’s law.’ …. But see Société Nationale Industrielle Aérospatiale v. United States Dist. Court for Southern Dist. of Iowa, 482 U. S. 522, 542 (1987) (observing that other jurisdictions generally allow much more limited discovery than is available in the United States).” […]

“Unless and until the judgment debtor, here, NML, proves that other nations would allow unconstrained access to Argentina’s assets, I would be guided by the one law we know for sure—our own. That guide is all the more appropriate, as our law coincides with the international norm. See §1602. Accordingly, I would limit NML’s discovery to property used here or abroad ‘in connection with . . . commercial activities.’ §§1602, 1610(a). I therefore dissent from the sweeping examination of Argentina’s worldwide assets the Court exorbitantly approves today.” [Slip. op. 5-6]

Citation: Republic of Argentina v. NML Capital, Ltd., No. 12-842 (U.S. Supreme Court, June 16, 2014).

TERRORISM

Seventh Circuit affirms District Court orders to have Syrian assets turned over to one of the groups of Plaintiffs competing for the assets; Court outlines procedure for enforcing judgments under the FSIA in cases of state-sponsored terrorism, and interprets 28 U.S.C. Section 1610 [Exceptions to the immunity of a foreign state from attachment or execution]

In the following case, the Seventh Circuit interprets 28 U.S.C. Section 1610 [Exceptions to the immunity of a foreign state from attachment or execution] where two groups of terrorism victims claim the same assets of the Syrian Arab Republic. The U.S. government has designated that country as a state sponsor of terrorism.

The underlying District Court cases both originated in the U.S. District Court for the District of Columbia. The “Baker plaintiffs” (appellants) were victims of the 1985 hijacking of EgyptAir Flight 648 by the Abu Nidal group, which was supported by the Syrian government. Of the 95 passengers and crew, 58 died during the hijacking. The “Gates plaintiffs” (appellees) are relatives of two civilian contractors who in 2004 were kidnapped by al Qaeda in Iraq and brutally killed.

Both groups of plaintiffs obtained large judgments against the Syrian Arab Republic, and sought to attach certain Syrian funds in the Northern District of Illinois pursuant to 28 U.S.C. Section 1610(g) (allowing attachment of assets in the U.S. belonging to foreign states and their agencies and instrumentalities to execute judgments based on state-sponsored terrorism).

The Foreign Sovereign Immunities Act (FSIA) expressly allows civil claims against foreign governments (including their agencies and instrumentalities) for acts of state-sponsored terrorism. See 28 U.S.C. Section 1605A. Should a judgment result, the successful plaintiff may execute it against the commercially used assets of the foreign state in the U.S. See 28 U.S.C. Section 1610.

The District Court for the Northern District of Illinois found that the Gates plaintiffs’ lien on the Syrian assets has priority over that of the Baker plaintiffs. The FSIA does not provide its own attachment and execution procedures. Pursuant to Federal Rule of Civil Procedure 69(a), attachment and execution procedures to satisfy a federal judgment must comply “with the procedure of the state where the court is located, but a federal statute governs to the extent it applies.” Thus, Illinois law determines the priority of the liens on the Syrian assets.

“A lien can be created under Illinois law by service of a “citation to discover assets.” See 735 ILCS 5/2-1402(m) … A garnishment notice also creates a lien under Illinois law. See 735 ILCS 5/12-707(a) … Priority of competing liens is determined based on the order in which the competing liens were obtained. E.g., Federal National Mortgage Ass’n v. Kuipers, 732 N.E.2d 723, 726 (Ill. App. 2000) (“A lien that is first in time generally has priority and is entitled to prior satisfaction of the property it binds.”).”

“On December 8, 2011, the Gates plaintiffs registered their judgment in the Northern District of Illinois and served on JP Morgan Chase Bank a citation to discover Syrian assets it might have been holding. They filed their § 1610(c) order from the District of Columbia in the Northern District of Illinois, but they did not seek or obtain a second § 1610(c) order from the Northern District of Illinois. …”

“The bank’s response to the Gates plaintiffs’ citation identified two groups of responsive accounts relevant to this appeal: an AT&T account containing frozen funds belonging to Syrian Telecom, and two accounts containing blocked electronic funds transfers belonging to the Banque Centrale de Syrie. Based on this information, the Gates plaintiffs served AT&T with a citation to discover assets on February 9, 2012 seeking any other responsive AT&T assets besides the account at JP Morgan Chase. The Gates plaintiffs also pursued other responsive accounts at JP Morgan Chase Bank.”

“On February 13, the Baker plaintiffs filed a motion to intervene in the Gates case. The Baker plaintiffs had not registered their judgment in the Northern District of Illinois until December 15, 2011, several days after the Gates plaintiffs. … Unlike the Gates plaintiffs, however, the Baker plaintiffs sought and obtained a new § 1610(c) order from the Northern District of Illinois on December 16. The Baker plaintiffs then served JP Morgan Chase Bank with two garnishment notices: a narrow initial notice served on December 16, and a broader amended notice served on January 5, 2012.”

“The Baker plaintiffs argued that the Gates plaintiffs’ failure to obtain a new § 1610(c) order from the Northern District of Illinois violated the FSIA and nullified the Gates plaintiffs’ liens. The district court held that the Gates plaintiffs’ § 1610(c) order from the District of Columbia court complied with the FSIA and that the Gates plaintiffs’ liens on the Syrian assets had priority. The district court eventually issued two turnover orders. The first, issued on May 13, 2013, ordered AT&T to turn over to the Gates plaintiffs the frozen Syrian Telecom funds. The second, issued on February 3, 2014, ordered JP Morgan Chase Bank to turn over to the Gates plaintiffs funds belonging to the Banque Centrale de Syrie.” [Slip op. 4] (footnote omitted)

The Baker plaintiffs appealed. Because the legal issues are basically the same, the Seventh Circuit consolidated the appeals.

The U.S. Court of Appeals for the Seventh Circuit affirms the District Court orders to have Syrian assets turned over to the Gates plaintiffs.

The Court first outlines the procedures for obtaining and enforcing judgments under the FSIA in cases of state-sponsored terrorism.

“Congress has chosen civil litigation under the FSIA rather than international diplomacy as the monetary remedy for U.S. victims of state-sponsored acts of terror. These appeals stem from the fact that the FSIA does not provide a mechanism for distributing equitably among different victims any Syrian assets in the United States that are subject to attachment. Instead, victims who finally obtain judgments must then engage in the costly, burdensome, and often fruitless task of searching for available assets.”

“These victims of terror can then find themselves pitted in a cruel race against each other—a race to attach any available assets to satisfy the judgments. The terms of the race are essentially winner-take-all rather than any equitable sharing among victims of similar losses. Under the FSIA’s compensation scheme, a terrorism judgment against Syria can be satisfied only at the expense of other terrorism victims.”

“Lawsuits against foreign states in United States courts raise special substantive and procedural problems. The central substantive problem such suits must confront is foreign sovereign immunity. The FSIA codifies the general rules with respect to both immunity from suit and immunity from attachment of assets. See 28 U.S.C. § 1604 (immunity from suit), § 1609 (immunity from attachment and execution) … The FSIA also recognizes several exceptions to these general immunities. See 28 U.S.C. §§ 1605-07 (exceptions to foreign state immunity from suit), §§ 1610-11 (exceptions to foreign state property’s immunity from attachment and execution).”

“The FSIA adopted a ‘comprehensive set of legal standards governing claims of immunity in every civil action against a foreign state.’ Republic of Argentina v. NML Capital, Ltd., No. 12-842, 573 U.S. ___, ___ (2014) (slip op. at 6), quoting Verlinden B.V. v. Central Bank of Nigeria, 461 U.S. 480, 488 (1983). The FSIA is therefore the sole basis for jurisdiction over a foreign state in a United States court. …  Any suit against a state sponsor of terrorism and any attachment pursuant to a judgment against a state sponsor of terrorism must fall within the FSIA’s statutory exceptions to foreign sovereign immunity.”

“Among the exceptions, the FSIA allows victims of state sponsored terrorism to pursue actions against and to attach the property of state sponsors of terrorism. Section 1605A creates an exception to foreign sovereign immunity for suits seeking money damages for personal injury or death resulting from an act of state-sponsored terrorism. Plaintiffs winning judgments against state sponsors of terrorism can then use several FSIA exceptions to the attachment and execution immunity of foreign states’ United States property. See 28 U.S.C. § 1610. These provisions make it possible to sue a state sponsor of terrorism in a United States court and to attach assets to satisfy judgments against such foreign states.”

“Suing foreign states in United States courts also raises procedural issues. In particular, it is difficult to ensure that a foreign state receives notice of a United States proceeding against it and has a meaningful opportunity to participate. The FSIA establishes special service and notice requirements for suits against foreign states, including notice of default judgments obtained against them. See 28 U.S.C. § 1608(e). Section 1610(c) delays attachment and execution to satisfy most judgments against foreign states until a court determines that a reasonable period of time has elapsed following the entry of judgment and (in case of a default judgment) service of the judgment on the foreign state under § 1608(e).”

“These provisions work together to ensure that foreign states receive sufficient notice of United States legal proceedings instituted against them, as well as an opportunity to participate in those proceedings and an opportunity to respond to a default judgment before attachment of and execution against the foreign state’s assets in the United States.”

“The lien priority dispute between the Gates and Baker plaintiffs presents two principal legal issues under this statutory scheme. The first is whether § 1610(c), which requires a court’s permission before a judgment-holder begins to attach a foreign state’s assets in the United States, applies to judgments based on state-sponsored terrorism under §1605A that are executed pursuant to § 1610(g), which is an exception to foreign sovereign attachment immunity that applies only to execution of judgments for state-sponsored terrorism. The second question arises if § 1610(c) applies at all here. It is whether a judgment-holder must obtain a new § 1610(c) order in each district where she seeks to attach assets, or whether just one such order suffices.” [Slip op. 2-3] (footnote omitted)

Next, the Court explains two independent grounds why 28 U.S.C. Section 1610(c) does not give the Baker plaintiffs priority over the Gates plaintiffs.

“After the Gates plaintiffs secured their judgment, the District Court for the District of Columbia issued on August 23, 2011 an order under § 1610(c) determining that attachment could proceed because enough time had passed following the entry of their judgment and the notice thereof to Syria. The Gates plaintiffs contend first that § 1610(c) does not apply at all and second that even if it does, one order per judgment suffices for attachment and execution any-where in the United States. The Baker plaintiffs contend that the District of Columbia order allowed the Gates plaintiffs to pursue attachment only in the District of Columbia and that a new § 1610(c) order is needed in each judicial district where assets are sought. If the Baker plaintiffs were correct, then the Gates plaintiffs would not have obtained a prior valid lien to the Syrian assets in Illinois. We agree with the Gates plaintiffs on both grounds.” […]

“First, § 1610(c) simply does not apply to the attachment of assets to execute judgments under § 1610(g) for statesponsored terrorism.”

“Section 1610(c) applies to ‘attachment or execution referred to in subsections (a) and (b) of this section.’ Subsections (a) and (b) establish a number of specific exceptions to foreign sovereign immunity from attachment or execution. Those exceptions apply based upon a variety of factors, including the type of property, the use of the property, whether it was related to the lawsuit in question, and in some cases the type of lawsuit.”

“The Gates plaintiffs are not seeking attachment under § 1610(a) or (b). They seek attachment under § 1610(g), which authorizes attachment of property of foreign state sponsors of terrorism and their agencies or instrumentalities to execute judgments under § 1605A for state-sponsored terrorism. Section 1610(g) is not mentioned in § 1610(c). By its terms, then, § 1610(c) simply does not apply to execution or attachment under § 1610(g). That conclusion is also consistent with the more general tools of statutory interpretation and the structure of the FSIA.”

“The decision to include references to § 1610(a) and § 1610(b) while not including a reference to § 1610(g) is a strong indication that § 1610(c)’s requirement applies only to attachments under § 1610(a) and (b), and not to attachments under § 1610(g). See Walters v. Industrial and Commercial Bank of China, Ltd., 651 F.3d 280, 297 (2d Cir. 2011) (‘Through this explicit cross-reference to § 1610(a) and (b), § 1610(c) clearly signals that execution depends on a judicial determination that the property at issue falls within one of the exceptions to immunity set forth in those subsections.’).”

“Section 1610(g) was added to the FSIA as part of the 2008 FSIA Amendments. The other 2008 FSIA Amendments undermine any suggestion that Congress’ omission of a reference to § 1610(g) in § 1610(c) might have been an oversight that courts should ‘correct’ by interpretation. Congress replaced the then-existing terrorism exception to immunity from suit, then codified at 28 U.S.C. § 1605(a)(7), with a broader terrorism exception now codified at 28 U.S.C. § 1605A. …”

“Congress also made several changes to the FSIA’s attachment provisions to facilitate satisfaction of judgments obtained under § 1605A. Id. at 61-62. Congress amended the FSIA’s existing attachment provisions, codified at § 1610(a), (b), and (f), to make them available to holders of state-sponsored-terrorism judgments under § 1605A. See 28 U.S.C. § 1610(a)(7), 1610(b)(3), 1610(f)(1)-(2). Congress also added § 1610(g), a new, powerful attachment provision available only to victims of state-sponsored terrorism who hold judgments under § 1605A. See 28 U.S.C. § 1610(g)(1) (allowing attachment of property of a foreign state ‘against which a judgment is entered under section 1605A’).”

“Despite having amended § 1610(a), (b) and (f) to add references to § 1605A, Congress did not amend § 1610(c) to add a reference to § 1610(g). Surrounded by other references, Congress’ silence is a strong textual indication that § 1610(c) does not apply to efforts to enforce judgments under § 1605A through § 1610(g).”

“Faced with § 1610(c)’s lack of a reference to § 1610(g), the Baker plaintiffs essentially argue that § 1610(a) and (b), both of which are referenced in § 1610(c), are so similar to § 1610(g) that we should extend the scope of § 1610(c) to attachments under § 1610(g). We are not convinced. Section 1610(g) differs substantially from § 1610(a) and (b). Both § 1610(a) and (b) are available to all holders of FSIA judgments, not just to victims of state-sponsored terror. Sections 1610(a) and (b) are available to satisfy a wide variety of judgments, but they allow attachment of only specific categories of assets to satisfy those judgments. See, e.g., § 1610(a) (allowing attachment of foreign state property located in the United States and used for commercial activity there); § 1610(b) (allowing attachment of property of foreign state agency or instrumentality engaged in United States commercial activity).”

“By contrast, § 1610(g) is available only to holders of judgments under the § 1605A exception for state-sponsored terrorism, but it allows attachment of a much broader range of assets to satisfy those judgments. Specifically, § 1610(g) allows attachment of the property of a foreign state but also property of an agency or instrumentality ‘that is a separate juridical entity or is an interest held directly or indirectly in a separate juridical entity.’ Attachment is allowed “regardless of” whether the foreign state exercises economic control over the property, receives the profits of the property, manages the property, controls its daily affairs, or is the sole beneficiary in interest of the property. § 1610(g)(1).”

“This language was intended to avoid limits the Supreme Court had imposed on the ability of litigants to attach the assets of foreign state agencies and instrumentalities under § 1610(b). The Court had held that U.S. courts should ordinarily respect the separate juridical identities of such agencies and instrumentalities, with narrow exceptions. See First National City Bank v. Banco Para el Comercio Exterior de Cuba, 462 U.S. 611, 626-27 (1983) (cannot attach property of separate juridical entity unless entity is exclusively controlled by foreign state or recognizing separate status of entity and state would work fraud or injustice). Section 1610(g) provides that in cases of state-sponsored terrorism, assets of the defendant’s agencies and instrumentalities are subject to attachment and execution regardless of factors that would ordinarily insulate such assets in other contexts governed by § 1610(a) and (b).”

“Finally, our interpretation of § 1610(c) is consistent with the broader legislative purpose of the 2008 FSIA Amendments to make it easier for terrorism victims to obtain judgments and to attach assets. See In re Islamic Republic of Iran Terrorism Litigation, 659 F.Supp.2d at 58-63 (D.D.C. 2009) (detailed discussion of 2008 Amendments). Exempting attachments under § 1610(g), that is, attachments stemming from terrorism-related judgments, from § 1610(c)’s solicitous notice requirements is entirely consistent with the liberalizing purpose of the 2008 Amendments.” […]

“Even if § 1610(c) applied to attachment efforts under § 1610(g), the Gates plaintiffs complied with § 1610(c) in the District of Columbia before they sought attachment of the Syrian assets in the Northern District of Illinois. Section 1610(c) requires ‘the court’ to determine ‘that a reasonable period of time has elapsed following the entry of judgment and the giving of any notice required under section 1608(e) of this chapter.’”

“Where such a determination is required, one suffices for attachment efforts throughout the United States. There is no reason for later courts to revisit an earlier determination that sufficient time has passed to allow attachment. ….” […]

“The Gates plaintiffs obtained a determination from the D.C. District Court that sufficient time had passed following the entry of their judgment for attachment to proceed. They were not required to seek a duplicative determination of the same question by the Northern District of Illinois before attaching the Syrian assets. For two independent reasons, then, § 1610(c) does not bar the priority of the Gates plaintiffs’ liens on the Syrian assets in the Northern District of Illinois ahead of the Baker plaintiffs’ liens.” [Slip op. 5-7] (footnote omitted)

The Court concludes that the Gates plaintiffs have complied with the FSIA requirements, and have established a priority lien on the Syrian funds in this case.

Citation: Gates v. Syrian Arab Republic, Nos. 13-2280, 14-1452 (7th Cir. June 18, 2014).

TOPICS IN BRIEF

EU Council extends the EU-U.S. Agreement for scientific and technological cooperation. Through a Council Decision, the Council of the European Union has approved a 5-year extension of the Agreement for scientific and technological cooperation between the European Community and the Government of the United States of America. The original 1998 Agreement provides that it may be extended for 5-year periods by mutual written agreement. The EU-U.S. areas of cooperation include the environment, biomedicine, engineering, non-nuclear energy, biotechnology, and transportation. See Article 4 of the 1998 Agreement. Citation: 2014 O.J. of the European Union (L 128) 43, 30 April 2014. The original 1998 Agreement is available through the EU Treaties Office Database at http://ec.europa.eu/world/agreements/downloadFile.do?fullText=yes&treatyTransId=753.