- A “foreign state” includes not just the country itself but also:
- Political subdivisions – e.g. The City of Amsterdam is a “political subdivision” of the Netherlands. Malewicz v. City of Amsterdam, 362 F. Supp. 2d 298 (D.D.C.2005).
- “Agencies or Instrumentalities”: This is a key category that should not be overlooked. The definition of “agency or instrumentality” is fairly broad and sweeps in many foreign commercial enterprises.
- An “agency or instrumentality” is defined as “any entity” that:
- is a separate legal person “corporate or otherwise;” and
- is an “organ” of the state or of a “political subdivision” of the state OR is majority owned by the state or by a political subdivision of the state; and
- is not a citizen of the U.S. and is not “created under the laws” of still a third country – i.e. is created under the laws of the country that owns a majority interest or of which it is an “organ.”
- Practice Tip: By negative implication, an entity is not entitled to claim sovereign immunity where the government is only a minority owner or where the entity is created under another country’s laws – i.e. no sovereign immunity for a Dominican corporation majority-owned by the Dutch government.
- The “majority owned” prong requires proof of direct ownership by the state or by a political subdivision of a state. Dole Food, 538 U.S. at 474.
- Disputes therefore may arise as to (a) who actually owns the enterprise and (b) whether the owner is itself merely an organ or instrumentality, which is not enough to make the owned-entity an “agency or instrumentality” for purposes of the FSIA.
- E.g., Filler v. Hanvit Bank, 378 F.3d 213 (2d Cir. 2004) (organ’s ownership of two banks did not, in turn, make the banks organs or instrumentalities of foreign state).
- Practice Tip: There are certain important differences in application of the FSIA to “states” v. “agencies and instrumentalities” with respect to service of process, venue, and limitations on damages. See discussions below.
- Whether an entity is a “political subdivision” of the state or, instead, an “organ,” “agency,” or “instrumentality” is an area ripe for factual and legal disputes. E.g. In re Terrorist Attacks on September 11, 2001, 349 F.Supp.2d 765 (S.D.N.Y. 2005) (disputed issues of fact concerning whether owner was political subdivision of Saudi Arabia or merely an organ of the state).
- The legal standards are unsettled. See, e.g., In re Terrorist Attacks on September 11, 2001, 349 F. Supp.2d at 790-91 (comparing “legal characteristics” and “core functions” tests); see also Murphy v. Korea Asset Management Corp., 421 F. Supp. 2d 627, 641 (S.D.N.Y. 2005) (test for “organ” unsettled).
- Issues to consider include: who created and controls the entity, does it contract or own property in its own name, are its functions principally commercial or governmental in nature, does the entity perform a “core function” of a sovereign (e.g. is it the army or taxing authority?)
- Of these, the commercial v. governmental nature of the work may be most important. See, e.g., Supra Medical Corp. v. McGonigle, 955 F.Supp. 374 (E.D. Pa. 1997) (medical and dental schools established by British government served commercial purpose and, therefore, not subject to FSIA).
Ch. 9 Suing Non-U.S. Governmental Entities in U.S. Courts
JENNIFER R. SCULLION, JASON GERSTEIN*, JESSICA KASTNER*
VI. What is a “Foreign State”?
* Not Yet Admitted