Osseiran v. International Finance Corp.

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 9, 2008 Decided January 13, 2009

No. 07-7122

SALAH N. OSSEIRAN,

APPELLEE

v.

INTERNATIONAL FINANCE CORPORATION,

APPELLANT

Appeal from the United States District Court

for the District of Columbia

(No. 06cv00336)

Francis A. Vasquez Jr., argued the cause for appellant.

With him on the briefs was Frank Panopoulos.

Michael Joseph argued the cause for appellee. With him

on the brief was Alex Blanton. Joseph O. Click entered an

appearance.

Before: RANDOLPH, ROGERS and TATEL, Circuit Judges.

Opinion for the Court filed by Circuit Judge RANDOLPH.

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RANDOLPH, Circuit Judge: The International Finance

Corporation is a global institution with 178 member states,

including the United States. It invests in private enterprises in

developing nations. Its charter states that it “shall seek to

revolve its funds by selling its investments to private investors

whenever it can appropriately do so on satisfactory terms.”

Articles of Agreement of the International Finance Corporation,

art. 6, § 3(vi), Dec. 5, 1955, 7 U.S.T. 2197, T.I.A.S. No. 3620

(“IFC Charter”). Salah N. Osseiran, a Lebanese businessman,

sought to purchase one of International Finance’s investments.

When the deal soured, Osseiran sued International Finance. The

question on appeal is whether the International Finance

Corporation is immune from the suit.

In September 2005, Osseiran approached Jan van Bilsen,

International Finance’s portfolio manager for the Middle East.

Osseiran wanted to buy International Finance’s 11 percent stake

in the Middle East Capital Group, a Guernsey corporation

headquartered in Beirut, Lebanon. At the time, Osseiran was a

minority shareholder in the Capital Group. In an October 3,

2005, email to van Bilsen, Osseiran offered to purchase the

shares and requested confidentiality for his offer. The parties

then began negotiating the terms of the proposed sale, primarily

through email and telephone exchanges. Two months of

bargaining culminated in van Bilsen sending Osseiran a draft

sales agreement on November 26. The November agreement

set forth the purchase price, payment terms, and warranties. It

also stated that the parties intended to be contractually bound

only upon execution of the document; van Bilsen noted that

International Finance reserved the right to modify the terms. On

December 1, Osseiran responded that the agreement was

“generally Ok” and proposed some changes. Salah N. Osseiran

Decl., Feb. 26, 2006, Ex. D. At this point the parties’ accounts

diverge. Despite Osseiran’s entreaties, International Finance

declined to sign the draft agreement. On or before February 16,

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2006, Osseiran learned that International Finance intended to

sell its shares to a higher bidder.

Osseiran’s amended complaint was in three counts.

Count 1 alleged that the November agreement was a binding

contract and that International Finance breached it. Count 2

alleged that International Finance knew Osseiran planned to

acquire a controlling interest in the Middle East Capital Group,

that he bought out other shareholders in reliance on International

Finance’s “promise to sell” him its shares, and that International

Finance is therefore estopped from reneging and selling the

shares to another party. Count 3 alleged breach of

confidentiality on the basis that International Finance agreed to

keep its discussions with Osseiran secret but then divulged them.

International Finance moved to dismiss on the grounds

that it was immune from suit under the International

Organizations Immunities Act, 22 U.S.C. §§ 288–288f, and that

the complaint failed to state a cause of action. The district court

held that International Finance had waived its immunity, but

granted the motion to dismiss the breach of contract count

pursuant to Federal Rule of Civil Procedure 12(b)(6).1 Osseiran

v. Int’l Fin. Corp., 498 F. Supp. 2d 139, 142 (D.D.C. 2007). We

have appellate jurisdiction over International Finance’s

interlocutory appeal from the denial of its immunity claim with

respect to Count 2 (promissory estoppel) and Count 3

1

The statutory basis for the court’s jurisdiction is the

International Finance Corporation Act, 22 U.S.C. § 282f, which

provides that any “action at law or in equity to which the

[International Finance] Corporation shall be a party shall be

deemed to arise under the laws of the United States, and the

district courts of the United States shall have original

jurisdiction of any such action.”

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(confidentiality). See, e.g., Rendall-Speranza v. Nassim, 107

F.3d 913, 916 (D.C. Cir. 1997).

The International Organizations Immunities Act applies

to those international organizations which the President

designates as entitled to the benefits of the Act. Section 2(b)

states that such organizations “shall enjoy the same immunity

from suit and every form of judicial process as is enjoyed by

foreign governments, except to the extent that such

organizations may expressly waive their immunity for the

purpose of any proceedings or by the terms of any contract.” 22

U.S.C. § 288a(b). Among the protected institutions are the

International Monetary Fund, the World Bank, and the World

Trade Organization. 22 U.S.C. § 288 (historical note).

In 1956, President Eisenhower conferred the benefits of

the Act on the International Finance Corporation, subject to any

limitations contained in the corporation’s charter. Exec. Order

No. 10,680, 21 Fed. Reg. 7,647 (Oct. 2, 1956). A section of the

charter entitled “Position of the Corporation with Regard to

Judicial Process” states:

Actions may be brought against the Corporation

only in a court of competent jurisdiction in the

territories of a member in which the Corporation

has an office, has appointed an agent for the

purpose of accepting service or notice of process,

or has issued or guaranteed securities. No actions

shall, however, be brought by members or

persons acting for or deriving claims from

members. The property and assets of the

Corporation shall, wheresoever located and by

whomsoever held, be immune from all forms of

seizure, attachment or execution before the

delivery of final judgment against the

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Corporation.

IFC Charter art. 6, § 3(vi). The provision carries “full force and

effect in the United States” by virtue of the International Finance

Corporation Act, 22 U.S.C. § 282g, which executes United

States membership in the corporation.

The waiver language just quoted is identical to that

appearing in the charter of the International Finance

Corporation’s parent entity, the World Bank, and is common in

the charters of other international financial institutions. See

Restatement (Third) of Foreign Relations Law § 467 reporter’s

note 3 (1987). We first considered a charter with this language

in Lutcher S.A. Celulose e Papel v. Inter-Am. Dev. Bank, 382

F.2d 454, 457 (D.C. Cir. 1967), which held that, through this

language, the defendant bank waived immunity from a debtors’

suit to enforce a loan agreement.

There followed Mendaro v. World Bank, 717 F.2d 610

(D.C. Cir. 1983), and Atkinson v. Inter-Am. Dev. Bank, 156 F.3d

1335 (D.C. Cir. 1998). The question in Mendaro was whether

the World Bank had immunity from a former employee’s sexual

harassment and discrimination suit. Although the waiver

provision contained no exceptions for different types of suit, the

court read a qualifier into it. The court reasoned that an

organization would not give up immunity unless it would gain

a “corresponding benefit which would further the organization’s

goals.” Mendaro, 717 F.2d at 617. A waiver of immunity “with

respect to the World Bank’s commercial transactions with the

outside world” made sense, the court thought, because otherwise

private parties would be hesitant to transact business with the

Bank. Id. at 618. The court thought language in the charter

indicated that the waiver of immunity, like immunity itself, was

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meant to aid the Bank in accomplishing its mission.2 Id. The

court went on to hold that the World Bank had not waived its

immunity from its employee’s suit because the potential benefit

of attracting qualified staff was offset by the Bank’s employee

grievance process and outweighed by the disruption to its labor

practices. Id. at 619 n.56; see also Atkinson, 156 F.3d at 1338.

In Atkinson, the court considered another claim related

to an international organization’s internal affairs. The court held

that the Inter-American Development Bank had not waived its

immunity from an action to garnish one of its employee’s wages

in order to satisfy a divorce judgment. Atkinson, 156 F.3d at

1338–39. Waiver of immunity from such actions would yield

the Bank no conceivable benefit. Id. at 1338. In so holding the

court stated that if waiver of immunity from a “particular type

of suit would further the [organization’s] objectives,” then the

court will find a waiver. Id. (emphasis in original).

Both Mendaro and Atkinson upheld an international

organization’s claim that it had not waived immunity. Both

opinions were consistent with the organization’s apparent view

that invoking immunity was in its best interest. But neither case

considered the organization’s view conclusive. The court held

in both cases that it was for the federal judiciary to decide

whether an international organization’s invocation of immunity

for certain actions would interfere with its mission. One might

2

International Finance’s charter, like the others

considered in this line of cases, prefaces the article on “Status,

Immunities and Privileges” with this statement: “To enable the

Corporation to fulfill the functions with which it is entrusted, the

status, immunities and privileges set forth in this Article shall be

accorded to the Corporation in the territories of each member.”

IFC Charter art. 6, § 1.

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suppose that an organization could mount a case that its

judgment about the need for immunity in certain classes of cases

was deserving of judicial deference. But the International

Finance Corporation has not argued the case along these lines.

Instead, International Finance contends that waiver of

immunity for promissory estoppel and breach of confidentiality

suits would not advance its interests because Osseiran has not

established the essential elements of his claims or, in the

alternative, because his claims are not cognizable under

governing law. In other words, Osseiran will lose on the merits.

The trouble is that in this area, as in others, immunity does not

turn on the validity of the underlying suit. See Kirkham v.

Société Air France, 429 F.3d 288, 293 (D.C. Cir. 2005);

Lutcher, 382 F.2d at 460 (finding that the defendant

international organization waived immunity to the plaintiff’s

suit, then affirming dismissal for failure to state a claim). Both

Mendaro and Atkinson ask whether a waiver of immunity to

allow this type of suit, by this type of plaintiff, would benefit the

organization over the long term. Atkinson, 156 F.3d at 1338;

Mendaro, 717 F.2d at 618. Since the validity of Osseiran’s

claims is not a prerequisite to jurisdiction, we need not

determine whether the law of Guernsey, the site of Middle East

Capital Group’s incorporation, controls, as International Finance

claims.

Both Mendaro and Atkinson stated that immunity from

suits based on “commercial transactions with the outside world”

can hinder an organization’s ability to operate in the

marketplace. Mendaro, 717 F.2d at 618; Atkinson, 156 F.3d at

1338. The thought was that parties may hesitate to do business

with an entity insulated from judicial process; promises founded

on good faith alone are worth less than obligations enforceable

in court. See Atkinson, 156 F.3d at 1338; see also Lutcher, 382

F.2d at 460. International Finance is in the business of selling

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its investments to private parties. IFC Charter art. 3, § 3(vi).

Sales agreements result from negotiations. Osseiran’s

promissory estoppel and confidentiality claims concern

International Finance’s alleged representations during such

negotiations. To follow the Mendaro-Atkinson theory, waiver

of immunity for an action by such a plaintiff, asserting claims

arising out of that category of activity, might help attract

prospective investors by reinforcing expectations of fair play.

Such a “corresponding benefit” would promote International

Finance’s chartered objective of revolving its investments.

As against this potential benefit, International Finance

identifies no unique countervailing costs like those the court

identified in Mendaro. See 717 F.2d at 618 (noting waiver

would “lay the Bank open to disruptive interference with its

employment policies”).3 It follows that the broad language of

the waiver in International Finance’s charter is controlling and

that the corporation does not have immunity from Osseiran’s

claims in counts 2 and 3 of his amended complaint.

Affirmed.

3

The Corporation’s internal policy of requiring formal

execution before assuming binding obligations may go to the

reasonableness of Osseiran’s reliance. But it does not militate

against finding waiver.