Petition for Writ of Certiorari — Slade v. United States of Mexico

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86-7 a r pi ‘ >

NO.

; a

IN THE SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1986

EDWIN SLADE,

vs.

THE UNITED STATES OF MEXICO,

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Edwin Slade, Pro Se

4326 S. Caliente St.

Las Vegas, Nevada 89119

Telephone: (702) 734-6681

eh ent Re ent

OF ae me!

QUESTION PRESENTED FOR REVIEW

1. Is Mexico wholly ‘immune’ from

suit, on petitioner”’s claim?

PARTIES TO PROCEEDINGS

No other petitioner is party to this

proceeding.

Pe a pa

TABLE OF CONTENTS

CHAPTER PAGE

Question Presented........e2+-- i

Petition for Writ....ceeeeees 1

Table of Authorities.......+-. 2

Opinions Of Courts Below...... 3

Jurisdiction of Court........- 3

Constitutional Provisions..... 3

Statement Of CaSe.....eeeeeeee 4

Reasons For Allowing Writ..... 5

Conclusion. .ccccccccccesessess ©

Appendix A..wcccccccrcccccceeee LO

Appendix B....ccccccccceeccess Ll

Appendix C.ccccccccccccccccces 48

Certificate of Service........ 49

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1986

EDWIN SLADE,

PETITIONER,

UNITED STATES OF MEXICO,

RESPONDENT.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA

The petitioner, Edwin Slade,

unschooled in law, respectfully prays

that a writ of certiorari issue to review

the judgment of the United States Court

of Appeals for the District of Columbia

filed on May 27, 1986.

TABLE OF AUTHORITIES

Case

Chisholm v. Georgia .......

S. 0.8. (2 Dallas) 419

Lamont v. Travelers Ins. Co.

N.Y.L.J., Jan 31, 1933,

P- 611 col. 4 (1933), aff°d,

254 App. Div. 511 (lst Dept

1933),reversed and remanded,

281 N.Y. 362, 24 N.E. 2a 81

(1939); on remand 267 App.

Div. 984 (Ist. Dep*t),

Leave to appeal denied

268 App. Div. 733 (1944)

Referee Report, November 15,

1941, page 58.

Statutes

28 U.S.C. Sec. BOO ci wcack.

| ees

a ree

aia eine

U.S. Constitution

MURSGA@ Esegcmees 9,..:.>.°..-

Won w

OPINION BELOW

The U.S. Court of Appeals filed its

judgment on May 27, 1986, (Appendix A)

affirming the Memorandum Opinion of the

U.S. District Court for the District of

Columbia (CVA 84-1343) dated July 8, 1985

(Appendix B). a motion for

reconsideration was denied on July 24,

1986 (Appendix C).

JURISDICTION

Jurisdiction of this court is sought

by petitioner after rendition of judgment

in a civil case by the Court of Appeals

for the District of Columbia.

The date of the judgement sought to

be reviewed is May 27, 1986 known as case

No. 85-5986.

The date of the order denying a

motion for reconsideration is July 24,

1986.

Jurisdiction of this court is

codified under Title 28, United States

Code, Section 1254(1).

CONSTITUTIONAL PROVISIONS

Article III, Section 2 of the U.S.

Constitution provides that:

The judicial power shall extend to

all cases...between a state, or the

citizens thereof, and foreign

states...

-3-

STATEMENT OF THE CASE

This is a cause of action for’ money owed

to an American citizen by ae foreign

sovereign. Petitioner holds bearer

receipts for this debt, denominated in

U.S. dollars and issued and payable in

New York by Mexican Presidential decree

and ratified by the Congress of the

United States of Mexico in 1922. The

debt was due and payable in 1968, and was

guaranteed by the railroad revenue, the

Oil export revenue, and the full faith

and credit of Mexico. The debt went into

default in 1924. However, the New York

Supreme Court ruled that this default did

not relieve Mexico of its contractual

obligation to make final repayment in

1968 Lamont vs. Travelers Ins. Co.

Petitioner seeks prospective application

of the Foreign Sovereign Immunities Act

to cure this debt with monies earned by

Mexico in the United States of America

after 1976, and pledged by Mexico to

service this debt.

The basis for federal jurisdiction in the

court of first instance was 28 U.S.C.

Sec. 1331,1332,1361,1651l.

REASONS FOR ALLOWING WRIT

The U.S. Court of Appeals for _ the

District of Columbia Circuit has decided

an important federal question on foreign

sovereign immunity which is directly in

conflict with applicable decisions of

this court.

The courts below have confused the right

of sovereignty of a foreign sovereign in

his own domain, with the status of a

foreign sovereign within the United

States, as in this case.

It i¢ oan indisputable fact the U.S.

Constitution grants this court

jurisdiction over a sovereign, and this

fact has never been changed by law. In

1792 the U.S. Supreme Court, in the case

of Chisholm vy. Georgia, 2 U.S. (2

Dallas) 419, the Attorney-General of the

United States Randolph affirmed, on p.

421,

What if a state should impair her

Own contracts? These evils, and

others like them, cannot be

corrected without a suit against the

state.

Justice Blair writes, on p. 451,

To the constitution of the United

States, the term sovereign is

totally unknown.

Justice Wilson, states on p. 456,

A state, like a merchant, makes a

contract. A dishonest state, like a

dishonest merchant, wilfully refuses

to discharge it: the latter is

amenable to a court of justice; upon

general principles of right, shall

the former when summoned to answer

to the fair demands of its

creditors, be permitted,

Proteus-like, to assume a new

appearance, and to insult him and

justice, by declaring I am a

sovereign state? Surely not.

Justice Cushing noted on p. 468:

The rights of individuals and the

justice due them are as dear and

precious as those of states.

Indeed, the latter are founded on

the former: and the great end object

of them must be to secure and

support the rights of individuals,

or else, vain is government.

Chief Justice Jay, on p. 473 summarizes

with these words:

It is plain, then that a state may

be sued, and hence it plainly

follows, that suability and state

sovereignty are not incompatible.

Thus, at the foundations of our nation’s

history, the right of petitioner to sue a

sovereign entity was firmly held by the

Supreme Court, and never changed.

Denial of petitioner°s right to sue a

sovereign is unconstitutional ae 6

applies to petitioner.

Since all federal judges have sworn to

uphold the Constitution of the United

States, it is reversible error to hold

that the "Doctrine of Sovereign Immunity"

supersedes the Constitution of the United

States.

Further, it is improper that a_ letter

from a federal employee to his superior

in the executive branch (the Tate Letter)

could in any way vitiate the rights

guaranteed to American citizens’ by the

Constitution. This was anticipated by

the founding fathers when they espoused

the principle of separation of powers.

The executive branch cannot unilaterally

change the plain meaning of the

Constitution; that task is vested in the

legislative branch of the government.

Any opinion to the contrary is reversible

error. The appellate court below relied

on these faulty premises which are in

direct opposition to previous opinions

rendered by this court.

CONCLUSION

For all the foregoing reasons, petitioner

aGa

Edwin Slade respectfully prays that a

writ of certiorari issue to review the

judgment of the United States Court of

Appeals for the District of Columbia in

the above captioned case.

EDWIN SLADE, PRO SE

APPENDIX A

NOT TO BE PUBLISHED SEE LOCAL RULE 8

UNITED STATES COURT OF APPEALS

No. 85-5986 September Term, 1985

Edwin Slade,

Appellant,

. Vv.

United States of Mexico

Civil Action No. 84-01343

FILED May 27 1986

George A. Fisher Clerk

APPEAL FROM THE UNITED STATES

DISTRICT COURT FOR THE DISTRICT OF

COLUMBIA Before: ROBINSON, Chief Judge,

GINSBURG, Circuit Judge and Re*, Chief

Judge of the United States Court of

International Trade

JUDGMENT

This appeal was considered on the

record from the United States District

Court for the District of Columbia and

was briefed by the parties. Thye court

has reviewed the matter in controversy

and concludes that the

plaintiff-appellant”s claim does not

warrant a further opinion. See D.C.

Cie. R. 11(d), 13(c). For the reasons

cogently stated by the District Court in

its July 8, 1985, Memorandum Opinion, it

ORDERED and ADJUDGED that the judgement

dismissing this case because (1) the

Foreign Sovereign Immunities Act does not

apply retroactively to cover the

transactions at issue, and (2) Mexico is

therefore wholly immune from suit on

atte

plaintiff-appellant’s claim, is affirmed.

Per Curiam

For the Court

(SIGNATURE)

George A. Fisher Clerk

APPENDIX B

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

EDWIN SLADE,

Plaintiff,

THE UNITED STATES OF MEXICO,

Defendant.

Civil Action No. 84-1343

FILED JUL 8 - 1985

James F. Davey, Clerk

MEMORANDUM ORDER

Plaintiff, pro se, filed this action

against the United States of Mexico

to recover $472,123, the purported

face value of certain "Receipts for

Interest in Arrears" which he

alleges were issued by the Mexican

government pursuant to

dite

certain agreements made in 1922.1/

This action was originally filed in

the United States District Court for

the District of Nevada.2/ On October

28, 1981, that court dismissed

plaintiff°“s complaint for lack of

personal jurisdiction over the

defendant. Plaintiff appealed and

the Ninth Circuit, in an unpublished

opinion, affirmed the court’s

finding that it lacked personal

jurisdiction, but it nevertheless

vacated the lower court’s order of

dismissal with instructions to

transfer the matter pursuant to

1l/ Plaintiff himself purchased these

receipts in 1972.

2/ Edwin Slade v. United States of

Mexico, CIV-LV-80-44, HEC, filed on

February 13, 1980.

atBu

28 U.S.C. Sec. 1406(a).3/ In accordance

with plaintiff“s request, the District

Court in Nevada transferred the action to

this Court on April 30, 1984. Currently

pending are the parties” crossmotions for

summary judgement.4/ °

In order to understand better the

jurisdictional issues raised by Mexico,

the background of the agreements under

which plaintiff*s receipts were issued

and the amendments to those agreements

will be summarized.

{

3/ The Ninth Circuit stated that "if such

Jurisdiction exists at all, it would seem

to be only in New York, or less probably,

in the District of Columbia pursuant to

28 U.S.C. Sec. 1391(f) (1)-(4)." Opinion

at 3.

4/ The motion filed by plaintiff merely

States that he is moving for summary

judgment "based on the record now before

the Court."

- &

From 1886 to 1910, during the so-called

"Diaz regime," Mexico was engaged in

extensive construction projects. In

order to finance such projects, the

government of Mexico as well as certain

municipalities and privately-owned

railroads issued bonds and various other

debt instruments totalling over $500

million. These bonds were sold

world-wide by banking houses in the

United States and Europe. The government

of Mexico continued to make payments on

these debts until 1914, when civil unrest

broke out in that country.

After the Mexican government ceased

making payments, a number of banking

houses, many of which had sold bonds to

the public, joined together and formed a

committee -- i.e., the International

Committee of Bankers (the Committee) --

to negotiate with the Mexican government

for the resumption of payment

om 3a

on the bonds.5/ After several years of

negotiation, an agreement was finally

reached between the Finance Minister of

Mexico and the Committee.6/ This

agreement, the "Plan and Agreement of

June 16, 1922," was intended to restore

certain specified obligations, both

private and public, and to provide for

the discharge of such obligations on a

limited and deferred basis by the Mexican

government in accordance with its ability

to pay.

5/ Although the Committee was formed

for the purpose of protecting the

interests of the bondholders, neither the

bondholders nor the government of Mexico

authorized the formation of the

Committee. Rather, it was a

self-constituted and self-appointed

entity.

6/ This agreement was’ subsequently

ratified by the President and Congress of

Mexico.

oi6=

Among

that,

Lé

other things, the Plan

ARREARS OF

INTEREST

-1€6A~

provided

The payment in cash of all interest

due and payable on or before January

2, 1923, on both the government and

the railway obligations, is to be

waived by the bondholders.

The payment of interest upon all

arrears of interest due and payable on

or before January 2, 1923, on both the

government and railway cbligations is

to be waived by the bondholders.

Notwithstanding these provisions, the

Plan provided that the government of

Mexico would set aside during a 40 year

period -- i.e., from 1928 to 1968 -- sums

sufficient to retire the unpaid interest.

Holders of coupons for such unpaid

interest were required to deposit their

coupons with a trustee designated by the

Committee who, in exchange for’ the

coupons, would issue receipts for’ the

face amount of the coupons -- the same

"Receipts for Interest in Arrears" upon

which plaintiff sues. In accordance with

the plan, the receipts were to be issued

not by the government of Mexico, but by

om oe

the Committee. The plan provided,

however, that if the Plan was not, for

any reason, fully carried out during the

next 5 years, the bondholders’ would

"resume all their contractual rights."

Upon adoption of this plan, the Committee

drafted a second agreement -- the Deposit

Agreement of July Ey 39a2s This

agreement set forth the

rights of the holders of coupons for

interest in arrears who deposited their

coupons with the Committee. By its term,

the Deposit Agreement was “between such

holders of the bonds. . . and of the

coupons Or other evidences of

indebtedness for or rights to unpaid

interest . . . as shall become parties

to this agreement in the manner herein

after provided . . . and fetecnattondd

Committee of Bankers of Mexico. .. "

=18-

The deposit agreement also stated that,

in the event that the Mexican government

defaulted, the holders could recover

their deposited coupons or the assignment

of rights to interest represented by the

receipts from Guaranty Trust Company of

New York. Approximately 98 percent of

all the creditors holding bonds’ and

interest coupons covered by the Plan

deposited them with the Committee.

Because of continued civil unrest and

economic troubles in Mexico, the Mexican

government was unable to carry out the

1922 Plan as it had agreed. The —

Committee and the Finance Minister for

Mexico again entered into negotiations

and on October 23, 1925, agreed toa

supplemental or modified plan

~1 Qe

-- the "1925 Modification."7/ One of the

purposes of the 1925 Modification was to

limit the Government’s liability,

obliging it to repay only those amounts

it could realistically afford. The 1925

Modification differed from the 1922

Agreement in that it distinguished the

direct debts of the central government

and political subdivisions, on the one

hand, from the debts of the railways on

the other. With respect to interest on

arrears, the 1925 Modification provided

that the government would discharge the

direct debt and the railways would

discharge their own debt.8/

7/ This agreement, too, was ratified by

the President and Congress of Mexico.

8/ The 1925 Modification did not alter

the right of the receipt holders’ to

recover the underlying coupons or other

instruments in the event that the Mexican

government or the railways defaulted.

-20-.

Between 1923 and 1928, the Mexican

government and the railways paid the

Committee in excess of $45 million to

purchase and redeem the outstanding debts

covered by the 1922 Plan and 1925

Modification. In 1928, however, the

Mexican government again ceased making

payments because of the social and

economic conditions in the country.

Although the Committee tried to work out

another agreement with the Mexican

government, it was unable to do so. In

1932, the Committee abandoned

negotiations with the intention of

distributing the remaining funds it held.

Ten years later, the Mexican government

entered into a third agreement with the

Committee -- the 1942 Agreement. Under

this Agreement, the holders of Receipts

for Interest in Arrears could receive

payments, which had ceased in 1928,

@2le

mole 2 tn, |

directly from the government of Mexico,

but such payments would be at less than

; face value. Before such holders were

eligible to receive any payments,

however, they had _ to assign their

_ proportionate interest in the remaining

funds held by the Committee to the

Mexican government. In 1946, the Mexican

government and the Committee entered into

a similar agreement with respect to the

repayment of railway obligations.

An additional prerequisite to receive

payments under either the 1942 or 1946

agreements, was registration of the

instruments (including the Receipts for

Interest in Arrears), pursuant to the

August 4, 1942 decree of the Mexican

government. This decree required all

holders of obligations of the Mexican

government and the National railways

which were issued under the Deposit

Agreement of 1922 to register their

securities with the Mexican government so

that the government could determine

whether the owners were enemy or

non-enemy aliens. The right to register

under this decree terminated on December

29, 1951 pursuant to the Law on the

Destination of Enemy Bonds ("the Enemy

Bonds Act").

All holders of Receipts for Interest in

Arrears who presented their receipts for

registration pursuant to the August 4,

1942 decree had their receipts retired

pursuant to either the 1942 or 1946

Agreement with the Committee. Thus, any

Receipts for Interest in Arrears

presently in existence, including those

held by plaintiff, were not registered as

required under the 1942 decree.

Moreover, pursuant to the Enemy Bonds

Act, all receipts which were not so

ee Oe

i ee eee

registered passed to the ownership of the

Mexican government, with no rights

retained by the holders.

By way of further background, the Court

notes that this is not the first action

to be filed in the United States relating

to the Receipts for Interest in Arrears

or other instruments issued under the

1922 Agreements. In 1932, a number of

bondholders who had deposited their

receipts pursuant to the 1922 Deposit

Agreement filed a series of lawsuits in

New York against the Committee to obtain

priority in the distribution of

approximately $7 million held by _ the

Committee -- the Committee had

distributed $33 of the $45 million paid

by the government of Mexico between 1923

and 1928 and retained another $5 million

-24-

for its own expenses. The Mexican

government, which also sought to recover

this $7 million, argued, by special

appearance, that it was. a necessary party

to the litigation, and that the

proceedings could not go forward since

the New York courts lacked jurisdiction

over it.

Although Mexico’s argument was initially

successful, the New York courts

ultimately affirmed the findings of the

court-appointed referee that the

Committee was not an agent of Mexico, and

that the government of Mexico was not a

party to the Deposit Agreement of 1922

under which the receipts were issued. On

that basis, the litigation was allowed to

go forward without Mexico, and_ the

Committee was ultimately ordered to make

an accounting of the remaining assets it

held and to distribute such assets in an

«28.

ee ee a a tee ene

appropriate manner.

A second lawsuit was filed against the

Committee in 1952, again in a New York

State court, to determine the

distributive rights of certain claimants

to the remaining funds held by the

Committee. Among the parties to this

action were Guaranty Trust Company of New

York and Bankers Trust Company -- the

stakeholders of the past due interest

coupons which were turned over to the

Committee in exchange for Receipts for

Interest in Arrears. As previously

noted, the 1922 Agreements provided that

the holders of the receipts could recover

the underlying coupons if the Mexican

government or the railways failed to

provide funds sufficient to purchase or

redeem the receipts. The court, however,

found that these coupons had no

substantial monetary value apart from the

@26<

offers to purchase made by the Mexican

government in 1942 and 1946. Guaranty

Trust Company was directed to publish

notices stating that depositors could

withdraw their coupons and rights’ to

interest from the two. banks within the

next six months. Following this six

months period, the court authorized the

banks to destroy the remaining coupons

and thereby discharged them from any

obligations thereunder. The court also

discharged the Committee and ordered that

it be dissolved upon payment of its

remaining funds to Guaranty Trust Company

of New York.

IIt

Based on the foregoing facts,9/ it is

clear that, as a matter of substantive

contract law, plaintiff cannot recover

money due on receipts for interest in

afPa

eS ee ee ET NT orn eee

Ret ins ais

tens

BS Sos Te

arrears issued under’ the 1922 Deposit

Agreement. However, Mexico has not moved

to dismiss or for summary judgement on

this ground. Rather, it argues that this

Court lacks jurisdiction over it under

the doctrine of sovereign immunity.

9/ The background information recited

above comes’ from defendant’s' brief and

the affidavit of Miguel

Valdes-Villarreal, exhibit A to

defendant’s motion to dismiss or for

summary judgment. Plaintiff has not

controverted any of these statements of

fact.

«28-

The foreign Sovereign Immunities Act

(FSIA) provides’ the sole basis’ for

subject matter jurisdiction over suits

against foreign states. 28 U.S.C. Sec.

1330, 1604. Verlinden B. V.v. Central

Bank of Nigeria, 461 U.S. 480 (1983);

Asociacion de Reclamantes v. United

Mexican States, 735 F.2d 1517 (D.C. Cir.

1984); McKeel v. Islamic Republic of

Iran, 722 F.2d 582 (9th Cir. 1983); Goar

v. Compania Peruana de Vapores, 688 F.2d

Si? (tn. €ae. 1982); Rex v. Cia.

Compania Peruana de Vapores, 660 F.2d

875, 880-81 (4th Cir. 1981); Ruggiero v.

Compania Peruana de Vapores, 639 F.2d

872, 875-76 (2d Cir. 1981). The FSIA,

which was enacted in 1976, codified the

so-called "restrictive" principle of

«Zi Ge

foreign sovereign immunity.10/ Under this

theory, a foreign state is immune from

suits for its sovereign or public acts

(actiones jure imperii), but it is not

immune for its private or commercial acts

(actiones jure gestionis).

The FSIA sets forth the general rule that

"a foreign state shall be immune from the

jurisdiction of the courts of

10/ The executive branch formally

adopted the principle of restrictive

sovereign immunity in 1952. 26 Dept. of

State Bull. 984-5 (1952) (the "Tate

Letter"), reprinted in Alfred Dunhill of

London Inc. v. Republic of Cuba, 425

i 682, 311-18 (197 (1976). In the

so-called "Tate Letter," the State

Department publicly took the _ position

that henceforth it would recommend to the

United States Courts that as a matter of

policy, a foreign state should be granted

immunity only for its sovereign or public

acts and not for its private acts.

«40x

the United States," 28 U.S.C. Sec.

1604; and then lists several specific

exceptions to that rule. The exception

upon which plaintiff relies is that for

commercial activity, 11/ the largest and

most important exception to immunity.

Asociacion de Reclamantes, supra, 735

F.24 at 1520. The Act defines the term

“commercial activity to mean “either a

1l/ 28 U.S.C. Sec. 1605(a)(2) provides

that:

A foreign state shall not be immune

from the jurisdiction of courts of the

United States or the States in any case -

in which the action is based upon a

commercial activity carried on in the

United States by the foreign state; or

upon an act performed in the United

States in connection with a commercial

activity of the foreign state elsewhere;

Or upon an act outside the territory of

the United States in connection with a

commercial activity of the foreign state

elsewhere and that act causes a direct

effect in the United States.

a3ie

a ee <= 5) . ’ es a I a a ——p ee

Okage Se ce Mees il ae Pigs tiie ee Se ee Pee R ee ee ee

ait. dit a

Poe ee ke woe

ee eS eT ee . e

Frac eee ata ae

regular course of commercial conduct or a

particular commercial transaction or

act," 28 U.S.C. Sec. 1603(d).

The Act further provides that "(t)he

commercial character of an activity. .

be determined by reference to. the

nature of the course of conduct or

particular transaction or act, rather

than by reference to its purpose."

Mexico concedes that, based on the

legislative history of the FSIA, Congress

intended to include government borrowing

or the issuance of public debt within the

commercial activity exception to

-32-

sovereign immunity.12/ Nevertheless,

12/ See H. R. Rep. No. 1487, 94th

Cong., 2d Sess., at 10, 16, reprinted in

1976 U.S. Code Cong. Admin. News,

6604. See also Delaume, Public Debt and

Sovereign Immunity: The Sovereign

Immunities Act of 1976, 71 Am. J. Int°l

L. 399, 405 (July 1977); Von Mehren, The

Foreign Sovereign Immunities Act of 1976,

17 Colum. J. Trans. L. 33, 49 n.69

(1978).

The FSIA, as first proposed,

contained a section (proposed section

1606) which provided that all debts of

sovereigns would remain beyond the

jurisdiction of the United States courts.

See H. R. 11315, 93d Cong., lst Sess.

(1973); H. R. 11315, 94th Cong., lst

Sess. (1975); Hearings on H. R. 3493

before the Subcommittee on Claims and

Government Relations of the House

Committee on the Judiciary, 93d Cong.,

lst Sess. (1973). The Committee

ultimately deleted this section as

unnecessary because it found that United

States lenders "invariably include an

express waiver of immunity in the debt

instrument." H. Rep. No. 94-1487,

Supra, at 10; S. Rep. No. 1310, 94th

Cong., 2d Sess. 7 (1976); U.S. Code

Cong. Admin. News 6609 (1976).

The United States District Court in

Asociacion de Reclamantes, supra,

however, made the following observations:

Proposed section 1606 was ambiguous

in that it applied to all debts, not just

n%3e

ee Le eee 2

Mexico argues that the FSIA does not

| confer subject matter jurisdiction

general governmental obligations. The

State Depatrtment considered amending it

but then decided that no provision was

better than a more precise provision

which identified -only non-commercial

debts for general government obligations

as eligible for per se sovereign immunity

The 1976 House Report specifically

discusses the deletion of proposed

section 1606 to which the above quoted

passage referred. The Committee appears

to have ignored the fact that a public

debt could exist in other than the

commercial lending context. It merely

suggests that only public debts "which

are of a commercial nature and should be

treated like other commercial

transactions" are excepted from sovereign

immunity . . . The non-commercial debt

obligation is thus arguably immune by

inplication and may place the "internal

obligations" in dispute in this case

outside the scope of Section 1606

exceptions.

This in accordance with the

historical meaning of a “public debt"

which was considered a per se public act

and a sufficient basis for sovereign

immunity.

$61 Ff. Supp. 1190, 1195-96 n.10

(citations omitted).

wths

over this case because (1) Congress did

not intend the Act to be applied

retroactively and (2) even if the FSIA

were applicable, the receipts are not

analogous to public debt and the

activities of the Mexican government with

respect to the 1922 agreement, under

which the receipts were issued, do not

constitute “commercial activity” within

the meaning of section 1605(a)(2). For

the reasons stated below, the Court finds

that the FSIA cannot be applied

retroactively to this case where all the

operative events occurred before 1952.

Accordingly, plaintiff“s action will be

dismissed for want of subject matter

-35-

_ —— _ Se» iF .

a |

jurisdiction.13/

The question of the retroactive

application of the FSIA to _ pre-1952

transactions was recently decided by the

United States District Court for the

Northern District of Alabama in Jackson

V. People“s Republic of China, 596 F.

Supp. 386 (N.D. Ala. 1984), 14/ a case

Similar in several respects to the case

at bar. In Jackson, a group of United

States holders of Hukang Railroad bonds

issued in 1911 by

13/ Because the court finds that the

question of the FSIA“’S retroactivity is

dispositive, it need not address the

other issues raised by Mexico.

14/ In Jackson, the United States

intervened on behalf of China by filing a

"Statement of Interest" in which it

argued against retroactive application of

the FSIA to the conduct of foreign states

predating 1952.

-36-

The Imperial Chinese government sued the

People’s Republic of China to recover the

unpaid principal and interest on these

bonds. The court after setting aside the

default judgment it had previously

entered against China, dismissed the

action for want of subject matter

jurisdiction based on its conclusion that

neither the language of the FSIA nor

its legislativ2 history evince that

it be retroactively applied; and to

apply the FSIA in this action would

Clearly alter the antecedent rights

of China.

596 F. Supp. at 389. The Court finds

the reasoning of the Jackson court

persuasive and concurs in its holding.

It is axiomatic that retroactive

application of statutes is disfavored.

Greene v. United St.tes, 376 U.S. 149,

160 (1964); In re District of Columbia

Workmen’s Compensation Act, 554 F.2d

1075, 1079 (D.C. Cir. 1976). The

=37-

Supreme Court in Union Pac. R. Co. v.

Laramie Stock Yards Co., 231 U.S. 190

(1913), explained this basic canon of

statutory construction as follows:

The first rule of construction is

that legislation must be considered

as addressed to the future, and not

to the past. The rule is one of

obvious justice and prevents’ the

assigning of a quality or effect to

acts or conduct which they did not

have or did not contemplate when

they were performed. The rule has

been expressed in varying degrees of

strength, but always of one import,

that a retrospective operation will

not be given to a statute which

interferes with antecedent rights .

° unless such be "the

unequivocal and inflexible import of

the terms, and the manifest

intention of the legislation."

(quoting United States v. Heth, 3

Cranch 399, 413.

231 U.S. at 199.

From 1922 when the Receipts of Interest

of Arrears were issued until 1951 when

the deadline for registration under the

Enemy Bonds Act

-38-

occurred, 15/ _—s the United States

recognized and adhered to the theory of

absolute sovereign immunity. Thus, an

action, such as this, against a foreign

state for the collection of a public debt

did not exist during the times relevant

to this controversy. In 1952, The

Executive Branch formally adopted the

restrictive theory of immunity, but it

was applied only gradually by the courts

in the following

15/ Although the original plan and

Agreement of 1922 provided for payments

by Mexico until 1968, all the operative

events precluding such payments occurred

before 1952: the original bonds were

issued in the late 1800°s and early

1900°s, the interest payments’ were

suspended in 1914, the settlements of

receipts through a_ series of agreements

took place in the 1920’s and 1940’s, and

the Enemy Bonds Act’s final registration

deadline was in 195l.

=39-

years.16/ Thus, in order to appply the

restrictive theory of sovereign immunity

as codified in the FSIA to this case, the

court would have to find that

retroactivity was the “unequivocal and

inflexible import of the terms, and the

manifest intention of the legislation.”

16/ Mexico contends that after the United

States endorsed the restrictive theory of

sovereign immunity, certain fiscal

matters, including the issuance of public

debt, continued to be considered

governmental in nature and therefore

immune. See National City Bank v.

Comisara General Ce Abastecimuntos y

Transportes, 336 F.2d 354 (2d Cir.

1964). Thus, according to Mexico, it was

not until 1976 when the FSIA was enacted

that the transaction at issue could be

regarded as private commercial activity.

-4o-

Union Pac. R. Co. Vv. Laramie Stock

Yards Co., supra, 231 U.S. at 199.

This, the Court cannot do.

The statutory language and legislative

history of the FPSIA provide no support

for the retroactive application of the

Act to transactions occurring before

1952. To the contrary, the language of

the Act is prospective, providing that

"claims of foreign states to immunity

should henceforth be decided by courts of

the United States in conformity with the

principles set forth in this chapter." 28

U.S.C. Sec. 1602 (emphasis added). The

prospective nature of the Act is

underscored by the fact that Congress

delayed the effective date of the FSIA

for a 90 day period so as to give foreign

states advance notice of the Act’s

provisions and the United States” new

policy. 28 U.S.C. Sec. 1602 note.

-41-

Moreover, there is nothing in the

legislative history to indicate that

Congress intended the FSIA to be applied

retroactively to transactions predating

1952. The committee reports reveal that

the Tate letter played a pivotal role in

shaping United States policy concerning

the immunity of foreign sovereigns after

1952 and that the FSIA was merely

designed to codify the restrictive

principle of sovereign immunity embodied

in that letter -- “the bill is not

intended to affect the substantive law of

liability." S. Rep. No. 94-1310, 94th

Cong., 2d Sess. ll (1976); H. R. Rep.

Ne 94-1487, 94th Cong., 2d Sess. 12

(1976). Retroactive application of the

Act would repudiate the immunity of

foreign sovereigns for transactions

predating 1952 and- thus be inconsistent

with Congress” intent not to affect the

o§2.

substantive law ofliability.17/

17/ Other courts which have addressed the

ssue of retroactivity have reached a

similar conclusion. See, Q.g.,

Corporacon Venezolana_ de Fomento v.

Vintero Sales Corp., 629 F. 2d 786, 791

(2d Cir. 1980) (Congress did not intend

for the FSIA to confer’ subject matter

jurisdiction retroactively) ; Amoco

Overseas Oil Co. v. Compagnie Nationale

Algerienne, 605 F.2d 648, 654 (2d Cir.

1979) (It was not the "manifest intention

of the legislative" to apply the FSIA

retroactively. To do moreover, would

prejudice very substantial antecedent

rights of the parties). Cf. Ohntrup v.

- Firearms Center Ine., Si6. ¥. Supp.

1281, 1283-84 (E.D. Pa. 1981), affd,

760 #.24 259 (34 Cir. 1985) (While

nothing that the substantive immunity

principles set forth in the FSIA have

been given retroactive effect, the court

declined to give the provisions governing

subject matter jurisdiction retroactive

effect) ; Yessenin-Volpin v. Novosti

Press Agency, 443 F. Supp. 849, 851 n.1

(S.D.N.Y. 1978) (Based on its findings

that the FSIA does not create new rights

of immunity but merely codifies’ the

restrictive principle of sovereign

immunity, the court concluded that

applying the substantive provisions of

the FSIA to an action commenced before

its effective date would not interfere

with the antecedent rights of the

parties). The Court notes that in all

the above-cited cases, the underlying

events or transaction occurred and the

cause of action accrued after 1952.

«84.

Finally, to apply the FSIA to the

underlying transactions would clearly

prejudice the antecedent rights of

Mexico.18/

18/ The Court notes‘that the FSIA was not

enacted until 24 years after the

restrictive theory was adopted in 1952.

Thus, there was no reason for Congress to

consider the question of retroactivity

since presumably causes of action more

than 24 years old would be barred by the

statute of limitations. See Schmidt v.

Polish People’s Republic, 742 F.2d 67 (2d

Cie. 1948) . In Schmidt, the court

dismissed as time barred an action to

recover on defaulted treasury notes

issued by the Republic of Poland in 1929

and 1930. The court rejected plaintiffs

arguement that the FSIA revived all

claims existing against foreign

governments before the FISA“s passage.

While nothing that the Act enhanced a

partys capacity to obtain personal

jurisdiction over a sovereign state, the

court found that

nothing in its language or

legislative history indicates that

such wholesale reactivation of

ancient claims was intended.

Moreover, since the "Tate Letter" of

1932s ‘ . foreign sovereign

immunity had not extended to the

commercial activity of a foreign

state, such as' is involved here, .

: and Congress had no reason

whatsoever to believe that it was

-44-

event of such a default.19/ The Court

finds that because Mexico may have

reasonably relied on these factors in

Structuring its conduct ortor to 1952, it

would be inequitable to divest Mexico of

the absolute immunity it enjoyed in 1922

by applying the FSIA to this case.

18/ (Continued) reviving otherwise

dormant claims based on such activity.

742 F.2d at 71 (citations omitted). 19/

The formation of the Committee, the

lengthy and repeated negotiations

undertaken by that Committee with the

Mexican government, and the numerous

agreements under which Mexico agreed to

repay the debts bolster this finding.

-45-

See Insurance Company of North America v.

Marina Salina Cruz, 649 F.2d

1266,1272(9th Cir. 1981) (In actions

arising undr the FSIA, it must be

determined “whether that Act gives such

clear notice to tocéiin countries as to

remove, as a reasonableness factor, the

expectations of immunity of agencies of

foreign countries performing commercial

functions.") .20/

20/ In its statement of interest filed in

Jackson, supra, the United States argued

that the FSIA should not be applied

retroactively to transactions predating

1952 since to do so would upset the

settled expectations of foreign states.