Amicus Curiae Brief — Dole Food Co. v. Patrickson

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Nos. 01-593 and 01-594

——_—_—_—_—_—_——~>EeeoEe———me es on

IN THE

Supreme Court of the Gnited States

DOLE FOOD COMPANY, ef al’.

Petitioners.

Vv.

GERARDO DENNIS PATRICKSON, ef al..

Respondents.

DEAD SEA BROMINE Co., LTD., et al.

Petitioners,

Vv.

GERARDO DENNIS PATRICKSON, ef al.,

Respondents.

On Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

BRIEF AMICUS CURIAE OF CONSORTIUM

DE REALISATION, CDR-ENTERPRISES, AND

CREDIT LYONNAIS, S.A.

IN SUPPORT OF PETITIONERS

GEORGE J. TERWILLIGER IH *

DARRYL S. LEW

R. SHAWN GUNNARSON

WHITE & CASE LLP

601 Thirteenth Street, N.W.

Suite 600 South

Washington, D.C. 20005-3807

(202) 626-3600

* Counsel of Record Counsel for Amici Curiae

WILSON-EPES PRINTING CO., INC. — (202) 789-0096 -— WASHINGTON, D.C 20001

TABLE OF CONTENTS

Page

De Ce FF CEE EE cotisccnenentctrnesecsecnsnenecscnsetvene iil

DU PACTS GU GPO BIIEIEED D cesessccccsscccccncsscessccssccscoces |

INTRODUCTION AND SUMMARY OF

REITER TOO TTT Te EEO EE 3

FE ENO TT cniisidicntntasinnsnisnesumicniemueiidinesapeninnsneenenernees 5

I. CONSTRUING THE DEFINITION OF

“AGENCY OR INSTRUMENTALITY” TO

INCLUDE ENTITIES INDIRECTLY

OWNED BY A FOREIGN STATE COM-

PORTS WITH THE FSIA’S LANGUAGE,

THE COURT’S DESCRIPTION OF “OWN-

ERSHIP” IN CORPORATE RELATION-

SHIPS, THE FSIA’S PURPOSE AND THE

CIRCUMSTANCES OF ITS ENACTMENT... 5

Bi ee BD eccercttensinitnennicncinstentiinnssuarenn 5

B. The Court’s Description of “Ownership” in

Corporate RelationshipsS................:::c0eeeee 6

C. The Purposes of the FSIA and _ the

Circumstances of Its Enactment................... 8

Il. CONSTRUING THE FSIA TO INCLUDE

ENTITIES THAT WERE STATE-OWNED

WHEN LITIGATION-CREATING CON-

DUCT OCCURRED BUT WERE PRIVA-

TIZED BEFORE SUIT IS FILED COM-

PORTS WITH THE STATUTORY TEXT

AND THE COURT’S SOVEREIGN IMMU-

NITY JURISPRUDENCE AND FURTHERS

THE PURPOSES OF THE ACT.................000008 13

(i)

il

TABLE OF CONTENTS—Continued

Page

. The Grammatical Tense of the Definition

of “Agency or Instrumentality” .................+- 13

. The Western Maid Case ..........:ccccssessseseseees 14

. The Abiding Sovereign Interest in Pri-

VENBOE ERTIES .2.cccccccccccccssecssesonssscssennennentones 15

INL BION ncccccscccccsesccoscoscscssncnssecssintenennmennnannanis 17

iil

TABLE OF AUTHORITIES

CASES

Almendarez-Torres v. United States, 523 U.S.

EIT sss cseenrensenmenensnnnesnenensenennnsseenveceseececees

Bangor Punta Operations, Inc. v. Bangor &

Aroostook R.R. Co., 417 U.S. 703 (1974)..........

Calmar S.S. Corp. v. United States, 345 U.S. 446

TT ietatesiieeeesietiipnrneesemamneneantuasanennanenentananoneeseneseteee

Cargill Int'l S.A. v. M/T Pavel Dybenko, 991

ef Le en

Coalition for Clean Air v. Southern Cal. Edison

Co., 971 F.2d 219 (9th Cir. 1992).......ccccceeeeess

Colorado Interstate Gas Co. v. Federal Power

Comm 'n, 324 U.S. S81 (1945) ..cccccccccceeeeeeeeeeees

Delgado v. Shell Oil Co., 231 F.3d 165 (Sth Cir.

First Nat'l City Bank v. Banco Para el Comercio

Exterior de Cuba, 462 U.S. 611 (1983).............

General Elec. Capital Corp. v. Grossman, 991

F.2d 1376 (8th Cir. 1993) .........ccccccccecseeeeseeeeees

Gould, Inc. v. Pechiney Ugine Kuhlmann, 853

F.2d 445 (6th Cir. 1988) ...........ccccccccceesssereeeeeees

In re Texas Eastern Transmission Corp., \5 F.3d

PPE, Cee ccccccssssscccncccescecevecccsssenseseecees

In re The Western Maid, 257 U.S. 419 (1922).......

Keifer & Keifer v. Reconstruction Fin. Corp.,

Be AR, Be COB Pacccccnccccccccscccsrsccceszecececccccesecs

Maritime Int'l Nominees Estab. v. Republic of

Guinea, 693 F.2d 1094 (D.C. Cir. 1983)...........

Peré v. Nuovo Pignone, Inc., 150 F.3d 477 (Sth

BOR, Fe ecerescccscesecesnsecccscsssssccnceseseseceensscocccseees

Page

iV

TABLE OF AUTHORITIES—Continued

Page

United States v. Bestfoods, 524 U.S. 51 (1998)..... 1]

Verlinden B.V. v. Central Bank of Nigeria, 461

ee IU iiertniechitechcchsieatna taint cial 8

Williams v. Taylor, 529 U.S. 420 (2000)............... 7

STATUTES ANi* RULES

nae 6

OE 3

ie OF GN rcrceretiencrninanctniesenamasinatuaatacarie 4

ee Oe Ce terninaenttnieicninentnishainnenitedicistiatin 3,4

CC OT TED 3

| Te 3,5

Se ie 0 TT ccnrscicnrnstrcinceniiahiatdiaiadeineatiais 11

eee rss crrreiicseehcintiicbesitataanniesit passim

ee . 11

i i i hinernirtcnbhiceiinearierthenideinsieiincaiitiiniaiaiadst 3

Se eres Oe acer ceinernatitmetinintaitalieninem eatin 3

A ee 4

i 3

eS re 4

Foreign Sovereign Immunities Act of 1976, 28

U.S.C. §§ 1330, 1332(a)(4), 1391(f, 1441(d),

Re Ge ccriecennunitanemenienmnatacinismatiaienstintis passim

United States Enrichment Corp. Privatization

Act, 42 U.S.C. § 2297h-7(a) 1)........ccccccccecceeeees 16

MISCELLANEOUS

ABA, Introduction: Privatization—The Global

Scale-Back of Government Involvement in

National Economics, 48 Admin. L. Rev. 435

W. Friedmann, Government Enterprise: A Com-

parative Analysis, in Government Enterprise

(W. Friedmann & J.F. Garner eds., 1970) ......... 9-10

Vv

TABLE OF AUTHORITIES—Continued

H.R. Rep. No. 94-1487 (1976), reprinted in 1976

USE LAR, GEG cccccssccssessessessssssscsssssssesssesese 9,

Anjali Kumar, The State Holding Company, |87

World Bank Discussion Papers (1992)..............

Letter from Robert S. Ingersoll, Deputy Secretary

of State, and Harold R. Tyler, Jr., Deputy

Attorney General, to Carl O. Albert, Speaker

of the House of Representatives (Oct. 31,

1975) in H.R. Rep. No. 94-1487, at 44 (1976),

reprinted in 1976 U.S.C.C.A.N. 6604, 6634 .....

Letter from Jack B. Tate, Acting Legal Adviser,

Department of State, to Phillip B. Perlman,

Acting Attorney General (May 19, 1952),

reprinted in 26 Dep't of State Bulletin 984

Rebecca J. Simmons, Note, Nationalized and De-

nationalized Commercial Enterprises Under

the Foreign Sovereign Immunities Act, 90

Colum. L. Rev. 2278 (1990) ...................cceceeeeee

Working Group of the ABA, Report: Reforming

the Foreign Sovereign Immunities Act, 40

Colum. J. Transnat’! L. 489 (2002)....................

IN THE

Supreme Court of the Anited States

No. 01-593 and 01-594

DOLE FooD COMPANY, ef ail.,

Petitioners,

Vv.

GERARDO DENNIS PATRICKSON, ef al.,

Respondents.

DEAD SEA BROMINE Co., LTD.., et a/.,

Petitioners,

Vv.

GERARDO DENNIS PATRICKSON, ef al.

Respondents.

On Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

BRIEF AMICUS CURIAE OF CONSORTIUM

DE REALISATION, CDR-ENTERPRISES, AND

CREDIT LYONNAIS, S.A.

IN SUPPORT OF PETITIONERS

STATEMENT OF INTEREST

This brief is submitted on behalf of Consortium de

Réalisation (“CDR”), CDR Enterprises (“CDR-E”), and

Crédit Lyonnais, S.A. (“Crédit Lyonnais”).' The Republic of

' No counsel! for a party authored this brief in whole or in part, and no

person or entity, other than the amici curiae, made a monetary contri-

bution to the preparation and submission of this brief.

2

France (the “Republic”) made the sovereign decision to

rescue Crédit Lyonnais, a state-owned bank, from impending

financial failure. To this end, in 1995 the Republic created

CDR, a defeasance corporation similar to the U.S. Resolution

Trust Corporation, to which the Republic transferred certain

assets and liabilities of Crédit Lyonnais for orderly liqui-

dation. CDR’s shares are wholly owned by the Etablissement

Public de Financement et de Restructuration, a public

administrative body and arm of the French State. CDR, in

turn, has several wholly-owned subsidiaries, including

CDR-E. which owns and manages for purposes of defeasance

certain industrial interests formerly owned by Crédit

Lyonnais. It is estimated that the Republic will spend

approximately U.S. $20 billion in public monies as part of

this defeasance operation.

As corporations established to carry out the Republic’s

sovereign decision to rescue and rehabilitate C rédit Lyonnais,

CDR and CDR-E are in every sense of the word “instru-

mentalities” of the Republic and should be treated as such

under the Foreign Sovereign Immunities Act of 1976

(“FSIA”), 28 U.S.C. §§ 1330, 1332(a)(4), 1391(f), 1441(d),

1602-11 (2001). Each is currently a defendant in one or

more civil actions in the United States, and each has relied on

its status as an “agency or instrumentality” of the Republic to

invoke the FSIA as a basis for federal jurisdiction. Both

therefore have an interest in the first question presented:

“Whether a corporation is an ‘agency or instrumentality’ if a

foreign state owns a majority of the shares of a corporate

enterprise that in turn owns a majority of the shares of

the corporation.” Dole Food Co. v. Patrickson, 122 S. Ct.

2657 (2002).”

? Not before the Court is the question of whether an entity that does not

qualify as an “instrumentality” based on the majority ownership test

nonetheless qualifies as an “organ” of a foreign state under the FSIA.

3

Crédit Lyonnais was privatized in 1999. It is a defendant

in two civil actions in the United States that arise out of the

same pre-privatization business transactions. One action was

filed against Crédit Lyonnais before privatization, while the

other was filed thereafter. In each action, Crédit Lyonnais

has invoked its status as an “agency or instrumentality” of the

Republic under the FSIA as a basis for federal jurisdiction.

Crédit Lyonnais therefore has an interest in the second

question presented: “Whether a corporation is an ‘agency or

instrumentality’ if a foreign state owned a majority of the

shares of the corporation at the time of the events giving rise

to litigation, but the foreign state does not own a majority of

those shares at the time that a plaintiff commences a suit

against the corporation.” /d.

Given the interests at stake, the amici file this brief with the

full support of the Republic of France. The amici accordingly

submit this brief in support of Petitioners and with the written

consent of all parties. Letters of consent have been filed with

the Clerk of the Court.

INTRODUCTION AND SUMMARY OF ARGUMENT

The questions presented in this case arise under the

definitional section of the FSIA, 28 U.S.C. § 1603, and

address whether certain types of entities are agencies or

instrumentalities of a foreign state so that they can invoke

federal jurisdiction under the FSIA, see id. at §§ 1330(a) and

1441(d), and the statute’s related procedural protections.’

> The FSIA contains procedural provisions governing, among other

things, venue, service of process, and attachment, arrest and execution.

See 28 U.S.C. §§ 1391(f) (venue), 1608 (service of process), 1609-11

(attachment, arrest, and execution). Some provisions of the FSIA,

however, apply only to foreign states and not to their agencies and

instrumentalities, such as the protection against punitive damages. See id.

at § 1606. In addition, the service and venue provisions for agencies and

instrumenialities resemble those for private corporations. Compare id. at

4

This case does not present the entirely separate question of

whether an entity that qualifies as an “agency or instru-

mentality” is entitled to sovereign immunity under the FSIA.*

Considering “the statute’s language, structure, subject

matter, context, and history—factors that typically help courts

determine a statute’s objectives and thereby illuminate its

text{,]” Almendarez-Torres v. United States, 523 U.S. 224,

228 (1998)—the Court should answer both questions pre-

sented in the affirmative. The FSIA’s definition of “agency

or instrumentality” encompasses corporate entities a majority

of whose shares are owned both directly and indirectly by a

foreign state when litigation-creating conduct occurs, even if

the entity is subsequently privatized. Not only is this

construction consistent with the statutory text, purpose, and

history, but it also recognizes that the strong sovereign

interest in state-owned entities does not dissipate auto-

matically because of tiered ownership or privatization.

Accommodating this enduring sovereign interest lies at the

heart of the FSIA and furthers the statute’s purpose of

promoting harmony in United States foreign relations by,

among other things, providing a federal forum for civil claims

against foreign states and their agencies and instrumentalities.

§1391(f) (venue) with §1391(c) (venue) and § 168(b)(2) (service) with

Fed. R. Civ. P. 4(d)(3) (service).

* Because the FSIA’s jurisdictional and procedural protections are

separate and distinct from its grant of sovereign immunity, see Maritime

Int'l Nominees Estab. v. Republic of Guinea, 693 F.2d 1094, 1105 n.18

(D.C. Cir. 1983), it would be erroneous to assume that answering the

questions presented in the affirmative would unduly expand the number of

entities obtaining immunity from civil suit in United States courts.

Indeed, because many foreign state-owned entities become involved in

United States litigation based on their commercial activities, such entities

typically will not be immune from such civil claims. See Rebecca J.

Simmons, Note, Nationalized and Denationalized Commercial Enter-

prises Under the Foreign Sovereign Immunities Act, 90 Colum. L. Rev.

2278, 2288 (1990).

5

ARGUMENT

I. CONSTRUING THE DEFINITION OF

“AGENCY OR’ INSTRUMENTALITY” TO

INCLUDE ENTITIES INDIRECTLY OWNED

BY A FOREIGN STATE COMPORTS_ WITH

THE FSIA’S LANGUAGE, THE COURT’S

DESCRIPTION OF “OWNERSHIP” IN COR-

PORATE RELATIONSHIPS, THE FSIA’S

PURPOSE AND THE CIRCUMSTANCES OF

ITS ENACTMENT

A. The Statutory Text

The definition of “agency or instrumentality” is found at 28

U.S.C. § 1603, which provides in relevant part:

(a) A “foreign state”, except as used in section 1608

of this title, 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, or a majority of whose shares or

other ownership interest is owned by a foreign state or

political subdivision thereof; and

' (3) which is neither a citizen of a State of the

United States as defined in section 1332(c) and (d) of

this title, nor created under the laws of any third

country.

Section 1603(b)(2) defines an “agency or instrumentality

of a foreign state,” in part, as a “separate legal person... . a

majority of whose shares or other ownership interest is owned

by a foreign state or political subdivision thereof... .” /d.

6

(emphasis added). Resolution of the first question presented

chiefly turns, therefore, on the meaning of the verb “owned”

in the FSIA.°

On its face, the word “owned” is unqualified and is not

defined in the FSIA. It neither expressly requires direct

ownership nor prohibits indirect ownership. Consequently, it

must be afforded its “ordinary or natural meaning.” Smith v.

United States, 508 U.S. 223, 228 (1993). As the United

States Court of Appeals for the Fifth Circuit observed, “The

plain language of the statute simply requires ‘ownership’ by a

foreign state. It draws no distinction between direct and

indirect ownership; neither does it expressly impose a re-

quirement of direct ownership.” Delgado v. Shell Oil Co.,

231 F.3d 165, 176 (5" Cir. 2000). Interpreting “owned” in

§ 1603(b)(2) to mean only entities directly owned by a

foreign state would therefore require the Court to read into

the statute a limitation not imposed by Congress.°

B. The Court’s Description of “Ownership” in

Corporate Relationships

Courts describing the relationship between parent and

subsidiary corporations have not restricted the meaning of

* While amici concentrate their textual argument on the word “owned”

in § 1603(b)(2), that provision also refers to “other ownership interest.”

The plain meaning of “ownership interest” is expansive, and shows that

Congress cast its definitional net broadly in § 1603(b)(2) to encompass

relationships between foreign states and entities well beyond the mere

direct holding of shares by the state.

° The United States suggests that Congress’s failure to use more

elaborate language in § 1603(b)(2), such as “‘owns or controls directly, or

indirectly,”” means that the FSIA excludes from its purview entities

indirectly owned by a foreign state. Brief for the United States (Nos.

01-593 & 01-594) (“Br. United States”) 9. n.4 (quoting 15 U.S.C.

§ 1802(3)). The absence of such additional verbiage, however, says noth-

ing about the meaning of the word “owned” standing alone, and does not

support, let alone compel, the government’s interpretation.

7

“ownership” to the direct holding by a parent of shares in its

subsidiary. Indeed, this Court has described the ownership

interests held by a corporate parent in its subsidiary as

extending beyond the subsidiary’s shares to include its assets.

Colorado Interstate Gas Co. v. Federal Power Comm'n,

324 U.S. 581, 607 (1945) (observing in a rate-making case

involving natural gas producers that a parent corporation

“owned the producing properties at the beginning of the

transaction through one subsidiary; it owned them at the end

of the transaction through another subsidiary”).

Because the assets of a subsidiary include the shares it

owns in subsidiary corporations, it is therefore not surprising

that this Court also has described a corporate parent as the

owner of the shares of a second-tier subsidiary held through a

first-tier subsidiary. In Bangor Punta Operations, Inc. v.

Bangor & Aroostook R.R. Co., 417 U.S. 703 (1974), BPO (a

wholly-owned subsidiary of Bangor Pynta}acquired 98.3% of

the outstanding stock of BAR, a railroad. Commenting on the

nature of the claims at issue (the substance of which are not

relevant here), the Court described Bangor Punta as the

“owner” of BAR even though Bangor Punta owned the BAR

shares indirectly through BPO. /d. at 706. In addition to

using the word “own” to describe a parent corporation’s

relationship to an indirectly held corporate subsidiary, the

Court has, conversely, referred to both directly and indirectly

owned government corporations as “instrumentalities” of the

government. See Keifer & Keifer v. Reconstruction Fin.

Corp., 306 U.S. 381, 388-89 (1939).

Therefore, these decisions further illustrate that describing

entities held by a foreign state through a corporate inter-

mediary as being “owned” by that state for purposes of the

FSIA is consistent with the ordinary, natural meaning of the

word. See Smith, 508 U.S. at 228; accord Williams v. Taylor,

529 U.S. 420, 431 (2000).

8

C. The Purposes of the FSIA and the Cir-

cumstances of Its Enactment

Construing “agency or instrumentality” to include entities

indirectly owned by a foreign sovereign through a tiered

corporate structure also comports with and advances the

underlying purposes of the FSIA and recognizes the circum-

stances of its enactment.

Congress enacted the FSIA in 1976 for the purpose of

“comprehensively regulating the amenability of foreign

nations to suit in the United States.” Verlinden B.V. v. Cen-

tral Bank of Nigeria, 461 U.S. 480, 493 (1983). From the

Executive Branch’s perspective, the FSIA was enacted “to

facilitate and depoliticize litigation against foreign states and

to minimize irritations in foreign relations arising out of such

litigation.” Letter from Robert S. Ingersoll, Deputy Secretary

of State, and Harold R. Tyler, Jr., Deputy Attorney General,

to Carl O. Albert, Speaker of the House of Representatives

(Oct. 31, 1975) in H.R. Rep. No. 94-1487, at 44, 45 (1976),

reprinted in 1976 U.S.C.C.A.N. 6604, 6634.

Such politicization occurred because the State Department

was increasingly involved in deciding requests for foreign

sovereign immunity under the pre-FSIA legal regime, during

which the United States had adopted the “restrictive theory”

of foreign sovereign immunity (granting immunity for

sovereign acts but denying it for commercial acts) as a matter

of Executive policy rather than national legislation. See

Letter from Jack B. Tate, Acting Legal Adviser, Department

of State, to Phillip B. Perlman, Acting Attorney General (May

19, 1952), reprinted in 26 Dep’t of State Bulletin 984, 985

(1952). Consequently, “foreign nations often placed diplo-

matic pressure on the State Department in seeking immunity.

On occasion, political considerations led to suggestions of

immunity in cases where immunity would not have been

available under the restrictive theory.” Verlinden, 461 U.S. at

487. Congress therefore enacted the FSIA, in part, to adopt

9

by statute the “restrictive theory” of immunity and to transfer

the often thorny issue of foreign sovereign immunity from the

political branches to the judiciary as a means of “reducing the

foreign policy implications of immunity determinations, and

assuring litigants that these often crucial decisions are made

on purely legal grounds and under procedures that insure due

process.” H.R. Rep. No. 94-1487, at 7 (1976), reprinted in

1976 U.S.C.C.A.N. 6604, 6606.

By the time Congress enacted the FSIA in 1976, the

number of foreign state-owned corporations created to carry

out sovereign tasks had grown dramatically, as had the

potential for legal disputes between these entities and United

States citizens. As the Court has observed, “[i]ncreasingly

during this century, governments throughout the world have

established separately constituted legal entities to perform a

variety of tasks.” First, Nat’l City Bank v. Banco Para el

Comercio Exterior de Cuba, 462 U.S. 611, 624 (1983).

Foreign states use such corporate structures to accomplish

governmental and commercial objectives, including the im-

proved control of publicly owned enterprises, the integration

of enterprises in certain industrial sectors, the management of

enterprises in preparation for privatization, and the financial

rescue of loss-producing enterprises. See Anjali Kumar, The

State Holding Company, 187 World Bank Discussion Papers

11-12 (1992).

Indeed, scholars surveying the field six years before

Congress enacted the FSIA elaborated on this point, noting in

particular the use of multi-tiered public corporations by

developing nations:

[P]ublic enterprise, largely in the form of development

corporations, has become an essential instrument of

economic development in the economically backward

countries which have insufficient private venture capital

to develop the utilities and industries which are given

priority in the national development plan. Not infre-

10

quently, these public development corporations . . .

directly or through subsidiaries, enter into partnerships

with national or foreign private enterprises, or they offer

shares to the public.

W. Friedmann, Government Enterprise: A Comparative

Analysis, in Government Enterprise 333-34 (W. Friedmann

& J.F. Garner eds., 1970) (emphasis added), quoted in First

Nat'l City Bank, 462 U.S. at 625. As evidenced by amici, this

phenomenon has not been limited to developing nations.’

When it enacted the FSIA, Congress was well aware of this

widespread use of tiered corporate structures to carry out

sovereign functions, and accounted for this phenomenon by

defining the term “agency or instrumentality of a foreign

state” to cover a wide range of entities:

As a general matter, entities which meet the definition of

an “agency or instrumentality of a foreign state” could

assume a variety of forms, including a state trading

corporation, a mining enterprise, a transport organization

such as a shipping line or airline, a steel company, a

central bank, an export association, a governmental

procurement agency or a department or ministry which

acts and is suable in its own name.

H.R. Rep. No. 94-1487, at 15-16 (1976), reprinted in 1976

U.S.C.C.A.N. 6604, 6614.

Against this backdrop, Congress surely could have limited

the scope of the FSIA to directly owned instrumentalities had

it intended to so circumscribe the definition of “foreign state”

” Indeed, the United States itself created and employed numerous

multi-tiered public corporations in response to the Great Depression and

World War Il. See Keifer & Keifer, 306 U.S. at 390 (“Because of the

advantages enjoyed by the corporate device compared with conventional

executive agencies, the exigencies of war and the enlarged scope of

government in economic affairs have greatly extended the use of

independent corporate facilities for governmental ends.”).

in the statute. That Congress did not do so is telling,

particularly since it took care elsewhere in the FSIA to

delimit the scope of otherwise broad terms in precisely that

manner. See 28 U.S.C. § 1605(a)(2) (providing for jurisdic-

tion based on certain commercial activity that “causes a direct

effect in the United States”) (emphasis added).*

Construing the word “own” to include indirectly held

subsidiaries of a foreign state, and thereby affording them the

jurisdictional and procedural benefits of the FSIA, not only

recognizes the circumstances surrounding enactment of the

statute, but also recognizes the practical reality that the

sovereign interest in state-owned corporate structures trans-

cends the first tier of ownership. As the American Bar Asso-

ciation recently observed in connection with recommending

reforms to the FSIA, “The strength of a foreign state’s

sovereign interests in an area does not necessarily dissipate

when it employs more complicated legal structures resem-

bling those used by modern private businesses.” Working

Group of the ABA, Report: Reforming the Foreign Sovereign

Immunities Act, 40 Colum. J. Transnat’! L. 489, 523 (2002)

(“ABA Working Group”). This statement is as true for amici

as it is for other multi-level state-owned entities. The

*The United States argues unconvincingly that the definition of

“agency or instrumentality” should be narrowly construed because

Congress enacted the FSIA against the background “principle of separate

corporate status.” Br. United States 7. However, United States v.

Bestfoods, 524 U.S. 51 (1998), on which the government principally

relies, Br. United States 7-8, stands for the unremarkable proposition that

the ownership of shares without more is not a proxy for corporate liability.

See 524 U.S. at 61-62. In addition, interpreting the term “owned” in light

of an entity’s distinct corporate personality is redundant, if not irrelevant,

under the FSIA, because the statute already requires an entity to

demonstrate that it is “a separate legal person.” 28 U.S.C. § 1603(b)(1).

Whether a subsidiary of a foreign state-owned corporation is a “separate

legal person” therefore adds nothing to the analysis of whether it is

“owned” by the state.

12

Republic of France has an abiding interest in the operation of

both CDR and CDR-E as part of a comprehensive defea-

Sance structure established to carry out the financial

rescue and rehabilitation of Crédit Lyonnais, plainly a

sovereign undertaking.

Perhaps because Congress recognized this enduring sover-

eign interest in state-owned entities, it intended for the

jurisdictional provisions of the statute to be construed

broadly. “Such broad jurisdiction in the Federal courts

should be conducive to uniformity in decision, which is

desirable since a disparate treatment of cases involving

foreign governments may have adverse foreign relations

consequences.” H.R. Rep. No. 94-1487, at 13 (1976),

reprinted in 1976 U.S.C.C.A.N. 6604, 6611; accord id. at 32,

6631 (“In view of the potential sensitivity of actions against

foreign states and the importance of developing a uniform

body of law in this area, it is important to give foreign states

clear authority to remove to a Federal forum actions brought

against them in the State courts.”). As one federal Court of

Appeals has recognized, “a liberal approach in implementing

the FSIA’s comprehensive jurisdictional scheme is most

conducive to the FSIA’s paramount objectives of keeping

federal courts open to foreign states, and indeed of

affirmatively encouraging private actions against foreign

states to be adjudicated in federal court.” Jn re Texas Eastern

Transmission Corp., 15 F.3d 1230, 1241 (3d Cir. 1994)

(citations omitted).

In light of the foregoing, amici urge the Court to reverse

the unduly narrow interpretation of § 1603(b)(2) of the FSIA

adopted by the Ninth Circuit that limited the statute’s reach to

entities that are directly owned by a foreign state. See Pet.

App. 20a-2la. This interpretation conflicts with the text,

Structure, purpose and background of the FSIA, and

undervalues the strong sovereign interest in indirectly held

public corporations created to accomplish state governmental

and commercial objectives.

13

Il. CONSTRUING THE FSIA TO INCLUDE

ENTITIES THAT WERE STATE-OWNED

WHEN LITIGATION-CREATING CONDUCT

OCCURRED BUT WERE _ PRIVATIZED

BEFORE SUIT IS FILED COMPORTS WITH

THE STATUTORY TEXT AND THE COURT’S

SOVEREIGN IMMUNITY JURISPRUD-

ENCE AND FURTHERS THE PURPOSES OF

THE ACT

A. The Grammatical Tense of the Definition of

“Agency or Instrumentality”

The FSIA defines an “agency or instrumentality” to include

an entity “a majority of whose shares . . . is owned by a

foreign state.” 28 U.S.C. § 1603(b)(2). Seizing on the use of

the present tense in this definition, the Ninth Circuit ex-

pressed skepticism over whether entities that had been

privatized by the time suit was filed could avail themselves of

the procedural and jurisdictional provisions of the FSIA in

litigation involving pre-privatization events. See Pet. App.

17a—18a. This concern, shared by the Solicitor General, see

Br. United States 15, is misplaced.

Use of the present tense in defining “agency or instru-

mentality” simply does not require that an entity be state-

owned when an action is commenced against it. The defi-

nitional use of the present tense is timeless and does not

control when an entity must exhibit the characteristics of an

instrumentality to effectuate the purposes of the FSIA. See,

e.g., Coalition for Clean Air v. Southern Cal. Edison Co., 971

F.2d 219, 225 (9th Cir. 1992) (observing that in construing

congressional intent “[t}he present tense is commonly used to

refer to past, present, and future all at the same time”). The

language of § 1603(b)(2) certainly does not foreclose apply-

ing the FSIA to entities that were state-owned at the time of

the underlying conduct, even if the entities were subsequently

privatized.

14

Indeed, every federal Court of Appeals to have considered

the issue has ruled that an entity that was majority state-

owned when the conduct giving rise to the litigation occurred

is entitled to the benefits and protections of the FSIA. See

Pere v. Nuovo Pignone, Inc., 150 F.3d 477, 480-81 (Sth Cir.

1998); General Elec. Capital Corp. v. Grossman, 991 F.2d

1376, 1381-82 (8th Cir. 1993); Gould, Inc. v. Pechiney Ugine

Kuhlmann, 853 F.2d 445, 449-50 (6th Cir. 1988). As the

United States Court of Appeals for the Eighth Circuit

observed, the present tense used in § 1603(b)(2) can “speak to

a variety of situations, including the time of the alleged

wrongdoing.” General Elec. Capital Corp., 991 F.2d at 1381

(citation omitted). The correctness of this view is confirmed

by the Court’s sovereign immunity jurisprudence.

B. The Western Maid Case

This Court’s jurisprudence has recognized the principle

that the sovereign character of an entity survives its priva-

tization for purposes of immunity for pre-privatization

conduct. Jn re The Western Maid, 257 U.S. 419 (1922). In

that case, two ships were leased or chartered to the United

States and used for public purposes during wartime. After the

ships were returned to their private owners, claims were

brought against the ships for damages caused by collisions

that occurred while the ships were in government service.

This Court, speaking through Justice Holmes, found that the

vessels were immune from suit due to their status at the time

of the relevant conduct. /d. at 432-33. Put differently,

because of the sovereign character of the vessels at that time,

they were entitled to the then prevailing benefit of absolute

immunity from suit regardless of their subsequent transfer

into private hands. See Calmar S.S. Corp. v. United States,

345 U.S. 446, 452 (1953) (describing the principal issue in

The Western Maid as “whether an enforceable liability could

have been created when those two vessels passed into private

ownership, although no such liability arose when the

15

collisions occurred”). Similarly, if an entity is an instrumen-

tality of a foreign state when it engages in litigation-creating

conduct, it should be entitled to invoke the procedural and

jurisdictional benefits and protections of the FSIA regardless

of whether it is later privatized.

C. The Abiding Sovereign Interest in Privatized

Entities

In construing the FSIA, it should be recognized that there

is an abiding sovereign interest in the judicial treatment of a

former state-owned entity. If a former state-owned entity is

sued based on pre-privatization conduct, the propriety of

conduct performed under the aegis of the state is being

scrutinized. Judicial scrutiny of such conduct implicates the

same foreign policy concerns that animated the passage of the

FSIA. See, e.g., Peré, 150 F.3d at 481 (“The foreign policy

concerns underlying sovereign immunity do not necessarily

disappear when a defendant loses its foreign status before suit

is filed.”); General Elec. Capital Corp., 991 F.2d at 1381

(“The foreign policy concerns discouraging us from judging

the acts of another nation are not necessarily eliminated

because an entity is not a foreign state at the time of suit.”);

ABA Working Group, 40 Colum. J. Transnat’! L. at 530

(“{A]ctions of foreign states remain politically sensitive even

after the entity is sold or otherwise loses its status as a foreign

state or instrumentality.”). In commenting on the timing

issue, the Ninth Circuit recognized, but seriously

undervalued, this important sovereign interest. See Pet.

App. 18a.

The abiding state interest in privatized entities also

frequently implicates the public fisc of the foreign sovereign.

In this regard, privatization agreements often contain

indemnification clauses that require the foreign state to

indemnify the now private entity against certain liabilities

arising from pre-privatization conduct. See Cargill Int'l S.A.

16

v. M/T Pavel Dybenko, 991 F.2d 1012, 1016 (2d Cir. 1993)

(acknowledging that in the process of privatization “the

foreign state may remain financially responsible for any

judgments won against a former state-owned entity,

especially where the acts at issue occurred when the entity

was still under government control”). Nor is this an

exclusively foreign phenomenon. For example, the United

States itself has made indemnification commitments in the

privatization of its interests. See United States Enrichment

Corp. Privatization Act, 42 U.S.C. § 2297h-7(a)( 1) (providing

for continuing liability of the Secretary of Energy for pre-

privatization conduct). This is precisely the situation faced

by amici, because the Republic of France has remained

financially responsible for certain pre-privatization conduct of

Crédit Lyonnais.”

As one commentator has observed, privatization has been

“the dominant international economic trend” over the past

decade. ABA, /ntroduction: Privatization—The Global

Scale-Back of Government Involvement in National Eco-

nomics, 48 Admin. L. Rev. 435, 435 (1996). Given this

trend, denying the benefits and protections of the FSIA to

privatized entities in cases involving pre-privatization

conduct could adversely affect many former state owners.

Such a ruling also would disturb the settled expectations of

foreign states based on the uniformity of decisional law

generated by the Courts of Appeals on the timing issue,” see

® The existence of such sovereign financial commitments substantially

undermines the Ninth Circuit's assumption that litigation against

privatized corporations does not directly implicate sovereign interests.

See Pet. App. 18a (“Nor will American courts necessarily have to worry

about ordering a foreign state to pay money to a private litigant.”).

tn contrast, applying the FSIA to formerly state-owned entities

would not frustrate the settled expectations of private plaintiffs. Where a

claim involves pre-privatization conduct, the plaintiff would have actually

dealt with a foreign state-owned entity. As a result, a trial of the

plaintiff's claim in federal court under the FSIA procedures against the

17

Pet. App. 17a, and would therefore risk creating the very

friction in foreign relations that the FSIA was designed

to avoid.

For these reasons, the Court should construe the FSIA as

applying to an entity that was an “agency or instrumentality”

when the conduct occurred that gives rise to the litigation.

CONCLUSION

For the foregoing reasons, the judgment of the United

States Court of Appeals for the Ninth Circuit should be

reversed.

Respectfully submitted,

GEORGE J. TERWILLIGER III*

DARRYL S. LEW

R. SHAWN GUNNARSON

Wuite & CASE LLP

601 Thirteenth Street, N.W.

Suite 600 South

Washington, D.C. 20005-3807

(202) 626-3600

* Counsel of Record Counsel for Amici Curiae

August 23, 2002

now privatized entity would afford the plaintiff those same rights to which

the plaintiff was entitled when the events occurred underlying the

litigavion.