# Amicus Curiae Brief — Dole Food Co. v. Patrickson

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0511%3A11

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2003
- **Citation:** 538 U.S. 468

## Text

| wee (* «eee TI SQ
{ . que “mrt US,
7 > TF

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.

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0511%3A11. Public record. Not legal advice.