Amicus Curiae Brief — Dead Sea Bromine Co., Ltd. v. Patrickson

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Supreme Court, U.S.

FILED

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Nos. 01-593 and 01-594

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IN THE

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Supreme Court of the Anited eiates

DOLE FOOD COMPANY, ef al.,

Petitioners,

Vv.

GERARDO DENNIS PATRICKSON, ef a/.,

Respondents.

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

Petitioners,

GERARDO DENNIS PATRICKSON, ef a/.,

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 III *

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

. Seg

TABLE OF CONTENTS

INTRODUCTION AND SUMMARY OF

TET wesiiciciliciittceniiiiebdnipuiteisamitaliatantenasnnivcunnee

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Il.

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...

Fas Wee I HOU cnccicccctctccctsescocsscsoncocesconece

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

Corporate Relationships...................ccccc00000-

C. The Purposes of the FSIA and the

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

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.............0:0000000.

(i)

TABLE OF CONTENTS—Continued

A. The Grammatical Tense of the Definition

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

B. The Western Maid Case ..............ccccccceseeeeeees

C. The Abiding Sovereign Interest in Pri-

VERBOSE HRBIIES ..cccccccccscecccenvsesesonsesonsesensenntens

HIN LLUBIOIN occcsccccccccccccosescesosonnesessssscnsonenssossonsssnnesenes

TABLE OF AUTHORITIES

CASES Page

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

ee 4

Bangor Punta Operations, Inc. v. Bangor &

Aroostook R.R. Co., 417 U.S. 703 (1974).......... 7

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

STITT iaiiieilidbchdteatideieterneiraetniiiacinntenntnnnnmesceneneasenees 14-15

Cargill Int'l S.A. v. M/T Pavel Dybenko, 99\

ET 15-16

Coalition for Clean Air v. Southern Cal. Edison

Co., 971 F.2d 219 (9th Cir. 1992)... 13

Colorado Interstate Gas Co. v. Federal Power

Comm 'n, 324 U.S. 581 (1945)............cccccccceeseees 7

Delgado v. Shell Oil Co., 23\ F.3d 165 (Sth Cir.

ES eee 6

Dole Food Co. v. Patrickson, 122 S. Ct. 2657

ST iiaiiaiinaiieatdtetereatnatinteeenintndntanaieinenenagnentemnetees 2,3

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

Exterior de Cuba, 462 U.S. 611 (1983)............. 9,10

General Elec. Capital Corp. v. Grossman, 99|

a 14, 15

Gould, Inc. v. Pechiney Ugine Kuhimann, 853

TET 14

In re Texas Eastern Transmission Corp., 15 F.3d

een 12

In re The Western Maid, 257 U.S. 419 (1922)....... 14

Keifer & Keifer v. Reconstruction Fin. Corp.,

cn 7, 10

Maritime Int'l Nominees Estab. v. Republic of

Guinea, 693 F.2d 1094 (D.C. Cir. 1983)........... 4

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

eT 14, 15

TABLE OF AUTHORITIES—C ontinued

Page

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

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

Ss SI Ce ncnnssensenenensneremeeemesvenessseneenen 8

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

STATUTES AND RULES

BP Site 0) Cie ercerssecnmerenesesssemseemtemmensennessens 6

ee 3

28 U.S.C. § 1391(c).......... semausesanemmmanemmenesmnenenens 4

ee irs 0 Be iciennentitnnaeemen 3,4

Be ice © Se rtennnmnecderssenemennsenemmmenen 3

ae Cre 0 ie rertecrnnnensenenseneemmemnan 3,5

aD Cire © CD ccnensnsccsnecesnssnsssnmscenssssenestes 11

ye passim

rE oR 11

SD ls OF Cl cesnnnssnsnemenemmnenenmissenenmmenies 3

a Gels Cie trcennsseserensssscsrnssresesensesecensemesanes 3

SD Cre Bh GED severnssecsnsenneensssteemmemsmamens 4

8 Ge © Ge Bccrcrecsnenreeenemmetemeen 3

POG, Gh, GRR, Fe Se cneccscsessersessesnsnemsmmnsennteens 4

Foreign Sovereign Immunities Act of 1976, 28

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

| passim

United States Enrichment Corp. Privatization

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

TABLE OF AUTHORITIES—Continued

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

Page

RS Ries GED ccssscscsnscccnsscscsnsseussnsessscnsecsat 9, 10, 12

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, 6636 .....

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).......................000000

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 United States

No. 01-593 and 01-594

DOLE FOOD COMPANY, ef ai.,

Petitioners,

Vv.

GERARDO DENNIS PATRICKSON, ef al.,

Respondents.

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

Petitioners,

Vv.

GERARDO DENNIS PATRICKSON, ef a/.,

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.

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 Crédit 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 instrur <ntality” 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.

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

instrumentalities resemble those for private corporations. Compare id. at

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 § 1608(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).

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.

(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.

“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 Punta) 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).

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

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-

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.

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.” /n 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.

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., 97 |

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.

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

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 *he 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.

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, I/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.”’).

'° in 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

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

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

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

litigation.

AMICUS CURIAE

BRIEF

Supreme Cour

FIL!

(io) & |

Nos. 019964 & 01-594 | AUG 23 or

een e—emeaeemee—=—Eeeeeeeeeeeeee

IN THE | OFFICE oF Tia

Supreme Court of the United States

DOLE FOOD COMPANY. et ai.

Petitioners.

GERARDO DENNIS PATRICKSON. ef al.

Respondents.

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

Petitioners.

GERARDO DENNIS PATRICKSON., ef al.

Respondents.

On Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

BRIEF AMICI CURIAE OF

THE REPUBLIC OF IRELAND AND

ICAROM PLC (UNDER ADMINISTRATION)

IN SUPPORT OF PETITIONERS

MARTIN R. BAACH*

JAMES P. DAVENPORI

GEOVETTE E. WASHINGTON

BAACH ROBINSON & LEWIS PLL

One Thomas Circle. Suite 200

Washington, D.C. 20005

* Counsel of Record (202) 833-8900

Counsel for the

Republic of Ireland and

August 23, 2002 Icarom ple (Under Administration;

ce Ae eT LE LS SY rt

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

TABLE OF CONTENTS

Page

BPW CSUR D COW ARIE CUTIIAE ccccceveseccccesecsccscssnsececeese

SUMMARY OF ARGUMENT ...................:cccccssesserenees 3

EER A RACE I OR NT Oe ee 4

l ICAROM IS A COMPELLING EXAMPLI

OF AN INSTRUMENTALITY THAT IS

100% OWNED BY A FOREIGN GOVERN-

MENT NOTWITHSTANDING THE FACT

THAT LEGAL TITLE TO ICAROM’S

SHARES IS HELD BY NOMINEEBG................ §

A. ICI’s Background and Later Insolvency ..... 6

B. The Irish Government’s Response to the

Impending Economic Crisis......................- | 7

C. The “Structure of the Government's

PIETY TIILAT cencicetcucinanomnneedsuctmensgoneioens | x

ll. THE STATUTE’S PLAIN LANGUAGI

SUPPORTS EXTENDING FSIA

PROTECTION TO MAJORITY-OWNED

ENTITIES, WHETHER HELD DIRECTLY

| _ Ca |

ll THE STATUTE’S UNDERLYING PUR-

POSE WOULD BE DISSERVED BY

REQUIRING A BRIGHT-LINE DISTINC-

TION BETWEEN DIRECT AND INDIRECT

IIE \atinieniinhctiensinestesinenieatiniameiniinieniininascetinis 16

IV. A SUBSTANTIVE RATHER THAN A

FORMALISTIC APPROACH OFFERS A

BETTER SOLUTION TO THE ISSUE OF

TIERED OWNERSHIP UNDER THE FSIA ... 2

TELLIN Piciciiiciasiasniteigamahaeiebiniiidnddiniessbiistabesmadion 23

(1)

TABLE OF AUTHORITIES

CASES Page

In re Air Crash Disaster Near Roselawn, 96 F.3d

Fae CHD CR, Fi ianccsrctivisasedéinininiiiaiaan 1S

Browning-Ferris Industries, Inc. v. Lexington

Insurance Co., No. 02-643, slip op. (D. Ariz.

FORD C2, Bee wniewinionameaaiaom 3

Connecticut National Bank v. Germain, 503 U.S.

DOP CFP ee Peccevecsseietenntitiddaaaae

Cool Fuel, Inc. v. Board of Equalization, 210

F.36 Fee Co GR. BOOED ities 14,15

EOTT Energy Operating Ltd. Partnership v.

Winterthur Swiss Insurance Co., 257 F.3d

996 CH CH. FEO t Avicenna i oe ee

Fortis Insurance Ltd. v. Browning-Ferris

Industries, Inc.., No. H-02-1226,

slip.op. (S.D. Tex. June 26, 2002) ......00........02 3, 6, 10

Gates v. Victor Fine Foods, 54 F.3d 1457 (9th

CRB. SSFP cccccccocisveonssseienseubhueucueanenneneniananann passim

Linton v. Airbus Industrie, 30 F.3d 592 (Sth Cir.

WED cxccceeeesscensneiesuiiensiaelianisemmasamnnaannananeennn |

Outhoard Maritime Corp. v. P.T. Indonesian

Consortium of Construction Industries, 582

F. Supp. 1136 (D. Md. 1984)........... ewes 10

Parex Bank v. Russian Savings Bank, 8\ F. Supp.

36 SOG (SEAN. ¥ . GOD cxenssenetlesessccsssssesnsninaion 1S

Patrickson v. Dole Food Co., 251 F.3d 795 (9th

Cir. 2001), cert. granted, 70 U.S.L.W. 3798

(SITE) sovcecexenssoennctnsssenunenseeiianenninapiiinnll 4,5, 11, 15, 22

S & S Machinery Co. v. Masinexportimport, 706

PP LILgy Le Ay |) Ce ernunneen 10

United States v. Zacks, 375 U.S. §9 (1963) ........... 15

TABLE OF AUTHORITIES—C ontinued

STATUTES

28 U.S.C. § 1330(a)

28 U.S.C. § 1441(d)

28 U.S.C. § 1602, et seq

28 U.S.C. § 1603(a)

28 U.S.C. § 1603(b)

28 U.S.C. § 1603(b)(2) .

28 U.S.C. § 1603(c)

28 U.S.C. § 1608

28 U.S.C. § 1609

28 U.S.C. § 1610

28 U.S.C. § 161}

MISCELLANEOUS

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

U.S.C.C.A.N. 6604

Joseph W. Dellapenna, 25th Anniversary of the

Foreign Sovereign Immunities Act: Refining

the Foreign Sovereign Immunities Act, 9

Willamette J. Int'l Law & Dispute Resolution

$7 (2001)

Recommendations and Report on the U.S

Foreign Sovereign Immunities Act, Working

Group of the Int'l Litig. Comm. of the Am

Bar. Ass'n (October 2001 )

IN THE

Supreme Court of the United States

Nos. 01-593 & 01594

DOLE Foop COMPANY. ef a/..

Petitioners.

GERARDO DENNIS PATRICKSON., ef al

Respondents,

DEAD SEA BROMINE Co.. LTD.. ef a/..

Petitioners.

GERARDO DENNIS PATRICKSON., ef a/

Responde nts

On Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

BRIEF AMICI CURIAE OF

THE REPUBLIC OF IRELAND AND

ICAROM PLC (UNDER ADMINISTRATION)

IN SUPPORT OF PETITIONERS

INTEREST OF AMICI CURIAE

In 1985, the Republic of Ireland acquired what was then a

privately-held insurer known as The Insurance Corporation of

Counsel for the parties in these actions have consented to the filing of

this brief, and those consents have been filed with the Clerk of this Court

No counsel for either party had any role in authoring this brief. and no

person other than the named amici and their counsel made any monetary

contribution to the preparation and submission of this briet

Ireland ple (“ICI"). At the time of the acquisition, ICI, one of

Ireland’s largest insurers, was insolvent, and the Irish

government feared that its failure would also lead to the

collapse of ICI’s then parent, Allied Irish Banks (“AIB”"), one

of Ireland's premier banks. The government's intervention to

acquire ICI and relieve AIB of the financial burden that ICI

represented was calculated to avert severe damage to the Irish

insurance and banking systems and, ultimately, to the stability

of the Irish economy. This brief is filed on behalf of amici

curiae the Republic of Ireland and its wholly-owned

instrumentality Icarom ple (Under Administration)

(“Icarom™), which ICI was renamed in 1990. Icarom now

operates solely in run off.

The interests of the Republic of Ireland and Icarom stem

from the latter's involvement in insurance coverage litigation

in the United States. From the early 1970's until 1990, in

addition to writing domestic insurance in Ireland, ICI was an

active participant in the London insurance market and

subscribed to a number of insurance policies for North

American insureds. As such, ICI (and Icarom as its

successor) is a frequent defendant in coverage actions brought

by those insureds in American courts. In a number of

instances where an action has been filed in state court,

ICl/lcarom has removed the case to federal court pursuant to

the Foreign Sovereign Immunities Act of 1976 (“FSIA”), 28

U.S.C. § 1602, et seg., on the basis of the Republic of

lreland’s ownership.

As discussed more fully below, the Republic of Ireland

chose to structure its ownership of ICI/Icarom through a

holding company. Thus, the issue of whether ICI/Icarom

qualifies as an “agency or instrumentality” under the FSIA

arises frequently in these coverage actions. Recently, lcarom

was denied access to federal court in two actions that arose

within the Ninth Circuit’s jurisdiction on the basis of that

circuit's bright-line rule against jurisdiction for tiered entities.

EOTT Energy Operating Lid. P'ship v. Winterthur Swiss Ins

Co., 257 F.3d 992 (9th Cir. 2001); Browning-Ferris Indus.

Inc. v. Lexington Ins. Co., No. 02-643, slip op. (D. Ariz. June

12, 2002). On the same facts, however, courts in other

circuits have determined that the Republic of Ireland's

ownership does qualify Icarom as the government's

instrumentality and entitles Icarom to federal jurisdiction

The latest decision to so rule is Fortis Insurance Lid \

Browning-Ferris Industries, Inc.. No. H-02-1226, slip op

(S.D. Tex. June 26, 2002).’

The Republic of Ireland and Icarom have an interest in this

Court's resolution of the question of whether tiered

ownership is permissible under the FSIA, since it may

directly affect currently pending cases in which Icarom is a

party. In addition, it may affect Icarom’s future ability to

remove cases to federal court. Accordingly, the Republic of

lreland and Icarom file this brief to put before the Court their

factual circumstances and to urge the Court, for reasons in

addition to those set forth in the Petitioners’ briefs, to

construe the FSIA in a manner that permits tiered ownership

SUMMARY OF ARGUMENT

There is a wide range of circumstances that can lead a

foreign government to use a tiered ownership structure for

entities in which it has a vital proprietary interest \

combination of Irish legal requirements and emergency

economic conditions led the Republic of Ireland to use a

shell corporation to act as its nominee in holding legal title

to ICI. This structure cannot obscure, however, that the

Irish government has 100% of the beneficial ownership of

that company.

* The district court’s opinion is not yet published. A COpy is contained

in the Lodging Material of Amici Curiae the Republic of Ireland and

Icarom pic (Under Administration) In Support of Petitioners

Under the FSIA’s plain language, a foreign sovereign’s

“agency or instrumentality” qualifies for the statute's

procedural protections whether it is owned directly by the

sovereign or indirectly through another of the sovereign’s

agencies or instrumenialities. This interpretation follows

from (1) the statute's express definition of the term “foreign

State” as including its “agency or instrumentality,” and (ii) the

use of the undefined terms “owned” and “ownership interest”

to extend the statute's reach to a broad array of proprietary

interests, legal and beneficial, direct and indirect.

[he statute's underlying purpose is to protect the foreign

relations interests of the United States by providing more

uniform treatment in resolving disputes in which foreign

sovereigns have proprietary interests, achieved by channeling

such disputes into the federal courts. This purpose requires

that the statute be construed to reach all entities in which a

foreign sovereign has a genuine majority ownership interest,

however that interest may be structured. A_ formalistic

approach that would automatically exclude from FSIA

protection any entity that is owned by a foreign sovereign

through a tiered structure is destructive of that core purpose.

[he district courts should determine whether an entity

qualities for FSIA protection based on the substance of the

foreign sovereign’s Ownership interest and not by application

of a ngid rule against tering.

ARGUMENT

Beginning with Gates v. Victor Fine Foods, 54 F.3d 1457

(9th Cir. 1995), the Ninth Circuit has refused to accord FSIA

status to tiered entities. In the case at bar (Patrickson v. Dole

Food Co., 251 F.3d 795 (9th Cir. 2001), cert. granted, 70

U.S.L.W. 3798 (2002)), the Ninth Circuit ruled that the

manner in which the Israeli government structured its

ownership interests in the Dead Sea companies disqualifies

them from treatment as state-owned instrumentalities under

the FSIA. In EOTT Energy, the Ninth Circuit reached the

same conclusion regarding the Republic of Ireland's

ownership of Icarom. In each instance, the circuit court's

ruling cannot be squared with the plain language of the statute

and, moreover, is at war with the statute’s underlying

purpose. This Court should reverse.

I. ICAROM IS A COMPELLING EXAMPLE OF

AN INSTRUMENTALITY THAT IS [00%

OWNED BY A FOREIGN GOVERNMENT

NOTWITHSTANDING THE FACT THAT

LEGAL TITLE TO ICAROM’S SHARES IS

HELD BY NOMINEES.

There are a huge variety of circumstances in which foreign

governments choose to tier their ownership of entities in

which they have a genuine, even vital, proprietary interest

As one commentator has noted, the Mexican government has

long had a vital national interest in its oil industry, its major

source of foreign exchange. That interest did not diminish

when, in 1982, Mexico decided to restructure its ownership of

what had been a single national petroleum company into a

holding company with four subsidiaries.’ This Court should

therefore be careful in construing the FSIA to take into

account not only the fact pattern presented in Patrickson but

the wide array of ways in which foreign governments may

structure their ownership interests. The Irish government's

ownership of Icarom provides a useful fact pattern against

which the statute can be measured. As we shall show, the

Republic of Ireland, as beneficial owner of Icarom,

indisputably holds 100% vf the proprietary interest in that

company notwithstanding that in structuring its ownership it

Joseph W. Dellapenna, 25th Anniversary of the Foreign Sovereign

Immunities Act: Refining the Foreign Sovereign Immunities Act, 9

Willamette J. Int'l Law & Dispute Resolution 57, 89 (2001)

chose to use a shell corporation whose only function ts to act

as its nominee in holding bare legal title to Icarom’s stock.

icarom is thus not some remote «atity in which the Irish

government happens to have a commercial interest. The

government did not acquire ICI in order to generate

commercial profits from the business of insurance. Rather,

the government acted to salvage ICI when it became

insolvent. It did so for the stated purpose of protecting the

Irish economy from the risk of collapse that the government

feared could ensue from the financial failure of one of the

country’s largest insurers and the threat this posed to Its

parent, the country’s premier commercial bank. The structure

of that acquisition, in turn, was dictated by requirements of

Irish law in combination with the government's perception

that speed and initial secrecy were essential to the

acquisition.”

A. 1C!'s Background and Later Insolvency

IC] was incorporated as a limited liability company in

1935. in Dublin, Ireland. In its early years, ICI primarily

concentrated on Irish non-life insurance business The

company rapidly grew to become the largest liability and

marine insurer in Ireland. In the 1970's, ICI expanded its

operations into foreign markets, including the London

insurance market.

In 1981, AIB acquired 25% of ICI’s stock. Two years

later, AIB purchasea the remaining ICI shares and assumed

full control of the company. Shortly after the acquisition,

* Facts pertinent to the Republic of Ireland's ownership of Icarom are

drawn from the record in Fortis Insurance and USX Corp. v. Adriatic

Insurance Co., No. 95-866 (W.D. Pa. removed June 7, 1995), and in

particular from the Republic of Ireland's Certification of Ownership,

discussed more fully at pp. 9-10 supra. A copy of the Certification of

Ownership is included among the material lodged with the Court by

these amici.

-y .

however. AIB discovered that ICI’s financial position had

deteriorated, due in large part to losses associated with its

London business. In late 1984, AIB injected IR£40 million of

capital into ICI to shore up its operations. However, this

investment proved insufficient to rehabilitate ICI. Upon

further investigation, AIB determined that there were

additional deficiencies that made ICI’s continued viability

questionable and learned that ICI could not estimate with any

degree of certainty the extent of its losses. It eventually

became painfully clear that the restoration of ICI to full health

would require major additional funding.

B. The Irish Government’s Response to the

Impending Economic Crisis

In early 1985, AIB informed the Irish government of ICI’s

precarious financial condition. Given the enormity of ICI's

losses and the amount of money likely to be needed to put the

company on sound financial footing, the Irish government

quickly recognized that AIB was incapable of funding ICI's

liabilities without putting its own solvency in jeopardy. Since

AIB was the largest bank in Ireland and ICI was the leading

insurer to corporate Ireland, the Irish government had grave

concerns about what might happen to the Irish insurance and

banking systems and, in turn, to the Irish economy if

information concerning ICI’s financial condition became

public with no soluticn to the impending crisis in place.

“To avoid [ICI’s] collapse and to minimise as far as

possible the general economic repercussions that might arise

therefrom.” the Irish government reached the decision on

March 15, 1985, to take emergency action. Its solution was

to acquire ICI from AIB, relieve AIB of the exposure that ICI

represented to its own financial condition, and have the public

Republic of Ireland Certification of Ownership, Lodging Material

at 20.

treasury serve as the source of funds of last resort in the

rehabilitation of ICI. Since the goal of the acquisition was to

maintain the stability of the insurance and banking systems in

Ireland, the government wanted it to be immediately clear to

the »ublic that AIB no longer had responsibility for the

liabilities of ICI and that the government, not AIB, would

assure that ICI would not default on its insurance obligations.

Thus, the government acted to complete its acquisition of ICI

by the end of the St. Patrick’s Day weekend when the

financial markets would reopen.

To effectuate the transfer in the quickest and quietest

manner possible, the government used a “shelf” company,

Gebhard Limited, controlled by the Minister for Industry,

Trade, Commerce and Tourism (“Minister”), through which

to acquire the shares of ICI from AIB. Subsequently, the

lrish Parliament enacted legislation that specifically

authorized the Minister to acquire ownership of ICI through

Sealuchais Arachais Teoranta (“SAT”), the new name for

Gebhard Limited. This legislation, entitled the “Insurance

(Miscellaneous Provisions) Act 1985” (the “I985 Act”),

made the transfer of ICI’s shares to SAT retroactive to March

15, 1985.

C. The Structure of the Government’s Owner-

ship of ICI

The threatened economic crisis that led the Irish

government to acquire ICI also influenced the ownership

structure that the government elected to use for the

acquisition. Initially, the government acquired ICI through

Gebhard Limited, a pre-existing shell company controlled by

solicitors acting for the Irish government. After securing

control, the government could act more deliberately in

the passage of special legislation authorizing this shell,

renamed SAT, to serve as the holding company nominee for

the Minister.

Under Irish law, ICI was required to have at least seven

shareholders in order to maintain its status as a public limited

company (“plc”). Accordingly, the government caused legal

title to six of ICI’s shares to be issued to senior civil servants,

who hold them in trust for the Minister. SAT took legal title

to the remaining 139,999,994 shares of ICI as a holding

company nominee fcr the benefit of the Minister. Under Irish

company law, a company that is not a plc must have at least

two shareholders. Two high-ranking civil servants therefore

agreed to hold legal title to the only two issued shares of SAT

in trust for the Minister. The terms of the trusteeship under

which the two civil servants hold the shares of SAT are set

forth in the 1985 Act, which also establishes that control over

the trustees rest with the Minister. For example, the

shareholders of SAT, who are also its directors, are appointed

by and may be removed by the Minister, after consultation

with the Minister for Finance. The directors of SAT hold

their positions on terms and conditions set by the Minister in

consultation with the Minister for Finance. In the event of the

death or retirement of a director, his share automatically vests

in the Minister without the necessity for transfer. Any

dividend received on account of the shares of SAT must be

paid to the Minister for the benefit of the Exchequer.

The Republic of Ireland has officially confirmed its

ownership of Icarom when the issue has arisen in

jurisdictional disputes. In an insurance coverage action

pending in district court for the western district of

Pennsylvania’, the current Minister for Enterprise, Trade and

Employment, the Honorable Mary Harney, provided a

Certification of Ownership, duly authenticated by the U.S.

° USN Corp. v. Adriatic Ins. Co., No. 95-866 (W.D. Pa. removed

June 7, 1995).

” The name of the Department of Industry, Trade, Commerce and

Tourism was changed in 1992 to the Department of Enterprise, Trade and

Employment.

Vice Consul in Ireland, formally declaring the government's

assertion of ownership of ICI and now Icarom. Icarom

subsequently filed the same Certification in the southern

district of Texas, and it was the basis for that court’s recent

decision in Fortis Insurance recognizing Icarom’s status as an

instrumentality of the Irish government. As stated in the

Certification, the responsible government Minister

“continue[s] in full ownership of ICAROM plc, in a manner

consistent with the Irish Law.” *

Under this ownership structure, all the shares of Icarom are

held for the benefit of the Minister and she, as the

personification of the Irish state, is the beneficial and

equitable owner of 100% of Icarom. Given its 100%

beneficial interest, the Irish government’s ownership is not

indirect in any sense pertinent to the statutory scheme. The

holding company and civil servants are not true

intermediaries even in the sense of an operating company that

owns subsidiaries but are instead merely nominees whose

sole function is to hold legal title to ICI’s stock for the

government’s benefit. Only by exalting form over substance

could ICI be deemed an _ inappropriate entity for

“instrumentality” treatment under the FSIA.”

* As the circuit court observed in S & S Machinery Co. v.

Masinexportimport, 706 F.2d 411, 415 (2d Cir. 1983), “statements of

foreign officials . . . have been accorded great weight in determining

whether an entity is entitled to claim the protection of the FSIA.” See

Fortis Ins. Ltd. vy. Browning-Ferris Indus., Inc., No. H-02-1226, slip op. at

6 n.8 (S.D. Tex. June 26, 2002); Outboard Maritime Corp. v. P.T.

Indonesian Consortium of Constr. Indus., 582 F. Supp. 1136, 1143-44

(D. Md. 1984).

” In USX, in addition to challenging the analysis of tiered ownership

championed by Gates and its progeny, Icarom contends that: (i) by virtue

of the Irish government’s 100% beneficial interest, it is directly owned by

the government and not indirectly owned through a true intermediary; and

(ii) because the government acquired it in order to rescue the Irish

economy, it qualifies in any event as an organ of the government. Plainly,

il. THE STATUTE’S PLAIN LANGUAGE SUP-

PORTS EXTENDING FSIA PROTECTION TO

MAJORITY-OWNED ENTITIES, WHETHER

HELD DIRECTLY OR INDIRECTLY.

In EOTT Energy, the Ninth Circuit adhered to the

inflexible rule against tiered ownership that it had laid down

in Gates and followed in Patrickson, holding that Icarom is

not majority-owned by the Republic of Ireland. Contrary to

the Ninth Circuit’s thesis, the FSIA’s majority-ownership

requirement does not purport to direct exactly how a state

instrumentality must be owned. The requirement is a

functional and practical measure of the extent of a foreign

government’s proprietary interest in an entity. It is not a rigid

blueprint that dictates to foreign governments how to legally

structure their sovereign affairs. It expressly does not specify

the type of ownership interest that must be held. It does not

limit ownership to holding legal title to the instrumentality’s

stock. It does not prohibit ownership through intermediaries.

Rather, the statute simply requires that the foreign state own a

“majority” interest in the entity, whether that interest is held

through “shares” or through some “other ownership interest.”

28 U.S.C. § 1603(b)(2). As the Fifth Circuit correctly

observed in Linton v. Airbus Industrie, 30 F.3d 592, 598 n.29

(Sth Cir. 1994), the FSIA “erects no explicit bar to the

methods by which a foreign state may own an

instrumentality.”

One of the more perplexing aspects of the Ninth Circuit’s

analysis is its assertion that a prohibition against any tiered

ownership is required by the literal language of the statute

and its insistence that Congress should have used other

language if it meant to allow indirectly-owned entities to

a purely commercial entity can be government-owned without being an

organ, and an entity can perform functions that qualify it as an organ

without it being government-owned. Icarom is both.

—

qualify as agencies or instrumentalities. In fact, the plain

language of §1603 dictates that an agency or instrumentality

of a foreign sovereign may be owned by another agency or

instrumentality of that sovereign, and Congress did not need

to use other language to achieve this result.

First, and foremost, the words “foreign state” constitute a

defined term in the statute. No interpretation is required to so

conclude. The term is bracketed by quotation marks and is

expressly listed as such under the provision entitled

“§$1603(a). Definitions.” That section unambiguously

provides that “for purposes of this chapter,” the defined term

“foreign state” shall be deemed to “include” both a “political

subdivision” and an “agency or instrumentality” of that state.

28 U.S.C. § 1603(a). The sole exception, again expressly, is

§1608, a provision dealing with service of process and other

procedural matters not pertinent to the issue here presented.

There and there alone, the statute says that the term “foreign

state” when used in combination with the term “political

subdivision” is meant to exclude any “agency or

instrumentality.” In all other instances, the more inclusive

statutory definition of “foreign state” contained in §1603(a)

applies. Hence, when the defined term “foreign state”

appears in the very next subsection, §1603(b)(2), it must be

read expressly to “include” an “agency or instrumentality.”

An “agency or instrumentality” is therefore defined as “any

entity . . . a majority of whose shares or other ownership

interest is owned by a foreign state,” which, in turn,

“includes” its “agencies and instrumentalities.” 28 U.S.C.

§ 1603(b)(2). Thus the statute’s plain reading is that direct

ownership by the foreign government itself is not required.

FSIA_ status extends as well to those agencies and

instrumentalities majority-owned by other agencies or

instrumentalities of the foreign government.

Second, the statute nowhere expresses the notion that

indirect ownership does not qualify for FSIA treatment.

There are no such words in the statute. To the contrary, the

only express requirement is that the foreign state must hold

the majority ownership interest in the entity, without

distinction as to whether it be direct or indirect. To be sure,

there are statutes that for clarification or emphasis add the

phrase “directly or indirectly” to indicate the breadth of a

term or concept, but that phrase is hardly mandatory in order

for courts to give a statute an equivalently broad construction.

The Ninth Circuit improperly takes the statute’s silence as a

directive to engraft the opposite phrase—‘directly but not

indirectly’—on the statutory language. But the statute itself

uses no such phrase.

In the face of the statutory language that says that the term

“foreign state” is one of the statutory “definitions,” the Ninth

Circuit’s insistence that it is not is indefensible. In the face of

the statutory command that the term shall be used as defined

for all purposes in the FSIA, except for the one express

purpose of service of process, the Ninth Circuit's decision to

broaden the exception to other circumstances, unexpressed in

the statute, is untenable. In support of its rewriting of the

statute, the Ninth Circuit makes two points, neither of which

withstands analysis.

First, the court stresses that Congress used the word

“includes” when it incorporated a political subdivision and an

agency or instrumentality into the term “foreign state” rather

than use the word “means.” Gates, 54 F.3d at 1462. But this

choice of words hardly transforms what Congress explicitly

called a “definition” into a non-definition. Use of the word

“means” would have been appropriate had Congress

endeavored to supply a complete list of all entities that fall

within its defined term, but Congress did not choose to do it

that way. For starters, the inclusion of the foreign sovereign

itself and the sovereign’s central government are both left

implicit. The use of the word “includes” makes clear that,

regardless of whatever else the term might encompass,

“foreign state” expressly extends to a foreign sovereign’s

agencies and instrumentalities.

Congress’ use of “includes” to set forth a definition is

common in many statutes. It is even used elsewhere in the

FSIA. In 28 U.S.C. § 1603(c), in defining the “United States”

for purposes of the statute, Congress specified that the term

“includes all territory and waters, continental or insular,

subject to the jurisdiction of the United States.” Surely this

choice of “includes” rather than “means” would not leave a

court free to limit the phrase in other sections of the statute to

territorial land and not territorial waters. If anything, the

word “includes” is more expansive than the word “means”

when used in a definition, since it leaves the courts room to

enlarge upon the enumerated list with other similar instances.

However, it does not permit a court to exclude expressly

listed instances, as the court below has done.

Second, the sole reason the Ninth Circuit gives for its gloss

on the statutory definition—its perceived need to avoid

surplusage—also does not hold up to close inspection. Gates

argues that if the term “foreign state” in all instances includes

an “agency or instrumentality,” it must perforce also include a

“political subdivision,” making the express addition of

“political subdivision” in §1603(b)(2) unnecessary. 54 F.3d

at 1462. The flaw in the Gates analysis is its transformation

of a tool of statutory construction into a rule of law. To be

sure, it is usually appropriate to construe statutes so as to

avoid redundancies. But as this Court has emphasized,

canons of construction are no more than rules of thumb which

sometimes must yield to the cardinal canon of construction,

that the Congress is presumed to say what it means and mean

what it says. Connecticut Nat'l Bank v. Germain, 503 U.S.

249, 253 (1992) (“[rjedundancies across statutes are not

unusual events in drafting”). The Ninth Circuit ignored this

principle in Gates which in other settings it, too, has

recognized. See, e.g., Cool Fuel, Inc. v. Board of

Equalization, 210 F.3d 999, 1005 (9th Cir. 2000) (“rigid

adherence” to rule against redundancy “must yield” when it

would “require disregard of clear indications to the contrary”

(quoting United States v. Zacks, 375 U.S. 59, 69 (1963))).

Here, application of the rule would be contrary to the

unambiguous statutory command that for all purposes save

one, the term “foreign state” shall include its “agency or

instrumentality.” The Gates reading would erect a second

exception, flatly contrary to what the statute says. As the

Seventh Circuit recognized, in deciding whether to accept an

arguable redundancy or to impose a construction that clearly

conflicts with a clear statutory command, the redundancy

must be tolerated. /n re Air Crash Disaster Near Roselawn,

96 F.3d 932, 940-41 (7th Cir. 1996); see also, Parex Bank v.

Russian Sav. Bank, 8\ F. Supp. 2d 506, 508 (S.D.N.Y. 2000).

It is not for the courts to tidy up poor statutory drafting at the

cost of Congressional intent.

The Ninth Circuit unfortunately ignores other important

statutory language bearing on the issue. In establishing its

ownership-interest test, Congress recognized that a foreign

government's interest, whether in a corporate or non-

corporate entity, could be held through “shares” or some

“other ownership interest.” It is telling that Congress used

the words “owned” and “ownership” in the statute without

defining them. See 28 U.S.C. §1603(b)(2). Just as this

absence of definition of these words permits a broader, more

flexible construction, the disjunctive phrase that joins a

particular instance (“shares”) with the general category

(“other ownership interest”) is expansive, not limiting. See

id. Plainly, the form of “ownership,” whether the entity is

“corporate” or non-corporate (“otherwise”), is not restricted

to “shares.” '° Given the vast array of forms of ownership

Contrary to the Ninth Circuit's suggestion in Patrickson, 251 F.3d at

807, the term “other ownership interest” is not tied solely to non-corporate

(“otherwise”) entities like partnerships. Just as the statute refers to non-

that the hundreds of different foreign governments with

widely disparate legal systems could potentially use,

declining to provide a fixed statutory definition of these

words is not surprising, and the Ninth Circuit was wrong in

insisting upon a limited definition.

In sum, on plain reading, the statute does not distinguish

between legal and beneficial ownership, nor between

ownership of a corporate entity through shares or through

other ownership interests, nor between direct and indirect

ownership. By definition, it expressly permits an agency or

instrumentality to be owned by another agency or

instrumentality. The Ninth Circuit’s conclusion to the

contrary, based solely on a concern about surplusage, cannot

be sustained.

iil. THE STATUTE’S UNDERLYING PURPOSE

WOULD BE DISSERVED BY REQUIRING A

BRIGHT-LINE DISTINCTION BETWEEN

DIRECT AND INDIRECT OWNERSHIP.

We do not wish to be understood to discard the Ninth

Circuit’s concerns regarding plain language. There is a

genuine issue of surplusage, and to that extent the statute

could be clearer. Rather, we fault the Ninth Circuit for

insisting that it has found the correct plain reading of the

statute when its reading fails even more than its alternative to

account for the full statutory text. To the extent that

ambiguities persist after a plain reading of a statute, and the

various rules designed to aid construction are inconclusive or

in conflict, the touchstone for interpretation must be the

nature of the statute itself. No statute should be read in a

vacuum. Its underlying object or fundamental purpose must

corporate (“otherwise”) entities held by “shares” (e.g . partnership shares

or shares in a joint stock association), so, too, does it expressly

contemplate that a “corporate” entity can be held by an “other ownership

interest.” 28 U.S.C. § 1603(b).

inform its construction. Yet it is here especially that the

Ninth Circuit’s analysis stumbles. More troubling than the

flaw in their linguistic analysis is the damage that Gates and

its progeny would inflict on the FSIA’s core purpose: to

protect the foreign relations interests of the United States by

minimizing the chance for confrontations with foreign

governments that might arise by exposing them to the

potential vicissitudes of state court justice and jury verdicts.

It is not comity but uniformity of treatment which the FSIA

seeks to promote.'' Under the FSIA’s approach, the key to

promotion of good foreign relations in respect to litigated

controversies is in assuring uniformity of treatment from

nation to nation by placing their matters in the hands of the

federal judiciary. Recognizing the many ways in which

foreign governmental interests may be involved in a litigation

controversy, Congress chose to describe broadly what

constitutes a “foreign state” for purposes of the statute.

Congress thus intended the FSIA to extend procedural

protection to a wide array of entities in which a foreign

government has a majority proprietary interest, and the

' Unfortunately, the Solicitor General's brief in support of certiorari

misses this point. Noting that foreign jurisdictions generally do not grant

immunity-based protections to government-owned entities at all unless

they engage in sovereign acts, the Solicitor General suggests that

extending such protection to subsidiaries would be even less reciprocated

abroad. Brief at |!. Yet this very observation — that foreign jurisdictions

do not typically grant protection even to directly government-owned

commercial entities—underscores that the FSIA is not so much about

comity as about uniformity. However foreign courts choose to treat U-S.

government-owned commercial entities, Congress has determined to

provide foreign government-owned counterparts not with immunity but

with the uniform treatment that access to federal courts provides.

courts are accordingly obliged to construe the law broadly

to achieve this end. As the legislative history of the

statute shows:

[EJntities 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 (1976), reprinted in 1976

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

A broad construction of such statutory terms as “foreign

state,” “agency or instrumentality,” “ownership interest,” and

“owned,” is particularly essential given the enormous

diversity of foreign governments and systems of laws which

the statute can be expected to reach. It would be the very

antithesis of what the law seeks to achieve to adopt a narrow

and parochial view of how the FSIA permits a foreign

government to structure the entities in which it has a vital

interest and still be eligible for FSIA treatment. Indeed,

allowing the ownership structure required by the legal system

of one foreign state to qualify while denying another’s simply

because, as with ICI, legal title is held by a nominee, would

be calculated to accomplish the exact opposite of the statute's

stated goal of uniformity of treatment ai reliable access by

foreign sovereigns to a unitary system of federal courts. As

the legislative history observes, “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.” /d. at 6611.

It is in this context and not against the backdrop of what a

court might regard as black-letter principles of U.S. corporate

law that the FSIA must be interpreted. The notion that it is

U.S. domestic jurisprudence on corporate organization and

ownership that must inform how the FSIA is interpreted ts

hardly self-evident. The FSIA was not enacted to establish or

even necessarily to reflect positive principles of corporate

law, such as rules of limited liability, separateness of the

corporate entity from its shareholders, consolidation of

financials of related corporate entities, or the like. U.S.

corporate law is thus not the appropriate model against which

to measure the reach of the FSIA’s majority ownership test.

ICI is a perfect illustration. As a matter of Irish law, the

government could not be the sole legal owner of ICI with

direct title to all of its shares, because a minimum of seven

shareholders was required to maintain ICI’s status as a public

limited company. To be sure, as a strict legal matter, the

Minister could have held legal title to all but six of ICI’s

shares, as the government typically does when it owns and

operates commercial ventures, but the government never

intended its ownership of ICI to represent a commercial

venture opportunity. Because of the extraordinary economic

circumstances that led to the ICI acquisition, other important

Irish public policy considerations counseled a different

structural approach. It was the prospect of an economic crisis

arising from ICI’s and, potentially, AIB’s insolvency that

caused the government to move quickly and quietly to secure

control over ICI while the Irish financial markets were closed

and, in turn, that led to use of a pre-existing shell corporation

to acquire most of ICI’s shares, which action was later

retroactively authorized by the passage of the 1985 Act. This

is the essence of sovereign discretion. For a court to hold that

this ownership structure, dictated by Irish law and the

perceived need for speed and secrecy, cannot qualify for the

protection of the FSIA, notwithstanding that the government

holds a complete beneficial interest, while another foreign

state’s direct legal ownership of a mere 51% interest in a

commercial operation would enjoy all the law's procedural

benefi’s, is indefensible. .

Seemingly oblivious to what the FSIA attempts to

accomplish, Gates and its progeny assert that according

foreign state status to indirectly majority-owned commercial

entities would considerably expand the FSIA’s protection “far

down the line” of a corporate chain. See, e.g, Gates, 54 F.3d

at 1462. Yet the Ninth Circuit recites no examples of

circumstances in which second or lower-tier companies might

be afforded FSIA protection when to do so would somehow

be inappropriate. Indeed, it even acknowledges that “such a

broad view of sovereign immunity may very well be

desirable.” Jd. The short answer is that in determining

whether an entity is too remote from the foreign sovereign,

Congress did not set a direct-versus-indirect test but a

majority-owned test. The mere fact that a foreign

government decides to hold legal title to all of a company’s

shares though one or more intermediaries rather than directly

does not lessen the government’s true interest.

Similarly, the Gates observation. that according foreign

state status to commercial entities that are indirectly majority-

owned by a foreign state unduly accords them competitive

advantages just begs the question. Congress expressly chose

to provide certain procedural protections to entities that

qualify as foreign states, such as access to federal court, 28

U.S.C. § 1441(d), the determination of factual issues by

federal judges rather than juries, id. at §1330(a), and the right

to special protections from pre-judgment attachment and

execution, id. at §§1609-11. The fact that those protections

will be extended to indirectly-held entities does not in any

way address the separate inquiry whether such entities are

among those that Congress wished to favor.

For these reasons, the ABA Working Group tasked with

the study of the FSIA recommended making the plain

language of the statute even plainer, by providing that the

FSIA “does not require direct majority ownership by a

foreign state for an instrumentality to qualify for” foreign

state status.' As the ABA Working Group recommended

(id.):

[Pjresumptive sovereign immunity should apply to

corporations indirectly majority owned by foreign states

[because] at least some states structure important areas

of national interest, such as natural resources, through

several levels of corporations. The strength of a foreign

state’s sovereign interests in an area do not necessary

dissipate when employing more complicated legal

structures resembling those used by modern private

businesses.

This observation could have been written with ICI in mind,

where any contention that the Irish government’s ownership

interest in ICI is somehow attenuated due to the fact that a

nominee company holds legal title to most of ICI’s shares

entirely puts form ahead of substance. All of ICI’s shares are

ultimately held for the benefit of the pertinent Irish Minister.

Quite simply, the Irish government owns ICl. This Court

should reject any construction of the FSIA that would

conclude otherwise.

IV. A Substantive Rather Than a Formalistic

Approach Offers a Better Solution to the Issue of

Tiered Ownership Under the FSIA.

Especially in circumstances where plain-text arguments

raise honest differences, rigid adherence to a formalistic

construction of a statute is ill-advised and scrupulous regard

for the statute’s underlying purpose becomes paramount.

‘2, Recommendations and Report on the U.S. Foreign Sovereign

Immunities ‘ct, Working Group of the Int'l Litig. Comm. of the Am. Bar.

Ass'n, at 7 (Uctober 2001).

Here, the Ninth Circuit has proffered no plausible policy

argument why an entity should be excluded from the

procedural protections of the FSIA solely because the foreign

government has structured its ownership through an

intermediary. To the contrary, that court has itself

acknowledged that the better rule might be to include entities

so owned. Gates, 54 F.3d at 1462. The better approach, we

submit, is to require district courts to evaluate the factors that

support or refute whether the foreign government has a

genuine “majority” “ownership interest,” regardless of how

structured, rather than apply an inflexible antitiering rule.

The district courts are fully capable of assessing whether

the foreign government has a true proprietary interest in the

particular entity or whether its connection to the entity is

entirely incidental and without indicia of genuine ownership.

It is, after all, ownership that Congress set as its test. The test

is not legal structure, not governmental purpose,'* not day-to-

day participation in the entity’s affairs, not even control,

although majority ownership may represent the power to

control. The district courts are fully capable of determining

whether the foreign government holds an actual majority

ownership interest. The courts could deny instrumentality

treatment where, for instance, the government for reasons

peculiar to its system of laws holds full legal title to the entity

but the beneficial interest is entirely in private hands. It can

give due consideration to any expressions by the government

of how it perceives its ownership interests in the entity in

circumstances where its own laws and local circumstances

have dictated the adoption of an indirect legal structure. All

such considerations are well within the purview of the district

courts in determining in specific circumstances what actually

'? There is a separate test that does look to the governmental purpose of

the entity in question, the “organ” test of §1603(b)(2), but that test is not

at issue in Patrickson.

constitutes “majority ownership.” No mechanical rule is

needed, particularly none based on parochial notions of U.S.

corporate law.

We do not presume to speak for the parties in the instant

case as to how such factors apply to the Dead Sea companies,

although it is difficult to see how the mere use of a tiered

structure can obscure the fact the Israeli government owned

well in excess of the majority interest in these companies.

We simply suggest that no mechanical rule should be adopted

under the guise of statutory interpretation that looks to form

rather than substance. As a consequence, we urge that the

Court reject any invitation to construe the statute so as to

exclude an entity like ICI from treatment as a government-

owned instrumentality under the FSIA.

‘

CONCLUSION

For the foregoing reasons, amici curiae the Republic of

Ireland and Icarom, plc (Under Administration) urge that the

decision below be reversed.

Respectfully submitted,

MARTIN R. BAACH*

JAMES P. DAVENPORT

GEOVETTE E. WASHINGTON

BAACH ROBINSON & LEWis PLLC

One Thomas Circle, Suite 200

Washington, D.C. 20005

* Counsel of Record (202) 833-8900

Counsel for the

Republic of Ireland and

August 23, 2002 Icarom ple (Under Administration)

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