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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2003
- **Citation:** 537 U.S. 1185

## Text

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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

' or

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,
V.

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

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

. Seg

TABLE OF CONTENTS

INTRODUCTION AND SUMMARY OF
TET wesiiciciliciittceniiiiebdnipuiteisamitaliatantenasnnivcunnee

TT Wain taaiadaiiitest hiathteaihiniintiinaaaalatae

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)

13

il
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

iv
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

Vv
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)....................

9

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.

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 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.

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
instrumentalities 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 § 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).

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 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).

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.” /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.

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., 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.

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 *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.

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, 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

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
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

ee

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.

V.

GERARDO DENNIS PATRICKSON. ef al.
Respondents.

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

V.

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)

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 )

i)

IN THE
Supreme Court of the United States

Nos. 01-593 & 01594

DOLE Foop COMPANY. ef a/..
Petitioners.
v.

GERARDO DENNIS PATRICKSON., ef al
Respondents,

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

Wa

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

2

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.

3

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

4

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

5

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)

6

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.

8

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.

9

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.

10

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.

13

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,

14

“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

15

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-

16

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).

17

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.

18

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.

19

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

20

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

21

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).

22

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.

23

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)

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0512%3A14. Public record. Not legal advice.