Amicus Curiae Brief — Powerex Corp. v. Reliant Energy Services, Inc.

—

5 Bala ———————___

POWEREX CORP., PETITIONER

v.

RELIANT ENERGY SERVICES, INC., ET AL.

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS-

FOR THE NINTH CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE SUPPORTING PETITIONER

PAUL D. CLEMENT

Solicitor General

Counsel of Record

PETER D. KEISLER

Assistant Attorney General

EDWIN S. KNEEDLER

Deputy Solicitor General

DouUGLAS H. HALLWARD-DRIEMEIER

Assistant to the Solicitor

General

MARK B. STERN

JOHN B. BELLINGER Ill H. THOMAS BYRON III

Legal Adviser Attorneys

Department of State

Washington, D.C. 20520 Department of Justice

Washington, D.C. 20530-0001

(202) 514-2217

BEST AVAILABLE COPY

QUESTIONS PRESENTED

1. Whether petitioner, which is wholly owned by a crown

corporation that is itself wholly owned by the Canadian

Province of British Columbia, and which performs obligations

and exercises rights of the Provinee pursuant to treaties with

the United States, is entitled to the protections of the Foreign

Sovereign Immunities Act of 1976, 28 U.S.C. 1602 et seq., as

an “organ of a foreign state or political subdivision thereof,”

28 U.S.C. 1603(b)(2).

2. Whether the court of appeals had jurisdiction to review

the district court’s remand order, notwithstanding 28 U.S.C.

1447(d).

(1)

TABLE OF CONTENTS

Page

IE Ue CE « vc cncanvasievencessacessver 1

PE s ccensnn eee hehe snsoeseru skeet aneebedeeusua ]

IIIS oc vosucsntaccasulencenunndesacens 6

Argument:

I. Because the district court had removal jurisdic-

il.

tion, its subsequent remand order was subject to

EE 5. o's Kou pwadadenwes Geceacnvauss 7

A. Section 1447(d) does not preclude

appellate review of an order remanding a

properly removed case on the basis of the

district court’s post-removal rulings ........... 7

B. Because this case was properly removed,

the court of appeals had jurisdiction to

review the district court’s rulings in the exercise

I icc enw detaeedsdesdedcess 11

Petitioner is an agency or instrumentality of

the Province for purposes of the FSIA............ 16

A. Inthe FSIA, Congress restricted the

scope of foreign state immunity while

expanding the class of entities that could

invoke the Act’s procedural benefits ......... 16

B. Congress intended the definition of

agency or instrumentality to be flexible

SN sé cath cnaheeecestscaucaseannnes 20

C. Petitioner is an organ of British Columbia

because it serves a public purpose on

GME GT URS FUGVENED onc cece cccccccccscces 22

(IIT)

IV

Table of Contents—Continued: Page

D. The court of appeals’ analysis of the

various factors in isolation failed to appre-

ciate the extent of petitioner’s relationship

to BC Hydro and the Province .............. 25

ED Shdbsuadduvedeasadeadiecdewadcienisisasecee 30

EEE Kbaduvevesuecceswasdncdsbsassvackseecuseeuns la

TABLE OF AUTHORITIES

Cases:

Acron Inv., Inc. v. FSLIC, 363 F.2d 236 (9th Cir.),

cert. denied, 385 U.S. 970 (1966) ...............2... 24

Alfred Dunhill of London, Inc. v. Republic of Cuba,

EE ors Cup ntkicubedeeeesaseuen’s 16, 17

American Nat'l Red Cross v. S.G., 505 U.S. 247

ee ee ee re re Peer 19

Amoco Petroleum Additives Co., In re, 964 F.2d 706

CT oe tee de ee ee has adad 8

Beacon Threatres, Inc. v. Westover, 359 U.S. 500

DE ied weed eee EUR Usama es ol ee es dy 16

Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343 (1988) .. 8,9

Cherry Cotton Mills, Inc. v. United States,

Se CED duivdavesthonssndvnescseccesess 19

City of Waco v. United States Fid. & Guar. Co.,

ED dnnascénsnndndcecneccnsesnanes 15

Coale v. Societe Coop. Suisse de Charbons, 21 F.2d

Ps HD cc cKdveucdeccavsstcescearars 17

Corporacion Mexicana de Servicios Meritimos, S.A.

de C.V. v. M/T Respect, 89 F 3d 650 (9th Cir. 1996) ... 22

Cases—Continued: : Page

Department of Employment v. United States,

SED Wa PCED os cccdceusundtisweneespenees 19, 22

Dole Food Co. v. Patrickson, 538 U.S. 468 (2003) .... 19, 20

Emergency Fleet Corp. v. Western Union Tel. Co.,

eer eee 20

FSLIC v. Ticktin, 490 U.S. 82 (1989) ...........-.6.- 19

Filler v. Hanvit Bank, 378 F.3d 213 (2d Cir.), cert.

denied, 543 U.S. 1022 (2004) ............ cece eeees 21

First Nat! City Bank v. Banco Para el Comercio

Exterior, 462 U.S. 611 (1983) .............4.. 23, 27, 28

Franchise Tax Bd. v. Construction Laborers

Vacation Trust, 463 U.S. 1(1983) .............006. 14

Freeport-McMoRan, Inc. v. KN Energy, Inc.,

GA ae SED 0c 0s ccccescivevasissacespassans 8

Grupo Dataflux v. Atlas Global Group, L.P.,

OES Ue Be GE nv cd cnccvendeensédscsceeusauun 8

Guaranty Trust Co. v. United States, 304 U.S. 126

GREED 6.0.6. 00h000000600000604000 00000 16

Inland Waterways Corp. v biisee 309 U.S. 517

ED on vevcccnssceu40scenee. sus 5ueusneseeeeeee 19

Keifer & Keifer v. RFC, 306 U.S. 381 (1939) .........-. 19

Kelly v. Syria Shell Petrolewm Dev. B.V., 213 F.3d

841 (5th Cir.), cert. denied, 531 U.S. 979 (2000) ... 21, 22

Kircher v. Putuam Funds Trust, 126 S. Ct. 2145 |

GD 0.000 6eeuensaeasessanessnadaaaeenneeceee 5, 11

Kunzi v. Pan-Am, 833 F.2d 1291 (9th Cir. 1987) ......... 9

Lebron v. National R.R. Passenger Corp., 513 US.

SPOGINEED pe cicscntvcnsanescectenevantesucemenue 24

Lehmenv. Nakshian, 453 U.S. 156 (1981) ............ 16

VI

Cases—Continued: Page

Letherer v. Alger Group, L.L.C., 328 F 3d 262 (6th

ee he dan kein ech eweeseds 8

Linton v. Airbus Industrie, 30 F.3d 592 (5th Cir.),

cert. denied, 513 U.S. 1044 (1994) .... 000000... S

Mitchell v. Forsyth, 472 U.S. 5M (1985)... 2... eee ee 16

Nolan v. Boeing Co., 919 F.2d 1058 (Sth Cir. 1990),

cert. denied, 499 U.S. 962 (1991) .................. 12

Oliver Am. Trading Co. v. Mexico, 264 U.S. 440

ee ee i ia een edeebees 13

Oklahoma Tax Comm'n v. Graham, 489 U.S. 838

RS ES TEN ein RS a a 15

Osborn v. Haley, 1278. Ct. 881 (2007) ........ 8, 10, 12, 15

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

2001), aff'd and dismissed in part, 538 U.S. 468

a 5, 21

Poore v. American-Amicable Life Ins. Co.,

218 F.3d 1287 (11th Cir. 2000) .................. 8, 10

Quackenbush v. Allstate Ins. Co., 517 U.S. 706 (1996) .... 8

Reddam v. KPMG LLP, 457 F.3d 1054 (9th Cir.

Dili eeekCeeb eek ebhekeeeekéeteseececs es 8

Sloan Shipyards Corp. v. U.S. Shipping Bd.

Emergency Fleet Corp., 258 U.S. 549 (1922) ......... 17

St. Paul Mercury Indem. Co. v. Red Cab Co.,

ee ise se cucacheeeagene Y

Steel Co. v. Citizens for Better Env't, 523 U.S. 83

REE Ea Lee 13

Thermtron Prods., Inc. v. Hermansdorfer,

EE cccdrsacavestnioeses 7, 8, 11, 12, 14

Vil

Cases—Continued: Page

Things Remembered, Ine. v. Petrarca, 516 U.S. 124

Be Pniet deenctucnibnstendonsdcceanthescdesases 7,13

Trans Penn Wax Corp. v. McCandless, 50 F.3d 217

SS ED 00 6064bsnkcngscdcavenntedanetescedas 8

Transit Cas. Co. v. Certain Underwriters at Lloyd's,

119 F.3d 619 (8th Cir. 1997), cert. denied, 522 U.S.

RE obs ddeaddacecssseccecudsintéasbecusues 8

United States v. Deutsches Kalisyndikat Gesellschaft,

Se ae SEP as GUD cvcetccececccecccesnees 17

United States v. Jorn, 400 U.S. 470 (1971) 2.0... ..0... 13

USX Corp. v. Adriatic Ins. Co., 345 F.3d 190

(3d Cir. 2003), cert. denied, 541 U.S. 903

Re dwewanndecdesstercésuneees 21, 22, 24, 26, 27, 30

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

Ge EEE oes ccccnescicesevessacess 1, 16,17

Treaties and statutes:

Treaty Between the United States of America and

Canada Relating to Cooperative Development of

the Water Resources of the Columbia River Basin,

eh, es Ss EP SE du bb cadevcdacctesucies 2

Treaty Between Canada and the United States of

America Relating to the Skagit River and Ross

Lake, and the Seven Mile Reservoir on the Pond

D’Oreille River, Apr. 2, 1984, T.1.A.S. No. 11,088 .... 3

Act of Nov. 19, 1988, Pub. L. No. 100-702,

A, I, GED oo oéocccccovevecacccecses 7)

VIII

Statutes—Continued: Page

Act of Oct. 1, 1996, Pub. L. No. 104-219, § 1,

PP ch dsdecccuseunnss Ghee nerereeescoses 10

Foreign Sovereign Immunities Act of 1976,

PEL dcvcenscnevedcdabaniemecdseud l

ED vccduudvieteucsecuned 1, 4, 12, 20

SE denincdecdecucuess 1, 12, 18, 20, 26

ED \ chducdencdctisedvivedustonns 5

ED «be cuicasescadevenenewanuns 19

SE ba dctuddatevesuséssceadleshined 19

aD ccaucatbausehskekdcuvauaseses 17

Pe MED ccececdcakssdneusentacnens 17, 19

SE CD, Seon dutengeutensesedaauadnes 17

SE ED ni cddcvesdedccesseecunnsens 17

EE 6d cicieckbevaeeunsuneenbaws 19

Government Corporation Control Act, ch. 557,

DED cn cc cucnshucecsduseuacseees 24

rrr re TT 29

SD o£ cc ncucedeccududpedeeusseahouses 24

NS ao cep cnacedboudesiensunesendaoonets 28

PEED ¢ cnduccdevecsenddccescdsisetdocsuss 25

Eo ccna dadeeebadassevessbeseeas 25

EE een ids sSectenné wuienwnsdheaes 14, 16

40) cach a ectnwnsed decent smeenukes 17

Ds tbh diccavedbasensedsbnasderiasieden 19

nc cbv conc deetueyeEkeesheseideeubebe 1]

ED ces ccnddundsduusddwedduaanewn 1, 16, 17

Ps BEE sev ecccsoceccteccesesescescesets 4,11,14

1X

Statutes—Continued: Page

PC EE Reed edebbccededctscesibcensénnes oe 15

Pe ED bc ndusieccdessadudsndconnkenes 4,11

PE DEED | 660 vin Sacvineccccsvesesaeus 9, la

PG CUED cnccntecccduccssduswans 9, 10, la

28 U.S.C. 1447(c) (Supp. 111996) ................005- 10

i Pere T TTC rere ree passim

SP ED sbcakediendneucses bivncuncnee passim

EG Sct dGesks dnd dddawbacndnnanwests 24, 25

Gade eGedccebncededecsascadceneavevkes 25

SPEED shupywaddnnheadducneevesudennns 12

Miscellaneous: ;

BC Hydro, Annual Report 2006 <http://www.

behydro.com/rx_files/info/info46749.pdf> ........... 25

Comment, The Jurisdictional Immunity of Foreign

Sovereigns, 63 Yale L.J. 1148 (1954) ............... 17

PGE, CU SUUPEEED ciccvedevessceccscceseses 30

Bernard Fensterwald, Jr., Sovereign Immunity and

Soviet State Trading, 63 Harv. L. Rev. 614 (1950) .... 18

William C. Hoffman, The Separate Entity Rule in

International Perspective: Should State

Ownership of Corporate Shares Confer Sovereign

Status for Immunity Purposes ?,

I iin I A 18

H.R. Rep. No. 799, 104th Cong., 2d Sess. (1996) ........ 10

H.R. Rep. No. 889, 100th Cong., 2d Sess. Pt. 1

GE dee cakinsencdsaddenndnusenunegsccnceces 9, 10

Miscellaneous—Continued: Page

H.R. Rep. No. 1487, 94th Cong., 2d Sess. (1976) ... passim

Letter from Jack B. Tate, Acting Legal Adviser, U.S.

Dep't of State, to Philip B. Perlman, Acting Att’y

an ccdnenesestkesscvsecaewaes 16, 17

S. Rep. No. 366, 104th Cong., 2d Sess. (1996) .......... 15

INTEREST OF THE UNITED STATES

The United States has an interest in the proper interpreta-

tion of the Foreign Sovereign Immunities Act of 1976 (FSIA),

28 U.S.C. 1602 et seqg., and in the proper procedures to be fol-

lowed when federal agencies and foreign sovereigns remove

a case to federal court. In response to the Court’s invitation,

the Solicitor General filed a brief at the petition stage ex-

pressing the views of the United States. ;

STATEMENT

1. The FSIA “contains a comprehensive set of legal stan-

dards governing claims of immunity in every civil action

against a foreign state or its political subdivisions, agencies,

or instrumentalities.” Verlinden B.V. v. Central Bank of Ni-

geria, 461 U.S. 480, 488 (1983). The FSIA defines “foreign

state” to include “an agency or instrumentality of a foreign

state,” 28 U.S.C. 1603(a), which, in turn, is defined to mean:

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 citi-

zen 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.

28 U.S.C. 1603(b). The FSIA “guarantees foreign states the

right to remove any civil action from a state court to a federal

court,” Verlinden, 461 U.S. at 489, and that, “lujpon re-

moval{,| the action shall be tried by the court without jury,”

28 U.S.C. 1441(d). Those rights exist whether or not the for-

eign state is immune from suit in the particular case, and they

extend to agencies and instrumentalities of a foreign state as

well as the foreign state itself. /bid.; 28 U.S.C. 1603(a).

(1)

2

2. Petitioner is a corporation organized under the laws of

the Province of British Columbia, a political subdivision of

Canada. Petitioner is wholly owned by the British Columbia

Power and Hydro Authority (BC Hydro), a provincial crown

corporation that is in turn wholly owned by the Province. Pet.

App. 53a, 58a. BC Hydro, by law, “is for all its purposes an

agent of the government and its powers may be exercised only

as an agent of the government.” /d. at 166a. The directors of

BC Hydro are appointed by the Lieutenant Governor in Coun-

cil and hold office during pleasure, and the exercise of the

board of directors’ powers is subject to the approval of the

Lieutenant Governor in Council. /d. at 166a-167a.

BC Hydro’s responsibilities include the construction of

dams, storage facilities, and reservoirs, and the generation,

transmission, and distribution of electricity. Pet. App. 32a,

167a-168a. BC Hydro is also responsible for implementing on

behalf of Canada the Columbia River Treaty between the

United States and Canada, which is designed to control the

flow of the Columbia River for both flood control and power-

generation purposes benefitting both nations. /d. at 50a-51a.'

Under the treaty-based management system, Canadian dams

sometimes must release more water than would be optimal for

their own power-generating purposes, in order to maintain

water levels in the United States. /d. at 5la. The treaty ac-

cordingly provides that the United States will reimburse the

Province (as assignee of Canada) for foregone power-generat-

ing opportunities. See id. at 5la, 5da.

BC Hydro generates more electric power than the Prov-

ince needs. In 1988, BC Hydro created petitioner, at the di-

rection of the Province, as a wholly owned subsidiary to mar-

ket BC Hydro’s excess power to the United States. See Pet.

' See Treaty Between the United States of America and Canada Relating

to Cooperative Development of the Water Resources of the Columbia River

Basin, signed Jan. 17, 1961, entered into force Sept. 16, 1964, 15 U.S.T. 1555;

Pet. App. 61a-137a.

3

App. 30a; J.A. 267. The directors of petitioner are appointed

by the board of BC Hydro. J.A. 234. A majority of peti-

tioner’s directors are members of the BC Hydro board, ibid.,

and appointment of the single outside member was subject to

the concurrence of the Office of the Premier, zbid.; Pet. App.

58a-59a. Petitioner’s business activities are subject to a risk

management policy established and overseen by BC Hydro,

and there is close operational coordination between BC Hydro

and petitioner to optimize BC Hydro’s generating capacity. |

Id. at 28a. Petitioner’s income is consolidated with that of BC

Hydro, ibid., and a significant portion of those consolidated

profits are either transferred to the Province, id. at 202a-

204a, or taken into account in the rate charged for BC Hy-

dro’s power, thereby subsidizing the cost of power to the Prov-

ince’s citizens, see J.A. 206.

After petitioner was created, it worked together with the

Province in negotiating agreements regarding Canada’s enti-

tlement under the Columbia River Treaty. See Pet. App. 55a.

Ultimately, the Province assigned to petitioner its rights un-

der that Treaty. See J.A. 133-159. In addition, petitioner is

responsible for providing power to the City of Seattle as re-

quired in the Skagit River Treaty between the United States

and Canada.” See J.A. 190-194.

3. a. Plaintiffs—including the State of California and indi-

vidual energy consumers—sued cross-plaintiffs (among oth-

ers) in California state court, seeking damages for alleged

manipulation of the electricity market in violation of state law.

The latter parties filed cross-complaints against petitioner,

BC Hydro, the Bonneville Power Administration (BPA), and

Western Area Power Administration (WAPA), alleging that

they participated in the manipulation of energy markets.

- See Treaty Between Canada and the United States of America Relating

to the Skagit River and Ross Lake, and the Seven Mile Reservoir on the Pond

D’Oreille River. with annex, signed Apr. 2. 1981, entered inte force Dec. 14,

1984, T.L.A.S. No. 11,088; Pet. App. 138a-1 46a.

dq

Petitioner and BC Hydro removed the case to federal dis-

trict court pursuant to the FSIA, 28 U.S.C. 1441(d). The fed-

eral agencies invoked 28 U.S.C. 1442(a)(1) as additional au-

thority for removal. Pet. App. 19a. The plaintiffs moved to

remand the case to state court. They argued that the court

lacked jurisdiction to adjudicate the claims against BC Hydro

and the federal agencies because they were immune from the

cross-claims, and that petitioner could not remove under the

FSIA because it was not an agency or instrumentality of Brit-

ish Columbia. Jd? at 20a, 22a, 33a, 38a.

The district court granted the motion to remand. Pet. App.

18a-44a. The court held that, as “a corporation wholly-owned

by a political subdivision of a foreign government,” BC Hydro

qualified as a “foreign state” for purposes of the FSIA, id. at

21a (citing 28 U.S.C. 1603(a)), and that the claims against it

did not fall within any of the FSIA’s exceptions to immunity,

see id. at 2la-33a. The court also held that BPA and WAPA

were immune from suit, id. at 40a, and that because the state

court lacked jurisdiction over the claims against BPA and

WAPA, so did the federal court, because its jurisdiction on

removal was derivative of that of the state court, ¢d. at 43a-

44a. The court concluded, however, that petitioner did not

come within the statutory definition of an agency or instru-

mentality, and therefore did not qualify as a “foreign state”

under the FSIA. /d. at 33a-38a.

BC Hydro, BPA, and WAPA sought to clarify that the

claims against them had been dismissed, but the district court

denied their requests. The court reasoned that, because it

could not exercise jurisdiction over the claims against those

parties, it could not dismiss the claims, and was instead re-

quired by 28 U.S.C. 1447(¢) to remand the entire action to

state court. See J.A. 281-286, 287-289.

b. The cross-plaintiffs, BPA, WAPA, and petitioner cach

appealed. Pet. App. 8a-9a. The court of appeals first held

that 28 U.S.C. 1447(d) did not bar appellate review. The court

reasoned that the district court had removal jurisdiction over

5

the case at the outset because of BC Hydro’s status as a for-

eign state and BPA and WAPA’s status as federal agencies.

Id. at 10a. Because the district court had jurisdiction, and had

exercised that jurisdiction to decide the claims of immunity

and the status of petitioner, the court of appeals held that it

was “not deprived by § 1447(d) of jurisdiction to review these

substantive rulings.” /bid.

The court then held (on the appeal of the cross-plaintiffs)

that BC Hydro, BPA, and WAPA were entitled to immunity.

Pet. App. lla, 14a. It also held (on the appeal of BPA and

WAPA) that the district court erred in refusing to dismiss the

claims against them because, in a removed action, a defen-

dant’s immunity “is vindicated only by the district court’s

dismissal of the claims.” /d. at 16a.

With respect to petitioner’s appeal, the court of appeals

affirmed, holding that petitioner is not an “organ of a foreign

state or political subdivision thereof,” 28 U.S.C. 1603(b)(2).

Pet. App. 14a. The court stated that its determination of or-

gan status would turn ultimately on “whether the entity en-

gages in a public activity on behalf of the foreign govern-

ment,” and that it would “look to the purposes of an entity’s

activities, the entity’s independence from government, the

level of financial support received from the government, and

the entity’s privileges and obligations under the law.” /d. at

15a (quoting Patrickson v. Dole Food Co., 251 F.3d 795, 807

(9th Cir. 2001), aff’d and dismissed in part, 538 U.S. 468

(2003)). The court of appeals observed that petitioner “was

not run by government appointees, was not staffed with civil

servants, was not wholly owned by the government, was not

immune from suit, and did not exercise any regulatory author-

ity.” /d. at 15a-16a. The court acknowledged that petitioner

offered evidence that it “serves a public purpose,” but the

court concluded that what it regarded as petitioner’s “high

degree of independence from the government of British Co-

lumbia, combined with its lack of financial support from the

government and its lack of special privileges or obligations

6

under Canadian law dictate {the} holding that PowerEx is not

an organ of British Columbia.” Jd. at 16a.

SUMMARY OF ARGUMENT

1. The district court recognized that BC Hydro, BPA, and

WAPA properly removed this action to federal court in order

to vindicate their sovereign immunity from suit. The court

nevertheless remanded the case to state court on the ground

that, although the defendants properly removed, their immu-

nity prevented the court from actually hearing the claims

against them. That is not a proper basis for remand under

Section 1447(c), which provides for remand only on the basis

of a defect in removal procedure or jurisdiction, not on the

basis of developments in federal court after a case was prop-

erly removed. More particularly, with respect to this case,

Congress specifically provided for removal by foreign states

and the United States, as well as their agencies and instru-

mentalities, in large part to permit questions of immunity to

be decided by the federal courts. Plainly, it did not intend an

affirmative finding of immunity to be a basis for remanding

the immune parties to state court. Because the district

court’s remand was not for a reason specified in Section

1447(c), review of its order was not barred by Section 1447(d).

2. The court of appeals’ mechanical application of the test

for whether an entity is an “organ” of a foreign state was

flawed. The factors must be applied flexibly in service of, and

with constant reference to, the ultimate question: whether the

defendant serves a public purpose on behalf of its govern-

ment. Many of the factors the court found lacking, such as

immunity under domestic law, would be significant if they

were present because they would be strongly suggestive of a

certain type of government entity, but their absence is not

significant. Many United States government instrumentali-

ties lack some of the factors the court of appeals emphasized,

and the test has to be flexible enough to capture the wide

variety of government instrumentalities. Much more signifi-

7

cant, in this case, are the circumstances of petitioner’s cre-

ation, its close involvement with BC Hydro—its sole share-

holder, and the Province’s wholly owned statutory agent—on

matters of public interest, and the close financial relationship

between petitioner and BC Hydro. Under a proper analysis,

it is clear that petitioner qualifies as an “organ” of the Prov-

ince.

ARGUMENT

I. BECAUSE THE DISTRICT COURT HAD REMOVAL JU-

RISDICTION, ITS SUBSEQUENT REMAND ORDER WAS

SUBJECT TO APPELLATE REVIEW

The district court plainly had subject-matter jurisdiction

at the time of removal, and it properly proceeded to resolve

numerous questions of federal law in the exercise of that ju-

risdiction. The district court’s erroneous decision, after hold-

ing several of the defendants immune from the claims against

them, to remand the entire case to the state court was subject

to review by the court of appeals. The language and history

of 28 U.S.C. 1447(d), and this Court’s decisions construing

that provision, make clear that a district court’s order re-

manding a case that was properly removed at the outset is not

subject to Section 1447(d)’s bar on appellate review.

A. Section 1447(d) Does Not Preclude Appellate Review Of

An Order Remanding A Properly Removed Case On The

Basis Of The District Court’s Post-Removal Rulings

1. This Court has made clear that Section 1447(d) must be

read in pari materia with 28 U.S.C. 1447(¢c). See Thermtron

Prods., Ine. v. Hermansdorfer, 423 U.S. 336, 343 (1976).

“{O)|nly remands based on grounds specified in § 1447(c) are

immune from review under § 1447(d).” Things Remembered,

Ine. v. Petrarca, 516 U.S. 124, 127 (1995). See Kircher v.

Putnam Funds Trust, 126 S. Ct. 2145, 2153 (2006) (same).

Thus, this Court has upheld appellate review of remand or-

8

ders based on: a district court’s decision to overturn the At-

torney General’s certification that a federal employee was

acting within the scope of his employment and thus immune

from suit, Osborn v. Haley, 127 S. Ct. 881, 893-896 (2007); a

district court’s crowded docket, Thermtron, 423 U.S. at 340-

341; abstention, Quackenbush v. Allstate Ins. Co., 517 U.S.

706, 710-712 (1996); and the discretionary remand of state law

claims after the federal law claims that had supported re-

moval were eliminated from the case, Carnegie-Mellon Univ.

v. Cohill, 484 U.S. 343, 348, 355 n.11 (1988). Each of those

cases was properly removed to federal district court. The

district court therefore was properly vested with jurisdiction

from the cutset, and the purported ground for the remand

was not one encompassed within Section 1447(c) or, therefore,

by the bar to appellate review in Section 1447(d).

One ground for remand provided in Section 1447(c) is lack

of subject matter jurisdiction. But that reference must be

understood, and has been understood by all but one of the

courts of appeals to address the issue, as limited to remand

orders based on a defect in subject matter jurisdiction at the

time of removal that rendered the removal itself jurisdiction-

ally improper.’ That reading is consistent with the general

rule that a federal court’s subject matter jurisdiction is fixed

at the time the suit is brought and is not defeated by subse-

quent events. See, e.g., Osborn, 127 8. Ct. at 896; Grupo

Dataflux v. Atlas Global Group, L.P., 541 U.S. 567, 574

(2004); Freeport-McMoRan, lne. v. KN Energy, Inc., 498 U.S.

* See, «.y., Reddam v. KPMG LLP, 457 F.3d 1054. 1058 (9th Cir. 2006);

Letherer vy. Alger Growp, L.L.C., 328 F.5d 262, 265 (6th Cir. 2003); Poore v.

American-Amicable Life Ins. Co., 218 F.3d 1287, 1290-1291 (11th Cir. 2000);

Transit Cas. Co. v. Certain Underwriters at Lloyd’s, 119 F.3d619, 623 (8th Cir.

1997), cert. denied, 522 U.S. 1075 (1998); Trans Penn Wax Corp. v. McCand-

less, 50 F.3d 217. 223 (3d Cir. 1995); /n re Amoco Petroleum Additives Co., 9A

F.2d 706, 708-709 (7th Cir. 1992). But see Linton v. Airbus Industrie, 30 F.3d

592, 599-600 (Sth Cir.), cert. denied, 513 U.S. 1044 (1994).

9

426 (1991); Cohill, 484 U.S. at 350-351; St. Paul Mercury

Indem. Co. v. Red Cab Co., 303 U.S. 283, 294 (1938).

2. That reading is also consistent with the historical devel-

opment of Section 1447(c). Before 1988, the text of Section

1447(¢) made explicit that it authorized remand only based on

defects at the time of removal. It mandated remand “{iJf at

any time before final judgment it appears that the case was

removed improvidentiy and without jurisdiction.” 28 U.S.C.

1447(c) (1982). In Thermtron, the Court recognized that “only

remand orders” issued on the ground that “removal was im-

provident and without jurisdiction{] are immune from re-

view.” 423 U.S. at 346. Thus, under the pre-1988 version, it

was Clear that an order remanding a properly removed case

based on post-removal developments, such as the dismissal of

the federal claims on which removal was based, was not a

remand order under Section 1447(c) and was therefore not

immune from review under Section 1447(d). See, e.g., Cohill,

484 U.S. at 348; Kunzi v. Pan-Am, 833 F.2d 1291, 1295 (9th

Cir. 1987) (where district court found removal jurisdiction

proper, case “could not have been removed ‘improvidently and

without jurisdiction,’ and thus the remand|[] could not have

been based on section 1447(c)”).

That rule was not altered by later amendments to Section

1447(c), which established different time limitations for re-

mands based on two types of defects in removal—a defect in

removal procedure and a defect in removal relating to subject

matter jurisdiction. In 1988, Congress amended Section

1447(c), Pub. L. No. 100-702, § 1016(¢)(1), 102 Stat. 4670, to

require a party to file “[a] motion to remand tie case on the

basis of any defect in removal procedure * * * within 30 days”

or forfeit the objection. 28 U.S.C. 1447(c) (1988). The House

Report explained that “[sJo long as the defect in removal pro-

cedure does not involve a lack of federal subject matter juris-

diction,” there is no reason the case should be sent back to

state court long after the fact. H.R. Rep. No. 889, 100th

Cong., 2d Sess. Pt. 1, at 72 (1988). In contrast, with regard to

10

a “defect” that did “involve a lack of federal subject matter

jurisdiction,” 7bid., the amended statute required remand “at

any time before final judgment,” 28 U.S.C. 1447(c) (1988).*

In 1996, the provision was again amended, Pub. L. No. 104-

219, § 1, 110 Stat. 3022, to clarify that waivable objections to

removal include “any defect other than lack of subject matter

jurisdiction.” 28 U.S.C. 1447(c) (Supp. II 1996). The refer-

ence to “any defect”—like the similar reference in the 1988

House Report—makes clear that the phrase “lack of subject

matter jurisdiction” means a non-waivable jurisdictional “de-

fect” in the removal itself. /bid.; see H.R. Rep. No. 799, 104th

Cong., 2d Sess. 1 (1996) (“30-day limit applies to any ‘defect’

other than the lack of subject matter jurisdiction”).

The foregoing history demonstrates that Congress did not

intend to broaden the class of unreviewable remand orders,

but rather sought only to ensure that plaintiffs promptly raise

any objection to the removal on non-jurisdictional grounds.

See H.R. Rep. No. 889, at 72. As under Thermtron, “the

proper inquiry is still whether the court had jurisdiction at

the time of removal.” Poore, 218 F.3d at 1290; see n.3, supra.

3. There are, moreover, sound reasons why Congress

would not bar appellate review of decisions rendered by the

district court in the exercise of acknowledged jurisdiction.

Section 1447(c) is an “antishuttling provision{].” Osborn, 127

S. Ct. at 895. “Ordinarily, when the plaintiff moves to remand

a removed case for lack of subject matter jurisdiction, the

federal district court undertakes a threshold inquiry; typically

' The House Report makes clear that Congress understood a mandatory

(and therefore unreviewable) remand for lack of subject matter jurisdiction at

the time of removal to be distinct from a remand in a properly removed case

after the court had resolved disputed federal questions, which was discretion-

ary. See H.R. Rep. No. 889, at 72 (emphasizing that “|t/he amendment is

written in terms of a defect in ‘removal procedure’ in order to avoid any

implication that remand is unavailable after disposition of all federal questions

leaves only State law questions that might be decided as a matter of ancillary

or pendent jurisdiction or that instead might be remanded”).

11

the court determines whether complete diversity exists or

whether the complaint raises a federal question.” /bid. (em-

phasis added). Such “threshold” jurisdictional questions,

which determine whether the case was properly removed in

the first place, should, and most often will, be decided at the

outset. Section 1447(d) embodies Congress’s judgment that

little would be gained, and much lost, from protracted appel-

late litigation about whether such threshold determinations

were correct. See Kircher v. Putnam Funds Trust, 1268. Ct.

2145, 2152 (2006).

Those considerations are quite different where, as here,

the district court unquestionably possessed jurisdiction over

the removed case from the outset and proceeded to adjudicate

rights of the parties under federal law. At that point, consid-

erations of efficiency may weigh against transfer of the case

back to state court, which would be “perfectly free to reject

the remanding court’s” federal rulings. Kircher, 126 S. Ct. at

2157. That is particularly true in a case like this, when the

district court remanded only after making rulings on federal

issues that confirmed that a federal forum was appropriate.

Assuring access to the federal! judicial system for resolution

of such questions is the reason that Congress provided for

removal in the first place. See Thermtron, 423 U.S. at 344

(comparing remand of “an otherwise properly removed ac-

tion” to dismissal and referral to state court of “an action

properly filed in the federal court in the first instance”).

B. Because This Case Was Properly Removed, The Court Of

Appeals Had Jurisdiction To Review The District Court's

Rulings In The Exercise Of That Jurisdiction

1. In this case, the district court stressed that no party

contested that the actions could be removed pursuant to 28

U.S.C. 1441 and 1442. See Pet. App. 20a. As federal agencies,

BPA and WAPA were entitled to remove the action pursuant

to 28 U.S.C. 1442(a)(1) and have their amenability to suit ad-

judicated by the federal district court, which they did. See

12

Pet. App. 7a, 39a-40a. Similarly, as a crown corporation

wholly owned by the Province of British Columbia, BC Hydro

unquestionably qualifies as an agency or instrumentality of

Canada and therefore as a foreign state under 28 U.S.C.

1603(a) and (b). Pet. App. 12a-14a, 21a. Therefore, BC Hydro

had the right to remove the action under 28 U.S.C. 1441(d) in

order to have its claim of immunity decided by the federal

court, which claim the court upheld. Pet..App. 21a-33a.

Because removal by BC Hydro, BPA, and WAPA was

proper, the district court had (and retained) subject-matter

jurisdiction over the entire case irrespective of the “foreign

state” status of petitioner. Remand therefore was not re-

quired by 28 U.S.C. 1447(c). See, e.g., Nolan v. Boeing Co.,

919 F.2d 1058 (5th Cir. 1990), cert. denied, 499 U.S. 962

(1991); see also H.R. Rep. No. 1487, 94th Cong., 2d Sess. 32.

(1976). It follows that the bar to appellate review in Section

1447(d)—which applies only to “remand orders issued under

§ 1447(c) and invoking the [mandatory] grounds specified

therein,” Osborn, 127 S. Ct. at 893 (quoting Thermtron, 423

U.S. at 346) (brackets added in Osborn)—does not apply to a

district court order remanding a case after it resolved certain

questions of federal law properly brought before it.”

2. The district court made no reference to Section 1447(c)

in its initial remand order. The court did, however, invoke

* In holding that appellate review of (he remand order was not barred in

Osborn, the Court relied on the specification in 28 U.S.C. 2679%(d)(2) that the

Attorney General's certification that the defendant federal employee was acting

within the scope of his employment “shall conclusively establish scope of office

or employment for purposes of removal.” The Court concluded that that “anti-

shuttling” provision must be given precedence over 28 U.S.C. 1447(d). The

Attorney General's certification is the threshold jurisdictional predicate for

removal under 28 U.S.C. 2679(d\2). The specification that his certification is

conclusive “for purposes of removal” thus serves to foreclose any contention

that remand is required by Section 1447(c) if the district court overturns that

certification. Here, because removal jurisdiction was unquestionably proper

from the outset, the absence of a provision like Section 2679(d)(2) is irrelevant.

15

that provision in subsequent orders that, inter alia, denied

motions by BC Hydro, BPA, and WAPA to clarify that the

claims against them had been dismissed on immunity

grounds. J.A. 283, 288. The district court’s belated invocation

of Section 1447(¢), and its statement that the case was “re-

manded for lack of subject matter jurisdiction,” J.A. 283-284,

are not dispositive. A court’s characterization of its action is

not binding on this Court either to confer or to deny appellate

jurisdiction. See, e.g., United States v. Jorn, 400 U.S. 470, 478

n.7 (1971) (plurality opinion of Harlan, J.) (trial court’s char-

acterization of its action as “acquittal” did not deprive Court

of appellate jurisdiction); Oliver Am. Trading Co. v. Mexico,

264 U.S. 440, 442 (1924) (district court’s characterization of

dismissal of Mexico on grounds of immunity as a “jurisdic-

tional question” did not bar this Court from “determining for

itself whether the question which was certified is in truth one

of the jurisdiction of the lower court as a federal court”);

Things Remembered, 516 U.S. at 134 (Ginsburg, J., concur-

ring). Allowing a district court’s mischaracterization of its

decision as “jurisdictional” to defeat appellate jurisdiction is

particularly problematic in light of the oft-remarked confu-

sion surrounding that term. See Steel Co. v. Citizens for

Better Env't, 523 U.S. 83, 90 (1998) (“Jurisdiction is a word of

many, too many, meanings.”).

In this case, it is evident from the district court’s own or-

ders that its reference to “lack of subject matter jurisdiction”

was not a finding that it lacked removal jurisdiction. To the

contrary, the court drew a clear distinction between the ques-

tion “whether the actions were properly removed in the first

instance,” which was not contested, and the question whether

the court had “jurisdictional authority to hear the removed

claims,” because of the defendants’ immunity. Pet. App. 20a.

‘Thus, the court noted that “[njone of the parties contend that

the cross-|defendants] could not remove these actions under

the provisions of 28 U.S.C. §§ 1441 and 1442.” [bid.

“Rather,” the court continued, “[p]laintiffs argue that the

14

Court lacks jurisdiction over the removed actions and, as

such, they must be remanded.” /bid. (emphasis added). The

court stressed that “(t]he issue hinges, then, on the Court’s

jurisdictional authority to hear the removed claims, not

whether the actions were properly removed in the first in-

stance.” Ibid. (emphases added).

Those questions are, indeed, distinct. Unlike the federal

courts’ original subject matter jurisdiction over foreign states

under Section 1330, which exists only if an exception to the

foreign state’s immunity applies, removal jurisdiction under

Section 1441(d) exists over “/a/ny civil action brought in a

State court against a foreign state as defined in section

1603(a)” (emphasis added). If, in a case properly removed

under this provision, the district court concludes that the for-

eign state is immune, the proper response is to dismiss the

claims against it. That would be the point of a federal immu-

nity. Likewise, as the court of appeals held (Pet. App. 16a-

17a), when a suit against the United States or an agency, such

as BPA and WAPA, that is not subject to suit in state court is

removed under 28 U.S.C. 1442, “the proper course for a fed-

eral district court to take after removal would be to dismiss

the case altogether, without reaching the merits.” Franchise

Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1,

24 n.27 (1983) (emphasis added).

Thus, a holding that a defendant that properly removed a

case to federal court under one of those provisions is immune

from the claims against it is not a finding that the court lacked

removal jurisdiction. It therefore is neither a determination

of a “lack of subject matter jurisdiction” for purposes of Sec-

tion 1447(c), nor an order within the bar to appellate review

in Section 1447(d). To the contrary, it is a ruling that accentu-

ates the need for a federal forum, which is provided to ensure

that the federal-law immunity is fully protected. The district

court’s invocation of Section 1447(c) cannot shield a remand

order on that mistaken ground from appellate review. See

Thermtron, 423 U.S. at 350-352 (Section 1447(d) does not bar

15

review of question whether remand was of the type authorized

by Section 1447(c)).

In Sections 1442(a) and 1441(d), “Congress has expressly

provided by statute for removal | because] it desired federal

courts to adjudicate defenses based on federal immunities”

for the federal government and its agencies and officers, and

for foreign states and their agencies and instrumentalities.

Oklahoma Tax Comm'n v. Graham, 489 U.S. 838, 841-842

(1989); see S. Rep. No. 366, 104th Cong., 2d Sess. 30-31 (1996)

(Section 1442(a)(1) reflects “Congress’ intent that questions

concerning * * * the scope of Federal immunity * * * be

adjudicated in Federal court”); H.R. Rep. No. 1487, at 32

(FSIA’s removal provision reflects “the potential sensitivity

of actions against foreign states and the importance of devel-

oping a uniform body of law in this area”). It would be absurd

to think that Congress, which provided both immunity from

suit and a right of removal to federal court to vindicate that

immunity, would have intended to shield from appellate re-

view an order like that of the district court here holding that,

because the defendants have a federal immunity from suit, the

claims against them must be remanded to state court. Noth-

ing in the text, history, or purposes of Section 1447(¢) and (d)

requires that absurd result."

“ Even if Seetion 1447(4) did preclude review of the remand order itself, it

would not bar appeal of the separate aspect of the court’s order denying the

motions of BC Hydro, BPA, and WAPA to dismiss the claims against them,

which can be reversed even if the case is to be remanded. See Oshori, 127 5.

Ct. at 902 (Souter, J., concurring and dissenting in part) (citing City of Waco

v. United States Fid. & Guar. Cu., 293 U.S. 140 (1931)). Here, for example, the

court of appeals correctly upheld its appellate jurisdiction over the district

court's order denying BPA and WAPA’s motions to dismiss on immunity

grounds. Pet. App. 16a-17a. Because no party has sought review of that aspect

of the court of appeals’ judgment, it is not before the Court.

We agree with petitioner (Br. 40-41, 48-50) that, even apart from the district

court's uncontested removal jurisdiction based on the removals by BC Hydro,

BPA, and WAPA, there are strong arguments that the remand order denying

petitioner's claim to foreign state status and the right under the FSIA to a

16

II. PETITIONER IS AN AGENCY OR INSTRUMENTALITY

OF THE PROVINCE FOR PURPOSES OF THE FSIA

A. In The FSIA, Congress Restricted The Scope Of Foreign

State Immunity While Expanding The Class Of Entities

That Could Invoke The Act’s Procedural Benefits

1. Until 1952, the United States adhered to the “absolute”

theory of foreign sovereign immunity, Verlinden, 461 U.S. at

486, under which “foreign sovereigns and their public prop-

erty |[we]re * * * not * * * amenable to suit in our courts with-

out their consent,” Guaranty Trust Co. v. United States, 304

U.S. 126, 134 (1938). In 1952, the Department of State an-

nounced the adoption of the “restrictive” theory of foreign

sovereign immunity. See Letter from Jack B. Tate, Acting

Legal Adviser, to Philip B. Perlman, Acting Att’y Gen. (May

19, 1952) (Tate Letter) in Alfred Dunhill of London, Ince. v.

Republic of Cuba, 425 U.S. 682, 711-715 (1976). The Tate Let-

ter stated that thenceforth the Department would recommend

that foreign states be granted immunity only for their sover-

eign or public acts (jure imperii), and not for their commer-

cial acts (jure gestionis). Id. at 711. See Verlinden, 461 U.S.

at 486-487. The United States adopted the restrictive theory

in light of the growing acceptance of that theory among for-

federal forum and bench trial is subject to appellate review in the federal

courts. Mitchell v. Forsyth, 472 U.S. 511, 525 n.8 (1985) (“we have held that

state-court decisions rejecting a party's federal-law claim that he is not subject

to suit before a particular tribunal are ‘final’ for purposes of our certiorari

jurisdiction under 28 U.S.C. § 1257"); ef. Beacon Theatres, Inc. v. Westover, 359

U.S. 500, 511 (1959) (right to interlocutory mandamus relief for denial of jury

trial “is settled”). The right Lo a non-jury trial is an important aspect of foreign

sovereigns’ immunity from suit. Cf. Lehman v. Nakshian, 453 U.S. 156, 160-

161 (1981) (holding the United States’ immunity from a jury trial must be

separately and expressly waived). Further, that right would be irretrievably

lost in the event of a remand, because the right to a bench trial applies only in

the tederal forum. See 28 U.S.C. 1330, 1441(d).

17

eign nations and the need for a judicial forum to resolve dis-

putes stemming from the “widespread and increasing practice

on the part of governments of engaging in commercial activi-

ties.” Tate Letter (Alfred Dunhill, 425 U.S. at 714).

In 1976, Congress enacted the FSIA to establish a “com-

prehensive scheme” governing the manner by which “foreign

sovereigns may be held liable in a court in the United States,”

Verlinden, 461 U.S. at 496-497. The FSIA provides rules

ranging from the manner of serving process, 28 U.S.C.

1608(a), (b) and (¢), to the execution of judgments, 28 U.S.C.

1609-1611. As a general matter, the FSIA codifies the “re-

strictive theory” of sovereign immunity, allowing foreign

states to be sued for their “commercial activities.” Verlinden,

461 U.S. at 487-488. Even where the FSIA denies immunity,

the Act guarantees foreign states the right to remove a civil

action from state to federal court and the right to a bench,

rather than jury, trial in federal court. /d. at 489 (citation

omitted); 28 U.S.C. 1330(a), 1441(d).

2. During the time when the United States adhered to a

policy of “absolute” immunity for foreign states, a significant

practical limitation on that doctrine was the courts’ refusal to

extend immunity to separate legal entities owned by foreign

governments. Following this Court’s rule with respect to

domestic government corporations, many courts held that “la]

suit against a corporation is not a suit against a government

merely because it has been incorporated by direction of the

government, and is used as a governmental agent, and its

stock is owned solely by the government.” United States v.

Deutsches Kalisyndikat Gesellschaft, 31 F.2d 199, 202

(S.D.N.Y. 1929) (citing Sloan Shipyards Corp. v. U.S. Ship-

ping Bd. Emergency Fleet Corp., 258 U.S. 549 (1922)). See

Coale v. Societe Coop. Suisse de Charbons, 21 F.2d 180

(S.D.N.Y. 1921) (A. Hand, J.).

Some commentators characterized the separate entity rule

as applied to foreign sovereigns as a “judicial effort|| to re-

strict the applicability of the absolute theory.” Comment, The

18

Jurisdictional Immunity of Foreign Sovereigns, 63 Yale L..J.

1148, 1154 (1954). The effort was criticized as “unsatisfac-

tory” because it failed to focus on more substantial policy

concerns, such as whether the entity’s actions were under-

taken in a sovereign capacity. Jd. at 1153-1154. See Bernard

Fensterwald, Jr., Sovereign Immunity and Soviet State

Trading, 63 Harv. L. Rev. 614, 619 (1950) (criticizing rule as

“a makeweight used to avoid application of the generally un-

desirable doctrine of absolute immunity”).

The United States’ adoption of the restrictive theory of

immunity created an opportunity for the courts to refine the

separate entity rule. Just as with foreign sovereigns them-

selves, courts could hold their separate corporate entities

subject to suit when engaging in commercial activity, but not

when engaged in activity of a sovereign nature. In practice,

however, there was “chaos” among the lower courts concern-

ing separate entities. William C. Hoffman, The Separate F'n-

tity Rule in International Perspective: Should State Owner-

ship of Corporate Shares Confer Sovereign Status for Immu-

nity Purposes?, 65 Tul. L. Rev. 535, 548 (1991). There were

several approaches a court might employ: continue to apply

“the classic separate entity rule”; infer a waiver of the entity’s

immunity if “the corporate charter contained a ‘sue and be

sued’ clause”; or apply the restrictive theory to corporate

entities, with some courts “looking to the ‘purpose’ of the ac-

tivity” and others “to the ‘nature’ of the activity.” /d. at 550

n.77. Some courts “analogized to the doctrine of disregard of

the corporate form,” but diverged significantly from tradi-

tional corporate law. /d. at 548 & n.71.

When Congress enacted the FSIA, it rejected the either/or

dichotomy of the traditional separate entity rule in favor of a

considerably more calibrated approach. While Congress lim-

ited foreign states’ immunity in keeping with the restrictive

theory, it extended the Act’s protections to foreign states’

agencies and instrumentalities, see 28 U.S.C. 1608(b). Con-

gress thus rejected the analogy of piercing the corporate veil.

. 1

19

See Dole Food, 538 U.S. at 474-476. Rather, it crafted a cali-

brated set of rules that afford immunity and procedural safe-

guards to agencies and instrumentalities that are in some

ways more limited than those afforded foreign states proper.

See, e.g., 28 U.S.C. 1605(a)(3) (ess immunity from expropria-

tion claims), 1606 (limiting punitive damages against foreign

state but not instrumentality), 1608(b) (less restrictive service

of process rules for instrumentalities), #610(b) (broader rights

to execute judgments against property of instrumentalities).

But the important rights to remove a suit to federal court and

to a non-jury trial in federal court were extended to an

“agency or instrumentality of a foreign state.” H.R. Rep. No.

1487, at 32. Congress viewed such protections, even for a

commercial agency or instrumentality, as necessary “[{i]n view

of the potential sensitivity of actions against foreign states

and the importance of developing a uniform body of law in this

area.” /bid. ,

3. By providing that foreign state agencies and instrumen-

talities will generally be subject to suit for their commercial

activities, but guarantying certain procedural protections,

Congress approximated the treatment accorded agencies and

instrumentalities of the federal government. The long-stand-

ing practice with respect to government-owned corporations

is that they are subject to suit, see Keifer & Keifer v. RFC.,

306 U.S. 381, 390-391 (1939), but are nonetheless routinely

recognized as agencies or instrumentalities of the government

for other purposes, including the right to remove a suit to

federal court. See, e.g., American Natl Red Cross v. S.G., 505

U.S. 247, 249, 257 (1992) (Red Cross entitled to remove state

suit); FSLIC v. Ticktin, 490 U.S. 82, 85-86 (1989) (28 U.S.C.

1345 provides jurisdiction over suit brought by FSLIC); De-

partment of Employment v. United States, 385 U.S. 355

(1966) (Red Cross immune from state taxation); Cherry Cot-

ton Mills, Inc. v. United States, 327 U.S. 536, 539 (1946)

(claims of RFC could be asserted as counterclaims of the

United States); Ji/and Waterways Corp. v. Young, 309 U.S.

20

517, 522-524 (1940); Emergency Fleet Corp. v. Western Union

Tel. Co., 275 U.S. 415, 420-421 (1928).

B. Congress Intended The Definition Of Agency Or Instru-

mentality To Be Flexible And Inclusive

1. Congress recognized that there are many ways in which

foreign governments may organize functions carried out on

their behalf, and it made certain that the FSIA would be flexi-

ble enough to accommodate that variety. Thus, in extending

the protections of the FSIA to an “agency or instrumentality”

of a foreign state, 28 U.S.C. 1603(a), Congress provided that

entities could qualify several ways. Specifically, a “separate

legal person, corporate or otherwise,” qualifies as an “agency

or instrumentality” if it is either “an organ of a foreign state

or political subdivision thereof,” or “a majority of [its] shares

or other ownership interest is owned by a foreign state or a

political subdivision thereof.” 28 U.S.C. 1603(a) and (b).

The majority ownership prong of the definition establishes

a categorical rule of inclusion. See Dole Food, 538 U.S. at 474

(construing that categorical protection to require direct own-

ership by the foreign state or political subdivision). Thus,

Congress provided that, even “|w|here ownership is divided

between a foreign state and private interests, the entity will

be deemed to be an agency or instrumentality” as long as “a

majority of the ownership interests (shares of stock or other-

wise) is owned by a foreign state or by a foreign state’s politi-

cal subdivision.” H.R. Rep. No. 1487, at 15. There is no in-

quiry into the entity’s purpose or function—it is treated as a

sovereign based solely on majority ownership.

The other prong of the definition is intended to allow quali-

fication regardless of the entity’s particular form of organiza-

tion or control, based upon a more functional analysis. See

H.R. Rep. No. 1487, at 15-16 (recognizing that an agency or

instrumentality “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 com-

21

pany, a central bank, an export association, a governmental

procurement agency or a department or ministry which acts

and is suable in its own name”). “A flexible approach is par-

ticularly appropriate after Dole, inasmuch as courts likely

now will be asked to evaluate the possible organ status of a

wide variety of entities controlled by foreign states through

ticring arrangements and because of the widely differing

forms of ownership or control foreign states may exert over

entities.” l/SX Corp. v. Adriatic Ins. Co., 345 F.3d 190, 208

(3d Cir. 2003), cert. denied, 54) U.S. 903 (2004).

2. In determining whether an entity qualifies as an organ

under Section 1603(b), the courts of appeals consider multiple

factors including, ¢rter alia, the circumstances of the entity’s

creation, its purpose, the involvement of the state in its af-

fairs, any financial support or grant of exclusive economic

rights from the state, its privileges and obligations under local

law, and its employment practices. See Pet. App. 15a; Filler

v. Hanvit Bank, 378 F.3d 213, 217 (2d Cir.), cert. denied, 543

U.S. 1022 (2004); USX, 345 F.3d at 209; Patrickson, 251 F.3d

at 807;' Kelly v. Syria Shell Petroleum Dev. B.V., 213 F.3d

841, 846-847 (5th Cir.), cert. denied, 531 U.S. 979 (2000).

The listed factors certainly can be relevant in determining

whether an entity is an “organ” of a foreign state. But, as the

Fifth Circuit has emphasized, a court should “wot apply [the

factors] mechanically.” Kelly, 213 F.3d at 847; see also U/SX,

345 F.3d at 208. Instead, they should be consulted with con-

stant reference to the ultimate question: whether the defen-

dant is “an entity that engages in activity serving a national

interest and does so on behalf of its national government.” /d.

at 209. The weight of any particular factor in a given case

depends on the extent to which it informs that ultimate test.

~ In Patrickson, the Ninth Cireuit held that the foreign entity there was

neither an organ of nor majority-owned by a foreign state or political

subdivision. This Court considered only the question of majority ownership.

22

See id. at 214 (“[wleighing the[] factors qualitiatively as well

as quantitatively”).

C. Petitioner Is An Organ Of British Columbia Because It

Serves A Public Purpose On Behalf Of The Province

1. Petitioner is an organ of British Columbia in light of the

circumstances and purposes surrounding its creation and its

ongoing activities in relatiOn to public resources in the Prov-

ince and Canada’s rights and obligations under international

agreements. Petitioner was created at the specific direction

of the Cabinet of the Province, which decided, after debates

in the Provincial legislative assembly, J.A. 197-202, to “pro-

vide a single window agency to be responsible to market the

export of power outside the province,” J.A. 267. The govern-

ment’s decision was communicated, through the Minister of

Mines and Petroleum Resources, to BC Hydro, a crown corpo-

ration wholly owned by the Province, with the direction to

“incorporate the Export Agency” as a “wholly owned subsid-

iary of B.C. Hydro.” /bid. It is commonly recognized that

state agencies and instrumentalities frequently manage the

export of natural resources in furtherance of governmental

interests. See H.R. Rep. No. 1487, at 15-16 (“state trading

corporation” and “export association” are examples of agen-

cies or insirumentalities); U/SX, 345 F.3d at 210 (noting that

the exploitation and distribution of public resources is a “gov-

ernment purpose” that “would weigh * * * heavily in favor of

organ status”) (citing Kelly, 213 F.3d at 848, and Corporacion

Mexicana de Servicios Meritimos, S.A. de C.V. v. M/T Re-

spect, 89 F.3d 650, 654-655 (9th Cir. 1996)).

Petitioner furthers another quintessential governmental

interest: Canada and the Province have assigned to petitioner

the right to market Canada’s entitlement to power generated

by BPA pursuant to the Columbia River Treaty and the re-

sponsibility of providing power to the City of Seattle as re-

quired by the Skagit River Treaty. See Pet. App. 55a, 56a-

57a; ef. Department of Employment, 385 U.S. at 359 (noting,

23

as supporting American Red Cross’s status as government

instrumentality, that the government had “devolved upon the

Red Cross the right and the obligation to meet this Nation’s

commitments under various Geneva Conventions”). Peti-

tioner actively participated with the Province in negotiating

with the responsible American entities in carrying out the

agreements. See Pet. App. 55a.”

2. Moreover, it is evident, in light of the close relationship

between petitioner and the Province, through BC Hydro, that

petitioner engages in its activities for the benefit of the gov-

ernment. BC Hydro by statute “is for all its purposes an

agent of the government and its powers may be exercised only

as an agent of the government.” Pet. App. 166a. Thus, BC

Hydro’s interactions with petitioner are undertaken on behalf

of the government. Those interactions are considerable.

BC Hydro’s board, which is appointed by the Provincial

Lieutenant Governor, appoints the members of petitioner’s

board of directors. J.A. 234. A majority of petitioner’s board

members are also members of the BC Hydro board, ibid., and

its one outside member was “subject to concurrenée by the

Office of the Premier.” Pet. App. 59a; J.A. 234.

* The district court erroneously discounted the significance of petitioner's

role in marketing the Canadian entitlement under the Columbia River Treaty

because a provision of the assignment agreement provides that “Powerex will

not be or be construed as the agent of the Province.” See Pet. App. 56a n.11,

It is understandable that the Province, which otherwise has the corporate veil

standing between itself and its government-owned corporations, would have

made separate provision in connection with the direct assignment of its treaty

rights to petitioner to clarify that the Province would not be hefd liable for

petitioner's losses or other wrongs in regard to the assignment, nor subject

petitioner to the direct control of the Province. See First Natl City Bank vy.

Banco Para el Comercio Exterior, 462 US. 611, 625 (1983) (noting that “the

instrumentality’s assets and liabilities must be treated as clistinet from those

of its sovereign in order to facilitate credit transactions with third parties”).

The quoted provision therefore has little independent significance to peti-

tioner’s status under the ESTA beyond the fact, which the FSLA presumes, that

petitioner is a separate legal entity.

24

The Province has, moreover, sole beneficial ownership and

control of petitioner, albeit through BC Hydro. In such cir-

cumstances, the inference that petitioner is an organ of the

Province is particularly strong. See USX, 345 F.3d at 213

(when a foreign government “has complete control over all

shares of [the defendant} albeit through a tiered arrange-

ment,” and the subsidiary serves the government’s purposes,

“this factor weighs in favor of a finding of organ status”).

When no private person owns any interest in an entity, then

the ultimate fiduciary responsibility is to the state and the

state alone.’ Indeed, the United States regards its own

second-tier subsidiaries of wholly owned government corpora-

tions to be, like their parents, “wholly owned Government

corporation{s].”"* Moreover, such second-tier government

corporations are afforded numerous advantages as agencies

or instrumentalities of the government. See, e.g., 12 U.S.C.

84(c)(5) (loans to “any corporation wholly owned directly or

indirectly by the United States”), 28 U.S.C. 1733 (admissibil-

* In contrast, in Dole Food, Bromine Compounds, Ltd., was three levels

removed from the government, and private owners participated at two

different levels, thereby reducing the government's ultimate beneficial interest

to 66%, and obligating the entity to serve interests other than the government's

alone. See J.A. at 9%, Dole Food, supra, No. 01-598, J.A. 93.

See Government Corporation Control Act, ch. 557, § 101, 59 Stat. 597-598

(listing as “wholly owned Government corporation! s|” the Regional Agricul-

tural Credit Corps., Defense Plant Corp., Defense Supplies Corp., Metals

Reserve Co., War Damage Corp... RFC Mortgage Co., Petroleum Reserves

Corp., Rubber Development Corp., Tennessee Valley Associated Cooperatives,

Inc., and FSLIC); Lebrow v. National R.R. Passenger Corp., 513 U.S. 374, 388-

389 (1995) (noting, with respect to all but the last of these, that they were

incorporated by other government owned corporations); Acron Jnus., [ne. v.

FSLIC, 363 F.2d 236, 239-240 (9th Cir.) (noting that the FSLIC was, in 1945,

a wholly owned subsidiary of the Home Owner's Loan Corporation), cert.

denied, 585 U.S. 970 (1966).

25

ity of copies of records), 2408 (no requirement to post secu-

rity)."" e

The close relationship between the Province and its wholly

owned second-tier subsidiary is demonstrated in several ways.

Petitioner’s business activities are subject to a risk manage-

ment policy established by BC Hydro, and there is close coor-

dination between BC Hydro and petitioner to optimize BC

Hydro’s generating capacity. Pet. App. 28a. Petitioner's net

income is reported with BC Hydro’s on consolidated income

statements, thereby eliminating the financial effect of deal-

ings between the two. J.A. 215, 220; BC Hydro, Annual Re-

port 2006, at 83 <http://www.behydro.com/rx_files/info/

infv46749.pdf.>. A significant portion of BC Hydro’s consoli-

dated profits is either transferred to the Province, id. at 262a-

204a, or taken into account in the rate charged for BC Hy-

dro’s power, with the effect that those profits subsidize the

cost of power to the Province’s citizens. See J.A. 206.

D. The Court Of Appeals’ Analysis Of The Various Factors In

Isolation Failed To Appreciate The Extent Of Petitioner's

Relationship To BC Hydro And The Province

1. Although the court of appeals made reference to “the

ultimate question” of whether petitioner “engages in a public

activity on behalf of the foreign government,” Pet. App. 15a,

it proceeded mechanically, as through a checklist. Its analy-

—

" As presently worded, Sections 1733 and 2408 confer procedural benefits

on any “agency” of the United States, but the Reviser’s notes from the 1948

revision of Title 28 confirm that that word encompasses corporations indirectly

owned by the United States. See 28 U.S.C. 1733, historical and revision notes

(the words “any corporation all the stock of which is beneficially owned by the

United States either directly or indirectly” in 28 U.S.C. 661 (1940) “were

omitted as covered by ‘or agency’ ”); 28 U.S.C. 2408, historical and revision

notes (“Word ‘agency’ was substituted” for phrase in 28 U.S.C. S70 (1940), “in

view of the creation of many independent governmental agencies since the

enactment of the original law”).

oF o~

sis, in full, of the factors as they apply to petitioner was as

follows:

| Petitioner] was not run by government appointees, was

not staffed with civil servants, was not wholly owned by the

government, was not immune from suit, and did not exer-

cise any regulatory authority. Even though [petitioner]

offers some evidence that it serves a public purpose, its

high degree of independence from the government of Brit-

ish Columbia, combined with its lack of financial support

from the government and its lack of special privileges or

obligations under Canadian law dictate our holding that

[petitioner] is not an organ of British Columbia.

Id. at 15a-16a (emphasis added) (citation omitted). In other

words, the court of appeals put to one side the substantial

evidence that petitioner “serves a public purpose” because it

did not conform with or was outnumbered by the other speci-

fied factors. The court did not analyze those factors to see

what light they shed on whether petitioner serves the public

interests of the Province. ;

2. Furthermore, the factors that the court of appeals con-

sidered are not factors of equal weight that can be counted up

and scored. Some factors would powerfully suggest agency

status if present, but their absence may carry little, if any,

significance. One example is whether petitioner is “immune

from suit” under Canadian law. Pet. App. 16a. It would be a

strong, perhaps even determinative, indication that a foreign

state regarded a separate legal entity as its “organ” if the

state extended to the entity the sovereign’s immunity from

suit in its own courts. But, the absence of such immunity can-

not, consistent with Congress's intent, be deemed a “factor| |

weighing against” that status. /bid. In order to be an organ,

“an entity must be a separate legal person,” USX, 345 F.3d at

~ 214; 28 U.S.C. 1603(b), and Congress intended that that re-

quirement could be satisfied by “any * * * entity which, un-

27

der the law of the foreign state where it was created, can sue

or be sued in its own name.” H.R. Rep. No. 1487, at 15 (em-

phasis added). See First Nat'l City Bank v. Banco Para el

Comercio Exterior, 462 U.S. 611, 624 (1983) (Bancec) (an

“instrumentality is typically established as a separate juridi-

cal entity, with the power||* * * to sue and be sued”); U’SX,

345 F.3d at 214 (concluding that whether the defendant “is

subject to suit” in its home country “should not be considered

|as] part of the organ analysis”). Indeed, treating the absence

of immunity as counting against qualification as an organ is

inconsistent with Congress’s practice of subjecting its own

corporate creations to suit while extending them other

protections as agencies or instrumentalities of the govern-

ment. See pp. 19-20, supra.

The court of appeals also counted as a factor against peti-

tioner that it was “not wholly owned by the government,”

Pet. App. 15a-16a, by which it meant that petitioner “is not

owned by the Province, but by BC Hydro,” jd. at l6a. That

approach, which counts the fact that an entity fails to satisfy

the majority-ownership test as a strike against recognizing it

as an organ as well, ignores that Congress specifically estab-

lished the two tests as a/ternatives in order to capture the full

“variety of forms” by which a foreign state could organize its

agencies or instrumentalities. H.R. Rep. No. 1487, at 15-16.

Other arrangements besides the traditional one of direct own-

ership can also be indicative of a significant relationship be-

tween the government and the entity.

The court also counted as a factor against petitioner that

it engaged in commercial, rather than regulatory, activities.

Pet. App. 16a. However, as the Third Circuit has cautioned,

“too heavy a focus on the commercial nature of an entity's

activities would tend to confuse the question of the level of

protection provided by the F'SIA (full immunity or not) with

the antecedent question * * * whether the entity comes

within the purview of the FSIA at all.” USX, 345 F.3d at 210.

Congress itself recognized that foreign states are especially

28

likely to create separate legal entities as agencies or instru-

mentalities of the state to conduct activities that might also be

undertaken by private corporations, such as “a mining enter-

prise, a transport organization such as a shipping line or air-

line, [or] a steel company.” H.R. Rep. No. 1487, at 16.

The fact that petitioner is “not staffed with civil servants,”

Pet. App. 15a, should also be of little significance. Precisely

because the organ prong of the test is a catch-all, it covers a

range of entities with widely varying relationships with the

state. While an organization staffed entirely with civil ser-

vants would mark an entity as particularly likely to qualify,

one would not necessarily expect to find civil servants staffing

even a wholly owned corporation. The Tennessee Valley Au-

thority, for example, “perhaps the best known of the Ameri-

can public corporations,” Bancec, 462 U.S. at 625 n.15, does

not adhere to the laws regarding public employees, see 16

U.S.C. 831b (board shall appoint officers and employees

“without regard to the provisions of Civil Service laws appli-

cable to officers and employees of the United States”). See

Bancec, 462 U.S. at 624 (instrumentalities are “often” not

subject to governmental “personnel requirements”). More-

over, to the extent that there might be any negative inference

from the fact that petitioner’s employees are not civil ser-

vants, it is insignificant in light of those features of peti-

tioner’s relationship with the Province and BC Hydro that

distinguish it from a purely private corporation. For example,

petitioner's employees participate in BC Hydro’s retirement

plan, J.A. 247-248, and members of petitioner’s board of direc-

tors are appointed by BC Hydro’s board, which is appointed

by the Provincial Lieutenant Governor, and outside members

of petitioner’s board are “subject to concurrence by the Office

of the Premier.” Pet. App. 58a-59a.

Finally, the court of appeals’ statement that petitioner

lacks “financial support from the government” and “special

privileges or obligations under Canadian law,” Pet. App. l6a,

is inaccurate. As petitioner explains (Pet. Br. 31-32), it is

29

immune from taxation by the Province and Canada’s federal

government, and it is subject to numerous financial benefits,

including the Province’s ability to make loans to it or assume

its debt. In addition, petitioner has the considerable advan-

tage of a firm commitment to export surplus power generated

by BC Hydro, the Province's statutory agent, and of being the

assignee of the Province’s rights under the Columbia River

Treaty. Petitioner is also subject to reporting requirements

that Canada imposes on corporations in which the government

owns “directly or indirectly” a majority of the shares. See id.

at 28 n.30, 30 n.31."°

3. As demonstrated, even those factors that the court of

appeals viewed as detracting from a finding of organ status

actually reinforce the close connection between the Province

and petitioner and the conclusion that petitioner serves a pub-

lie purpose on behalf of the Province. Petitioner is much more

interrelated with the Province, and much more clearly serves

a public purpose on behalf of a foreign sovereign, than many

corporations in which a government simply owns a majority

of the shares. An entity in which “ownership is divided be-

tween a foreign state and private interests,” H.R. Rep. No.

1487, at 15, may well be subject to suit and engage predomi-

nantly, even exclusively, in activities deemed “commercial”

under the FSIA, and may do so to the significant benefit of

persons other than the state. But Congress nonetheless cate-

gorically afforded such entities the protections of the Act.

The alternative “agency or instrumentality” standard should

be construed in that expansive light.

There is no reason for the courts to strain, as they did dur-

ing the period of absolute immunity (see pp. 17-18, spra), to

avoid recognizing an entity as an agency or instrumentality of

" In the United States, the Government Corporation Control Act, 31 U.S.C.

9101-9110, likewise imposes certain financial requirements, including reporting

obligations, on “Government corporation|s |,” including, as indicated above, see

p. 24 & n.10, spre, corporations indirectly owned by the government.

30

a foreign state. Under the FSIA’s framework, “the fact that

an entity is an ‘agency or instrumentality of a foreign state’

does not in itself establish an entitlement to sovereign immu-

nity.” H.R. Rep. No. 1487, at 15. But by the same token,

“[ajn entity which does not fall within the definitions of sec-

tions 1603(a) or (b) would not be entitled to sovereign immu-

nity +” any case,” regardless of whether the conduct at issue

was sovereign in nature. /bid. (emphasis added). See USX,

345 F.3d at 210. As the Departments of State and Justice

recognized when they submitted to Congress the 1973 version ~

of the FSIA, extension of the Act’s protections to agencies

and instrumentalities was “not likely” to “result in a large

number of immunity cases, as most foreign activities of such

entities are likely to be commercial and will not be entitled to

immunity.” 119 Cong. Rec. 3436 (1973). By nonetheless

bringing such entities within the FSIA’s scope, Congress con-

ferred on them its important procedural protections, as well

as immunity from suit when undertaking sovereign functions.

CONCLUSION

The court of appeals’ ruling that petitioner is not an agency

- or instrumentality of British Columbia should be reversed. If

the Court concludes that the court of appeals did not have

jurisdiction of petitioner’s appeal, the judgment of the court

of appeals should be vacated only to that extent. See n.6, su-

pra.

Respectfully submitted.

JOHN B. BELLINGER III

Legal Adviser

Department of State

MARCH 2007

dl -

PAUL D. CLEMENT

Solicitor General

PETER D. KEISLER

Assistant Attorney General

EDWIN 8S. KNEEDLER

Deputy Solicitor General

DouGLAS H. HALLWARD-DRIEMEIER

Assistant to the Solicitor

General

MARK B. STERN

H. THOMAS BYRON III

Attorneys

APPENDIX

1. 28 U.S.C. 1447(c) (1982) provides in pertinent part:

If at any time before final judgment it appears that the

case was removed improvidently and without jurisdiction, the

district court shall remand the case and may order the pay-

ment of just costs. * * *.

2. 28 U.S.C. 1447(c) (1988) provides in pertinent part:

A motion to remand the case on the basis of any defect in

removal procedure must be made within 30 days after the

filing of the notice of removal under section 1446(a). If at any

time before final judgment it appears that the district court

lacks subject matter jurisdiction, the case shall be remanded.

* ¢ & ;

3. 28 U.S.C. 1447(c) (2000) provides in pertinent part:

A motion to remand the case on the basis of any defect

other than lack of subject matter jurisdiction must be made

within 30 days after the filing of the notice of remova! under

section 1446(a). If at any time before final judgment it ap-

pears that the district court lacks subject matter jurisdiction,

the case shall be remanded. * * *.

(la)