Opposition Brief — Milena Ship Management Co. v. Newcomb

No. 95-620

—— ——_—_—_o ss

$n the Supreme Cowt of the Cuited States

OcTOBER TERM, 1998

MILENA SHIP MANAGEMENT COMPANY, LTD., ET Al

PETITIONERS

R. RICHARD NEWCOMB, DIRECTOR

OFFICE OF FOREIGN ASSETS CONTROL,

DEPARTMENT OF THE TREASURY, ET AL

ON PETITION FOR A WRIT OF CERTIORARI!

LO THE UNITED STATES COURT OF APPEAI

FOR THE FIFTH CIRCUTI

BRIEF FOR THE RESPONDENTS IN OPPOSITION

DREW S. DAYs, III

So/ { ior PY hié ral

FRANK W. HUNGER

\s j fal Altorney (7e@)

MARK B STERN

Allorney

Lh parton nt of Justices

Wa } ngton, 1 AOSD

COL) O14-221 4

2 aha

QUESTIONS PRESENTED

1. Whether the Treasury Department’s Office of For-

eign Assets Control reasonably determined that vessels

operated by petitioners were subject to Executive

Orders blocking all property in which the Federal

Republic of Yugoslavia has an interest.

2. Whether the court of appeals erred in refusing to

issue a writ of mandamus directing the government to

maintain petitioners’ vessels.

TABLE OF CONTENTS

Page

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TABLE OF AUTHORITIES

Cases:

First English Evangelical Lutheran Church v. County of

Los Angeles, 482 U.S. 304 (1987) .........:ccccccseseceeeeeeeeeeees 10-11

Florida Power & Light Co. v. Lorion, 470 U.S. 729

SII a cunddabhacgupessnseesensosteeenbrncetezeseveceuevecseroerecooreuerneooers 8

Constitution and statutes:

U.S. Const. Amend. V (Due Process Clause) ................... 7, 10, 11

International Emergency Economic Powers Act, 50

i PE, IIROIIIIIIS 0.0: conc cnmasnenssonseedeucterepecouecerecooverseveverses 2

United Nations Participation Act of 1946, 22 U.S.C.

SII sissiin bi siedeueeddepddconesensnetesevasssoeseeooeodeoeceneeseessoneceorscoqvere 2

U.N. Security Council Res. No. 757 (1992)... 2,4

Montenegro Law on the Transformation of Management:

SITE \TT ccceceenaesevcesoubeocessevecetseuonsosveveceuccereseseureduereveoneses 9

INIT IE ios ccapuceancnsidncsededieeanioonnetenerdeniebusoeetsensnerosecosseees 9

BOE, GD coceccevevecrvcscccscevecseccosseeseverennecsssecsencesesscesessoeseees 10

Exec. Order No. 12,808, 3 C.F.R. 305 (1992 comp.) ......... 2, 3, 11

Exec. Order No. 12,810, 3 C.F.R. 307 (1992 comp.) ......... 2, 11

Exec. Order No. 12,846, 58 Fed. Reg. 25,771 (1993) ........ 11

(111)

In the Supreme Court of the Chuted States

OCTOBER TERM, 1993

No. 93-620

MILENA SHIP MANAGEMENT COMPANY, LTD., ET AL.,

PETITIONERS

Vv.

R. RICHARD NEWCOMB, DIRECTOR,

OFFICE OF FOREIGN ASSETS CONTROL ,

DEPARTMENT OF THE TREASURY, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

70 THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

BRIEF FOR THE RESPONDENTS IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. la-9a)

is reported at 995 F.2d 620. The order of the district

court denying petitioners’ motion for summary judg-

ment (Pet. App. 36a-48a) is reported at 804 IF. Supp.

859. The order of the district court denying appoint-

ment of a custodian (Pet. App. 29a-35a) is reported at

804 F. Supp. 855. The order of the district court

denying preliminary relief (Pet. App. lla-28a) is

reported at 804 I. Supp. 846.

(1)

ys

JURISDICTION

The judgment of the court of appeals was entered on

July 21, 1993. The petition for a writ of certiorari was

filed on October 19, 1993. The jurisdiction of this

Court is invoked under 28 U.S.C. 1254(1).

STATEMENT

l. a. To combat state-sponsored violence in former

Yugoslav territory, President Bush issued two Exec-

utive Orders in 1992 that imposed comprehensive

sanctions against the unrecognized Government of

the Federal Republic of Yugoslavia (Serbia and Mon-

tenegro) (hereinafter Yugoslavia). Exee. Order No.

12,808, 3 C.F.R. 3805 (1992 comp.), reproduced at Pet.

App. 46a-49a; Exec. Order No. 12,810, 3 C.F.R. 307

(1992 comp.), reproduced at Pet. App. 50a-55a. Among

other provisions, the orders instructed the Secretary

of the Treasury, in consultation with the Secretary of

State, to “block” all property and interests in prop-

erty of the Yugoslav government. Exec. Order No.

12,808, 88 1, 2, 5, Pet. App. 46a-48a; Iexec. Order No.

12,810, $8 1,6, Pet. App. 50a-5la, 54a-5ha.

The first of those orders was issued pursuant to

powers vested in the President by the International

Kmergency Kconomie Powers Act (IEPA), 50

U.S.C. 1701-1706. Pet. App. 46a. The second order

invoked both the IEEPA and the United Nations

Participation Act of 1945 (UNPA), 22 U.S.C. 287e.

Pet. App. 50a. The executive orders implement sanct-

ions previously adopted by the United Nations in

Security Council Res. No. 757 (1992).

b. To implement the executive orders, the Trea-

sury Department’s Office of Foreign Assets Control

(OFAC) issued orders implementing the blocking of

all property located in the United States owned or

7

a. Petitioners assert (Pet. 8-13) that OFAC

exceeded the scope of the executive orders and

violated the Due Process Clause in adopting a pre-

sumption that entities located within Serbia and

Montenegro are owned or controlled by the Yugoslav

government. As the court of appeals held, however,

the presumption was a reasonable method of imple-

menting the President’s executive orders in light of

the history of government involvement in Yugoslav

business enterprises and the need for immediate

action to enforce the United Nations resolutions.

Pet. App. 6a-7a. Nothing in either the text of the

executive orders or the Due Process Clause pre-

cluded OF AC’s adoption of such a presumption, which

was reasonably designed to further the purposes of

the executive orders.'

b. Petitioners contend (Pet. 13-14) that the

administrative record does not adequately support

OFAC’s initial adoption of the presumption that the

Yugoslav government owns or controls entities

located in Serbia and Montenegro. For the reasons

set forth above, however, the agency acted appropri-

ately in adopting the presumption based on its

knowledge of prior Yugoslav law and on the absence of

any basis for concluding that conditions had signifi-

cantly changed in Serbia and Montenegro. See Pet.

App. 6a-7a, 107a.

' Petitioners err in contending (Pet. 12) that OFAC’s

conclusion is inconsistent with other judicial and administrative

determinations regarding the Yugoslav economy. None of

those rulings or statements ‘“walwed the executive orders at

issue here or construed curremi Yuyoslav law, which gives the

government a direct financial interest in the “social capital” of

Yugoslav business enterprises.

8

In any event, even if the record had been inadequate

to support the agency’s initial blocking orders, any

such inadequacy would have been more than remedied

by OFAC’s detailed decision rejecting petitioners’

application for unblocking of the vessels. See Pet.

App. 102a-118a. Contrary to petitioners’ assertions,

that decision was not an impermissible “post hoc

rationalization| |” (Pet. 13) for the agency’s past

actions. Rather, in issuing that decision, OFAC

properly considered the additional materials sub-

mitted by petitioners in support of their application

and concluded that the presumption of government

control of Yugoslav entities and the continued

blocking of petitioners’ vessels were justified. Peti-

tioners point to no authority for the proposition that

an agency is precluded from relying on all properly

submitted materials in considering whether to grant

an application for administrative relief, and we are

aware of none.

Moreover, if petitioners had sought review of the

original emergency blocking notice, and a court had

deemed OF AC’s explanation inadequate, the appropri-

ate course would have been a remand to the agency to

allow it to supplement the record and fully explain its

decision. See Florida Power & Light Co. v. Lorion,

470 U.S. 729, 744 (1985). Thus, even if petitioners

were correct in claiming that the agency’s initial

orders lacked record support, they would not be

entitled to any relief, because the agency’s decision

rejecting petitioners’ application for unblocking

amply demonstrates the propriety of the continued

blocking of petitioners’ vessels.

c. Petitioners claim (Pet. 15-18) that OFAC misin-

terpreted Yugoslav law when it concluded that the

Yugoslav government has an interest in JOP within

9

the meaning of the executive orders.? That fact-bound

contention is incorrect, and does not merit further

review.

The court of appeals correctly held that, under any

standard of review, the Yugoslav government had an

interest in petitioners’ vessels. Under the economic

system established by the government of the former

Yugoslavia, business enterprises were “socially-

owned” and were managed by “workers’ councils.”

Pet. App. 107a-108a. In 1989, the government enacted

statutes to permit the sale of shares in these

“socially-owned” firms. Under those laws, “if the

‘social capital’ [of the firm] is sold, the proceeds are to

be deposited into development ‘Funds’ established by

the governments of each | Yugoslav] republic.” Jd. at

108a. The Funds “appear to be an arm of [the]

government” (ibid.), and were established to accomp-

lish a variety of governmental purposes, including

lending for privatization, public investment in

troubled firms, and investments for pensions. /d. at

109a, citing Montenegro Law on the Transformation

of Management (LOMT), arts. 37, 45.

Alternatively, an enterprise may choose merely to

add to its capital by issuing new shares and retaining

the proceeds. In that event, the social capital remains

in the business and will be claimed by the gov-

ernment if the enterprise is later sold or liquidated.

Pet. App. 109a-110a, 114a-115a. JOP selected this

2 Petitioners’ suggestion (Pet. 15) that the court of appeals

gave improper deference to the agericy’s interpretation of

foreign law is without foundation. The court made clear that it

would sustain OFAC’s decision even applying de novo review.

Pet. App. 7a. Moreover, the court could properly have de-

ferred to the expert view of the agency charged with

regulation of foreign assets under the executive orders.

10

latter approach to privatization, and thus the gov-

ernment retains an interest in JOP’s social capital.

Id. at 111a-116a.

In addition to the government’s continuing fi-

nancial interest in the social capital of JOP and

similar companies, applicable law gives the govern-

ment sweeping powers over such entities. For

example, under Article 49 of the LOMT, the govern-

ment is authorized to designate the management of

privatized companies and to take over an enterprise

under a variety of circumstances, such as when the

enterprise sustains a business loss. Pet. App. 112a.

As the court of appeals concluded (id. at 7a), “society

has an interest in each business enterprise” within

the meaning of the executive order, even if the scope

of the interest cannot be precisely defined. Thus,

OFAC properly concluded that Yugoslav law

continues to give the government an interest in

Yugoslav entities such as JOP.

2. linally, petitioners contend (Pet. 18-19) that the

court of appeals erred in denying their petition for a

writ of mandamus directing appointment of a

custodian for their vessels. Petitioners do not

identify any statutory authority for such an order,

however. Instead, they urge that mandamus is

required because the blocking order constitutes a

taking without just compensation.

Kiven if we assume arguendo that petitioners’

taking claim is valid, petitioners are not entitled to

the relief they seek. The Fifth Amendment “is

designed not to limit the governmental interference

with property rights per se, but rather to secure

compensation in the event of otherwise proper

interference amounting to a taking.” First English

Evangelical Lutheran Church v. County of Los

ll

Angeles, 482 U.S. 304, 315 (1987). Thus, even if

petitioners had a valid claim for just compensation

under the Fifth Amendment, they would have no basis

for seeking appointment of a custodian.

3. Finally, even if the questions presented by

petitioners were otherwise appropriate for review by

this Court, this case would not present a proper

vehicle for resolving those questions. Petitioners’

claims have effectively been mooted by Exec. Order

No. 12,846, 58 Fed. Reg. 25,771 (1993), which blocks all

property and interests in property of all entities

within the territory of the Yugoslav government,

regardless of their governmental affiliation. The

order further confirms that all expenses incident to

the blocking and maintenance of property blocked

under that order or Exec. Order Nos. 12,808 and

12,810 “shall be charged to the owners or operators of

such property.” 58 Fed. Reg. 25,771 (1993). Thus, it is

clear that petitioners’ vessels are now blocked, and

that petitioners’ requested mandamus relief is pre-

cluded, by the express terms of Exec. Order No.

12,846. Further review is therefore unwarranted.

12

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted.

DREW S. DAYs, III

Solicitor General

FRANK W. HUNGER

Assistant Attorney General

MARK B. STERN

Attorney

DECEMBER 1993

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