Opposition Brief — Arriba, Ltd. v. Petroleos Mexicanos

No. 92 - 476

Supreme Court of the United States

OCTOBER TERM, 1992

ARRIBA, LIMITED,

Petttioner,

Ve

PETROLEOS MEXICANOS,

Respondent.

On Writ Of Certiorari To

The United States Court Of Appeals

For The Fifth Circuit

PEME®’S BRIEF IN OPPOSITION TO

PETITION FOR WRIT OF CERTIORARI

KENNETH R. WYNNE _

> aaa (Counsel of Record)

oS. Mark Maney

— aa %, Wynne & Maney

# 2730 Texas Commerce Tower

Houston, Texas 77002

(713) 227-8835

ne Alfredo R. Pérez

— ta Bracewell & Patterson

4 2900 South Tower Pennzoil Place

ts Houston, Texas 77002

(713) 223-2900

Counse/ for Respondent,

Petroleos Meucanos

Alpha Law Brief Co. * 6113 Aletha Lane * Houston, Texas 77081 (713)981-9000

i

QUESTIONS PRESENTED

? When suit is brought against a foreign state

under the Foreign Sovereign Immunities Act, does the

plaintiff have the burden to allege facts demonstrating the

existence of subject matter jurisdiction?

2. When the charter of an instrumentality of a

foreign state endows it with the power to sue and be sued

within that foreign state, does that charter provision

constitute a statutory waiver of the protections of the Foreign

Sovereign Immunities Act of the United States?

il

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED ........--+-+:+-> i

TABLE OF CONTENTS .....-- sees seee0> ii

TABLE OF AUTHORITIES .........++-+-.- ill

STATEMENT OF THE CASE .... ~~. ss 0355+ |

REASONS FOR DENYING THE WRIT .......-. 5

[. The dismissal of Arriba’s

claims without jurisdictional

discovery was proper and

accords with the rulings of this

Court and all Circuit Courts of

Appeals that have addressed

the 1608 4 6 cule cae ow eee he 6

i. The Fifth Circuit’s rejection of

Arriba’s argument that Pemex

has waived its sovereign

immunity from suit 1s

supported by all relevant

authority, including the

legislative history of the FSIA ..... 13

CONCLUSION 9.2050 V4 eee eee 16

APPENDIX A 2.6.0 20S i ee ee la

iil

TABLE OF AUTHORITIES

CASES Page

Argentine Republic v. Amerada Hess

Shipping Corp., 488 U.S. 428 (1989) .......... 6, 8

Arriba, Ltd. v. Petroleos Mexicanos,

Seo Fae oem (oun Gir. P9982) ww wk es 2.6

Boelens v. Redman Homes,

yan P20 1068 Oth Cir. 1984) ........... 6

Compania Mercantil Argentina v. United States

Shipping Board, 40 T.L.R. 601 (1924) ......... 15

Compania Mexicana, S.A. v. United States

District Court, 859 F.2d 1354

BE a tl, i2

Dayton v. Czechoslovak Socialist Republic,

672 F. Supp. 7 (D.D.C. 1986), aff'd,

834 F.2d 203 (D.C. Cir. 1987),

cert. denied, 486 U.S. 1054 (1988) .. 2... . 13-15

First Nat’l City Bank v. Banco Para el

Comercio Exterior de Cube (Bancec),

6, 5) a 9g

Foremost-McKesson, Inc. v. Islamic

Republic of Iran, 905 F.2d 438

PO ew ke Se ee

FW/PBS, Inc. v. City of Dallas,

Meee OPS ION) ee we ee es 8

iV

Gould, Inc. v. Pechiney Ugine Kuhlmann,

S> 1.20 44) (6m) Cir. T9G8) . ww we ew ee 1]

Loeffer v. Frank, 486 U.S. 549 (1988) .......... 15

McNutt v. General Motors Acceptance Corp.,

eo Be en te Pett mega 7

Mitchell v. Forsythe, 472 U.S. 511 (1985) ........ 10

Rush-Presbyterian - St Luke’s Medical Center

v. Hellenic Republic, 877 F.2d 574 (7th Cir.),

ee ae A OR | Rn ee ee ae 1]

Segni v. Commercial Office of Spain,

B10 F.c0 oee (ree UM. TRS? ). eee ete es 1]

Siderman de Blake v. Republic of Argentina,

965 F.20. 699 (th Cir. 1992)... . 2. 2 ee 1]

Sierra Club v. Shel! Oil Co..,

817 F.2d 1169 (Sth Cir. 1987) ........02.. 8

Sloan Shipyards Corp. v. United States

Shipping Board Emergency Fleet Corp.,

Be toc CRASS kis een eK we ee we 15

Stena Rederi AB v. Comision de Contratos,

923 F.2d 380 (Sth Cir. 1991) ........... 10

United States v. Pink, 315 U.S. 203 (1942) ....... 4

Verlinden B.V. v. Central Bank

of Nigeria, 461 U.S. 476 (1983) .............. 8

OOO

STATUTES

aS U.aik. OE See" BOUT koa a oe

ae USA... | Wee 64 4 6 ae ee ee eee

48 USC. BF SOR IGS 66 ok SS oe eee

£8 USS... SA 6 eh ee ee eee

MISCELLANEOUS

Gordon, Foreign State Immunity

in Commercial Transactions (1991) .....0.0..0.2.2..

H. Rep. No. 1487, 94th Cong.,

2d Sess. 15, reprinted in 1976

U.S. Code Cong. & Admin. News 6604

Houston Chronicle, Sept. 10, 1992 ............

Sucharitkul, State Immunities and Trading

Activities in International Law (1959) . 2... ..

NO. 92-476

IN THE

Supreme Court of the United States

OCTOBER TERM, 1992

ARRIBA, LIMITED,

Petitioner,

PETROLEOS MEXICANOS,

Respondent.

PEMEX’S BRIEF IN OPPOSITION TO PETETION

FOR WRIT OF CERTIORARI

The Respondent, Petroleos Mexicanos (commonly

known as Pemex), a decentralized agency of the sovereign

government of the United Mexican States, prays that this

Court deny the petition of Arriba, Ltd. for writ of certiorari.

STATEMENT OF THE CASE

Arriba’s colorless statement of the case bears only the

faintest resemblance to Arriba’s allegations and rhetoric in

the courts below: gone are Arriba’s xenophobic

characterizations of Mexico as a corrupt land devoid of law;

gone are Arriba’s paranoid cries of international conspiracy

reaching to the highest levels of the Mexican government;

gone are Arriba’s claims of billion dollar damages, bribes,

threats, and beatings.

2

Arriba is straining mightily to whitewash the sordid

tale of its dealings with notorious criminals. This Court

would be best served by reference to Arriba’s original

complaints (set out in the Appendix to Arriba’s Petition) and

to the Fifth Circuit’s concise description of those allegations,

which that Court aptly compared to Oliver Stone’s movie

"JFK." Arriba, Ltd. v. Petroleos Mexicanos, 962 F.2d 528,

537 (Sth Cir. 1992), reprinted at the Appendix to Arriba’s

Petition ("A.App.") at 18a.'_ Pemex is constrained to

1. Although Arriba chides Pemex and the Fifth Circuit Court of

Appeals for casting aspersions on Arriba’s character, particularly for the

fitting reference to "JFK” (Petition at 11 n.7), Arriba’s own allegations

allege involvement with criminals (hence the basis for Arnba’s RICO

claims). The central figure and defendant in Arriba’s allegations 1s La

Quina (the moniker of Joaquin Hernandez Galicia), who was iecently

sentenced to thirty years in prison for a variety of crimes including the

murder of a federal judge. See Houston Chronicle, Sept. 10, 1992.

Thirty-nine of his cohorts, including at least one other Arriba defendant,

were also sentenced to long prison terms. Anather central figure in

Arriba’s story, who for some reason was never made a defendant, Jose

Cruz Contreras, the man who incorporated and allegedly ran Comater,

is subject to a pending extradition request by the Mexican government.

Jose Cruz Contreras is charged with being La Quina’s gun smuggler,

among other crimes.

Arriba’s complaints of mudslinging are also insincere. Arriba’s

restrained demeanor is newly donned. The lower courts were regaled

with arguments such as the following:

Pemex’s brief suggests that President de la Madrid's

administration cleaned up the country. Who is kidding whom,

and for whom is this polemic written?

R. Vol. 6 at 28.

Arriba is quite skeptical about the gracious invitations at the end

of Pemex’s brief: "Pemex is amenable to suit in Mexico (id. at

56) . . . [Rledress can certainly be had within Mexico for

fraud, extortion, and fraudulent transfer; and alter ego 1s

recognized...”

~

a

3

identify just a few of the clear omissions and distortions in

Arriba’s newest statement of the case.

Foremost, Pemex never dealt or contracted with

Arriba. Arriba dealt and contracted with, and originally sued

(on the identical subject matter of its current claims, on three

previous occasions over six years, id. at 531-32; A.App. at

Sa-6a), only the Union of Petroleum Workers of the Republic

of Mexico (the "Union"),? the Union’s Commission of

Contracts,* and various officials of each, never Pemex. As

the Fifth Circuit noted, "Arriba has not alleged that Pemex

negotiated, participated or contracted with it directly in any

way.” Id. at 534; A.App. at 12a. Arriba’s attempts in its

Petition to imply the contrary are misleading and do not

comport with Arriba’s allegations. "Arriba admits that [its

Union deal] was structured to avoid any direct dealings with

Pemex officials or any other branch of the Mexican

government.” Jd. at 530; A.App. at 3a (footnote describing

the reasons for such circumspection omitted).

Arriba’s complaints chronicle its dealings with

members of the Union, most notably La Quina, whereby the

Union’s Commission of Contracts (a private entity) allegedly

Yeah, right.

x em OK OK

Is this a joke? Pemex cannot be serious about the practicability

of a fair tnal of Arriba’s claims in Mexico.

Id. at 34. And these are mere examples.

2. Sindicato de Trabajadores Petroleros de la Republica Mexicana.

3. Comision de Contratos del Comite Ejecutivo del Sindicato de

Trabajadores Petroleros del la Republica Mexicana.

4

twice promised that it could “arrange”* for Pemex (a

governmental agency) to supply Arriba with oil at bargain

prices without the need of a coniract with Pemex. Bribes

were apparently the intended substitute for a written

agreement with Pemex.’ According to Arriba, it never

funded the bribes, so the oil never materialized.°

Arriba attempted to saddle Pemex with responsibility

for the Commissron's promises by alleging that La Quina’s

corrupt empire controlled Pemex, such that the private-Union

and governmental agency-Pemex were = alter egos.’

According to Arnba, La Quina’s promises and the

Commission's contracts bound Pemex, despite Pemex's lack

Of assent of participation in them, Of course, Arnba might

as well be suing New York City because the Union sold it

the Brooklyn Bridge; the Union had no more right to sell

Mexico's oil, which is vested by the Mexican Constitution im

the sovereign."

4. See, e.g., Armba’s Complaint 4 36 reprinted at A.App. at Sa

5S. dd. at [4 15-17 (A.App. at 52a)

6. Id. at Jf 15-20 (A. App. at S2a-53a)

7. See, e.g., id. at JJ 9-10 (A. App. at 50a)

8. Although not a factor in the Fifth Circuit's analysis (see 962 F.2d

at 530-31 0.3; A.App. at 3a n.3), the illegality of Arnba’s Union-deals

was defifiitively established by the Declaration of the Attorney General

of Mexico, which was submitted to the district court. The full translation

of that declaration, which contains 4 complete history of the relevant laws

of Mexico, 16 set forth in the Appendix to this Bret, Pemex aloo notes

that this Court has previously accepted ouch declarations as definitive

merprecations A foreign law, United States v. Pink, 415. U5, 203, 220

(1942)

Arriba’s jurisdictional theory mirrors its claims for

direct relief: jurisdiction over Pemex is predicated on

attributing to Pemex the Union’s contacts here. Arriba’s

convoluted attribution argument, however, masks a more

practical reason for Pemex’s involvement in this action

Having on three separate occasions sued the Union, its

Commission, and various of its officials, without ever

naming Pemex as a responsible party, and having garnered

hundred-million dollar default judgments but less than total

Satisfaction, Arriba finally turned to the one party it knew

had substantial assets, Pemex. So, for the first time, Arriba

sued Pemex, claiming that this sovereign arm of the Mexican

government i8 a RICO enterprise 4a criminal lo

ibstantiate these assertions, Arriba sought discovery fron

rig sf ECHELONS ¢ r M ¥ ify vo roimeni which thy

‘ f rif ;

a4

st *' CT

rhe Fifth Circuit Court of Appeals, finding no basis

for entertaining Armba'’s claims apainst Pemex, an

instrumentality of the Mexican government, ordered the

acuion dismissed for lack of subject matter jurisdiction under

the Foreign Sovereign Immunities Act (the "FSIA"), 28

US. SO 1430, 1441(a) & 1602-1611 Here, Arriba seek:

|

a very limited review of that ruling

i

6

REASONS FOR DENYING THE WRIT

This action focuses on the existence of subject matter

jurisdiction. Pemex is a decentralized agency of the United

Mexican States, and as such is generally immune from the

jurisdiction of United States courts. The scope oft

jurisdiction over Pemex is determined entirely by the FSIA.

Argentine Republic v. Amerada Hess Shipping Corp., 488

U.S. 428, 435-41 (1989). And, as a grant of subject matter

jurisdiction, the FSIA must be strictly construed against the

exercise of jurisdiction. /d. at 687: see also Boelens vy.

Redman Homes, 748 F.2d 1058, 1067 (Sth Cir, 1984),

lhe theory by which Arriba sought to find jurisdiction

over Pemex under the FSIA, which depended on attributing

the actions of private persons and entities to Pemex, was, in

the Fifth Circuit's words, “breathtakingly bold.” Arriba, 962

F.2d at 534; A.App. at lla. It was certainly unprecedented

In keeping with its newly scrubbed rhetoric, however, Arriba

avoids any detailed discussion of its jurisdictional theory or

even the allegations that allegedly support it. Instead, Arnba

calmly claims a night to “limited” jurisdictional discovery and

asserts that Pemex is a mere commercial enterprise that has

waived its immunity under the FSIA. These facially innocent

arguments, however, hide more than they explain.

I. The dismissal of Arriba’s claims without

jurisdictional discovery was proper and accords

with the rulings of this Court and all Circuit

Courts of Appeals that have addressed the issue.

Arriba claims, and asks this Court to rule, that,

"Plainuffs enjoy a general right to conduct jurisdictional

discovery,” Petition at 13, Arriba’s Petition argues that the

rifth Circuit's instruction to dismiss Arriba’s claims without

discovery conflicts with the decisions of other circuits,

5

namely the Second, Sixth, Ninth, and D.C. Circuits. Jd. at

15.

In focusing on its claimed "general right to conduct

jurisdictional discovery," Arriba avoids challenging the Fifth

Circuit’s rulings that the factual allegations in Arriba’s

Complaints do not support jurisdiction and that Arriba’s

“breathtakingly bold theory” of jurisdiction, as alleged, is

insupportable, 962 F.2d at 534-37; A.App. at lla-18a. In

lieu of attempting to defend its unprecedented jurisdictional

theories, Arriba makes a seemingly innocuous request for

discovery

Arriba's discovery position is, however, no less bold,

and no less unprecedented. It would allow a plaintiff a

jurisdictional “fishing expedition" against any party,

including a foreign state, simply for the asking, with no

requirement that the plaintiff first allege some facts which,

if true, would establish jurisdiction. There is no such right.

And, far from confl«ting with the decisions of the other

circuits, the Fifth Circuit’s refusal to allow Arriba its

“Massive, intrusive discovery" in this case comports with the

Gecisions Of this Court and all other circuit courts. See id.

at $36: A.App. at 1 /a.

Arriba’s claimed blanket’ entitlement to

“jurisdictional” discovery’ does not exist absent some

allegations supporting jurisdiction. Proper jurisdictional

discovery is designed solely to resolve disputed fact

9 Although labelled "jurisdictional," Arriba’s discovery requests

were indistinguishable from discovery on the merits. Basically, both

Arrba’s claims for relief and its jurisdictional theory relied upon the

allegation that Pemex (as part of the government of Mexico) and the

Union (4 private entity) were alter egos, and establishing that premise

required, by Ariba’s own estimation, a monumental amount of

dit “very §4¢ 967 V Jd wt 536 4. 1S; A. App at 17a n.15.

8

questions. First, however, the plaintiff "must allege in his

pleadings the facts essential to show jurisdiction... . If he

does make them, an inquiry into the existence of jurisdiction

is obviously for the purpose of determining whether the facts

support his allegations." McNutt v. General Motors

Acceptance Corp., 298 U.S. 178, 189 (1936). See also

FW/PBS, Inc. v. City of Dallas, 493 U.S. 215, 607 (1990);

Sierra Club v. Shell Oil Co., 817 F.2d 1169, 1172 (Sth Cir.

1987)("[A] court may determine it lacks jurisdiction based on

the pleadings alone.").

In FSIA cases 1n particular, this Court has sanctioned

determinations of subject matter jurisdiction based solely on

the plaintiff's allegations, without the opportunity for

discovery. See Argentine Republic v. Amerada Hess

Shipping Corp., 488 U.S. 428 (1989) (reversing, 830 F.2d

421 (2d Cir. 1988)); Verlinden B.V. v. Central Bank of

Nigerta, 461 U.S. 476 (1983). In Amerada Hess, this Court

found Argentina immune under the FSIA, based solely on the

plaintiff's allegations. 488 U.S. at 432, 439-43; 830 F.2d at

423 ("Because the district court dismissed [the plaintiff's]

complaint for lack of jurisdiction, we must accept appellant’s

allegations as true."). In Verlinden, this Court stated that

"even if the foreign state does not enter an appearance to

assert an immunity defense, a district court still must

determine that immunity is unavailable under the Act." 461

U.S. at 493 n.20. Of course, if the foreign state does not

appear, that determination must be made on the basis of the

plaintiff’s allegations alone.

In this case, the Fifth Circuit assumed arguendo the

veracity of Arriba’s allegations and concluded that those

allegations "do not confer jurisdiction over Pemex consistent

with the FSIA." 962 F.2d at 537; A.App. at 18a-19a.

Arriba, however, does not request review of the legal basis

for that conclusion, but claims instead that it should be

9

allowed broad-range discovery despite that conclusion.

It is at this juncture that Arriba’s tactical decision to

divert attention from its novel jurisdictional theory and to

focus solely on discovery misfires, because the fatal flaw in

Arriba’s claims is not a lack of discovery but the bankruptcy

of Arriba’s jurisdictional theory. The broad attribution theory

on which Armiba relies for jurisdiction, whereby Pemex, a

governmental arm of the United Mexican States, was

allegedly responsible for the actions and jurisdictional

contacts of the Commission and Union, both private entities,

rests upon this Court’s Bancec opinion. First Nat’l City

Bank v. Banco Para el Comercio Exterior de Cube (Bancec),

462 U.S. 611, 626-27 (1983).

The Fifth Circuit "wholeheartedly" rejected Arriba’s

theory, holding, "Bancec is inapposite to this case." 962

F.2d at 534-35; A.App. at 12a-13a; see also id. at 536-37;

A.App. at 14a-17a.

By failing to seek review of that ruling of the Fifth

Circuit, and thus conceding that its allegations do not support

jurisdiction, Arriba effectively forecloses any need for

determining if discovery is needed. As the Fifth Circuit

explained, "because Arriba’s allegations do not satisfy

Bancec, permitting discovery will not cure the FSIA

jurisdictional deficiency." /d. at 537; A.App. at 18a

(footnote omitted). Significantly, Arriba declined the

opportunity to amend its pleadings. '”

10. At the hearing on Pemex’s motion to dismiss and other motions,

including a motion for more definite statement (pled in the alternative),

the following exchange occurred:

THE COURT: Do you want to stand on your

complaint, Mr. White, as I am getting to rule on all of these

motions?

10

Although not essential to its analysis, the Fifth Circuit

correctly noted that jurisdictional discovery should be

permitted more circumspectly and with greater court

supervision when sought from a foreign state, than from a

private entity. In analyzing the restrictions to be placed on

discovery from foreign sovereigns, the Fifth Circuit turned

to this Court’s decisions regarding the protection afforded to

domestic governmental officials. /d. at 534; A.App. at Ila.

See also Stena Rederi AB v. Comision de Contratos, 923

F.2d 380, 385-86 (Sth Cir. 1991) (citing Mitchell v.

MR. WHITE: YES....But with that -- and

as far as the record is concerned, we have filed now two

controverting affidavits.

R.Vol. 9 at 46.

Although Arnba criticizes the Fifth Circuit for “ignonng

altogether the evidentiary material that Arriba was able to present,” see

Petition at 12, that evidence is irrelevant because, at best, such evidence

attempts solely to corroborate Arriba’s allegations of jurisdictional facts,

which were not contested for purpose of Pemex’s motion to dismiss. In

fact, the affidavits were originally proffered on the act of state issue,

which the Fifth Circuit did not reach, and sought to controvert Pemex’s

proof on that issue, which is why Arriba refers to its affidavits as

“controverting affidavits."

On the jurisdictional question, however, Pemex did not contest

Arnba’s factual allegations. Neither did the Fifth Circuit dismiss or

discount those allegations. So, Arriba’s existing “proof” is irrelevant, as

is any evidence that discovery might have provided.

Of course, Pemex continues to challenge the actual veracity of

Arriba’s scurnlous allegations against Pemex and the government of

Mexico. Pemex also contests the competency of Arriba's affidavits,

which contain more political rhetoric than statements of fact. See also the

Declaration of the Attorney General of Mexico, the English translation

of which is reprinted in the Appendix to this Brief.

11

Forsythe, 472 U.S. 511, 528 (1985)).

The comparision is apt and_ well-established.

Including the Fifth Circuit, at least five circuits have

expressly equated the immunity afforded foreign states under

the FSIA with that granted domestic government officials,

based on the holding that the immunity granted each is

immunity from suit, not merely from damages.'' As the

11. E.g., Stena, 923 F.2d at 386 (Sth Cir.); Foremost-McKesson,

Inc. v. Islamic Republic of Iran, 905 F.2d 438, 442 (D.C. Cir. 1990);

Rush-Presbyterian - St Luke’s Medical Center v. Hellenic Republic, 877

F.2d 574, 576 n.2 (7th Cir.), cert. denied, 493 U.S. 937 (1989); Gould,

Inc. v. Pechiney Ugine Kuhlmann, 853 F.2d 445, 450-51 (6th Cir. 1988);

Compania Mexicana, S.A. v. United States District Court, 859 F.2d

1354, 1358 (9th Cir. 1988) (per curiam); Segni v. Commercial Office of

Spain, 816 F.2d 344, 345-47 (7th Cir. 1987).

Arriba’s reliance on the Gould opinion is misplaced. In fact, the

very next words following Arriba’s quotation from Gould (on page 16 of

its Petition), which Arriba cites to support a blanket nght of discovery,

State:

Yet, extensive discovery and other extended proceedings at this

stage may frustrate the significance and benefit of entitlement to

immunity from suit. Accordingly, discovery and fact-finding

should be limited to the essentials necessary to determining the

preliminary question of jurisdiction.

853 F.2d at 451.

Arriba also quotes extensively from the D.C. Circuit (on pages

16 and 17 of its Petition), but pretermits its quotation just prior to, "the

District Court should closely control and limit the discovery and fact-

finding so as to avoid ‘frustrat[ing] the significance and benefit of ...

immunity from suit.’ Gould, 853 F.2d at 451." Foremost-McKesson, 905

F.2d. at 449. That Court adds: "It 1s further clear that the plaintiff bears

the burden of asserting facts sufficient to withstand a motion to dismiss

....” Id. at 447 (emphasis in original).

12

Fifth Circuit noted, "it is unimaginable that FSIA would

authorize broader exposure to suit of a foreign government

instrumentality such as Pemex than that of domestic

governmental units." 926 F.2d at 537; A.App. at 17a.

Because Pemex’s immunity under the FSIA is, like

that of domestic governmental officials, immunity from suit

not merely from damages, discovery should be allowed only

if "necessary to determining the preliminary question of

jurisdiction." Gould, 853 F.2d at 451 (emphasis added).

That 1s, "the plaintiff bears the burden of asserting facts

sufficient to withstand a motion to dismiss ...." Foremost-

McKesson, 905 F.2d at 447 (emphasis in original). As the

Fifth Circuit stated in this case, while explaining the same

authority Arriba cites before this Court, "As the other FSIA

cases demonstrate, discovery may be used to confirm specific

facts that have been pleaded as a basis for enforcing the

commercial activities exception, but it cannot supplant the

pleader’s duty to state those facts at the outset of the case."

962 F.2d at 537 n.17; A.App. at 18a-19a n.17 (citation

omitted). ,

Arriba’s entire point of error is that it should have

been allowed more discovery, but discovery makes sense

only when issues of fact are in dispute. Arriba’s fatal

deficiency, as noted by the Court of Appeals, is not that it

needed discovery, which it did not get; it is that Arriba

Arriba’s own quotation from the Ninth Circuit establishes that

discovery is permissible only “[t]o the extent that the jurisdictional facts

are disputed...." Siderman de Blake vy. Republic of Argentina, 965 F.2d.

699, 713 (9th Cir. 1992) (quoted by Armba at Petition at 17), petition for

certiorari filed, 61 U.S.L.W. 3156 (Aug. 20, 1992).

In another opinion, not cited by Arriba, the Ninth Circuit

dismissed an action under the FSIA based on the pleadings alone.

Compania Mexicana, 859 F.2d. at 1358.

13

needed jurisdictional aliegations, which it did not make, and

a viable jurisdictional theory, which it never asserted.

Despite Arriba’s contrary presentation to this Court (resting

on abbreviated quotes, see supra n.11), this Court and all the

Circuit Court of Appeals are agreed on this point: absent

factual allegations supporting subject matter jurisdiction, an

action against a foreign state should be dismissed. Arriba’s

complaints have that deficiency, the Fifth Circuit dismissed

for that reason, and Arriba’s Petition for Writ of Certiorari

does not challenge the correctness of that ruling. That

dismissal should not be disturbed over Arriba’s discovery

complaint.

IT. The Fifth Circuit’s rejection of Arriba’s argument

that Pemex has waived its sovereign immunity

from suit is supported by all relevant authority,

including the legislative history of the FSIA.

As the Fifth Circuit stated, Arriba’s "imaginative"'

“argument that endowing a state entity with the capacity to

sue and be sued constitutes an implied waiver of sovereign

immunity [under the FSIA] is ‘easily rejected.’"'* Arriba

bases its argument on one out-of-context sentence from this

Court’s Bancec opinion. 462 U.S. at 625. Bancec begins by

recognizing that the FSIA grants immunity from suit in the

United States to all foreign governmental instrumentalities

(id. at 620-22), and then describes the powers of the typical

government instrumentality, which generally include the

12. 962 F.2d at 538; A.App. at 20a.

13. Id. at 538 n.19; A.App. at 20a n.19 (quoting M.W. Gordon,

Foreign State Immunity in Commercial Transactions § 6.18, at 6-46

(1991), citing Dayton v. Czechoslovak Socialist Republic, 672 F. Supp.

7 (D.D.C. 1986), aff'd, 834 F.2d 203 (D.C. Cir. 1987), cert. denied,

486 U.S. 1054 (1988)).

14

power to sue and be sued (id. at 624-25). Arriba’s argument

rests entirely on one sentence from that description, which

reads, "Provisions in the corporate charter stating that the

instrumentality may sue and be sued have been construed to

waive the sovereign immunity accorded to many

governmental activities, thereby enabling third parties to deal

with the instrumentality knowing that they may seek relief in

the courts." Jd. at 625 (footnote omitted). From this

sentence, Arriba makes the unsubstantiated leap that Bancec

holds that a capacity to sue and be sued waives immunity

from any and all suits in this country.

Bancec, however, does not hold that instrumentalities,

by virtue of having the capacity to sue and be sued, waive

their sovereign immunity under the FSIA. The statement in

Bancec is merely part of a general description of

instrumentalities and indicates only that a_ typical

instrumentality can be sued in its own country. Arriba cites

no authority for its far different conclusion, and its reasoning

is contradictory. This Court in Bancec began its analysis by

recognizing that government instrumentalities are protected

by the FSIA. /d. at 620-22. Only thereafter did it note that

the "typical government instrumentality" has the capacity to

sue and be sued. /d. at 625. Surely this one sentence did

not vitiate the immunity protection afforded such

instrumentalities under the FSIA, which this Court had just

recognized in the immediately preceding discussion.

The true meaning of Bancec is mirrored by Congress’

actions in adopting the FSIA. The FSIA grants immunity to

all foreign states, expressly defined to include

instrumentalities. 28 U.S.C. § 1603(a). “Moreover, the

legislative history to § 1603 [of the FSIA] establishes that

entities with the capacity to ‘sue and be sued’ were included

within the protection of § 1604." Dayton, 672 F. Supp. at

15

11.'* Also, like this Court in Bancec, Congress noted that

the typical government instrumentality has the capacity to be

sued, and included that power within its definition of the

entities protected by the FSIA. H. Rep. No. 1487, 94th

Cong., 2d Sess. 15, reprinted in 1976 U.S. Code Cong. &

Admin. News 6604, 6613-14; see also Dayton, 672 F. Supp.

at 11. Thus, as the Dayton court noted, "Congress intended

to extend sovereign immunity to all foreign state

instrumentalities endorsed with the capacity to sue and be

sued when it enacted the FSIA." 672 F. Supp. at 11.

Arriba’s waiver theory does not even hold true for

domestic governinental agencies. With the adoption of the

Federal Torts Claims Act, Congress once again cloaked all

"sue and be sued" agencies of the United States with the

identical sovereign immunity afforded all other agencies of

this country.'" And, even before that Act, when such

domestic agencies were sued abroad, the United States

government argued for, and foreign governments recognized,

the sovereign immunity of those "sue and be sued" agencies

outside the United States. Compare Sloan Shipyards Corp.

v. United States Shipping Board Emergency Fleet Corp. , 258

U.S. 549 (1922)(United States government-owned shipping

company not immune from suit in the United States) with

Compania Mercantil Argentina vy. United States Shipping

Board, 40 T.L.R. 601 (1924) (same corporation immune

from suit in England); see also Sucharitkul, State Immunities

and Trading Activities in International Law 132 (1959)

14. The Fifth Circuit cited Dayton (965 F.2d at 538 n.19; A.App.

at 20a n.19), although for some reason Arriba asserts that "[t]he Fifth

Circuit does not appear to embrace the reasoning of Dayton." Petition

at 22 n.14.

LS. 28 U.S.C. § 2679(a); Loeffer v. Frank, 486 U.S. 549, 561-62

(1988). With the FSIA, Congress did the same for foreign

instrumentalities. Dayton, 672 F. Supp. at 11.

16

(discussing Compania Mercantil).

Arriba’s waiver argument thus provides no basis for

granting writ of certiorari. The Fifth Circuit’s ruling on this

issue conforms with all relevant authority.

CONCLUSION

For these reasons, the petition for wnt of certiorari

should be denied.

Respectfully Submitted,

Kenneth R. Wynne

(Counsel of Record)

Mark Maney

Wynne & Maney

2730 Texas Commerce Tower

Houston, Texas 77002

(713) 227-8835

Alfredo R. Pérez

Bracewell & Patterson

2900 South Tower Pennzoil Place

Houston, Texas 77002

(713) 223-2900

Counsel for Respondent,

Petroleos Mexicanos

acetic nenati aac tate

la

APPENDIX A

Declaration of the Attorney General of Mexico

(from R. Vol. 7 at 115-30)

C.P. Francisco Rojas

Director General

Petroleos Mexicanos

PRESENTE

In reference to your request, | have received and

reviewed copies of the complaint, in English and in Spanish,

brought against Petroleos Mexicanos and others before the

United States District Court for the Southern District of

Texas, Houston Division, No, H-90-1767, styled Arriba,

Ltd. v. Petroleos Mexicanos, et al.

In that regard, pursuant to the authority granted by

Article 102 of the Political Constitution of the United

Mexican States, and Article 4, section V of the Law of the

Attorney General’s Office of the Republic of Mexico

currently in effect, issued on November 13, 1983 and

published in the Official Gazette of the Federation [Diario

Oficial de la Federacion] on December 12, 1983, I hereby

give my opinion based upon the facts alleged in the above

referenced lawsuit,

This opinion covers three basic issues, The first

describes the legal status of Petroleos Mexicanos and the

laws which govern that entity, The second discusses the

constitutional amendments, statutes, regulations, and official

decrees issued by the Federal Government in the years 1982,

1983, and early 1984, as the basis of the moral renovation

program established under former President Lic, Miguel de

la Madrid Hurtado and the relation of those laws to the

allegations in this lawsuit. Finally, this opinion explains the

legal status of the Union of Petroleum Workers of the

Republic of Mexico [Sindicato de Trabajadores Petroleros de

la Republica Mexicana] and the Commission of Contracts of

the Union, a civil society [Comision de Contratos del

Sindicato, Sociedad Civil].

In accordance with articles 25 and 2% of the Political

Constitution of Mexico, the public sector (the Government)

has exclusive authority over all areas of strategic value to the

national development, including petroleum, other

hydrocarbons, and the basic petrochemicals, To manage

these strategic activities, the State acts through its Organisms

and Enterprises, which are owned and controlled by the

Federal Government.

Article 27 of the Constitution states that the Nation

has direct dominion, inalienable and imprescriptibie, of all

natural resources, including petroleum and _ other

hydrocarbons. Paragraph 6 prohibits the issuance of

concessions for the exploitation of petroleum and other

hydrocarbons and establishes that the Nation itself must

perform exploitation of the same in the manner directed by

the Regulatory Law,

The Regulatory Law to Article 27 of the Constitution

in the Petroleum Branch, presently in effect, and published

in the Official Gazette of the Federation on November 29,

1958, reiterates that the Nation has direct dominion over all

natural resources, and again states that the exploitation of

hydrocarbons must be performed by the Nation directly

Article 4 of the Regulatory Law states:

The Nation will carry out the exploration and

exploitation of petroleum and the. other

activities that are referred to in Article 3 by

means of Petroleos Mexicanos, a

Decentralized Public — Institution whose

Structure, functions, and internal regulations

are established by the law, regulations, and

other corresponding dispositions. . . .

4a

Additionally, Article 9 of the Regulatory Law to

Article 27 of the Constitution states that "The petroleum

industry is exclusively under federal jurisdiction, . . .”

The Organic Law of Petroleos Mexicanos, currently

in effect and published in the Official Gazette of the

Federation on February 6, 1971, contains the functions,

powers, and duties of Petroleos Mexicanos in order to fulfill

the objectives established by the Constitution and its

regulatory laws, Article | [of the Organic Law] states:

Petroleos Mexicanos, created by decree of

June 7, 1938, is a Decentralized Public

Organism of the Federal Government, of a

technical, industrial, and commercial nature,

with its own legal status, and its own

patrimony, with domicile in Mexico City,

Federal District.

In accordance with the Regulatory Law of Article 27

of the Constitution, the Organic Law of Petroleos Mexicanos

grants to the Federal Government exclusive jurisdiction over

the petroleum industry, Article 17 states:

In all actions, agreements, and contracts in

which Petroleos Mexicanos is involved, the

federal laws of Mexico shall apply, and the

disputes in which it is a party, whatever their

nature, shall be of the exclusive jurisdiction of

the Federal Courts of Mexico. . . .

Based on the foregoing, it is easily concluded that

Petroleos Mexicanos, created by decree of the Federal

Congress, with its own legal status and patrimony, is a

Decentralized Organism that forms part of the Public

Administration of the Federal Government of Mexico.

Sa

Therefore, the only courts with jurisdiction over PEMEX are

the Federal Courts of the Mexican Republic, a power which

is ratified and reiterated by other rules, currently in effect,

of the Mexican Juridical System such as the Organic Law of

the Federal Public Administration and the Federal Law of

Parastatal Entities, both implementing Article 90 to the

Constitution and its regulations.

In December of 1982, the then President of the

United Mexican States, Lic, Miguel de la Madrid Hurtado,

announced his program for the moral renovation of mexican

society, which proclaimed, inter alia, two fundamental

responsibilities:

The first has as tts goal the elimination of the

corruption prevalent in the government and in its relation

with society. Therefore, the Public Administration must be

honest, professional, and efficacious. Bureaucratic burdens

must be removed before they overwhelm society. It is

essential to put the Power of the State in the hands of the

people, so that it can serve as the basic protector of the

peoples’ rights,

The second has as its object the identification,

investigation, processing, and sanctioning, with legality,

efficiency, severity, and impartiality, of any corruption

prevalent within governmental enuties.

The reforms and additions to the Political

Constitution, in conjunction with the secondary laws, were

the first step towards the fulfillment of the moral renovation

within the government, so that society can find support in

those reforms and thereby totally vindicate its rights; so that

the law can effectively contrel the public servants in their

6a

relationship with society, and so that their functions are not

diminished and so that their conduct will comport with the

law.

In order to fulfill these goals, upon the initiative of

the President of the United Mexican States, the Federal

Congress amended twenty-two articles of the Federal

Constitution, and promulgated and substantially amended

their respective regulatory laws. Among those reforms are:

(a) In December of 1982, articles 22, 73, 74,

76, 94, 97, 108, 109, 110, 111, 112, 113,

114, 127, and 134 of the Constitution were

amended in order to define the duties of

public servants at all levels. These

amendments basically established that public

servants Cannot maintain business or personal

interest in direct conflict with their offices,

and further established personal liability for

violations of their duties.

(b) In the same way, Article 134 of the

Political Constitution of Mexico and _ its

Federal Regulatory Law were amended to

insure impartial contracting with governmental

entities, thereby guarantying the State the

most favorable conditions available regarding

price, quality, financing, opportunity, and

other pertinent factors.

(c) Likewise, in December of 1982, the

Secretary General of the Comptroller’s Office

of the Federation was created, as permitted by

a previous reform of the Organic Law of the

Federal Public Administration. According to

Article 32 bis, section XVII of the cited

Ta

Organic Law, the Secretary has the power to

oversee and to investigate the acts, omissions

or conduct of the public servants, to establish

administrative responsibilities, to impose the

sanctions established by the law, and when

appropriate, to file the proper charges with the

District Attorney [Ministerio Publico], and to

provide any requested assistance.

(d) In 1982, Title Ten of the Federal Penal

- Code was substantially reformed to include 8

new crimes imputable to public servants,

among them we should highlight the Abuse of

Public Office, Trafficking in Influence, and

Intimidation and Collusion of Public Servants.

These federal crimes were added with new

administrative sanctions that the Federal

Congress enacted as part of the Federal Law

of the Responsibilities of Public Servants; all

of these laws manifest the purposes of the

constitutional reforms, particularly the goals

of Article 134 of the Constitution.

(e) On January 28, 1984, Lic. Carlos Salinas

de Gortari -- then-Secretary of Budget and

Planning and acting within the authority

granted him by articles 32 of the Organic Law

of the Federal Public Administration, and 6,

28, 30, 33, 37, 38, 51, 55, 56, and 57, and

others of the Law of Public Works -- issued

an official proclamation, which was published

in the Official Gazette of the Federation on

January 30, 1984, directed at enforcing

obedience to the reforms; its objective was to

combat the contracting practices then existing

between governmental entities and the private

8a

sector. This proclamation reaffirmed the

principles of the Law and decreed that the

public entities were required to follow the

mandates of the Constitution and its regulatory

laws.

Accordingly, any contract that violates these

procedures, or other agreements’ with

legitimate ends but which are executed

without recourse to the requirements of the

federal law, shall be considered null and void

as a matter of law. The most substantial

effect of the order of Lic. Carlos Salinas de

Gortari as to Petroleos Mexicanos was to

abrogate the contractual clauses between

Petroleos Mexicanos and the Union of

Petroleum Workers of the Republic of Mexico

by which Petroleos Mexicanos was obligated

to grant to the Union, in favor of the Union’s

civil societies, contracts without a public

bidding process or without fulfilling all formal

requisites. This official proclamation of the

Secretary of Budget and Planning also

declared that any public. servant who

personally executed such a contract or who

was involved in the execution of such a

contract would be personally liable.

(f) Shortly after the facts related above, the

immediate result of such dispositions was to

declare that any type of concession given to

the Union relating to hydrocarbon products

was unconstitutional, and thus illegal and

void.

Under the practice prior to these regulations,

9a

a fixed percentage of PEMEX contracts were

granted to the Union without recourse to a

bidding process. It was contemplated that the

Union would either perform these contracts

directly or by subcontract, retaining some

percentage as profit; the profit in either case

was expected to finance social programs for

the workers. In practice, however, the

Union’s leaders created the Commissions in

order to keep the profit outside of the Union,

so the workers themselves did not benefit.

PEMEX, in turn, was also damaged because

it did not receive the best terms when

contracting. In recognition of these

irregularities, these types of practices were

terminated beginning in 1984 by the Order of

the now President of the Republic of Mexico,

Lic. Carlos Salinas de Gortari. After these

official orders, all PEMEX contracts had to

comply with the formalities established by the

law and in particular the principles established

by Article 134 of the Constitution.

As stated in these reforms, any contract with

a governmental entity, such as Petroleos

Mexicanos, must be formalized, establishing

in writing all obligations that derive from the

contract, particularly in those cases in which

the Law requires that Petroleos Mexicanos

grant those contracts directly to the interested

parties without intermediaries, as is the case

of first hand sales of petroleum, natural gas,

and products obtained from the processing of

those products, according to Article 3, section

II of the Regulatory Law to Article 27 of the

Petroleum Branch and Article 2 of the

10a

Organic Law of Petroleos Mexicanos.

The rights and obligations of the contract

cannot be partially or totally assigned or

transferred to any other individual or entity

that is not a party to the contract. Any

contract based, in whole or in part, on

promises, inducements, side-deals or other

arrangements, or involving parties not

included in the contract, will be null and void

as to the governmental entity. The individuals

involved are personally responsible for the

consequences of the contract, and will also be

subject to criminal _ sanctions. Any

modification or amendment to the contract

must follow the same formalities as_ the

original contract. The same laws dictate that

the governmental entity is not responsible for

any fraudulent and illicit promises, or side-

deals that would make the contract null.

Solely the individuals involved in such

dealings are personally responsible for their

actions.

in analyzing the allegations in the complaint

and assuming strictly for purpose of this

opinion that those allegations have any basis

in fact, the types of "arrangements" described

in paragraphs 17, 19, 21, 23, 24, 27, 28, 29,

30, 34, 35, and 36 of the complaint (solely as

examples) are illegal and are completely

without effect and null and void as a matter of

law because they violate the laws described

above.

lla

Second, the legal reforms mentioned impose

direct responsibility on the public servants

who may have participated in such acts,

assuming hypothetically that those acts

occurred, and that responsibility can never be

imposed on Petroleos Mexicanos.

Third, if a United States Court were to

impose liability on Petroleos Mexicanos as a |

result of the allegations contained in the

complaint, the objectives and essential :

principles of the legal reforms brought about

by the moral renovation program wouid be

frustrated by condoning and legitimizing the

illegal "arrangements." Further, to require

Petroleos Mexicanos to finance and to

subsidize the corruption described in the

complaint would wrongfully drain the

resources of the Nation.

I.

Under the Mexican juridical system, Unions and

societies have constitutional and legal status clearly distinct

from decentralized agencies of the Public Administration.

;. Petroleos Mexicanos

(a) Petroleos Mexicanos is a Decentralized

Public Organism of the Federal Government

that forms part of the Federal Public

Administration, and whose objectives compose

the realization of all the activities of the

petroleum industry, according to terms of the

governing federal laws.

See ae

ho

12a

(b) The dissolution of Petroleos Mexicanos or

the granting of its activities to another entity

of the Federal Public Administration can only

be achieved by decree of the Federal Congress

through the abrogation or modification of the

particular laws that presently govern the

activities entrusted to Petroleos Mexicanos by

the Nation.

(c) Petroleos Mexicanos is registered in the

Public Registration of Decentralized

Organisms before the Secretary of Budget and

Planning (article 24 of the Federal Law of the

Parastatal Entities).

Unions.

(a) In contrast, the objectives of unions are

the protection of the private interests of their

members, exercising the right to strike, and

executing and administering Collective

Bargaining Agreements with public or private

entities. The Federal Labor Law governs the

labor relationship, contained in Art. 123,

Subsection A of the Constitution. All its

principles, rules, and institutions tend to one

sole function: the harmonious and just

regulation of the relations between capital and

labor.

The unions can own property only for the

benefit of their members and for the

fulfillment of their objectives (articles 374 and

375 of the Federal Labor Law). The unions

are strictly prohibited from conducting

commercial activities for profit (article 378 of

l3a

the Federal Labor Law).

(b) Because the unions are created by the free

will of their members, only the members can

dissolve the union, either according to the

union charter or by vote of the members

(articles 378 and 379 of the Federal Labor

Law).

(c) The unions must be registered before the

Secretary of Labor and Social Services when

under federal jurisdiction and before the

Board of Conciliation and Arbitration [Labor

Courts] when under local jurisdiction (article

365 of the Federal Labor Law).

Societies

(a) The Commission of Contracts of the

Executive General Committee of the Union of

Petroleum Workers of the Republic of

Mexico, S.C. [Civil Society], was

incorporated as a civil society by means of the

public record number 25905 formalized before

the authority of Public Notary Number 65 of

the Federal District, Lic. Pedro del Paso

Carrara, and is governed by its articles of

incorporation, the civil laws, and any other

relevant regulations. In Mexico, the Civil

Societies are authorized to perform

commercial activities that do not constitute

speculation.

(b) The civil societies are dissolved according

to their articles of incorporation and by the

happening of certain events listed in the Civil

l4a

Code.

(c) The Civil Societies, in contrast to the

above, must be registered before the Public

Registry of Civil Societies in order to deal

with third parties (article 2694 of the Federal

Civil Code). The Commission of Contracts is

registered in Volume 445, page 126 of the

Public Registry of Property of the Federal

District.

As can be seen, under the mexican juridical system it

is not possible to confuse the juridical personality of the

Decentralized Public Organisms (Petroleos Mexicanos), the

Unions (the Union of Petroleum Workers of the Republic of

Mexico), and the Civil Societies (the Commission of

Contracts of the Union); the relationship between them is

unique under the law, and of course, because of their

different and contrary goals none of them can be agent of the

other and cannot even represent the other in any activity.

The three legal persons mentioned above, Petroleos

Mexicanos, the Union, and the Commission of Contracts,

were created under different legal frameworks and possess

different formalities, objectives, and goals; they are

registered in different public registries, and their functions

and organization are controlled by different legal

hyierarchies.

For further illustration, I cite some of their more

notable differences below:

l. The objectives and functioning of Petroleos

Mexicanos are established by the Regulatory Law to Article

27 of the Constitution in the Petroleum Branch and by the

Organic Law of Petroleos Mexicanos, both laws issued by

the Federal Congress.

lS5a

The objectives of the National Union of Petroleum

Workers of the Republic of Mexico, its duration, the

conditions of membership, the rights and obligations of

members, the meeting of members, the election of

representatives and the term of their position, the Union

dues, and the rules for the liquidation of their assets, are

established in the Union charter, which is freely approved by

the association of workers.

Turning on the other hand to the Commission of

Contracts, S.C., according to tts public articles of

incorporation, the partners determine the goals and operating

procedures of the entity pursuant to the ad hoc rules

established in the Civil Code and the articles of

incorporation.

rz Petroleos Mexicanos is registered in the Public

Registry of Decentralized Organisms, under the Secretary of

Budget and Planning; the Union of Petroleum Workers of the

Republic of Mexico is registered in the Registry of

Association of the Secretary of Labor and Sociai Services,

and the Commission of Contracts of the S.T.P.R.M., S.C.,

in the Registry of Civil Societies of the Public Registry of

Property and Commerce of the Department of the Federal

District.

: The Decentralized Organisms of the Federal

Government, in addition to the specific laws creating them,

must comply with and fulfill numerous regulations of public

order; the Unions only follow the rules of the Federal Labor

Law and those internal regulations established in thei!

charters; and Civil Societies are governed by the Civil Code

and their articles of incorporations.

4. The development and operations of Petroleos