08-5621-cv
Aurelius Capital Partners v. The Republic of Argentina
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term, 2008
(Argued: May 11, 2009 Decided: October 15, 2009)
Docket No. 08-5621-cv(L),08-5619-cv (con), 08-5620-cv (con),
08-5622-cv (con), 08-5623-cv (con), 08-5624-cv(xap), 08-5626-
cv(con), 08-5630-cv-(con), 08-5691-cv(con), 08-5692-cv(con),
08-5693-cv(con), 08-5694-cv(con), 08-5695-cv-(con), 08-5696-
cv(con), 08-5697-cv(con), 08-5698-cv-(con), 08-5699-cv(con),
08-5700-cv(con), 08-5701-cv(con), 08-5702-cv(con), 08-5703-
cv(con), 08-5705-cv(con), 08-5708-cv(con), 08-5709-cv(con),
08-5710-cv(con), 08-5711-cv(con), 08-5712-cv(con), 08-5713-
cv(con), 08-5714-cv(con), 08-5723-cv(con), 08-5726-cv(con),
08-5727-cv(con), 08-5729-cv(con), 08-5730-cv(con), 08-5731-
cv(con), 08-5734-cv(con), 08-5735-cv(con), 08-5737-cv(con),
08-5738-cv(con), 08-5740-cv(con), 08-5741-cv(con), 08-5744-
cv(con), 08-5746-cv(con), 08-5747-cv(con), 08-5748-cv (con),
08-5749-cv(con), 08-5750-cv(con), 08-5751-cv(con), 08-5753-
cv(con), 08-5754-cv(con), 08-5755-cv(con), 08-5756-cv(con),
08-5757-cv(con), 08-5758-cv(con),08-5759-cv(con), 08-5760-
cv(con), 08-5761-cv(con), 08-5762-cv(con), 08-5769-cv(con),
08-5771-cv(con), 08-5774-cv(con), 08-5775-cv(con), 08-5776-
cv(con), 08-5778-cv(con), 08-5779-cv(con), 08-5780-cv(con),
08-5782-cv(xap), 08-5783-cv(con), 08-5790-cv(con), 08-5792-
cv(con), 08-5793-cv(con), 08-5794-cv (con), 08-5796-cv(con),
08-5799-cv(con), 08-5800-cv(con), 08-5802-cv(con), 08-5803-
cv(con), 08-5807-cv(con), 08-5808-cv(con), 08-5811-cv(con),
08-5817-cv(con), 08-5821-cv(con), 08-5825-cv(con), 08-5829-
cv(con) 08-5869-cv(con), 08-5870-cv(con), 08-5872-cv(con), 08-
5885-cv(con),08-5910-cv(con),08-5913-cv(con), 08-5981-cv(con),
08-6133-cv(con), 08-6135-cv(con), 08-6136-cv(xap), 08-6137-
cv(con), 08-6138-cv(con), 08-6242-cv(con), 08-6243-cv(con),
08-6249-cv(con), 08-6250-cv(con), 08-6251-cv(con), 08-6252-
cv(con), 08-6253-cv(con), 08-6254-cv(con), 08-6255-cv(con),
08-6256-cv(con), 08-6257-cv(con), 08-6260-cv(con), 08-6261-
cv(con), 08-6269-cv(con), 08-6270-cv(con), 09-0151-cv(con),
09-0155-cv(con), 09-0158-cv(con), 09-0160-cv(con), 09-0161-
cv(con), 09-0163-cv(con), 09-0164-cv(con), 09-0165-cv(con),
09-0525-cv(con), 09-0803-cv (con), 09-0812-cv (con).
- - - - - - - - - - - - - - - - - - - -x
A URELIUS C APITAL P ARTNERS, LP, et al.,
Plaintiffs-Appellees,
- v.-
T HE R EPUBLIC OF A RGENTINA,
Defendant-Appellant,
A RAUCA B IT AFJP S.A., et al.,
Interested-Non-Party Appellants,
A DMINISTRACIÓN N ACIONAL DE S EGURIDAD S OCIAL,
Interested-Non-Party-Appellant.
- - - - - - - - - - - - - - - - - - - -x
Before: WALKER and WALLACE, * Circuit Judges. **
The Republic of Argentina appeals from the district
court’s orders of attachment and execution entered in late
2008 over Argentine social security funds, which under
proposed Argentine legislation were to be transferred to the
*
The Honorable J. Clifford Wallace, United States
Court of Appeals for the Ninth Circuit, sitting by
designation.
**
The Honorable Sonia Sotomayor, originally a member
of the panel, was elevated to the Supreme Court on August 8,
2009. The two remaining members of the panel, who are in
agreement, have determined the matter. See 28 U.S.C.
§ 46(d); Local Rule 0.14(b); United States v. Desimone, 140
F.3d 457 (2d Cir. 1998).
2
Administración Nacional de Seguridad Social (the
Administration), an Argentine governmental entity. The
orders were confirmed in the district court’s opinion and
order dated December 11, 2008, immediately after the
legislation transferring the funds to the Administration
became effective. We reverse the decision of the district
court and vacate the orders.
J ONATHAN I. B LACKMAN, Cleary Gottlieb Steen & Hamilton
LLP (Carmine D. Boccuzzi, Christopher P. Moore,
Rahul Muhki, Benjamine J. A. Sauter, and Michael
J. Byars, on the brief), New York, New York, for
Defendant-Appellee-Cross-Appellant Republic of
Argentina.
M ARCO E. S CHNABL, Skadden, Arps, Slate, Meagher &
Flom LLP (Lauren E. Aguiar, Timothy G. Nelson, and
Sarah E. McCallum, on the brief), New York, New
York, for Non-Party Appellant Administración
Nacional de Seguridad Social.
B ARRY R. O STRAGER, Simpson, Thacher & Bartlett LLP
(Tyler B. Robinson and David Elbaum, on the
brief), New York, New York, for Plaintiffs-
Appellees Aurelius Capital Partners, LP, Aurelius
Capital Master, Ltd. and Blue Angel Capital I LLC.
D AVID D UNN, Hogan & Hartson LLP, New York, New York,
for Plaintiffs-Appellees GMO Emerging Country Debt
L.P., GMO Emerging Country Debt Investment Fund
PLC, GMO Emerging Country Debt Fund, and Teachers
Insurance and Annuity Association of America.
T HEODORE B. O LSON, Gibson, Dunn & Crutcher LLP
(Matthew D. McGill and Jason J. Mendro, Gibson,
Dunn & Crutcher LLP, Robert A. Cohen and Dennis H.
Hranitzky, Dechert LLP, and David W. Rivkin, John
3
B. Missing, and Suzanne M. Grosso, Debevoise &
Plimpton LLP, on the brief), New York, New York,
for Plaintiffs-Appellees NML Capital, Ltd. and EM
Ltd.
J. CLIFFORD WALLACE, Senior Circuit Judge:
The Republic of Argentina (Republic) appeals from the
district court’s orders of attachment and execution (Thomas
P. Griesa, Judge) entered in late 2008 over Argentine social
security funds, which under proposed Argentine legislation
were to be transferred to the Administración Nacional de
Seguridad Social (the Administration). The orders were
confirmed in the district court’s opinion and order dated
December 11, 2008, immediately after the legislation
transferring the funds to the Administration became
effective. The district court had jurisdiction pursuant to
28 U.S.C. § 1330. We have jurisdiction over the appeal from
the district court’s December 11, 2008 order and opinion
pursuant to 28 U.S.C. § 1291, and we have jurisdiction over
the restraining orders, orders of attachment and writs of
execution pursuant to 28 U.S.C. § 1292(a)(1) and the
collateral order doctrine described in Cohen v. Beneficial
Industrial Loan Corp., 337 U.S. 541, 546-47 (1949). Because
we conclude that the funds were immune from attachment under
the Foreign Sovereign Immunities Act (Act), 28 U.S.C. §§
4
1602-1611, we reverse the decision of the district court and
vacate its orders.
I
In 2001, the Republic defaulted on payments on debt
instruments issued to bondholders. In connection with the
issuance of the Argentine bonds, the Republic had agreed to
a waiver of sovereign immunity. As a result of the default,
many bondholders, including the majority of the plaintiffs
in this case, obtained judgments against the Republic.
Since the judgments against the Republic were entered, the
bondholders have attempted to recover on the judgments.
Most of these attempts have been unsuccessful “because they
concerned property that was immune from execution under the
[Act] or property that did not belong to the Republic.” See
Br. of Def.-Appellant Republic of Argentina at 4-5, citing,
inter alia, Capital Ventures Int’l v. Republic of Argentina,
280 F. App’x 14, 15 (2d Cir. 2008) and EM Ltd. v. Republic
of Argentina, 473 F.3d 463, 475-76 (2d Cir. 2007).
On October 21, 2008, the President of the Republic
announced that private pension funds, held and managed on
behalf of Argentine workers and pensioners, would be
transferred to the Administration. This appeal stems from
5
certain judgment holders’ attempts to execute upon some of
those funds in order to satisfy their judgments. Before
describing the proceedings in the district court whereby the
plaintiffs attempted to execute against the pension funds,
background on the Administration and the private pension
funds is necessary.
The Argentine constitution requires that the government
provide social security benefits to its citizens. Const. of
the Argentine Nation, First Part, Ch. 1, § 14bis, available
at
http://www.argentina.gov.ar/argentina/portal/documentos/cons
titucion_ingles.pdf (requiring that “[t]he State shall grant
the benefits of social security, which shall be of an
integral nature and may not be waived”). In 1991, the
Republic adopted a decree creating a unified social security
system, known as the “Distribution System.” Later that
year, the Administration was established for the purpose of
administering the Distribution System. The Administration
also administered other programs, including welfare and
unemployment benefits. In 1993, the Argentine government
reformed the pension system to create a hybrid regime that
allowed Argentine workers and pensioners to choose between
6
the Distribution System and a new private plan, the
“Capitalization System.” Under the Capitalization System,
workers made contributions to individual accounts managed by
private corporations, which administered the retirement and
pension funds and provided payments and benefits due to the
pensioners in exchange for management fees. By law, the
assets in the funds were only to be used to provide social
security benefits, and the private corporations did not have
property rights in the funds’ assets. Some of the funds
were held in New York, where the private corporations
invested the funds to grow for the benefit of the
pensioners.
Dissatisfied with the Capitalization System, in 2007,
the Argentine Congress passed a law that allowed
Capitalization System participants to switch back to the
Distribution System. In order to facilitate this
transition, the Argentine Congress passed a decree
establishing the Sustainability Guarantee Fund (Guarantee
Fund), which received the social security funds transferred
from the Capitalization System and was managed by the
Administration. The law establishing the Guarantee Fund
7
provided that its assets could be used only to provide
social security benefits to qualifying participants.
Then, on October 21, 2008, proposed legislation was
introduced in the Argentine legislature requiring the
reunification of the bifurcated social security system. The
proposed legislation required all of the assets in the
Capitalization System to be transferred to the Guarantee
Fund. The proposed legislation also reaffirmed that assets
in the Guarantee Fund may only be used to provide social
security benefits for Argentine pensioners.
On October 29, 2008, the district court signed an Order
to Show Cause in three of the cases brought by Aurelius
Capital Partners and Blue Angel Capital against the Republic
based on defaulted bonds. The Order to Show Cause set for
hearing a motion to authorize the United States Marshals
Service to serve a writ of execution covering the retirement
and pension funds, and related property located in New York
and belonging to the Republic, the Administration, and the
private corporations holding the funds under the
Capitalization System. Although the plaintiffs in the three
initial cases moved for relief only against the Republic and
did not name either the Administration or the private
8
corporations as parties, the district court nevertheless
authorized the plaintiffs to make immediate service of
restraining notices to the Republic, the Administration and
the private corporations, which prevented removal of the
retirement and pension funds or any of their assets from the
United States. The restraining notices did not prohibit the
parties from engaging in daily trading activities, provided
that no property left the United States. The theory behind
the orders was that once the proposed legislation had been
enacted and the property had been transferred to the
Administration, it would essentially become property of the
Republic; if the property belongs to the Republic, then,
because the Republic had waived sovereign immunity with
respect to the bondholders’ judgments, judgment could be
executed against it.
Two days after the October 29 order, EM Ltd. and NML
Capital, Ltd. obtained “me too” ex parte writs of execution
and restraining notices in their respective post-judgment
cases, as well as restraining orders and attachments of the
funds managed by the Administration and/or the private
corporations. By the end of November 2008, plaintiffs in 72
actions had obtained either writs of execution and
9
restraining notices in post-judgment cases or restraining
orders and orders of attachment in cases where judgment had
not yet been entered (together, the Orders). The district
court found that, as a result of the Orders, approximately
$200 million was frozen in New York accounts, primarily
investment accounts.
On November 12, 2008, the Republic moved to vacate the
Orders, and the district court held a hearing on the motion
on November 14, 2008. The Republic argued that it had no
interest in the social security assets managed by the
private corporations or the property administered by the
Administration. It also argued that the Administration is
an “agency or instrumentality” separate from the Republic
for purposes of the Act, and that therefore, its assets are
not available to creditors of the Republic. The Republic
further argued that the property managed by the
Administration and the private corporations is used for a
non-commercial purpose – payment of pension benefits – and
that therefore, the Republic’s creditors were precluded from
executing upon the property under the Act. The
Administration and the private corporations, appearing on a
limited and special basis as interested non-parties,
10
likewise opposed the plaintiffs’ motions, arguing that the
Administration was a juridically distinct, independent
political subdivision of the Republic and therefore not
liable for the Republic’s debts. At the conclusion of the
hearing, the district court continued the Orders. In
ordering continuation of the previously entered orders, the
court stated that it was exercising its “equitable power to
simply hold the status quo and prevent assets from getting
spirited out of the country.” The court opined that it had
previously only entered a “freeze order,” and not an
“attachment,” which the court said would have been
inappropriate at the time.
The district court also directed the parties to engage
in discovery concerning, inter alia, the Republic’s use of
the social security assets, the Administration’s
institutional relationship to the executive branch of the
Argentine government, and the location of any additional
custodial assets that may be held in the United States.
However, the Administration declined to participate in
discovery, claiming that it was not required to submit to
discovery because it was not a party to the action, and
11
because the court lacked jurisdiction over it pursuant to
the Act.
On December 9, 2008, the proposed legislation became
law, mandating that the majority of the funds previously
administered by the private corporations be transferred in
kind to the Guarantee Fund administered by the
Administration in Argentina. The Argentine law states that
the assets of the funds shall be invested “by applying
criteria of sufficient security and profitability while
contributing to the sustainable development of the real
economy.” Law 26,425, art. 8, Dec. 9, 2008. The law states
that “[t]he total amount of the funds may only be employed
to make payments in the Argentine Integrated Pension
System.” Id. The law further provides that social security
funds managed by the Administration may be invested only in
Argentine securities. Id.
On December 11, 2008, the district court issued an
Opinion and Order granting the motions for writs of
execution and confirming its prior Orders authorizing
restraints and attachment of pension funds managed by the
Administration and the private corporations. In its
opinion, the district court held that the Administration is
12
a political subdivision of the Republic, and therefore, the
Administration is subject to the jurisdiction of the court
because the Republic is subject to the court’s jurisdiction;
and similarly, the assets of the Administration are subject
to attachment and execution to the same degree as are the
assets of the Republic.
Next, the district court considered whether the
plaintiffs had established that the funds were being “used
for a commercial activity in the United States” as required
by the Act. See 28 U.S.C. § 1610(a), (d). The district
court recognized that the social security funds were
required by Argentine law to be used solely to maintain the
social security system, and that those funds were, at the
time the orders were signed, in the hands of the
corporations, which were indisputably private entities.
However, applying the Supreme Court’s holding in Republic of
Argentina v. Weltover, 504 U.S. 607 (1992), the district
court held that the funds were “used for a commercial
activity in the United States” because the funds were
invested in the hope of profit while under the
administration of the private corporations, and because the
transfer of the funds to the Administration was undertaken
13
not for the benefit of the pension funds, but instead “to
effectively appropriate funds for non-pension governmental
uses.” The district court concluded that the funds were not
immune from attachment and execution under the Act. The
district court also held that the restraining orders filed
before the Argentine legislation took effect were valid.
On March 4, 2009, the district court issued an order
authorizing the U.S. Marshal Service to serve the
plaintiffs’ writs of execution on garnishee financial
institutions where the funds are currently held. However,
the district court directed that the assets not be seized
until further order of the court. Nevertheless, because the
district court’s prior orders “froze” the funds in the
United States, the Administration has been unable to take
possession of the funds, and the new law transferring the
funds to the Administration has not been implemented. The
Republic, the Administration, and the private corporations
appeal from the district court’s orders.
II
Before we discuss the appeal’s substance, we must
address a threshold jurisdictional question: whether the
14
Administration, a non-party appellant, has standing to
challenge the district court’s issuance of the Orders.
In this case, the plaintiffs did not name the
Administration as a party to the actions to enforce
judgments against the assets of the Administration. The
Administration appeared on a special and limited basis
before the district court to argue in favor of vacating the
district court’s Orders regarding attachment and execution.
The Administration filed a memorandum and declarations in
opposition to the Order to Show Cause and restraining
orders. On appeal, the Administration filed a brief as a
non-party appellant and appeared at oral argument.
Plaintiffs-Appellees GMO Emerging Country Debt L.P., GMO
Emerging Country Debt Investment Fund PLC, GMO Emerging
Country Debt Fund, and Teachers Insurance and Annuity
Association of America (together, GMO) argue that the
Administration, as a non-party to this action, does not have
standing to offer argument in the appeal from the district
court’s decision because the Administration did not
intervene in the district court proceedings.
Although “[s]tanding to appeal is an essential
component of our appellate jurisdiction,... [t]he question
15
of nonparty standing to appeal ‘does not implicate the
jurisdiction of the courts under Article III of the
Constitution.’” Official Comm. of Unsecured Creditors of
WorldCom, Inc. v. S.E.C., 467 F.3d 73, 77 (2d Cir. 2006)
quoting Devlin v. Scardelletti, 536 U.S. 1, 6 (2002).
“Rather, the issue is whether an appellant should be treated
as a party for purposes of appealing a judgment when it was
not a party in the proceedings below.” Id. “As a general
rule, only a party of record in a lawsuit has standing to
appeal from a judgment of the district court.” Hispanic
Soc’y of the N.Y. City Police Dep’t v. N.Y. City Police
Dep’t, 806 F.2d 1147, 1152 (2d Cir. 1986). There is,
however, an exception to this rule when "the nonparty has an
interest that is affected by the trial court’s judgment."
Id. The putative appellant must be able to “identify an
‘affected interest.’” Kaplan v. Rand, 192 F.3d 60, 67 (2d
Cir. 1999), quoting United States v. Int’l Bhd. of
Teamsters, 931 F.2d 177, 183-84 (2d Cir. 1991); see
WorldCom, 192 F.3d at 78 (a nonparty need not “prove that it
has an interest affected by the judgment,” but only “stat[e]
a plausible affected interest”).
16
In Karaha Bodas Co. v. Perusahaan Pertambangan Minyak
Dan Gas Bumi Negara, we addressed an analogous challenge to
a non-party’s standing to appeal. 313 F.3d 70, 81-82 (2d
Cir. 2002). In that case, a limited liability company
sought to enforce an arbitral award against Pertamina, an
oil and gas company owned and controlled by the Republic of
Indonesia. Id. at 75. Pertamina was deemed an “agency or
instrumentality” of Indonesia for purposes of the Act. Id.
at 75-76. The Republic of Indonesia was not named as a
party. Id. at 81. On appeal, we acknowledged that in
general, a party’s absence from the initial proceedings and
its failure to intervene would preclude its participation in
the appeal. Id. However, we held that because the Republic
of Indonesia had alleged that it “owns the property
encompassed by the garnishment order . . . this constitutes
an ‘affected interest,’ which entitle[d] the [Republic of
Indonesia] to join this appeal.” Id. at 82.
In the case before us, the Administration clearly has
an interest that is affected by the district court’s orders.
The Orders attach and execute upon funds that, on
implementation of the December 2008 Argentine law, are
administered by the Administration. The position of the
17
Administration is analogous to that of the non-party
Republic of Indonesia in Karaha Bodas, except that, in
Karaha Bodas, the agency was named as a party but the parent
republic was not, whereas in this case the Republic was
named as a party and the Administration was omitted. If
anything, the appropriateness of the Administration’s
standing to appeal is even stronger in this case than in
Karaha Bodas, because it is the Administration’s property at
stake. The Administration, as the entity that manages the
funds, has an even more direct interest in the property
deemed subject to attachment and execution than the Republic
of Indonesia had in Karaha Bodas.
GMO argues that where a proposed appellant had an
opportunity to intervene but failed to do so before the
district court, the nonparty does not have standing to
appeal, even if it has an interest affected by the district
court’s judgment. Relying on a Supreme Court case, Marino
v. Ortiz, 484 U.S. 301 (1988), GMO argues that, for policy
reasons, the Administration should not reap the benefit of
being allowed to make arguments on appeal where it failed to
intervene in the district court proceedings. In Marino,
petitioners, a group of individuals who claimed to have been
18
adversely affected by a settlement in an employment
discrimination case, chose not to intervene in the district
court proceedings. Id. at 303. Instead, the petitioners
filed their action during the time between the district
court’s interim approval of a settlement and its issuance of
a final consent decree. Id. The district court dismissed
the petitioners’ action, and the court of appeals upheld the
dismissal, holding that it constituted an impermissible
collateral attack on a consent decree by persons who could
have intervened in the action but chose not to. Id. at 303-
04. The issue in that case was whether the district court
may dismiss an impermissible collateral attack by
non-parties. Id. at 304. The Court affirmed the district
court’s disallowance of the action by the petitioners. Id.
(stating “[w]e think the better practice [than to allow a
nonparty to appeal in an action like Marino] is for such a
nonparty to seek intervention for purposes of appeal;
denials of such motions are, of course, appealable”).
The Administration’s interest in this litigation is
qualitatively different from the Marino petitioners’
interest. The plaintiffs in this case are attempting to
execute upon the property of the Administration. The
19
plaintiffs chose not to make the Administration a party to
the action, even though the Administration’s interest is
directly affected. Unlike the petitioners in Marino, who
claimed a tangential harm from a settlement but chose not to
intervene, it is difficult to imagine a situation where the
property of a party will be more affected by the court’s
decision than the property of the Administration here. Cf.
Hispanic Soc’y, 806 F.2d at 1152 (dismissing non-party
appellant’s appeal because the putative appellants had no
affected interest in the employment discrimination
litigation as they had no right to promotion and did not
allege any discrimination against themselves). Further, in
Marino, the district court had dismissed the petitioners’
action. In this case, the district court permitted the
Administration to participate in the district court
proceedings as a non-party. Marino does not govern this
case.
GMO also argues that the interest of the Administration
is fully and amply protected by the Republic’s arguments on
appeal. GMO does not offer persuasive support for this
argument. Instead, GMO cites Federal Rule of Civil
Procedure 24, which governs the rules of intervention. The
20
Administration did not seek to intervene in the district
court proceedings, so Rule 24 does not apply to this case.
We therefore hold that the Administration has standing
to appeal the district court’s orders as a nonparty
appellant.
III
GMO also argues that the district court erred in
allowing the Administration to submit memoranda and
declarations, and to offer argument in the district court
proceedings in opposition to the Orders, because the
Administration invoked sovereign immunity during the
discovery process. To the extent GMO raises an evidentiary
challenge, GMO does not point to any evidence that it
believes should have been stricken from the record;
therefore, there is no evidentiary ruling for us to consider
on appeal. Further, insofar as GMO challenges the district
court’s decision to allow the Administration to submit
memoranda of points of law regarding the Orders, we have
stated that it is “essential for the district court to
afford the parties the opportunity to present evidentiary
material . . . on the question of FSIA jurisdiction. The
district court should afford broad latitude to both sides in
21
this regard.” Reiss v. Société Centrale du Groupe des
Assurances Nationales, 235 F.3d 738, 748 (2d Cir. 2000).
Although this statement is not directly controlling because
the Administration was not a party to the case, it supports
the idea that a district court is afforded broad discretion
in its determination of jurisdictional issues. The district
court acted well within its discretion to consider arguments
presented by the Administration to secure a full
understanding of the jurisdictional issues.
IV
We next turn to the primary issue on appeal: whether
the funds administered by the Administration are subject to
attachment. We review de novo legal conclusions denying Act
immunity to a foreign state or its property. In re
Terrorist Attacks on Sept. 11, 2001, 538 F.3d 71, 79 (2d
Cir. 2008). We review the district court’s ruling on a
request for an order of attachment for abuse of discretion.
EM Ltd. v. Republic of Argentina, 473 F.3d 463, 472 (2d Cir.
2007). The district court abuses its discretion if it
applies legal standards incorrectly, relies on clearly
22
erroneous findings of fact, or proceeds on the basis of an
erroneous view of the applicable law. Id.
Under section 1609 of the Act, property in the United
States of a foreign state is immune from attachment or
execution unless the property fits within one of the limited
exceptions enumerated in sections 1610 or 1611 of the Act.
28 U.S.C. § 1609. The provisions of section 1611 are not
applicable to this case. See 28 U.S.C. § 1611. We
therefore focus on section 1610(a), which authorizes
execution against property of a foreign state located in the
United States only if the property is “used for a commercial
activity in the United States,” even if the foreign
sovereign has waived its immunity. 28 U.S.C. § 1610(a); see
also EM Ltd., 473 F.3d at 481 n.19 (“[I]f a foreign
sovereign waives its immunity from execution, U.S. courts
may execute against ‘property in the United States . . .
used for a commercial activity in the United States.’”
(quoting Conn. Bank of Commerce v. Republic of Congo, 309
F.3d 240, 247 (5th Cir. 2002))).
Thus, the property that is subject to attachment and
execution must be “property in the United States of a
foreign state” and must have been “used for a commercial
23
activity” at the time the writ of attachment or execution is
issued. “Even when a foreign state completely waives its
immunity from execution, courts in the U.S. may execute only
against property that meets these two statutory criteria.”
Conn. Bank, 309 F.3d at 247. This clearly follows from the
plain language of section 1610(a). Section 1610(a) does not
say that the property in the United States of a foreign
state that “will be used” or “could potentially be used” for
a commercial activity in the United States is not immune
from attachment or execution. More is required: the
property in the United States of a foreign state must be
used for a commercial activity in the United States “upon a
judgment entered by a court of the United States or of a
State.” 28 U.S.C. § 1610(a). “To conclude otherwise would
render meaningless the provisions of §§ 1610(a) & (d), which
subject to attachment property of a foreign state when the
property is ‘used for a commercial activity’ and when the
foreign state ‘has waived its immunity from attachment.’”
EM Ltd., 473 F.3d at 481 n.19; cf. FG Hemisphere Assocs.,
LLC v. République du Congo, 455 F.3d 575, 594 (5th Cir.
2006) (holding that “[p]rior to issuing a garnishment order,
a district court must make factual findings that support
24
application of the § 1610(a) exception to executional
immunity,” and therefore, the court must determine the
location of each form of property at time of issuance of the
order to ensure that it governs property located in the
United States).
On appeal, the parties focus largely on whether the
Administration qualifies as an “agency or instrumentality”
of the Republic under section 1610(b) of the Act. However,
even if the Administration is not a separate “agency or
instrumentality” for purposes of the Act, but instead is a
political subdivision of the Republic, we must first
determine whether the funds were being used for a commercial
activity in the United States as of the effective date of
the Argentine legislation transferring the funds to the
control of the Administration. If not, the funds are not
subject to attachment or execution, regardless of the
Administration’s independent juridical status or lack
thereof.
The district court issued its opinion two days after
the Republic adopted the legislation authorizing the
retirement and pension funds to be transferred to the
25
Administration. The order attaching the assets of the
Administration was effective immediately upon the transfer.
The Act is clear: “The property in the United States of
a foreign state” must be “used for a commercial activity in
the United States” before it is susceptible to attachment
and execution. 28 U.S.C. § 1610(a) (emphasis added). The
commercial activities of the private corporations who
managed these assets are irrelevant to this inquiry. The
plaintiffs do not argue that the private corporations were
acting as the alter ego of the Republic. Therefore, before
the retirement and pension funds at issue could be subject
to attachment, the funds in the hands of the Republic must
have been “used for a commercial activity.” Because the
order attaching the assets of the Administration became
effective immediately upon the passage of legislation
transferring the assets from the private corporations to the
Administration, neither the Administration nor the Republic
had the opportunity to use the funds for any commercial
activity whatsoever. The only activity that the Republic
had engaged in with regard to the funds at the time that the
district court confirmed the Orders was the adoption of a
law transferring legal control of the funds from the private
26
corporations to the Administration. As we read “used for a
commercial activity,” we hold that a sovereign’s mere
transfer to a governmental entity of legal control over an
asset does not qualify the property as being “used for a
commercial activity.” A contrary conclusion would
essentially nullify the Act’s commercial activity
requirement in cases involving attachment and execution of a
foreign state’s property.
Thus, we conclude that the district court abused its
discretion in issuing the Orders. The Republic had not used
the funds for any commercial activity at the time of
attachment. Under the plain language of 28 U.S.C.
§ 1610(a), the funds are immune from attachment.
V
On appeal, the Administration argues that it is an
“agency or instrumentality” separate from the Republic, and
therefore, its interest in the funds is not subject to
attachment or execution because the Administration has not
waived its sovereign immunity. The district court held that
the Administration is not a separate “agency or
instrumentality,” but rather, it is a political subdivision
of the Republic. We need not reach this issue, as we have
27
determined that neither the Administration nor the Republic
used the funds for a commercial activity in the United
States. We therefore need not determine whether the
Administration is a juridically independent “agency or
instrumentality” separate from the Republic for purposes of
the Act.
The Republic and the Administration also argued that
the funds at issue are expressly designated by Argentine law
as social security assets, and therefore, their investment
(and concomitant payment to Argentine pensioners) is a
quintessentially governmental activity, and not a commercial
activity under the Act. See 28 U.S.C. § 1610(a) and (b).
Again, we need not reach this issue, as we have determined
that neither the Administration nor the Republic used the
funds for a commercial activity in the United States for the
same reason as stated above: the accounts were attached as
soon as the Administration gained legal title to them. Even
assuming (without deciding) that there may have been
commercial activity prior to that time in the form of
investment of the assets, it is undisputed that such
activity was undertaken by private corporations, on behalf
of pensioners, not by the Republic or the Administration.
28
Also, because we hold that the retirement and pension
funds are not property subject to attachment and execution
under the Act, we need not address the propriety of the
district court’s issuance of the restraining orders prior to
the passage of the legislation transferring the funds, when
the funds were still the property of the private
corporations.
CONCLUSION
We understand the frustration of the plaintiffs who are
attempting to recover on judgments they have secured.
Nevertheless, we must respect the Act’s strict limitations
on attaching and executing upon assets of a foreign state.
For the foregoing reasons, we reverse the district
court’s judgment and vacate all of the associated orders, as
well as its opinion confirming those orders.
29