United States Court of Appeals,
Fifth Circuit.
No. 93-2610.
Gopalakrishnan N. MANGATTU, Derryl F. Remedioa, and Thaluthara K.
Francis, Plaintiffs-Appellants,
v.
M/V IBN HAYYAN, et al., Defendants,
United Arab Shipping Co. (S.A.G.), and M/V IBN AL ATHEER,
Defendants-Appellees.
Oct. 17, 1994.
Appeal from the United States District Court for the Southern
District of Texas.
Before REYNALDO G. GARZA, DeMOSS, and PARKER, Circuit Judges.
ROBERT M. PARKER, Circuit Judge:
The district court found that Appellee, United Arab Shipping
Co, (S.A.G.) (UASC) is a foreign state under the Foreign Sovereign
Immunities Act (FSIA), and released Appellee's vessel, which
Appellants had seized, without requiring security. We affirm.
I. FACTS
Gopalakrishnan N. Mangattu, Derryl F. Remedioa and Thaluthara
K. Francis, Plaintiffs-Appellants, are citizens of India who worked
as merchant seamen on M/V HAYYAN, a ship owned by defendant, UASC.
On December 1, 1992, Appellants filed suit claiming unpaid earned
wages, double wages, personal injuries and other damages, in
personam against the vessel owner and in rem against the vessel on
which they worked, M/V IBN HAYYAN. The vessel owner, UASC is
wholly owned by six foreign sovereigns: Saudi Arabia, Kuwait,
Qatar, United Arab Emirates, and Iraq each own 19.33%, and Bahrain
owns 3.335%.
On December 12, 1992, Appellants dismissed the in rem action.
UASC subsequently answered, and discovery commenced. On July 14,
1993, Appellants filed a motion requesting the attachment of the
M/V IBN AL-ATHEER, which is also owned by UASC, pursuant to Rule B
of the Supplemental Rules for Certain Admiralty and Maritime
Matters. Appellants asserted that they had a maritime lien against
the M/V HAYYAN, the M/V HAYYAN had left American port, but the M/V
IBN AL-ATHEER was currently docked at an American port, and thus
the conditions for an in rem action had been fulfilled. They also
sought leave to file a second amended complaint re-asserting an in
rem action. The magistrate judge issued an order which granted
leave to file the second amended complaint, which added the in rem
action and authorized attachment under Rule B. On July 24, 1993,
Appellants served the maritime attachment and garnishment on the
M/V IBN AL-ATHEER.
The district court, after hearing, found that UASC was a
foreign state under the Foreign Sovereign Immunities Act and that
Appellants could not arrest or attach the vessel. Therefore the
district court ordered release of the vessel and denied Appellants'
request for security. The Court later denied a motion for
reconsideration. Appellants appeal those orders.
II. IS UASC AN AGENT OR INSTRUMENTALITY OF A FOREIGN STATE?
We must determine whether UASC, which claims to be a foreign
state under the Foreign Sovereign Immunities Act is entitled to
that status. The question turns on the definition of "foreign
state," in 28 U.S.C. § 1603, which provides:
Definitions
For purposes of this chapter—
(a) A "foreign state", except as used in section 1608 of
this title, includes a political subdivision of a foreign
state or an agency or instrumentality of a foreign state as
defined in subsection (b).
(b) An "agency or instrumentality of a foreign state"
means any entity—
(1) which is a separate legal person, corporate or
otherwise, and
(2) which is an organ of a foreign state or
political subdivision thereof, or a majority of whose
shares or other ownership interest is owned by a foreign
state or political subdivision thereof, and
(3) which is neither a citizen of a State of the
United States as defined in section 1332(c) and (d) of
this title, nor created under the laws of any third
country.
In order to qualify for treatment as a foreign state, UASC
must meet all three requirements under § 1603(b). There is no
dispute that Appellee satisfies (b)(1). This appeal focuses on the
second and third requirements.
a. Can foreign states pool their ownership interest?
Appellants contend that § 1603(b)(2) requires that 51% or more
of Appellee's stock be owned by a single foreign state, and that
several foreign states cannot pool their ownership interests to
attain the majority ownership required by the statute. There is no
authority in this or any other circuit interpreting this language.
Appellants contend that Linton v. Airbus Industrie, 794 F.Supp. 650
(S.D.Tex.1992)1 supports their position. In dicta, that district
court did articulate the argument against pooling relied on by
1
On subsequent appeal, this Court dismissed the appeal for
lack of jurisdiction to review the appeal. Linton v. Airbus
Industrie, 30 F.3d 592 (5th Cir.1994).
appellants:
First it is far from clear that pooling is allowed under
FSIA. To approve pooling, the Court must assume that FSIA
applies to entities 50% or more of whose shares are owned by
foreign states, even though no single foreign state owns more
than 50%. Section 1603, however, speaks only of entities 50%
or more of whose shares are owned by a foreign state,
singular. Arguably, had Congress wished to permit pooling, it
could have easily defined a foreign state as an entity 50% or
more of whose shares are owned by a foreign state or states.
Because Congress did not so define foreign state, it is not
for the courts to substitute this definition for the one
provided.2
The Linton court went on to say that while it was not too much
of a stretch to assume that Congress intended to allow pooling, the
fact situation in Linton was not a question of pooling. Instead,
the company in question was owned by other entities that were, in
turn, partially owned by foreign states and partially controlled by
private interests. The court found that to allow pooling of
interests by companies owned by other entities, which were
partially owned by foreign states would substantially broaden the
reach of FSIA, which it declined to do.
Appellee cites two district court cases that have approved
pooling in cases analogous to this one, and distinguishes Linton,
pointing out that the issue of whether an entity owned 100% by a
group of sovereigns could be considered a foreign sovereign under
§ 1603 of the FSIA was not before the court in that case. LeDonne
v. Gulf Air, Inc., 700 F.Supp. 1400 (E.D.Va.1988) involved a
corporation established by treaty among four Persian Gulf states.
In that case the district court rejected the argument that FSIA was
2
Linton, 794 F.Supp. at 652. On appeal, this Court noted
that the district court's reasoning should be examined in light
of the rules of statutory construction and the cases in which
pooling has been considered. 30 F.3d at 597 n. 29.
inapplicable unless a majority ownership was vested in a single
state:
This is an unnecessary literalism that runs counter to the
Act's purpose and ignores the well-established international
practice of states acting jointly through treaty-created
entities for public or sovereign purposes. If the policies
that animate the FSIA are to be given their full range, it
must, therefore, apply to treaty created instrumentalities
jointly owned by foreign states. Id. at 1406.
See also, International Ass'n of Machinists v. OPEC, 477
F.Supp. 553 (C.D.Cal.1979) (The court found that OPEC is governed
by FSIA.)
Appellants contend that UASC is not a treaty created entity,
as the English word "treaty" is not used in the English language
version of the Agreement and Articles filed in the record of this
cause. The UASC was created in 1976 by an agreement among the
governments of the six nations, to "strengthen the economic
ligaments among them to develop their resources." The articles of
association dictate that the text of the both the Agreement for
Establishment and the Articles of Association shall be deemed of
force in all participant States even though prejudicial to their
local laws. A treaty is simply a compact made between two or more
independent nations with a view to the public welfare. United
States v. Belmont, N.Y., 301 U.S. 324, 330-32, 57 S.Ct. 758, 761,
81 L.Ed. 1134 (1937). A treaty is not only a law but also a
contract between two nations and must, if possible, be so construed
as to give full force and effect to its parts. United States v.
Reid, 73 F.2d 153, 155 (9th Cir.1934). We conclude that UASC is a
treaty created instrumentality for purposes of the FSIA.
We hold that an entity 100% owned by foreign states, created
by an agreement of all the participating states, satisfies the
requirements of § 1603(b)(2).
b. Was UASC created under the laws of a third country?
Appellants argue that UASC fails to meet § 1603(b)(3) because
it was "created under the laws of a third country." Appellee is a
Kuwait corporation. Appellants take the position that only
Kuwait's interest (less than 20%) can be considered in determining
ownership interest, because UASC is "created under the laws of a
third country" as to all participating nations other than Kuwait.
The rationale of this [§ 1603(b)(3) ] exclusion is the common
sense presumption that when a foreign state establishes a
company under the laws of yet another state or acquires a
company created by another country, the intention is to engage
in private commercial activity, not public, non-commercial
activity. The key to the presumption's validity is that the
instrumentality is created or established in a country
different from the owner nation. LeDonne v. Gulf Air, Inc.,
700 F.Supp. 1400, 1406 (E.D.Va.1988).
The record establishes that UASC was created by an agreement
that was given the force of law in all member nations, and
incorporated under the laws of one of its members. Such an entity
satisfies both the purpose and the letter of § 1603(b)(3).
III. DID UASC WAIVE IMMUNITY FROM ATTACHMENT?
UASC concedes that it engaged in commercial activity in the
United States. Appellants rely on the §§ 16053 and 16064 for the
3
§ 1605 provides in pertinent part:
§ 1605. General exceptions to the jurisdictional
immunity of a foreign state
(a) A foreign state shall not be immune from the
jurisdiction of courts of the United States or of the
States in any case—
(2) in which the action is based upon a commercial
activity carried on in the United States by the foreign
proposition that once UASC engaged in commercial activity, they
lose all benefit of FSIA immunity, and are subject to all the
processes and remedies available against any defendant.
Section 1605 talks specifically about waiver of jurisdictional
immunity, and § 1606 provides that a foreign state shall be liable
in the same manner and to the same extent as a private individual,
except for a limitation on punitive damages, neither of which
inform the question of attachment.
Rather, the issue of attachment is governed by § 1609, which
provides, "the property in the United States of a foreign state
shall be immune from attachment arrest and execution, except as
provided in sections 1610 and 1611 of this chapter." The plain
words of the statute clearly preclude reading the language of §§
1605 and 1606 to control the issue in this case. Under § 1610(d),
property of a foreign state used for commercial activity in the
United States shall not be immune from attachment prior to the
entry of judgment if the purpose of attachment is to secure
satisfaction of a judgment that may ultimately be entered against
state; or upon an act performed in the United States
in connection with a commercial activity of the foreign
state elsewhere; or upon an act outside the territory
of the United States in connection with a commercial
activity of the foreign state elsewhere and that act
causes a direct effect in the United States.
4
§ 1606 provides as follows:
§ 1606. Extent of liability
As to any claim for relief with respect to which a
foreign state is not entitled to immunity under section
1605 or 1607 of this chapter, the foreign state shall
be liable in the same manner and tot he same extent as
a private individual under like circumstances[.]
the foreign state and not to obtain jurisdiction. So the real
question is whether the purpose of the attachment was to secure
satisfaction of a possible judgment or to gain jurisdiction. The
Motion for Issuance of Warrant of Arrest filed by Appellants
specifically sought to attach the vessel in order to subject UASC,
a nonresident defendant, to personal jurisdiction. The procedure
employed by Appellants, Rule B of the Supplemental Rules for
Certain Admiralty and Maritime Claims, provides a basis for
attachment only in the situation where an in personam claim is made
against a defendant not found within the district. Appellants
later filed Plaintiff's Request for Security for Release for the
Arrest M/V IBN AL ATHEER. In that pleading Appellants asserted
that the vessel had been seized in accordance with a court order
authorized by Rule B of the Supplemental Rules of Certain Admiralty
and Maritime Claims, and asked the district court to set an amount
for the release bond in accordance with Rule E of the Supplemental
Rules, mentioning the Appellants desired adequate security for
their claims.
The district court did not err in releasing the vessel ordered
seized by the magistrate judge for the purpose of attaining
jurisdiction. However, if the Appellants plead and establish an
entitlement to seizure of UASC's property for security of their
claims under § 1610(d), nothing in this opinion should be construed
to preclude that remedy.
IV. WAIVER
Attachment is also available in the case of an explicit
waiver of immunity. Appellants assert, without authority, that
explicit waiver may be found when a foreign state subjects itself
to the terms of the subsequent law of another country. Appellants
claim that their claim arising under 46 U.S.C. § 10313, et seq. is
based on a subsequent law of another country. If the subsequent
law of another country in fact waives immunity, it would be an
implicit waiver, which is not a basis for abrogation of immunity
under § 1610. Because the record contains no evidence of explicit
waiver, we find no merit in this ground of error.
V. CONCLUSION
The order of the district court is AFFIRMED.