References: [2002] 309 F3d 240
Links: Worldlii
Coram: Emilio M Garza
(United States Court of Appeals, Fifth Circuit) Connecticut Bank had acquired the rights to a valid London judgment against the Congo for defaulting on a loan agreement. It obtained a default judgment in New York in relation to the London judgment debt. The Bank then sought to attach various debts owed by a group of Texas oil companies to the Congo. The debts constituted various royalty obligations by the oil companies for activities connected with the exploration for and the sale of the Congo’s oil.
Held: The debts due from the oil companies were not ‘property . . used for a commercial activity’ within the meaning of section 1610(a). Judge Garza, for the majority said: ‘The phrase ‘used for’ on its face denotes something different and more specific than the phrases ‘integral to’ or ‘necessary to’. It also denotes something distinct (and narrower) than the other phrases the Bank uses in its petition, such as ‘related to’ or ‘contemplated by.”
Judge Garza said: ‘What matters under the statute is what the property is ‘used for’, not how it was generated or produced. If property in the United States is used for a commercial purpose here, that property is subject to attachment and execution even if it was purchased with tax revenues or some other noncommercial source of government income. Conversely, even if a foreign state’s property has been generated by commercial activity in the United States, that property is not thereby subject to execution or attachment if it is not ‘used for’ a commercial activity within our borders. The district court (and the litigants) have focused on the question of whether the Congo’s joint venture with the garnishees, which gave rise to the royalty and tax obligations that the Bank want to garnish, was a ‘commercial activity in the United States’. This was the wrong question to consider. What matters under the statute is not how the Congo made its money, but how it spends it. The amenability of these royalties and taxes to garnishment depends on what they are ‘used for’, not on how they were raised.’
He added: ‘The phrase ‘used for’ in section 1610(a) is not a mere syntactical infelicity that permits courts to look beyond the ‘use’ of property, and instead try to find any kind of nexus or connection to a commercial activity in the United States. The statute means what it says: property of a foreign sovereign . . may be executed against only if it is ‘used for’ a commercial activity. That the property is revenue from or otherwise generated by commercial activity in the United States does not thereby render the property amenable to execution.
. . To use property for a commercial activity, within the ordinary meaning of ‘use’, would be to put the property in the service of the commercial activity, to carry out the activity by means of the property. Here, the royalty obligations in question represent the revenue, the income, from an allegedly commercial activity. In ordinary usage, we would not say that the revenue from a transaction is ‘used for’ that transaction.’
He referred to the Act, noting the distinction in the Act between the jurisdictional immunity in section 3(1), which provides that a state is not immune as respects proceedings ‘relating to’ a commercial transaction and section 13(4), which, as he put it, makes explicit that the mere relationship to a commercial activity does not suffice to permit execution, the property must ‘for the time being’ be ‘in use or intended for use for a commercial purpose’. He concluded that the Act parallels the FSIA on the footing that: ‘it allows jurisdiction based on mere relationship to a commercial activity, but very clearly permits execution only depending on the ‘use’ of the property.’
This case is cited by:
- Cited – SerVaas Incorporated -v- Rafidian Bank and Others SC (Bailii, [2012] UKSC 40, [2012] 3 WLR 545, [2012] WLR(D) 257, Bailii SC, UKSC 2011/0247, SC Summary, SC)
The appellant had contracted to construct a factory in Iraq. On the imposition of sanctions, the respondent bank’s assets were frozen. The appellant sought to recover the sums due to it, and obtained judgment in France. After the fall of Hussain, . .