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
 

1On 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). 

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
 

2Linton, 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. 

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
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
 

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

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
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[.] 

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
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.