State-Owned Entity Transparency and Accountability Reform Act of 2016

To improve the Foreign Sovereign Immunities Act of 1976, and for other purposes. 1. Short title This Act may be cited as the State-Owned Entity Transparency and Accountability Reform Act of 2016 2. Findings Congress finds the following: (1) As Congress expressed when it enacted the Foreign Sovereign Immunities Act of 1976 ( Public Law 94–583 commercial activity (2) As the Supreme Court observed 7 years after Congress enacted the Foreign Sovereign Immunities Act of 1976, increasingly … governments throughout the world have established separately constituted legal entities to perform a variety of tasks Bancec typically established as … separate juridical entit[ies], with powers to hold and sell property and to sue and be sued distinct economic enterpris[es] on an enterprise basis a greater degree of flexibility and independence from close political control than is generally enjoyed by government agencies. These same features frequently prompt governments in developing countries to establish separate juridical entities as the vehicles through which to obtain the financial resources needed to make large-scale national investments (3) Because government instrumentalities established as juridical entities distinct and independent from their sovereign should normally be treated as such a presumption of independent status (4) However, the Supreme Court explained in Bancec that courts have consistently refused to give effect to the corporate form where it is interposed to defeat legislative policies a corporate entity is so extensively controlled by its owner that a relationship of principal and agent is created would work fraud or injustice (5) As state instrumentalities have developed over time, their corporate structure has commonly become more complex. In many cases, the structure of state instrumentalities has also become more opaque. At the same time, as a result of globalization, such entities are increasingly involved in commerce and trade involving companies and consumers of the United States. The result is that companies and consumers of the United States seeking to sue a foreign state-owned entity under the commercial activity (6) As they have grown larger, more opaque, and more involved in commercial activity with companies and consumers of the United States, state instrumentalities have continued aggressively to assert that they are immune to suit in courts of the United States. (7) In some cases, courts also have struggled to determine the correct juridical entity subject to their jurisdiction based on the commercial activity (8) In light of the sometimes opaque structure of state instrumentalities and their increasing interactions with companies and consumers of the United States, it is necessary to preserve potential claims of people of the United States against such entities based on their commercial activities. Therefore, for purposes of determining jurisdiction under the commercial activity 3. Amendment Section 1603(d) of title 28, United States Code, is amended— (1) by inserting (1) A (2) by adding at the end the following: (2) For purposes of section 1605(a)(2), a commercial activity of an agency or instrumentality of a foreign state shall be attributable to any corporate affiliate of the agency or instrumentality that— (A) directly or indirectly owns a majority of shares of the agency or instrumentality; and (B) is also an agency or instrumentality of a foreign state. .

Summary: State-Owned Entity Transparency and Accountability Reform Act of 2016 This bill amends the federal judicial code to allow U.S. courts to hear cases against a foreign state's corporate affiliates under the exception to foreign sovereign immunity that subjects a foreign state's commercial activities to the jurisdiction of U.S. courts. In determining whether a U.S. court has jurisdiction to hear a case based on the commercial activity of a foreign state, a commercial activity of an agency or instrumentality of a foreign state is attributable to any corporate affiliate of the agency or instrumentality that: (1) directly or indirectly owns a majority of shares of the agency or instrumentality, and (2) is also an agency or instrumentality of a foreign state.