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SECTION 1. SHORT TITLE.

This Act may be cited as the ''State-Owned Entity Transparency and
Accountability Reform Act of 2016''.

SEC. 2. FINDINGS.

Congress finds the following:
(1) As Congress expressed when it enacted the Foreign
Sovereign Immunities Act of 1976 (Public Law 94-583; 90 Stat.
2891), under international law, foreign states are immune from
the jurisdiction of the courts of the United States and of the
States, subject to certain exceptions. One of these exceptions,
the ''commercial activity'' exception, generally subjects
foreign states to the jurisdiction of courts of the United
States in actions relating to a foreign state's commercial
activities.
(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''. First National City Bank v. Banco Para El
Comercio Exterior de Cuba, 462 U.S. 611 (1983) (referred to in
this section as ''Bancec''). These state instrumentalities are
''typically established as . . . separate juridical entit[ies],
with powers to hold and sell property and to sue and be sued''.
Run by states as ''distinct economic enterpris[es]'', they
operate ''on an enterprise basis'' while enjoying ''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'', courts have
accorded them ''a presumption of independent status'' for
purposes of assessing jurisdiction under the Foreign Sovereign
Immunities Act of 1976.
(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''. As a result, courts will refuse to presume an
instrumentality's independence from a foreign state if ''a
corporate entity is so extensively controlled by its owner that
a relationship of principal and agent is created'' or
respecting the corporate form ''would work fraud or
injustice''. Transamerica Leasing, Inc. v. La Republica de
Venezuela, 200 F.3d 843, 848-49 (D.C. Cir. 2000).
(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'' exception of the Foreign
Sovereign Immunities Act of 1976 may struggle to determine
which juridical entity--for example, which member or affiliate
of an instrumentality--to sue.
(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'' exception. In others,
courts have rejected claims against instrumentalities for
failure to show an intra-instrumentality alter ego
relationship.
(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'' exception to the Foreign Sovereign
Immunities Act of 1976 only, companies and consumers of the
United States should not be required to prove an alter ego
relationship between members of an instrumentality to establish
subject-matter jurisdiction, as follows.

SEC. 3. AMENDMENT.

Section 1603(d) of title 28, United States Code, is amended--
(1) by inserting ''(1)'' before ''A''; and
(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.''.
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.