Opinion ID: 795095
Heading Depth: 2
Heading Rank: 3

Heading: Applicability of Af-Cap I and Af-Cap II

Text: 30 The Garnishees assert that the FSIA requires that a court determine that a foreign sovereign's property meet the requirements for an exception to immunity before authorizing execution against such property. They complain that instead of making the required determinations, the district court merely decided that Af-Cap II was conclusive on the immunity issue, and argue that this exclusive reliance on Af-Cap II was error. FG Hemisphere counters that Af-Cap II settles the immunity issue because the Garnishees were located in the United States when this case was removed to the district court. 31 The Af-Cap II holding that the situs of the garnishee is the situs of the property is instructive regarding our focus on the Congo's intangible property. Nevertheless, we distinguish Af-Cap II on its facts and reasoning because the Af-Cap II panel did not make the determinations there that are essential to the issues in this case. 32
33 In Af-Cap I and Af-Cap II, we examined the same royalty obligations that FG Hemisphere seeks to garnish in this case and determined that a common sense appraisal of the requirements of justice and convenience in this particular context yields the conclusion that the situs of these royalty obligations is the United States— the situs of the Garnishees. Af-Cap II, 383 F.3d at 371 (internal quotation marks omitted). On the Af-Cap I and Af-Cap II record, it was undisputed that Texas was the locus from which the garnishees had supervised, directed, and financed the activities that gave rise to their obligations to make royalty payments to the Congo. Af-Cap I, 309 F.3d at 262-63 (Dennis, J., dissenting from denial of rehearing en banc). 34 Also undisputed was the Garnishees' continuous presence in Texas. Id. Accordingly, Af-Cap I and Af-Cap II did not consider either (1) whether the garnishees—and therefore intangibles in their possession—were in the United States, or (2) the applicable time period during which the obligations must be in the United States for § 1610(a) purposes (the § 1610(a) situs snapshot, or the situs snapshot). See Af-Cap II, 383 F.3d at 371-73 (discussing the rule applicable to a § 1610(a) situs determination for intangibles but not discussing the situs of the garnishees). 35 2. Classification of the Royalty Interests Was Not At Issue In Af-Cap I and Af-Cap II 36 In Af-Cap I, we assumed that the obligations were intangible property; in Af-Cap II, we stated that the royalty obligations were intangibles. Nevertheless, neither Af-Cap I nor Af-Cap II analyzed the nature of the property, in large part because Af-Cap I and Af-Cap II addressed only the FSIA exception to executional immunity. Neither Af-Cap I nor Af-Cap II mentioned statutory or jurisprudential support—or considered the record's factual support—for the assumption and conclusion that these obligations were intangible property. 37 For example, the word intangible first appears in Af-Cap I as follows: Contrary to the Bank's suggestion, assigning the phrase `used for' its ordinary meaning does not make it impossible to execute against the intangible property of the foreign state. Af-Cap I, 309 F.3d at 257. Next, we noted that Af-Cap, Inc.'s predecessor in interest, Connecticut Bank of Commerce suggests that, because it is difficult to prove what a foreign state intends to do in the future with intangible property, like bank accounts, judgment creditors will rarely be able to execute against any intangible property. Id. (footnote omitted). 38 Continuing to refer generally to intangible property, we examined the meaning of used for in § 1610(a)'s used for commercial activity in the United States requirement, noting that we cannot see how focusing on the use of property forecloses execution against intangible property. Our decision in Atwood Turnkey Drilling, Inc. v. Petroleo Brasileiro, S.A., 875 F.2d 1174 (5th Cir.1989), helps illustrate how certain intangible property can uncontroversially be viewed as used in service of a commercial activity in the United States. Af-Cap I, 309 F.3d at 258. We concluded that intangible property is not so inherently speculative that courts cannot determine how such interests are used by the foreign state. Id. 39 The Af-Cap I panel first associated intangible with the Congo's royalty interest in an observation that, [o]n the record before us . . . the Congo has not put its intangible property in the service of any commercial activity in the United States. Id. at 258. The second such association was a finding that, [u]nder the undisputed facts, the property executed upon—the garnishees' intangible obligations to pay royalties—are in the United States, as required by FSIA § 1610(a). The garnishees are oil companies headquartered in Texas. The situs of a debt is the situs of the debtor in Texas. Id. at 261-62 (Dennis, J., concurring in the judgment but disagreeing as to the controlling principles of law). Next is a statement that [t]he factual question of what the royalty and tax obligations are `used for' appears much less difficult on this record than the legal question of determining the situs of the intangible royalty obligations. Id. at 265. Our focus in Af-Cap I was the interest entitling its owner to a share as part of the § 1610(a) used for commercial activity requirement—not the classification of that interest. 40 In Af-Cap II, we confirmed the Af-Cap I assumption that the royalty obligations are intangibles, and determined that the situs of an intangible obligation is the situs of the garnishee. Whether the royalty obligations were classified as intangibles or otherwise was not squarely part of our analysis. The panel in Af-Cap II determined whether the obligation to pay royalties, assumed in Af-Cap I and Af-Cap II to be intangible, was in the United States, given the uncontroverted fact that the garnishees were in the United States. 41 Finally, the Congo's royalty interests, but not SNPC's working interest, was at bar in both Af-Cap I and Af-Cap II. There has been no appellate determination that the working interest satisfies either requirement for application of the § 1610(a) exception to execution immunity. 42 To sum up: In the Af-Cap cases, we decided that (1) the obligations to pay royalties to the Congo, here at issue in FG Hemisphere I, had been used for commercial activity in the United States; and (2) as to these intangible obligations to pay royalties, the undisputed United States situs of the garnishees was the § 1610(a) situs of the Congo's intangible property. In FG Hemisphere I and FG Hemisphere II, we are not faced with a straightforward application of law to undisputed fact, as was the case in Af-Cap II. To properly apply the Af-Cap II § 1610(a) situs rule in each of these two appeals, it must be determined when the property must be in the United States; whether the obligations at issue are intangible; and whether SNPC's working interest was property in the United States that was used for commercial activity in the United States. Our Af-Cap decisions do not speak to these determinations. As in the Af-Cap decisions, we do not analyze whether the property at issue in either appeal is classified as tangible or intangible. Moreover, because the garnishment writs against SNPC must be dissolved for other reasons, we do not address whether SNPC's working interest share satisfies the requisites of § 1610(a). In contrast to the Af-Cap decisions, the facts disputed in both appeals require that we determine the § 1610(a) time period during which the obligations must be in the United States.