Opinion ID: 6688
Heading Depth: 1
Heading Rank: 2

Heading: is uasc an agent or instrumentality of a foreign state?

Text: 6 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. Sec. 1603, which provides: Definitions 7 For purposes of this chapter-- 8 (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). 9 (b) An agency or instrumentality of a foreign state means any entity-- 10 (1) which is a separate legal person, corporate or otherwise, and 11 (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 12 (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. 13 In order to qualify for treatment as a foreign state, UASC must meet all three requirements under Sec. 1603(b). There is no dispute that Appellee satisfies (b)(1). This appeal focuses on the second and third requirements. 14 a. Can foreign states pool their ownership interest? 15 Appellants contend that Sec. 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 appellants: 16 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 17 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. 18 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 Sec. 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: 19 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. 20 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.) 21 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. 22 We hold that an entity 100% owned by foreign states, created by an agreement of all the participating states, satisfies the requirements of Sec. 1603(b)(2).b. Was UASC created under the laws of a third country? 23 Appellants argue that UASC fails to meet Sec. 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. 24 The rationale of this [Sec. 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). 25 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 Sec. 1603(b)(3). 26