Opinion ID: 764897
Heading Depth: 2
Heading Rank: 3

Heading: Who is a Subject of a Foreign State?

Text: 29 The State Department's view, communicated to us by the Justice Department at our request, is that: 30 [I]n the last analysis, Hong Kong nationals, including corporations, [were] subjects of United Kingdom sovereignty. While the United States views Hong Kong as largely autonomous in most respects, as a matter of recognition, it deal[t] with Hong Kong through British authorities, since Hong Kong [was] ultimately subject to United Kingdom sovereignty. The various international agreements between Hong Kong and the United States [were] identified in the State Department's authoritative Treaties In Force under United Kingdom sovereignty. The Consular Convention between the United States and the United Kingdom identifie[d] citizens of the United Kingdom's colonies (including corporations) as U.K. nationals for purposes of relations between the two countries. This approach [was] mirrored in the underlying legal structure under which [a Hong Kong] corporation was created. The Letters Patent for Hong Kong issued by the British Crown [made] clear that ultimate sovereignty and authority, including final approval of all laws, [was] reserved to the British Crown. Since the ultimate sovereign authority over [a Hong Kong corporation was] the British Crown, [it] should be treated as a subject of United Kingdom sovereignty for purposes of alienage diversity jurisdiction. Gov't Brief at 6-7. 4
31 Matimak rejected the State Department's argument, which was identical to the argument presented to us, on the ground that Hong Kong corporations were not United Kingdom citizens according to explicit United Kingdom law. If they were not citizens, Matimak reasoned, they could not be subjects. We agree with Matimak that, in general, there is no difference between the way our federal courts deal with citizens and subjects: 32 In § 1332(a)(2) the terms citizen and subject do not connote a different degree of attachment or allegiance to a foreign state. 1 James Wm. Moore et al., Moore's Federal Practice ¶ 0.75 (3d ed. 1996); United States v. Wong Kim Ark, 169 U.S. 649, 663-664, 42 L. Ed. 890, 18 S. Ct. 456 (1898) (The term `citizen,' as understood in our law, is precisely analogous to the term `subject' in the common law, and the change of phrase has entirely resulted from the change of government.). Rather, the terms are meant to encompass persons living under distinct forms of government: A monarchy has subjects; a republic has citizens. Moore, supra, ¶ 0.75. 33 Matimak, 118 F.3d at 85. 34 The two terms are identical in that they both describe a relationship between an individual and a sovereign power that suffices to confer alienage jurisdiction on a federal court. That the terms are identical for this specific purpose, however, does not mean that a sovereign must have only citizens or only subjects. See Walter C. Hutchens, Note, Alienage Jurisdiction and the Problem of Stateless Corporations, 76 Wash. U. L.Q. 1067, 1081 n.81 (1998). 35 British law does not clearly establish that the British Crown recognizes only one sort of sovereign relationship. Rather, British law, while silent on the crucial issue here, seems to recognize both citizens and subjects. The United Kingdom has by statute made natural persons who are citizens of Hong Kong or other British colonies subjects of the Crown. See British Nationality Act 1948, at 1. Hong Kong corporations are not covered by this statute, but the State Department's position is that Hong Kong's laws required Crown approval at the relevant time, and its Conclusion that Hong Kong corporations were thus ultimately subject to United Kingdom sovereignty seems eminently reasonable. We are concerned that, were we to decide that a foreign sovereign must choose between having citizens and subjects, we would be making a fairly significant foreign policy decision, and one that the State Department rejects. 36
37 We accord substantial weight to the State Department's position. In Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964), the Supreme Court considered the right of an instrumentality of a hostile foreign government to file suit in U.S. courts. The United States had severed formal diplomatic relations with Cuba, but had not derecognized it as a sovereign. The Court rejected the argument that a hostile government should not be allowed to litigate in U.S. courts. Sabbatino looked to the executive's position in support of its decision: 38 The view that the existing situation between the United States and Cuba should not lead to a denial of status to sue is buttressed by the circumstance that none of the acts of our Government have been aimed at closing the courts of this country to Cuba, and more particularly by the fact that the Government has come to the support of Cuba's act of state claim in this very litigation. Id. at 411. 5 39 We will likewise take heed of the State Department's position here. We do not believe that executive authority in foreign policy matters is limited to the definition of foreign state for § 1332 purposes. Executive competence also extends to the definition of citizens or subjects, at a minimum in cases where the proper interpretation is unclear and the outcome may affect our foreign policy. Just as the executive is best positioned to make the determination that recognition of a sovereign is appropriate, the executive is best situated to conclude that Hong Kong was, at the time suit was filed, so closely connected to the United Kingdom that its corporations were United Kingdom subjects.
40 In summary, it is established that Hong Kong corporations were not United Kingdom citizens at the time the lawsuit was filed, but it is quite plausible that they were United Kingdom subjects. The law of the United Kingdom is not entirely clear on this point. The State Department, however, has informed us that, consistent with various agreements with Hong Kong and the United Kingdom, it considers Hong Kong corporations to have been subjects of the United Kingdom for alienage diversity purposes. This, it represents, best reflects the actual relationship between the United Kingdom, Hong Kong, and the United States. There is no indication that the United Kingdom disagrees with this characterization. For the reasons set forth above, we agree with the State Department that treating Hong Kong corporations as United Kingdom subjects comports with the facts and the law of alienage jurisdiction. We therefore have jurisdiction of this case under 28 U.S.C. § 1332(a)(2).