Opinion ID: 795095
Heading Depth: 3
Heading Rank: 1

Heading: The Factual Basis For The December 2004 Immunity Determination

Text: 78 In accord with the statute, Af-Cap II does not permit a § 1610(a) exception to immunity for obligations that were not used for commercial purposes in the United States. Af-Cap II, 389 F.3d at 504. The fact that property was generated by commercial activity, namely, oil exploration, is irrelevant; what matters under § 1610(a) is what the property is used for. Walker Int'l I, 395 F.3d at 235-36; see also Af-Cap I, 309 F.3d at 251 (What matters under [§ 1610(a)] is what the property is `used for,' not how it was generated or produced.). [E]ven if a foreign state's property [was] generated by commercial activity in the United States, that property is not thereby subject to execution or attachment if it is not used for a commercial activity within our borders. Af-Cap I, 309 F.3d at 251 (internal quotation marks omitted). 79 In its December 2004 order, the district court stated that the Garnishees . . . owe to SNPC certain intangible obligations under agreements relating to [the 1979] Convention. This order does not otherwise mention the Convention, JOA, or Amendment to Lifting except in reference to the Congo's waiver of immunity and the Garnishees' royalty obligations. The district court concluded that the Garnishees' payments of SNPC's share of operation expenses, and recoupment of their payments from SNPC's share of oil, is a transaction that functions like a revolving loan—and is therefore not immune under the FSIA — but did not determine whether this transaction is a loan or other intangible obligation. Similarly, the district court made no factual findings that support its determination that the Garnishees' obligation to pay SNPC's working interest share is property that satisfies the § 1610(a) requirements. There is no factual basis in the district court's analysis to support its conclusion that the Garnishees owe intangible obligations to SNPC that are not immune from execution. 80 FG Hemisphere argues that the working interest share has been used for commercial activity in the United States to finance the lifting and production of oil, and/or to finance the costs of such production. According to FG Hemisphere, the Garnishees' obligation to pay SNPC its working interest share has been used to finance the production and lifting of oil in Congolese waters. FG Hemisphere characterizes the reimbursement to the Garnishees as a use of the Garnishees' obligation to give SNPC its working share. FG Hemisphere asserts that this use of SNPC's working interest share to reimburse the Garnishees is payment of a commercial debt to the Garnishees. FG Hemisphere further asserts that the Garnishees are deemed to be in the United States for purposes of the FSIA, and were undisputedly based in the United States when this action commenced in federal court. Therefore, FG Hemisphere contends, this reimbursement use of the working interest share is commercial activity in the United States under the FSIA, just as in Af-Cap II the Congo's use of royalties to pay a commercial debt to a United States-based creditor was commercial activity in the United States. See Af-Cap II, 383 F.3d at 368, 370-71 and 389 F.3d at 504. 81 FG Hemisphere's argument is creative but it does not accurately describe the sequence of these transactions. Pursuant to the JOA, the Garnishees advance SNPC's share of the operating expenses. SNPC is then obligated to reimburse the Garnishees; it is SNPC's debt obligation. After an oil lifting, SNPC takes less than its working interest share of the production with the remaining part of its share used to reimburse the Garnishees. Just over one third of the total production is retained by the Garnishees to reimburse themselves. It is not clear how the repayment of SNPC's debt to the Garnishees becomes SNPC property in the hands of the Garnishees solely because the Garnishees and SNPC agreed that SNPC may reimburse the Garnishees by letting them keep part of an oil lifting that otherwise would be paid to SNPC. 82 Neither the district court's factual findings nor FG Hemisphere's argument in this interlocutory appeal indicates that SNPC's working interest was used for commercial activity within the United States. The district court's conclusion that this property was located in the United States was based on a previous, unrelated situs determination and on a situs snapshot taken at commencement of the federal garnishment proceedings. The district court's factual findings do not support its conclusions of law. The district court misapprehended § 1610(a) in making the immunity determination and authorized execution against SNPC's property because it incorrectly applied the law to the facts. 83