Court Opinion

ID: 5773
Source: CourtListenerOpinion
Date Created: 2010-04-25 05:09:33+00
Date Added: 2024-06-11T13:31:56.813817
License: Public Domain

United States Court of Appeals,

                                              Fifth Circuit.

                                              No. 92-3905.

              MILENA SHIP MANAGEMENT COMPANY, et al., Plaintiffs-Appellants,

                                                    v.

  R. Richard NEWCOMB, Director, Office of Foreign Assets Control of the Department of the
Treasury, et al., Defendants-Appellees.

                                             July 21, 1993.

Appeal from the United States District Court for the Eastern District of Louisiana.

Before SMITH, DUHÉ and WIENER, Circuit Judges.

          WIENER, Circuit Judge.

          Plaintiff-Appellant Milena Ship Management Company, Ltd. (Milena) appeals the district

court's grant of summary judgment in favor of Defendants-Appellees, the Office of Foreign Assets

Control (OFAC) of the Department of the United States Treasury, and the United States Customs

Service (collectively, the government). Milena challenges the blocking of four of its vessels pursuant

to two Executive Orders and the denial of its petition to unblock the ships. As we find no reversible

error in the district court's rulings, we affirm.

                                                    I

                                    FACTS AND PROCEEDINGS

          The International Emergency Economic Powers Act (IEEPA)1 grants the President authority

to regulate or prohibit international economic transactions in case of a national emergency "which has

its source in whole or substantial part outside the United States."2 Included in this authority is the

power to prevent "transactions involving[ ] any property in which any foreign country or a national

thereof has any interest[ ] by any person, or with respect to any property, subject to the jurisdiction

   1
       50 U.S.C. §§ 1701-1706.
   2
       Id. § 1701(a).
of the United States."3 Another Act of Congress, the United Nations Participation Act (UNPA)4

authorizes the President to implement measures adopted by the U.N. Security Council pursuant to

Article 41 of the U.N. Charter.

          Operating under the authority of these two statutes, then President Bush issued two executive

orders in reaction to growing civil unrest in former Yugoslavia. Both orders, Executive Orders

12808 and 12810, impose U.N. mandated economic sanctions against the unrecognized Federal

Republic of Yugoslavia (FRY or Yugoslavia), consisting of the provinces of Serbia and Montenegro.

Executive Order 12808 blocks "all property and interests in property in the name of the Government

of Yugoslavia, that hereafter come within the United States, or that are or hereafter come within the

possession or control of United States persons." Executive Order 12810 reiterates this restriction

and additionally prohibits all imports to the United States from the FRY and all exports from the

United States to the FRY.

          These Executive Orders also direct the Secretary of the Treasury (Secretary) to promulgate

regulations necessary to "block" all property in which the FRY has an interest. On that authority,

OFAC immediately issued General Notice No. 1, stating that all entities located or organized in the

FRY are presumed to be owned or controlled by the Yugoslavian government. This presumption was

based on the history of that government's involvement in business corporations and other enterprises,

and its residual interest in those companies. Included in this category was Jugosloanska Oceanska

Plovidba (JOP), a commercial shipping company headquartered in Kotor, Montenegro. Under

OFAC's order, foreign subsidiaries of Yugoslavian companies are also presumed to be owned or

controlled by the Yugoslavian government.

          In the course of implementing the Executive Orders, United States Customs agents detained

four vessels owned and operated by various JOP subsidiaries—the M/V ZETA and the M/V

MOSLAVINA in the port of New Orleans, the M/V DURMITOR in Baltimore, and the M/V

   3
       Id. § 1702(a)(1)(B).
   4
       22 U.S.C. § 287(c).
MARTINOVIC in Savannah.5 Milena, which manages and operates all four vessels, denies that JOP

is connected with the FRY government. Accordingly, Milena applied to OFAC for an order

unblocking JOP's frozen assets. While this application was pending before OFAC, Milena sought

declaratory and injunctive relief in the District Court for the Eastern District of Louisiana. That court

denied the request, finding that a preliminary injunction would not serve the public interest.

        Subsequently, OFAC denied Milena's petition to unblock the vessel, citing three bases for that

decision. First, OFAC cited the U.N. Sanctions Committee ruling that the "continued operation and

associated transfers of funds or resources to the owners of four ships controlled and managed by the

Milena Ship Management Company of Malta ... would be in violation of the sanctions established

under [Security Council] Resolution 757." OFAC interpreted this language as meaning "that the

release of the vessels would constitute a prohibited transfer of an economic resource of both the

Government of [the FRY] and a "person' within [that country], namely, JOP."

        Second, OFAC interpreted the law of the FRY, considering affidavits and articles submitted

by various experts. According to the affidavit of Dr. Branko Vukmir, a legal advisor to the U.N., the

government of the FRY retains an interest in business enterprises by virtue of the system of "social

capital" as opposed to internal (personal) shares. In addition, the government determines and limits

the issuance of internal shares and has established a governmental fund to receive the proceeds from

the sale of the "social capital." Finally, OFAC concluded that the interest retained by the government

under this system justified the conclusion that all Yugoslavian vessels were owned by the government.

        Soon afterwards, Milena again filed a motion in the district court, this one being for

declaratory and injunctive relief by way of a Motion for Summary Judgment, arguing that OFAC

erred in denying Milena's application to have the vessels unblocked. Milena also sought appointment

of a custodian to maintain the blocked vessels. Reviewing OFAC's order, the district court agreed

with OFAC's interpretation of Yugoslavian law that led OFAC to conclude that JOP is in fact owned

or controlled by the Yugoslavian government. In addition, the district court reviewed and accepted

   5
     Ownership of the blocked vessels was transferred to companies in Malta prior to the issuance
of the Executive Orders. Thus, the vessels fly the Maltese flag, even though the companies in
Malta are still owned by JOP.
OFAC's factual findings regarding the Yugoslavian government's control over the economy in general

and an enterprise's social capital specifically. Consequently, the district court denied the motion for

summary judgment. 804 F. Supp. 859.

          Ultimately, the district court granted summary judgment in favor of the government,

dismissing Milena's claim. Milena timely appealed from this decision.

                                                   II

                                            DISCUSSION

A. Standard of Review

          We review the district court's decision de novo, but review the agency's decision, as did the

district court, with the appropriate deference. We will set aside agency action if we find it to be

"arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law."6 In reviewing

an agency action, we inquire whether the agency acted within its authority, adequately considered all

the relevant factors, and provided a reasoned basis for its decision.7 Furthermore, we give special

deference to an agency's interpretation of an order it is charged to administer.8 Finally, we base our

review of an administrative action "on the full administrative record that was before t he

[administrative officer] ... at the time he made his decision."9

B. OFAC's Presumption

           Milena first challenges OFAC's initial presumption that the Yugoslavian government has a

proprietary interest in all vessels owned by Yugoslavian companies. Milena stresses that at the time

OFAC made this decision it did not possess the Vukmir article, one which plaintiffs themselves later

supplied to OFAC. Consequently, Milena insists that OFAC had no basis for the decision and

therefore acted arbitrarily and capriciously. The government responds that the presumption does not

   6
       Administrative Procedure Act, 5 U.S.C. § 706(2)(a).
   7
    Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415-16, 91 S. Ct. 814, 823-
24, 28 L. Ed. 2d 136 (1971).
   8
   United States v. New Orleans Pub. Serv., Inc., 553 F.2d 459 (5th Cir.1977), cert. granted
and vacated on other grounds, 436 U.S. 942, 98 S. Ct. 2841, 56 L. Ed. 2d 783 (1978).
   9
       Overton Park, 401 U.S. at 420, 91 S.Ct. at 825.
constitute a final agency action and is therefore not reviewable. According to the government, the

only final and reviewable agency action is OFAC's refusal to unblock the vessels.

        The district court rejected the government's argument regarding finality in its denial of a

preliminary injunction. The court correctly noted that agency action is final when it results in "the

imposition of an obligation, the denial of a right, or the fixing of a legal relationship."10 The court

held that the presumption as applied to JOP "clearly imposes obligations (the burdens associated with

the blocking), denies rights (the plaintiff's rights to freely use and transfer and deal with their

property) and fixes a legal relat ionship (the relationship between the plaintiffs as the targets of a

blocking order and the United States as the issuer of the blocking order)." We agree.

         Having concluded that the district court was co rrect in its conclusion that the initial

presumption as applied to JOP was a final agency decision, we review the reasonableness of that

decision. Here, again, Milena emphasizes that OFAC did not have access to the Vukmir article when

it made its decision. Even without the Vukmir article, however, OFAC acted reasonably in issuing

the presumption of government ownership. OFAC had to act quickly following the issuance of the

Executive Orders; delay would have allowed the assets to leave the United States, thereby thwarting

the purpose of the Orders. OFAC assumed, based on its knowledge of governmental involvement

in business enterprises under the recently ended communist regime, that there were still vestiges of

pervasive government ownership and control in the present system. This presumption is supported

by the venerable legal maxim that a known condition is presumed to continue in existence until there

is evidence to the contrary. Given the general confusion surrounding the fall of communist regimes

in eastern Europe, and the indisputable fact that the existing socialist infrastructures are never

dismantled and replaced with capitalism overnight, OFAC's presumption of state ownership and

involvement was reasonable.

C. OFAC's Refusal to Unblock the Vessels

         Milena next challenges OFAC denial of Milena's petition to unblock the vessels. The

   10
     United States Dep't of Justice v. Federal Labor Relations Authority, 727 F.2d 481, 493 (5th
Cir.1984).
cornerstone of OFAC's decision was its interpretation of Yugoslavian law, based on the Vukmir

article and the current Yugoslavian law on privatization. Milena disputes OFAC's interpretation of

that law and insists that OFAC's interpretation is subject to de novo review. The district court applied

a deferential standard of review, yet recognized that OFAC's interpretation would also prevail under

a de novo review. We again agree with the district court.

          Even under the more stringent de novo review, OFAC's interpretation of Yugoslavian law is

correct. The Vukmir article describes the Yugoslavian system as based on the concept of "social

capital." As such, society has an interest in each business enterprise, albeit the exact nature of that

interest is somewhat obscure. Although Milena stresses the difference between a societal interest and

a state interest (as in other communist systems), there is little practical difference. As the Vukmir

article makes clear, the trend towards privatization has created a dilemma: when a heretofore public

business enterprise goes private (i.e., sells private shares), who or what receives the proceeds from

the sale of society's interest? Under the 1990 law, the proceeds are placed in one or more funds

controlled by the government.

          In the instant case, JOP is not a private company. Therefore, "society"—through its

representative, the government—still retains an interest in the enterprise. Should JOP go private, the

government would receive a portion of the proceeds, placed in a government controlled fund. In light

of the fact that the societal interest reverts to the government, we conclude that the Yugoslavian

government retains an interest in JOP.

D. Appointment of a Custodian for the Vessel

           Finally, Milena seeks a writ of mandamus compelling the government to appoint a custodian

for the vessels and pay for their maintenance. Although the IEEPA is silent on the appointment of

a custodian, its predecesso r The Trading With The Enemy Act (TWEA)11 did provide for the

appointment of a custodian. Milena argues that the TWEA provides guidance for interpreting the

IEEPA; therefore, because the TWEA provides for appointment of a custodian, Congress intended

the same pro vision to apply under the IEEPA. This bit of legal legerdemain is wholly specious.

   11
        50 U.S.C.App. § 5.
Exhibit "A" for the proposition that if Congress had wanted to impose an obligation on the

government to appoint a custodian, it knew how to say so directly. This is doubly true in the case

of IEEPA, wherein Congress incorporated certain TWEA provisions and omitted others. Under these

circumstances, Congress's omission of the custodian provision evidences a conscious intent not to

assume that obligation.

        In addition, were we to find that the government had a duty to appoint a custodian—or had

a duty to reimburse Milena for maintenance—the effect would be to shift the costs of the blocking

from the sanctioned nation to the United States. This obviously would run counter to the purpose

of economic sanctions, which is to exert economic pressure on the offending government, not to

mitigate it.

                                                  III

                                           CONCLUSION

        In this appeal of an administrative agency's decision to block vessels owned by the

Yugoslavian government pursuant to two Executive Orders, Milena, as operator of the vessels,

challenges the reasonableness of the agency's decision. The agency's initial presumption that the all

vessels owned by Yugoslavian companies were subject to blocking was reasonable given the need to

act quickly and the general knowledge t hat, under the communist system, the government had a

proprietary int erest in all business enterprises. Moreover, in view of this system, in which the

government retains an interest in business ent erprises in the form of "social capital," the agency's

refusal to unblock the vessels was reasonable. Finally, there is no statutory basis for Milena's claim

that the government is obligated to appoint a custodian for the vessels. To the contrary, the omission

by Congress of such provision when it adopted the IEEPA was clearly deliberate, following as it did

on the heels of the predecessor act, the TWEA, which contained such a provision.

        For the foregoing reasons, the decision of the district court is

        AFFIRMED.