Sovereign Immunity

• Author: International Law Group
• Pages: 38-39

Page 38

Af-Cap, Inc. (Plaintiff), the judgment creditor, filed garnishments and liens against any property of the judgment debtor, the Republic of Congo (Defendant), held by the third party Chevron Texaco Corporation (CT Corp.) and its U.S. subsidiaries (jointly Chevron Texas). The Defendant's assets held by CT Corp and Chevron Texas consist of intangible obligations such as bonuses, taxes and royalties from the Defendant's resources of oil and hydrocarbons. The Defendant asserted sovereign immunity. (See related case at 2006 International Law Update 174.)

The Defendant's obligations result from a 1984 loan by Equator Bank to build a highway on the Defendant's territory. In the contract the Defendant consented to "execution against any property whatsoever (irrespective of its use or intended use)." Also, the Defendant waived its "immunity from suit, execution, attachment ... or other legal process." In 1985, the Connecticut Bank of Commerce (CBC) became Equator Bank's assignee, obtained a judgment against Defendant in England, and converted it into a U.S. judgment in the New York courts.

The district court vacated the garnishments and liens filed against the Defendant and Plaintiff appealed. The U.S. Court of Appeals for the Ninth Circuit affirms. It held that Defendant did not use the obligations for any commercial activity in thePage 39 U.S. and thus had retained its immunity under the F. S. I. A., 28 U.S. C. ß 1610(a). The Court rejects Plaintiff's claim that the Defendant's waiver renders ß 1610(a) inapplicable to the loan.

"In fact, the opposite is true. Under ß 1609, 'the property in the United States of a foreign state shall be immune from attachment[,] arrest and execution except as provided in section[ ] 1610 . . .' 28 U.S.C. ß 1609. In turn, ß 1610(a), the exception at issue in this case, provides: 'The property in the United States of a foreign state . . . used for a commercial activity in the United States, shall not be immune from attachment in aid of execution, or from execution, upon a judgment entered by a court of the United States or of a State . . . if: (1) the foreign state has waived its immunity from attachment in aid of execution, or from execution . . .' 28 U.S.C. ß 1610(a) ..."

"[Plaintiff's] contention that the [Defendant's] waiver renders 28 U.S.C. ß 1610(a) inapplicable is self-defeating because, in the absence of a waiver, the property of the Congo would be immune from attachment under ß 1609. We agree with...