Sovereign Immunity

• Author: International Law Group
• Pages: 114-115

Page 114

New York law exempts from taxation all real property owned by a foreign government when that state is using it solely for diplomatic offices or quarters for ambassadors or ministers plenipotentiary to the United Nations. For many years, Respondent (New York City) has levied property taxes against Petitioners (the governments of India and Mongolia) for those parts of their diplomatic office buildings used to house lower level employees and their families.

The Permanent Mission of India to the United Nations occupies a 26-fl oor building in New York City that the Government of India owns. The Mission uses several fl oors for diplomatic offices, but about 20 fl oors contain residential units for employees of the diplomatic mission and their families. The employees - all of whom are below the rank of Head of Mission or Ambassador - are Indian citizens who receive housing from the Mission rent free.

Likewise, the Ministry for Foreign Affairs of the People's Republic of Mongolia occupies a six-story building in New York City, which the Mongolian Government owns. Certain fl oors of the Ministry Building include residences for lower level employees of the Ministry and their families. Petitioners have consistently declined to pay the taxes.

By operation of state law, the unpaid taxes eventually transmogrifi ed into tax liens held by the Respondent against the residential properties.

As of February 1, 2003, the Indian Mission owed about $16.4 million in unpaid property taxes and interest, while the Mongolian Ministry owed about $2.1 million.

On April 2, 2003, Respondent filed suits in the New York state courts seeking declaratory judgments to establish the validity of these tax liens; Petitioners removed the cases to federal court pursuant to 28 U.S.C. ß 1441(d), which provides for such removal by a foreign state or its instrumentality. There they contended that they were immune under the Foreign Sovereign Immunities Act of 1976 (FSIA), which is "the sole basis for obtaining jurisdiction over a foreign state in federal court, Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 439."

The District Court disagreed, however, relying on an FSIA exception to a foreign state's immunity from federal jurisdiction where "rights in immovable property situated in the United States are in issue." 28 U.S. C. ß 1605(a)(4). Reviewing the District Court's interlocutory decision under the "collateral order" doctrine, a unanimous panel of the...