Sovereign Immunity

• Author: International Law Group

Icarom (formerly ICI) is a provider of employer's liability and public liability insurance policies in Ireland, and was once the second largest agency in the industry. In 1985, Icarom's financial situation became extremely grave, and the government of Ireland foresaw serious economic consequences for the Irish economy if Icarom could not shoulder its financial responsibilities. Ireland acquired Icarom from Allied Irish Banks and created Sealuchis Arachais Teoranta (SAT) through legislation designed to enable the government to hold Icarom shares. All SAT directors are Irish Ministry employees.

An insurance policy dispute landed Icarom (then called ICI) as a defendant in Montana state court in 1990. ICI removed to federal court claiming it was an "instrumentality of a foreign government" as defined in the Foreign Sovereign Immunities Act of 1976 (FSIA) [see 28 U.S.C. Section 1603]. That court granted summary judgment on some claims and tried others.

During the course of the pending appeal, however, Icarom discovered that the prior decision in Gates v. Victor Fine Foods, 54 F.3d 1457 (9th Cir. 1995), seemingly supported its immunity from suit under the FSIA. Thus, the district court appears to lack removal jurisdiction. After further briefing and argument on this issue, the U.S. Court of Appeals for the Ninth Circuit finds that Icarom is not a "foreign state" under the "majority owned" prong of the FSIA. Not having enough facts before it to determine whether Icarom is an "organ" of the Irish government, however, it remands for further proceedings on this issue.

To qualify for immunity under FSIA, the organization being sued must be either (a) a foreign state, or (b) an agency or instrumentality of a foreign state. Icarom, not qualifying as a foreign state, would meet the requirements for classification as an instrumentality of a foreign state if it were (1) an entity that is a separate legal person, (2) an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof, and (3) which is neither a citizen of a U.S. state or created under the laws of any third country.

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