Em Ltd., Plaintiff-appellant, v. Republic of Argentina, Defendant-appellee.nml Capital, Ltd., Plaintiff-appellant, v. the Republic of Argentina, Defendant-appellee.nml Capital, Ltd., Plaintiff-appellant, v. the Republic of Argentina, Defendant-appellee,banco Central De La Republica Argentina, Interested-non-party-appellee.docket No. 06-0403-c v. Docket No. 06-0405-c v. Docket No. 06-0406-cv, 473 F.3d 463 (2d Cir. 2007)

This appeal arises from the efforts of plaintiffs-appellants NML Capital, Ltd. ("NML") and EM Ltd. ("EM") (collectively, "plaintiffs") to attach certain funds held in an account of the Banco Central de la República Argentina ("BCRA"), the central banking authority of the Republic of Argentina ("Argentina" or "the Republic"), at the Federal Reserve Bank of New York ("FRBNY") (the "FRBNY Account").¹  EM holds, and NML seeks, a judgment against the Republic arising out of the Republic's default on debt obligations held by EM and NML. Even though plaintiffs do not hold or seek judgments against BCRA, they contend that they are entitled to attach $105 million of BCRA's funds held in the FRBNY Account (the "FRBNY Funds"). In particular, plaintiffs argue that the Republic obtained an attachable interest in the FRBNY Funds after the President of the Republic issued two decrees that gave the Republic the authority to use BCRA funds for repayment of the Republic's debts to the International Monetary Fund ("IMF"), but that did not specifically designate the FRBNY Funds for use in repaying the IMF. The United States District Court for the Southern District of New York (Thomas P. Griesa, Judge) vacated orders of prejudgment attachment obtained by NML, and postjudgment restraining notices obtained by EM, that had previously been ordered with respect to the FRBNY Funds. This appeal followed.

We consider here whether the Republic's actions associated with the repayment of its debt to the IMF deprived the FRBNY Funds of immunity from attachment under provisions of the Foreign Sovereign Immunities Act of 1976 ("FSIA") related to the attachment of sovereign assets, 28 U.S.C. §§ 1609-11. We affirm the order of the District Court, concluding that the FRBNY Funds are immune from attachment under the FSIA because, notwithstanding the issuance of the decrees, the FRBNY Funds continue to be owned by BCRA, a separate juridical entity from the Republic, and are not available to satisfy a judgment against the Republic. Moreover, we conclude that the provisions of the FSIA allowing attachment of a foreign state's "property in the United States ... used for a commercial activity in the United States," 28 U.S.C. § 1610(a); see also id. § 1610(d) (allowing prejudgment attachment of a foreign state's property "used for a commercial activity in the United States"), would not permit attachment of the FRBNY Funds even if the funds were considered an attachable asset of the Republic. A government's repayment of its debt to the IMF is not a "commercial activity," and the record is barren of any evidence that the FRBNY Funds were to be "used for" repayment of the IMF.

BACKGROUND

In December 2001, in the midst of a financial crisis in Argentina, the Republic announced a moratorium on its debt service payments. Since that time, the Republic has not made scheduled payments on the debt instruments at issue in this litigation.² 

On April 10, 2003, EM, a holder of defaulted Argentine debt, filed an action against the Republic in the United States District Court for the Southern District of New York to recover more than $700 million in interest and principal owed on an Argentine bond it had acquired. EM moved for summary judgment, and the Court granted the motion on September 12, 2003, awarding final judgment to EM in the amount of $724,801,662.56. See EM Ltd. v. Republic of Argentina, No. 03 Civ. 2507(TPG), 2003 WL 22120745 (S.D.N.Y. Sept.12, 2003), amended by EM Ltd. v. Republic of Argentina, No. 03 Civ. 2507(TPG), 2003 WL 22454934 (S.D.N.Y. Oct.27, 2003).³  We affirmed the judgment in favor of EM on August 31, 2004. See EM Ltd. v. Republic of Argentina, 382 F.3d 291, 292-94 (2d Cir. 2004).

NML, another holder of defaulted Argentine debt, filed suit in the United States District Court for the Southern District of New York on November 7, 2003, seeking to recover funds due on approximately $170 million in defaulted bonds that the Republic had issued. NML filed a second action on February 28, 2005, seeking payment on approximately $32 million in so-called "Argentine Floating Rate Accrual Notes." No judgment had been rendered in either of NML's suits at the time NML sought to attach the FRBNY Funds.

In the terms and conditions governing EM's bond, the Republic "irrevocably agreed not to claim and has irrevocably waived ... immunity to the fullest extent permitted by the laws of [the] jurisdiction." Terms and Conditions Governing Bond Issued June 22, 2001, Joint Appendix ("J.A.") 54. The Republic also "consent [ed] generally for the purposes of the Foreign Sovereign Immunities Act to the giving of any relief or the issue of any process in connection with any Related Proceeding or Related Judgment, provided that attachment prior to judgment or attachment in aid of execution shall not be ordered by the Republic's courts with respect to . . . the assets which constitute freely available reserves." Id. The bonds that NML acquired contained similar waivers.

On December 15, 2005, Argentina's President, Néstor Kirchner, issued two emergency executive decrees: Decree 1599/2005 and Decree 1601/2005 (the "Decrees"). Decree 1599 provided that BCRA reserves in excess of the amount needed for the backing of the Republic's "monetary base," see Law No. 23,928 of 3/27/91 art. 6, as amended by Law No. 25,561 of 1/7/02 art. 4, J.A. 447 (defining "monetary base" as "composed of the monetary circulation [of Argentine pesos] plus the demand deposits of the financial entities with [BCRA], in checking accounts or special accounts"), "may be used for payment of obligations undertaken with international monetary authorities." Decree 1599/2005 art. 1, J.A. 22. These excess reserves were dubbed "unrestricted reserves" by the decree ("Unrestricted Reserves").⁴  Decree 1601/2005 directed the Ministry of Economy and Production (the "Ministry") to take the necessary steps to repay the Republic's debt to the IMF out of the Unrestricted Reserves. At the time of the Decrees, BCRA had approximately $26.8 billion in reserves and needed $18.4 billion to cover the monetary base; thus, approximately $8.4 billion in reserves became Unrestricted Reserves pursuant to the Decrees. On December 29, 2005, the Ministry issued Resolution No. 49, directing BCRA to repay the Republic's debt to the IMF and providing that, in exchange, the Republic would give BCRA a non-transferrable note. See Resolution No. 49 art. 1, J.A. 511 ("Let [BCRA] be instructed in line with [the Decrees] ... to repay the debt incurred with the [IMF].").

On December 30, 2005, EM moved in the District Court for an ex parte order in aid of enforcing its judgment, and Judge Barbara S. Jones, sitting in Part I, see Rules for the Division of Business Among District Judges of the Southern District of New York 5(b) (motions for "emergency matters in civil cases" presented to the district judge sitting in "Part I"), entered restraining notices, see 28 U.S.C. § 1610(c) (requiring that a court order the attachment of, or execution against, the assets of a foreign state or its instrumentalities); see also Fed. R. Civ. P. 69(a) ("The procedure on execution ... shall be in accordance with the practice and procedure of the state in which the district court is held . . . except that any statute of the United States governs to the extent it is applicable"); N.Y. C.P.L.R. § 5222 (establishing procedure for service of restraining notices on parties holding property of judgment debtor), with respect to property of the Republic and the BCRA held at eight garnishee banking institutions, including the FRBNY. NML contemporaneously sought and obtained from Judge Jones ex parte orders of prejudgment attachment and temporary restraining orders concerning the same assets, see Fed. R. Civ. P. 64 (providing that remedies involving "seizure of ... property for the purpose of securing satisfaction of [a] judgment ... are available under the circumstances and in the manner provided by the law of the state in which the district court is held"); N.Y. C.P.L.R. § 6201 (setting forth grounds for prejudgment attachment under New York law).

On January 3, 2006, the Republic's debt to the IMF was repaid by BCRA using BCRA's assets. The FRBNY Funds were not used in connection with that payment, although the parties dispute whether the funds might have been used for this purpose in the absence of the court-ordered restraints on the transfer of the funds.

On January 6, 2006, the Republic and BCRA moved by order to show cause to vacate the attachments and restraining notices (collectively, the "Restraining Notices"). Following a conference held that day before Judge Griesa, to whom EM's and NML's suits against the Republic had been assigned, the parties agreed to modify the Restraining Notices pending resolution of the order to show cause, and on January 9, 2006, the District Court entered a stipulation and consent order that amended the Restraining Notices so that BCRA could conduct its day-to-day operations. Pursuant to these amended attachments and restraining notices (collectively, the "Amended Restraining Notices"), the garnishee institutions were required to maintain in any covered account a sum not less than 95% of the amount on deposit at the close of business on January 6, 2006. Of the putative garnishee institutions, only the FRBNY held any significant amount—namely, $105 million—that was subject to the Amended Restraining Notices. EM and NML cross-moved on January 10, 2006 to confirm the Amended Restraining Notices, and, in the alternative, EM sought discovery on five issues relating to the validity of the Amended Restraining Notices.⁵ 

Following submissions by the parties and oral argument, the District Court vacated the Amended Restraining Notices by oral decision on January 12, 2006. The District Court described four separate grounds for its decision. First, operating under the premise that assets owned by BCRA could not be used to satisfy judgments against the Republic, it rejected plaintiffs' argument that the Decrees had the effect of transferring ownership of the Unrestricted Reserves in general, or the FRBNY Funds in particular, from BCRA to the Republic. Plaintiffs had conceded at oral argument on the parties' cross-motions that the Unrestricted Reserves were the property of BCRA, not the Republic, before the issuance of the Decrees. The District Court concluded that the Decrees had no effect on the ownership of the Unrestricted Reserves, and certainly no effect on the ownership of the FRBNY Funds; thus, the Unrestricted Reserves and the FRBNY Funds remained the property of BCRA. The District Court agreed that the Decrees reflected the Republic's power to direct BCRA to take certain actions with respect to BCRA's assets, but, according to the District Court, the Republic's ability to exercise some control over BCRA did not mean that the ownership of the FRBNY Funds changed hands from BCRA to the Republic.

Second, the District Court held that even if it were to treat the FRBNY Funds as if they were owned by the Republic, plaintiffs would not be able to attach the funds under the FSIA unless they were able to demonstrate that the funds had become property of the Republic "used for a commercial activity in the United States," 28 U.S.C. § 1610(a) (1) (permitting postjudgment attachment of a foreign state's property "used for a commercial activity in the United States" if the foreign state had waived immunity from attachment); id. § 1610(d) (1) (same as to prejudgment attachment).⁶  The District Court concluded that plaintiffs did not satisfy this requirement here because the Republic's payments to the IMF, which were facilitated by the Decrees, constituted a "government financial activity and not a commercial activity."

Third, the District Court concluded that another provision of the FSIA, 28 U.S.C. § 1611(b) (1), provided a separate and independent basis for vacating the attachments and restraining orders. That statutory provision protects from attachment property "of a foreign central bank ... held for its own account," unless the protection has been explicitly waived by the central bank or the bank's parent foreign government.⁷  In the view of the District Court, the FRBNY Account "was, is, and continues to be the property of the central bank used for central banking functions," and therefore, "the prohibition of Section 1611 on attaching those funds must apply."

Fourth, the District Court rejected plaintiffs' arguments that there had been an explicit waiver of BCRA's immunity of the type that would be necessary to expose BCRA's assets to attachment under 28 U.S.C. § 1611(b) (1). The District Court also implicitly denied EM's discovery request by vacating the Amended Restraining Notices without authorizing further discovery.

On January 24, 2006, the District Court entered a written order formally vacating the Amended Restraining Notices, staying the order pending appeal, and certifying the order for appeal pursuant to 28 U.S.C. § 1292(b).⁸ 

We expedited the appeal. The United States and the FRBNY have appeared before us as amici in support of the Republic and BCRA.

DISCUSSION

We have jurisdiction pursuant to 28 U.S.C. § 1292(b). The appeal was certified by the District Court, and we agree that the District Court's ruling involves unresolved controlling questions of law, and that an appeal would advance the termination of the litigation.⁹ 

We review a district court's ruling on a request for an order of attachment for abuse of discretion. See Capital Ventures Int'l v. Republic of Argentina, 443 F.3d 214, 222 (2d Cir. 2006) (addressing prejudgment attachment). We will find such an abuse of discretion if the district court "applies legal standards incorrectly or relies upon clearly erroneous findings of fact, or proceed [s] on the basis of an erroneous view of the applicable law." Id. (quoting Register.com, Inc. v. Verio, Inc., 356 F.3d 393, 398 (2d Cir. 2004)); see also Zervos v. Verizon N.Y., Inc., 252 F.3d 163, 169 (2d Cir. 2001) ("error of law" constitutes "abuse of discretion").

In this case, we consider the legal conclusions that underlay the District Court's exercise of discretion to vacate the attachments—namely, that the Republic had no attachable interest in the FRBNY Funds, and that the funds were otherwise immune from attachment under the FSIA. Thus, the dispositive issues here are ones of law, which we review de novo. See Heerwagen v. Clear Channel Commc'ns, 435 F.3d 219, 225 (2d Cir. 2006) (noting that this Court "will find an abuse of discretion whenever the district court commits an error of law, which we review de novo").

We agree with the decision of the District Court. We conclude that the Decrees did not create an attachable interest on the part of the Republic in the FRBNY Funds, and that Section 1610's provisions allowing attachment of property of a foreign state "used for a commercial activity" would not permit attachment of the FRBNY Funds even if they were attachable assets of the Republic.

The FSIA protects foreign states' property from attachment and execution, subject to existing international obligations, except under the conditions set forth in two other provisions of the FSIA, 28 U.S.C. §§ 1610 and 1611. See 28 U.S.C. § 1609 ("Subject to existing international agreements to which the United States is a party at the time of enactment of this Act the property in the United States of a foreign state shall be immune from attachment arrest and execution except as provided in sections 1610 and 1611 of this chapter."); Letelier v. Republic of Chile, 748 F.2d 790, 793 (2d Cir. 1984) (" [U]nder [FSIA] § 1609 foreign states are immune from execution upon judgments obtained against them, unless an exception set forth in §§ 1610 or 1611 of the FSIA applies.").

The FSIA's protections against attachment and execution extend to the instrumentalities of a foreign state such as BCRA, although the protections applicable to assets of instrumentalities vary from those applicable to the assets of the foreign states themselves. See Karaha Bodas, 313 F.3d at 82 ("Section 1610 provides different regimes for sovereign states on the one hand, and their agencies and instrumentalities on the other."); see also S & S Machinery Co. v. Masinexportimport, 706 F.2d 411, 414 (2d Cir. 1983) ("State-owned central banks indisputably are included in the [FSIA's] definition of `agency or instrumentality.'"). Under subsections 1610(a) and (d), assets of a foreign state can be attached only if the assets sought to be attached are "used for a commercial activity in the United States." But under subsection 1610(b), which concerns agencies and instrumentalities of foreign states, creditors may attach "any property in the United States of an agency or instrumentality of a foreign state engaged in commercial activity in the United States," 28 U.S.C. § 1610(b) (emphasis added). As we explained in Karaha Bodas, " [s]ubsection (a) is generally thought to be narrower than subsection (b). While subsection (b) applies to all property of the agencies and instrumentalities of foreign states, subsection (a) applies only to the property of foreign states that is `used in commercial activity.'" Karaha Bodas, 313 F.3d at 82 (quoting Conn. Bank of Commerce v. Republic of Congo, 309 F.3d 240, 253 (5th Cir. 2002)).

The FSIA provides additional protection to assets of foreign central banks. See 28 U.S.C. § 1611(b) (1), note 7, ante. Congress developed 28 U.S.C. § 1611(b) (1) to shield from attachment the U.S. assets of foreign central banks, many of which might be engaged in commercial activity in the United States while managing reserves and engaging in financial transactions, and to provide an incentive for foreign central banks to maintain their reserves in the United States:

Section 1611(b) (1) provides for the immunity of central bank funds from attachment or execution. It applies to funds of a foreign central bank or monetary authority which are deposited in the United States and "held" for the bank's or authority's "own account"—i.e., funds used or held in connection with central banking activities, as distinguished from funds used solely to finance the commercial transactions of other entities or of foreign states. If execution could be levied on such funds without an explicit waiver, deposit of foreign funds in the United States might be discouraged. Moreover, execution against the reserves of foreign states could cause significant foreign relations problems.

H.R.Rep. No. 94-1487 ("FSIA House Report") at 31, as reprinted in 1976 U.S.C.C.A.N. 6604, 6630; see also Paul L. Lee, Central Banks and Sovereign Immunity, 41 Colum. J. Transnat'l L. 327, 376 (2003) (noting that Section 1611(b) (1) appears to have been developed in order to avoid the "potential difficulties" that central banks would be faced with if their assets were subject to attachment under the provisions of Section 1610(b) applicable to other instrumentalities).

Plaintiffs' reliance on the attachment provisions applicable to foreign states— § 1610(a) and its prejudgment counterpart, § 1610(d)—rather than on the attachment provisions applicable to foreign agencies and instrumentalities set forth in § 1610(b), makes clear that their arguments are premised on a threshold determination that the FRBNY Funds are an attachable interest of the Republic, not of BCRA.

B. The Decrees Did Not Convert the FRBNY Funds Into an Attachable Interest of the Republic

Although plaintiffs hold or seek judgments against the Republic, the FRBNY Funds that plaintiffs seek to attach are held in BCRA's name. Plaintiffs have conceded that: (1) before December 15, 2005, the date on which the Decrees were issued, the FRBNY Funds were the property of BCRA; (2) plaintiffs had no right to attach the FRBNY Funds before that date; and (3) even after issuance of the Decrees, the FRBNY Funds were held in BCRA's name. Thus, under New York law, it is presumed that the FRBNY Funds continue to be owned by BCRA even after issuance of the Decrees.¹⁰  See Karaha Bodas, 313 F.3d at 86 ("Under New York law, the party who possesses property is presumed to be the party who owns it. When a party holds funds in a bank account, possession is established, and the presumption of ownership follows." (citing Pollock v. Rapid Indus. Plastics Co., 113 A.D.2d 520, 497 N.Y.S.2d 45, 49 (2d Dep't 1985); Kolodziejczyk v. Wing, 261 A.D.2d 927, 689 N.Y.S.2d 825, 825 (4th Dep't 1999); and Perkins v. Guar. Trust Co. of N.Y., 274 N.Y. 250, 261, 8 N.E.2d 849 (1937))).

Plaintiffs do not bring to our attention any contrary New York or Argentine legal principles governing ownership of funds in bank accounts, see Karaha Bodas, 313 F.3d at 85-86 (analyzing New York and Indonesian legal principles governing rights of Indonesian government and Indonesian instrumentality to funds held in New York bank accounts), nor do they point to any order or other document explicitly transferring ownership of the FRBNY Funds from BCRA to the Republic. Instead, plaintiffs contend that the Decrees changed the legal status of $8.4 billion of BCRA's reserves—i.e., the funds that the Decrees designated as Unrestricted Reserves—when it made those funds available to pay the Republic's debt to the IMF. NML contends that the Decrees had the effect of making the Unrestricted Reserves property of the Republic. See Br. of Appellant NML 32-33. EM argues that it is immaterial whether the "nominal" holding and ownership of the Unrestricted Reserves changed, because under New York attachment law the Unrestricted Reserves are attachable if the Republic has a right to assign or transfer them. See Br. of Appellant EM 27-29 (citing N.Y. C.P.L.R. § 5201(b) ("A money judgment may be enforced against any property which could be assigned or transferred, whether it consists of a present or future right or interest and whether or not it is vested ....")). According to EM, the Unrestricted Reserves must be subject to attachment because the Decrees demonstrated the Republic's power to assign or transfer BCRA's assets. See id. at 27-28 ("Indeed, the fact that it was even possible for President Kirchner, with the stroke of a pen, to appropriate (or borrow) the Unrestricted Reserves to pay Argentina's debts and then direct when and how the payment should be made proves beyond question that the Argentine state controls not only the Unrestricted Reserves, but all of the Central Bank's assets.").

Plaintiffs also argue that the Decrees transformed _all reserves of BCRA, including the FRBNY Funds, into attachable assets of the Republic because the Decrees did not specify which of BCRA's funds would be designated as Unrestricted Reserves and used to repay the IMF. See Br. of Appellant EM 31 ("The consequence of Argentina's deliberate decision to preserve all of its options with respect to paying its creditors out of its foreign exchange reserves, wherever located, is that all of the funds garnished by the Restraining Notices [including the FRBNY Funds] were Unrestricted Reserves."); Br. of Appellant NML 36 (arguing that the Decrees subjected to attachment "any portion of the reserves held by the Central Bank anywhere in the world . . . unless and until the attachments became so large that they exceeded the Unrestricted Reserves").¹¹  According to plaintiffs, the FRBNY Funds must be treated as attachable Unrestricted Reserves because the Decrees failed to exclude the FRBNY Funds from being so designated. See Br. of Appellant EM 31-32 ("It makes no difference whether Argentina actually intended to pay the IMF from those funds, since the Decrees do not differentiate on that basis. To conclude otherwise would be to allow Argentina to utilize a problem of its own creation to evade its creditors.").

It is important to distinguish arguments which assert that the Decrees transferred to the Republic ownership or control over the assets of BCRA, see, e.g., Karaha Bodas, 313 F.3d at 90-92 (analyzing foreign state's ownership rights in assets possessed by instrumentality), from arguments that turn on the Republic's control over BCRA itself. The legal principles governing when a foreign state's control over its instrumentality permits attachment of the instrumentality's assets to satisfy a judgment against the state are well-established, see post, but were not addressed by plaintiffs in their submissions to the District Court or to this Court.

We conclude that (1) the Decrees did not alter property rights with respect to the FRBNY Funds—the assets that are the subject of the present appeal—but merely reflect the Republic's ability to exert control over BCRA itself, and (2) plaintiffs have not availed themselves of any arguments that would allow attachment of the FRBNY Funds based on the Republic's control over BCRA.

Plaintiffs' arguments concerning ownership of, and control over, the FRBNY Funds are not supported by the Decrees. The record is barren of any evidence that ownership or control over the FRBNY Funds was transferred to the Republic upon issuance of the Decrees, or that the Decrees required BCRA to use the FRBNY Funds, as opposed to other reserves, to repay the IMF. Rather than transferring funds to the Republic from BCRA, the Decrees and Resolution No. 49 directed BCRA to make reserves available to repay the IMF, and then to repay the IMF using those funds, leaving the decision of which specific funds would be used to BCRA's discretion. See, e.g., Reply Br. of Appellant NML 13-14 n. 9 (acknowledging that "the Decrees fail to specify particular assets as Unrestricted Reserves").

While the Decrees may have manifested the Republic's ability and willingness to control BCRA, and to direct BCRA to use its assets for the benefit of the Republic, they did not cause control of BCRA's assets to change from BCRA to the Republic. To conclude otherwise would be to allow creditors of a foreign state to attach _all of the assets of the state's central bank any time the foreign state issues directives affecting the central bank's reserves.¹²  Corporate law principles, which apply by analogy to the relationship between the Republic and its instrumentality BCRA, see, e.g., First Nat'l City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611, 628-33, 103 S. Ct. 2591, 77 L. Ed. 2d 46 (1983) ("Banco") (applying corporate law principles to determine circumstances under which separate juridical status of government instrumentality must be disregarded), support this conclusion. See Dole Food Co. v. Patrickson, 538 U.S. 468, 475-76, 123 S. Ct. 1655, 155 L. Ed. 2d 643 (2003) (holding that the FSIA did not affect underlying corporate law principles, and stating that " [a] corporate parent which owns the shares of a subsidiary does not, for that reason alone, own or have legal title to the assets of the subsidiary.... The fact that the shareholder is a foreign state does not change the analysis." (citations omitted)); United States v. Wallach, 935 F.2d 445, 462 (2d Cir. 1991) (" [S]hareholders do not hold legal title to any of the corporation's assets. Instead, the corporation—the entity itself—is vested with the title." (citations omitted)); see also 1 William Meade Fletcher, Cyclopedia of the Law of Corporations § 31 at 78, 84 (rev. ed. 2006) ("Shareholders, even the controlling shareholder, cannot transfer or assign the corporation's properties and rights, nor apply corporate funds to personal debts or objects ...." (footnotes omitted)).¹³ 

To the extent that plaintiffs' claim on the FRBNY Funds is based on the Republic's control over BCRA, as demonstrated by the Decrees, see, e.g., Br. of Appellant EM 27-28 (arguing that the Republic's ability to appropriate BCRA's assets "with the stroke of a pen ... proves beyond question that the Argentine state controls not only the Unrestricted Reserves, but all of the Central Bank's assets"), plaintiffs have failed to avail themselves of well-established legal principles that might permit attachment. In Banco, the Supreme Court stated that "government instrumentalities established as juridical entities distinct and independent from their sovereign should normally be treated as such." 462 U.S. at 626-27, 103 S. Ct. 2591. According to the Court,

[f]reely ignoring the separate status of government instrumentalities would result in substantial uncertainty over whether an instrumentality's assets would be diverted to satisfy a claim against the sovereign, and might thereby cause third parties to hesitate before extending credit to a government instrumentality without the government's guarantee. As a result, the efforts of sovereign nations to structure their governmental activities in a manner deemed necessary to promote economic development and efficient administration would surely be frustrated.

Id. at 626, 103 S. Ct. 2591 (footnote omitted).

The Court found support for this proposition in the legislative history of 28 U.S.C. § 1610(b), see note 6, ante (quoting § 1610(b)), the provision of the FSIA addressing the circumstances under which a judgment creditor may execute upon the assets of an instrumentality of a foreign government:

Section 1610(b) will not permit execution against the property of one agency or instrumentality to satisfy a judgment against another, unrelated agency or instrumentality. There are compelling reasons for this. If U.S. law did not respect the separate juridical identities of different agencies or instrumentalities, it might encourage foreign jurisdictions to disregard the juridical divisions between different U.S. corporations or between a U.S. corporation and its independent subsidiary. However, a court might find that property held by one agency is really the property of another.

Banco, 462 U.S. at 627-28, 103 S. Ct. 2591 (quoting FSIA House Report at 29-30, as reprinted in 1976 U.S.C.C.A.N. at 6628-29).

In Banco, the Court held that the "presumption that a foreign government's determination that its instrumentality is to be accorded separate legal status will be honored," id. at 628, 103 S. Ct. 2591, could be overcome under certain circumstances, including where the instrumentality is "so extensively controlled by its owner that a relationship of principal and agent is created," id. at 629, 103 S. Ct. 2591, and where recognizing the instrumentality's separate juridical status would "work fraud or injustice," id. (quoting Taylor v. Standard Gas Co., 306 U.S. 307, 322, 59 S. Ct. 543, 83 L. Ed. 669 (1939)) (internal quotation mark omitted); see also Letelier v. Republic of Chile, 748 F.2d 790, 794 (2d Cir. 1984) ("The Banco Court held that a foreign state instrumentality is answerable just as its sovereign parent would be if the foreign state has abused the corporate form, or where recognizing the instrumentality's separate status works a fraud or an injustice.").

Our respect for the separate juridical status of government instrumentalities led us to conclude in Letelier that the assets of Chile's state-owned airline, LAN, could not be executed upon to satisfy a judgment obtained against the Republic of Chile. See Letelier, 748 F.2d at 792, 799. We interpreted Banco to establish a presumption that assets of a foreign government instrumentality could not be executed upon to satisfy a judgment against a parent foreign government. That presumption could be overcome only if the party seeking attachment carried its burden of demonstrating that the instrumentality's separate juridical status was not entitled to recognition. See id. at 794-95.

In Letelier, the district court had held that Chile's "direct control" of LAN's "assets and facilities," its power to use LAN's assets, its ability to "have decreed LAN's dissolution and taken over property interests held in LAN's name," and its use of the instrumentality's facilities and personnel to plan and carry out an assassination that gave rise to the judgment at issue in the case amounted to an abuse of corporate form justifying disregard of the instrumentality's separate juridical status. Id. at 794. We reversed, holding that

[p]laintiffs had the burden of proving that LAN was not entitled to separate recognition. A creditor seeking execution against an apparently separate entity must prove the property to be attached is subject to execution. The evidence submitted by the judgment creditors does not reveal abuse of corporate form of the nature or degree that Banco found sufficient to overcome the presumption of separate existence. As both Banco and the FSIA legislative history caution against too easily overcoming the presumption of separateness, we decline to extend the Banco holding to do so in this case.

Id. at 795 (citations and internal quotation marks omitted).

In a recent case, LNC Invs., Inc. v. Republic of Nicaragua, 115 F. Supp. 2d 358 (S.D.N.Y. 2000), aff'd sub nom. LNC Invs., Inc. v. Banco Central De Nicaragua, 228 F.3d 423 (2d Cir. 2000), a district court applied Banco to defeat the efforts of LNC Investments ("LNC"), a judgment creditor of the Republic of Nicaragua ("Nicaragua"), to execute on assets of Nicaragua's central bank held in the FRBNY. In that case, LNC obtained a judgment against Nicaragua based on its holdings of defaulted debt instruments issued by Nicaragua. To satisfy the judgment, LNC sought to execute on assets of Banco Central de Nicaragua—Nicaragua's central bank—held in the FRBNY, contending that Nicaragua had waived immunity from attachment of its central bank's assets and, in the alternative, that the central bank could be required to satisfy the judgment against Nicaragua. See id. at 360-63.

The district court rejected LNC's waiver argument, see id. at 361-63, and held that the central bank could be required to satisfy the judgment against its parent sovereign government only if LNC could overcome the Banco presumption that the central bank's separate juridical status must be respected, see id. at 363. It concluded that LNC failed to prove that Nicaragua abused the central bank's corporate form (i.e., that the central bank was the "alter ego" of Nicaragua), or that respecting the central bank's separate juridical status would work a fraud or injustice. See id. at 363-66.

We affirmed in a brief opinion in which we expressed our agreement with the district court's reasoning. See LNC Invs., 228 F.3d at 423 ("The district court held that the Central Bank's assets could not be reached to satisfy the judgment against Nicaragua. We agree and affirm for substantially the reasons stated by the district court."). This result has been described by a commentator as "consistent with the outcome in a series of prior appellate decisions that had shown a strong aversion to overriding the presumption of independent status for separate corporate agencies or instrumentalities." Paul L. Lee, Central Banks and Sovereign Immunity, 41 Colum. J. Transnat'l L. 327, 364 (2003).¹⁴  See also First City, Texas-Houston, N.A. v. Rafidain Bank, 150 F.3d 172, 176 (2d Cir. 1998) (using Banco to analyze claim that central bank of Iraq should be held liable for Iraq-owned commercial bank's repudiation of debts as commercial bank's "alter ego"); Olympic Chartering S.A. v. Ministry of Indus. and Trade of Jordan, 134 F. Supp. 2d 528, 530 (S.D.N.Y. 2001) (rejecting claim by judgment creditor of Jordan's Ministry of Industry and Trade for jurisdictional discovery concerning the Central Bank of Jordan ("CBJ") because "petitioner has made no allegation that CBJ is an alter ego of the judgment debtor nor of `fraud or injustice' involving CBJ" (quoting Banco, 462 U.S. at 629, 103 S. Ct. 2591)).

We see no reason why the presumption of separateness required by Banco and applied in Letelier and LNC Investments should not apply here to shield the FRBNY Funds from attachment. The separate juridical status of BCRA is not disputed by plaintiffs,¹⁵  and plaintiffs expressly elected not to argue in support of attachment that BCRA's separate juridical status should be disregarded because BCRA is the alter ego of the Republic. See, e.g., Jan. 12, 2006 Hr'g Tr. 8, Special Appendix of Appellant EM 13 (counsel for EM acknowledging that the FRBNY Funds were "the central bank's property before the decree, subject to arguments which we think are legitimate arguments of ours that the central bank is the alter ego of the government. But that would still make it the central bank's property."); NML Reply Br. 21-22:

The reason Central Bank assets were not available before December 15, 2005, [the date on which the Decrees were issued,] to be attached by Argentina's creditors is that the relevant debts are Argentina's and not the Central Bank's. Before President Kirchner decreed funds held by the Central Bank available to pay a debt of Argentina, appellants had no basis—other than an alter ego argument, which they have not yet made in the District Court—to argue that they were entitled to attach Central Bank funds to pay a debt of Argentina.

(citation omitted) (second emphasis added). Nor have they argued that the Banco presumption should be overcome based on a finding that disregarding BCRA's separate juridical status is necessary to prevent fraud or injustice.¹⁶  In fact, neither EM nor NML even so much as mentions Banco in its briefs.

We reject plaintiffs' effort to circumvent Banco and our decisions in Letelier and LNC Investments by characterizing the Republic's ability and willingness to control BCRA as a transfer of property rights sufficient to give the Republic an attachable interest in the FRBNY Funds. Under Banco and its progeny, plaintiffs bear the burden of overcoming the presumption that the FRBNY Funds are not available to satisfy a judgment against the Republic. Banco indicates two circumstances in which the presumption may be overcome—if BCRA were proven to be the alter ego of the Republic, or if disregarding BCRA's separate juridical status were necessary to avoid fraud or injustice. Plaintiffs chose not to argue that either of these circumstances existed here, even though the Republic's alleged misdeeds cited in plaintiffs' briefs might have lent some credence to these arguments.¹⁷  Banco forecloses any argument that all of BCRA's $26.8 billion in reserves are "attachable interests" of the Republic merely because the Republic hypothetically could have ordered (but in the Decrees did not order) BCRA to assign or transfer the FRBNY Funds. See Letelier, 748 F.2d at 794 (findings that assets and facilities of Chile's instrumentality LAN "were under the direct control of Chile, which had the power to use them; [and that] Chile could have decreed LAN's dissolution and taken over property interests held in LAN's name" did not support allowing creditor to attach LAN's assets in order to satisfy judgment against Chile).

C. Use of Funds To Repay the IMF Is Not a "Commercial Activity"

Even if we agreed that the Decrees effectively converted all of BCRA's reserves—including the reserves held in the FRBNY Account—into attachable assets of the Republic, we could not authorize the pre—or postjudgment attachment of the FRBNY Funds unless we found that the account had become property of the Republic "used for a commercial activity in the United States."¹⁸  28 U.S.C. §§ 1610(a) & (d); see note 6, ante (quoting relevant portions of § 1610). Plaintiffs essentially concede as much by arguing that the Unrestricted Reserves are attachable because they were "used for a commercial activity." See Br. of Appellant EM 32-36 (arguing that Unrestricted Reserves are attachable because they have been "used for a commercial activity"); Br. of Appellant NML 37-47 (same).¹⁹ 

Plaintiffs contend that the Republic's use of the FRBNY Funds constituted "a commercial activity in the United States" under 28 U.S.C. § 1610(a) because the funds could have been used to repay the Republic's debt to the IMF. They rely on Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 112 S. Ct. 2160, 119 L. Ed. 2d 394 (1992), in which the Supreme Court held that Argentina's issuance of commercial bonds constituted "commercial activity" under the FSIA, see id. at 615-17, 112 S. Ct. 2160, to argue that a government's repayment of debt always constitutes "commercial activity" within the meaning of the FSIA. Under this reasoning, the Republic engaged in "commercial activity" when BCRA repaid the Republic's debt to the IMF.

We disagree with plaintiffs' argument on two separate and independent grounds. First, we hold that the Republic's relationship with the IMF is not "commercial" in nature; thus, use of Unrestricted Reserves to repay the IMF did not constitute "commercial activity." Second, even if we assumed that the Republic's relationship with the IMF was "commercial" in nature, plaintiffs have failed to show on the present record that any of the FRBNY Funds were to be "used" to pay the IMF.

The FSIA's definition of "commercial activity" states that " [t]he commercial character of an activity shall be determined by reference to the nature of the course of conduct or particular transaction or act, rather than by reference to its purpose." 28 U.S.C. § 1603(d). According to the Supreme Court in Weltover, " [a] foreign state engaging in `commercial' activities `do [es] not exercise powers peculiar to sovereigns'; rather, it `exercise [s] only those powers that can also be exercised by private citizens.'" 504 U.S. at 614, 112 S. Ct. 2160 (second and third alterations in original) (quoting Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 704, 96 S. Ct. 1854, 48 L. Ed. 2d 301 (1976) (plurality opinion)). This led the Court to conclude that "when a foreign government acts, not as regulator of a market, but in the manner of a private player within it, the foreign sovereign's actions are `commercial' within the meaning of the FSIA. . . . [T]he issue is whether the particular actions that the foreign state performs (whatever the motive behind them) are the type of actions by which a private party engages in `trade and traffic or commerce.'" Id. (quoting Black's Law Dictionary 270 (6th ed.1990)). The Court concluded in Weltover that Argentina engaged in "commercial activity" within the meaning of the FSIA when it issued commercially-available debt instruments, because the instruments were "in almost all respects garden-variety debt instruments: They may be held by private parties; they are negotiable and may be traded on the international market (except in Argentina); and they promise a future stream of cash income." Id. at 615, 112 S. Ct. 2160.

The Republic's borrowing relationship with the IMF, and the repayment obligations assumed thereunder, are not similarly "commercial" for several reasons. First, when the Republic borrows from the IMF, it "exercise [s] powers peculiar to sovereigns." Id. at 614, 112 S. Ct. 2160. The IMF is a unique cooperative international institution established by treaty — the Bretton Woods Agreement — following the end of the Second World War. See Articles of Agreement of the IMF, 60 Stat. 1401, T.I.A.S. 1501 (Dec. 27, 1945). The Bretton Woods Agreement has since been amended twice, most recently in 1976, see Second Amendment of Articles of Agreement of the International Monetary Fund, Apr. 30, 1976, 29 U.S.T. 2203, T.I.A.S. No. 8937 ("IMF Agreement"), available at http://www.imf.org/external/pubs/ft/aa/aa. pdf.²⁰  Only sovereign nation states can become members of the IMF, see IMF Agreement art. II, 29 U.S.T. at 2205-06, and only members can avail themselves of IMF financing, see id. arts. IV-V, 29 U.S.T. at 2208-20. The Republic is one of 184 sovereign nations that are members of the IMF. See IMF, Members' Quota and Voting Power, http://www.imf.org/external/ np/sec/memdir/members.htm.

Second, the IMF's borrowing program is part of a larger regulatory enterprise intended to preserve stability in the international monetary system and foster orderly economic growth. See IMF Agreement art. IV § 1, 29 U.S.T. at 2208 (describing requirement that each member "undertakes to collaborate with the Fund and other members to assure orderly exchange arrangements and to promote a stable system of exchange rates"); id. § 3, 29 U.S.T. at 2209 (granting the IMF the power "to oversee the international monetary system in order to ensure its effective operation" by "exercis [ing] firm surveillance over the exchange rate policies of members"). The Republic's borrowing relationship with the IMF is regulatory in nature because the IMF's provision of foreign currency or IMF-specific assets in exchange for domestic currency, see post (discussing unique nature of IMF loan arrangements), generally requires regulatory action by the Republic. See Fact Sheet — IMF Lending, http://www.imf.org/ external/np/exr/facts/howlend.htm ("An IMF loan is usually provided under an `arrangement,' which stipulates the specific policies and measures a country has agreed to implement to resolve its balance of payments problem."); see also Sandra Blanco & Enrique Carrasco, The Functions of the IMF and the World Bank, 9 Transnat'l L. & Contemp. Probs. 67, 75 (1999) (describing IMF loans beyond a minimum size as entailing "the explicit commitment by the member country to implement remedial measures in return for IMF assistance . . . . Those measures typically have related to the domestic money supply, budget deficits, international reserves, external debt, exchange rates, and interest rates."). The Republic agreed to many economic policy and regulatory reform measures in exchange for the IMF loans that were ultimately repaid in 2005. See IMF Independent Evaluation Office, The IMF and Argentina, 1991-2001 17-38 (2004) (describing and evaluating IMF's efforts to influence Argentina's exchange rate and fiscal policies, and to encourage structural reforms, in exchange for providing Argentina access to IMF capital); see also Weltover, 504 U.S. at 614, 112 S. Ct. 2160 (concluding that "a foreign government's issuance of regulations limiting foreign currency exchange is a sovereign activity, because such authoritative control of commerce cannot be exercised by a private party").²¹ 

Third, the terms and conditions of the Republic's borrowing relationship with the IMF are not governed by a "garden-variety debt instrument [ ]," id. at 615, 112 S. Ct. 2160, but instead by the Republic's treaty obligations to the international organization, as supplemented by the terms and conditions contained in agreements associated with individual loans. If the Republic failed to comply with these obligations, it would be in breach of the IMF Agreement and as a result could lose its rights to use IMF borrowing facilities, participate in IMF governance, and ultimately, remain a member of the IMF. See IMF Agreement art. v. § 5, 29 U.S.T. at 2213; id. art. XXVI § 2, 29 U.S.T. at 2254. The vehicle for enforcing the Republic's obligations to the IMF is diplomatic and thus sovereign, not commercial. See MCI Telecommunications Corp. v. Alhadhood, 82 F.3d 658, 663 (5th Cir. 1996) ("We find that alleged promises made through diplomatic channels do not constitute commercial activity.").

Fourth, IMF loans are structured in a manner unique to the international organization, and are not available in the commercial market. Instead of obtaining currency in exchange for debt instruments, IMF debtors purchase "Special Drawing Rights" ("SDRs") or other currency from the IMF in exchange for their own currency. See IMF Agreement art. V § 2(a), 29 U.S.T. at 2210 (stating that, with certain exceptions, "transactions on the account of the Fund shall be limited to transactions for the purpose of supplying a member, on the initiative of such member, with special drawing rights or the currencies of other members from the general resources of the Fund . . . in exchange for the currency of the member desiring to make the purchase"); id. art. XVII §§ 2-3, 29 U.S.T. at 2239-40 (discussing who may hold SDRs); see also Blanco & Carrasco, ante, at 74 ("Although the IMF's assistance is usually referred to as `lending' or `loans,' a member country actually `purchases' SDRs or other currencies from the Fund in exchange for its own currency and agrees to `repurchase' (buy back) its own currency at a later date."). Because a nation state's borrowing relationship with the IMF takes place outside of the commercial marketplace, it cannot be considered "commercial" in nature. Compare Weltover, 504 U.S. at 617, 112 S. Ct. 2160 (holding that Argentina "participated in the bond market in the manner of a private actor" when it issued bonds).

Even if we were to regard repayment of IMF debts as "commercial activity" within the meaning of §§ 1610(a) and (d), we would be required to hold that, on the present record, the FRBNY Funds are not available for attachment under § 1610 because the FRBNY Funds were never "used for commercial activity," and plaintiffs presented no evidence to the District Court that the Republic or BCRA intended the FRBNY Funds to be so designated. See 28 U.S.C. § 1610(a) (requiring attachable property to be "used for a commercial activity" (emphasis added)); id. § 1610(d) (same as to prejudgment attachment). We need not define the precise contours of "used for" within the contemplation of § 1610 because there is no evidence that either actual use or designation for use occurred here with respect to the FRBNY Funds. The mere fact that the FRBNY Funds could have been used to repay the Republic's debts to the IMF after the Decrees does not, standing alone, render those funds attachable. See Conn. Bank of Commerce v. Republic of Congo, 309 F.3d 240, 254 (5th Cir. 2002) (noting that the phrase "used for" in § 1610(a) "means what it says: property of a foreign sovereign . . . may be executed against only if it is `used for' a commercial activity"). The plain language of the statute suggests that the standard is actual, not hypothetical, use. See Walker Int'l Holdings Ltd. v. Republic of Congo, 395 F.3d 229, 236 (5th Cir. 2004) (property not "used for" reimbursement of legal expenses where agreements never moved beyond negotiation stage). Even if actual use were not required, at least specific designation for such use would be necessary. Cf. Af-Cap Inc. v. Republic of Congo, 383 F.3d 361, 370 (5th Cir. 2004) ("Although . . . contemplated use is not actual use, it is strongly suggestive that the [funds at issue] were not cordoned off for use of [the state] in its sovereign capacity." (footnote omitted)).

Here, though, the Decrees made all BCRA funds potentially available for the repayment of the Republic's debts, and never specified which funds would be used to back the monetary base and which funds would be designated Unrestricted Reserves. Accordingly, plaintiffs cannot demonstrate on the basis of the Decrees alone that the FRBNY Funds were intended to be "used for" repaying the IMF.

D. The FRBNY Funds Are Immune From Attachment Even Without Reference to Section 1611(b) (1)

The parties have offered a variety of interpretations of 28 U.S.C. § 1611(b) (1)'s provision granting immunity from attachment for property "of a foreign central bank . . . held for its own account," provided that the central bank's immunity is not "explicitly waived." 28 U.S.C. § 1611(b) (1). But because the FRBNY Funds have remained assets of BCRA that cannot be used to satisfy a judgment against the Republic, we need not decide which interpretation of § 1611(b) (1)'s "held for its own account" language is correct in order to resolve this appeal. Section 1611(b) (1) provides a central bank with special protections from a judgment creditor who would otherwise be entitled to attach the central bank's funds under 28 U.S.C. § 1610. See 28 U.S.C. § 1611(b) (1) (protecting from attachment assets of a central bank " [n]otwithstanding the provisions of section 1610"). We have already held that plaintiffs have not established their right to attach the FRBNY Funds. Thus, even assuming arguendo that the FRBNY Funds were not "held for [BCRA's] own account," or that the Republic explicitly waived BCRA's immunity from attachment,²²  plaintiffs would remain unable to attach the FRBNY Funds.

Our interpretation of Section 1611(b) (1) is in accord with the district court's opinion in LNC Investments, which found persuasive the Nicaraguan central bank's argument that its assets could not be attached to satisfy a judgment against Nicaragua even if Nicaragua waived the central bank's immunity from attachment:

[a]lthough a parent government may waive the immunity of its central bank pursuant to § 1611, nothing in the clear language of § 1611 remotely suggests that such a waiver automatically renders a central bank liable for a judgment entered against its parent government. Section 1611 simply demonstrates that the assets of a foreign bank can be attached and executed to satisfy a judgment entered against that foreign central bank when, and only when, the central bank or its parent government has made an explicit waiver of the bank's immunity.

LNC Invs., Inc. v. Republic of Nicaragua, 115 F. Supp. 2d 358, 362-63 (S.D.N.Y. 2000) (alteration and emphasis in original), aff'd sub nom. LNC Invs., Inc. v. Banco Central De Nicaragua, 228 F.3d 423 (2d Cir. 2000); see also Paul L. Lee, Central Banks and Sovereign Immunity, 41 Colum. J. Transnat'l L. 327, 395 (2003) (" [W]hether or not the central bank has explicitly waived immunity and whether or not the funds constitute funds held for the central bank's own account, property of the central bank will be subject to attachment or execution only for claims against the central bank and not for claims that pertain only to the government or its other agencies and instrumentalities.").

E. The District Court Properly Denied EM's Discovery Request

We are mindful that a federal trial court has wide latitude over the management of discovery, see Wills v. Amerada Hess Corp., 379 F.3d 32, 41 (2d Cir. 2004), but in the FSIA context, "discovery should be ordered circumspectly and only to verify allegations of specific facts crucial to an immunity determination." First City, Texas-Houston, N.A. v. Rafidain Bank, 150 F.3d 172, 176 (2d Cir. 1998) (quoting Arriba Ltd. v. Petroleos Mexicanos, 962 F.2d 528, 534 (5th Cir. 1992) (internal quotation marks omitted)); cf.' Kelly v. Syria Shell Petroleum Dev. B. V., 213 F.3d 841, 849 (5th Cir. 2000) ("FSIA immunity is immunity not only from liability, but also from the costs, in time and expense, and other disruptions attendant to litigation."). Because the record makes clear that the FRBNY Funds were never an attachable asset of the Republic and that § 1610's "commercial activity" exception to immunity from attachment does not apply, EM was "not entitled to any other discovery," as it has failed to "show [ ] a reasonable basis for assuming jurisdiction" over BCRA. Rafidain Bank, 150 F.3d at 177 (quoting Filus v. Lot Polish Airlines, 907 F.2d 1328, 1332 (2d Cir. 1990)). There is no indication on this record that the District Court improperly calibrated the "delicate balancing `between permitting discovery to substantiate exceptions to statutory foreign sovereign immunity and protecting a sovereign's or sovereign agency's legitimate claim to immunity from discovery.'" Id. at 176 (quoting Arriba, 962 F.2d at 534).

CONCLUSION

For the reasons stated above, plaintiffs' motion for certification of the appeal pursuant to 28 U.S.C. § 1292(b) is granted. The order of the District Court vacating the Amended Restraining Notices is affirmed.