Yugoimport v. Republic of Croatia, Republic of Slovenia, No. 11-1990 (2d Cir. 2014)
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The Bank filed this interpleader action to determine ownership of funds held on deposit in an account in the name of the Federal Directorate of Supply and Procurement (FDSP), an entity organized under the former Socialist Federal Republic of Yugoslavia (SFRY). The account was frozen pursuant to an executive order during the Bosnian War. Yugoimport, a Serbian entity, claimed full ownership of the funds as successor-in-interest to the FDSP. The Republics of Croatia and Slovenia contend that the funds should be divided among the states succeeding the SFRY under a multilateral treaty, the Succession Agreement. The court held that interpretation of the Succession Agreement was governed by the Vienna Convention and that the FSPA was an agency of the SFRY. Therefore, the court affirmed the district court's grant of summary judgment to the Republics.
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11-1990-cv Yugoimport v. Republic of Croatia, Republic of Slovenia 1 UNITED STATES COURT OF APPEALS 2 FOR THE SECOND CIRCUIT 3 August Term, 2012 4 (Argued: August 29, 2012 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Decided: February 10, 2014) Docket No. 11-1990-cv - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - THE BANK OF NEW YORK, Interpleader-Plaintiff, v. YUGOIMPORT, Interpleader-Defendant-Appellant, v. REPUBLIC OF CROATIA, REPUBLIC OF SLOVENIA, Interpleader-Defendants-Appellees. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - B e f o r e: WINTER, SACK, and RAGGI, Circuit Judges. Appeal from an order of the United States District Court for 24 the Southern District of New York (Alvin K. Hellerstein, Judge) 25 granting summary judgment to the Republics of Croatia and 26 Slovenia. 27 action to determine ownership of funds held in an account frozen 28 pursuant to executive order during the Bosnian War. 29 court found that the depositor was an agency of the former The Bank of New York commenced this interpleader 1 The district 1 Socialist Federal Republic of Yugoslavia and that the funds were 2 subject to division among the Yugoslav successor states pursuant 3 to a multilateral treaty. 4 purporting to be sole successor-in-interest of the original 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 depositor, appeals. Yugoimport, a Serbian instrumentality We affirm. RICHARD A. JACOBSEN, Orrick, Herrington & Sutcliffe LLP, New York, NY, for InterpleaderDefendant-Appellant. BOAZ S. MORAG, Cleary Gottlieb Steen & Hamilton LLP, New York, NY, SAMUEL SPITAL (Richard L. Mattiaccio, on the brief), Squire, Sanders & Dempsey LLP, New York, NY, for Interpleader-DefendantsAppellees. WINTER, Circuit Judge: The Bank of New York commenced this interpleader action to 22 determine ownership of $2,551,785.37 plus interest held on 23 deposit in an account in the name of the Federal Directorate of 24 Supply and Procurement ( FDSP ), an entity organized under the 25 laws of the former Socialist Federal Republic of Yugoslavia 26 ( SFRY ). 27 order during the Bosnian War. 28 The account was frozen in 1992 pursuant to executive The Interpleader-Defendants, Yugoimport and the Republics of 29 Croatia and Slovenia, all -asserted competing claims to the 30 funds. 31 the disputed funds as successor-in-interest to the FDSP. Yugoimport, a Serbian entity, claimed full ownership of 2 The 1 Republics of Croatia and Slovenia contend that the funds should 2 be divided among the states succeeding the SFRY pursuant to a 3 multilateral treaty, the Succession Agreement. 4 Succession Issues Between the Five Successor States of the Former 5 State of Yugoslavia, June 29, 2001, 41 I.L.M. 3 (2002). 6 district court granted summary judgment to the Republics. 7 hold that interpretation of the Succession Agreement is governed 8 by the Vienna Convention and that the FDSP was an agency of the 9 SFRY. 10 13 The We As such, the funds are subject to division under that Agreement. We, therefore, affirm. 11 12 See Agreement on BACKGROUND a) Historical Context We summarize only the facts relevant to this appeal. Those 14 seeking a more detailed account should go to the district court s 15 opinion. 16 344, 346-49 (S.D.N.Y. 2011). 17 Bank of N.Y. v. Yugoimport SDPR J.P., 780 F.Supp.2d This case arises from the violent breakup of the SFRY. The 18 ethnic, racial, and religious tensions of the Balkans, and the 19 consequences of these tensions spanning generations, have been 20 the subject of commentary so extensive and well-known as not to 21 require citation. 22 these tensions erupted into bloodshed with the weakening of 23 communist states in the 1980's. While somewhat controlled after World War II, Beginning in 1989, the 3 1 constituent states of the SFRY sought independence, leading to 2 nearly a decade of armed conflict. 3 independence on June 25, 1991. 4 Macedonia followed suit shortly thereafter. 5 Republic of Slovenia, 984 F. Supp. 209, 212- 213 (S.D.N.Y. 1997) 6 (describing the collapse). 7 territories, Serbia and Montenegro, issued a joint declaration 8 formally dissolving the SFRY and establishing themselves as the 9 Federal Republic of Yugoslavia ( FRY ). Slovenia formally declared Croatia, Bosnia-Herzegovina, and See Yucyco, Ltd. v. On April 27, 1992, the remaining See id. The FRY 10 purported to be the sole successor of the SFRY. 11 other Republics disputed the FRY s claim, and the United Nations 12 Security Council issued a resolution declaring that the claim was 13 not generally accepted by the world community. U.N.S.C. Res. 14 757, U.N. Doc. S/RES/757, 31 I.L.M. 1427, 1454 (May 30, 1992). 15 Additionally, the Security Council denied the FRY s request to 16 step into the shoes of the SFRY for the purpose of continuing the 17 SFRY s U.N. membership. 18 31 I.L.M. 1427, 1473 (Sept. 19, 1992). 19 See id. The U.N.S.C. Res. 777, U.N. Doc. S/RES/777, In December 1995, due in large part to American efforts and 20 armed NATO intervention, representatives of Bosnia-Herzegovina, 21 Croatia, and the FRY signed the Dayton Accords, bringing a 22 qualified measure of peace to the region. 23 agreed to recognize and respect each other s sovereignty and 4 The three Republics 1 authorized the deployment of a U.N.-led multinational military 2 implementation force in Bosnia. 3 for Peace in Bosnia and Herzegovina ( Dayton Accords ), Bosn. & 4 Herz.-Croat.-Fed. Repub. Yugo., Dec. 14, 1995, 35 I.L.M. 75, 89, 5 92 (1996). 6 See General Framework Agreement Because the Dayton Accords did not address a number of 7 issues arising from the breakup of the SFRY, Annex 10 of the 8 Accords established the Office of the High Representative to 9 assist in the implementation of the peace. Id. at 147. The High 10 Representative was to be appointed by the U.N. and was charged 11 with overseeing the creation of mutual agreements among the 12 signatory states concerning various issues. 13 was distribution of financial assets of the SFRY. 14 Res. 1022, U.N. S/RES/1022, 35 I.L.M. 259, 260 (November 22, 15 1995). 16 Id. One such issue See U.N.S.C. After the signing of the Dayton Accords, armed conflict 17 between the FRY and Kosovars and continuing sole-successor 18 sentiments in the FRY stymied the ability of the signatory states 19 to reach an agreement. 20 Succession Issues of the Former Socialist Federal Republic of 21 Yugoslavia, 96 Am. J. Int l L. 379, 379 (2002). 22 2001, after NATO intervention in the Kosovo conflict and 23 political shifts weakened FRY sole-successor sentiments, the See Carsten Stahn, The Agreement on 5 On June 29, 1 emerging successor states, under the supervision of the High 2 Representative, finally came to an agreement. 3 b) 4 The Succession Agreement The Succession Agreement recognizes five SFRY successor 5 states - Croatia, Slovenia, Bosnia-Herzegovina, Macedonia, and 6 the FRY. 7 seven Annexes, each of which deals with the division of 8 particular types of assets and/or liabilities. 9 are relied upon by the parties. 10 See Succession Agreement, 41 I.L.M. at 3.1 It contains Annexes C and G Annex C deals with the division of financial assets and 11 liabilities. Article 1 of Annex C defines the financial assets 12 of the SFRY to include accounts and other financial assets in 13 the name of the SFRY Federal Government Departments and 14 Agencies. Id. at 25. 15 financial assets, including funds held in foreign banks, shall be 16 distributed in the following proportions: 17 15.50%; Croatia 23.00%; Macedonia 7.50%; Slovenia 16.00%; and the 18 FRY 38.00%. Id. at 27.2 Article 5 provides that SFRY s foreign Bosnia and Herzegovina Whether the funds at issue here were 1 In June 2006, Serbia and Montenegro separated into independent states. Montenegro agreed that it would not be deemed a successor state to the SFRY or a party to the Succession Agreement. 2 Although Article 5(1) does not expressly include the assets of SFRY agencies in its definition of foreign financial assets, there is no dispute that the distribution scheme set forth in Article 5(2) applies to foreign-held assets of SFRY agencies. The general definition of financial assets embodied in Article 1 -- which includes the assets of SFRY agencies -- applies to the foreign financial assets addressed in Article 5. Succession Agreement, 41 I.L.M. at 25. 6 1 held in the name of an SFRY agency -- i.e. FDSP -- for purposes 2 of the Succession Agreement is the principal issue in this 3 appeal. 4 Annex G deals with private property. Article 1 thereof 5 states that [p]rivate property and acquired rights of citizens 6 and other legal persons of the SFRY shall be protected by 7 successor States in accordance with the provisions of this 8 Annex. 9 Yugoimport attaches importance to it. Id. at 35. We mention this provision only because However, if the funds were 10 held in the name of an SFRY agency, Annex G would be 11 inapplicable; if not, Yugoimport would succeed on this appeal 12 even without Annex G. 13 c) 14 The FDSP/Yugoimport We trace the history of Yugoimport in mind-numbing detail 15 because the nature of its governance and functions is critical - 16 decisive, actually - to the disposition of this appeal. 17 We begin with a summary that will suffice for casual 18 readers, who can then move on to the next section. Yugoimport 19 functioned primarily as an arms dealer for the successive 20 sovereign states referred to generally as Yugoslavia, from 1949 21 until the events giving rise to this case. 22 controlled, managed, and supervised at all times by the 23 government -- in particular, by officials responsible for 24 national defense. It was owned, Its earnings were put to public purposes. 7 1 We now turn to the details. The original Yugoimport was 2 created on June 27, 1949 by the Federal People s Republic of 3 Yugoslavia (the FPRY ).3 4 Enterprises (Act No. 5585/49)(June 27, 1949). 5 statute described it as [a] state business . . . of state-wide 6 significance created to engage in the import and export of all 7 types of goods. 8 were provided by the FPRY s Minister of Finance, id. art. 2, and 9 it operated under the administrative and operational supervision 10 11 Basic Law on State Business Id. arts. 1, 3. Its enabling Yugoimport s initial assets of the FPRY s Ministry of Foreign Trade. Id. art. 4. On July 28, 1971, after the FPRY became the SFRY, a new law 12 established the basic form and substance of SFRY agencies. See 13 Law on Organizational Structure and Scope of Operations of 14 Federal Administration Bodies and Federal Organizations, art. 1 15 (Act No. 1045/71) (July 28, 1971) (hereinafter referred to as the 16 Law on Agencies ). 17 of National Defense. 18 the Law on Agencies in several ways. 19 the Act on the Organization and Scope of Functions of Federal 20 Administrative Authorities and Federal Organizations (Act No. 21 21/74) (April 26, 1974) (hereinafter referred to as the Amending One such agency was the Federal Secretariat Id. arts. 3, 5. 3 In 1974, the SFRY amended See Act on the Amendment of The FPRY was the predecessor state of the SFRY. It existed from 1946 to 1963. Like the SFRY, the FPRY was a socialist state headed by Josip Broz Tito from 1963 to 1980. 8 1 Act ). Article 3 of the Amending Act set forth amendments 2 pertaining to the SFRY Federal Secretariat of National Defense. 3 One amendment merged Yugoimport into a new sub-agency known as 4 the Federal Directorate of Trade and Special Purpose Commodity 5 Reserves or the Federal Office for Trading and Reserves of 6 Special Purpose Goods (the Federal Office for Trading and 7 Reserves ). 8 Jugoimport-SDPR, art. 2 (FRY Gazette No. 89/9) (Jan. 27, 1997) 9 (FRY) (describing the merger in 1974 of Yugoimport into the See id. art. 3; Statute of the Public Enterprise 10 Federal Office for Trading and Reserves). The Amending Act 11 further stated that the Federal Office for Trading and Reserves 12 was established within the Federal Secretariat of National 13 Defense for the purpose of performing tasks associated with the 14 sale and accumulation of commodity reserves . . . for the 15 national defense. 16 other words, the Federal Office for Trading and Reserves was the 17 SFRY s arms dealer. Amending Act, art. 3 (Act. No. 21/74). In 18 In 1991, the SFRY reconstituted the Federal Office for 19 Trading and Reserves as the Federal Directorate for Commerce of 20 Special Purpose Products. 21 Commerce of Special Purpose Products, art. 24 (SFRY Gazette No. 22 11/91) (1991). 23 1996, the Federal Directorate for Commerce of Special Purpose 24 Products came to be known as the Federal Directorate of Supply See Law on the Federal Directorate for It is undisputed that sometime between 1991 and 9 1 and Procurement, or the FDSP.4 2 refer to the entity solely as the FDSP and its enabling law as 3 the FDSP Enabling Law or simply the Enabling Law. 4 For the sake of clarity, we will The Enabling Law that created the FDSP set forth its 5 function and management structure. See id. The Enabling Law 6 also required management, in agreement with the Federal Executive 7 Council, to establish within six months a governing statute 8 that would describe with greater particularity the FDSP s 9 business activities and administration. Id. arts. 16, 17, 23. 10 Once created, the statute could be changed only with approval of 11 the Federal Executive Council. 12 promulgated thereunder, Statute of the Federal Directorate for 13 Commerce of Special Purpose Products (Act. No. 750-3) (May 8, 14 1991) (SFRY) (hereinafter referred to as the FDSP Statute or 15 Statute ), is akin to articles of incorporation. 16 both the Enabling Law and the Statute to determine the defining 17 characteristics of the FDSP. Id. art. 4. The statute We draw upon 18 4 The parties agree that the Federal Directorate for Commerce of Special Purpose Products and the FDSP are the same entity, governed by the same organizational laws. Additionally, the 1996 statute reconstituting the FDSP as Yugoimport, discussed infra, states that Yugoimport keeps up the legal continuity of the Federal Directorate of Supply and Procurement established with the Law on the Federal Directorate of Supply and Procurement ( Official Gazette of SFRY 11/91). Statute of the Public Enterprise Jugoimport SDPR, art. 2 (FRY Gazette No. 89/9) (Jan. 27, 1997). Despite referring to the entity as the FDSP, the citation refers to the enabling law pursuant to which the Federal Directorate for Commerce of Special Purpose Products was established. 10 1 The primary function of the FDSP remained the procurement 2 and trading of arms and military equipment on behalf of the SFRY. 3 FDSP Enabling Law, art. 1 (11/91) ( The [FDSP] . . . performs 4 activities that are in the interest of the . . . [SFRY] in the 5 area of foreign trade commerce with armaments and military 6 equipment. ); see also FDSP Statute, art. 8 (Act No. 750-3) 7 (describing with greater particularity the FDSP s activities in 8 the area of armaments and military equipment ). 9 allowed to undertake other lines of business subject to approval The FDSP was 10 from the Federal Secretariat for People s Defense and only so 11 long as such undertakings did not impact its business dealings in 12 armaments and military equipment. 13 (11/91); FDSP Statute, art. 9 (Act No. 750-3). 14 required to direct its work in accordance with the plans for the 15 development and equipping of the military, FDSP Statute, art. 12 16 (Act No. 750-3), and it was the FDSP s responsibility . . . to 17 organize and prepare for action in cases of immediate war danger 18 . . . [and] to perform other tasks and activities that are in the 19 interest of general people s defense. 20 Secretariat for People s Defense supervised the FDSP s 21 performance of national-interest functions, and the FDSP 22 submitted quarterly and annual reports to the Federal Secretariat 23 for this purpose. FDSP Enabling Law, art. 3 The FDSP was Id. art. 38. FDSP Enabling Law, art. 19 (11/91). 11 The Federal Due to 1 the nature of the FDSP s work, the Enabling Law required that all 2 employee positions within the FDSP be staffed exclusively with 3 active military personnel. 4 Id. art. 18. The FDSP was organized as a juridical entity with the 5 status of a legal person. Id. art. 4. It guaranteed its 6 obligations with its own property, FDSP Statute, art. 2 (Act No. 7 750-3), and it was empowered to act on its own behalf and own 8 account and on others behalf and account pursuant to contract. 9 FDSP Enabling Law, arts. 7, 8 (11/91); FDSP Statute, art. 10 (Act 10 No. 750-3). 11 those on whose behalf . . . it perform[ed] foreign trade 12 commerce and services . . . [were] determined by contract. 13 Enabling Law, art. 8 (11/91). 14 The mutual rights and obligations of the FDSP and FDSP The FDSP was managed by a Director and a Council (the FDSP 15 Council ), both of which were appointed, supervised, or removed 16 by the Federal Executive Council. 17 Council consisted of a representative of each of the following: 18 19 20 21 22 23 24 25 26 27 28 Id. arts. 9-15. The FDSP 1) Federal Secretariat for People s Defense 2) Federal Secretariat for Foreign Affairs 3) Federal Secretariat for Foreign Economic Relations 4) Yugoslav National Bank 5) The Yugoslav Association of Industries for Armament and Military Equipment; and 6) A representative from the employees of the [FDSP]. FDSP Statute, art. 24 (Act. No. 750-3). 12 The Director was also a 1 member of the FDSP Council. FDSP Enabling Law, art. 11 (11/91); 2 FDSP Statute, art. 25 (Act. No. 750-3). 3 The Director was responsible for, among other things, 4 business decisions, hiring and staffing decisions, and managing 5 the FDSP s preparation for national defense. 6 22 (Act. No. 750-3). FDSP Statute, art. The FDSP Council was responsible for 7 8 9 10 11 12 13 14 15 16 17 Id. art. 26. 18 changes in status (splitting, merging, and acquiring) subject to 19 approval from the Federal Executive Council. 20 1) Pass[ing] the strategic plan; 2) Pass[ing] a plan for foreign trade commerce and a financial plan; 3) Pass[ing] a decision for the permanent and long-term investments of the [FDSP]; 4) Decid[ing] upon the long-term acquiring of funds; [and] 5) Perform[ing] other tasks defined by the law . . . The FDSP Council was also empowered to decide[] on Id. art. 3. The FDSP s earnings were to be used to replenish the funds 21 spent and to provide for personal, common, and general social 22 needs and responsibilities. 23 surplus or profit in a given year, the Director and FDSP Council 24 were to determine the division of profits in the course of 25 preparing the annual report. 26 experienced a liquidity problem or a loss, the FDSP Council was 27 to inform the Federal Secretariat for People s Defense and the 28 Federal Executive Council. Id. art. 16. Id. art. 19. Id. art. 21. 13 If it produced a net If the FDSP 1 Because the FDSP operated out of Belgrade, Serbia, the FRY 2 was able to control its physical assets during the armed conflict 3 described supra. 4 FDSP as Yugoimport SDPR. 5 organizational law in September 1996, and the Belgrade Business 6 Court issued a decision purporting to merge the two entities in 7 early 1997. 8 (PR. Nr. 291) (Official Gazette of SRY No. 46/96) (Sept. 27, 9 1996) (FRY). In 1996, the FRY formally reconstituted the The government enacted a new See Law on the Public Enterprise Jugoimport-SDPR Like the FDSP, Yugoimport SDPR was created pursuant 10 to an enabling law and its functions and management structure 11 were set out more precisely in a governing statute enacted by 12 the managing board. 13 Jugoimport-SDPR, preamble (FRY Gazette No. 89/9) (Jan. 27, 14 1997) (FRY), promulgated under Law on the Public Enterprise 15 Jugoimport-SDPR, (Official Gazette of SRY No. 46/96). 16 primary function of Yugoimport SDPR remained the procurement and 17 trading of weapons and military equipment. 18 SDPR, arts. 2, 4 (46/96).5 19 state, id. art. 5, and the federal government was empowered to: 20 (i) approve the governing statute and any changes made to the See Statute of the Public Enterprise The Law on Jugoimport- Initial funding was provided by the 5 According to the governing statute, Jugoimport-SDPR deal[t] with other activities as well. Statute on Jugoimport SDPR, art. 4. The statute listed several hundred activities, ranging from the production, processing and refrigeration of animal meat to publishing books and bookbinding to the retail trade of household appliances, radios, and tv sets. Id. 14 1 statute thereafter; (ii) the development plan and working 2 program; (iii) any increases or decreases in basic capital; (iv) 3 any plans to acquire or sell real estate; (v) annual financial 4 plans and investment decisions; and (vi) any changes to the 5 organizational structure. 6 Id. art. 15. Yugoimport SDPR was managed by a Director, a Managing Board, 7 and a Supervisory Board. Id. art. 8. The Director was appointed 8 and subject to dismissal by the federal government. 9 Board consisted of eight members, five of which were appointed The Managing 10 and subject to dismissal by the federal government. 11 14.6 12 appointed and subject to dismissal by the federal government, and 13 two members. 14 [Yugoimport] to be organized as a stock-sharing company, but 15 required that the state retain at least 51 percent ownership. 16 Id. art. 16. 17 Id. arts. 9, And the Supervisory Board consisted of a president, Id. arts. 12, 17, 20. The enabling law permitted Following the dissolution of the FRY, Yugoimport has 18 continued to operate in Serbia, presumably reorganized under 19 Serbian law or adopted thereunder. 20 d) 21 22 The Disputed Funds In 1991, the FDSP opened a deposit account with the Bank of New York. On May 30, 1992, the United States, pursuant to an 6 The remaining three members were elected by Yugoimport SDPR employees. Id. arts. 9, 14. 15 1 Executive Order issued by President George H.W. Bush, froze all 2 property, and interests in property, in the name of the [SFRY] or 3 the [FRY] . . . in the United States, including property in the 4 name of their agencies, instrumentalities and controlled 5 entities, and any person acting or purporting to act for or on 6 behalf of any of the foregoing. 7 23299, Sec. 2, 4(c) (May 30, 1992). 8 of Foreign Assets Control, a division of the Department of 9 Transportation, published a notice containing a list of entities Exec. Order No. 12808, 57 F.R. On July 20, 1992, the Office 10 owned or presumed to be controlled by the [FRY]. 11 Foreign Assets Control General Notice No. 1, 57 F.R. 32051-02 12 (July 20, 1992). 13 freeze remained in place until February 2003. 14 commenced shortly thereafter. 15 e) 16 The FDSP was on the list. Id. Office of The asset This litigation Procedural History In light of Yugoimport s and the Republics competing claims 17 of ownership of the funds, the Bank of New York filed this 18 interpleader action on April 14, 2003 in New York state court. 19 Pursuant to the Foreign Sovereign Immunities Act, 28 U.S.C. §§ 20 1441(d) and 1446, Slovenia removed the case to the Southern 21 District of New York, where it was initially assigned to Judge 22 Charles S. Haight. 23 16 1 The bank deposited the disputed funds into the district 2 court s registry and, on June 2, 2004, obtained a discharge from 3 this action. 4 of the FDSP s status as an SFRY agency, which is of course 5 critical to the application of Annex C of the Succession 6 Agreement. 7 judgment or, in the alternative, for a stay to allow the Standing 8 Joint Committee under the Succession Agreement to make a 9 determination regarding whether the funds were subject to Judge Haight ordered limited discovery on the issue On July 31, 2006, the Republics moved for summary 10 division.7 11 summary judgment and opposed the Republics motion to stay, 12 arguing that it was not subject to the jurisdiction of the 13 Standing Joint Committee. 14 the case so that the Standing Joint Committee could decide the 15 issue. 16 9055, 2007 WL 1378426, at *10-11 (S.D.N.Y. May 11, 2007) 17 (hereinafter Yugoimport I ). On September 22, 2006, Yugoimport cross-moved for On May 11, 2007, Judge Haight stayed Bank of New York v. Yugoimport SDPR J.P., No. 03 Civ. 7 Article 5 of the Succession Agreement sets forth dispute-resolution methods that the successor states are to use in the event of disagreement: If the differences [over interpretation] cannot be resolved . . . the States concerned shall either (a) refer the matter to an independent person of their choice, with a view to obtaining a speedy and authoritative determination of the matter . . .; or (b) refer the matter to the Standing Joint Committee. 41 I.L.M at 5. The Standing Joint Committee, established by Article 4 of the Succession Agreement, consists of senior representatives of each successor state. Id. at 4. 17 1 In the fall of 2008, the case was reassigned to Judge Alvin 2 K. Hellerstein, who lifted the stay because, in the interim, the 3 successor states had not appointed any members to the Standing 4 Joint Committee and it had never met. 5 district court granted the Republics motion for summary judgment 6 and held that the funds were to be divided among the successor 7 states. 8 was an agency, as a matter of law, under Annex C of the 9 Succession Agreement. On April 29, 2011, the It based this holding on its conclusion that Yugoimport Bank of New York v. Yugoimport SDPR J.P., 10 780 F. Supp. 2d 344 (S.D.N.Y. 2011) (hereinafter Yugoimport 11 II ). 12 DISCUSSION 13 We review a grant of summary judgment de novo. K&A 14 Radiologic Tech. Serv s, Inc. v. Comm r of the Dep t of Health of 15 New York, 189 F.3d 273, 278 (2d Cir. 1999) (citing Bogan v. 16 Hodgkins, 166 F.3d 509, 511 (2d Cir. 1999)). 17 a) 18 Application of the Succession Agreement When subject matter jurisdiction is based on the Foreign 19 Sovereign Immunities Act (the FSIA ), 28 U.S.C. §§ 1441(d), 20 1446, 1603(a), we apply the choice-of-law rules of the forum 21 state, here New York, with respect to all issues governed by 22 state substantive law. 23 of the People s Republic of China, 923 F.2d 957, 959 (2d Cir. Barkanic v. Gen. Admin. of Civil Aviation 18 1 1991).8 2 choice-of-law questions in contract cases. 3 requires application of the law of the jurisdiction with the most 4 significant interest in, or relationship to, the dispute. 5 Freres & Co. v. Protective Life Ins. Co., 108 F.3d 1531, 1539 (2d 6 Cir. 1997) (Brink s Ltd. v. South African Airways, 93 F.3d 1022, 7 1030-1031 (2d Cir. 1996) (citing In re Allstate Ins. Co. & 8 Stolarz, 81 N.Y.2d 219, 227 (1993))); Auten v. Auten, 308 N.Y. 9 155, 160-61 (1954). New York courts adopt a center of gravity approach to This approach Lazard To determine the jurisdiction with the 10 greatest interest in the dispute, New York courts consider a 11 spectrum of significant contacts, including the place of 12 contracting, the places of negotiation and performance, the 13 location of the subject matter, and the domicile . . . of the 8 The FSIA, 28 U.S.C. §§ 1330, 1332, 1391(f), 1441(d), 1602-1611, grants foreign sovereigns general immunity from suit in the U.S., id. § 1604, unless the action falls under one of several enumerated exceptions. Id. §§ 16051607. Where an exception applies, district courts have original jurisdiction over the action, id. § 1330, and if the action was brought in state court, the foreign sovereign may remove it to the district court of the district encompassing the state in which the action is pending. Id. § 1441(d). Congress did not intend that the FSIA establish substantive rules of liability. See Barkanic, 923 F.2d at 960 (quoting Verlinden v. Cent. Bank of Nigeria, 647 F.2d 320 (2d Cir. 1981), rev d on other grounds, 461 U.S. 480 (1983)). The FSIA operates as a pass-through, granting federal courts jurisdiction over otherwise ordinary actions brought against foreign states. It provides foreign states and their instrumentalities access to federal courts only to ensure uniform application of the doctrine of sovereign immunity. Id. at 960-961. Because the FSIA creates federal question jurisdiction but does not supply any substantive law of liability, see Verlinden, 461 U.S. at 491-93, choice of law problems arise in the FSIA context. The FSIA contains no express choice of law provision, but Section 1606 provides that a foreign sovereign shall be liable in the same manner and to the same extent as a private individual under like circumstances. 28 U.S.C. § 1606. In Barkanic, we found that the goal of like-treatment is best served by applying the state choice of law rules if the action is governed by state substantive law. Barkanic, 923 F.2d at 959. 19 1 contracting parties. 2 Allstate, 81 N.Y.2d at 227). 3 require[] the court to honor the parties choice [of law 4 provision] insofar as matters of substance are concerned, so long 5 as fundamental policies of New York law are not thereby 6 violated. 7 1987). 8 9 Brink s, 93 F.3d at 1031 (citing In re New York choice-of-law rules also Woodling v. Garrett Corp., 813 F.2d 543, 551 (2d Cir. The countries with the strongest interest in the present dispute are the successor states. All of them, except for non- 10 party Macedonia, have ratified or acceded to the Vienna 11 Convention on the Law of Treaties (the Vienna Convention ), 12 opened for signature May 23, 1969, 1155 U.N.T.S. 331, reprinted 13 in 8 I.L.M. 679, which contains a set of interpretive rules 14 regarding treaty interpretation.9 15 SFRY was also a party to the Vienna Convention. 16 Article 9 of the Succession Agreement provides that the 9 Prior to its dissolution, the Moreover, The Vienna Convention was adopted on May 22, 1969 by the United Nations Conference on the Law of Treaties. http://treaties.un.org/Pages/ViewDetailsIII.aspx?&src=TREATY&mtdsg_no=XXIII~1& chapter=23&Temp=mtdsg3&lang=en (last visited Jan. 16, 2014). To date, 113 nations are parties to the Convention and 45 nations are signatories to it. Id. The SFRY signed and ratified the Vienna Convention on May 23, 1969. Id. After the dissolution of the SFRY, Slovenia became a party on July 6, 1992; Croatia on October 12, 1992; Bosnia-Herzegovina on September 1, 1993; and Serbia on March 12, 2001. Id. All the pertinent countries became parties to the Vienna Convention prior to the finalization of the Succession Agreement on June 29, 2001. See Vienna Convention, art. 4, 1155 U.N.T.S. at 334 (explaining that the Convention does not apply retroactively to treaties already in force); Chubb & Son, Inc. v. Asiana Airlines, 214 F.3d 301, 308 n.5 (2d Cir. 2000) (same). 20 1 Succession Agreement is to be interpreted in accordance with 2 international law, of which the Vienna Convention is an integral 3 part. 4 9. 5 apply the interpretative rules set forth in the Vienna 6 Convention. 7 See supra n.9; Succession Agreement, art. 9, 41 I.L.M. at Therefore, under New York s choice-of-law principles, we To reiterate, the issue is whether the FDSP was an agency of 8 the SFRY as that term is used in the Succession Agreement. 9 The term agency is not defined in the Succession Agreement, and 10 neither party has supplied a definition under SFRY law. Under 11 the Vienna Convention, terms in a treaty are to be interpreted in 12 accordance with their ordinary meaning. 13 31(1). 14 language in which the treaty was drafted. 15 (providing that treaties authenticated in two or more languages 16 are equally authoritative in each language, and where language 17 divergences create ambiguity, courts should adopt the meaning 18 which best reconciles the texts ). 19 drafted in English. 20 apparently not susceptible to English translation, i.e., 21 dwelling rights, the Agreement provided Croatian, Slovenian, 22 and Serbian versions to clarify its meaning. Succession 23 Agreement, Annex G, art. 6, 41 I.L.M. at 36. The absence of such 24 non-English versions of the term agency indicates that there was Vienna Convention, art. A term s ordinary meaning is generally derived from the See id. art. 33 The Succession Agreement was In at least one instance where a concept was 21 1 no intended meaning beyond the plain-language English definition. 2 Therefore, we construe the term agency in accordance with 3 generally-accepted international principles and its ordinary 4 meaning in English. 5 A principal-agent relationship is created by express or 6 implied contract or by law, in which one party (the agent) may 7 act on behalf of another party (the principal) and bind that 8 other party by words or actions. 9 Dictionary (9th ed. 2009). AGENCY (1), Black s Law The fact that FDSP was organized as a 10 corporation does not preclude it from being deemed an SFRY agency 11 under the Succession Agreement. 12 agency in Black s Law Dictionary expressly includes government 13 corporations: 14 including a government corporation. 15 Dictionary (9th ed. 2009). The definition of federal A department or other instrumentality . . . , AGENCY (3), Black s Law 16 As the district court observed, there is nothing 17 inconsistent, or even unusual, about a state employing the 18 corporate form to create an agency. 19 2d at 356. 20 corporations that function as agencies. 21 pointed out in an impressive string cite, almost all of the fifty 22 U.S. states have corporations that function as agencies. 23 358; see also 1 Fletcher Cyc. Corp. § 57 ( A public corporation Yugoimport II, 780 F. Supp. Quite the contrary, many governments have public 22 As the district court Id. at 1 . . . may be defined as a corporation that is created by the 2 state as an agency in the administration of civil government. ). 3 For the purposes of determining which entities are entitled 4 to sovereign immunity, the FSIA, the Canada State Immunity Act, 5 and the European Convention on State Immunity all adopt broad 6 definitions of agency that expressly include public corporations. 7 See 28 U.S.C. § 1603(b) ( An agency or instrumentality of a 8 foreign state means any entity (1) which is a separate legal 9 person, corporate or otherwise, and (2) which is an organ of a 10 foreign state or political subdivision thereof, or a majority of 11 whose shares or other ownership interest is owned by a foreign 12 state or political subdivision thereof . . . ); Canada State 13 Immunity Act, R.S.C. 1985, c. S-18, § 2; European Convention on 14 State Immunity Explanatory Report, Art. 27 ¶ 107-109 (noting that 15 proceedings are frequently brought . . . not, strictly speaking, 16 against a State itself, but against [] legal entit[ies] 17 established under the authority of the State and exercising 18 public functions and that such entities may be . . . State 19 agencies, such as national banks or railway administrations ). 20 Under any reasonable understanding of the term, there is no 21 doubt that the FDSP was an agency of the SFRY, as the exhaustive 22 description of its origins, ongoing governance, and role showed. 23 It was, at all times, controlled by the government; its 23 1 management consisted of government officials; it was subject to 2 supervision by the Federal Secretariat of People s Defense and 3 the Federal Executive Council; its earnings were to be used not 4 only to replenish[] funds spent but also to provide for 5 personal, common, and general social needs and responsibilities ; 6 and management could not alter the FDSP Statute without approval 7 from the Federal Executive Council. 8 12, 15, 16 (11/91); FDSP Statute, art. 16 (Act. No. 750-3). 9 Moreover, the FDSP served a purpose so elemental to a nation- FDSP Enabling Law, arts. 19, 10 state government as to render any suggestion that it was not an 11 SFRY agency risible. 12 A compelling reason for the existence of nation states is to 13 strengthen military defense, as the American experience 14 demonstrates. 15 equipping the SFRY s military forces according to strategic needs 16 determined by the SFRY. 17 with the government s military planners, and it was the FDSP s 18 responsibility to supply the military to meet its perceived 19 needs. 20 enterprises were owned and controlled by the government - the 21 FDSP was clearly a governmental agency because of the important 22 national-interest functions it performed. The FDSP was the SFRY s arms dealer, charged with It was required to coordinate its work Even in the SFRY - a socialist state where many 23 24 1 In an effort to avoid this plain language interpretation, 2 Yugoimport submitted several pieces of extrinsic evidence, 3 including: 4 FRY Minister of Finance who served as a delegate in the 5 negotiations of the Succession Agreement and as an FRY (and now 6 as a Serbian) representative in the Annex C Committee on the 7 Distribution of Financial Assets and Liabilities; (ii) documents 8 purporting to represent the drafting history of the Succession 9 Agreement; and (iii) letters submitted by the Ministers of (i) an affidavit of Dr. Veroljub DugaliÄ , a former 10 Finance of Bosnia-Herzegovina and Serbia.10 11 that the district court was able to grant summary judgment only 12 by failing to consider or by not crediting this evidence. 13 However, none of these items could properly have been taken into 14 consideration under the interpretive rules set forth in the 15 Vienna Convention. 16 17 Under the Vienna Convention, external evidence may be considered only in limited circumstances. 18 19 20 21 22 23 Yugoimport contends Article 31 provides A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. Vienna Convention, art. 31(1). 10 We need not reach the issue of whether this extrinsic evidence, even if considered, would be sufficient to alter the result. As discussed supra, the nature and functions of the FDSP may well have dictated the result we reach. 25 1 Yugoimport contends that the extrinsic evidence proffered is 2 necessary to interpreting the Treaty in context and in the light 3 of its object and purpose. 4 because the Vienna Convention expressly sets forth in Article 31 5 the materials that may be considered to discern that context and 6 purpose. 7 of the treaty, including its preamble and annexes; (ii) [a]ny 8 agreement relating to the treaty which was made between all the 9 parties in connection with the conclusion of the treaty ; and Id. However, this argument fails Context may be evaluated by consulting: (i) the text 10 (iii) [a]ny instrument which was made by one or more parties in 11 connection with the conclusion of the treaty and accepted by the 12 other parties as an instrument related to the treaty. 13 31(2) (emphasis supplied). 14 subsequent agreement between the parties regarding the 15 interpretation of the treaty or the application of its 16 provisions; (b) [a]ny subsequent practice in the application of 17 the treaty which establishes the agreement of the parties 18 regarding its interpretation; and (c) [a]ny relevant rules of 19 international law. 20 is an obvious preference of the Vienna Convention toward 21 consideration only of those materials that were ratified, 22 adopted, or somehow endorsed by all the treaty parties. 23 the documents proffered by Yugoimport are not traced to all the A court may also consult: Id. art. (a) [a]ny Id. art. 31(3) (emphasis supplied). 26 There Because 1 successor states, the district court should not have considered 2 them or afforded them weight in determining the context of the 3 treaty or its object and purpose.11 4 Yugoimport next contends that such evidence is properly 5 before the court because the treaty is ambiguous. 6 Article 32 of the Vienna Convention states: 7 8 9 10 11 12 13 14 15 16 17 18 19 Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31 [ordinary-meaning analysis], or to determine the meaning when the interpretation according to article 31: (a) [l]eaves the meaning ambiguous or obscure; or (b) [l]eads to a result which is manifestly absurd or unreasonable. Vienna Convention, art. 32 (emphasis added). 20 courts may consider certain, limited types of external evidence 21 only to confirm the ordinary meaning of the text, or where the 22 ordinary meaning is ambiguous or would lead to absurd results. 23 External evidence may not be admitted to create ambiguity where 24 there is none or to compel an interpretation different from the 25 text s ordinary meaning. Under this Article, 26 11 Yugoimport also cites Article 31(4) for the proposition that special meaning shall be given to a term if it is established that the parties so intended. Id. art. 31(4). However, as discussed above there is no indication that the parties intended a special meaning for agency. 27 1 Yugoimport contends that the treaty is ambiguous because: 2 (i) the term agency is undefined, and (ii) Annexes C and G, when 3 read in conjunction, create an ambiguity. 4 Succession Agreement is not ambiguous in this regard. 5 to include a precise definition of agency does not render the 6 contract ambiguous with regard to the term agency, at least so 7 far as a body intended to arm the SFRY s military is concerned. 8 Furthermore, we perceive no relevant conflict between Annexes C 9 and G. We find that the A failure Annex C calls for the division of assets of governmental 10 agencies. Annex G does not inform the definition of agency in 11 Annex C. It provides that private property of legal persons 12 shall be respected. 13 as a legal person, it was a public corporation that functioned, 14 as intended, as an SFRY agency. 15 were its funds private property. 16 dictate otherwise. 17 b) 18 Although Yugoimport may have been organized Under no discernible principles Therefore, Annex G does not An Afterword Although the decisive issue on this appeal is disposed of 19 above, we address Yugoimport s argument that its corporate form 20 shields it from application of Annex C of the Succession 21 Agreement. 22 organized as a corporation, under United States federal common 23 law it is not subject to the Succession Agreement unless it is 24 deemed to be an alter ego of the SFRY. Yugoimport contends that because the FDSP was 28 1 Yugoimport relies principally on First National City Bank v. 2 Banco Para El Comercio Exterior de Cuba ( Bancec ), 462 U.S. 611 3 (1983). 4 counterclaim against Bancec, Cuba s fully-owned foreign-trade 5 agent, for actions taken against Citibank by the Cuban 6 government.12 7 organized as an independent juridical entity under Cuban law and 8 therefore could not be liable for actions of the Cuban 9 government. At issue in Bancec was whether Citibank could maintain a Bancec s successor maintained that it was The Supreme Court agreed that government 10 instrumentalities established as juridical entities distinct and 11 independent from their sovereign should normally be treated as 12 such. 13 Cuban organizational law as decisive. 14 effect to the law of the chartering state in determining whether 15 the separate juridical status of its instrumentality should be 16 respected would permit the state to violate with impunity the 17 rights of third parties under international law while effectively 18 insulating itself from liability in foreign courts. Id. at 626-27. The Court refused, however, to treat the 12 According conclusive Id. at 621- Bancec filed suit against Citibank in the Southern District of New York to recover on an unpaid letter of credit. Bancec had executed a series of contracts whereby it purchased sugar from another instrumentality of the Cuban government and then sold the sugar as export to a private company. Citibank issued the letter of credit on behalf of the private company as consideration for the sugar. Shortly after the issuance of the letter, Cuba nationalized all property belonging to American citizens and entities in Cuba, including Citibank s branch offices in Cuba. When the letter of credit became due, Citibank credited the amount due to Bancec s account but then applied the account balance to setoff the value of Citibank s lost Cuban branches. After Bancec initiated the action, Citibank counterclaimed seeking setoff based on the Cuban government s seizure of its assets. Id. at 613-16. 29 1 22. The Court ruled that foreign instrumentalities organized 2 under foreign law as independent juridical entities are entitled 3 to a presumption of independence, but this presumption can be 4 overcome by equitable veil-piercing or alter-ego analysis under 5 federal common law. Id. at 626-30. 6 To the extent that Yugoimport s arguments suggest that 7 Bancec controls interpretation of the Succession Agreement as to 8 whether FDSP was an agency of the SFRY, the argument fails. 9 The purpose of treaty interpretation is to give effect to the 10 intent of the contracting states. 11 applies to the unilateral acts of a single sovereign and attempts 12 to reconcile the oft-conflicting goals of giving respect to the 13 acts of other sovereigns while avoiding results that amount to 14 the rewarding of fraud. 15 do with interpretation of the Succession Agreement. 16 Bancec s alter-ego analysis Bancec s analysis simply has nothing to Moreover, assuming the FDSP was organized as an independent 17 juridical entity or corporation,13 nothing in Bancec suggests 18 that the FDSP s legal form insulates it from the Succession 13 This assumption is likely correct. The FDSP was organized as a juridical entity with the status of a legal person. FDSP Enabling Law, art. 4 (11/91). It was empowered to act on its own behalf and enter into contracts, id. arts. 7, 8, and it guaranteed its obligations with its own property, FDSP Statute, art. 2 (Act. No 750-3). The organizational laws also suggest that the government intended for the FDSP to be funded by its own commercial activities. See id. art. 16 (providing that earnings were to be used to replenish funds spent ); id. art. 21 (providing that the FDSP Council was to inform the Federal Secretariat for People s Defense and the Federal Executive Council if the FDSP experienced a liquidity problem or a loss in any given year). 30 1 Agreement. 2 and the principles of comity animating Bancec. 3 establishes two analytic components, a presumption of 4 independence and alter-ego analysis, that operate in tandem. 5 Such a result would be contrary to both corporate law Bancec Contrary to Yugoimport s suggestion, the Court s concern 6 about the diversion of an instrumentality s assets was not 7 motivated by a desire to protect instrumentalities for their own 8 sake; the recognition of the independent status afforded to 9 instrumentalities is derivative of, and incidental to, the 10 underlying purpose of the presumption, which is to give respect, 11 but not conclusive effect, to foreign sovereigns policy 12 decisions. 13 based on [d]ue respect . . . for foreign sovereigns and 14 principles of comity between nations ).14 15 16 Id. at 626-27 (observing that the presumption is The presumption may be overcome by alter-ego analysis, i.e. if the instrumentality was so extensively dominated by the 14 As the Court explained, governments create juridical entities for a variety of important governmental purposes. Instrumentalities run as distinct economic enterprises are often exempt from the budgetary and personnel requirements applicable to other government agencies. Bancec, 462 U.S. at 624. Such instrumentalities also enjoy a greater degree of flexibility and independence from political control than typical agencies. Id. By delegating certain activities to such instrumentalities, governments may easily waive sovereign immunity with respect to the instrumentalities activities, enabling third parties to deal with the instrumentality with confidence that judicial relief will be available should the need arise. Id. at 625. Most importantly, it is often easier to obtain large-scale financing using entities with distinct debt structures. Id. at 625-26. Disregarding corporate form would frustrate these objectives. In the case of a developing country, diversion of an instrumentality s assets to satisfy debts of the sovereign could stymie investment and cause third-parties dealing with the instrumentality to demand government guarantees. See id. 31 1 sovereign that a principal-agent relationship existed and where 2 respecting the corporate form of the instrumentality blindly . . 3 . would cause . . . injustice. 4 Res. Azerbaijan Corp. v. State Oil Co. of the Azerbaijan 5 Republic, 582 F.3d 393, 400 (2d Cir. 2009). 6 overcome the presumption of independence bears the burden of 7 proof. 8 Dhabi, 215 F.3d 247, 252 (2d Cir. 2000). 9 measure of respect due foreign sovereigns. Id. at 629, 632; see Frontera The party seeking to Zappia Middle East Constr. Co. Ltd. v. Emirate of Abu This burden evinces the Alter-ego analysis is 10 simply a back-stop measure that prevents foreign sovereigns from 11 using their business laws to immunize themselves from third-party 12 liability.15 13 is no third-party seeking redress and Bancec is relied upon 14 solely to shield the instrumentality from the foreign state that 15 owns it. It defies logic to apply it where, as here, there 16 For the foregoing reasons, we hold that Bancec has no 17 bearing on the issue of whether the FDSP was an agency as that 18 term is used in the Succession Agreement. 19 Yugoimport cannot show as a matter of law that it was not an 20 agency, its motion for summary judgment was properly denied. 15 And, because In Bancec, the Cuban government could not have brought suit in the U.S. without waiving its sovereign immunity with respect to counterclaims. Bancec, 462 U.S. at 630; see also 28 U.S.C. § 1607(c) (foreign states waive their sovereign immunity with respect to counterclaims to the extent that the counterclaim does not seek relief exceeding in amount or differing in kind from that sought by the foreign state. ). Failure to apply alter-ego analysis would have permitted the Cuban government to circumvent Section 1607(c). 32 1 2 3 CONCLUSION For the reasons stated herein, the district court s order and opinion are AFFIRMED. 33
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