Definition of Foreign State

Definition of “foreign State” in the Fsia in 2011

United States views on international law (based on the document “Digest of U.S. Practice in International Law”): On October 4, 2011, the United States filed an amicus brief in the U.S. Court of Appeals for the Second Circuit in a case brought by the European Union (“EU,” formerly “EC”) and 26 of its member states against RJR Nabisco and related companies (“RJR”). European Community v. RJR Nabisco, No. 11-2475 (2d Cir. 2011). The lower court had dismissed the EU's tort law claims against RJR on the basis that the EU did not qualify as a “foreign state” or an “agency or instrumentality” of a foreign state as defined in the FSIA, and therefore was essentially a nonentity for purposes of jurisdiction based on diversity of parties. The U.S. amicus brief, excerpted below (with most footnotes and citations to the record omitted), took the position that the EU, while not a foreign state, qualifies as an agency or instrumentality of a foreign state as defined in the FSIA, and therefore the lower court should not have dismissed for lack of diversity jurisdiction. In a separate section not included below, the United States brief also argued that the lower court improperly dismissed the EU's federal claims under the Racketeer Influenced and Corrupt Organizations (“RICO”) Act. The United States amicus brief is available at (internet link) state.gov/s/l/c8183.htm.

Developments

The district court dismissed the EC's common law claims because it determined that the EC is not a “foreign state” within the meaning of the FSIA and the diversity jurisdiction statute. While the district court correctly determined that the EC is not recognized by the United States as a foreign state in its own right, the court erred in holding that the EC is not an agency or instrumentality of its member states. Because the FSIA defines “foreign state” to include such agencies or instrumentalities, the EC qualifies as a “foreign state” for purposes of the diversity statute. Accordingly, the district court should not have dismissed the EC's state common law claims for lack of diversity jurisdiction.

A. The district court correctly concluded that the EC is not a “foreign state” in its own right. The FSIA does not define “foreign state” except to say that the term includes political subdivisions and agencies or instrumentalities. 28 U.S.C. § 1603(a). That is not surprising, because the Constitution gives the President the exclusive authority to recognize foreign states and their governments. See, e.g., Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 410 (1964) (“Political recognition [of a foreign government] is exclusively a function of the Executive.”); Zivotofsky v. Secretary of State, 571 F.3d 1227, 1231 (D.C. Cir. 2009) (holding that the Constitution gives the President exclusive power to recognize foreign sovereigns), cert. granted 131 S. Ct. 2897 (2011). For this reason this Court looks to the Executive Branch to determine a foreign person's citizenship for purposes of alienage jurisdiction. Matimak Trading Co., 118 F.3d at 80–81. The district court here thus correctly concluded that, because the President has not recognized the EC as a foreign state, the EC does not qualify as a foreign state in the basic sense of that term.

Details

On appeal, the EC seeks a remand to have the district court consider whether the EC is a “foreign state” under what the EC describes as the Supreme Court's “definition” of that term in Samantar v. Yousuf, 130 S. Ct. 2278 (2010). EC Br. 44–47. A remand on that issue is unnecessary. In Samantar, the Supreme Court held that the FSIA does not govern the immunity of individual foreign officials. Samantar, 130 S. Ct. at 2282. The Court held that Congress codified standards for foreign state immunity in the FSIA, but left foreign official immunity determinations to the State Department. Id. at 2291. In reaching that conclusion, the Supreme Court considered whether foreign officials come within the FSIA's definition of “foreign state.” Id. at 2286. The Court observed that “[t]he term 'foreign state' on its face indicates a body politic that governs a particular territory.” Ibid. But Congress gave the term a “broader meaning, by mandating the inclusion of the state's political subdivisions, agencies, and instrumentalities.” Ibid. (citing 28 U.S.C. § 1603(a)). The Court concluded, however, that Congress did not intend to include individual foreign officials even within this “broader meaning” of “foreign state.” Id. at 2286–89.

The EC argues that it qualifies as a “foreign state” under what it characterizes as the Supreme Court's “definition” of that term as “'a body politic that governs a particular territory.'” (quoting Samantar, 130 S. Ct. at 2286). But Samantar nowhere addresses which branch of the United States Government determines which body politic governs what particular foreign territory. In light of the FSIA's silence on that question, courts cannot properly conclude that Congress intended to diminish the President's constitutional authority to recognize foreign states or assign that authority to the courts. See Armstrong v. Bush, 924 F.2d 282, 289 (D.C. Cir. 1991) (“When Congress decides purposefully to enact legislation restricting or regulating presidential action, it must make its intent clear.”).

More about the Issue

B. Although the President has not recognized the EC as a foreign state, the FSIA defines the term “foreign state” to include “an agency or instrumentality of a foreign state.” 28 U.S.C. § 1603(a). To qualify as an agency or instrumentality of a foreign state, an entity must be a separate legal person, an organ of a foreign state, and not created under the laws of a third country. Id. § 1603(b). The district court concluded that the EC has independent legal status and is not created under the laws of a third country (i.e., under the laws of a non-member state).

These conclusions are correct. At the time it brought suit, the EC had separate legal personality. Consolidated Version of the Treaty Establishing the European Community (EC Treaty), art. 281, Oct. 11, 1997, 1997 O.J. (C340) 293 (“The Community shall have legal personality.”). And because each member state ratified within its own legal system the treaty creating the EC, the EC was created under the laws of the member states. EC Treaty, art. 313, 1997 O.J. (C340) 302; see In re Air Crash Disaster Near Roselawn, Ind. on Oct. 31, 1994, 96 F.3d 932, 938 (7th Cir. 1996) (an entity created under the laws of a member state to an international agreement is not created under the laws of a third country).

Considering the EC's status as an organ of its member states, the district court correctly concluded that an entity can qualify as an “organ” under the FSIA if it is an organ of multiple states. As used in the FSIA, an “organ of a foreign state” is an entity created by the state to carry out a public function. See, e.g., Patrickson v.Dole Food Company, 251 F.3d 795, 807 (9th Cir. 2001), aff'd on other grounds 538 U.S. 468 (2003). A foreign state acting alone can create an entity to carry out a public function, such as management of the state's natural resources or the provision of basic needs such as water or electricity to remote parts of the country. Similarly, when foreign states jointly create an entity to carry out a public function, in some circumstances that entity can qualify as an “organ” under the FSIA.

Definition of Foreign State

Definition of Foreign State