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”): Having concluded that the multi-national character of the EC is not a bar to the EC's status as an organ, the district court next considered whether the EC qualifies as an organ under this Court's Filler decision. Filler identified five factors as “relevant” to consideration of whether an entity is an organ of a foreign state:

1. “whether the foreign state created the entity for a national purpose”;

2. “whether the foreign state actively supervises the entity”;

3. “whether the foreign state requires the hiring of public employees and pays their salaries”;

4. “whether the entity holds exclusive rights to some right in the [foreign] country”; and

5. “how the entity is treated under foreign state law.”

Filler, 378 F.3d at 217. Considering these factors, the district court determined that the EC is not an organ of its member states. However, that conclusion resulted from a flawed application of the Filler factors.…

The district court recognized that the member states formed the EC for quintessential national purposes: to establish a common market and monetary union, and to coordinate economic activities and policies throughout the member states. For the reasons given by the EC, that determination is correct. The United States has consistently taken the view that the public purpose factor is the most important consideration in determining an entity's organ status. Brief for the United States as Amicus Curiae, Powerex Corp. v. Reliant Energy Servs., Inc., at 6, 21–22, No. 05-85 (Sup. Ct. Mar. 2007). The district court paid little attention to this factor, other than to acknowledge that the EC satisfies it.

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The remaining Filler factors support the conclusion that the EC is an organ of its member states, especially when considered in reference to the public purposes for which the EC was created. The treaty establishing the EC delegates from the member states to the EC the authority to exercise specified sovereign powers. See, e.g., EC Treaty, art. 3, 1997 O.J. (C340) 181. The district court believed that this implies that the member states do not actively supervise the EC. However, this Court has held a state's exercise of significant control over an entity supports organ status. See, e.g., Peninsula Asset Management (Cayman) Ltd. v. Hankook Tire Co., Ltd., 476 F.3d 140, 143 (2d Cir. 2007) (finding active supervision of entity by state through “(1) appointing its governor and auditor; (2) acting through a related agency * * *; and (3) regulating the inspection fees that [the entity] can collect”). The member states have extensive and ultimate control over the EC, defining its areas of authority and limiting its power to act outside those areas. EC Treaty, art. 5, 1997 O.J. (C340) 182 (“The Community shall act within the limits of the powers conferred upon it by this Treaty and of the objectives assigned to it therein. * * * Any action by the Community shall not go beyond what is necessary to achieve the objectives of this Treaty.”). That is sufficient to qualify as active supervision under Peninsula Asset Management.

The district court recognized that EC officials are “public employees” in that they exercise “'powers conferred by public law and duties designed to safeguard the general interests of the state or of other public authorities.'” (quoting Case 149/79, Commission of the European Communities v. Kingdom of Belgium, 1980 E.C.R. 3881, ¦ 10). The district court thought that the third Filler factor did not support the EC's organ status because EC officials are not public employees of the EC's member states. But the third Filler factor asks whether the state “requires the hiring of public employees and pays their salaries,” not whether the state itself is the employer. Filler, 378 F.3d at 217. As the district court recognized, the treaty establishing the EC itself required the creation of certain positions, to be filled by public officials. And the EC member states funded much of the EC's operations, including the pay of EC employees. …

Developments

The EC satisfies the fourth Filler factor, as the district court concluded, because the EC member states delegated to the EC exclusive authority over certain sovereign functions. The EC, for example, “has exclusive competence * * * to conclude the Multilateral Agreements on Trade and Goods.” Opinion 1/94, Competence to Conclude International Agreements Concerning Services and the Protection of Intellectual Property — Art. 228(6) of the EC Treaty, 1994 E.C.R. I-5267, ¦ 34.

Finally, the district court erred in concluding that there was no evidence that any of the member states considered the EC to be their “organ.” In Peninsula Asset Management, this Court determined that the fifth Filler factor was satisfied because “the Korean government informed the State Department and the district court that it treats [the Financial Supervisory Service of the Republic of Korea] as a government entity.” 476 F.3d at 143. Here, every member of the EC but one is a plaintiff in this suit. Through their briefing, these member states informed the district court that they consider the EC to be a governmental entity. Because the State Department accepts the EC member states' representation, that representation should be conclusive.

In sum, the factors this Court considers when evaluating an entity's status as an organ of a foreign state compel the conclusion that the EC is an organ of its member states, especially when considered in reference to the clear governmental purposes the EC was established to further. Because the EC is an organ of its member states, and because it satisfies the other requirements under 28 U.S.C. § 1603(b), the EC is an “agency or instrumentality” of its member states. Accordingly, the EC is a “foreign state” within the meaning of the FSIA, and the district court erred in concluding that it lacked subject matter jurisdiction over the EC's state law claims under the diversity statute.

Definition of “foreign State” in the Fsia

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See Also

• Privileges
• Immunities
• Foreign Sovereign Immunities