WINTER, Circuit Judge:
The Bank of New York commenced this interpleader action to determine ownership of $2,551,785.37 plus interest held on deposit in an account in the name of the Federal Directorate of Supply and Procurement ("FDSP"), an entity organized under the laws of the former Socialist Federal Republic of Yugoslavia ("SFRY"). The account was frozen in 1992 pursuant to executive order during the Bosnian War.
The Interpleader-Defendants, Yugoimport and the Republics of Croatia and Slovenia, all—asserted competing claims to the funds. Yugoimport, a Serbian entity, claimed full ownership of the disputed 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 pursuant to a multilateral treaty, the Succession Agreement. See Agreement on Succession Issues Between the Five Successor States of the Former State of Yugoslavia, June 29, 2001, 41 I.L.M. 3 (2002). The district court granted summary judgment to the Republics. We hold that interpretation of the Succession Agreement is governed by the Vienna Convention and that the FDSP was an agency of the SFRY. As such, the funds are subject to division under that Agreement. We, therefore, affirm.
We summarize only the facts relevant to this appeal. Those seeking a more detailed account should go to the district court's opinion. Bank of N.Y. v. Yugoimport SDPR J.P., 780 F.Supp.2d 344, 346-49 (S.D.N.Y.2011).
This case arises from the violent breakup of the SFRY. The ethnic, racial, and religious tensions of the Balkans, and the consequences of these tensions spanning generations, have been the subject of commentary so extensive and well-known as not to require citation. While somewhat controlled after World War II, these tensions erupted into bloodshed with the weakening of communist states in the 1980's. Beginning in 1989, the constituent states of the SFRY sought independence, leading to nearly a decade of armed conflict. Slovenia formally declared independence on June 25, 1991. Croatia, Bosnia-Herzegovina, and Macedonia followed suit shortly thereafter. See Yucyco, Ltd. v. Republic of Slovenia, 984 F.Supp. 209, 212-213 (S.D.N.Y.1997) (describing the collapse).
In December 1995, due in large part to American efforts and armed NATO intervention, representatives of Bosnia-Herzegovina, Croatia, and the FRY signed the Dayton Accords, bringing a qualified measure of peace to the region. The three Republics agreed to recognize and respect each other's sovereignty and authorized the deployment of a U.N.—led multinational military implementation force in Bosnia. See General Framework Agreement for Peace in Bosnia and Herzegovina ("Dayton Accords"), Bosn. & Herz.-Croat.-Fed. Repub. Yugo., Dec. 14, 1995, 35 I.L.M. 75, 89, 92 (1996).
Because the Dayton Accords did not address a number of issues arising from the breakup of the SFRY, Annex 10 of the Accords established the Office of the High Representative to assist in the implementation of the peace. Id. at 147. The High Representative was to be appointed by the U.N. and was charged with overseeing the creation of mutual agreements among the signatory states concerning various issues. Id. One such issue was distribution of financial assets of the SFRY. See U.N.S.C. Res. 1022, U.N. S/RES/1022, 35 I.L.M. 259, 260 (November 22, 1995).
After the signing of the Dayton Accords, armed conflict between the FRY and Kosovars and continuing sole-successor sentiments in the FRY stymied the ability of the signatory states to reach an agreement. See Carsten Stahn, The Agreement on Succession Issues of the Former Socialist Federal Republic of Yugoslavia, 96 Am. J. Int'l L. 379, 379 (2002). On June 29, 2001, after NATO intervention in the Kosovo conflict and political shifts weakened FRY sole-successor sentiments, the emerging successor states, under the supervision of the High Representative, finally came to an agreement.
The Succession Agreement recognizes five SFRY successor states—Croatia, Slovenia, Bosnia-Herzegovina, Macedonia, and the FRY. See Succession Agreement, 41 I.L.M. at 3.
Annex C deals with the division of "financial assets and liabilities." Article 1 of Annex C defines the financial assets of the SFRY to include "accounts and other financial assets in the name of the SFRY Federal Government Departments and Agencies." Id. at 25. Article 5 provides that SFRY's foreign financial assets, including funds held in foreign banks, shall be distributed in the following proportions: Bosnia and Herzegovina 15.50%; Croatia
Annex G deals with private property. Article 1 thereof states that "[p]rivate property and acquired rights of citizens and other legal persons of the SFRY shall be protected by successor States in accordance with the provisions of this Annex." Id. at 35. We mention this provision only because Yugoimport attaches importance to it. However, if the funds were held in the name of an SFRY agency, Annex G would be inapplicable; if not, Yugoimport would succeed on this appeal even without Annex G.
We trace the history of Yugoimport in mind-numbing detail because the nature of its governance and functions is critical— decisive, actually—to the disposition of this appeal.
We begin with a summary that will suffice for casual readers, who can then move on to the next section. Yugoimport functioned primarily as an arms dealer for the successive sovereign states referred to generally as Yugoslavia, from 1949 until the events giving rise to this case. It was owned, controlled, managed, and supervised at all times by the government—in particular, by officials responsible for national defense. Its earnings were put to public purposes.
We now turn to the details. The original Yugoimport was created on June 27, 1949 by the Federal People's Republic of Yugoslavia (the "FPRY").
On July 28, 1971, after the FPRY became the SFRY, a new law established the basic form and substance of SFRY agencies. See Law on Organizational Structure and Scope of Operations of Federal Administration Bodies and Federal Organizations, art. 1 (Act No. 1045/71) (July 28, 1971) (hereinafter referred to as the "Law on Agencies"). One such agency was the Federal Secretariat of National Defense. Id. arts. 3, 5. In 1974, the SFRY amended the Law on Agencies in several ways. See Act on the Amendment of the Act on the Organization and Scope of Functions of Federal Administrative Authorities and Federal Organizations (Act No. 21/74) (April 26, 1974) (hereinafter referred to as the "Amending Act"). Article 3 of the Amending Act set forth amendments pertaining to the SFRY Federal Secretariat of National Defense. One amendment merged Yugoimport into a new sub-agency
In 1991, the SFRY reconstituted the Federal Office for Trading and Reserves as the Federal Directorate for Commerce of Special Purpose Products. See Law on the Federal Directorate for Commerce of Special Purpose Products, art. 24 (SFRY Gazette No. 11/91) (1991). It is undisputed that sometime between 1991 and 1996, the Federal Directorate for Commerce of Special Purpose Products came to be known as the Federal Directorate of Supply and Procurement, or the FDSP.
The Enabling Law that created the FDSP set forth its function and management structure. See id. The Enabling Law also required management, in agreement with the Federal Executive Council, to establish within six months a governing "statute" that would describe with greater particularity the FDSP's business activities and administration. Id. arts. 16, 17, 23. Once created, the statute could be changed only with approval of the Federal Executive Council. Id. art. 4. The statute promulgated thereunder, Statute of the Federal Directorate for Commerce of Special Purpose Products (Act. No. 750-3) (May 8, 1991) (SFRY) (hereinafter referred to as the "FDSP Statute" or "Statute"), is akin to articles of incorporation. We draw upon both the Enabling Law and the Statute to determine the defining characteristics of the FDSP.
The primary function of the FDSP remained the procurement and trading of arms and military equipment on behalf of the SFRY. FDSP Enabling Law, art. 1 (11/91) ("The [FDSP] ... performs activities that are in the interest of the ... [SFRY] in the area of foreign trade commerce with armaments and military equipment."); see also FDSP Statute, art. 8 (Act No. 750-3) (describing with greater particularity the FDSP's activities "in the area of armaments and military equipment"). The FDSP was allowed to undertake other lines of business subject to approval from the Federal Secretariat for People's Defense and only so long as such
The FDSP was organized as a juridical entity with the "status of a legal person." Id. art. 4. It guaranteed its obligations with its own property, FDSP Statute, art. 2 (Act No. 750-3), and it was empowered to act "on its own behalf and own account" and on others' behalf and account pursuant to contract. FDSP Enabling Law, arts. 7, 8 (11/91); FDSP Statute, art. 10 (Act No. 750-3). The mutual rights and obligations of the FDSP and "those on whose behalf... it perform[ed] foreign trade commerce and services ... [were] determined by contract." FDSP Enabling Law, art. 8 (11/91).
The FDSP was managed by a Director and a Council (the "FDSP Council"), both of which were appointed, supervised, or removed by the Federal Executive Council. Id. arts. 9-15. The FDSP 17 Council consisted of a representative of each of the following:
FDSP Statute, art. 24 (Act. No. 750-3). The Director was also a member of the FDSP Council. FDSP Enabling Law, art. 11 (11/91); FDSP Statute, art. 25 (Act. No. 750-3).
The Director was responsible for, among other things, business decisions, hiring and staffing decisions, and managing the FDSP's preparation for national defense. FDSP Statute, art. 22 (Act. No. 750-3). The FDSP Council was responsible for
Id. art. 26. The FDSP Council was also empowered to "decide[] on changes in status (splitting, merging, and acquiring)" subject to approval from the Federal Executive Council. Id. art. 3.
The FDSP's earnings were to be used to "replenish the funds spent and to provide for personal, common, and general social needs and responsibilities." Id. art. 16. If it produced a net surplus or profit in a given year, the Director and FDSP Council
Because the FDSP operated out of Belgrade, Serbia, the FRY was able to control its physical assets during the armed conflict described supra. In 1996, the FRY formally reconstituted the FDSP as Yugoimport SDPR. The government enacted a new organizational law in September 1996, and the Belgrade Business Court issued a decision purporting to merge the two entities in early 1997. See Law on the Public Enterprise "Jugoimport-SDPR" (PR.Nr.291) (Official Gazette of SRY No. 46/96) (Sept. 27, 1996)(FRY). Like the FDSP, Yugoimport SDPR was created pursuant to an enabling "law" and its functions and management structure were set out more precisely in a governing "statute" enacted by the managing board. See Statute of the Public Enterprise "Jugoimport-SDPR," preamble (FRY Gazette No. 89/9) (Jan. 27, 1997)(FRY), promulgated under Law on the Public Enterprise "Jugoimport-SDPR," (Official Gazette of SRY No. 46/96). The primary function of Yugoimport SDPR remained the procurement and trading of weapons and military equipment. Law on Jugoimport-SDPR, arts. 2, 4 (46/96).
Yugoimport SDPR was managed by a Director, a Managing Board, and a Supervisory Board. Id. art. 8. The Director was appointed and subject to dismissal by the federal government. The Managing Board consisted of eight members, five of which were appointed and subject to dismissal by the federal government. Id. arts. 9, 14.
Following the dissolution of the FRY, Yugoimport has continued to operate in Serbia, presumably reorganized under Serbian law or adopted thereunder.
In 1991, the FDSP opened a deposit account with the Bank of New York. On May 30, 1992, the United States, pursuant to an Executive Order issued by President George H.W. Bush, froze "all property, and interests in property, in the name of the [SFRY] or the [FRY] . . . in the United States," including property in the name of their "agencies, instrumentalities and controlled entities, and any person acting
In light of Yugoimport's and the Republics' competing claims of ownership of the funds, the Bank of New York filed this interpleader action on April 14, 2003 in New York state court. Pursuant to the Foreign Sovereign Immunities Act, 28 U.S.C. §§ 1441(d) and 1446, Slovenia removed the case to the Southern District of New York, where it was initially assigned to Judge Charles S. Haight.
The bank deposited the disputed funds into the district court's registry and, on June 2, 2004, obtained a discharge from this action. Judge Haight ordered limited discovery on the issue of the FDSP's status as an SFRY agency, which is of course critical to the application of Annex C of the Succession Agreement. On July 31, 2006, the Republics moved for summary judgment or, in the alternative, for a stay to allow the Standing Joint Committee under the Succession Agreement to make a determination regarding whether the funds were subject to division.
In the fall of 2008, the case was reassigned to Judge Alvin K. Hellerstein, who lifted the stay because, in the interim, the successor states had not appointed any members to the Standing Joint Committee and it had never met. On April 29, 2011, the district court granted the Republics' motion for summary judgment and held that the funds were to be divided among the successor states. It based this holding on its conclusion that Yugoimport was an agency, as a matter of law, under Annex C of the Succession Agreement. Bank of New York v. Yugoimport SDPR J.P., 780 F.Supp.2d 344 (S.D.N.Y.2011) (hereinafter "Yugoimport II").
We review a grant of summary judgment de novo. K & A Radiologic Tech. Serv's, Inc. v. Comm'r of the Dep't of Health of New York, 189 F.3d 273, 278 (2d Cir.1999) (citing Bogan v. Hodgkins, 166 F.3d 509, 511 (2d Cir.1999)).
When subject matter jurisdiction is based on the Foreign Sovereign Immunities
The countries with the strongest interest in the present dispute are the successor states. All of them, except for non-party Macedonia, have ratified or acceded to the Vienna Convention on the Law of Treaties (the "Vienna Convention"), opened for signature May 23, 1969, 1155 U.N.T.S. 331, reprinted in 8 I.L.M. 679, which contains a set of interpretive rules regarding treaty interpretation.
To reiterate, the issue is whether the FDSP was an agency of the SFRY as that term is used in the Succession Agreement. The term agency is not defined in the Succession Agreement, and neither party has supplied a definition under SFRY law. Under the Vienna Convention, terms in a treaty are to be interpreted in accordance with their ordinary meaning. Vienna Convention, art. 31(1). A term's ordinary meaning is generally derived from the language in which the treaty was drafted. See id. art. 33 (providing that treaties authenticated in two or more languages "are equally authoritative in each language," and where language divergences create ambiguity, courts should adopt the meaning which "best reconciles the texts"). The Succession Agreement was drafted in English. In at least one instance where a concept was apparently not susceptible to English translation, i.e., "dwelling rights," the Agreement provided Croatian, Slovenian, and Serbian versions to clarify its meaning. Succession Agreement, Annex G, art. 6, 41 I.L.M. at 36. The absence of such non-English versions of the term agency indicates that there was no intended meaning beyond the plain-language English definition. Therefore, we construe the term "agency" in accordance with generally-accepted international principles and its ordinary meaning in English.
A principal-agent relationship is "created by express or implied contract or by law, in which one party (the agent) may act on behalf of another party (the principal) and bind that other party by words or actions." AGENCY (1), Black's Law Dictionary (9th ed.2009). The fact that FDSP was organized as a corporation does not preclude it from being deemed an SFRY agency under the Succession Agreement. The definition of "federal agency" in Black's Law Dictionary expressly includes government corporations: "A department or other instrumentality . . ., including a government corporation." AGENCY (3), Black's Law Dictionary (9th ed.2009).
As the district court observed, "there is nothing inconsistent, or even unusual, about a state employing the corporate form to create an agency." Yugoimport II, 780 F.Supp.2d at 356. Quite the contrary, many governments have public corporations that function as agencies. As the district court pointed out in an impressive string cite, almost all of the fifty U.S. states have corporations that function as agencies. Id. at 358; see also 1 Fletcher Cyc. Corp. § 57 ("A `public' corporation. . . may be defined as a corporation that is created by the state as an agency in the administration of civil government.").
For the purposes of determining which entities are entitled to sovereign immunity,
Under any reasonable understanding of the term, there is no doubt that the FDSP was an agency of the SFRY, as the exhaustive description of its origins, ongoing governance, and role showed. It was, at all times, controlled by the government; its management consisted of government officials; it was subject to supervision by the Federal Secretariat of People's Defense and the Federal Executive Council; its earnings were to be used not only to "replenish[] funds spent" but also "to provide for personal, common, and general social needs and responsibilities"; and management could not alter the FDSP Statute without approval from the Federal Executive Council. FDSP Enabling Law, arts. 19, 12, 15, 16 (11/91); FDSP Statute, art. 16 (Act. No. 750-3). Moreover, the FDSP served a purpose so elemental to a nation-state government as to render any suggestion that it was not an SFRY agency risible.
A compelling reason for the existence of nation states is to strengthen military defense, as the American experience demonstrates. The FDSP was the SFRY's arms dealer, charged with equipping the SFRY's military forces according to strategic needs determined by the SFRY. It was required to coordinate its work with the government's military planners, and it was the FDSP's "responsibility" to supply the military to meet its perceived needs. Even in the SFRY—a socialist state where many enterprises were owned and controlled by the government—the FDSP was clearly a governmental agency because of the important national-interest functions it performed.
In an effort to avoid this plain language interpretation, Yugoimport submitted several pieces of extrinsic evidence, including: (i) an affidavit of Dr. Veroljub Dugalić a former FRY Minister of Finance who served as a delegate in the negotiations of the Succession Agreement and as an FRY (and now as a Serbian) representative in the Annex C Committee on the Distribution of Financial Assets and Liabilities; (ii) documents purporting to represent the drafting history of the Succession Agreement; and (iii) letters submitted by the Ministers of Finance of Bosnia-Herzegovina and Serbia.
Under the Vienna Convention, external evidence may be considered only in limited circumstances. Article 31 provides
Vienna Convention, art. 31(1).
Yugoimport contends that the extrinsic evidence proffered is necessary to interpreting the Treaty in "context and in the light of its object and purpose." Id. However, this argument fails because the Vienna Convention expressly sets forth in Article 31 the materials that may be considered to discern that context and purpose. Context may be evaluated by consulting: (i) the text of the treaty, including its preamble and annexes; (ii) "[a]ny agreement relating to the treaty which was made between all the parties in connection with the conclusion of the treaty"; and (iii) "[a]ny instrument which was made by one or more parties in connection with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty." Id. art. 31(2) (emphasis supplied). A court may also consult: "(a) [a]ny subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions; (b) [a]ny subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation; and (c) [a]ny relevant rules of international law." Id. art. 31(3) (emphasis supplied). There is an obvious preference of the Vienna Convention toward consideration only of those materials that were ratified, adopted, or somehow endorsed by all the treaty parties. Because the documents proffered by Yugoimport are not traced to all the them or afforded them weight in determining the context of the treaty or its object and purpose.
Yugoimport next contends that such evidence is properly before the court because the treaty is ambiguous. Article 32 of the Vienna Convention states:
Vienna Convention, art. 32 (emphasis added). Under this Article, courts may consider certain, limited types of external evidence only to confirm the ordinary meaning of the text, or where the ordinary meaning is ambiguous or would lead to absurd results. External evidence may not be admitted to create ambiguity where there is none or to compel an interpretation different from the text's ordinary meaning.
Yugoimport contends that the treaty is ambiguous because: (i) the term agency is undefined, and (ii) Annexes C and G, when read in conjunction, create an ambiguity. We find that the Succession Agreement is not ambiguous in this regard. A failure to
Although the decisive issue on this appeal is disposed of above, we address Yugoimport's argument that its corporate form shields it from application of Annex C of the Succession Agreement. Yugoimport contends that because the FDSP was organized as a corporation, under United States federal common law it is not subject to the Succession Agreement unless it is deemed to be an "alter ego" of the SFRY.
Yugoimport relies principally on First National City Bank v. Banco Para El Comercio Exterior de Cuba ("Bancec"), 462 U.S. 611, 103 S.Ct. 2591, 77 L.Ed.2d 46 (1983). At issue in Bancec was whether Citibank could maintain a counterclaim against Bancec, Cuba's fully-owned foreign-trade agent, for actions taken against Citibank by the Cuban government.
To the extent that Yugoimport's arguments suggest that Bancec controls interpretation of the Succession Agreement as to whether FDSP was an "agency" of the SFRY, the argument fails. The purpose of treaty interpretation is to give
Moreover, assuming the FDSP was organized as an independent juridical entity or corporation,
Contrary to Yugoimport's suggestion, the Court's concern about the diversion of an instrumentality's assets was not motivated by a desire to protect instrumentalities for their own sake; the recognition of the independent status afforded to instrumentalities is derivative of, and incidental to, the underlying purpose of the presumption, which is to give respect, but not conclusive effect, to foreign sovereigns' policy decisions. Id. at 626-27, 103 S.Ct. 2591 (observing that the presumption is based on "[d]ue respect . . . for foreign sovereigns" and "principles of comity between nations").
The presumption may be overcome by alter-ego analysis, i.e. if the instrumentality was so extensively dominated by the sovereign that a principal-agent relationship existed and where respecting the corporate form of the instrumentality "blindly ... would cause ... injustice." Id. at 629, 632, 103 S.Ct. 2591; see Frontera Res. Azerbaijan Corp. v. State Oil Co. of the Azerbaijan Republic, 582 F.3d 393, 400 (2d Cir.2009). The party seeking to overcome the presumption of independence bears the burden of proof. Zappia Middle East Constr. Co. Ltd. v. Emirate of Abu Dhabi, 215 F.3d 247, 252 (2d Cir. 2000). This burden evinces the measure of respect due foreign sovereigns. Alter-ego analysis is simply a back-stop measure
For the foregoing reasons, we hold that Bancec has no bearing on the issue of whether the FDSP was an agency as that term is used in the Succession Agreement. And, because Yugoimport cannot show as a matter of law that it was not an agency, its motion for summary judgment was properly denied.
For the reasons stated herein, the district court's order and opinion are AFFIRMED.
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.
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, 103 S.Ct. 1962, 76 L.Ed.2d 81 (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, 103 S.Ct. 1962, 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.
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).
