Moody, William B.

English

University of Denver

Denver Journal of International Law & Policy Volume 3 Number 2 Fall Article 9 May 2020 Sovereign Immunity - Anaconda Co. v. Corporacion del Cobre William B. Moody Follow this and additional works at: https://digitalcommons.du.edu/djilp Recommended Citation William B. Moody, Sovereign Immunity - Anaconda Co. v. Corporacion del Cobre, 3 Denv. J. Int'l L. & Pol'y 305 (1973). This Case Notes is brought to you for free and open access by the University of Denver Sturm College of Law at Digital Commons @ DU. It has been accepted for inclusion in Denver Journal of International Law & Policy by an authorized editor of Digital Commons @ DU. For more information, please contact jennifer.cox@du.edu,dig-commons@du.edu. CASE NOTESOVEREIGN IMMUNITY-Anaconda Co. v. Corporaci6n del Cobre, 55F.R.D. 16 (S.D.N.Y. 1972), cert. denied, 93 S. Ct. 2735 (1973).In the latter part of 1969, the Chilean Exploration Company(CHILEX) and the Andean Copper Mining Company (ANDES)transferred all of their assets and liabilities to two separate Chileancorporations. Together with the Anaconda Company, each sold 51percent of the stock in their various Chilean mining interests to onedefendant, Corporaci6n del Cobre (CODELCO), which made pay-ment by promissory notes guaranteed by another defendant, Corpo-raci6n de Fomento de la Producci6n (CORFO). In July of 1971, theAllende government, by constitutional amendment, I nationalized theChilean mining industry. Involved in the nationalization were theCODELCO and CORFO interests, as well as the remaining 49percent interest of each of the three plaintiffs. CODELCO, now astate agency, is responsible for operating and managing the mines.2Although Chilean nationalizations have been the subject ofmuch comment and litigation, the three plaintiff mining companiesinvolved in this case did not challenge the legality of the action.Instead, they brought suit in the U.S. District Court to recover on thepromissory notes and attached two million dollars the defendants hadon deposit in U.S. banks.The defendants moved to vacate the order of attachment givingthree arguments in support of their motion. First, they contendedthat sovereign immunity prevented suit against them without theirconsent, since the corporations were "organic parts of the Chileanstate that . . . were created to, and do, carry out governmental func-1. Chile: Constitutional Amendment Concerning Natural Resources and TheirNationalization (July 15, 1971), Law 17,450, conveniently found in 10 INT'L LEGALMATERIALS 1067 (1971) [hereinafter cited as the Nationalization Amendment].2. For a closer examination of incidents leading to and occurring throughout thisnationalization period in Chile, see generally Expropriation Symposium: Proceedingsof the 1972 Regional Conference of the American Society of International Law at theUniversity of Denver College of Law, 2 DENVER J. INT'L L. & POLICY 125 (1972); Landau,Economic and Political Nationalism and Private Foreign Investment, 2 DENVER J.INT'L L. & POLICY 169 (1972); Schlesser, Recent Developments in Latin-AmericanForeign Investment Laws, 6 INT'L LAWYER 64 (1972); Thome, Expropriation in Chileunder the Frei Agrarian Reform, 19 AM. J. COMp. L. 489 (1971); Wesley, ExpropriationChallenge in Latin America: Prospects for Accord on Standards and Procedures, 46TOL. L. REv. 232 (1971); Santa Maria, Perspectives on Spanish American Legal NormsGoverning Mining Concessions, "Chileanization, "and the Concensus of Vida del Mar,11 VA. J. INT'L L. 177 (1971); Doman, New Developments in the Field ofNationalization, 3 N.Y.U. J. INT'L L. & POLITICS (1970).306 JOURNAL OF INTERNATIONAL LAW AND POLICYtions (jure imperii)."3 Second, since the plaintiffs had already sub-mitted their claim to a special Chilean tribunal,4 attachment shouldnot have been granted while the matter was sub judice there.5 Finally,they urged vacation as an exercise of judicial discretion.Judge Metzner, trying the case, initially held that the case couldbe decided on procedural grounds alone, without addressing the con-tentions of the defendants, since, under New York law,6 an attach-ment may be vacated only after the defendant has made an appear-ance and these defendants had not done so. The judge did not stopthere, however, and his holdings with respect to the contentions of thedefendants form the most interesting aspect of the opinion.The basic question confronting the court was whether the at-tached property was that of a foreign government and, therefore,subject to sovereign immunity,7 or a foreign government engaged incommercial activities,8 or a foreign corporation subject to the laws of3. 55 F.R.D. 16, 17 (S.D.N.Y. 1972).4. Nationalization Amendment, supra note 1, at 1069. The Amendment providesfor the establishment of a "Tribunal for hearing appeals on the amount of compensa-tion determined by the Comptroller General utilizing a specific formula provided inthe amendment, to be paid to corporations whose interest was expropriated. TheAmendment also states that there is "no appeal available against its (the Tribunal's)decision."5. The case referred to has since been resolved by the Tribunal. Copper TribunalDecision, Diario Oficial (Aug. 1972), conveniently found at Special Copper TribunalDecision on the Question of Excess Profits of Nationalized Copper Companies, 11 INT'LLEGAL MATERIALS 1013 (1972) [hereinafter cited as Copper Tribunal Decision].6. New York CPLR § 6223 Vacating or Modifying Attachments:. . * If, after the defendant has appeared in the action, the court deter-mines that the attachment is unnecessary to the security of the plaintiffit shall vacate the order of attachment. Such a motion shall not of itselfconstitute an appearance in the action.New York law is applied here in accordance with Rule 64, Federal Rules of CivilProcedure providing that attachment for the purpose of jurisdiction and execution "areavailable under the circumstances and in the manner provided by the law of the statein which the district court is held."7. New York and Cuba Mail -S.S. Co. v. Republic of Korea, 132 F. Supp. 684(S.D.N.Y. 1955). Plaintiff sought to recover damages sustained by its vessel by attach-ing funds of the Republic of Korea on deposit in various New York banks. Inasmuchas the Department of State filed a statement, recognizing that "under internationallaw property of a foreign government is immune from attachment and seizure," theCourt complied with the request and granted the motion to vacate the attachment.8. Harris and Co. Advertising Inc. v. Republic of Cuba, 127 So.2d 687 (Fla. Dist.Ct. App. 1961). Here, attachment of government funds deposited in various local bankswas upheld:It would not be compatible with the principle of judicial powers of asovereign nation if funds deposited as private funds. . . used in businesstype activities here, would be clothed in a vail radiating foreign sover-eignty.See also Pacific Molasses Co. v. Conrite de Ventas de Mulin de la Repiiblica Domini-VOL. 3:305CASE NOTEthe United States.' This distinction between activity which is govern-mentally oriented and that which is commercially oriented forms theessence of a sovereign immunity defense.'0There are two ways to raise the question of sovereign immunityonce the merits of the controversy have been placed in issue. Eitherthe State Department may assert such immunity, or the claim maybe made by an accredited diplomatic representative of the foreignstate." An assertion by the State Department is usually determi-native of the issue," as courts will generally not exercise their juris-diction so as to embarrass the executive branch.' 3 This procedure isnot an "abrogation" of judicial power.'4 However, in the instant casethere was no intervention by the State Department. The issue wasraised only by the affidavit of the Chilean Ambassador. The courtwas thus left to its own discretion in determining the merits of theclaim.' 5cana, 219 N.Y.S.2d 1018, 30 Misc. 2d 560 (Sup. Ct. N.Y. County 1961); National CityBank v. Republic of China, 348 U.S. 356 (1955); Republic of Mexico v. Hoffman, 324U.S. 30 (1945). See generally S. SUCHARITHUL, STATE IMMUNITIES AND TRADE ACTIVITIESIN INTERNATIONAL LAW, 347-50 (1959); T. QUITLARA, THE AMERICAN LAW OF SOVEREIGNIMMUNITY 254-309 (1970).9. The distinction between public acts (acta jure imperii) and private acts (actajure gestionii) is the foundation for the holding in the present case and will be discussedin greater depth, infra.10. The issue is often solved by treaty provisions which preclude the assertion ofsovereign immunity in the commercial disputes. Some examples are:Treaty of Friendship, Commerce, and Navigation between the UnitedStates and the Federal Republic of Germany (signed Oct. 29, 1954), art.18, para. 27 U.S.T. 1839, 1859, T.I.A.S. No. 3593, 273 U.N.T.S. 3,26;Treaty of Friendship, Commerce, and Navigation between the UnitedStates and Italy (signed Feb. 2, 1948) art. 24, para. 6, 63 Stat. 2255,T.I.A.S. No. 1965; Treaty of Friendship, Commerce, and Navigation be-tween the United States and Iceland (signed Jan. 21, 1950) art. XV, para.3, 1 U.S.T. 785, 796, 797, T.I.A.S. No. 2155, 206 U.N.T.S. 296, 288.11. RESTATEMENT (SECOND) OF FOREIGN RELATIONS LAW OF THE UNITED STATES§ 71(1)(b) [hereinafter cited as RESTATEMENT].12. Republic of Mexico v. Hoffman, 324 U.S. 30, 35 (1945); The Schooner Ex-change v. McFadden, 11 U.S. (7 Cranch) 116 (1812); Compalija Espafiola de Nave-garian Martina, S.A.V. The Navemar, 303 U.S. 64 (1938).13. Ex parte Republic of Peru, 318 U.S. 578, 588 (1943). See also United Statesv. Lee, 106 U.S. 196, 209 (1882).In such cases the judicial department of this government follows theaction of the political branch, and will not embarass the latter by assum-ing an antagonistic jurisdiction.14. New York and Cuba Mail S.S., supra note 7, at 685,• . . This course entails no abrogation of judicial power, it is a self-imposed restraint to avoid embarrassment of the executive in the conductof foreign affairs.15. Victory Transport, Inc. v. Comisara General de Abastecimi6ntos y Trans-portes, 336 F.2d 354, 360 (2d Cir. 1964) [hereinafter cited as Victory Transport];Republic of Mexico v. Hoffman, supra note 12, at 34; Ex parte Republic of Peru, supranote 13, at 587; Ex parte Muir, 254 U.S. 522, 533 (1920).1973308 JOURNAL OF INTERNATIONAL LAW AND POLICYIn reaching his decision, Judge Metzner relied upon the distinc-tion between jure imperii and jure gestionis.'" This distinction is thebasis of the restrictive theory of sovereign immunity, 7 and the policyfollowed by the State Department since 1952.' 8 In its determination,the court attempted to find the characteristics of a corporation whichwould qualify, or disqualify, it for immunity. It looked to the Restate-ment (Second) of Foreign Relations Law which states that the im-munity of a foreign state "extends to. . . a corporation created underits laws and exercising functions comparable to those of an agency ofthe state."1 9 Adopting the Restatement comment, the court agreedthat the term "agency" means "a body having the nature of a govern-16. Victory Transport, supra note 15, at 360. See also National City Bank v.Republic of China, supra note 8; Hannes v. Kingdom of Roumania Monopolies Instit.,260 App. Div. 189, 20 N.Y.S. 2d 825 (1st Dept. 1940), Et Ve Blik Kuruna v.B.N.S. Int'lSales Corp., 240 N.Y.S.2d 971 (Sup. Ct. 1960).17. In contrast to the restrictive theory generally used today, is the classical theoryespoused by Chief Justice Marshall in The Schooner Exchange, supra note 10. Theusual point of reference for the change from the classical to the restrictive is theeloquent dissent of Justice Mach in The Pesaro, 277 F.472 (S.D.N.Y. 1921), where hedifferentiates between commercial and war vessels of governments. Recently, legalscholars have moved toward a third theory which would virtually remove sovereignimmunity as a defense. Schmitthoff, The Nineteenth Century Doctrine of SovereignImmunity and the Importance of the Growth of State Trading, 2 DENVER J. INT'L L. &POLICY 199 (1972).18. Letter of Acting Legal Adviser, Jack B. Tate to Department of Justice, May19, 1952, 26 DEP'T STATE BULL. 984 (1952):• . . the Department feels that the widespread and increasing practice onthe part of governments of engaging in commercial activities makes nec-essary a practice which will enable persons doing business with them tohave their rights determined in the courts. For these reasons it willhereafter be the Department's policy to follow the restrictive theory ofsovereign immunity in the consideration of requests of foreign govern-ments for a grant of sovereign immunity.For comment on the "Tate letter" see Dubrovir, A Gloss on the Tate Letter's Restric-tive Theory of Sovereign Immunity, 54 VA. L. REv. 1 (1968); Bishop, New UnitedStates Policy Limiting Sovereign Immunity, 47 AM. J. INT'L L. 93 (1953); Comment,Restrictive Sovereign Immunity, the State Department and the Court, 62 N.W.U. L.J.397 (1967).19. RESTATEMENT, supra note 10, at § 66. Additionally, the RESTATEMENT providesimmunity to the following areas of a foreign state:(a) the state itself;(b) its head of state and any person designated by him as a member ofhis official party;(c) its government or any governmental agency;(d) its head of government and any person designated by him as amember of his official party;(e) its foreign minister and any person designated by him as a memberof his official party;(f) any other public minister, official, or agent of the state with respectto acts performed in his official capacity if the effect of exercising jurisdic-tion would be to enforce a rule of law against the state ...VOL. 3:305CASE NOTEment department or ministry,"2 and that "great weight must begiven to the fact that the foreign state considers the corporation tobe performing the functions of a governmental agency.""On the other hand, the court noted, if a corporation is permittedto be sued in its own country, in the same manner as a private corpo-ration, immunity becomes highly questionable." Additionally, whena foreign government engages in commercial activities outside thetraditional areas of government functions, the corporation, or sepa-rate governmental entity, should be reachable.2Relying upon the opposing affidavits, Judge Metzner found sev-eral points against the claim of sovereign immunity. First, if thecorporations were indeed immune, then it would not have been neces-sary for the government of Chile to join them as a party in the pro-ceedings in the Chilean courts.24 Secondly, the terms for delivery ofthe notes were in accordance with the laws of the State of New Yorkand the parties to the notes considered the New York office of CO-DELCO as the domicile of the corporation. This led to the conclusionthat the defendants were not entitled to sovereign immunity.The defendants urged application of the Victory Transport case,where legislative acts, such as nationalization, were found to be pub-lic acts, and sovereign immunity was granted even in the absence ofState Department suggestion. 2 However, Judge Metzner pointed out20. Id. Comment. Reiterated in the Comment is the previous discussion statingthat:In determining whether the agency is in fact a part of the government,the views of the government creating the agency are given great weight,but are not necessarily conclusive.See also Hannes v. Kingdom of Roumania Monopolier Instil., supra note 16; UnitedStates v. Deutsches Kalisyndikat Gesellschaft, 31 F.2d 199 (S.D.N.Y. 1929)[hereinafter cited as United States v. Deutsches].21. Id. Reporter's Notes. Judge Metzner points out that this argument is favorableto the defendants' point of view.22. Id. Reporter's Notes. Judge Metzner points out that this argument is favorableto the plaintiffs' point of view.23. United States v. Deutsches, supra note 21; Coale v. Socit6 Co-operativeSuisse dis Charbona Basle, 21 F.2d 180 (S.D.N.Y. 1921). See also The Harvard Re-search in International Law Art. 23, 29 AM. J. INT'L L. Supp. 451, 700 (1935):A State may permit orders or judgments of its courts to be enforcedagainst the property of another State not used for diplomatic or consularpurposes: (a) When the property is immovable property; or (b) When theproperty is used in connection with the conduct of an enterprise...24. Copper Tribunal Decision, supra note 4.25. Victory Transport, supra note 15, at 360. It is stated that public acts aregenerally limited to the following areas:(1) internal administrative acts, such as expulsion of an alien;(2) legislative acts, such as nationalization;(3) acts concerning the armed forces;1973310 JOURNAL OF INTERNATIONAL LAW AND POLICYthat the nationalization occurred in July of 1971,26 whereas the sale,for which the notes were issued, occurred in 1969. This prior obliga-tion of CODELCO, therefore, was not affected by the nationalization.The second argument urged by the defendants was that since theplaintiffs had submitted their claims to a special Chilean court, thematter was sub judice and the attachment should have been vacated.This was handled rather summarily. The Special Copper Tribunal"was established to hear appeals from those affected by nationaliza-tion on the amount of compensation decided upon by the ComptrollerGeneral.2 In making the decision, the Comptroller General arrived ata negative sum. 9 This negative sum provides a unique area of set-offfor any claims against the Chilean government by those, such as theplaintiffs, who have claims arising outside the nationalizationscheme. After joining CODELCO as a party in the appeal before theSpecial Copper Tribunal, the government further asserted that anyobligation on the notes should be paid out of that compensation. Thecourt found it incomprehensible that the defendants could assert thatthis matter was being seriously contended in Chile.The defendants final argument urged the exercise of judicialdiscretion to vacate the order. The defendants raised three groundswhich they thought rendered the exercise of judicial discretion appro-priate. First, since the claim was for one hundred million dollars andthe attachment was on a mere two million dollars, which would notafford the plaintiffs much relief, the attachment should have beenremoved. Secondly, the attachment would have damaged trade be-tween Chile and the United States and, therefore, have adverselyaffected the U.S. balance of payments. Finally, the attachmentwould have had a deleterious effect on the economy of Chile. JudgeMetzner found the arguments ludicrous, difficult to believe, and pro-perly within the sphere of the State Department. The court then(4) acts concerning diplomatic activity;(5) public loans.26. Nationalization Amendment, supra note 1.27. Nationalization Amendment, supra note 1, at 1069 (see note 3.). For furtherinformation on the structure of the Tribunal see Regulations of the Special CopperTribunal, 11 INT'L LEGAL MATERIALS 147 (1971).28. Id., see also note 3. As pointed out by Judge Metzner compensation wasdetermined by the Comptroller using the formula of the value of the mines less "excessprofits," rights to mineral deposits, and the value of property in poor condition. Ac-cording to the Amendment, the "President of the Republic" is "empowered to orderthe Comptroller General . . . to deduct all or part of the excess profits earned by thenationalized companies" as determined by the President. Nationalization Amend-ment, supra note 1, at 1069.29. Decree Concerning Excess Profits of Copper Companies (Sept. 28, 1971), 11INT'L LEGAL MATERIALS 1235 (1971).VOL. 3:3051973 CASE NOTE 311denied the motion and vacated the temporary stay granted to thedefendants.William B. Moody

Sovereign Immunity - Anaconda Co. v. Corporacion del Cobre

https://digitalcommons.du.edu/cgi/viewcontent.cgi?article=2148&amp;context=djilp

Sovereign Immunity - Anaconda Co. v. Corporacion del Cobre

Abstract

Similar works

Full text

Available Versions

University of Denver