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February 25, 1969

PAN AMERICAN TANKERS CORPORATION, a corporation and Whitehall Navigation Corporation, a corporation, Plaintiffs,
The REPUBLIC OF VIETNAM, a sovereign, Nha May Xi-Mang Ha-Tien, d/b/a Hatien Cement Plant, a corporation, and Viet-Nam Xi-Mang Cong-Ty, d/b/a Vixico, a corporation, Defendants

Herlands, District Judge.

The opinion of the court was delivered by: HERLANDS

HERLANDS, District Judge:


 The question now presented to the Court for decision is whether the plea of sovereign immunity entered by The Republic of Viet Nam in opposition to plaintiffs' motion to compel arbitration is sufficient in law.

 Because of the sketchy and elliptical manner in which the position of The Republic of Viet Nam was formulated when this matter first came before the Court, it has taken two opinions by the Court -- one reported at 291 F. Supp. 49 (S.D.N.Y.1968), the other filed December 6, 1968 as a memorandum opinion -- to develop the record into its present state.

 Pursuant to those opinions, counsel for plaintiffs and counsel for The Republic of Viet Nam have submitted affidavits, documentary exhibits, and memoranda of law. Although the Court recognizes that certain disputed issues of fact and conflicting legal interpretations exist, the Court holds that The Republic of Viet Nam may not assert sovereign immunity as a defense to the motion to compel arbitration.

 Plaintiffs' motion arises out of an agreement for the transportation of cement, which, plaintiffs allege, was entered into with them by the three named defendants. The procurement and transportation of this cement were to be financed through use of funds made available by the Agency for International Development (A.I.D.), a United States governmental agency.

 The defendants Hatien Cement and Vixico (apparently two private entities, though Hatien Cement was organized, and its stock is wholly owned by, The Republic of Viet Nam), in notices dated January 10, 1968, announced the opening of bids for the supply and transportation of cement.

 The invitation to bid for the transportation contract detailed various conditions. The bids were to be submitted to the Directorate of Commercial Aid, Ministry of Economy of The Republic of Viet Nam. The Directorate reserved the right to accept or reject any offer. Demurrage would be paid by the importers, while dispatch would be paid to the Director of Commercial Aid. All bidders were required to furnish a bid bond in favor of "DCA/Ministry of Economy" (Directorate of Commercial Aid, Ministry of Economy). A performance bond in favor of the Director of Commercial Aid had to be furnished by the successful bidder within ten days after official notification of award. The Directorate of Commercial Aid, Hatien Cement and Vixico were signatories to the invitation to bid.

 The Director of Commercial Aid opened all the bids received on January 17, 1968. George Bates, president of plaintiffs, was present in the Director's office, and heard the Director announce that plaintiffs' bid for the cement transportation was lowest. In his affidavit, sworn to December 23, 1968, Bates states that the Director then informed him that a contract would be awarded plaintiffs upon receipt of written approval from A.I.D.

 On January 27, 1968, plaintiffs' agent in Saigon was handed a letter by the Director of Commercial Aid which states, in relevant part: "This is to confirm that award has been made to George T. Bates and Co. Inc. for the transportation of 190.000 M/T of cement * * *."

 Anglo Vietnam Co., Ltd., plaintiffs' Saigon agent, prepared a Fixture Note, dated January 27, 1968. This Fixture Note (at page "3", provision "13/." thereof) expressly incorporated the terms of an unsigned "GENCON Charter Party" and unsigned "Riders attached" (consisting of two pages). The second page of the last mentioned Rider contains provision "31" entitled "Arbitration Clause," requiring arbitration of disputes.

 After negotiation, other discussions, and some correspondence, the Fixture Note was accepted and signed by the Director of Commercial Aid, Hatien Cement, and Vixico, on or about February 22, 1968.

 By letter dated May 14, 1968, and "writ" of May 15, 1968, Hatien Cement and Vixico notified plaintiffs' agent that they would not accept any more cement nor be financially responsible for any fee relating to the use of plaintiffs' ships. As explained in another letter dated May 14, 1968 from Hatien Cement and Vixico to the Minister of Economy, the "Tet offensive" produced a "pessimistic" market for cement and, as a consequence, there was no available warehouse space. The letter requested the Minister to intervene and to ask plaintiffs to suspend or cancel the contract because this was a "case of superior force."

 In a letter to plaintiffs dated July 3, 1968, the Minister of Economy sought to settle the difficulties ensuing after the letter of May 14, 1968 from Hatien Cement and Vixico to plaintiffs. The Minister stated that he would request the cement importers to honor the cement transportation contract and to accept the remaining cement, but that the importers and plaintiffs would have to negotiate and settle the question of damages attributable to delay as a separate matter.

 On July 29, 1968, plaintiffs filed their complaint in personam with maritime attachment and garnishment. On August 14, 1968, they served their notice of motion for an order to compel arbitration. It is to this motion that The Republic of Viet Nam has appeared specially and entered its plea of sovereign immunity.

 The Republic of Viet Nam contends that it is entitled to immunity because its role in the transactions detailed above was that of governmental supervisor over the expenditure of foreign exchange, and, therefore, its acts were political or sovereign in nature.

 Plaintiffs, on the other hand, vigorously deny that the involvement of The Republic of Viet Nam in the transactions was so limited. In their view, the various documentary exhibits and affidavits filed in this case demonstrably preclude such a finding. Moreover, plaintiffs argue, even if The Republic of Viet Nam acted in the transaction only in a supervisory manner, it would not be entitled to immunity because the courts have not interpreted the category of immune political acts so broadly as to include such activity. Finally, plaintiffs contend that the central focus of the inquiry must be on the essential nature of the transaction out ...

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