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COURT OF APPEALS OF NEW YORK 1969.NY.42339 <>; 250 N.E.2d 698; 25 N.Y.2d 252 decided: July 1, 1969. REPUBLIC OF ARGENTINA, APPELLANT,v.CITY OF NEW YORK ET AL., RESPONDENTS Republic of Argentina v. City of New York, 29 A.D.2d 1052, modified. Counsel Jerome S. Rubin and Eric L. Keisman for appellant. Bruno A. Ristau, of the Washington, D. C. Bar, admitted on motion pro hac vice, for United States of America, amicus curiae. Counsel J. Lee Rankin, Corporation Counsel (Edith I. Spivack, Edward J. McLaughlin and Russell D. Scott of counsel), for respondents. Counsel Louis J. Lefkowitz, Attorney-General (Samuel A. Hirshowitz and Hillel Hoffman of counsel), in his statutory capacity under section 71 of the Executive Law. Chief Judge Fuld. Judges Burke, Scileppi, Bergan, Breitel and Jasen concur. Author: Fuld

Republic of Argentina v. City of New York, Chief Judge Fuld. Judges Burke, Scileppi, Bergan, Breitel and Jasen concur.

Author: Fuld

 We must decide, on this appeal, whether, as a matter of customary international law, premises owned by a foreign state and devoted exclusively to consular and other public governmental uses, are exempt from the imposition of real property taxes by the municipal government where the property is located.

The Republic of Argentina, owning property located in the Borough of Manhattan which it uses as its consulate, instituted this action against the City of New York in 1967. In the first count of its two-count complaint, it seeks the return of the real property taxes it paid on that property between 1947 and 1965 and, in the other count, it prays for a judgment -- pursuant to article 15 of the Real Property Actions and Proceedings Law -- declaring those premises tax exempt and discharging the tax liens imposed against the property for unpaid taxes assessed since 1966. Upon cross motions for summary judgment, the court at Special Term found for the city and dismissed the complaint. The Appellate Division affirmed, and the Republic of Argentina seeks a reversal in our court. The United States Government, appearing as amicus curiae, has argued in support of Argentina's position.

The premises involved were purchased by the plaintiff in 1947 and used, since that time, solely by its governmental agencies. The principal occupant of the premises, since 1960, has been the Argentine Consul General for the City of New York. After making an initial payment, representing taxes which had accrued against the prior owner of the property, Argentina paid no taxes to the city during the period between 1947 and 1960, when a lump sum payment was agreed upon in settlement of all past accrued taxes. From that year until February of 1966, the plaintiff paid the taxes as they were assessed, albeit under protest. In August of that year, however, the Argentine Government notified the city that it considered itself exempt from taxation under international law, and the present action was commenced in February, 1967.

On this appeal, the plaintiff argues that its immunity from taxation is established by the customs and practices of nations which are binding on state and local governments as a form of (to quote from the plaintiff's brief) "federal common law". The city does not dispute that it is bound to observe international law but it contends that there is no established rule which prevents local taxation of consular offices in the absence of a treaty.

Although the United States at one time took a position similar to that now taken by the city, the Government has, at least since 1965, adopted a contrary view. Its present official position is set forth in a letter written, on September 2, 1965, by Richard D. Kearney, an Acting Legal Advisor to the Department of State, to the Comptroller of the City of New York:

"The Department of State is of the opinion that under recognized principles of international law and comity the several states of the United States, as well as their political subdivisions, should not assess taxes against foreign government-owned property used for public noncommercial purposes."

The Kearney letter cited a number of reasons for the view expressed, including (1) the practices of other countries; (2) the trend among political subdivisions of the United States to grant such exemptions; (3) the serious political consequences which would attend upon any attempt to enforce a tax assessment by evicting a foreign government from its property; and (4) the lack of any valid basis for distinguishing between foreign state-owned personal property or embassy real property -- which classes of property are concededly exempt from taxation -- and other real property used for governmental purposes.

In view of the position taken by the United States, the city emphasizes that, in deciding this case, the court is not bound to accept the Government's submission but must make its own determination as to the status of Argentina's property under international law.*fn1 This is perfectly true but, recognizing as we must that our conclusion may affect the interests of the nation as a whole, we would be derelict in our duty and responsibility if we were to ignore those interests in reaching decision. The Government asserts, and we are in no position to dispute it, that "[taxation] by political subdivisions of the United States of foreign government-owned real property used for official purposes has been a growing irritant in the conduct of the foreign relations of the United States. If left unchecked, such taxation will prejudice and hamper the effective conduct of our foreign relations."*fn2

However, as already indicated, we do not premise our decision solely upon what the Government urges are to its best interests. The evidence at hand establishes that granting a tax exemption in this case is mandated by the rules of international law. It is settled that, where there is neither a treaty, statute nor controlling judicial precedent, all domestic courts must give effect to customary international law. To ascertain what it is, "resort must be had", the Supreme Court has said, "to the customs and usages of civilized nations; and, as evidence of these, to the works of jurists and commentators, who, by years of labor, research and experience, have made themselves peculiarly well acquainted with the subject of which they treat." (The Paquete Habana, 175 U.S. 677, 700; see, also, Hilton v. Guyot, 159 U.S. 113, 163.)*fn3 And the most authoritative of such works are international conventions, codifying or declaring existing law. These are carefully drafted documents, prepared by representatives of many different countries and intended to reflect the rules to which nations generally conform. (See, e.g., Statute of the International Court, 59 U.S. Stat. 1031, 1055; Murarka v. Bachrach Bros., 215 F. 2d 547; Bergman v. De Sieyes, 170 F. 2d 360, 362.)

With respect to the particular question before us -- namely, the tax status of government-owned consular offices -- the document which most clearly sets forth the applicable international standards of conduct is the Vienna Convention on Consular Relations, drafted in 1963 under the auspices of the United Nations with the active participation of representatives from the United States and 91 other countries. This document, which has already been ratified by 33 nations, explicitly announces that (art. 32, ยง 1)

"Consular premises and the residence of the career head of consular post of which the sending State or any person acting on its behalf is the owner or lessee shall be exempt from all national, regional or municipal dues and taxes whatsoever, other than such as represent payment for specific services rendered." (Emphasis supplied.)

The Convention has not yet been considered by the Senate for formal ratification by the Government and is, consequently, not absolutely binding upon our courts. However, it does constitute "weighty authority: i.e., the consensus of opinion of the distinguished lawyers there assembled as to what 'principles' on the subject were at that time 'generally accepted' as a part of international law." (Bergman v. DeSieyes, 170 F. 2d 360, 362, supra.)

In the Kearney letter -- in which the State Department noted that, "under recognized principles of international law and comity", the property owned by a foreign government and used for public noncommercial purposes should be exempt from local taxation -- the United States Government was clearly indicating its agreement with the rule expressed by the Vienna Convention. The acceptance of this principle by other nations has been demonstrated by a survey conducted by the United States, revealing that, of the 45 nations in which our Government maintains consulates, only six fail to accord a tax exemption to ...

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