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UNITED EURAM CORP. v. UNION OF SOVIET SOCIALIST RE
December 4, 1978
UNITED EURAM CORPORATION, Plaintiff,
UNION OF SOVIET SOCIALIST REPUBLICS, Ministry of Culture of the Union of Soviet Socialist Republics, the State Concert Society of the Union of Soviet Socialist Republics, a/k/a Gosconcert, United States of America and Madison Square Garden Center, Inc., Defendants
The opinion of the court was delivered by: POLLACK
The defendants have moved under Rule 12(b) of the Fed.R.Civ.P. to dismiss the complaint on various grounds. For the reasons given below, the motion is denied in all respects.
The plaintiff is an impressario. The defendants are the U.S.S.R., its Ministry of Culture, and the State Concert Society of the U.S.S.R., "Gosconcert." Pursuant to a cultural exchange agreement between the United States and the U.S.S.R., the plaintiff and Gosconcert signed several contracts. Under these contracts, Gosconcert was to send artists to the United States and Great Britain to give performances organized by the plaintiff, and the plaintiff was to pay a fee to Gosconcert, the salaries of the artists, and the expenses of the tour. The plaintiff has sued for breach of those contracts.
The defendants now move, first, to dismiss the complaint against all defendants on the grounds that they are immune from suit because the statutory "commercial activity" exception to sovereign immunity does not apply; second, to dismiss the complaint against the U.S.S.R. and the Ministry of Culture because they are entities distinct from Gosconcert and were not parties to the contracts; and, third, to dismiss the complaint against the U.S.S.R. because no effective service has been made on it.
"Commercial Activity" Exception to Sovereign Immunity
Section 4(a) of the Foreign Sovereign Immunities Act, 28 U.S.C. § 1605(a)(2), provides:
A foreign state (or any agency or instrumentality thereof) shall not be immune from the jurisdiction of courts of the United States or of the States in any case
in which the action is based upon a commercial activity carried on in the United States by the foreign state; or upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States . . . .
"Commercial activity" is defined in the statute to mean:
either a regular course of commercial conduct or a particular commercial transaction or act. The commercial character of an activity shall be determined by reference to the nature of the course of conduct or particular transaction or act, rather than by reference to its purpose.
(Id., 28 U.S.C. § 1603(d).)
The defendants argue that because the contracts were signed pursuant to the cultural exchange agreement between the United States and the U.S.S.R., they are artistic and governmental, not commercial, in character. The plaintiff counters that the purpose of the activity is irrelevant under the Act and that the contracts were "commercial" because they were agreements to trade services for cash. Both parties rely on the Report on the Act by the House Judiciary Committee, whose relevant part states in full:
(d) Commercial activity. Paragraph (c) of section 1603 defines the "commercial activity" as including a broad spectrum of endeavor, from an individual commercial transaction or act to a regular course of commercial conduct. A "regular course of commercial conduct" includes the carrying on of a commercial enterprise such as a mineral extraction company, an airline or a state trading corporation. Certainly, if an activity is customarily carried on for profit, its commercial nature could readily be assumed. At the other end of the spectrum, a single contract, if of the same character as a contract which might be made by a private person, could constitute a "particular transaction or act."
As the definition indicates, the fact that goods or services to be procured through a contract are to be used for a public purpose is irrelevant; it is the essentially commercial nature of an activity or transaction that is critical. Thus, a contract by a foreign government to buy provisions or equipment for its armed forces or to construct a government building constitutes a commercial activity. The same would be true of a contract to make repairs on an embassy building. Such contracts should be considered to be commercial contracts, even if their ultimate object is to further a public function.
By contrast, a foreign state's mere participation in a foreign assistance program administered by the Agency for International Development (AID) is an activity whose essential nature is public or governmental, and it would not itself constitute a commercial activity. By the same token, a foreign state's activities in and "contacts" with the United States resulting from or necessitated by participation in such a program would not in themselves constitute a sufficient commercial nexus with the United States so as to give rise to jurisdiction (see sec. 1330) or to assets which could be subjected to attachment or execution with respect to unrelated commercial transactions (see sec. 1610(b)). However, a transaction to obtain goods or services from private parties would not lose its otherwise commercial character because it was entered into in connection with an AID program. Also public or ...
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