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March 23, 1984


The opinion of the court was delivered by: SWEET


Presently pending before the court are the motions of plaintiff Banque Compafina ("Compafina") to confirm its ex parte order of attachment ("Order") and of defendant Banco de Guatemala ("Banco de Guatemala") to vacate the Order pursuant to the Foreign Sovereign Immunities Act of 1976 ("FSIA"), 28 U.S.C. §§ 1601 through 1611, specifically §§ 1611(b)(1) and 1610(d)(1). For the reasons given below, the motion of Banco de Guatemala is granted, the Order is vacated, and costs and damages may be assessed as set forth below.

 Compafina, a Swiss banking corporation, has brought this action to recover on six promissory notes ("Notes") issued by defendant Desarrollo de Autopistas y Carreteras de Guatemala, S.A. Four of the notes are payable to defendant Estoril Associated, Ltd. and two are payable to defendant Devco Development Co., Inc. The payees endorsed the notes to Compafina. Banco de Guatemala has guaranteed the notes.

 Banco de Guatemala is a bank created pursuant to the statutes of the Republic of Guatemala ("the Republic") and is owned by the Republic. It has the exclusive authority in the Republic, among other things, to issue currency, to have custody of and to administer the Republic's monetary reserves, to engage in open-market transactions in Guatemalan government securities so as to regulate the money supply, and to act as depository for the funds of the Republic and its agencies. Compafina does not dispute that Banco de Guatemala thus qualifies as a "foreign state" under § 28 U.S.C. § 1603(a) and (b), and as a "central bank" within the meaning of $28 U.S.C. § 1611(b)(1).

 Compafina commenced these proceedings on February 3, 1984 by obtaining the Order from New York Supreme Court. The Order directed that the Sheriff of the City of New York or of any New York county to levy upon any property in which Banco de Guatemala has an interest up to the amount of $1,140,300. Pursuant to the Order, it appears that the Sheriff of the City of New York levied on Banco de Guatemala property held by at least one of 18 banks listed in the affirmation in support of confirmation of the Order. On February 9, the New York Supreme Court entered an order directing Banco de Guatemala to show cause why an order pursuant to N.Y.Civ.Prac.L. § 6211(b) should not be entered confirming the Order. On February 14, 1984, Banco de Guatemala removed the action to this court.

 Banco de Guatemala's motion to vacate was presented to the court on February 15, 1984 by way of order to show cause. A hearing was held at 4:30 p.m. on that day, at which Compafina submitted its motion to confirm and counsel argued and submitted further papers. After the hearing, in accordance with a stipulation between the parties entered into in open court at the hearing, the court vacated the attachment without prejudice to the merits of the motions, which were to be the subject of further submissions and a further hearing. On March 2, 1984, further argument was heard and further submissions were received. Among these submissions is an affidavit of Anthony M. Solomon ("Solomon"), president of the Federal Reserve Bank of New York ("Reserve Bank"), stating that if foreign central banks such as Banco de Guatemala become concerned that their United States assets are subject to attachment by private litigants, they might withdraw their dollar assets from this country, thereby destabilizing the dollar and the international monetary system.

 The parties' agreement reached on the original return day, described above, sought an early resolution of the motions, not only because of the out-of-pocket expenses involved, but also because of the significance of the attachment to the Guatemalan central bank and of the question regarding the applicability of the FSIA.

 § 1611(b)(1)

 Under the FSIA, a foreign state's property in the United States is generally immune from attachment. § 1609. Section 1610 provides some exceptions to this general rule, but § 1611(b)(1) overrides these exceptions:

 (b) Notwithstanding the provisions of section 1610 of this chapter, the property of a foreign state shall be immune from attachment and from execution, if --

 (1) the property is that of a foreign central bank or monetary authority held for its own account, unless such bank or authority, or its parent foreign government, has explicitly waived its immunity from attachment in aid of execution, or from execution, notwithstanding any withdrawl of the waiver which the bank, authority or government may purport to effect except in accordance with the terms of the waiver. . . .

 To come within § 1611(b)(1), Banco de Guatemala must show that the attached funds were "held for its own account," since Compafina does not dispute that Banco de Guatemala is a central bank within the meaning of § 1611(b)(1). According to the relevant legislative history, funds held for a central bank's "own account" are "funds used or held in connection with central banking activities, as distinguished from funds used solely to finance the commercail transactions of other entities or of foreign states." H.R. Rep. No. 94-1487, 94th Cong., 2d Sess. 31, reprinted in 1976 U.S. Code Cong. & Ad. News 6604, 6630.

 Banco de Guatemala has submitted the affidavit of Oscar Alvarez M. ("Alverez"), vice-president of Banco de Guatemala. In his affidavit, Alvarez states:

 In connection with its central banking activities, Banco de Guatemala maintains certain assets in the United States, including gold reserves deposited with the Federal Reserve Bank of New York and funds on deposit with commercial banks in New York City. Solomon, in his affidavit, states that Banco de Guatemala has provided the Reserve Bank with the required certification confirming that it owns the United States obligations that it has on deposit at the Reserve Bank, and that it does not hold or use the ...

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