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COLONIAL BANK v. COMPAGNIE GENERALE MARITIME ET FI

October 16, 1986

COLONIAL BANK, Petitioner,
v.
COMPAGNIE GENERALE MARITIME ET FINANCIERE, Respondent



The opinion of the court was delivered by: LEVAL

OPINION AND ORDER

PIERRE N. LEVAL, U.S.D.J.

This action was brought by Colonial Bank ("Colonial"), a Connecticut corporation, against Companie Generale Maritime et Financiere ("CGMF"), a corporation wholly owned by the Republic of France, for damages caused by CGMF's arrests in France and Egypt of the Greek-flag vessel the GME Atlantico (the "Atlantico"), a vessel owned by Compania Naviera Pancarib S.A. ("Pancarib") and operated by General Maritime Enterprises ("GME") under a time charter party. Colonial brings this action both in its own right as mortgagee of the vessel, and as assignee of Pancarib's claims against CGMF.

 Defendant CGMF moves to dismiss the complaint for lack of subject matter Jurisdiction, pursuant to Fed.R.Civ.P. 12(b)(1), and on the ground of forum non conveniens, pursuant to Fed.R.Civ.P. 12(b)(3). CGMF claims sovereign immunity under the Foreign Sovereign Immunities Act of 1976, 28 U.S.C. §§ 1330, 1601-1611 (1982). Colonial contends that four exceptions to sovereign immunity apply, and CGMF is, therefore, amenable to suit. CGMF's motion to dismiss Colonial's complaint for lack of subject matter Jurisdiction is granted. *fn1"

 Background

 1. Events Outside the United State:.

 CGMF is a shipping corporation wholly owned by the Republic of France. At all times relevant to this action, CGMF's commercial activities consisted solely of buying and selling vessels and transferring them to corporate subsidiaries by bareboat charter basis. The French-flag vessel Carbet was acquired by CGMF on December 30, 1976. It was operated at all times under a bareboat charter by Compagnie Generale Maritime ("CGM"), a French corporation and wholly owned subsidiary of CGMF, with offices in New York and other United States cities. The Carbet was used exclusively in shipping operations between France and French Guyana, and the French Antilles and French Guyana, never utilizing United States ports. In November 1981, CGMF contracted to sell the Carbet to the Belgian corporation General Maritime Enterprises ("GME") for $2,900,000. A few weeks later, GME informed CGMF that it would refuse to honor the contract. CGMF then sold the Carbet to a Thai corporation, and brought an arbitration proceeding in London against GME.

 On March 12, 1982, in an effort to secure its claim in the pending arbitration, CGMF caused the arrest in Le Havre, France of the Atlantico, a Greek-flag vessel operated by GME. Several days later, Pancarib, a Panamanian corporation, appeared before the court in Le Havre, alleging ownership of the Atlantico. CGMF asserted that although Pancarib was the registered owner of the Atlantico, Pancarib was a one vessel corporation established by GME, and Pancarib and GME were alter egos. The court denied Pancarib's application to vacate the arrest, finding that "either the vessel belongs effectively to G.M.E. or . . . [GME] has created an appearance destined to mislead third parties; COMPAGNIA NAVIERA PANCARIB appears as more or less a fictive company, more a purely legal construct than a reality . . . ." (Simon Aff. [P] 5.) The arrest order was, however, vacated on grounds that did not involve a ruling on ownership or on the alter ego theory, without prejudice to further attachment, and the vessel was released on April 8, 1982. Later the court reversed this decision reinstituting the order of attachment but only after the vessel had gained her freedom.

 In April 1982, CGMF was awarded damages against GME in the London arbitration in the amount of $799,958 plus interest, and shortly obtained[ judgments on the award both in England and in the Southern District of New York. Predicated on the award and English Judgment against GME, on October 14, 1982, CGMF obtained an ex parte arrest order from the Court of First Instance of Alexandria, Egypt and succeeded in arresting the vessel. On February 20, 1984, the Court of Imposition of Alexandria vacated the arrest order, holding that the arrest was wrongful because the Atlantico was not the property of GME. CGMF's appeal to the Alexandria court was dismissed that October. On April 8, 1984, while its appeal was still pending in Alexandria, CGMF obtained an ex parte order from the Court of First Instance of Cairo, Egypt and again secured the arrest of the vessel. That arrest order was vacated on January 6, 1985.

 Events Within the United States.

 On January 28, 1982, Pancarib and Colonial Bank entered into a loan agreement whereby Colonial loaned Pancarib $1.9 million to be used to finance Pancarib's purchase of the Atlantico. Pursuant to the loan agreement, Pancarib executed a First Preferred Ship's Mortgage (the "Mortgage") and assigned the Atlantico's earnings to Colonial.

 Shortly after the arrest in Le Havre, Pancarib defaulted on the mortgage. In October 1982 both Pancarib and Colonial demanded that the arrests be vacated. (Complaint [P] 71.) Upon learning that neither GME nor Pancarib had any other assets to secure the Judgment against GME, and that Colonial had an interest in the release of the Atlantico and was legally entitled to act with respect to the vessel, *fn2" CGMF sent attorneys in New York to Colonial to discuss the release of the vessel in exchange for security on, or settlement of, CGMF's claim against GME. (Horner Aff. [P] 7.) Nothing came of these discussions. On April 30, 1985, Pancarib assigned to Colonial all its claims against CGMF, and Colonial brought this action in October 1985.

 Colonial alleges tortious interference with the Atlantico, claiming that both Pancarib and Colonial were injured by the three arrests of the vessel. Colonial claims that if the vessel had not stood idle for two years, it would have been profitably employed by Pancarib which would not have been forced to default on the $1.9 million loan.

 Discussion

 The Foreign Sovereign Immunities Act of 1976, 28 U.S.C. §§ 1300, 1602-1611 (1982) (the "Act or the "FSIA"), is the exclusive source of subject matter Jurisdiction of suits involving foreign states. Letelier v. Republic of Chile, 748 F.2d 790, 793 (2d Cir. 1984), cert. denied, 471 U.S. 1125, 105 S. Ct. 2656, 86 L. Ed. 2d 273 (1985). Section 1330(a) of the Act confers original jurisdiction on district courts "without regard to amount in controversy of any nonjury civil action against a foreign state as defined in section 1603(a) of this title as to any claim for relief in personam with respect to which the foreign state is not entitled to immunity." 28 U.S.C. 1330(a) (1982). Neither party disputes that CGMF is an "instrumentality" of a foreign state as defined in § 1603 and thus entitled to a foreign state's immunity. *fn3" Unless the immunities of the Act failed to come into effect by reason of pre-existing treaties between the United States and France, 28 U.S.C. § 1604, CGMF is "immune from the jurisdiction of the courts of the United States and of the States except as provided in sections 1605 to 1607." 28 U.S.C. § 1604(1982). This court then lacks subject matter Jurisdiction unless one of the statute's exceptions applies. See Verlinden G.V. v. Central Bank of Nigeria, 461 U.S. 480, 489, 76 L. Ed. 2d 81, 103 S. Ct. 1962 (1983 ). Section 1605 sets forth the relevant exceptions, *fn4" as follows:

 (a) A foreign state shall not be immune from the jurisdiction of courts of the United States or of ...


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