O.N.E. Shipping Ltd. appeals from the May 22, 1986 dismissal of its antitrust action by the United States District Court for the Southern District of New York (Duffy, J.) on the ground of lack of subject matter jurisdiction under the doctrine of international comity. It also appeals from the district court's imposition of Rule 11 sanctions. Affirmed in part; reversed in part.
Kaufman and Cardamone, Circuit Judges, and Pollack, District Judge.*fn*
POLLACK, Senior District Judge
This appeal invokes the judicially created act of state doctrine on the anti-competitive effect of a foreign sovereign's cargo reservation laws-the laws of the Republic of Colombia-which require that 50% of licensed imports of liquid bulk cargo ("LBC") be transported on Colombian owned vessels, or on vessels chartered by a Colombian company.
The district court dismissed this suit brought under the Sherman Antitrust Act, 15 U.S.C. Sections 1, 2 (1982), on the ground that a federal court should not exercise jurisdiction hereof because "Colombian interests outweigh whatever antitrust enforcement interests the United States may have in this case as a matter of law." We affirm the dismissal.
Following the dismissal, appellant filed a motion under Rules 59 and 60 of the Federal Rules of Civil Procedure for reconsideration of the court's findings in light of allegedly new evidence and for an amendment of the judgment of its motion for a partial summary judgment. The court rejected the motions and sanctioned the appellant $500 under Rule 11. We reverse the order for sanctions.
In the late 1960s, Colombia passed a series of "Cargo Reservation Laws." The purpose of these laws was to favor Colombian shipping companies and the Columbian economy by requiring that imports and exports of certain types of cargo be transported exclusively by Colombian carriers. After 1969, those laws required that the first 50% of each licensed shipment imported into Colombia on trade routes served by Colombian carriers be transported on Colombian-owned vessels or on vessels chartered by a Colombian company. As the result of a delicate compromise between the United States and Columbia, U.S. flag lines were not subject to the protection laws.
Appellant O.N.E. Shipping Ltd. ("O.N.E."), a Bermuda corporation, and its predecessor in interest, had offered regular liquid bulk cargo tanker serve from U.S. gulf ports to Central and South America. Before 1973 there were no Columbian vessels capable of carrying LBC, so shipping to Columbia of this product was unaffected by the Columbia cargo reservation laws. This situation changed in 1973 and thereafter.
Appellee Flota Merchante Grancolombiana, S.A. ("Flota"), a Columbia shipping line substantially owned by the National Federation of Coffee Growers of Columbia, is a public organization and is "an agency or instrumentality" of the Columbian Government within the meaning of the Foreign Sovereign Immunities Act of 1976, 28 U.S.C. Section 1603(b).*fn1 Flota is Colombia's national line. Flota had no specially equipped LBC tankers of its own.
In 1973, to accommodate the needs of Columbian importers, Flota entered into a chartering agreement (revised in 1976) with appellee Andino Chemical Shipping, Inc., a Panamanian corporation and carrier of LBC, to handle Colombia's Atlantic coast trade.
In 1976, Flota entered into a similar chartering agreement with appellee Maritima Transligra, S.A. ("Transligra"), an Ecuadoran corporation, to charter the latter's tankers for use in Colombia's Pacific coast trade.
As required by Columbian law, Flota's chartering agreements were filed with and approved by the Colombian Government, enabling the non-Colombian tankers to receive the preferences accorded to Colombian flag vessels under the cargo reservation laws.*fn2 Together, the three appellees have captured up to 89% of the shipping imports of LBC into Colombia and O.N.E. has been virtually shut out therefrom.
As mentioned above, following a bilateral negotiation, no restrictions were placed by Colombia on the carriage of products imported from the United States if carried on United States flag vessels.
In April 1977, Flota, Andino and Transligra sought approval of their chartering agreements from the United States Federal Maritime Commission ("FMC") which would provide an exemption from U.S. antitrust laws. The FMC conditionally disapproved the agreements and subsequently conducted an investigation and a hearing. On May 23, 1983, the Administrative Law Judge ("ALJ") also disapproved the agreements. The ALJ found that Flota had attained near monopoly control over the LBC service to Colombia and that the agreements were prospectively unlawful. On appeal, the FMC affirmed the ALJ's order of disapproval and ruled that the agreements were anticompetitive, detrimental to United States commerce, contrary to the public interest and artificially increased transportation rates. The FMC ordered appellees to cease and desist. With these rulings in hand O.N.E. brought this antitrust action in the district court below.
O.N.E. charges appellees with unlawful concerted refusal to deal, conspiracy to exclude competitors, unlawful exclusive dealing, conspiracy to fix prices, conspiracy to divide markets and allocate customers, and attempt and conspiracy to monopolize.
O.N.E.'s antitrust suit represents a direct challenge to Colombia's cargo reservation laws and to the legality of appellees' space chartering agreements under those laws. The laws were designed to promote the development of a strong Colombian merchant marine and to assist Colombia's economic development.
Among other purposes, the cargo reservation laws enable the Colombian Government to monitor the allocation of the resources of Colombian shipping companies, to determine whether particular trade routes could prove harmful to the country's economy and to consider whether an applicant would provide effective, regular and continuous service.
The Colombian Government has repeatedly made known to the United States Department of State, as well as to the Federal Maritime Commission, its strong support for the cargo reservation laws and the chartering agreements thereunder among the appellees.
Applying the balancing tests of Timberlane Lumber Co. v. Bank of America, N.T. & S.A., 549 F.2d 597 (9th Cir. 1976) and Mannington Mills, Inc. v. Congoleum Corp., 595 F.2d 1287 (3d Cir. 1979) the district court concluded that because of Colombia's strong interest in its perfectionist legislation and because of the Columbian government's ownership interest in Flota through the National Federation of Coffee Growers, there would be probable cause adverse effects upon our foreign relations were it to assert jurisdiction over this suit. The comity balancing test has been explicitly used in this Court. See Joseph Muller Corp. Zurich v. Societe Anonyme de Gerance et D'Armement, 451 F.2d 727 (2d Cir. 1971) (per curiam), cert. denied, 406 U.S. 906, 92 S. Ct. 1609, 31 L. Ed. 2d 816 (1972).*fn3
In an effort to provide a single standard to determine whether American antitrust laws apply to a given extra-territorial transaction, Congress enacted the Foreign Trade Antitrust Improvements Act of 1982, Pub. L. No. 97-290, 96 Stat. 1246 (codified at 15 U.S.C. Section 6a) [hereinafter referred to as the "Act"].
Given the dismissal on comity grounds, the district judge did not decide whether the complaint should be dismissed under the "Act", although he did state that the Act "would not appear to provide a basis ...