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PAREX BANK v. RUSSIAN SAV. BANK

January 20, 2000

PAREX BANK, PLAINTIFF,
V.
RUSSIAN SAVINGS BANK A/K/A SAVINGS BANK OF THE RUSSIAN FEDERATION A/K/A RUSSIAN FEDERATION SAVINGS BANK OF THE RUSSIAN FEDERATION A/K/A SBERBANK, DEFENDANT.



The opinion of the court was delivered by: Sweet, District Judge.

OPINION

Plaintiff Parex Bank ("Parex") has moved, pursuant to 28 U.S.C. § 1447(c), to remand this action to New York State Supreme Court, New York County. For the reasons set forth below, the motion is denied.

Background and Prior Proceedings

On July 21, 1999, Parex, a Latvian bank which does business in New York, filed this action in New York Supreme Court against Russian Savings Bank a/k/a Savings Bank of the Russian Federation a/k/a Russian Federation Savings Bank a/k/a Commercial Savings Bank of the Russian Federation a/k/a Sberbank ("Sberbank"), a Russian bank which also does business in New York. Parex alleges that Sberbank failed to perform on a non-deliverable forward exchange contract purportedly entered into by Parex and Sberbank. On July 22, 1999, Justice Charles E. Ramos of the New York Supreme Court issued an order requiring Sberbank to show cause why an order of attachment should not be issued permitting a levy on Sberbank's account at the Bank of New York for assets totaling $3,755,642.01, as well as to show cause why a preliminary injunction should not be issued restraining Sberbank from selling, transferring, or assigning such assets. The order also temporarily restrained Sberbank from selling, transferring, or assigning those assets. Parex, as required, posted a bond of $750,000 on July 27, 1999, and served Sberbank with the summons and complaint and the order to show cause.

On August 9, Sberbank filed a notice of removal to remove the action to this Court, on the grounds of federal subject matter jurisdiction pursuant to 28 U.S.C. § 1330(a) & 1441(d).

The instant motion to remand was filed on September 10, 1999. Oral argument on the motion was heard on October 13, 1999, at which time the motion was deemed fully submitted.

Discussion

Section 1441(d) of Title 28 provides:

Any civil action brought in a State court against a foreign state as defined in § 1603(a) of this title may be removed by the foreign state to the district court of the United States for the district . . . embracing the place where such action is pending.

28 U.S.C. § 1441(d). Federal subject matter jurisdiction exists over matters involving foreign states pursuant to 28 U.S.C. § 1330(a). Sberbank maintains that it is a foreign state as defined in the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. § 1603(a), which states that a "foreign state" "includes a political subdivision of a foreign state or an agency or instrumentality of a foreign state as defined in subsection (b)." 28 U.S.C. § 1603(a). Under subsection (b), an "agency or instrumentality of a foreign state" is defined as an entity:

(1) which is a separate legal person, corporate or otherwise, and
(2) which is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof, and
(3) which is neither a citizen of a State of the United States as defined in section 1332(c) and (d) of this title, nor created under the laws of any third country.

28 U.S.C. ยง 1603(b). Parex does not dispute that Sberbank meets prongs (1) and (3) of subsection (b). The inquiry thus hinges on prong (2), i.e., whether (i) Sberbank is an organ of a foreign state or political subdivision thereof; or (ii) a majority of Sberbank's shares or other ownership interest is owned by a foreign state or political subdivision thereof. Sberbank maintains that it satisfies both (i) and (ii). Because ...


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