argument outlined above is not the inevitable result of a literal reading
of the statute.
Next, the first clause of Section 1603(b)(2) makes a political
subdivision of a foreign state an "agency or instrumentality" of that
state. By the same reasoning that would treat a first-tier subsidiary as
an "agency or instrumentality" of the state as a "foreign state," this
clause would equate a "political subdivision" of the state as a "foreign
state." But if a political subdivision were the statutory equivalent of a
"foreign state," the phrase "or political subdivision" in Section 1603(b)
would be superfluous. In consequence, the use of "political subdivision"
in Section 1603(b) suggests that a second-tier subsidiary is not a
Finally, if Congress intended that an "agency or instrumentality" of a
foreign state within the meaning of Section 1603(b) be indistinguishable
from a "foreign state" for purposes of Section 1603(a), it is difficult
to see why Section 1603(b)(2) does not refer to an "agency or
instrumentality" as one whose ownership of the majority of the shares of
another company would render that company itself an "agency or
instrumentality" of a foreign state.*fn14 In other words, if Congress
had intended a second-tier subsidiary to be a "foreign state" within the
meaning of Section 1603(a), a much clearer way to express that thought
would have been for the second clause of Section 1603(b)(2) to read "or a
majority of whose shares or other ownership interest is owned by a
foreign state or an agency or instrumentality or political subdivision
thereof . . ." The omission of the italicized words or their substantial
equivalent thus leaves the literalist approach to the statute somewhat
less than conclusive.
Where, as here, the statutory language leaves considerable doubt as to
Congress' intention, it is appropriate to look to the legislative history
and to construe the language in its light.
And that history provides considerable help in resolving this case.
"[T]he jurisdiction imparted by the FSIA is premised
upon specific considerations of international comity
and non-interference with the executive branch's
foreign policy authority.
`[E]nactment of the FSIA was in response to unique
policy considerations touching on the international
relations of the United States. . . . Indeed, the
Supreme Court has acknowledged Congress' deliberate
intent to circumvent much of the potential for
interference with the federal government's foreign
relations caused by lack of uniformity and local
bias in civil caselaw [sic] involving foreign states
as defendants by channeling private actions against
foreign sovereigns away from the state forums and
into federal courts to be adjudicated in nonjury
In other words, one of the principal reasons for the broad grant of
federal subject matter jurisdiction in the FSIA was to ensure, so far as
possible, that a federal forum would be available where the interests of a
foreign nation are involved in a manner which might affect the ability of
the executive branch to conduct successful foreign policy. A niggardly
of the provisions defining "foreign state" could render the Act
inapplicable even where foreign government interest in the entity before
the Court could have substantial foreign policy implications.
Against this background, the question before the Court comes into
sharper focus. Where, as here, a foreign government owns eighty percent
of the beneficial interest in an entity, particularly its national air
carrier, there can be little doubt that the interests of the foreign
sovereign are implicated to an extent sufficient to bring the case within
the intended ambit of the statutory language.
Plaintiff resists this conclusion, contending that this construction of
the FSIA would lead, in the Seventh Circuit's words, to "infinite
looping"*fn16 — treating a corporation far removed from any
foreign government as a "foreign state" because a majority of its shares
is held by a company, a majority of whose shares is owned by another
company, and so on ad infinitum until the top company is majority-owned
by a foreign state — and therefore to absurd results.*fn17 The
argument, to be sure, has its appeal. At the simplest level, if Nation A
owned 51 percent of Company B and Company B owned 51 percent of Company
C, the beneficial interest of Nation A in Company C would be
approximately 25 percent. Far more egregious examples could be
constructed. And even in this simple example, the case for treating
Company C — three-quarters of which would be in private ownership
— as a "foreign state" would be considerably weaker than for so
treating SAA. But "infinite looping" is not an inevitable consequence of
construing Section 1603(b)(2) so as to make SAA, by virtue of Transnet's
ownership of eighty percent of its shares, an "agency or instrumentality"
of the Republic of South Africa. One might well read the statute, for
example, as bringing second- and lower-tier subsidiaries of a foreign
nation within the definition of "foreign state" provided that the foreign
government beneficially owns a majority of the shares of the entity in
question. This would bring within the statute, for example, an nth-tier
subsidiary, all of the shares of which were held by a company at the
bottom of a long chain of foreign government subsidiaries, all of the
shares of each of which was held by the company above it, all the way up
the chain to the foreign government itself, but exclude from its
protection Company C in the example earlier in this paragraph. Both of
these results would be entirely consistent with the overall policy of the
Act. Both would have the added virtue of giving effect to the substance
of a foreign government's interest rather than to the form of ownership.
But there is no need to formulate any such rule today. Suffice it to say
now that where, as here, the Republic of South Africa owns an eighty
percent beneficial interest in SAA, the fact that it does so indirectly,
through its wholly owned subsidiary Transnet, rather than directly, is
immaterial to the analysis. This Court holds that SAA is an "agency or
instrumentality" of South Africa and therefore a "foreign state" for
purposes of the FSIA.
For the foregoing reasons, the plaintiff's motion to remand the
case to New York State Supreme Court, Bronx County is denied.