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CITY OF NEW YORK v. PERMANENT MISSION OF INDIA

July 6, 2005.

THE CITY OF NEW YORK, Plaintiff,
v.
THE PERMANENT MISSION OF INDIA TO THE UNITED NATIONS, GREATAMERICA LEASING CORPORATION, and "JANE DOE #1" through "JANE DOE #20", the names of the last 20 defendants being unknown to plaintiff, the person or parties intended to be, persons or corporations, if any, having or claiming an interest in or lien upon the property described in the complaint, Defendants. THE CITY OF NEW YORK, Plaintiff, v. THE BAYARYN JARGALSAIKHAN, AS PRINCIPAL RESIDENT REPRESENTATIVE TO THE UNITED NATIONS OF THE MONGOLIAN PEOPLE'S REPUBLIC, and "JANE DOE #1" through "JANE DOE #20", the names of the last 20 defendants being unknown to plaintiff, the person or parties intended to be, persons or corporations, if any, having or claiming an interest in or lien upon the property described in the complaint, Defendants.



The opinion of the court was delivered by: RICHARD CASEY, District Judge

MEMORANDUM & ORDER

In these actions the City of New York ("City") seeks declaratory judgments that it has valid tax liens against two properties in Manhattan — one owned by the Permanent Mission of India to the United Nations ("India") and the other by the Bayaryn Jargalsaikhan as the Principal Resident Representative of the Mongolian People's Republic to the United Nations ("Mongolia") — as a result of unpaid real-property taxes, other charges, and interest. India and Mongolia ("Defendants") have moved to dismiss the complaints against them on the ground that they are immune from suit under the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. § 1604. On what appears to be a matter of first impression in this Circuit, the Court concludes that India and Mongolia are not immune from suit because rights in immovable property situated in the United States are in issue. Accordingly, Defendants' motions are DENIED.

I. BACKGROUND

  India and Mongolia use their respective properties as office and residential space related to their Missions to the United Nations. Since 1993, India has used the first six floors, basement, and cellar of its property for Mission offices and accessory space. (Ruchira Kamboj Aff. ¶ 3.)*fn1 Floors seven through twenty-six contain residential apartments, in which Mission diplomats and their families reside. (Id. ¶¶ 3-4.) Security personnel and a driver are housed on the seventh floor. (Id. ¶ 5.) No resident of the building pays rent or other costs of housing. (Id. ¶ 7.) Mongolia has used its premises for Mission office and residential space since 1980. (See Gansukh Purevjav Aff. ¶ 3.) The six-story building provides offices and housing for the Ambassador-Permanent Representative to the United Nations, four other diplomats, and an administrative officer and driver. (Id. ¶ 2.)

  The City contends that Defendants must pay real-property taxes on those portions of the buildings that are used neither as Mission office space nor as an official residence for the countries' resident representatives to the United Nations with rank of ambassador or minister plenipotentiary. The City alleges that floors seven through twenty-six of India's premises are taxable because they are used exclusively as residences for staff below the rank of ambassador. India allegedly owes $16,376,702.09 in unpaid real-estate taxes, other charges, and interest accrued as of January 31, 2003. Mongolia allegedly has failed to pay $2,068,995.00 in real-estate taxes and interest accrued as of January 31, 2003. The sums sought stem from Mongolia's use of the fourth and fifth floors of its premises as residential space for staff ranking below the Mongolian Ambassador to the United Nations.

  New York law requires the payment of real-estate taxes on portions of foreign-government property that is not "used exclusively for the purposes of maintaining offices or quarters, for [the principal resident representative or resident representative with the rank of ambassador or minister plenipotentiary], or offices for the staff of such representatives." N.Y. Real Prop. Tax Law § 418(1). New York law further provides, "If a portion only of any lot or building of any such [foreign] government or [principal resident] representative is used exclusively for the purposes herein described, then such portion only shall be exempt and the remainder shall be subject to taxation unless otherwise exempt from taxation by law."*fn2 Id.

  The City originally brought suit in New York State Supreme Court to enforce payment of the unpaid taxes assessed against those portions of the buildings alleged not to be exempt from taxation under the New York Real Property Tax Law. Defendants removed the cases to this Court pursuant to 28 U.S.C. § 1441(d), which provides for removal by a foreign state of any suit brought against it in state court. After jurisdictional discovery, Defendants moved to dismiss the suits against them for lack of subject matter jurisdiction. The Court received consolidated briefing and argument on the motions, which address the identical issue: whether this Court has jurisdiction under the FSIA to eventually adjudicate the validity of the tax liens.

  II. DISCUSSION

  The FSIA provides the sole basis for a court in the United States to exercise subject matter jurisdiction in a suit against a foreign state.*fn3 Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 439 (1989). Under the FSIA, a foreign state is presumed to be immune from suit. See Saudi Arabia v. Nelson, 507 U.S. 349, 355 (1993). The party seeking to sue a sovereign bears the burden of overcoming this presumption by showing that a specific immunity exception applies. See Virtual Countries, Inc v. Republic of South Africa, 300 F.3d 230, 241 (2d Cir. 2002). The City asserts that the FSIA exception to immunity from suit in any case "in which rights . . . in immovable property situated in the United States are in issue," 28 U.S.C. § 1605(a)(4), removes immunity here.*fn4 A. Defendants Are Not Entitled To Immunity Under the FSIA

  The Court must begin its task of statutory interpretation with Congress's chosen language. See Barnhart v. Sigmon Coal Co., 534 U.S. 438, 450 (2002) ("As in all statutory construction cases, we begin with the language of the statute."). As just mentioned, the FSIA provides that a foreign nation will be required to litigate suits implicating "rights in immovable property." But, as then-Judge Scalia has explained, the FSIA's use of this phrase is not very enlightening: "[T]he term `rights in immovable property' is an imprecise one, susceptible of as many different meanings as there are areas of law for which that characterization of an interest may be relevant." Asociacion de Reclamantes v. United Mexican States, 735 F.2d 1517, 1521 (D.C. Cir. 1984). Faced with this ambiguity, to determine what Congress intended to include within the immovable-property exception the Court must look to extraneous sources — international practice at the time the FSIA was enacted and the exception's legislative history. See id. (examining legislative history and the FSIA's purposes to determine what Congress meant by the language used in the immovable-property exception).

  1. International Practice When The FSIA Was Enacted

  Prior to 1952, federal courts in the United States, following the position of the State Department, generally granted foreign sovereigns complete immunity from suit. Verlinden B.V. v. Cent. Bank of Nig., 461 U.S. 480, 486 (1983). In 1952, the State Department's policy changed, as reflected in a letter that Acting Legal Advisor Jack B. Tate sent to the U.S. Attorney General ("Tate Letter"). See Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 711-15 (1976) (plurality opinion) (reprinting the Tate Letter). The Tate Letter signified a shift from the absolute to a more restrictive theory of foreign sovereign immunity. Verlinden B.V., 461 U.S. at 487. "Under the restrictive, as opposed to the `absolute,' theory . . ., a state is immune from the jurisdiction of foreign courts as to its sovereign or public acts (jure imperii), but not as to those that are private or commercial in character (jure gestionis)." Nelson, 507 U.S. at 359-60. Despite these competing views, the Tate Letter explained that, "[t]here is agreement by proponents of both theories, supported by practice, that sovereign immunity should not be claimed or granted in actions with respect to real property (diplomatic and perhaps consular property excepted)." Tate Letter, reprinted in Alfred Dunhill, 425 U.S. at 711.

  The restrictive theory of foreign sovereign immunity, set forth in the Tate Letter, was ultimately codified by the FSIA. See H.R. No. 94-1487, at 7 (1976), reprinted in 1976 U.S.C.C.A.N. 6604, 6605 ("[T]he bill would codify the so-called `restrictive' principle of sovereign immunity, as presently recognized in international law."); see also Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 612-13 (1992) (holding that the FSIA largely codifies the restrictive theory and that its terms must be read against the backdrop of international practice at the time the FSIA was enacted). The FSIA also adopted the Tate Letter's view that a sovereign may be sued with respect to real property. Asociacion de Reclamantes, 735 F.2d at 1521 (explaining that "[t]he immovable property exception was enacted to codify, with minor modifications . . ., the pre-existing real property exception to sovereign immunity recognized by international practice"). Accordingly, the House of Representatives Report on the FSIA notes that the immovable-property exception "denies immunity in litigation relating to rights in real estate . . . located in the United States. It is established that, as set forth in the `Tate Letter' of 1952, sovereign immunity should not be granted in actions with respect to real property, diplomatic and consular property excepted." H.R. Rep. No. 94-1487, at 20, 1976 U.S.C.C.A.N. at 6618-19. The immovable-property exception was thus included in the FSIA in an effort to codify what the Tate Letter generally referred to as settled international practice under the restrictive, and even the absolute, theories of foreign sovereign immunity. But the FSIA itself sheds little light on what in 1976 was the settled international practice as to whether or when a sovereign could be sued in a real-property dispute. In addition, the FSIA does not discuss what the Tate Letter meant when it referred to "diplomatic and . . . consular property" as being excepted from immunity. See Tate Letter, reprinted in Alfred Dunhill, 425 U.S. at 711. The answers to these matters serve as guideposts to whether Defendants may be subject to suit here.

  International practice at the time of the FSIA's enactment "declined to extend the immunity of a foreign sovereign to `an action to obtain possession of or establish a property interest in immovable property located in the territory of the state exercising jurisdiction.'" Asociacion de Reclamantes, 735 F.2d at 1521 (quoting Restatement (Second) of Foreign Relations Law of the United States § 68(b) (1965)). According to the Second Restatement, "[t]he immunity from jurisdiction of a foreign state [did] not extend to actions for the determination of possession of, or an interest in, immovable or real ...


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