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Bulgartabac Holding Ad v. Republic of Iraq

September 30, 2009

BULGARTABAC HOLDING AD, PLAINTIFF,
v.
THE REPUBLIC OF IRAQ, NATIONAL TOBACCO STATE ENTERPRISE, THE CENTRAL BANK OF IRAQ, & RAFIDAIN BANK, DEFENDANTS.



The opinion of the court was delivered by: Richard J. Holwell, District Judge

MEMORANDUM OPINION AND ORDER

In this action, plaintiff Bulgartabac Holding AD seeks to recover on two contracts for the sale of cigarettes that its predecessor in interest entered into with agencies of the Republic of Iraq before the first Gulf War. Three of four defendants have moved to dismiss the action on the grounds that they are immune from suit under the Foreign Sovereign Immunities Act of 1976, 28 U.S.C. § 1602 (2006) ("FSIA" or the "Act"), and the action is time-barred. Bulgartabac contends that this Court has jurisdiction, because defendants undertook to pay it through the Bulgarian Foreign Trade Bank ("BFTB" or "Bulbank") in New York. Bulgartabac further contends that its cause of action did not accrue until 2007, and, alternatively, that the statute of limitations was equitably tolled by statements made by the Iraqi defendants during the thirteen-year international embargo against Iraq that commenced in 1990.

For the reasons that follow, the Court finds that Bulgartabac has made a sufficient jurisdictional showing to survive defendants' motion to dismiss. The Court, however, agrees with defendants that the action is not timely. Accordingly, defendants' motion to dismiss will be granted on non-jurisdictional grounds.

I. BACKGROUND

Plaintiff is a holding company and the successor in interest to the former Bulgarian state tobacco company, Bulgartabac. (Compl. ¶ 2.) Moving defendants are the Republic of Iraq, the Central Bank of Iraq ("CBI"), and Rafidain Bank ("Rafidain"). As the Second Circuit has noted previously, CBI is Iraq's central banking authority and is analogous to the Federal Reserve in the United States. Commercial Bank of Kuwait v. Rafidain Bank, 15 F.3d 238, 239 (2d Cir. 1994) ("Rafidain I"). Rafidain is a commercial bank that is wholly owned by the Republic of Iraq. Id. Both CBI and Rafidain are "agenc[ies] or instrumentalit[ies] of a foreign state" under the FSIA. Id.; see 28 U.S.C. § 1603(b).*fn1

Bulgartabac's claims against these defendants arise out of four layers of agreements that it or other Bulgarian entities entered into with agencies of the Republic of Iraq in the 1980s. The agreements are not easy reading. But to understand the jurisdictional issues raised by defendants' motion, it is necessary to consider each of them in some detail.

A. Layer One: Framework Agreements of the Bulgarian-Iraqi Joint Committee for Economic, Scientific, and Technical Cooperation

The first layer of agreements consists of two agreements entered into by the Bulgarian and Iraqi contingents of the Joint Bulgarian-Iraqi Committee for Economic, Scientific, and Technical Cooperation. In February 1986, the Joint Committee met in Baghdad. (See Compl. Ex. A1, at 1.) According to the meeting's minutes, the committee agreed that certain exports from Bulgaria to Iraq would be paid for on a deferred basis. "List A," appended to the minutes, identifies "[p]rojects to be implemented by Bulgarian organizations in Iraq on deferred payment basis." (Id. at 4.)*fn2 "List B" identifies "Bulgarian goods oriented for exportation to Iraq on a deferred payment basis," including "[t]obacco," "[c]igarette Baghdad brand," and "[o]ther brands of cigarettes." (Id. at 5.) The final list, which is unlabelled, identifies "Bulgarian goods oriented for exportation to Iraq on a deferred use basis." (Id. at 6.)

In March 1987, the Joint Committee met in Sofia, Bulgaria. (See Compl. Ex. A2, at 1.) According to a "Protocol" signed during this meeting, the Bulgarian and Iraqi contingents expressed their satisfaction with the results achieved during the prior year. They felt that wider opportunities existed for future cooperation. (Id.)

B. Layer Two: "Banking Arrangements" Implementing the Framework Agreements

The second layer of agreements consists of three "banking arrangements" implementing the Joint Committee's February 1986 agreement that payments for certain exports from Bulgaria to Iraq would be made on a deferred basis. Each arrangement was entered into by Bulbank and CBI, was signed on July 1, 1986, and specified that it would remain valid "until the final settlement of all obligations, ensuing there[from]." (Compl. Ex. D, at 1, 6; Compl. Ex. E [Weaver], at 1, 6; Compl. Ex. E [Pl.'s Exs.], at 1, 6.)*fn3

The banking arrangement most directly relevant to this action is "Banking Arrangement No. 3." This agreement governed the timing of payments to certain Bulgarian exporters. It applied to "all payments due or which will fall due to the Bulgarian side in Convertible Currency during... 1986 under all existing Civilian and special Banking Arrangements and commercial Contracts...." (Compl. Ex. E [Weaver], at 1-2.)

Two provisions of the agreement relate to how and where CBI was to pay Bulbank. First, article 1 establishes a payment schedule for export contracts within the scope of the agreement. It provides:

[A]ll payments due or which will fall due to the Bulgarian side in Convertible Currency during... 1986 under all existing Civilian and special Banking Arrangements and commercial Contracts shall be settled as follows:

A. 50% shall be paid in 1986 in accordance with relevant Contracts and Banking Arrangement.

B. 50% shall be paid one year from the dates of maturity in accordance with relevant contracts and Banking Arrangements.

C. Deferred payments bear simple interest rate of 5 (Five) percent annum.

(Id. at 1-2.)

Second, article 3 specifies how payments under contracts within the scope of the agreement are to be effected. It provides:

"BulBank" shall send to (CBI) monthly [estimates] of the deferred payments.

"CBI" shall confirm them or shall advise its remarks if any, within 30 days from their receipt.

On the respective maturity dates, "CBI" shall credit the Accounts of "BulBank" with Credit Lyonnais, New -- York, in convertible US. Dollars with amounts of due payments mentioned in article 1 above plus their ...


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