Vencedora Oceanica Navigacion, S.A. v. Compagnie Nationale Algerienne De Navigation (C.N.A.N.)

Decision Date05 April 1984
Docket NumberNo. 82-2133,82-2133
Citation730 F.2d 195
PartiesVENCEDORA OCEANICA NAVIGACION, S.A., Appellant-Plaintiff, v. COMPAGNIE NATIONALE ALGERIENNE DE NAVIGATION (C.N.A.N.) and The Republic of Algeria, Appellees-Defendants.
CourtU.S. Court of Appeals — Fifth Circuit

Ed Bluestein, Jr., Houston, Tex., Donald M. Waesche, New York City, for appellant-plaintiff.

Joseph Newton, Houston, Tex., for appellees-defendants.

Appeal from the United States District Court for the Southern District of Texas.

Before RANDALL and HIGGINBOTHAM, Circuit Judges, and McDONALD *, District Judge.

PER CURIAM:

The plaintiff, Vencedora Oceanica Navigation, S.A. ("Vencedora"), a Panamanian corporation and the owner of the vessel M/V KAPETAN MARCOS, N.L., brought this action against defendants Compagnie Nationale Algerienne De Navigation (C.N.A.N.) ("CNAN"), an instrumentality of the Algerian government, and the Republic of Algeria to recover for the loss of its vessel. Vencedora's claim is brought under Fed.R.Civ.P. 9(h), allowing maritime claims, and the Foreign Sovereign Immunities Act of 1976 ("FSIA" or the "Act"). 1 The district court dismissed Vencedora's action against defendants because it lacked subject matter and personal jurisdiction. For the reasons set forth below, we affirm.

FACTUAL AND PROCEDURAL BACKGROUND

On October 27, 1980, the KAPETAN MARCOS sailed from the Port of Sidi Kerir, Egypt, laden with a cargo of approximately 70,000 tons of Arabian crude oil en route to Coronna, Spain. At approximately 10:00 p.m. on October 31, 1980, there was a fire in the crews' quarters of the vessel. With the vessel about 280 miles from Palermo, Sicily and about 170 miles from Bejaia, Algeria, the officers and crew abandoned ship and were rescued by the T/V ESSO CAMBIA, which took the survivors to the Port of Annaba, Algeria. CNAN, an Algerian owned corporation that supervises Algeria's harbor and coastal tugs, ordered its tugs to render salvage assistance to the KAPETAN MARCOS. Upon the tugs' arrival at the scene, KAPETAN MARCOS' managing agent ordered that the ship be towed to Palermo, Sicily. CNAN, however, ordered its tugs to tow the vessel to the Algerian Port of Bejaia, and the tugs complied with this order.

When the KAPETAN MARCOS arrived in Bejaia, her value in this damaged condition was between $3 and $3.5 million, and her cargo had an estimated value of about $18.5 million. A dispute soon developed between CNAN and the owners of the ship and cargo over the sum that should be posted in Algeria as security for CNAN's salvage services. At the request of CNAN, representatives of both hull and cargo, together with their English solicitors, went to Algeria in November 1980 to negotiate the amount of the bond to be posted for release of the ship.

CNAN first demanded $27 million in security for its salvage services, a sum well in excess of the value of the salved property. By the end of the November negotiations, CNAN was demanding that $15.75 million be posted in Algeria as security while the English solicitors offered to post security in the amount of $5 million in Algeria or $15.75 million in a neutral forum, such as France or the United Kingdom. These proposals were rejected and CNAN proceeded with a seizure for security of the KAPETAN MARCOS and her cargo by application to the Bejaia Court, Commercial Section.

The Algerian Minister of Transportation and Director General of the Merchant Marine ordered the vessel removed from the port because it constituted a threat to public safety. In late November or early December 1980, pursuant to court order, the KAPETAN MARCOS, together with her cargo, was towed by CNAN tugs from Bejaia, Algeria, to the Port of Arzew, Algeria. On December 21, 1980, a storm hit the Port of Arzew. The KAPETAN MARCOS, which had been under the control of the Algerian authorities since she was first brought to Bejaia, Algeria, in November On January 14, 1981, Vencedora's representatives received a telex from the Algerian government stating that the vessel had become a "wreck" within the terms of the Algerian Maritime Code. On March 16, 1981, the Algerian government informed Vencedora's agent in London that its requests for the removal of KAPETAN MARCOS from the Algerian maritime area had not been honored and that the procedures for the stripping of Vencedora's rights had commenced. 2 On March 17, Vencedora replied that CNAN had made it impossible for the owners to remove the vessel and its cargo from the Algerian maritime area. Upon Vencedora's failure to remove the wreck, its ownership rights in the vessel were declared forfeited under the Algerian Maritime Code. 3 However, to date, the wreck has not been removed and the sale procedure provided by the Algerian Maritime Code has not commenced.

1980, went aground. The vessel's engine room flooded and Vencedora believes that the vessel has sustained additional body damage.

Vencedora alleges that CNAN and the Algerian government have tortiously deprived it of its vessel and have "caused and permitted [the vessel] to become a constructive, total loss." The defendants filed a motion to dismiss (1) for lack of subject matter jurisdiction and personal jurisdiction under FSIA; (2) for failure to state a claim upon which relief can be granted; and (3) on the grounds of forum non conveniens.

The district court granted the 12(b)(1) motion, holding that the defendants were immune from the jurisdiction of the court under the FSIA. Vencedora had argued that the defendants were not shielded by the Act because their conduct had caused them to fall within the "expropriation" exception to immunity under the FSIA. 28 U.S.C. Sec. 1605(a)(3). The court found this sub-section to be inapplicable:

There is no question that rights in property allegedly taken in violation of international law are at issue in this action. However, there is no indication that the M/V KAPETAN MARCOS N.L., or any property exchanged for the vessel, is "owned or operated" by the Defendants. Because none of the narrow exceptions to the jurisdictional immunity of foreign states delineated in the Act applies to the case, this Court reluctantly determines that it lacks jurisdiction ....

The court later denied Vencedora's motion for rehearing, holding that the first clause of the "commercial activities" exception in Vencedora makes two objections to the district court's decision. First, Vencedora contends that the lower court erred in holding that it lacked subject matter jurisdiction over the cause of action by reason of the first clause of section 1605(a)(2) of the Act. Second, Vencedora contends that the district court erred in holding that neither the KAPETAN MARCOS nor property exchanged for it was "owned or operated" by CNAN and Algeria under section 1605(a)(3). We address each contention in turn.

section 1605(a)(2) was also inapplicable. Vencedora now appeals.

FOREIGN SOVEREIGN IMMUNITY

The FSIA was enacted to bring a degree of unity to the disposition of legal claims against foreign governments by removing the executive branch as the arbitrator of such claims and entrusting that responsibility to the judiciary. Prior to the enactment of the Act, the federal courts' power to assert jurisdiction over foreign states was controlled by two theoretically distinct doctrines: absolute sovereign immunity and "restrictive" sovereign immunity. See generally Cardoza, A Note On Sovereign Immunity, 17 Va.J.Int'l.L. 491 (1977); Lauterpacht, The Problem of Jurisdiction Immunities of Foreign States, 28 Brit.Y.B.Int'l.L. 220 (1951).

Until 1952, the State Department usually requested immunity in all actions against friendly foreign sovereigns. 4 But in the so-called "Tate Letter," 5 the State Department announced its adoption of the "restrictive" theory of sovereign immunity. Under this theory, immunity is confined to suits involving the foreign sovereign's public acts, and does not extend to cases arising out of a foreign state's strictly commercial acts. See Verlinden B.V. v. Central Bank of Nigeria, --- U.S. ----, 103 S.Ct. 1962, 1968, 76 L.Ed.2d 81 (1983). In suits where a foreign state attempted to invoke absolute immunity as a defense, the executive branch examined the foreign state's activity, and the courts' grant of immunity turned on the outcome of the State Department's categorization of the conduct giving rise to the complaint. See Victory Transport, Inc. v. Comisaria General de Abastecimientos y Transportes, 336 F.2d 354 (2d Cir.1964), cert. denied, 381 U.S. 934, 85 S.Ct. 1763, 14 L.Ed.2d 698 (1965). See also, Republic of Mexico v. Hoffman, 324 U.S. 30, 65 S.Ct. 530, 89 L.Ed. 729 (1945); Ex parte Peru, 318 U.S. 578, 63 S.Ct. 793, 87 L.Ed. 1014 (1943); Spacil v. Crowl, 489 F.2d 614 (5th Cir.1974).

With its accommodation of diplomatic and political concerns, the State Department often lacked consistency, measured in legal terms, in applying the restrictive theory of immunity. See Verlinden, supra, at 1968. In response, the Departments of State and Justice proposed the FSIA to Congress. Passed in 1976, the FSIA codified the restrictive theory of sovereign immunity and attempted to provide a uniform statutory procedure for establishing subject matter and personal jurisdiction over foreign sovereign entities. Through the FSIA, Congress intended to eliminate the role of the State Department in the determination of the scope of foreign sovereign immunity and provide a regularized remedy against foreign commercial entities. See generally H.R.Rep. No. 94-1487, 94th Cong., 2d Sess., reprinted in 1976 U.S.Code The FSIA 6 grants sovereign immunity to foreign states, 7 their agencies and instrumentalities, except as otherwise provided by the Act. 8 There is personal jurisdiction when foreign states are served with adequate notice as specified in the Act 9 and when subject matter jurisdiction is present. 28 U.S.C. Sec. 1330(b) (1982)....

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