Belgrade v. Sidex Intern. Furniture Corp.
| Decision Date | 31 March 1998 |
| Docket Number | No. 97 Civ. 3376(LAK).,No. 97 Civ. 3912(LAK).,No. 97 Civ. 6478(LAK).,No. 97 Civ. 3913(LAK).,97 Civ. 3376(LAK).,97 Civ. 3912(LAK).,97 Civ. 3913(LAK).,97 Civ. 6478(LAK). |
| Citation | 2 F.Supp.2d 407 |
| Parties | Jugobanka A.D. BELGRADE, Plaintiff, v. SIDEX INTERNATIONAL FURNITURE CORPORATION, et al., Defendants. Jugobanka A.D. BELGRADE, Plaintiff, v. U.C.F. INTERNATIONAL TRADING, INC., et ano., Defendants. Jugobanka A.D. BELGRADE, Plaintiff, v. EURO INTERNATIONAL PTY., LTD., et ano., Defendants. Jugobanka A.D. BELGRADE, Plaintiff, v. SK PRODUCTS CORP., et ano., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Deyan Ranko Brashich, New York, NY, for plaintiff.
Ariane D. Austin, Andrew J. Rossman, Jonathan M. Jacobson, Akin, Gump, Strauss, Hauer & Feld, L.L.P., New York, NY, Edward O. Delaney, Frank McCloskey, Bart A. Karwath, Mark J. Dinsmore, Barnes & Thornburg, Indianapolis, IN, for defendants Sidex International Furniture Corporation, S.O.U.R. Sipad, Sarajevo, and its successor in interest Sipad Holding Sarajevo, Sipad Export-Import, Sarajevo, and its successor in interest, Sipad Export-Import, Sarajevo.
Carolyn T. Ellis, Coudert Brothers, New York, NY, for defendants Slovenijales D.D., U.C.F. International Trading, Inc., and SK Products Corp.
Wendy H. Schwartz, Assistant United States Attorney, Mary Jo White, United States Attorney, Steven D. McCreary, David R. Andrews, United States Department of State, Washington, DC.
In the early part of the 1990's, the secession of Slovenia, Croatia, and Bosnia and Herzogovina led to the dissolution of the Socialist Federated Republic of Yugoslavia ("SFRY"). Tidal forces driven by ethnic, religious, and nationalistic rivalries in the wake of that collapse have inflicted an extended period of strife on the region. These four actions are part of that turmoil.
Jugobanka A.D. Belgrade ("Jugobanka"), a banking corporation organized under the laws of the Federal Republic of Yugoslavia (Serbia & Montenegro) ("FRY (S & M)"), claims to be the successor of Jugobanka United Bank ("United") and Jugobanka D.D. Belgrade ("DD Belgrade"), both of which were organized under the laws of the SFRY. It here sues to collect ostensibly ordinary commercial debts and guarantees contracted by the defendants with United and DD Belgrade prior to the dissolution of the SFRY.
The defendants contend that the concededly defaulted obligations may not be pursued here because (1) Jugobanka is an agency or instrumentality of the FRY (S & M), an unrecognized foreign state, and therefore lacks standing, and (2) the adjudication of these claims would require the Court to address non-justiciable political questions relating to the dissolution of the SFRY. They assert, moreover, that the loans at issue were made from the currency reserves of the central bank of the former SFRY in furtherance of a governmental export program and therefore are assets of the SFRY. In defendants' submission, to permit plaintiff, allegedly an instrumentality of the FRY (S & M), to recover would provide these assets to the FRY (S & M) in derogation of the rights of the four other putative successors of the SFRY. One of the defendants, moreover, has asserted counterclaims by which it seeks to hold Jugobanka liable for alleged confiscation by the FRY (S & M) of its assets located in the territory of the FRY (S & M).
As noted, Jugobanka is a banking corporation organized under the laws of the FRY (S & M). It contends that it is the sole successor to DD Belgrade, formerly United, which were organized under the laws of the SFRY.1
The defendants in three of the actions (the "Slovenijales Actions") are Slovenijales D.D. ("Slovenijales") and three of its affiliates, U.C.F. International Trading, Inc. ("UCF"), SK Products Corp. ("SK"), and Euro International Pty., Ltd. ("Euro"). Although Slovenijales now is a privately owned manufacturing and export corporation organized under the laws of the Republic of Slovenia, its roots are found in the Communist past of the former SFRY. It was organized in 1948 as a "state-owned republic commercial enterprise." It was reconstituted as a "socially-owned" company in 1974 before being privatized in 1996. Its affiliates, UCF, SK and Euro, all are organized under the laws of western nations.
The defendants in the fourth action (the "Sidex Action") are Sidex International Furniture Corporation ("Sidex"), Sipad Export-Import Sarajevo ("SEI"), S.O.U.R. Sipad, Sarajevo ("SOUR"), and Sipad Holding Sarajevo ("SHS"). SEI is organized under the laws of, and owned by, the Federation of Bosnia and Herzegovina ("FBH"). Sidex is a New York corporation and wholly owned subsidiary of SEI. SOUR was a "composite organization of associated labor" organized under the laws of the former SFRY. SHS, successor-in-interest to SOUR, is a company organized under the laws of, and owned by, the FBH.
At the heart of these lawsuits are credit facilities and guarantees executed between the various defendants and both United and DD Belgrade. They may be summarized as follows:
Year Credit Facility Lender Obligor Guarantor
Amount
-------------------------------------------------------------------------------------
1989 $300,000 United Euro Slovenijales
1989 $6,500,000 United Sidex SEI and SOUR
1990 $300,000 DD Belgrade Euro Slovenijales
1990 $350,000 DD Belgrade UCF Slovenijales
1990 $5,000,000 DD Belgrade SK Slovenijales
1990 $6,500,000 DD Belgrade Sidex SEI and SOUR
The credit lines have been drawn down either fully or to a substantial extent. Initial demand was made at some point between June 1, 1992 and June 5, 1993.2 Subsequent attempts to negotiate a settlement were unsuccessful.3 Jugobanka now seeks to collect the balances allegedly due.
In reaction to the Yugoslav crisis, the United States has taken a number of actions, some of which are relevant here.
On May 30, 1992, President Bush, acting under International Emergency Economic Powers Act ("IEEPA"),4 issued an executive order blocking "all property and interests in property in the name of the Government of the Socialist Federal Republic of Yugoslavia or the Government of the Federal Republic of Yugoslavia that are in the United States...."5 On April 25, 1993, President Clinton blocked property and interests in property of all commercial, industrial, and public utility entities organized or located in the FRY(S & M).6 These and other executive orders have been implemented by the Department of the Treasury through the Federal Republic of Yugoslavia (Serbia and Montenegro) and Bosnian Serb-Controlled Areas of the Republic of Bosnia and Herzegovina Sanctions Regulations (the "Blocking Regulations").7 The Blocking Regulations specifically identify DD Belgrade as a "blocked entity."8
The Blocking Regulations prohibit transfer of any property or interest in property of a blocked entity without a license from the Office of Foreign Asset Control ("OFAC") in the Department of the Treasury.9 Any "attachment, judgment, decree, lien, execution, garnishment, or other judicial process" pertaining to blocked property is "null and void" with respect to that property absent an OFAC license.10
Jugobanka filed each of these actions in New York Supreme Court, New York County in early 1997. Each complaint alleges that the defendants, prior to March 31, 1993, defaulted on their obligations relating to the lines of credit extended by United and DD Belgrade and, further, that Jugobanka is the entity entitled to enforce these loan agreements. Slovenijales has counterclaimed for more than $20 million, alleging that Jugobanka is liable to it for seizure by the government of the FRY(S & M) of Slovenijales' assets in Serbia and Montenegro as well as the conversion by Jugoslovenska Izvozna i Kreditna Banka ("JIK Bank"), allegedly an FRY(S & M) instrumentality, of more than $7.5 million of deposits owned by Slovenijales. All four actions were removed to this Court.
All of the defendants seek dismissal of Jugobanka's complaints, either on their face or by summary judgment. Jugobanka moves to remand the Slovenijales actions to state court, for summary judgment on its claims in all four actions, to dismiss Slovenijales' counterclaims, and for a default judgment against Euro.11 The United States has filed a Statement of Interest in each action pursuant to 28 U.S.C. § 517.
The amended notice of removal in the Slovenijales Actions alleges that removal was proper on either of two grounds. First, Slovenijales asserts that it was an agency or instrumentality of a foreign sovereign at relevant times12 and therefore is entitled to a federal forum under the Foreign Sovereign Immunities Act ("FSIA").13 The removing defendants allege also that the Court has federal question jurisdiction14 because the adjudication of Jugobanka's claims would require interpretation of the Blocking Regulations and involve "fundamental issues of foreign policy."15
Any civil action brought in a state court against a "foreign state" may be removed by the foreign state to the district court for the district in which the action is pending.16 "Foreign state" is defined to include an "agency or instrumentality of a foreign state."17 An "agency or instrumentality" in turn is defined in relevant part as an entity "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."18
The removal petition alleges that Slovenijales, the removing defendant, was owned by the Republic of Slovenia, a...
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