Fg Hemisphere Associates v. Republique Du Congo
| Citation | 455 F.3d 575 |
| Decision Date | 10 July 2006 |
| Docket Number | No. 05-20042.,No. 04-20965.,04-20965.,05-20042. |
| Parties | FG HEMISPHERE ASSOCIATES, LLC, Plaintiff-Appellee, v. The RÉPUBLIQUE DU CONGO, Defendant-Appellant, CMS Nomeco Congo, Inc.; CMS Oil & Gas (Services) Co.; Nuevo Congo Co.; Nuevo Congo, Ltd., Garnishees-Appellants. FG Hemisphere Associates, LLC, Plaintiff-Appellee, v. The République du Congo, Defendant-Appellant. FG Hemisphere Associates, LLC, Plaintiff-Appellee, v. Republique du Congo, Defendant-Appellant, CMS Nomeco Congo Inc.; Nuevo Congo Co.; Nuevo Congo Ltd,; Garnishees-Appellants. FG Hemisphere Associates LLC.; Plaintiff-Appellee, v. The Republique du Congo; Defendant-Appellant. |
| Court | United States Courts of Appeals. United States Court of Appeals (5th Circuit) |
Robert Nathan Hochman (argued), Sidley Austin, Chicago, IL, Dillon James Ferguson, Andrews & Kurth, Houston, TX Bradford A. Berenson, Sidley Austin, Washington, DC, for Plaintiff-Appellee.
Boaz S. Morag (argued), Cleary, Gottlieb, Steen & Hamilton, New York City, for Defendant-Appellant.
Guy Stanford Lipe (argued), Vinson & Elkins, Eleanor Herbert Hodges, Thompson & Knight, Houston, TX, Andrew B. Derman, Thompson & Knight, Dallas, TX, for Garnishees-Appellants.
Appeals from the United States District Court for the Southern District of Texas.
Before BARKSDALE, STEWART and CLEMENT, Circuit Judges.
Before the court are two interlocutory appeals challenging three district court orders authorizing execution against property of a foreign sovereign, the République du Congo ("the Congo"), and Société Nationale des Pétroles du Congo ("SNPC"), an oil company owned by the Congo. To satisfy its money judgment against the Congo, FG Hemisphere, LLC, filed suit against CMS Nomeco Congo Inc., The Nuevo Congo Co., and Nuevo Congo Ltd. (collectively "the Garnishees"), and the Congo and SNPC. In the first appeal, No. 04-20965 ("FG Hemisphere I"), the Garnishees challenge two October 2004 orders that authorized the execution in favor of FG Hemisphere against the Congo's right to receive in cash or in-kind royalties from the Garnishees, in exchange for allowing them to drill for oil in Congolese waters. In the second appeal, No. 05-20042 ("FG Hemisphere II"), the Congo and the Garnishees challenge a December 2004 order authorizing the issuance of garnishment writs in favor of FG Hemisphere against SNPC's right to receive a 12.5% working interest share of oil produced in the Congo. We consolidated the appeals for oral argument and, due to the overlapping issues presented in the appeals, we also consolidate them for disposition.
The Congo and the Garnishees (collectively "the Congo Defendants") appeal, arguing in FG Hemisphere I that it was error for the district court to authorize execution against the interest in royalties without a prior determination that the property met the Foreign Sovereign Immunities Act ("FSIA") requirements for an exception to the Congo's sovereign immunity from execution. In FG Hemisphere II, the Congo Defendants argue that SNPC's working interest share is not a "debt obligation" and that SNPC's right to receive working interest oil is immune from garnishment under the FSIA. The Congo Defendants also assert that, at the time of the challenged orders, the property was not in the United States and therefore, pursuant to the FSIA, could not be garnished.
To resolve each appeal, we must decide this res nova issue: at what point in time does property have to be in the United States for a court to determine whether the exception to the Congo's sovereign immunity from execution applies? We conclude that (1) the foreign sovereign's property must be in the United States when the district court determines whether the exception applies, and (2) prior to authorizing execution, the district court must find the facts necessary for the exception to apply. We further conclude in each appeal that the district court misapprehended the effect of applying the exception to immunity, and that the challenged writs of garnishment issued as a direct result of a misinterpretation and misapplication of law. Accordingly, we reverse the October and December 2004 orders and remand with instructions that the district court dissolve the writs of garnishment.
In 1982 the Congo entered into a loan agreement with Banco do Brasil S.A. FG Hemisphere is the owner of the rights of Banco do Brasil under that loan agreement. The Congo subsequently defaulted and FG Hemisphere obtained a judgment against the Congo in the Southern District of New York. In the loan agreement, the Congo expressly waived its right to immunity from execution.
FG Hemisphere sought to satisfy its money judgment against the Congo via garnishment of royalty obligations under which the Garnishees periodically deliver oil that is produced, stored, and delivered in Congolese territorial waters. The royalty obligations arose under a 1979 agreement ("the Convention"). The parties to the Convention were the Congo, Congolese Superior Oil Company, Cities Service Congo Petroleum Corporation, Canadian Superior Oil, Ltd., and Société Nationale de Recherches et d'Exploitation Pétrolières "Hydro-Congo." It appears that the Garnishees are successors in interest to three of these parties, with SNPC being the successor to Hydro-Congo.
Pursuant to the Convention, the Congo issued a permit, the Marine 1 permit, allowing the companies to drill for oil in exchange for royalties paid to the Congo. Under the Convention, the Congo has the right to elect to receive royalties in cash or in-kind, but since 1999, the Congo has elected to receive the payments in-kind. The Garnishees and SNPC are the current owners of working interests in the Convention.
The rights and obligations of the parties to the agreement are governed by a series of contracts. The Joint Operating Agreement ("JOA"), a separate agreement among the working interest owners, sets forth their respective proportionate interests and also provides for how the oil production operations are conducted. The parties to the JOA were all the parties to the Convention except the Congo. A related agreement, the Amendment to Lifting Agreement, establishes the logistical procedures to coordinate oil liftings taken by SNPC and the Garnishees. The oil produced pursuant to the Convention is transported via a subsurface pipeline network to an offshore vessel located off the coast of the Congo.
A "lifting" occurs when oil is offloaded from a storage vessel located off of the Congo's coast. The Garnishees take liftings of oil stored on the vessel for their own account and sell 100% of the oil for their own account. CMS Nomeco Congo, Inc. ("CMS Nomeco"), as operator, calculates the royalty owed to the Congo and the working interest amount owed to SNPC as a result of the Garnishees' liftings. These amounts owed to the Congo and SNPC are called "the under-delivered position." CMS Nomeco records the results of its calculations on an "over/under statement." Once the combination of the Congo's royalty entitlement and SNPC's working interest entitlement exceeds an under-delivered position of at least 275,000 barrels, SNPC is entitled to take a lifting of oil for itself and for the Congo. Apparently, when SNPC conducts such a lifting, it lifts about 550,000 to 650,000 barrels, at which point it is "over-delivered," which is then accounted for in the over/under statement described above. Af-Cap Inc. v. Republic of Congo, ("Af-Cap II")1 383 F.3d 361, 365 n. 2, clarified on reh'g, Af-Cap Inc. v. Republic of Congo, 389 F.3d 503 (5th Cir.2004). SNPC would then not take another lifting until it is under-delivered by 275,000 barrels. In this manner, the SNPC lifting extinguishes the in-kind royalty obligation and puts SNPC into an over-delivered position. The process repeats as the Garnishees take more liftings.
The oil production operations entail operating costs that are borne by the working interest owners, which do not include the Congo. Pursuant to the JOA, the Garnishees advance SNPC's share of the operating expenses. These advances are reimbursed by allocation of a portion, 75%, of SNPC's 50% working interest share of the production. Accordingly, SNPC takes only 25% of its 50% share of the production, 12.5% of the total production. The remaining 75% of SNPC's share, or 37.5% of the total production, is lifted by the Garnishees to reimburse themselves for the amounts paid to cover SNPC's share of the operating costs. Through these various agreements, the working interest owners established a procedure for the lifting of the Garnishees' share of the oil as well as the lifting of SNPC's working interest share, which it takes at the same time it takes the Congo's royalty oil.
In May 2002, CMS Oil and Gas Co. and its subsidiary CMS Oil and Gas (International) Co., and subsidiaries of those companies, owned exploration and production assets in the United States, the Congo and various other countries. In July 2002, CMS Oil and Gas Co.'s parent company signed a purchase and sale agreement for the stock of CMS Oil and Gas (International) Co. along with its subsidiary, CMS Nomeco, to be sold to affiliates of Perenco S.A. Perenco S.A. and its affiliated companies, including the Garnishees, are headquartered in Europe.
In September 2002, CMS Nomeco, a Delaware corporation, became a member of the Perenco group of companies with officers and directors located in Paris and London. Operations relating to the Congo that previously had been performed in the United States were performed in the Congo. In July 2004, Nuevo Congo Ltd. and Nuevo Congo Co. became members of the Perenco group of companies. Nuevo Congo Ltd. is incorporated in the Cayman Islands and Nuevo Congo Co. is incorporated in Delaware. By July 2004, none of the...
To continue reading
Request your trial
-
Gulf Restoration Network, Inc. v. Salazar
...cases and, because of the “overlapping issues presented ..., we ... consolidate them for disposition.” FG Hemisphere Assocs., LLC v. Republique du Congo, 455 F.3d 575, 580 (5th Cir.2006). 2. The approvals were issued by the Mineral Management Service (MMS), a division of the DOI. In June 20......
-
Peterson v. Islamic Republic Of Iran
...state, it must raise and decide the issue of immunity from execution on its own initiative. See FG Hemisphere Assocs., LLC v. Republique du Congo, 455 F.3d 575, 590-91 (5th Cir.2006); Walker Int'l Holdings Ltd. v. Republic of Congo, 395 F.3d 229, 233 (5th Cir.2004) ("Neither 28 U.S.C. § 161......
-
Abelesz v. Magyar Nemzeti Bank , s. 11–2387
...as a right to payment. See Peterson v. Islamic Republic of Iran, 627 F.3d 1117, 1131 (9th Cir.2010); FG Hemisphere Assocs., LLC v. République du Congo, 455 F.3d 575, 588–90 (5th Cir.2006); Connecticut Bank of Commerce v. Republic of Congo, 309 F.3d 240, 251 (5th Cir.2002). 6. We are not per......
-
Weinstein v. Islamic Republic of Iran
...except as provided in sections 1610 and 1611....”15 One circuit has reached a contrary result, see FG Hemisphere Assocs. v. Republique du Congo , 455 F.3d 575, 590–91 (5th Cir. 2006), but did so relying, in our view, on inapposite precedent. The FG Hemisphere court cited a trio of Supreme C......