Harris v Vao Intourist, Moscow; Intourist, New York

CourtUnited States District Courts. 2nd Circuit. United States District Court (Eastern District of New York)
Date09 November 1979
United States, District Court, Eastern District, New York

(Weinstein, District Judge)

Harris
and
Vao Intourist, Moscow; Intourist, New York; National Hotel and the Union of Soviet Socialist Republics

Sovereign immunity Agencies or instrumentalities of foreign States Waiver of immunity under the Foreign Sovereign Immunities Act 1976 Whether Russian State-owned entities amenable to suit in United States courts under Section 1605 (a)(2) of the Act for allegedly tortious acts related to commercial activity taking place outside the United States Whether such acts having direct effect in the United States The law of the United States

Summary: The facts:An American tourist died in a fire at the Moscow National Hotel where he was a guest. His testator sought damages alleging that the death was caused by the negligence of one or more of the defendants. The defendant Intourist Moscow was a legal entity established by decrees of the USSR Council of Labour and Defence and by statute, and was a State-owned body vested with authority to establish hotels. The National Hotel was established pursuant to this authority as a separate legal entity authorized to operate and maintain a State-owned hotel in Moscow. All its assets were in Moscow, where it was registered as a legal person. It conducted no business activities in the United States. Intourist in New York was created in Moscow under the Intourist statute and was also State-owned. Its purpose was to promote tours from the United States to the USSR. It had offices in New York and conducted a substantial business there, encouraging the use of Intourist Moscow's facilities, including hotels in Moscow. A private New York travel service had arranged with Intourist Moscow for the deceased's accommodation at the Moscow National Hotel.

The defendants moved to dismiss the action on the ground that the Court lacked jurisdiction. Each defendant argued that it was immune from suit under the Foreign Sovereign Immunities Act 19761 as it was a unit of a foreign State under the definition contained in Section 1603 of the Act. The plaintiff contended that the defendants had waived their immunity or, alternatively, that their activities brought them within the exceptions to immunity contained in Section 1605 (a)(2) of the Act. Under Section 1605 (a)(2) a foreign State would not be immune from suit in any case in which the action was based on certain of its commercial activities.

Held:The motion to dismiss was granted.

(1) Each of the defendants qualified for immunity as an agency or instrumentality of a foreign State under the definition contained in Section 1603 of the Act.

(2) There was no evidence that the defendants had either explicitly or implicitly waived their immunity. The mere carrying on of commercial activities did not constitute an implied waiver of immunity. A letter from the Soviet Ambassador claiming immunity for each defendant had a persuasive quality.

(3) The exceptions to immunity contained in Section 1605 (a)(2) were not applicable:

(a) Under Cl. 1 of Section 1605 (a)(2) a foreign State was not immune in any case in which the action was based upon a commercial activity carried on by it in the United States. The commercial activity out of which this claim had arisen was the operation of the hotel in Moscow.

(b) Under Cl. 2 of Section 1605 (a)(2) a foreign State was not immune in any case in which the action was based upon an act performed in the United States in connection with a commercial activity of the foreign State elsewhere. Here, the allegedly negligent act had taken place in the USSR.

(c) Under Cl. 3 of Section 1605 (a) (2) a foreign State was not immune in any case in which the action was based upon its commercial activity outside the United States which caused a direct effect in the United States. The concept of commercial activity under this clause included contractual or tortious actions arising out of the commercial activities of foreign State-owned entities. Cl. 3 of Section 1605 (a) (2) thus encompassed tortious acts outside the United States related to commercial activity and having direct effect in the United States. The term direct effect meant that the actions of the foreign State must have a substantial impact in the United States. Here the allegedly negligent acts of the defendants had not caused the requisite effect in the United States. There had been no suffering by the injured person in the United States nor use of United States health facilities.

The text of the judgment of the Court commences on the following page.

Raymond DeJongh, an American tourist, died as a result of a fire in the Moscow National Hotel where he was a guest. Alleging that one or more of the defendants owned, leased, operated, managed, maintained and controlled the National Hotel negligently, plaintiff's testator seeks damages.

Defendants move to dismiss on the ground that this court lacks jurisdiction. Each defendant seeks protection as a unit of a foreign state under the Foreign Sovereign Immunities Act, 28 U.S.C. 1602 et seq.

The motion must be granted. Under the terms of the Immunities Act, each of the defendants qualifies for immunity as an agency or instrumentality of a foreign state. Because of the Act, an American traveler abroad injured by the negligence of a state-owned commercial instrumentality has less protection from American courts than he would have were he similarly injured by a privately owned enterprise. Whether appropriate remedies are available in the foreign jurisdictionas they will be in many situationsis not an issue relevant under the Act and we do not address it.

I. FACTS

All Union Company for Foreign Travel (Intourist, Moscow), is a legal entity established by decree of the Union of Soviet Socialist Republics Council of Labor and Defense and by statute. The Intourist Statute, Article 10, provides that the shares of Intourist may be owned only by Soviet organs or instrumentalities; 51% of the stock is owned by the State Administration for Foreign Tourism, 20% by the All-Union Organization, Mezhdunarondnaya, and 29% by the Union of Soviet Socialist Republics Chamber of Commerce.

Intourist, Moscow is vested with authority to establish hotels. The defendant National Hotel was created pursuant to this authority as a separate legal entity authorized to operate and maintain a state-owned hotel in Moscow. All of its assets are in Moscow, where the hotel is registered as a legal person; the hotel conducts no activities in the United States.

VAO Intourist in the United States of America, New York (Intourist, New York), was created in Moscow pursuant to Article 4 of the Intourist Statute. Like Intourist, Moscow, it is state-owned. Its purpose is to promote tours from the United States to the Union of Soviet Socialist Republics. For this purpose it maintains offices and conducts a substantial business in New York City, encouraging use of Intourist, Moscow's facilities, including hotels in Moscow. Whether it is a separate entity for purposes of the Immunities Act, as plaintiff alleges, or a part of Intourist, Moscow, incapable of being sued as an independent organization, as defendants assert, is, as will appear below, of no significance under the facts of this case.

When visitors from the United States seek accommodations in Russia, they do so through private United States travel agencies which place orders with Intourist, Moscow. Intourist, Moscow confirms the arrangements with the American private agencies; they, in turn, advise the travelers. In the case at bar, a private travel service located in New York City arranged with Intourist, Moscow for decedent's accommodations at the National Hotel.

II. LAW
A. Foreign States and Waiver of Immunity

Absent a showing that one of the exceptions to the Immunities Act applies, each of the defendants qualifies for immunity as a foreign state or as an agency or instrumentality of a foreign state under the Act. Section 1603 of title 28 provides that:

(a) A foreign state includes a political subdivision of a foreign state or an agency or instrumentality of a foreign state as defined in subsection (b).

(b) An agency or instrumentality of a foreign state means any entity

(1) which is a separate legal person, corporate or otherwise, and

(2) 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, and

(3) which is neither a Citizen of a state of the United States nor created under the laws of any third country.

Title 28, U.S.C. 1602 et seq., precludes actions against agencies or instrumentalities of foreign states, except as provided in the Act. Plaintiff claims that the defendants have waived this immunity or, alternatively, that the activities of the defendants cause them to be excluded, pursuant to section 1605(a)(2), from the Act's protection.

The legislative history suggests that implied waivers by commercial action are not consonant with the Act's purposes; implicit waivers are reflected in actions relating to adjudication and explicit waivers are found in treaties. The report on the Act states:

Section 1605(a)(1) [of title 28] treats explicit and implied waivers by foreign states of sovereign immunity. With respect to explicit waivers, a foreign state may renounce its immunity by treaty, as has been done by the United States with respect to commercial and other activities in a series of treaties of friendship, commerce, and navigation, or a foreign state may waive its immunity in a contract with a private party. Since the sovereign immunity of a political subdivision...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT