Lutcher SA Celulose e Papel v. Inter-American Dev. Bank

• Decision Date: 13 July 1967
• Docket Number: No. 20166.,20166.
• Citation: 382 F.2d 454
• Parties: LUTCHER S. A. CELULOSE e PAPEL and F. Lutcher Brown, Appellants, v. INTER-AMERICAN DEVELOPMENT BANK, Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

382 F.2d 454 (1967)

LUTCHER S. A. CELULOSE e PAPEL and F. Lutcher Brown, Appellants, v. INTER-AMERICAN DEVELOPMENT BANK, Appellee.

No. 20166.

United States Court of Appeals District of Columbia Circuit.

Argued January 18, 1967.

Decided July 13, 1967.

William W. Rayner, Washington, D. C., and Ernest A. Gross, New York City, for appellants.

William D. Rogers, Washington, D. C., for appellee.

Before EDGERTON, Senior Circuit Judge, FAHY^* and BURGER, Circuit Judges.

BURGER, Circuit Judge:

Appellants brought suit in the District Court for damages and injunctive relief claiming that the Bank had violated loan agreements with Lutcher S.A. Celulose e Papel by participating in loans made to competitors of Lutcher. This appeal followed the District Court's denial of preliminary injunctive relief and the grant of the Bank's motion to dismiss on the ground that the Bank is immune from suit and that the complaint failed to state a claim for which relief could be granted.¹

Appellant Lutcher S.A. is a Brazilian corporation organized in 1959 to engage in lumbering operations and the processing of paper pulp; F. Lutcher Brown is president and majority shareholder of Lutcher S.A.

Appellee is an international lending institution established in 1959 by joint action and subscription of the United States of America and all Latin American nations, Cuba excepted. Its stated purpose is "to contribute to the acceleration of the process of economic development of the member countries" by, among other means, "financing the development of member countries, giving priority to those loans and guarantees that will contribute most effectively to their economic growth."²

The complaint alleges that from 1961 to 1964 the Bank made loans to Lutcher aggregating $8,700,000. In the same period it also made loans aggregating $5,000,000 to another Brazilian corporation engaged in lumbering and pulp processing, Papel e Celulose Catarinense Ltda., referred to as the Klabin group. Klabin operated the largest pulp and paper facility in Brazil and had a "monopoly in the newsprint industry." The Bank also made loans of $15,500,000 to another borrower to expand the largest pulp and paper and newsprint facility in Chile. These loans were made over Brown's protests that the Bank had inaccurate information about the state of the pulp market in Brazil and in Latin America and that these loans could jeopardize Lutcher's financial and competitive position.

In 1965 the Klabin group came to the Bank to obtain clearances to enable it to borrow additional funds from other sources, and Lutcher again urged the Bank to study the market situation. The Bank stated it would have an independent study made. In reliance on this, Appellants' complaint continues, Lutcher made payments owed the Bank. But in February, 1966, it is claimed, the Bank decided not to have a market study made. It appearing that the Bank was about to approve the Klabin request, Appellants brought this action to enjoin the Bank from doing so and to recover damages.

Appellants allege that the Bank "knowingly carried out wrongful acts with reckless disregard" for Appellants by lending to competitors and breached "an implied obligation" not to hinder Lutcher in fulfilling its contract with the Bank. The complaint alleges the Bank "impliedly warranted" to act "prudently" in considering loan applications from applicants in competition with Lutcher. Appellants view the duty of the Bank in these terms: "As a Development bank, the Inter-American Bank should have assisted Lutcher S.A. and by all means avoided any direct action detrimental to Lutcher S.A." They also claim that the Bank breached the 1965 agreements to make a market study, in reliance upon which Lutcher had incurred new debts and taken actions which it might otherwise not have taken.

Appellee contends, apart from argument on the merits, that it is immune from suit by virtue of specific legislation.³ The International Organizations Immunities Act provides that international organizations may be designated by the President so that they "shall enjoy the same immunity from suit and every form of judicial process as is enjoyed by foreign governments, except to the extent that such organizations may expressly waive their immunity for the purpose of any proceedings or by the terms of any contract."⁴ In 1960 President Eisenhower designated the Bank an international organization entitled to immunity,⁵ hence the question of the Bank's immunity turns on whether it has waived immunity from suit.

The answer in this case must be found in the Agreement establishing the Bank. The relevant provision is paragraph 1, Section 3 of Article XI; it provides:

Actions may be brought against the Bank only in a court of competent jurisdiction in the territories of a member in which the Bank has an office, has appointed an agent for the purpose of accepting service or notice of process, or has issued or guaranteed securities.

This provision is hardly a model of clarity; Appellants argue it constitutes a waiver of immunity. The Bank urges that such an interpretation "would wipe out Section 2(b) of the Immunities Act," a result which it says can be avoided by interpreting the provision as only a partial waiver, allowing suit by bondholders, creditors, and beneficiaries of its guarantees, on the theory that in such cases vulnerability to suit contributes to the effectiveness of the Bank's operation.

Unless this provision is read as merely describing the available forum for such suits and actions as to which waiver had been otherwise made, it must itself be a waiver of immunity. We do not read it as a venue provision for actions resulting from individual waivers; rather it is a provision waiving immunity and laying venue for the suits permitted. The terms are clear that "actions may be brought against the Bank"; had the drafters intended this clause to be only a venue provision, the language would more likely have provided, in essence, that actions brought against the Bank pursuant to any waiver of immunity could be brought in certain named courts.⁶ We conclude the absence of such limitation was purposeful. The subscribing nations were certainly alert to the problem and it was entirely appropriate to resolve the immunity question in the organic law of the Bank rather than leave it to case-by-case decision. That this was a deliberate choice is indicated by the title of Article XI, "Status, Immunities and Privileges," and the fact that the second paragraph of Section 3 expressly prohibits suits by members. The drafters thus manifested full awareness of the immunity problem and we conclude they must have been aware that they were waiving immunity in broad terms rather than treating narrowly a venue problem. Thus we cannot read it in a restrictive sense; we read it as permitting the assertion of a claim against the Bank by one having a cause of action for which relief is available.

Our conclusion on this score is not without support in the historical background of the Bank's creation. For example, in response to questions from the House Committee considering the bill providing for United States participation in the Bank, then Assistant Secretary of the Treasury Upton, who had headed the United States delegation on the drafting committee, submitted a memorandum. In it he assured the Committee that the bill conformed with the Agreement in waiving the right of the United States to sue the Bank. The section of the bill providing jurisdiction for courts in the United States, he said, was not inconsistent with the Agreement's prohibition against suits by members. It had a different function, for "under the agreement, the Bank may be sued by persons other than member countries."⁷

The Special Report of the National Advisory Council on the Proposed Inter-American Development Bank contains a similar description of the Bank's status:

To carry out its operations the Bank is to have full juridical personality, though actions may not be brought against the Bank by members or persons deriving claims from members. Other legal actions, however, may be brought against the Bank in courts of the countries in which the Bank has an office or has appointed an agent to act for it or has issued or guaranteed securities. ⁸

There is another strand to the question of the Bank's immunity that bears notice. In 1960 President Eisenhower issued, as we noted, his Executive Order qualifying the Bank for immunities available under the terms of the International Organizations Immunities Act. In 1962 President Kennedy amended President Eisenhower's Order by another Order, which is entitled as intended "to provide for an exception to the Inter-American Development Bank's immunity from suit specified in the International Organizations Immunities Act." This Order added the following clause to the Eisenhower Order:

Provided, That such designation shall not be construed to affect in any way the applicability of the provisions of Section 3, Article XI, of the Articles of Agreement of the Bank. * * *⁹

As amended, the Order tracks the Orders qualifying the International Finance Corporation and the World Bank.¹⁰ Its effect could only have been to reinforce the waiver of immunity. The Eisenhower Order qualified the Bank "as a public international organization entitled to enjoy the privileges, exceptions, and immunities conferred by the International Organizations Immunities Act." By the terms of the Act, of course, the Bank enjoys immunity except to the extent that a waiver is shown. But the Kennedy Order removed the force of any argument that the Bank had had immunities conferred upon it by the Act regardless of its waiver. The Kennedy Order stated its purpose to be to provide for an exception to immunity, and it did so by decreeing that the designation of the Bank as an international organization entitled to enjoy the immunities conferred by the Act "shall not be construed to affect in any way the...