Permanent Mission of India to the United Nations v. City of N.Y.

• Decision Date: 14 June 2007
• Docket Number: No. 06–134.,06–134.
• Citation: 551 U.S. 193,75 BNA USLW 4433,127 S.Ct. 2352,168 L.Ed.2d 85
• Parties: PERMANENT MISSION OF INDIA TO THE UNITED NATIONS et al., Petitioners, v. CITY OF NEW YORK, New York.
• Court: U.S. Supreme Court

551 U.S. 193

127 S.Ct. 2352

168 L.Ed.2d 85

75 BNA USLW 4433

PERMANENT MISSION OF INDIA TO THE UNITED NATIONS et al., Petitioners,

v.CITY OF NEW YORK, New York.

No. 06–134.

Supreme Court of the United States

Argued April 24, 2007.

Decided June 14, 2007.

Syllabus^*

Under New York law, real property owned by a foreign government is exempt from taxation when used exclusively for diplomatic offices or quarters for ambassadors or ministers plenipotentiary to the United Nations. For years, respondent (City) has levied property taxes against petitioner foreign governments for that portion of their diplomatic office buildings used to house lower level employees and their families. Petitioners have refused to pay the taxes. By operation of state law, the unpaid taxes converted into tax liens held by the City against the properties. The City filed a state-court suit seeking declaratory judgments to establish the liens' validity, but petitioners removed the cases to federal court, where they argued that they were immune under the Foreign Sovereign Immunities Act of 1976 (FSIA), which is “the sole basis for obtaining jurisdiction over a foreign state in federal court,” Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 439, 109 S.Ct. 683, 102 L.Ed.2d 818. The District Court disagreed, relying on an FSIA exception withdrawing a foreign state's immunity from jurisdiction where “rights in immovable property situated in the United States are in issue.” 28 U.S.C. § 1605(a)(4). The Second Circuit affirmed, holding that the “immovable property” exception applied, and thus the District Court had jurisdiction over the City's suits.

Held: The FSIA does not immunize a foreign government from a lawsuit to declare the validity of tax liens on property held by the sovereign for the purpose of housing its employees. Pp. 2355 – 2358.

(a) Under the FSIA, a foreign state is presumptively immune from suit unless a specific exception applies. In determining the immovable property exception's scope, the Court begins, as always, with the statute's text. Contrary to petitioners' position, § 1605(a)(4) does not expressly limit itself to cases in which the specific right at issue is title, ownership, or possession, or specifically exclude cases in which a lien's validity is at issue. Rather, it focuses more broadly on “rights in” property. At the time of the FSIA's adoption, “lien” was defined as a “charge or security or incumbrance upon property,” Black's Law Dictionary1072, and “incumbrance” was defined as “[a]ny right to, or interest in, land which may subsist in another to the diminution of its value,” id., at 908. New York law defines “tax lien” in accordance with these general definitions. A lien's practical effects bear out the definitions of liens as interests in property. Because a lien on real property runs with the land and is enforceable against subsequent purchasers, a tax lien inhibits a quintessential property ownership right—the right to convey. It is thus plain that a suit to establish a tax lien's validity implicates “rights in immovable property.” Pp. 2355 – 2356.

(b) This Court's reading is supported by two of the FSIA's related purposes. First, Congress intended the FSIA to adopt the restrictive theory of sovereign immunity, which recognizes immunity “with regard to sovereign or public acts (jure imperii) of a state, but not ... private acts (jure gestionis).” Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 711, 96 S.Ct. 1854, 48 L.Ed.2d 301. Property ownership is not an inherently sovereign function. The FSIA was also meant to codify the real property exception recognized by international practice at the time of its enactment. That practice supports the City's view that petitioners are not immune, as does the contemporaneous restatement of foreign relations law. The Vienna Convention on Diplomatic Relations, on which both parties rely, does not unambiguously support either party, and, in any event, does nothing to deter this Court from its interpretation. Pp. 2356 – 2358.

446 F.3d 365, affirmed and remanded.

THOMAS, J., delivered the opinion of the Court, in which ROBERTS, C. J., and SCALIA, KENNEDY, SOUTER, GINSBURG, and ALITO, JJ., joined. STEVENS, J., filed a dissenting opinion, in which BREYER, J., joined, post, p. 2358.

John J.P. Howley, for the petitioners.

Sri Srinivasan, for the United States as amicus curiae, by special leave of the Court, supporting the petitioners.

Michael A. Cardozo, for the respondent.

John J.P. Howley, Counsel of Record, Robert A. Kandel, Kaye Scholer LLP, New York, New York, Steven S. Rosenthal, David O. Bickart, Kaye Scholer LLP, Washington, D.C., Counsel for Petitioners The Permanent Mission of India to The United Nations and The Permanent Representative of Mongolia to The United Nations.

Norman Corenthal, John R. Low-Beer, Brad M. Snyder, Michael A. Cardozo, Counsel of Record, Corporation Counsel of the City of New York, New York, N.Y., Counsel for Respondent,

Justice THOMAS delivered the opinion of the Court.

The Foreign Sovereign Immunities Act of 1976 (FSIA), 28 U.S.C. § 1602 et seq., governs federal courts' jurisdiction in lawsuits against foreign sovereigns. Today, we must decide whether the FSIA provides immunity to a foreign sovereign from a lawsuit to declare the validity of tax liens on property held by the sovereign for the purpose of housing its employees. We hold that the FSIA does not immunize a foreign sovereign from such a suit.

I

The Permanent Mission of India to the United Nations is located in a 26–floor building in New York City that is owned by the Government of India. Several floors are used for diplomatic offices, but approximately 20 floors contain residential units for diplomatic employees of the mission and their families. The employees—all of whom are below the rank of Head of Mission or Ambassador—are Indian citizens who receive housing from the mission rent free.

Similarly, the Ministry for Foreign Affairs of the People's Republic of Mongolia is housed in a six-story building in New York City that is owned by the Mongolian Government. Like the Permanent Mission of India, certain floors of the Ministry Building include residences for lower level employees of the Ministry and their families.

Under New York law, real property owned by a foreign government is exempt from taxation if it is “used exclusively” for diplomatic offices or for the quarters of a diplomat “with the rank of ambassador or minister plenipotentiary” to the United Nations. N.Y. Real Prop. Tax Law Ann. § 418 (West 2000). But “[i]f a portion only of any lot or building ... is used exclusively for the purposes herein described, then such portion only shall be exempt and the remainder shall be subject to taxation ... .” Ibid.

For several years, the City of New York (City) has levied property taxes against petitioners for the portions of their buildings used to house lower level employees. Petitioners, however, refused to pay the taxes. By operation of New York law, the unpaid taxes eventually converted into tax liens held by the City against the two properties. As of February 1, 2003, the Indian Mission owed about $16.4 million in unpaid property taxes and interest, and the Mongolian Ministry owed about $2.1 million.

On April 2, 2003, the City filed complaints in state court seeking declaratory judgments to establish the validity of the tax liens.¹ Petitioners removed their cases to federal court, pursuant to 28 U.S.C. § 1441(d), which provides for removal by a foreign state or its instrumentality. Once there, petitioners argued that they were immune from the suits under the FSIA's general rule of immunity for foreign governments. § 1604. The District Court disagreed, relying on the FSIA's “immovable property” exception, which provides that a foreign state shall not be immune from jurisdiction in any case in which “rights in immovable property situated in the United States are in issue.” § 1605(a)(4).

Reviewing the District Court's decision under the collateral order doctrine, a unanimous panel of the Court of Appeals for the Second Circuit affirmed. 446 F.3d 365 (2006). The Court of Appeals held that the text and purpose of the FSIA's immovable property exception confirmed that petitioners' personal property tax obligations involved “rights in immovable property.” It therefore held that the District Court had jurisdiction to consider the City's suits. We granted certiorari, 549 U.S. 1177, 127 S.Ct. 1144, 166 L.Ed.2d 910 (2007), and now affirm.

II

“[T]he FSIA provides the sole basis for obtaining jurisdiction over a foreign state in federal court.” Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 439, 109 S.Ct. 683, 102 L.Ed.2d 818 (1989). Under the FSIA, a foreign state is presumptively immune from suit unless a specific exception applies. § 1604; Saudi Arabia v. Nelson, 507 U.S. 349, 355, 113 S.Ct. 1471, 123 L.Ed.2d 47 (1993). At issue here is the scope of the exception where “rights in immovable property situated in the United States are in issue.” § 1605(a)(4). Petitioners contend that the language “rights in immovable property” limits the reach of the exception to actions contesting ownership or possession. The City argues that the exception encompasses additional rights in immovable property, including tax liens. Each party claims international practice at the time of the FSIA's adoption supports its view. We agree with the City.

A

We begin, as always, with the text of the statute. Limtiaco v. Camacho, 549 U.S. 483, 488, 127 S.Ct. 1413, 1418, 167 L.Ed.2d 212 (2007). The FSIA provides: “A foreign state shall not be immune from the jurisdiction of courts of the United States ... in any case ... in which ... rights in immovable property situated in the United States are in issue.” 28 U.S.C. § 1605(a)(4). Contrary to petitioners' position, § 1605(a)(4) does not expressly limit itself to cases in which the specific right at issue is title,...