Republic of Argentina v. City of New York

• Decision Date: 01 July 1969
• Citation: 303 N.Y.S.2d 644,25 N.Y.2d 252
• Parties: , 250 N.E.2d 698 REPUBLIC OF ARGENTINA, Appellant, v. CITY OF NEW YORK et al., Respondents.
• Court: New York Court of Appeals Court of Appeals

Page 644

303 N.Y.S.2d 644

25 N.Y.2d 252, 250 N.E.2d 698

REPUBLIC OF ARGENTINA, Appellant, v. CITY OF NEW YORK et al., Respondents.

Court of Appeals of New York.

July 1, 1969.

Jerome S. Rubin and Eric L. Keisman, New York City, for appellant.

Bruno A. Ristau, Washington, D.C., admitted on motion pro hac vice, for United States of America, amicus curiae.

J. Lee Rankin, Corporation Counsel (Edith I. Spivack, Edward J. McLaughlin and Russell D. Scott, New York City, of counsel), for respondents.

Louis J. Lefkowitz, Atty. Gen. (Samuel A. Hirshowitz and Hillel Hoffman, New York City, of counsel), in his statutory capacity under section 70 of the Executive Law.

FULD, Chief Judge.

We must decide, on this appeal, whether, as a matter of customary international law, premises owned by a foreign state and devoted exclusively to consular and other public governmental uses, are exempt from the imposition of real property taxes by the municipal government where the property is located.

The Republic of Argentina, owning property located in the Borough of Manhattan which it uses as its consulate, instituted this action against the City of New York in 1967. In the first count of its two-count complaint, it seeks the return of the real property taxes it paid on that property between 1947 and 1965 and, in the other count, it prays for a judgment--pursuant to article 15 of the Real Property Actions and Proceedings Law, Consol. Laws, c. 81--declaring those premises tax exempt and discharging the tax liens imposed against the property for unpaid taxes assessed since 1966. Upon cross motions for summary judgment, the court at Special Term found for the city and dismissed the complaint. The Appellate Division affirmed, and the Republic of Argentina seeks a reversal in our court. The United States Government, appearing as amicus curiae, has argued in support of Argentina's position.

The premises involved were purchased by the plaintiff in 1947 and used, since that time, solely by its governmental agencies. The principal occupant of the premises, since 1960, has been the Argentine Consul General for the City of New York. After making an initial payment, representing taxes which had accrued against the prior owner of the property, Argentina paid no taxes to the city during the period between 1947 and 1960, when a lump sum payment was agreed upon in settlement of all past accrued taxes. From that year until February of 1966, the plaintiff paid the taxes as they were assessed, albeit under protest. In August of that year, however, the Argentine Government notified the city that it considered itself exempt from taxation under international law, and the present action was commenced in February, 1967.

On this appeal, the plaintiff argues that its immunity from taxation is established by the customs and practices of nations which are binding on state and local governments as a form of (to quote from the plaintiff's brief) 'federal common law'. The city does not dispute that it is bound to observe international law but it contends that there is no established rule which prevents local taxation of consular offices in the absence of a treaty.

Although the United States at one time took a position similar to that now taken by the city, the Government has, at least since 1965, adopted a contrary view. Its present official position is set forth in a letter written, on September 2, 1965, by Richard D. Kearney, an Acting Legal Advisor to the Department of State, to the Comptroller of the City of New York:

'The Department of State is of the opinion that under recognized principles of international law and comity the several states of the United States, as well as their political subdivisions, should not assess taxes against foreign government-owned property used for public noncommercial purposes.'

The Kearney letter cited a number of reasons for the view expressed, including (1) the practices of other countries; (2) the trend among political subdivisions of the United States to grant such exemptions; (3) the serious political consequences which would attend upon any attempt to enforce a tax assessment by evicting a foreign government from its property; and (4) the lack of any valid basis for distinguishing between foreign state-owned personal property or embassy real property--which classes of property are concededly exempt from taxation--and other real property used for governmental purposes.

In view of the position taken by the United States, the city emphasizes that, in deciding this case, the court is not bound to accept the Government's submission but must make its own determination as to the status of Argentina's property under international law. ¹ This is perfectly true but, recognizing as we must that our conclusion may affect the interests of the nation as a whole, we would be derelict in our duty and responsibility if we were to ignore those interests in reaching decision. The Government asserts, and we are in no position to dispute it, that '(t)axation by political subdivisions of the United States of foreign government-owned real property used for official purposes has been a growing irritant in the conduct of the goreign relations of the United States. It left unchecked, such taxation will prejudice and hamper the effective conduct of our foreign relations.' ²

However, as already indicated, we do not premise our decision solely upon what the Government urges are to its best interests. The evidence at hand establishes that granting a tax exemption in this case is mandated by the rules of international law. It is settled that, where there is neither a treaty, statute nor controlling judicial precedent, all domestic courts must give effect to customary international law. To ascertain what it is, 'resort must be had', the Supreme Court has said, 'to the customs and usages of civilized nations; and, as evidence of these, to the works of jurists and commentators who, by years of labor, research, and experience have made themselves peculiarly well acquainted with the subjects of which they treat.' (The Paquete Habana, 175 U.S. 677, 700, 20 S.Ct. 290, 299, 44 L.Ed. 320; see, also, Hilton v. Guyot, 159 U.S. 113, 163, 16 S.Ct. 139, 40 L.Ed. 95.) ³ And the most authoritative of such works are international conventions, codifying or declaring existing law. These are carefully drafted documents, prepared by representatives of many different countries and intended to reflect the rules to which nations generally conform. (See, e.g., Statute of the International Court, 59 U.S.Stat. 1031, 1055; Murarka v. Bachrach Bros., 215 F.2d 547; Bergman v. De Sieyes, 170 F.2d 360, 362.)

With respect to the particular question before us--namely, the tax status of government-owned consular offices--the document which most clearly sets forth the applicable international standards of conduct is the Vienna Convention on Consular Relations, drafted in 1963 under the auspices of the United Nations with the active participation of representatives from the United States and 91 other countries. This document, which has already been ratified by 33 nations, explicitly announces that (art. 32, § 1)

'Consular premises and the residence of the career head of consular post of which the sending State or any person acting on its behalf is the owner or lessee Shall be exempt from all national, regional or municipal dues and taxes whatsoever, other than such as represent payment for specific services rendered.' (Emphasis supplied.)

The Convention has not yet been considered by the Senate for formal ratification by the Government and is, consequently, not absolutely binding upon our courts. However, it does constitute 'weighty authority: i.e., the consensus of opinion of the distinguished lawyers there assembled as to what 'principles' on the subject were at that time 'generally accepted' as a part of international law.' (Bergman v. De Sieyes, 170 F.2d 360, 362, Supra.)

In the Kearney letter--in which the State Department noted that, 'under recognized principles of international law and comity', the property owned by a foreign government and used for public noncommercial purposes should be exempt from local taxation--the United States Government was clearly indicating its agreement with the rule expressed by the Vienna Convention. The acceptance of this principle by other nations has been demonstrated by a survey conducted by the United States, revealing that of the 45 nations in which our Government maintains consulates, only six fail to accord a tax exemption to consular offices located within their territory and that most of the countries which have granted such exemption have done so without prior treaty or agreement.

The reason so many nations refrain from imposing real estate taxes on foreign consulates is easily discerned. Quite apart from concepts of international comity and regard for another State's sovereignty, it would be difficult, if not impossible, to enforce the collection of any tax levied against a friendly foreign government if the latter were not disposed to pay it. (See Yin-Tso Hsiung v. Toronto, (1950) 4 D.L.R. 209; City of St. John v. Fraser-Brace, 13 D.L.R.2d 177; see, also, Reference re Tax on Foreign Legations, (1943) 2 D.L.R. 481 (embassy property); French Republic v. Board of Supervisors of Jefferson County, 200 Ky. 18, 252 S.W. 124 (personal property); Bishop, Immunity from Taxation of Foreign State-Owned Property, 46 Am.J.Int.L. 239, 256.)

The unenforceability of a claim for taxes stems from the fact that no sovereign state can itself be sued without its consent, and its governmental property is not suceptible to attachment, levy or seizure by the courts or other authorities of a foreign country. (See, e.g., Schooner Exchange v. M'Faddon, 7 Cranch (11 U.S.) 116, 137, 3 L.Ed. 287; Hassard v. United States of Mexico, 173 N.Y. 645, 66 N.E. 1110, affg. 46 App.Div. 623, 6 N.Y.S. 939, affg. 29 Misc. 511, 512, 61 N.Y.S. 939.)...