SACE S.p.A. v. Republic of Paraguay

Decision Date21 March 2017
Docket NumberNo. 15–cv–1042 (KBJ),15–cv–1042 (KBJ)
Citation243 F.Supp.3d 21
Parties SACE S.P.A., Plaintiff, v. The REPUBLIC OF PARAGUAY, Defendant.
CourtU.S. District Court — District of Columbia

Ali Mojibi Yazdi, Eugene D. Gulland, Jonathan James Gimblett, Covington & Burling LLP, Washington, DC, for Plaintiff.

Ana C. Reyes, Dane Hal Butswinkas, Richmond T. Moore, Williams & Connolly, LLP, Washington, DC, for Defendant.

MEMORANDUM OPINION

KETANJI BROWN JACKSON, United States District Judge

Plaintiff SACE S.p.A. ("SACE") is an Italian joint stock corporation that has brought the instant action seeking to enforce two foreign money judgments against Defendant Republic of Paraguay ("Paraguay"). SACE claims that it holds all rights to two Swiss money judgments that are "enforceable against Paraguay under the laws of Switzerland[,]" (Compl., ECF No. 1, ¶¶ 12, 16); it has filed the instant action pursuant to the District of Columbia's Uniform Foreign–Country Money Judgment Recognition Act of 2011, ("the D.C. Recognition Act"), D.C. Code §§ 15–361 –71, seeking a court order that enters judgment against Paraguay for the U.S.–dollar equivalent of the amount of the Swiss awards, along with specified categories of interest. (See Compl., Relief Requested ¶ B.) Significantly for present purposes, SACE's complaint maintains that this Court has subject matter jurisdiction to entertain this enforcement action as provided under the Foreign Sovereign Immunities Act ("FSIA" or "the Act"), 28 U.S.C. §§ 1602 – 11, because Paraguay (a foreign state defendant) waived its sovereign immunity with respect to the loan transactions upon which the Swiss money judgments are based. (See Compl. ¶ 1.) See also 28 U.S.C. § 1605(a)(1) (authorizing jurisdiction over a foreign state in a case "in which the foreign state has waived its immunity either explicitly or by implication").

Before this Court at present is Paraguay's motion to dismiss SACE's complaint for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1). (Def.'s Mem. in Supp. of Def.'s Mot. to Dismiss ("Def.'s Mem."), ECF No. 13–2.) Among other things, Paraguay insists that there was no valid waiver of sovereign immunity under section 1605(a)(1) of the FSIA because SACE does not, and cannot, allege that the Paraguayan official who purportedly effected an explicit waiver of Paraguay's sovereign immunity was actually authorized to do so. (See id. at 25–35).1 SACE responds that section 1605(a)(1) does not require actual authority to waive the sovereign immunity of the foreign state, and that the circumstances it alleges in the complaint are sufficient to give rise to a reasonable belief that the pertinent official had such waiver authority—i.e., that the alleged facts demonstrate there was apparent authority to waive sovereign immunity. (Pl.'s Opp'n to Def.'s Mot. to Dismiss ("Pl.'s Opp'n"), ECF No. 16, at 23–30.)

For the reasons explained below, this Court agrees with Paraguay that the waiver provision of the FSIA requires actual authority to waive the foreign state's sovereign immunity, which is indisputably lacking in this case. This Court further finds that, even if apparent authority can suffice to trigger the FSIA's waiver provision, any belief that the Paraguayan official at issue here had the authority to waive Paraguay's sovereign immunity was unreasonable, given the fact the official was not a duly-accredited ambassador or otherwise vested with the power to act on Paraguay's behalf in this regard, and was also patently engaged in self-dealing when he made the waiver representations. Consequently, this Court concludes that it lacks subject-matter jurisdiction to entertain SACE's enforcement action, and as a result, Paraguay's motion to dismiss SACE's complaint must be GRANTED. A separate order consistent with this Memorandum Opinion will follow.

I. BACKGROUND
A. Factual Background

Unless otherwise noted, the following allegations of fact appear in SACE's complaint and the attached exhibits. (See Compl.; see also Compl. Exs. A–L, ECF Nos. 1–3 to 1–14.) In particular, the recitation below draws heavily from the two Swiss court decisions that announce the money judgments that SACE seeks to enforce in this lawsuit. (See J. of Civil Chamber of the Geneva Court of Justice, Sept. 3, 2004 ("2004 Swiss Judgment"), Compl. Ex. A, ECF No. 1–3; J. of the Tribunal of First Instance, Sept. 30, 2010 ("2010 Swiss Judgment"), Compl. Ex. C, ECF No. 1–5; see also Compl. ¶¶ 7, 11 (incorporating by reference the facts set forth in the Swiss court decisions).)

1. The Construction Projects That Paraguay Purportedly Authorized And Guaranteed

In the mid–1980s, two privately owned Paraguayan companies—Rosi SA ("Rosi") and Compania Industrial Agro–forestal Lapachos de San Isidro SA ("Lapachos")—entered into "Construction and Supply" contracts with certain Italian construction companies that agreed to undertake substantial building projects in Paraguay. (See 2004 Swiss Judgment at 3, 10.) Specifically, in May of 1986, Rosi agreed to pay US $25 million for the construction of a fruit-preserve factory (id. at 3), and in January of 1987, Lapachos agreed to pay 50 million Deutsche Marks for a pharmaceutical plant (id. at 10). Before entering into its contract, Rosi apparently received a letter from Paraguay's Ministries of Finance and of Industry and Trade that indicated that the "government had deemed the establishment of the fruit preserve factory as a high priority [.]" (2004 Swiss Judgment at 4.)2 Both contracts specifically stated that the multi-million dollar payments that Rosi and Lapachos owed would be financed over a ten-year period through either a bank loan (Rosi) or a credit contract (Lapachos) that was to be executed with specific financial institutions. (See id. at 3, 10.)

As part of the financing plan, a part-owner of both Rosi and Lapachos—a man by the name of Gustavo Gramont Berres ("Gramont")—became involved in the negotiation and execution of two Notes Financing Agreements ("NFAs") that Rosi and Lapachos entered into with a banking syndicate that the Overland Trust Banque ("OTB") had organized. (Id. at 4–5.) The NFAs were subject to Swiss law and were the primary source of the funding for the construction contracts. (Id. at 4, 8 (explaining that the Rosi NFA, along with subsequent addendums, covered a loan amounting to 46,700,000 SFr.); see also id. at 10, 13–14 (noting that the Lapachos NFA and supplemental credits financed a loan in the amount of DM 54,800,000).)3

Furthermore, and importantly, Gramont also signed two unconditional and irrevocable "Guarantees" on behalf of the Republic of Paraguay in order to secure the loan agreements with the OTB banking syndicate. (See Guaranty of the Republic of Paraguay, June 5, 1986 ("Rosi Guaranty"), Decl. of Lucio Amoruso ("Amoruso Decl.") Ex. 1, ECF No. 16–9; Guaranty of the Republic of Paraguay, Sept. 1, 1987 ("Lapachos Guaranty"), Amoruso Decl. Ex. 2, ECF No. 16–10.) Gramont signed the Rosi guaranty on June 5, 1986, and the Lapachos guaranty on September 1, 1987. (See Rosi Guaranty at 4; Lapachos Guaranty at 4; see also 2004 Swiss Judgment at 5, 10.) The wording in both guarantees was substantially similar: Gramont purported to be "duly authorized" by the "Constitution and Paraguayan law" to execute guarantees of the Rosi and Lapachos loans "in the name of the Paraguayan State[.]" (Rosi Guaranty at 2; Lapachos Guaranty at 2.) Thus, in essence, Gramont purported to make the country of Paraguay a guarantor with respect to the repayment of any outstanding amount that Rosi or Lapachos were obligated to pay to the OTB banking syndicate under the NFAs. (See Rosi Guaranty at 2–3; Lapachos Guaranty at 2–3.) Moreover, in each of the guaranty documents, Gramont specifically represented that "all disputes arising from the ‘NFA’ Agreement and the Guaranty shall be brought before the Swiss courts whose jurisdiction [Paraguay] accepts irrevocably," and that "[Paraguay] hereby expressly waives the privileges of immunity of jurisdiction and the enforcement privilege that may be granted to it[.]" (Rosi Guaranty at 4; Lapachos Guaranty at 4.)

With the construction contracts and financing arrangements complete, OTB then contracted with SACE—an Italian agency that provides insurance for export risks—to insure the banks in the syndicate against the risk of non-repayment on the part of Rosi and Lapachos, and the risk of nonpayment by Paraguay in its capacity as guarantor. (See 2004 Swiss Judgment at 6–7, 12.) Then, in anticipation of each of Rosi's biannual repayment dates, the first of which was scheduled for March 12, 1990, OTB sent letters to Rosi and to Paraguay beginning in September of 1989, "informing [them] of the amount of the principal and interest due on this due date" pursuant to Rosi's NFA. (2010 Swiss Judgment ¶ 16.) OTB likewise wrote Lapachos and Paraguay regarding the outstanding principal and interest owed by Lapachos on each of its bi-annual repayment dates, the first of which was scheduled for April 17, 1991. (See 2004 Swiss Judgment at 16).

When the repayment dates arrived, however, both Rosi and Lapachos failed to "honor their [repayment] obligations[,]" and upon their default, "the banks contacted the Republic of Paraguay so that it would act on its obligations as guarantor." (J. of the Tribunal of First Instance, Oct. 23, 2003, Decl. of Ana C. Reyes ("Reyes Decl.") Ex. 9, ECF No. 13–12, at 7.) "Paraguay then informed the banks ... on September 11, 1990, that it did not consider itself bound in any way by the commitments signed by [Gramont] (id. ) and, in turn, SACE disputed its obligation to insure Paraguay's guarantee (see J. of the Swiss Federal Tribunal, Aug. 20, 1998, Reyes Decl. Ex. 11, ECF No. 13–14, at 5). And because "the Paraguayan companies Rosi and Lapachos did not repay the loans granted, and neither the Republic of Paraguay nor SACE honored their guarantees," the banks commenced "legal proceedings before the Court of First Instance in...

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