of all the documents called for in all of the subpoenas herein involved.
However, while the case of Cobbledick v. United States, 1940, 309 U.S. 323, 60 S. Ct. 540, 84 L. Ed. 783, appears to indicate that an order quashing a subpoena duces tecum requiring the production of documents before a grand jury is not a final order for appeal purposes, as it arises in this case, such a rule places a heavy burden on the Court here, it would seem, to insure that the timely objections made by the British, Canadian, Danish, French, German, Italian, Japanese, the Netherlands, Norwegian, and Swedish Embassies with respect the subpoenas here, be given the greatest consideration.
Inasmuch as there can be little objection to the production of documents of the foreign corporations physically located in this country, either at their own or their agents' offices, and the documents of the United States corporations physically located in foreign countries, the objections of the movants with respect thereto are ruled inappropriate.
However, with respect to the documents of foreign corporations physically located in foreign countries, it would seem that this investigation would not be impeded if the Court reserved its opinion on the matter of production of those documents, at this time. Meanwhile the Government will be better informed, and so may better inform the Court, of the need for those documents, should such need still exist, after the inquiry has progressed to some extent.
On January 18, 1960, the Embassy of the Philippines transmitted to the Secretary of State a note in which it objected to the issuance of a subpoena directing the Philippine National Lines to produce certain documents. The claim was made that the Philippine Lines was an instrumentality of the Philippine Government and that the Government did not wish to waive its sovereign immunity from suit or process of this Court.
The State Department refused to recognize or allow the Philippine Government's claim of immunity. The State Department's reply of January 25, 1960, reads in part as follows:
'In considering requests of a foreign government for a grant of foreign sovereign immunity from the jurisdiction of courts in the United States, the Department of State follows the so-called restrictive theory of sovereign immunity. Under this theory a foreign government (including its instrumentalities) is entitled to immunity from the jurisdiction of the courts of the territorial sovereign only with regards to government acts (jure imperii) as distinguished from private or commercial activities (jure gestionis).
'Since it appears to the Department that the Philippine National Lines is engaged in commercial activities, the Department of State regrets that it cannot take the action requested in your note.'
No doubt the fact that in recent times many countries have nationalized certain industries has led to the tendency to adopt the 'restrictive theory' of governmental immunity. In re Investigation of World Arrangements, etc., supra; Coale v. Societe Cooperative Suisse Des Charbons, Basle, D.C.S.D.N.Y.1921, 21 F.2d 180.
Government counsel here maintains that the cases of Republic of Mexico v. Hoffman, 1945, 324 U.S. 30, 65 S. Ct. 530, 89 L. Ed. 729, and National City Bank of New York v. Republic of China, 1955, 348 U.S. 356, 75 S. Ct. 423, 99 L. Ed. 389, indicate the status and activities of a foreign government are foreign policy matters for consideration by the political branch of the government, and, since the State Department has denied immunity here, the Court must also refuse to recognize the Philippine National Lines' claim of sovereign immunity.
The Movant here, on the other hand, alleges that the State Department's refusal to recognize its claim of sovereign immunity is not in any way binding on this Court, and that in fact it would be proper for this Court to make the determination inasmuch as the 'restrictive theory' of sovereign immunity adopted by the State Department recognizes that its opinions on sovereign immunity are not binding on the courts.
It is true that the Supreme Court in Berizzi Bros. Co. v. S. S. Pesaro, 1926, 271 U.S. 562, 46 S. Ct. 611, 70 L. Ed. 1088, equated government operated merchant ships with the maintenance and training of a naval force. However, as noted in 26 Dept. State Bull. p. 985, the United States has a long established policy of not claiming immunity in foreign jurisdictions for its own merchant vessels.
The movant relies heavily on In re Investigation of World Arrangements, supra, where Judge Kirkland of this Court quashed a subpoena duces tecum issuing against Anglo-Iranian Oil Company on the grounds (1) that the company was indistinguishable from the Government of Great Britain, though the Government only owned 35 per cent of its capital but 'controlled' the company, and (2) to cite a foreign sovereign into our courts is contrary to the law of nations.
With respect to item (2), Judge Kirkland concluded that the successful prosecution of the Anglo-Iranian Oil Co. would result in a charge and finding that the British Government was guilty of violating the law of the United States. He envisaged the risk of belligerent action if foreign government property were seized.
It should be noted, however, that Judge Kirkland distinguished the case of United States v. Deutsches Kalisyndikat Gesellschaft et al., D.C.S.D.N.Y.1929, 31 F.2d 199, where a suit to enjoin violations of the antitrust laws was upheld against a French corporation in which the Government of France held an 11/15th interest. The Judge held that a French corporation that was involved in a 'commercial venture, entirely divorced from any governmental function' is far different than a 'sea-faring island-nation maintaining a constant supply of maritime fuel'.
The present case seems to fall somewhere in between the World Arrangements and the Gesellschaft cases.
The Justice Department here alleges that the movant is a purely commercial venture, and the State Department refuses to recognize the claim of sovereign immunity. Meanwhile, at this juncture in the proceedings, the Court is unable to ascertain whether the grand jury will use the information it seeks to possibly attempt to indict the Philippine National Lines or use the information to indict others.
However, it appears that nothing would be lost in this instance if the Court should reserve its views as to the issuance of the subpoena as it relates to the Philippine National Lines, pending a showing by the Government through information obtained in the course of the investigation, that (1) the movant's activities are substantially, if not entirely, commercial; (2) the records are needed for the furtherance of the investigation to prosecute others; and/or (3) evidence exists of its joining with others to violate federal laws. The Court's order will reflect this.
Certain of the Japanese shipping lines have moved to quash the subpoenas duces tecum on the grounds that their production is in violation of the Treaty of Friendship, Commerce, and Navigation between the United States and Japan, effective October 30, 1953 (TIAS 2863; 4 U.S.T. 2063). They specifically cite Article XVIII, which provides in part as follows:
'The two Parties agree that business practices which restrain competition, limit access to markets or foster monopolistic control, and which are engaged in or made effective by one or more private or public commercial enterprizes or by combination, agreement or other arrangement among such enterprizes, may have harmful effects upon commerce between their respective countries. Accordingly, each Party agrees upon the request of the other Party to consult with respect to any such practices and to take such measures as it deems appropriate with a view to eliminating such harmful effects.'
On the basis of a letter from the State Department to Senate Committee on Foreign Relations (Hearings, Subcommittee of the Committee on Foreign Relations, U.S. Senate, 82nd Cong., 2d Sess., May 9, 1952, p. 29), and the language of the court in United States v. R. P. Oldham Co., D.C.N.D.Cal.1957, 152 F.Supp. 818, denying a motion to dismiss on the basis of this Treaty provision in a criminal action charging a conspiracy in violation of the Sherman Act, this Court concludes that the issuance of subpoenas in this case to the Japanese lines does not violate Article XVIII of the Treaty.
The Ambassador of Japan in a letter addressed to the Secretary of State dated March 7, 1960, objected to the subpoenas here in question, but did not ground the objection specifically on the basis of the Treaty provisions. Rather the objections were confined to the production of documents located in the territorial jurisdiction of Japan.
The State Department, in a reply dated March 25, 1960, merely indicated that in accordance with the Embassy's request a copy of their note of March 7, 1960 was being forwarded to the Court. However, the State Department, in their reply, did indicate that the Justice Department was willing to discuss specific problems of compliance regarding the subpoenas with representatives of the Japanese shipping lines.
The objections on the grounds of territorial jurisdiction are treated elsewhere in this opinion.
Certain of the movants of Netherlands nationality claim that the compliance with the subpoenas here may be in contravention of the provisions of the Treaty of Friendship, Commerce, and Navigation, Article I (TIAS 3942, effective December 5, 1957) existing between the United States and The Netherlands:
'1. Each Party shall at all times accord fair and equitable treatment to the nationals and companies of the other Party, and to their property, enterprizes and other interests.
'2. Between the territories of the two Parties there shall be, in accordance with the provisions of the present treaty, freedom of commerce and navigation.'
It is considered that not only does Article I not support any claim for the quashing of the subpoenas here, but that Article VI (2) actually anticipates that such court orders must issue at times and only asks that searches, etc., be conducted according to law and with regard for the convenience of the nationals of the parties to the treaty.
The movants also assert that compliance with the subpoenas here would be in violation of section 39 of The Netherlands Economic Competition Law. With respect to Java-Pacific Lines, since this is a New York corporation, it is on a parity with other domestic corporations and cannot, in the Court's opinion, invoke any Netherlands laws to avoid complying with the subpoena. Securities and Exchange Commission v. Minas de Artemias, 9 Cir., 1945, 150 F.2d 215. The privilege of immunity to process here extends to countries and not to corporations.
Since the Court has reserved its views with respect to production of subpoenaed documents of foreign corporations located in foreign countries, the Court need not go into the question at this time of the effect of the subpoenas to produce documents located in The Netherlands other than to note that in its opinion Section 39 of The Netherlands Economic Competition Law does not in any way appear to prevent the production of documents of United States companies located in The Netherlands or the documents of Netherlands companies or their agents located in this country.
1. The motions to quash the subpoenas duces tecum are denied.
2. The subpoenas duces tecum are modified as hereinbefore specifically set forth.
3. Counsel are directed to prepare an appropriate order reflecting, among other things, the fact that the Court has reserved its views, i.e. taken the matter under advisement, as to the production or inspection of the subpoenaed documents, etc., of foreign corporations physically located in foreign countries, and as to the subpoena as it relates to the Philippine National Lines, pending certain showings by the Government as the inquiry progresses.