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February 10, 1982

Thomas GIBBONS and William R. Beiseigel, Plaintiffs,
The REPUBLIC OF IRELAND, Udaras na Gaeltachta, and Industrial Development Authority of Ireland, Defendants

The opinion of the court was delivered by: GESELL


This is an action against the Republic of Ireland and two of its instrumentalities under the Foreign Sovereign Immunities Act, 28 U.S.C. § 1602 et seq. (1976). The matter is before the Court initially upon the motion of the Republic of Ireland for summary judgment, plaintiffs' opposition thereto and the entire record herein. A motion to dismiss has also been filed by the two instrumentalities, Udaras na Gaeltachta ("UG") and Industrial Development Authority of Ireland ("IDA"). *fn1" Since the motion of the Republic of Ireland is dispositive as far as the Court's jurisdiction is concerned it is unnecessary to consider the motion of the other two defendants except as it relates to the determination of a proper venue.

 Both plaintiffs are United States citizens. They established a business in Ireland to produce metallized containers for use by the cosmetic industry in Europe. In exchange for their commitment to establish the business in a depressed region of Ireland UG agreed to provide various types of financial assistance. Once initiated, the venture was not a success and the Irish corporation established by plaintiffs is now being liquidated in Ireland.

 The Republic of Ireland is alleged to be liable on the ground that IDA and UG were acting as the agents of the Republic. Under the Foreign Sovereign Immunities Act a foreign state as defined in 28 U.S.C. § 1603(a) (1976) is subject to suit in United States courts if it engages in commercial activity having a sufficient nexus with the United States. See 28 U.S.C. § 1605(a) (1976). UG and IDA were engaged in commercial activities allegedly having a sufficient connection with the United States to subject them to suit in United States courts under the Act. The dispositive issue presented by the Republic of Ireland's motion for summary judgment is whether under the facts of this case the Republic of Ireland as the ultimate authority controlling the activities of these companies should also be subjected to suit and thus held responsible for the actions of IDA and UG. *fn2"

 UG and IDA were established by the Republic of Ireland to support the development of industry in Ireland. See Gaeltacht Industries Act, 1957; Industrial Development Authority Act, 1950. They are separate corporate bodies with power to sue and be sued. During the period relevant to this complaint the board of UG and the members of the Authority were appointed pursuant to statute by the Ministry for the Gaeltacht and the Ministry of Industry and Commerce, respectively. Although the Republic, through these ministries, exercises general supervisory control over UG and IDA, it is not involved in the day-to-day operations of either body. Affidavits prepared by representatives of the two ministries establish that neither was involved in nor had any knowledge of the events giving rise to this complaint.

 Plaintiffs concede that a foreign sovereign is not automatically subject to suit for the actions of its instrumentalities. They contend, however, that the Republic of Ireland should be subject to suit in this case because of the close legal relationship between these instrumentalities and the government of Ireland. The Court holds that under the facts of this case the Republic of Ireland is not subject to suit for the alleged wrongdoing of its instrumentalities IDA and UG.

 This conclusion is based primarily on the nature of the doctrine of sovereign immunity. Whether justified by the law and practice of nations, see The Schooner Exchange v. McFaddon, 11 U.S. 116, 7 Cranch 116, 3 L. Ed. 287 (1812), or the wise policy of deferring to the Executive in matters relating to foreign affairs, see Mexico v. Hoffman, 324 U.S. 30, 34, 65 S. Ct. 530, 532, 89 L. Ed. 729 (1945), the immunity of foreign sovereigns has long been recognized in United States courts. Although the gradual judicial acceptance and ultimate adoption by Congress of the restrictive theory of sovereign immunity, see S.Rep. 1310, 94th Cong., 2d Sess. 9 (1976) (hereinafter referred to as "S.Rep.") has reduced the scope of the doctrine, immunity remains the rule rather than the exception. The Foreign Sovereign Immunities Act states that, except as provided in international agreements and the specific provisions of the Act, "a foreign state shall be immune from the jurisdiction of the courts of the United States and of the States ..." 28 U.S.C. § 1604 (1976). The legislative history explains that the Act

starts from a premise of immunity and then creates exceptions to the general principle. The chapter is thus cast in a manner consistent with the way in which the law of sovereign immunity has developed. Stating the basic principle in terms of immunity may be of some advantage to foreign states in doubtful cases.... S.Rep. at 16-17.

 Similarly, the Restatement (Second) of Foreign Relations Law (1965) recognizes that "a state is immune from the exercise by another state of jurisdiction to enforce rules of law," id. § 65, subject only to well-defined exceptions, id. §§ 68, 69. Thus, this Court must respect the immunity of a foreign sovereign unless some exception to the rule of sovereign immunity is clearly warranted.

 The Foreign Sovereign Immunities Act does not provide explicit guidance on this issue. The legislative history indicates that the Act was "not intended to affect ... the attribution of responsibility between or among entities of a foreign state," S.Rep. at 11.

 The Act does, however, distinguish between the sovereign and its instrumentalities, clearly implying that the sovereign should not be routinely subjected to suit for the acts of its instrumentalities. If liability is found against an instrumentality, all of the property of an instrumentality is subject to execution, whether or not the property had any connection with the claim, 28 U.S.C. § 1610(b) (1976); but state property is subject to execution only if the property is or was used for the commercial activity upon which the claim is based. 28 U.S.C. § 1610(a) (1976). There is no suggestion that state property is involved in this activity. Entirely distinct provisions govern the manner of service of process upon a foreign state or one of its political subdivisions and an agency or instrumentality of a foreign state. Compare 28 U.S.C. § 1608(a) (1976) with 28 U.S.C. § 1608(b) (1976). Moreover, a foreign state cannot be held liable for punitive damages but an agency or instrumentality may be. 28 U.S.C. § 1606 (1976).

 It is evident from the Act and its legislative history that Congress contemplated that an action could be brought against either a foreign state or one of its instrumentalities depending on the circumstances but that a foreign state should not be automatically subject to suit for the actions of one of its instrumentalities. If this were not the case little purpose would be served by specifically providing for suits against an instrumentality and the distinctions drawn in the Act between the sovereign and its instrumentalities would be largely superfluous. It is far more reasonable in light of these provisions to assume that Congress intended that a sovereign could be subjected to suit only where representatives of the sovereign participated at least to some degree in the events giving rise to the action.

 Another factor bolstering this interpretation of congressional intent is that the United States is generally immune from suit in its own courts under similar circumstances. In FHA v. Burr, 309 U.S. 242, 60 S. Ct. 488, 84 L. Ed. 724 (1939), the Court held that the immunity of the United States is not abrogated when Congress provides that an agency or instrumentality of the United States may sue or be sued. *fn3" To the extent that United States instrumentalities with the power to sue and be sued engage in international commercial transactions giving rise to litigation in foreign courts it would obviously be preferable if the agency and not the United States were ...

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