that preclude enforcement of the setoff. First, BCR alleges that the setoff violates the Foreign Sovereign Immunities Act, 28 U.S.C. § 1602 et seq. ("FSIA"). The FSIA codifies the immunity from suit of foreign governments acting in their governmental capacity. Specifically, section 1611(b) provides that, "the property of a foreign state shall be immune from attachment and from execution, if -- (1) the property is that of a foreign central bank or monetary authority held for its own account, . . . ." BCR contends that the FSIA's immunity from attachment and execution extends to immunity from setoff. Thus, whether or not the requirements of maturity and mutuality were met, the FSIA precludes Riggs from executing a setoff against BCR's deposit.
Section 1611(b) (1), however, does not apply to the case at hand for two reasons. First, that section provides for immunity from attachment and execution, not immunity from setoff. Attachment and execution are fundamentally different from setoff. The former are legal remedies to legal wrongs, whereas the latter is a remedy that rests in equity. See, e.g., Frazier v. Marine Midland Bank, 702 F. Supp. 1000, 1003 (W.D.N.Y. 1988) (holding that the Social Security Act, 42 U.S.C. § 407, which exempts social security benefits from "execution, levy, attachment, garnishment or other legal process," does not exempt those benefits from setoff. (emphasis added)). When § 1611 immunizes BCR from attachment and execution, it does not speak to BCR's exposure to setoff.
Moreover, even if § 1611 were to extend to setoffs, it would still not apply to the setoff at issue in this case. Section 1611 covers property of a foreign bank "held for its own account." In other words, it exempts only those funds "used or held with central banking activities, as distinguished from funds used solely to finance the commercial transactions of other entities or of foreign states." H. Rep. 94-1487, 94th Cong., 2d Sess. 31 (1976). The $ 2 million deposit, as stated above, was placed by BCR to guarantee the loans extended to BPP, COFIDE, and Banco de la Nacion. In other words it was placed to finance the commercial transactions of other entities, not as part of BCR's central banking activities. Thus, the § 1611 exemption does not apply and the FSIA does not bar Riggs' action.
BCR further contends that, even if it had intended that the $ 2 million deposit guarantee the loans to COFIDE, BPP, and Banco de la Nacion, it could not be treated as such by Riggs because such a deposit would violate Peruvian law. BCR is an autonomous independent entity that is separate and distinct from the Republic and any other state-owned enterprise. The laws that govern BCR prohibit the use of its funds for purposes other than those of a central bank. Notably, BCR's funds may not be used to guarantee the obligations of another person.
The ramifications of BCR's action under Peruvian law, however, are of no consequence in this case. "Acts of foreign governments purporting to have extraterritorial effect. . . should be recognized by the courts only if they are consistent with the law and policy of the United States." Allied Bank International v. Banco Credito Agricola de Cartago, 757 F.2d 516, 522 (2d Cir. 1985). The deposit with Riggs was clearly intended to have extraterritorial effect--it was an extraterritorial act. As it would be inconsistent with U.S. law to not honor Riggs' setoff, Peruvian law cannot shield BCR from actions it took that it intended to have effect in the United States.
In sum, then, Riggs' setoff met the requirements of maturity and mutuality. BCR's deposit was not immune from setoff under the FSIA, nor does Peruvian law shield that deposit from setoff. Riggs' motion for summary judgment is being granted by an Order issued contemporaneously herewith.
December 12, 1994
HAROLD H. GREENE
United States District Judge
In consideration of the Opinion issued this date, it is this 12th day of December, 1994
ORDERED that plaintiff/counterclaim defendant's motion for summary judgment be and it is hereby DENIED; and it is further
ORDERED that defendant/counterclaim plaintiff's motion for summary judgment be and it is hereby GRANTED; and it is further
ORDERED that defendant/counterclaim plaintiff's motion to dismiss be and it is hereby DENIED as moot; and it is further
ORDERED that judgment is hereby entered in favor of the defendant/counterclaim plaintiff.
HAROLD H. GREENE
United States District Judge