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February 25, 1998


The opinion of the court was delivered by: KESSLER

 Plaintiff, the International Bank for Reconstruction and Development (the "World Bank" or the "Bank"), brings this action under the Articles of Agreement of the International Bank for Reconstruction and Development, Dec. 7, 1945, 60 Stat. 1440, 2 U.N.T.S. 134, as amended, Dec. 17, 1965, 16 U.S.T. 1942 (codified as amended at 22 U.S.C. §§ 286-286mm (1994)) (the "Articles of Agreement"), to recover monies paid to the Defendant District of Columbia to satisfy tax-deficiency assessments levied against Plaintiff's cafeteria operations. This matter is before the Court on the parties' cross-motions for summary judgment ("Pl.'s Mot.") [# 17] and ("Def.'s Cross-Mot.") [# 16].

 Upon consideration of Plaintiff's Motion, Defendant's Cross-Motion, and the entire record herein, for the reasons discussed below, Plaintiff's Motion is granted, and Defendant's Cross-Motion is denied.


 The facts of this case are not disputed. The World Bank is an international, inter-governmental organization composed of 180 members, including the United States. The primary purposes of the World Bank, include inter alia, providing financial assistance for the restoration and development of territories of member countries, and promoting private foreign investment and the balanced growth of international trade. (See Art. 1 of Articles of Agreement, attached as Pl.'s Ex. C.) Plaintiff's principal office in the United States is located in Washington, D.C. (Statement P 1.)

 The World Bank currently employs nearly 9,000 persons, including citizens from over 130 countries, who work in the Bank's headquarters and in 97 resident missions outside the United States. (Id.) The World Bank's Articles of Agreement confer upon it an international and intergovernmental status independent of any individual member country and broad tax immunities. All member countries, including the United States, have adopted the Bank's governing Articles of Agreement.

 In 1960, Plaintiff established a Food Service Program ("Program") at its principal office to provide dining facilities for the exclusive use of its staff, official visitors, and invited guests. (Statement P 5.) Since 1970, the Bank has engaged outside caterers to operate the Program. (Statement P 5.) During 1993-1995, Plaintiff contracted with Gardner Merchant Food Services, Inc. ("Gardner Merchant") to perform services under the Program. (Id. at P 6; see also service contract between Plaintiff and Gardner Merchant ("Contract"), attached as Pl.'s Ex. I.) Since the inception of the Program, the District has never collected nor has Plaintiff ever paid sales and use taxes for purchases of food or any other supplies used for the Program, or on sales of meals at the World Bank's cafeterias and dining rooms. (Statement P 7.)

 Under the Contract, Gardner Merchant agreed to provide various cafeteria services in accordance with the guidelines of Plaintiff's Operating Specifications for Food Service Facilities ("Operating Specifications"), which describes in great detail the duties and operations of a food-service contractor and the manner in which they must be performed. For example, the Operating Specifications dictate appropriate menus, pricing, hours of operation, sanitation, and employment practices. (See Contract Art. 7.1 and Annex A.) Gardner Merchant was subject to daily quality-assurance audits to ensure that it was complying with all of the Bank's requirement, policy and contract specifications. (Statement PP 10-11.) The Bank rigorously supervised and controlled every aspect of the Program's operations. (Statement P 11; Pl.'s Ex. H P 6.)

 The World Bank assured Gardner Merchant that it was immune from the duty to collect or pay any sales or use taxes because of the Bank's tax-immune status. (Id. at Art. 8.) In particular, Plaintiff agreed to furnish Gardner Merchant any required tax-exemption certification to relieve it of any duties to collect or pay sales or use taxes related to its transactions under the Contract. The provision in the contract indicating that Gardner Merchant could assert the Bank's immunity was consistent with prior practice of the Food Service Program. (Statement P 8 and Ex. I, Art. 8.1.) As a result, Gardner Merchant did not collect or pay Defendant any sales or use taxes related to transactions under the Program, such as sales of meals and purchases of supplies. (Statement P 8.)

 Defendant's Department of Finance and Revenue (the "Department") performed a general sales and use tax audit on Gardner Merchant for the period of January 1, 1994 through December 31, 1995, and issued a notice of deficiency. The notice mainly related to transactions dealing with the World Bank. (Statement P 12.) The Bank and Gardner Merchant contested the notice of deficiency through written submissions and a hearing before a Hearing Officer of the Department. (Statement P 13.) On November 22, 1996, the Department assessed sales and use taxes against Gardner Merchant in the amount of $ 688,737.61. The Department did not provide a rationale for its decision. (Statement P 14.)

 On May 22, 1997, Plaintiff paid Defendant approximately $ 680,195 to satisfy that portion of the assessment related to Gardner Merchant's Program transactions. (Statement P 16.) The amount paid by the Bank consists of approximately $ 347,039 in taxes, $ 156,167 in penalties, and $ 176,990 in interest. (Id.) The parties agree that Plaintiff overpaid approximately $ 25,818 in interest. (See Pl.'s Mot. at 9; Def.'s Cross-Mot. at 2.) Accordingly, the amount in controversy in this case is $ 654,378.


 Under Fed. R. Civ. P. 56, a motion for summary judgment shall be granted only if the pleadings, depositions, answers to interrogatories, admissions on file and affidavits show that there is no genuine issue of material fact, and that the moving party is entitled to judgment as a matter of law. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). In considering a motion for summary judgment, the "evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Id. at 255. In this case, both parties agree that the case may be disposed of on summary judgment.

 III. Neither The World Bank, Nor Its Independent Contractor, Is Liable For Sales Or Use Taxes Assessed On The Operation Of Its Food Service Program.

 This case raises significant issues of first impression. The primary question is whether the immunity from taxation granted to Plaintiff under the Articles of Agreement extends to Plaintiff's independent contractor who operates Plaintiff's cafeteria and pays Plaintiff a stated percentage of gross revenues.

 Plaintiff's broad tax-immune status is set forth in Article VII, Section 9(a) of the Articles of Agreement, which provides,

The Bank, its assets, property, income and its operations and transactions authorized by this Agreement, shall be immune from all taxation and from all customs duties. The Bank shall also be immune from liability for the collection or payment of any tax or duty.

 Plaintiff does not deny that Gardner Merchant is a separate and independent entity. Plaintiff argues, instead, that the "operations and transactions authorized by [the] Agreement" include the Food Service Program operated by its independent contractor. (See Pl.'s Mot. at 19-26.) Accordingly, the World Bank maintains that because the Food Service Program is a legally authorized operation and/or transaction of the institution, and because that Program may be operated through independent ...

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