Execution Sought Against Guinea in Delaware

After the District Court of Columbia entered default judgment against Guinea, A.D. Trade Belgium S.P.R.L. ("AD Trade") is now seeking to enforce that judgment in Delaware. On Friday, August 25, 2023, AD Trade filed a motion seeking a fi fa writ against garnishee Delaware corporation Compagnie des Bauxites de Guinee (“CBG” or “Garnishee”) in aid of enforcing A.D. Trade’s judgment against the Republic of Guinea (“Guinea”). Garnishee is owned by the state of Guinea (49%), and Harvey Aluminium of Delaware (51%).

AD Trade is seeking attachment of Guinea's stock in CBG. AD Trade is arguing that those shares are not exempt from attachment under the Foreign Sovereign Immunity Act because they are property used for commercial activity. AD Trade further explains that "[t]he CBG Shares are legally located in this District because, as a matter of Delaware law, 'the situs of the ownership of capital stock of all corporations existing under the laws of this State . . . shall be regarded as in this State,'” pointing out to 8 Del. C. § 169 and Alberta Sec. Comm’n v. Ryckman, 2015 WL 2265473, at *10 (Del. Super. Ct. May 5, 2015) (“For attachment and garnishment purposes, the situs of ownership in a Delaware corporation is Delaware.”), aff’d, 127 A.3d 399 (Del. 2015), for support. According to AD Trade, the shares are in CBG's possession.

AD Trade explains that the Court has already granted this relief in a different proceeding against Guinea, but that the sovereign reached a confidential settlement and so the shares were never auctioned off. See Compagnie Sahelienne D’Enterprise v. Republic of Guinea, C.A. No. 21-mc-530 (D. Del. Feb. 2, 2022).

Earlier this year, the District Court for the District of Delaware authorized the auction of Venezuela's shares in CITGO. We expect Delaware to become an important forum for sovereign litigation and judgment enforcement as a result of that ruling.

The case is A.D. Trade Belgium S.P.R.L. v. Republic of Guinea, 1:23-mc-00358-UNA (D.Del. 2023). AD Trade is represented by Jacob Kirkham, Josef M. Klazen, Darryl G. Stein, Geoffrey J. Derrick from Kobre & Kim.

AD Trade v. Guinea.pdf

Download PDF • 298KB

SDNY Dismisses Petition against Republic of Congo for Turnover of Property

On May 23, 2023, the Southern District of New York dismissed a petition against the Republic of Congo and Ecree LLC seeking turnover of a New York condo allegedly bought using funds embezzled from the Republic.

The action seeks enforcement of two arbitration awards against the Republic of Congo, which were confirmed and reduced to judgment in the District of Columbia, and then registered in the Southern District of New York.

The Court held that while the Petitioner alleged a theory within the Court's ancillary jurisdiction (as it involved a fraudulent conveyance of the property of Petitioner's debtor), the Petition had to be dismissed as it failed to make any allegations regarding the Republic itself.

The Court's discussion of ancillary jurisdiction related to fraudulent conveyance is notable. The Court explained:

The Second Circuit has held that an action to collect a judgment does not require an independent jurisdictional basis even where parties are nondiverse. See Epperson, 242 F.3d at 104. As Epperson explains, a fraudulent conveyance claim is a quintessential example of a follow-on action to collect a judgment that does not require an independent jurisdictional basis, inasmuch as failing to allow ancillary jurisdiction over such actions “would encourage judgment debtors to engage in such conduct, not only to avoid payment of the judgment but also to force the winning plaintiff to pursue him to another jurisdiction.” Id. at 107 n.10. Since Epperson, courts within the Second Circuit have routinely found that ancillary jurisdiction exists where the plaintiff or petitioner adequately pleads that the judgment debtor’s assets have been fraudulently conveyed in order to avoid payment of the subject judgment. See, e.g., Nat’l Council on Comp. Ins., Inc. v. Caro & Graifman, P.C., 259 F. Supp. 2d 172, 177 (D. Conn. 2003) (finding, in context of plaintiffs’ action seeking declaration that granting of mortgage was fraudulent and designed to avoid restitution order, that “action is within the ancillary jurisdiction of [the] court” and declining to dismiss due to non-diverse parties).

The Court explained that, however, the ancillary jurisdiction is not without limits. It does not, for example, extend beyond attempts to execute, or to guarantee eventual executability of, a federal judgment. This means, the Court continued, that a "federal court does not have ancillary jurisdiction over a 'new theor[y] of liability,' such as a veil-piercing claim that seeks to hold a third party independently liable for a judgment." The Second Circuit and courts within it have thus "draw[n] a distinction between post-judgment proceedings to collect an existing judgment and proceedings, such as claims of alter ego liability and veilpiercing, that raise an independent controversy with a new party in an effort to shift liability.”

The Court however held that the Petition failed to allege that the Republic has fraudulently conveyed the funds. The Court reviewed the state of the law and recognized "the well-accepted principle that 'not every action that happens to be taken by officials of a foreign state is properly attributable to that state.'” The Court explained that "[u]nder the act-of-state doctrine, courts distinguish between public acts taken by individual government actors that are attributable to the state and protected, and private acts that are not attributable to the state and not protected." Therefore, the question here was whether "Petitioner has alleged facts supporting a conclusion that the President (or any member of his family) was acting as an agent of the Republic when they allegedly fraudulently transferred the funds."

The Southern District found that "Petitioner has not asserted any non-conclusory allegations suggesting that the President was acting as an agent of the Republic when he allegedly misappropriated the funds at issue." It noted that the "Petitioner has not alleged that the President was acting within the scope of his employment, or that he acted with actual or apparent authority to bind the Congo when making the transfers. Embezzling funds for private use is undoubtedly a 'private' act — a 'useful [determination of] whether a foreign official’s conduct is attributable to his government or sovereign state[.]'”

The Court also dismissed the Petition on the grounds that Petitioner has not sufficiently pleaded that the condo is not immune from execution under the Foreign Sovereign Immunity Act (FSIA). The Court sided with Petitioner in finding that the alleged holding of the condo by a sovereign as a real estate investment constituted "commercial activity" under the FSIA. Nevertheless, the Court found that Petitioner failed to allege that it was the Republic's commercial activity. Thus, the use of the condo appeared to be a “private” act and not one that may be “attributable to [the] government.”

The case is Commissions Import Export S.A. v. Republic of the Congo et al., No. 1:19-mc-00195 (S.D.N.Y.).

Read the entire opinion here:

Commissions Import Export S.A. v. Republic of the Congo et al, 1_19-mc-00195, No. 127 (S.D

Download D • 467KB

Eleventh Circuit Affirms Decision on Sovereign Immunity in Angola Suit

On May 23, 2023, the Eleventh Circuit issued an opinion affirming the district court decision below in Africa Growth Corporation v. Republic of Angola, No. 21-11136.

The dispute before the appellate court was "whether Angola has foreign sovereign immunity." The Court explained that "[t]he answer turns on what the “'gravamen' of the action is. Under the Foreign Sovereign Immunities Act, if the 'gravamen' of the action is Angola’s expropriation of AFGC’s property, then Angola has immunity. But if the 'gravamen' of the action is the breach of the settlement agreement—and if the breach of the settlement agreement is commercial, not sovereign, in nature—then the Foreign Sovereign Immunities Act’s exception for commercial activity applies and Angola isn’t immune from suit."

"After a thorough review of the record," the Eleventh Circuit affirmed the decision of the Southern District of Florida and "conclude[d] that Angola’s taking of AFGC’s property was what injured AFGC here."

The dispute commenced in 2015, when AFGC, a Nevada corporation, bought real estate properties in Angola through its subsidiaries. The next year, the Angolan government took control of AFGC's subsidiaries and, therefore, its real estate. AFGC fought this action on multiple fronts, including a lawsuit in the District of Columbia.

The parties decided to negotiate a settlement, and eventually "reached an agreement that Angola would pay AFGC $47.5 million in exchange for AFGC relinquishing all rights and claims to the properties and—upon payment in full—a promise that AFGC would dismiss its D.C. lawsuit and end its lobbying efforts against Angola. The parties agreed to meet the next week to sign a written settlement agreement," but never reconvened and the Angolan government refused to keep its end of the deal. The D.C. lawsuit was dismissed for sovereign immunity reasons.

AFGC sued again, this time in the Southern District of Florida. AFGC asserted a cause of action for breach of contract, seeking the $47.5 million owed for the expropriated property and “further consequential damages, which collectively total in excess of USD 95 million” and, in the alternative, unjust enrichment. Angola moved to dismiss, arguing that the district court lacked subject matter jurisdiction because of the Foreign Sovereign Immunities Act (“FSIA” or “the Act”), 28 U.S.C. § 1602, et seq. The Southern District of Florida agreed, holding that “the gravamen of this case is the expropriation of real property,” so Angola retained its immunity.

The Eleventh Circuit affirmed, reviewing whether the lawsuit qualified for a commercial activity exception under the FSIA. The Court explained that Eleventh Circuit precedent "compels" this result--specifically Beg v. Islamic Republic of Pakistan, where the Pakistani government seized millions of dollars from the plaintiff, agreed to compensate him, and then reneged on the promise. The Court explained that both in Beg and in this case, the plaintiff was actually injured by the expropriation, and not the breach. "In both cases, the agreement was the means of redressing an injury previously inflicted," the Court explained. The Court contrasted this situation to one where "a sovereign power forms a contract with a private party and then reneges on it." In the latter scenario, "the sovereign power is engaging in commercial activity—even if the way that the sovereign reneges is through what may look like expropriation." But in the first, Beg controls and the expropriation, and not the contract, is the "gravemen" of the action.

A copy of the opinion may be found below.

Angola 11th Cir. Opinion 21-11136 dckt 000045_000 filed 2023-05-23.pdf

Download PDF • 274KB