Af-Cap, Inc. (Plaintiff), the judgment creditor, filed garnishments and liens against any property of the judgment debtor, the Republic of Congo (Defendant), held by the third party Chevron Texaco Corporation (CT Corp.) and its U.S. subsidiaries (jointly Chevron Texas). The Defendant's assets held

The Defendant's obligations result from a 1984 loan by Equator Bank to build a highway on the Defendant's territory. In the contract the Defendant consented to "execution against any property whatsoever (irrespective of its use or intended use)." Also, the Defendant waived its "immunity from suit, execution, attachment ... or other legal process." In 1985, the Connecticut Bank of Commerce (CBC) became Equator Bank's assignee, obtained a judgment against Defendant in England, and converted it into a U.S. judgment in the New York courts.

The district court vacated the garnishments and liens filed against the Defendant and Plaintiff appealed. The U.S. Court of Appeals for the Ninth Circuit affirms. It held that Defendant did not use the obligations for any commercial activity in the U.S. and thus had retained its immunity under the F. S. I. A., 28 U.S. C. Section 1610(a). The Court rejects Plaintiff's claim that the Defendant's waiver renders Section 1610(a) inapplicable to the loan.

"In fact, the opposite is true. Under Section 1609, 'the property in the United States of a foreign state shall be immune from attachment[,] arrest and execution except as provided in section[ ] 1610 . . .' 28 U.S.C. Section 1609. In turn, Section 1610(a), the exception at issue in this case, provides: 'The property in the United States of a foreign state . . . used for a commercial activity in the United States, shall not be immune from attachment in aid of execution, or from execution, upon a judgment entered by a court of the United States or of a State . . . if: (1) the foreign state has waived its immunity from attachment in aid of execution, or from execution . . .' 28 U.S.C. Section 1610(a) ..."

"[Plaintiff's] contention that the [Defendant's] waiver renders 28 U.S.C. Section 1610(a) inapplicable is self-defeating because, in the absence of a waiver, the property of the Congo would be immune from attachment under Section 1609. We agree with the Fifth Circuit that the waiver merely triggers the exception to the immunity from execution that would otherwise be in effect. ..."

"Rather than end our inquiry, the [Defendant's] waiver requires that we turn to the second requirement at issue in this case: whether the property was 'used for a commercial activity in the United States.' Connecticut Bank of Commerce v. Republic of Congo, 309 F. 3d 240, 251 (5th Cir. 2002) (CBC)] ..."

"The parties dispute the meaning of 'used for' in Section 1610(a), and the precise meaning of the term is an issue of first impression in this Circuit. The [Defendant] asks us to adopt the Fifth Circuit's interpretation of the term. According to the Fifth Circuit: 'To use property for a commercial activity, within the ordinary meaning of 'use,' would be to put the property in the service of the commercial activity, to carry out the activity by means of the property.' CBC, above at 254."

"'What matters under the statute is what the property is 'used for,' not how it was generated or produced,' id. at 251, and not whether the property merely has a 'nexus or connection to a commercial activity in the United States.' Id. at 254. In contrast, [Plaintiff] asks us to expand the Fifth Circuit's definition and determine whether property was used for a commercial activity in the United States by examining the entire underlying activity that generated the property in question." [Slip op. 7].

The legislative history of Section 1610(a) shows that the property at issue must have been used for a commercial activity in the U.S. Also, the two separate provisions in the F. S. I. A. for execution on property mandate caution in this case. Section 1610(b) is more permissive, allowing execution against any property in the U.S. belonging to an agency or instrumentality of a foreign state. Section 1610(a), however, is more restrictive and allows execution on the property of a foreign state only when it is in the U.S. and is used for a commercial purpose. Thus, the F. S. I. A. limits execution against property directly belonging to a foreign state.

The foreign state's actual use of the property is determinative. The Court essentially adopts the Fifth Circuit's test in CBC. Property that is used for a commercial activity in the U.S. if it is put into action, put into service, availed of, or employed for, a commercial activity, not just in connection or in relation to a commercial activity.

The present Court does not approve, however, of the Fifth Circuit's reservations to quantifying the number of commercial uses. That would unnecessarily complicate the determination under Section 1610(a). Here, the Defendant's assets are not being used for commercial activity in the U.S. and thus they are not subject to execution or collection under Section 1610(a).

Citation: Af-Cap, Inc. v. Chevron Overseas Limited, 475 F.3d 1080 (9th Cir. 2007).