Republic of Congo Wins Fifth Circuit Appeals

October 10, 2006

Cleary Gottlieb successfully represented the Republic of Congo (Brazzaville) in two Fifth Circuit appeals from attempts by judgment creditors of the Congo to satisfy their claims by executing upon the Congo’s right to receive royalty oil from petroleum exploration projects in the Congo in FG Hemisphere Associates v. Republique du Congo, and Af-Cap, Inc. v. Republic of Congo,in FG Hemisphere Associates v. Republique du Congo, 455 F.3d 575 (5th Cir. 2006), and Af-Cap, Inc. v. Republic of Congo, 2006 WL 2424778 (5th Cir. Aug. 23, 2006).

The net result of these decisions is to vacate writs of garnishment purporting to execute upon royalty obligations owed to the Congo by oil development corporations, to reverse a turnover order directing the Congo to sign over such royalty obligations to creditors, and to vacate an order holding the Congo in contempt for its refusal to comply with the turnover order on grounds of sovereign immunity.

In FG Hemisphere, the Court of Appeals held that lower courts must determine whether a foreign state’s property is “in the United States” and “used for a commercial activity in the United States” before it may be subject to attachment or execution under § 1610 of the FSIA every time a writ of garnishment or other form of execution on foreign state property is sought; the fact that the property was previously in the United States does not satisfy the statutory test. The court also held that these “situs snapshot” determinations must be made separately for each piece of property targeted for execution, and that any execution must satisfy all the requirements of state law even where no immunity is found under the FSIA.

In Af-Cap, the Fifth Circuit further held that non-monetary obligations (such as the obligation to deliver royalty oil) are not subject to garnishment under Texas law; that a contractual consent of a foreign sovereign to jurisdiction in New York is insufficient to support a finding of personal jurisdiction under the FSIA in Texas (which would be necessary to support a turnover order); and that the FSIA prohibits monetary contempt sanctions against a foreign state (a point on which the Congo was supported by the U.S. Department of Justice as an amicus curiae).