Henry H. Perritt, Jr.

Professor of Law

Chicago-Kent College of Law

565 West Adams Street

Chicago, IL 60661

(312) 906-5128

hperritt@kentlaw.edu

UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF NEW YORK

Wood Industries, LLC,

                   Plaintiff,

          vs.

The United Nations, The United Nations Mission in Kosovo, and Kosovo Trust Agency,

                   Defendant

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Case No.: 03-CV-7935 (MBM)

BRIEF OF AMICUS CURIAE GOVERNMENT OF KOSOVO

IN SUPPORT OF DEFENDANT KTA’S MOTION TO DISMISS


Table of contents

Table of contents. 2

Table of cases. 2

Summary of argument 8

Statement of interests. 8

Background on civil administration in Kosovo. 9

Argument 11

I. The court should dismiss the case because the defendants enjoy sovereign immunity. 11

A. KTA enjoys absolute immunity under the UN Treaty on Privileges and Immunities of the UN.. 12

B. KTA is immune under the IOIA.. 12

C. KTA is immune under the FSIA.. 13

2. KTA’s acts are not within the commercial activities exception to immunity. 15

II. The court should dismiss the case on forum non conveniens grounds, even if one or more defendants do not enjoy sovereign immunity. 17

III. The court should dismiss this action because deciding the case on the merits would require the court to review “Acts of State”. 22

IV. Litigating this case on the merits will undermine nationbuilding activities around the world. 25

Table of cases

Cases

Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 727 (1976)................................ 22

Ampac Group, Inc. v. Republic of Honduras, 797 F. Supp. 973 (S.D. Fla. 1992)...................... 16, 25

Askir v. Boutros-Ghali, 933 F. Supp. 368, 372-373 (S.D. N.Y. 1996)............................................ 13

Atkinson v. Inter-American Development Bank, 156 F.3d 1335, 1342 (D.C. Cir. 1998).................. 12

Banco Nacional Cuba v. Sabbatino, 376 U.S. 398, 427 (1964)....................................................... 22

Bell v. British Telecom, No. 95 Civ. 1972 (MBM), 1995 WL 476684 (S.D.N.Y. Aug. 9, 1995) 17, 19

Bigio v. Coca-Cola Co., 239 F.3d 440 (2d Cir. 2001).................................................................... 25

Boimah v. United Nations General Assembly, 664 F. Supp. 69, 71 (E.D. N.Y. 1987)...................... 12

Calgarth Investments, Ltd. V. Bank Saderat Iran, No. 95 Civ. 5332 (MBM), 1996 WL 204470 (S.D.N.Y. Apr. 26, 1996)................................................................................................................................................... 19

CL-Alexanders Laing & Cruickshank v. Goldfeld, 709 F. Supp. 472, 480-481 (S.D.N.Y. 1989).... 19

Dar-El-Bina Engineering & Contracting Co., Ltd. v. Republic of Iraq, 79 F. Supp.2d 374, 382 (S.D.N.Y. 2000)          16

DeLuca v. United Nations Organization, 841 F. Supp. 531.............................................................. 12

DeYoung v. Beddome, 707 F. Supp. 132, 139 (S.D.N.Y. 1989).................................................... 19

DiRienzo v. Philip Services Corp., 294 F.3d 21, 28-31 (2d Cir. 2002) [hereinafter “DiRienzo II”] 17, 19, 25

Doe v. Hyland Therapeutics Div., 807 F. Supp. 1117, 1128............................................................ 20

Dunhill, 425 U.S. at 697-698.......................................................................................................... 24

Eastman Kodak Co. v. Kavlin, 978 F. Supp. 1078, 1084-85 (S.D. Fla. 1997)................................ 18

Emmanuel v. United States, 253 F.3d 755, 756 (1st Cir. 2001)....................................................... 12

F.D. Import & Export Corp. v. M/V REEFER SUN, 2003 WL 21512065, *1 (S.D.N.Y., 2003)... 20

Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508-09 (1947).................................................................. 17

Hasakis v. Trade Bulkers, Inc., 690 F. Supp. 260, 262 (S.D.N.Y. 1988)........................................ 19

Hewitt v. Speyer, 250 F. 367, 370 (2nd Cir. 1918)......................................................................... 23

In re Assicurazioni Generali S.P.A. Holocaust Insurance Litigation, 228 F. Supp. 348, 350-351 (S.D.N.Y. 2002)         17, 18, 19, 20

In re Ski Train Fire in Kaprun, Austria on Nov. 11, 2000, 230 F. Supp. 2d 376, 387 (S.D.N.Y. 2002) 17

In re Union Carbide Corp. Gas Plant Disaster, 809 F.2d 195, 199 (2d Cir. 1987)........................... 17

Lybian American Oil Co. v. Socialist People’s Lybian Arab Jamahirya, 482 F. Supp. 1175, 1179 (D. D.C. 1980)         23

Machinists v. Org. of Petroleum Exporting Countries (OPEC), 649 F. 2d 1354 (1981).................... 24

Oetjen v. Central Leather Co., 246 U.S. 296 (1918);...................................................................... 23

Pavlov v. Bank of N.Y. Co., 135 F. Supp. 2d 426, 434-435 (S.D.N.Y. 2001)............................... 17

Piper Aircraft Co. v. Reno, 454 U.S. 235, 254 (1981).................................................................... 17

PT United Can Co. v. Crown Cork & Seal Co., 138 F.3d 65, 74 (2d Cir 1998)............................. 18

Ricaud v. American Metal Co., 246 U.S. 304, 310 (1918)........................................................ 22, 23

Sablic v. Croatia Line, 719 A.2d 172 (N.J. Super. App. Div. 1998)................................................ 14

Underhill v. Hernandez, 168 U.S. 250 (1897)...................................................................... 15, 22, 23

W. S. Kirkpatrick & Co. v. Environmental Tectonics Corp., Intl., 493 U.S. 400, 406 (1990)........... 22

Walter Fuller Aircraft Sales, Inc. v. Republic of the Philippines, 965 F. 2d 1375, 1388 (5th Cir. 1992) 23

Ward v. Brown, 22 F.3d 516, 518 (2d Cir. 1994)........................................................................... 12

Weltover, Inc. v. Republic of Argentina, 753 F. Supp. 1201, 1207 (S.D.N.Y. 1991), aff’d, 941 F.2d 145, 153 (2d Cir. 1991), aff’d on other grounds, 504 U.S. 607, 619 (1992)...................................................... 16, 25

WMW Machinery, Inc. v. Werkzeugmaschinenhandel GMBH, 960 F. Supp. 734 (S.D. N.Y).... 15, 20

World Wide Minerals, Ltd. v. Republic of Kazakhstan, 296 F.3d 1154 (D.C. Cir. 2002) 14, 22, 23, 25

Statutes

International Organizations Immunity Act, 22 U.S.C. §§ 288-288a(b).............................................. 12

Foreign Sovereign Immunities Act

28 U.S.C. § 1603(b)....................................................................................................................... 13

28 U.S.C. § 1605(a)(2).................................................................................................................. 15

28 U.S.C. §1604............................................................................................................................ 13

Consolidated Appropriations Resolution, 2003, Pub.L. 108-7, 117 Stat. 11, 168 (Feb. 20, 2003)... 21

Executive Order No. 9698, 11 Fed. Reg. 1809 (Feb. 19, 1946)...................................................... 12

International Emergency Economic Powers Act, 50 U.S.C. 1701-1706........................................... 21

Other Authorities

Presidential Determination with respect to Western Balkans, 68 Fed. Reg. 37389 (June 20, 2003)... 21

Executive Order 9698, 11 Fed. Reg. 1809 (Feb. 19, 1946)............................................................. 23

USAID Mission for Kosovo Website, http://www.usaid.gov/missions/kosovo/.................................. 21

Michael Ramsey, Acts of State and Foreign Sovereigns, 39 Harv. Intl. L. J. 1, 16 (1998)................. 23

Restatement(Third) of Foreign Relations of the United States, § 1, Reporters’ Note 4....................... 22

Treaties

United Nations Convention on Privileges and Immunities of the United Nations, Feb. 13, 1946, Art. II, § 2, 21 U.S.T. 1418, 1422, T.I.A.S. 6900......................................................................................................... 11

United Nations Materials

Meeting of the UN Security Council, 58th Year, 4853rd meeting, Oct. 30, 2003, SCOR S/PV.4853 13

Security Council Resolution 1244.............................................................................................. passim

Special Chamber UNMIK Regulation § 7........................................................................................ 18

UNMIK Admin Dir. 2003/13 §32................................................................................................... 17

UNMIK Admin Dir. 2003/13 §55-57............................................................................................. 17

UNMIK Admin. Dir. 2003/12 §52.................................................................................................. 18

UNMIK Admin. Dir. 2003/13 §22.7............................................................................................... 17

UNMIK Admin. Dir. 2003/13 §43.................................................................................................. 17

UNMIK Administrative Direction No. 2003/13............................................................................... 18

UNMIK Regulation 1999/1............................................................................................................... 9

UNMIK Regulation 2000/45........................................................................................................... 10

UNMIK Regulation 2000/47............................................................................................................. 9

UNMIK Regulation 2000/63........................................................................................................... 10

UNMIK Regulation 2001/9................................................................................................... 8, 10, 14

UNMIK Regulation 2002/12.................................................................................................... passim

UNMIK Regulation 2002/12 § 1..................................................................................................... 10

UNMIK Regulation 2002/12 § 5.5 (a)............................................................................................ 10

UNMIK Regulation 2002/12 § 6.1............................................................................................ 10, 14

UNMIK Regulation 2002/12 § 6.1 (m)........................................................................................... 10

UNMIK Regulation 2002/12 §§ 8.1-8.7................................................................................... 11, 14

UNMIK Regulation 2002/12 § 9.3.................................................................................................. 14

UNMIK Regulation 2002/12 § 10.2(b)........................................................................................... 14

UNMIK Regulation 2002/12 § 23.1-23.2....................................................................................... 14

UNMIK Regulation 2002/12 § 24.3................................................................................................ 22

UNMIK Regulation 2002/12 § 26................................................................................................... 14

UNMIK Regulation 2002/12 § 27................................................................................................... 14

UNMIK Regulation 2002/12 § 30............................................................................................. 17, 20

UNMIK Regulation 2002/12 § 30.1................................................................................................ 10

UNMIK Regulation 2002/13..................................................................................................... 10, 18

UNMIK Regulation 2002/13 § 3.2.................................................................................................. 18

UNMIK Regulation 2002/13 intro................................................................................................... 20


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Summary of argument

This court should embrace one or more of several doctrinal bases to decline deciding this case on the merits. Several interrelated doctrines of sovereign immunity, the doctrine of Forum Non-Conveniens and the Act of State Doctrine require this court to avoid reaching the merits of this lawsuit. It should dismiss the lawsuit, allowing it to be heard, if the plaintiff so desires, in the Special Chamber of the Kosovo Supreme Court.

Defendant Kosovo Trust Agency (“KTA”) enjoys the absolute immunity of the United Nations, requiring dismissal under the United Nations Treaty on Privileges and Immunities of the United Nations and the International Organizations Immunity Act. Independently, the KTA activities giving rise to this lawsuit are quintessentially governmental in nature, occurred outside the United States, and do not have direct effect in the United States, requiring dismissal under the Foreign Sovereign Immunities Act (“FSIA”). The court should dismiss the complaint under the doctrine of Forum Non Conveniens because the Special Chamber of the Supreme Court of Kosovo is available as an adequate alternative forum, and has exclusive jurisdiction over cases of this sort. Moreover, the court should decline to reach the merits of this lawsuit under the Act of State Doctrine, because the decisions of KTA are those of a foreign sovereign.

To the extent that ambiguities in the doctrines and conflicting caselaw give the court discretion, broad policy considerations require the court to resolve the ambiguities in favor of dismissal. The inescapable fact is that the international civil administration of Kosovo cannot succeed unless KTA can continue its work without facing the threat that disputes over privatization of individual enterprises will spawn litigation in national courts around the world. The legal framework for privatization includes a specialized judicial tribunal established specifically to hear privatization disputes. The exclusive jurisdiction given that tribunal should be honored by national courts, including this one. The novel nature of governmental authority exercised in Kosovo should not lead to mischaracterization of the decisions and acts in litigation.

Important policy and factual differences between this case and cases in which district courts have found privatization disputes to be justiciable in U.S. courts support dismissing this action. Litigating this case on the merits will undermine the ability of the international community to conduct civil administration of post-conflict territory, not only in Kosovo, but all over the world.

Statement of interests

Amicus Government of Kosovo is one of the Provisional Institutions of Self Government (“PISG”) established by the United Nations Interim Mission in Kosovo (“UNMIK”) in its UNMIK Regulation 2001/9 (May 15, 2001), providing a Constitutional Framework for Kosovo. Among other things, the PISG have responsibility for economic and fiscal policy; domestic and foreign trade, energy and investments; UNMIK Regulation 2001/9 § 5.1, and ensuring coordination on matters pertaining to the judicial system and the correctional service. Id. § 5.3. The Prime Minister is authorized to represent the Government. Id. § 9.4.13.

The amicus believes that the privatization program led by the Kosovo Trust Agency (“KTA”) under the authority of UNMIK Regulation 200/12 is an essential element of economic reconstruction in Kosovo, and that the possibility of piecemeal litigation in national courts over privatization disputes threatens the momentum and integrity of the privatization effort.

Background on civil administration in Kosovo

Kosovo, formerly an “autonomous province” of the Republic of Serbia within Yugoslavia, has been, since June 10, 1999 under the “civil administration” of the United Nations, operating through the United Nations Interim Mission in Kosovo (“UNMIK”), backed up by a NATO security force called “KFOR.”

U.N. Security Council Resolution 1244 authorizes both the civil and security presences, agreed to by the Federal Republic of Yugoslavia. SCR 1244 ¶ 5.  The resolution requests the Secretary General of the United Nations to appoint a “Special Representative” (“Special Representative of the Secretary General” or “SRSG”) to control the implementation of the international civil presence. SCR 1244 ¶ 6.  The resolution authorizes the Secretary General to establish the civil presence “in order to provide an interim administration for Kosovo under which the people of Kosovo can enjoy substantial autonomy within the Federal Republic of Yugoslavia, and which will provide transitional administration while establishing and overseeing the development of provisional democratic self-governing institutions to ensure conditions for a peaceful and normal life for all inhabitants of Kosovo.” SCR 1244 ¶ 10. 

Among other things, SRSG is to “perform basic civilian administrative functions where and as long as required, SCR 1244 ¶ 11 (b), to transfer its administrative responsibilities to “local provisional institutions,” SCR 1244 ¶ 11 (d), to facilitate a political process to determine Kosovo’s future status taking into the account the Rambouillet Accords,”[1] SCR 1244 ¶ 11 (e), and ultimately, to “oversee” the transfer of authority from Kosovo’s provisional institutions to institutions established under a political settlement.

Most significantly in conjunction with the present controversy—the SRSG is authorized to support “the reconstruction of key infrastructure and other economic reconstruction.” SCR 1244 ¶ 11 (g).

On July 25, 1999, the SRSG promulgated UNMIK Regulation No. 1999/1 exercising his authority under Resolution 1244.  That Regulation provided, among other things that the civil administration—the United Nations Interim Administration Mission in Kosovo (“UNMIK”)--would perform its duties under Resolution 1244 by “issue[ing] legislative acts in the form of UNMIK Regulations.” UNMIK Regulation 1999/1 § 4.  The UNMIK Regulation further provided that UNMIK would “administer moveable or immoveable property which is in the territory of Kosovo, including monies, bank accounts and other assets” as to which UNMIK has “reasonable and objective grounds” to conclude is “property of or registered in the name of, the Federal Republic of Yugoslavia or the Republic of Serbia or any of their organs, UNMIK Regulation 1999/1 § 6.1 (a), or “socially owned property.” Id. § 6.1 (b).  UNMIK administration of property pursuant to this authority “shall be without prejudice to the right of any person or entity to assert ownership or other rights in the property in a competent court in Kosovo, or in a judicial mechanism to be established by UNMIK Regulation.” Id. § 6.2.

In UNMIK Regulation 2000/47, the SRSG declared that “UNMIK, its property, funds and assets shall be immune from any legal process,” UNMIK Regulation 2000/47 § 3, defining “UNMIK” to mean the “international civil presence established pursuant to Security Council Resolution 1244 …integrating the interim civil administration, humanitarian affairs, institution building, and reconstruction components.” UNMIK Regulation 2000/47 § 1.

On June 13, 2002, the SRSG established the Kosovo Trust Agency (“KTA” or “the Agency”), in UNMIK Regulation 2002/12, explicitly citing authority under Resolution 1244 and UNMIK Regulation 1999/1.  The Agency was established as an independent body, possessing “full juridical personality,” with the capacity to contract, acquire, hold and dispose of property and to sue and be sued in its own name. UNMIK Regulation 2002/12 § 1. KTA reports through the reconstruction component of the civil administration. KTA was authorized to “administer publicly owned and socially owned enterprises (“SOEs”) and related assets within the context of Section 8.1 (q) of the Constitutional Framework.[2]  The authority of KTA expressly extended to “all enterprises and assets within the scope of” UNMIK Regulation 2000/63 establishing an administrative Department of Trade and Industry,” UNMIK Regulation 2002/12 § 5.5 (a), and UNMIK Regulation 2000/45 providing for self government of municipalities in Kosovo. Id. § 6.5 (b).

KTA has authority to take “any action (with certain exceptions) that the agency considers appropriate to preserve or enhance the value, viability, or governance” of the enterprises. UNMIK Regulation 2002/12 § 6.1.  The authority expressly includes “entering into arrangements for the management, reconstruction or reorganization of enterprises.” UNMIK Regulation 2002/12 § 6.1 (m).  KTA may establish subsidiaries and transfer assets to the subsidiaries, Id. § 6.1 (o), restructure an enterprise into several enterprises and/or corporations, Id. § 6.1 (q), contract out part of the activities of enterprises, Id. § 6.1 (r), and initiate bankruptcy proceedings. Id. § 6.1 (s).

With respect to socially owned enterprises, KTA, in addition to its basic authority, is empowered to establish subsidiaries of an SOE and transfer SOE assets to the subsidiary, to sell shares in the subsidiary, to liquidate SOEs, and to dispose of monies and other assets of SOEs. Id. § 6.2.

Section 18 of UNMIK Regulation 2002/12 limits the liability of KTA to its assets plus the unpaid portion of its subscribed capital, UNMIK Regulation 2002/12 § 18.1, and imposes other limitations on liability.  That section waives UNMIK’s immunity for KTA, but within sharply circumscribed channels.  The UNMIK Regulation provides that “the Special Chamber shall have exclusive jurisdiction for all suits against the agency.” UNMIK Regulation 2002/12 § 30.1, referring to the Special Chamber of the Supreme Court of Kosovo, established by UNMIK Regulation 2002/13.

When reorganizing SOEs, UNMIK is authorized to strip the liabilities from assets and to transfer the assets to investors free and clear of claims, and then must place the money received for the assets from investors selected through an open tender process into a trust, which then is available to satisfy claims adjudicated by the Special Chamber. UNMIK Regulation 2002/12 §§ 8.1-8.7.

This lawsuit arose from a decision by UNMIK to proceed with privatization under a new agency rather than commercialization under a department of UNMIK, and the subsequent decision by KTA to put certain assets up for tender in a transparent process rather than going forward with certain contracts expected by the plaintiff during the commercialization process.

Argument

I. The court should dismiss the case because the defendants enjoy sovereign immunity

An agency that has been created by the UN to carry out governmental-type functions in Kosovo, a region under on-going UN administration, is entitled to be accorded the immunity that is provided for by treaty and by federal statutes for foreign governments and/or international organizations.

KTA is immune from suit based on three different sources of law: the United Nations Treaty on the Privileges and Immunities of the United Nations, the International Organizations Immunity Act (“IOIA”), and the Foreign Sovereign Immunities Act (“FSIA”).

In applying the three doctrines that recognize immunity, the starting point is the fact that KTA exercises governmental functions in Kosovo. KTA, within its sphere of delegated authority under UNMIK Regulation 2002/12, exercises legislative and executive functions. Unlike a commercial enterprise or a common-law trustee, KTA enjoys more power than simply the power to contract or to administer assets. It has the power to impose legal obligations on third parties and the power to alter property rights, powers associated with governments.

An entity performing governmental functions, such as KTA, can acquire immunity either by delegation of authority from higher-level bodies enjoying immunity, or independently, based on the functions it performs. In this case KTA’s owes its existence and derives all of its powers from the United Nations, which enjoys immunity under the Treaty and under the IOIA. It performs functions that qualify it as a state under the FSIA. These functions are not “commercial activities” under the FSIA.

A. KTA enjoys absolute immunity under the UN Treaty on Privileges and Immunities of the UN

KTA owes its existence to, and derives its authority from, the United Nations. The United Nations, its subordinate components, and its officers enjoy absolute immunity under the United Nations Convention on Privileges and Immunities of the United Nations, Feb. 13, 1946, Art. II, § 2, 21 U.S.T. 1418, 1422, T.I.A.S. 6900.  UNMIK exercises the UN’s authority in Kosovo, delegated to the SRSG in Security Council Resolution 1244 through the Secretary General and then through the Special Representative of the Secretary General. UNMIK thus stands in the shoes of the UN itself in terms of immunity.

The KTA is a creature of UNMIK Regulation 2002/12, and exercises only those powers delegated to it under that UNMIK Regulation. In that respect, KTA should be viewed as similar to a federal administrative agency exercising statutorily delegated powers in the United States. Because it exercises delegated governmental power, KTA enjoys the same immunity as the delegating authority. Just as UNMIK would be immune from private suit in the national courts of foreign countries were it to have taken on the privatization task itself rather than delegating the function to KTA, KTA likewise is immune.

That UNMIK has partially waived immunity for KTA, by subjecting it to suit in the Special Chamber of the Supreme Court of Kosovo, does not alter the reality that its immunity against suit in other courts remains intact. In this respect, its immunity is similar to that of agencies of the United States Government, which remain immune from breach-of-contract actions in the regular federal courts despite partial waiver of immunity in the Tucker Act for suits in the United States Claims Court. See Ward v. Brown, 22 F.3d 516, 518 (2d Cir. 1994) (Claims Court has exclusive jurisdiction of breach of contract actions seeking more than $10,000 unless some statute other than Tucker Act waives sovereign immunity).

The KTA, as a creature of the United Nations, enjoys the same immunity as the UN under the Treaty.

B. KTA is immune under the IOIA

KTA also enjoys immunity derived from the UN’s immunity under § 7 (b) of the International Organizations Immunity Act (“IOIA”), 22 U.S.C. § 288a.  The IOIA confers immunity such as is enjoyed by foreign states, thus linking it to FSIA immunity. 22 U.S.C. § 288a(b). It covers organizations, such as the United Nations, in which the United States participates pursuant to a treaty, and which the President has designated by Executive Order. 22 U.S.C. §288. The President designated the United Nations as an organization covered by the immunities conferred by the Act in Executive Order No. 9698, 11 Fed. Reg. 1809 (Feb. 19, 1946).

KTA, deriving its power and thus its immunity from the UN, is immune from suit in this forum regardless of whether the IOIA, by granting to international organizations immunity coextensive with that of foreign governments, confers the absolute immunity foreign governments enjoyed at the time of the IOIA’s passage or only the restrictive immunity provided for in the FSIA. Compare Atkinson v. Inter-American Development Bank, 156 F.3d 1335, 1342 (D.C. Cir. 1998) (holding that Congress did not intend restrictive immunity doctrine of FSIA to apply to IOIA) with Boimah v. United Nations General Assembly, 664 F. Supp. 69, 71 (E.D. N.Y. 1987) (identifying uncertainty as to scope of IOIA immunity).  In Boimah, the court found it unnecessary to resolve ambiguities in the IOIA because it found the United Nations’ immunity under the convention to be absolute.  664 F. Supp. at 71. 

In several reported cases, federal courts have suggested that UN immunity under the treaty and/or under the IOIA is broader than FSIA immunity, although the facts of some of the cases made it unnecessary to reach that question.  See Emmanuel v. United States, 253 F.3d 755, 756 (1st Cir. 2001) (finding that US troops acting under UN authority in Haiti enjoyed UN’s absolute immunity under treaty; not mentioning IOIA); DeLuca v. United Nations Organization, 841 F. Supp. 531, 533 n. 1 (S.D.N.Y. 1994) (finding it unnecessary to consider exceptions of FSIA because convention provided sufficient ground for finding UN immune); Askir v. Boutros-Ghali, 933 F. Supp. 368, 372-373 (S.D. N.Y. 1996) (suggesting that UN immunity under treaty is broader than FSIA immunity but not deciding question because challenged conduct did not fall within commercial activity exception).

The KTA, deriving its powers from the United Nations, should be allowed the same absolute immunity the UN enjoys under the IOIA.

C. KTA is immune under the FSIA

KTA is immune from suit under the Foreign Sovereign Immunities Act (“FSIA”), which provides, subject to certain statutory exceptions, that “a foreign state shall be immune from the jurisdiction of the courts of the United States . . . .” 28 U.S.C. §1604. The Act defines “foreign state” to include political subdivisions, agencies and instrumentalities of foreign states, 28 U.S.C. § 1603(a), which are defined in turn to include entities which are separate legal persons, corporate or otherwise, which are organs of foreign states or subdivisions thereof, and which are not citizens of the United States or created under the laws of a third country. 28 U.S.C. § 1603(b). The KTA is not within the commercial activities exception to the FSIA because the activities giving rise to this lawsuit occurred outside the United States and did not have direct effect in the United States.

1.      KTA qualifies for FSIA immunity

KTA qualifies for FSIA immunity because it is engaged in quintessential governmental functions and because it derives its power from the United Nations, which qualifies as a foreign state under the FSIA. Section 1, paragraph 1 of Security Council Resolution 1244 provides, “All legislative and executive authority with respect to Kosovo, including the administration of the judiciary, is vested in UNMIK.” UNMIK is exercising the powers of a state, and KTA is its instrumentality in performing those governmental functions within a particular sphere of government.

In his report to the Security Council on October 30, 2003, the SRSG referred to privatization as “essential,” and the “only hope” for reducing 57 percent unemployment and other economic challenges. Meeting of the UN Security Council, 58th Year, 4853rd meeting, Oct. 30, 2003, SCOR S/PV.4853 at p.4. The mandate of Resolution 1244 could not have been achieved without governmental authority to alter property ownership rights.

KTA is an integral part of the governmental apparatus established in Kosovo by the SRSG. UNMIK Regulation 2002/12 characterizes KTA as an “independent body” under § 11.2 of the Constitutional Framework. Section 11.1 recognizes independent governmental bodies such as the Central Election Commission, the Kosovo Judicial and Prosecutorial Council, the Office of the Auditor-General, the Banking and Payments Authority of Kosovo, the Independent Media Commission, the Board of the Public Broadcaster, and the Housing and Property Directorate and the Housing and Property Claims Commission. Section 11.2 provides: “The bodies and offices specified above [in § 11.1], and such other independent bodies and offices as may be established by law, shall have the powers, obligations, and composition specified in the legal instruments by which they are established.” Chapter 11 thus contemplates the existence of agencies, plainly governmental in character, that operate independently of UNMIK and local governmental institutions. The reference to chapter 11 of UNMIK Regulation 2001/9 in UNMIK Regulation 2002/12 reinforces the conclusion that KTA’s pedigree is governmental rather than private.

Section 3 of UNMIK Regulation 2002/12 defines “corporation” to include a limited liability company or a joint stock company . . . recognized as such under the UNMIK Regulation on Business Organizations.” By characterizing KTA as an “independent body” rather than as a “corporation,” UNMIK manifested an intent to classify KTA’s functions as governmental rather than commercial.

The same conclusion flows from an examination of KTA functions, which are those of a governmental agency, not those of a commercial enterprise. The KTA, within its sphere of delegated authority under UNMIK Regulation 2002/12, exercises legislative and executive functions. Unlike a commercial enterprise or a common-law trustee, KTA enjoys more power than simply the power to contract or to administer assets. It has the power to impose legal obligations on third parties and the power to alter property rights, powers associated with governments. KTA has authority to “modify the authority” of the governance entities such as the chairman, directors, managers and boards of enterprises under its control. UNMIK Regulation 2002/12 § 6.1(c). It has authority to modify charters, by-laws and other relevant enterprise documents. Id. § 6.1(k). It can require employees and contractors to provide information. Id. § 6.1(g). It can require persons controlling documents regarding enterprises to produce those documents. Id. § 6.1(h). It can establish a business registry. Id. § 8.3. It can suspend lawsuits. Id. § 9.3. It is empowered to establish bidding processes to sell off assets of enterprises. Id. § 10.2(b). It can seek the assistance of the police and NATO military forces. Id. § 26. It can impose fines. Id. § 27. These are inherently governmental powers, not commercial activities. Moreover, KTA, like governmental entities, but unlike commercial entities, is exempt from taxation. Id. § 23.1-23.2.

The activities of privatization agencies in other states have uniformly have been viewed as falling with the FSIA, although case authority is mixed on whether such activities fall within the commercial activities exception of the Act. In Sablic v. Croatia Line, 719 A.2d 172 (N.J. Super. App. Div. 1998), the New Jersey intermediate court held that the Croatian Privatization Fund was a foreign entity entitled to FSIA immunity. In World Wide Minerals, Ltd. v. Republic of Kazakhstan, 296 F.3d 1154 (D.C. Cir. 2002), the Court of Appeals held that the District Court lacked jurisdiction to adjudicate a variety of contract claims asserted by an entity granted management rights over a state-owned uranium mining enterprise in Kazakhstan. It held that the state of Kazakhstan and its instrumentalities enjoyed immunity under the FSIA and had not waived it. The lawsuit alleged that the contracts were not performed because of certain decisions reached in the Kazakhstan privatization process. The plaintiff did not assert the commercial activities exception. 254 F.3d at 1161.  The Court of Appeals held that certain of the defendants were entitled to FSIA immunity, and that immunity had been waived only for certain claims that nevertheless fell within the act of state doctrine.  As to claims against a private corporation which allegedly interfered with the plaintiffs contracts, the Court of Appeals remanded for determination whether personal jurisdiction existed based on an alleged meeting in the United States involving that private defendant.

In Underhill v. Hernandez, 168 U.S. 250 (1897), decided before enactment of the FSIA, the Supreme Court held that what matters for treatment as a sovereign is, not formal recognition of the defendant as a “government,” but the exercise of governmental authority. 168 U.S. at 252. The KTA exercises governmental authority, and therefore is entitled to immunity under the FSIA.

2. KTA’s acts are not within the commercial activities exception to immunity

The acts of KTA at issue in this lawsuit do not fall within the commercial activities exception of the FSIA. The commercial activities exception in the FSIA, 28 U.S.C. § 1605(a)(2), withholds immunity from a foreign state when the “action is based on a commercial activity carried on in the United States by the foreign state; or upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States.” Id.

The purpose of the commercial activities exception is to restrict “the sovereign immunity of foreign states . . . to cases involving acts of a foreign state which are sovereign or governmental in nature, as opposed to acts which are either commercial in nature or those which private persons normally perform.” H.R. Rep. 94-1487, 94th Cong. 2d Sess. (1976) at p. 14.  The KTA decisions challenged in this suit were inherently governmental, and occurred in Kosovo, not in the United States. The action is not based on any act performed in the United States. The challenged acts of the KTA have no direct effect in the United States. The center of gravity of the controversy giving rise to this lawsuit is in Kosovo, not in the United States.

Two district court cases finding privatization in other countries to be within the commercial activities exception of the FSIA can be distinguished. In WMW Machinery, Inc. v. Werkzeugmaschinenhandel GMBH, 960 F. Supp. 734 (S.D. N.Y 1997), the district court held that the German privatization agency (the German Treuhand) was not entitled to sovereign immunity because the privatization agency, though an entity of the state of Germany, fell within the commercial activities exception.

Superficially, WMW Machinery seems to resemble this case. Closer examination, however, reveals important differences. WMW Machinery sued Treuhand as an owner of the German enterprise with which it contracted. Wood Industries alleges only that KTA is an “agency established by UNMIK Regulation.” Cplt. At 5. The contract at issue in WMW Machinery (an exclusive distribution agreement) was to be performed wholly in the United States and Canada; the contract in this case (to manage and develop socially owned factories and plants) would have been performed wholly in Kosovo. In WMW Machinery, defendant Treuhand allegedly ratified the contract at issue. 960 F. Supp. at 737 (Treuhand assured WMW that contract was still valid). In this case, KTA was not party to the contract that is the subject of the action, and its only alleged wrongful conduct was in not “approving or signing” two commercialization contracts. Cplt. at ¶¶ 29, 32. This lawsuit draws into question KTA’s policy decisions on how to proceed with privatization; WMW Machinery could be decided by reference only to primarily commercial decisions by the Treuhand. “The actions that form the basis of plaintiffs’ claims reflect an exercise of powers . . . akin to those that a controlling stockholder of a corporation might take as a player in the private market.” WMW Machinery, 960 F. Supp. at 740 [internal quotations omitted].

WMW Machinery’s ability to satisfy the “direct effect” requirement of the commercial activities exception was much stronger, because the contract was to be performed in the United States. In contrast, any effect in the United States of the KTA’s conduct is speculative at best, and beyond what has been accepted as direct effect in Second Circuit caselaw. Compare Dar-El-Bina Engineering & Contracting Co., Ltd. v. Republic of Iraq, 79 F. Supp.2d 374, 382 (S.D.N.Y. 2000) (dismissing claim for nonpayment of commercial obligation as falling outside commercial activities exception of FSIA because no obligation to make payment in United States) with Weltover, Inc. v. Republic of Argentina, 753 F. Supp. 1201, 1207 (S.D.N.Y. 1991) (holding that payment of debt in the United States was sufficient to satisfy direct effect requirement of FSIA commercial activities exception), aff’d, 941 F.2d 145, 153 (2d Cir. 1991) (emphasizing payment in New York as factual consideration in finding direct effect), aff’d on other grounds, 504 U.S. 607, 619 (1992) (holding that impairment of New York’s status as a “financial center” was insufficient, but that contract performance in New York was sufficient, to satisfy direct effects test).

In Ampac Group, Inc. v. Republic of Honduras, 797 F. Supp. 973 (S.D. Fla. 1992), the district court found subject matter jurisdiction under the commercial activities exception to the FSIA, rejecting the defendants’ arguments that “privatizing a national cement industry is an action that could only be taken by a foreign sovereign and thus [was] not ‘commercial activity,’  and that privatization …is merely the ‘flip side’ of nationalization, a quintessentially sovereign prerogative.”  797 F. Supp. at 976.  The District Court also rejected the argument that the act of state doctrine applied to the “unquestionably commercial” privatization decisions by the government of Honduras.  It also found personal jurisdiction based on meetings held by Honduran officials in the United States.

To be sure, the Ampac court held that, “Engaging in a program of privatization does not automatically insulate Honduras from suit in the United States.” 797 F. Supp. at 976. But it is well accepted that the applicability of the commercial activities exception is determined, not with reference to the purpose of the entity claiming immunity under the FSIA, but with reference to its specific activities drawn into question in the litigation. In Ampac, the activity in litigation was “[t]he sale of a company from its owners to the highest bidder in a routine commercial transaction.” 797 F. Supp. at 976. In this case, the activities in litigation are policy decisions by the KTA board relating to how privatization should be conducted after an earlier phase of commercialization under the direction of another agency.

Unlike WMW Machinery and Ampac, this case involves an effort to litigate policy decisions, made in Kosovo, not to enter into a contract in Kosovo to be performed wholly in Kosovo. The only alleged connection with the forum state is the location of the headquarters of another defendant. The only additional connection with the United States is the location of the plaintiff in New Jersey. Such activities do not satisfy the requirements of the commercial activities exception to the FSIA.

II. The court should dismiss the case on forum non conveniens grounds, even if one or more defendants do not enjoy sovereign immunity

Even if this court determines that one or more of the defendants do not enjoy sovereign immunity, it still should dismiss this case because the doctrine of forum non conveniens requires it. The United States Supreme Court applies a two prong test to determine whether a court should dismiss a case on forum non conveniens grounds. Under this test, the defendant moving for dismissal must show (1) that an alternative forum exists, and (2)  that “private and public interest factors weigh in favor of dismissal.” In re Ski Train Fire in Kaprun, Austria on Nov. 11, 2000, 230 F. Supp. 2d 376, 387 (S.D.N.Y. 2002) [hereinafter “In re Ski Train Fire”]; see Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508-09 (1947) [hereinafter “Gilbert”]; In re Assicurazioni Generali S.P.A. Holocaust Insurance Litigation, 228 F. Supp. 348, 350-351 (S.D.N.Y. 2002) (discussing structure of forum non conveniens analysis). The district court must give deference to the plaintiff’s choice of forum according to a sliding scale. DiRienzo v. Philip Services Corp., 294 F.3d 21, 28-31 (2d Cir. 2002) [hereinafter “DiRienzo II”] (reversing forum-non-conveniens dismissal because of undervaluing public interest in U.S. forum given extensive connections between dispute and United States and failure to give appropriate deference to representative plaintiff’s choice of forum). Under the sliding scale, less connection to the forum results in less deference to the plaintiff’s choice of that forum. In re Assicurazioni Generali S.P.A. Holocaust Insurance Litigation, 228 F. Supp. 348, 351 (S.D.N.Y. 2002) (discussing and applying “sliding scale” to determine deference due to plaintiff’s choice of forum).

In this case, the special chamber of the Kosovo Supreme Court is available as an alternative forum. A forum is available when the defendant is amenable to service of process in the alternative jurisdiction, except in “rare circumstances … where the remedy offered by the other forum is clearly unsatisfactory.” Piper Aircraft Co. v. Reno, 454 U.S. 235, 254 (1981) n. 22. Therefore, the forum must be both available and adequate. Here, the Special Chamber of the Kosovo Supreme Court is available because it has jurisdiction over the KTA. See UNMIK Regulation 2002/12 § 30 (granting Special Chamber “exclusive jurisdiction for all suits against the [KTA]”).

The Special Chamber of the Kosovo Supreme Court is not only available; it is also adequate.  The procedural law basis for inadequacy refers to whether there are excessive procedural limitations imposed by the alternative forum. To be an adequate alternative, a forum need not follow the same procedures as a United States court. See In re Union Carbide Corp. Gas Plant Disaster, 809 F.2d 195, 199 (2d Cir. 1987) (lack of jury trial does not make forum inadequate); Bell v. British Telecom, No. 95 Civ. 1972 (MBM), 1995 WL 476684 (S.D.N.Y. Aug. 9, 1995) (granting dismissal on forum non conveniens grounds; unavailability of certain legal theories or procedural devices in alternative forum do not make it inadequate); Pavlov v. Bank of N.Y. Co., 135 F. Supp. 2d 426, 434-435 (S.D.N.Y. 2001) (narrower scope of discovery than in U.S. courts does not make forum inadequate). Here, the Special Chamber has adequate procedural law to handle this case.  All documents are required to be in English and they can also be in Serbian or Albanian.  UNMIK Admin. Dir. 2003/13 §22.7.  In addition, there is a discovery process enforceable through monetary sanctions, UNMIK Admin. Dir. 2003/13 §43; oral as well as written argument can be made before the court, UNMIK Admin Dir. 2003/13 §32; and the parties have the option of invoking the appeals process of the Special Chamber, UNMIK Admin Dir. 2003/13 §55-57. Special Chamber procedures provide parties with “a meaningful opportunity to have [their claims] adjudicated in an impartial and transparent manner within a reasonable period of time and in accordance with norms established under the European Convention on Human Rights and having regard to generally accepted international standards.” Special Chamber UNMIK Regulation § 7. Decisions of the Special Chamber must be in writing, specifying reasons for the decision. Id. § 9.3. Parties may be represented by counsel, including foreign counsel. Id. § 21. The Special Chamber allows submissions in writing and orally. Id. tit. II, §§ 19-36. It provides for compulsory process for obtaining testimony. Id. § 18, and has procedures for obtaining evidence located outside of Kosovo. Id. § 9. It allows expert reports, Id. § 40, compulsory production of documents and physical items, id. § 43, and site visits, Id. § 44,

Furthermore, a forum can be adequate without offering the same cause of action as a United States court. PT United Can Co. v. Crown Cork & Seal Co., 138 F.3d 65, 74 (2d Cir 1998). Courts have dismissed cases on forum non conveniens grounds when the substantive law of the alternative forum does not provide the same remedy as U.S. law does. For example, RICO suits have been dismissed on the basis of forum non conveniens because, even though a RICO cause of action in unavailable in alternative forums, plaintiffs can gain relief on other grounds. Id. at 74. All that is required is that the alternative forum provide some remedy for the underlying acts. Bell v. British Telecom. Here, the Special Chamber of the Kosovo Supreme Court provides for a number of desirable remedies including: injunctions, UNMIK Admin. Dir. 2003/12 §52; costs, UNMIK Admin. Dir. 2003/12 §53; and monetary compensation equivalent to the lost asset, UNMIK Regulation 2002/13 10.3.

Finally, because U.S. courts avoid passing judgment on the worthiness of a foreign judicial system, political and social circumstances justify a finding that an alternative forum is inadequate only when the circumstances are extreme. See Eastman Kodak Co. v. Kavlin, 978 F. Supp. 1078, 1084-85 (S.D. Fla. 1997) (generalized allegations of partiality insufficient to show forum inadequacy, especially where party has chosen to transact business in the forum). For example, allegations that the Turkish court system is biased against U.S. parties and foreign women were insufficient to show forum inadequacy. Mercier v. Sheraton Intl., Inc., 981 F.2d 1345 (1st Cir. 1992). Here, a majority of the judges on the Special Chamber are international judges, UNMIK Regulation 2002/13 § 3.1 (June 13, 2002) [hereinafter “Special Chamber UNMIK Regulation”], and an international judge is the presiding judge. UNMIK Regulation 2002/13 § 3.2 (June 13, 2002). The Special Chamber has rules ensuring the impartiality of its judges, UNMIK Administrative Direction No. 2003/13 § 4 (June 11, 2003) [hereinafter “Special Chamber Rules”]. , which minimize any concern of local partiality.

This Court can therefore take judicial notice that the Special Chamber of the Kosovo Supreme Court provides an adequate forum. This case is entirely unlike In re Assicurazioni Generali S.P.A. Holocaust Insurance Litigation, 228 F. Supp.2d 348, 353-358 (S.D.N.Y. 2002), in which this court denied a motion to dismiss under forum non conveniens doctrine because a private insurance industry forum was an inadequate alternative forum. Unlike the insurance-industry forum in Assicurazioni Generali, the Special Chamber is a public court, not a private dispute resolution body. It is independent, not a “company store,” dependent on interested parties.

Turning to the second prong of the forum non conveniens determination, private and public interest factors weigh in favor of dismissal. Private interest factors include relative ease of access to evidence, Assicurazioni Generali, 228 F. Supp. at 359, availability of compulsory process for the attendance of unwilling witnesses, DiRienzo II, 294 F.3d at 29-30, cost of willing witness attendance, id., possibility of a view of premises, id., enforceability of any judgment, Assicurazioni Generali , 228 F. Supp. at 363, and other factors influencing convenience to the parties. DiRienzo II, 294 F.3d at 30; Assicurazioni Generali 228 F. Supp. at 365. In Hasakis v. Trade Bulkers, Inc., 690 F. Supp. 260, 262 (S.D.N.Y. 1988), this court dismissed on forum non conveniens grounds, finding that the witnesses were mostly outside the local forum and that the local community had no connection with litigation. On the other hand, this court denied dismissal in In re Assicurazioni Generali S.P.A. Holocaust Insurance Litigation, 228 F. Supp. 348, 359-366 (S.D.N.Y. 2002), where many witnesses were in the United States and documentary evidence was scattered all over Europe and the burden of transporting it to New York was no greater than the burden of transporting it to one of many alternative forums.

This case is much more like Hasakis, with all of the private interest factors tilting strongly toward dismissal. Like the witnesses in Hasakis who were mostly outside the local forum, virtually all of the witnesses and documents likely to be material to the issues in this lawsuit are located in Kosovo, not in New York. The premises in controversy are in Kosovo. Costs and likely visa problems present unusual burdens if witnesses must travel from Kosovo to appear in this action. It is unclear how a judgment issuing from this court would be enforced, given the absolute immunity of the United Nations assets, facilities and personnel located in this judicial district, and the absence of any explicit duty of courts in Kosovo to recognize and enforce U.S. judgments. This case is therefore entirely unlike Assicurazoni Generali, and this court should dismiss on the basis of forum non conveniens.

Furthermore, the public interest factors in this case weigh strongly in favor of dismissal on forum non conveniens grounds. Public interest factors include local interest in having local controversies decided at home compared with interest of foreign forums, administrative difficulties arising from court congestion, avoidance of unnecessary conflict-of-laws problems, and unfairness of burdening citizens in an unrelated forum with jury duty. DiRienzo II, 294 F.3d at 31; Assicurazioni Generali 228 F. Supp. at 367 n.15. This court regularly has dismissed cases on forum non conveniens grounds when the center of gravity of a lawsuit was located in another country. Compare Calgarth Investments, Ltd. V. Bank Saderat Iran, No. 95 Civ. 5332 (MBM), 1996 WL 204470 (S.D.N.Y. Apr. 26, 1996) (granting dismissal on forum non conveniens grounds; dispute “has only a minimal link to this country”) and Bell v. British Telecom, No. 95 Civ. 1972 (MBM), 1995 WL 476684 (S.D.N.Y. Aug. 9, 1995) (granting dismissal on forum non conveniens grounds; citizens of place of alternative forum have great interest in litigation; New York community has no interest) and DeYoung v. Beddome, 707 F. Supp. 132, 139 (S.D.N.Y. 1989) (dismissing action on comity grounds; forum-non-conveniens analysis reinforces comity conclusion due to strong foreign interest in dispute) with CL-Alexanders Laing & Cruickshank v. Goldfeld, 709 F. Supp. 472, 480-481 (S.D.N.Y. 1989) (denying dismissal on forum non conveniens grounds; securities fraud occurred in New York, most of witnesses in New York) and In re Assicurazioni Generali S.P.A. Holocaust Insurance Litigation, 228 F. Supp. 348, 367 (S.D.N.Y. 2002) (concluding that public interest factors weigh slightly in favor of plaintiff’s choice of forum, given strong localized interest, based among other things on New York statute). In this case, the center of gravity of the lawsuit is located in Kosovo.

The most compelling public interest factor is the overwhelming interest of the institutions in Kosovo in deciding this controversy through the exclusive jurisdiction of the Special Chamber, compared with the slight connection between this controversy and New York or any other place in the United States. The KTA decisions giving rise to this lawsuit were made in Kosovo, as part of basic governmental strategy for privatizing Kosovar enterprises. The property at issue is located in Kosovo.

The administrative-burden factor weighs in favor of dismissal. The Southern District of New York is “one of the busiest districts in the country,Doe v. Hyland Therapeutics Div., 807 F. Supp. 1117, 1128. As such, judges in the District have accorded special weight to this factor. Id. On the other hand, the Special Chamber of the Kosovo Supreme Court was established for the specific purpose of adjudicating privatization claims, UNMIK Regulation 2002/13 intro., and therefore will not be burdened by a multitude of other cases.

Another factor that weighs in favor of dismissal is the avoidance of duplicative litigation. The Southern District of New York recently explained that the public and private interest factors weighed in one direction primarily because of “the inconvenience and cost associated with potential duplicative litigation in the alternative fora of Equador or Italy.” F.D. Import & Export Corp. v. M/V REEFER SUN, No. 02 CIV. 2936 SAS, 2003 WL 21512065, *1 (S.D.N.Y., July 1, 2003). The court went on to explain that an agreement to take the dispute to only one of the two countries called for re-examination of the balance. Id. If this Court holds that U.S. federal courts have jurisdiction to hear this case, parties to disputes over Kosovo’s privatization process will be opened to litigation in any U.S. federal court in addition to the Kosovo Supreme Court. The United Nations has given exclusive jurisdiction over these matters to the Special Chamber of the Kosovo Supreme Court, KTA UNMIK Regulation §30, and this Court should avoid the potential for duplicative litigation by supporting the Kosovo Supreme Court’s exclusive jurisdiction.

Though there is a presumption in favor of the plaintiff’s choice of forum, this presumption is diminished when the lawsuit is based on activity that occurs abroad. The sliding scale used to determine the deference to be accorded the plaintiff’s choice overlaps analysis of private and public interest factors. Assicuraziona Generali, 228 F. Supp. at 351 (“the greater the . . . lawsuit’s bona fide connection to the United States and to the forum of choice and the more it appears that consideration of convenience favor the conduct of the lawsuit in the United States, the more deference will be accorded plaintiff’s choice of a U.S. forum . . . .”) As discussed in this section, this lawsuit’s connection to the United States is weak and considerations of convenience favor the conduct of the lawsuit in Kosovo, so this court should afford little weight to the presumption in favor of the plaintiff’s choice of forum.

WMW Machinery, Inc. v. Werkzeugmaschinenhandel GMBH, 960 F. Supp. 734 (S.D. N.Y), denying dismissal on forum non conveniens grounds, can be distinguished. In this case, unlike WMW Machinery, the United States Government has a stake in seeing the governmental process in Kosovo proceed as determined by the United Nations Security Council, unimpeded by threats of lawsuits in national courts. The United States Government had no legal involvement in determining the mechanisms for privatizing East German industry, and thus no interest in how the Treuhand operated. In contrast, the United States is a signatory to the United Nations Charter, and it is a member of the UN Security Council, with a veto. The UN Security Council is the source of legal authority to govern Kosovo until its final status is determined. As recently as October, the SRSG reaffirmed his understanding that the UN Security Council is the only body with the legal authority fundamentally to alter the governance arrangements for Kosovo, if it determines that different structures are appropriate, or if it determines to revise policies adopted by the SRSG.

This puts the United States in the legal decisionmaking chain, with shared oversight responsibility regarding privatization in Kosovo, in a way that was not present in the case of the Treuhand’s role in Germany. It puts the United States Government in the position of having impliedly approved the structure for privatizing SOEs in Kosovo, including the KTA, and the exclusive jurisdiction in the Special Chamber to hear and determine disputes arising from privatization.

Moreover, on June 20, 2003, the President continued the national emergency he declared in Executive Order 13219 with respect to the Western Balkans pursuant to the International Emergency Economic Powers Act (50 U.S.C. 1701-1706) “to deal with the unusual and extraordinary threat to the national security and foreign policy of the United States constituted by the actions of persons engaged in, or assisting, sponsoring, or supporting, . . . acts obstructing implementation of the . . . United Nations Security Council Resolution 1244 of June 10, 1999, in Kosovo.” 68 Fed. Reg. 37389 (June 20, 2003). This declaration reinforces the conclusion that the United States Government embraces the civil administration in Kosovo under UN auspices. The Congress continues to appropriate money to assist in economic reconstruction of Kosovo. See Consolidated Appropriations Resolution, 2003, Pub.L. 108-7, 117 Stat. 11, 168 (Feb. 20, 2003) (appropriating $525 million for assistance in Kosovo and other Eastern European and Baltic areas, limiting funds in Kosovo to 15% of total funds pledged by donors, and prohibiting use for large scale physical infrastructure reconstruction). The United States Agency for International Development’s (“USAID”) “assistance program in Kosovo helps to foster economic reform, democracy, and social transition.” http://www.usaid.gov/missions/kosovo/ [visited Nov. 15, 2003].

The commitment of the United States Government to the orderly administration of Kosovo under UN auspices adds to the public interests opposing federal court involvement in privatization disputes related to Kosovo.

In the forum-non-conveniens analysis, the factors tilted “slightly” in favor of a German forum in WMW Machinery; here they tilt overwhelmingly in favor of the Kosovo forum; the foreign sovereign explicitly gave exclusive jurisdiction to the Special Chamber; and in this case everything happened in Kosovo; the only connection with the forum is the citizenship of the plaintiff (New Jersey) and the principal office of a co-defendant (the UN)—which enjoys absolute immunity. The center of gravity of the WNW Machinery case was in the US; the center of gravity of this case is in Kosovo. The WMW Machinery court gave effect to a forum selection clause; this court should give effect, a fortiorari,  to the exclusive jurisdiction section of UNMIK Regulation 2002/12.

For all these reasons, this Court should dismiss this case on grounds of forum non conveniens because the Special Chamber of the Kosovo Supreme Court is an adequate and available alternative forum, and because the private and public interests at issue will be best served by dismissal.

III. The court should dismiss this action because deciding the case on the merits would require the court to review “Acts of State”

The Act of State doctrine requires dismissal of this lawsuit because deciding the merits would require this court to rule on the validity of acts performed by a foreign government, thus violating the rule expressed in Underhill v. Hernandez, 168 U.S. 250, 252 (1897) (courts of one country must not sit in judgment on acts of another government). When a federal court has jurisdiction over a claim, the Act of State Doctrine obliges the courts to accept the acts of the foreign sovereign as valid. The policies supporting the doctrine center around notions of international comity, separation of powers, and a desire to avoid embarrassing the Executive in its conduct of foreign relations.  See World Wide Minerals, Ltd. v. Republic of Kazakhstan, 296 F.3d 1154, 1165 (D.C. Cir. 2002) (quoting Banco Nacional de Cuba v. Sabbatino, 376 U.S.398, 423 (1964)).  Because of these policy considerations and because ruling on the validity of foreign sovereign acts uncomfortably approaches the political question doctrine, courts routinely avoid ruling on the validity of foreign sovereigns’ acts. See Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 727 (1976) (Marshall, J., dissenting) (ruling on foreign acts of state approaches political questions non-justiciable in federal courts); Baker v. Carr, 369 U.S. 186, 211-12 (1962) (questions involving foreign relations would require judiciary to exercise discretion committed to the Executive); Restatement(Third) of Foreign Relations of the United States, § 1, Reporters’ Note 4.

The Act of State Doctrine is a widely-applied common law doctrine of judicial decisionmaking rather than a statutory command.  See Banco Nacional Cuba v. Sabbatino, 376 U.S. 398, 427 (1964); Ricaud v. American Metal Co., 246 U.S. 304, 310 (1918). In Kirkpatrick, the Court stated that “[a]ct of state issues only arise when a court must decide – that is, when the outcome of the case turns upon – the effect of official action by a foreign sovereign.” W. S. Kirkpatrick & Co. v. Environmental Tectonics Corp., Intl., 493 U.S. 400, 406 (1990) (emphasis in original). 

In World Wide Minerals, Ltd. v. Republic of Kazakhstan, 296 F.3d 1154 (D.C. Cir. 2002), the Court of Appeals held the Act of State Doctrine foreclosed litigation of certain claims involving privatization as to which the state of Kazakhstan and its instrumentalities had waived immunity.

KTA’s decisions fall within the scope of the Act of State Doctrine. KTA’s decisions are those of a state for purposes of the doctrine. The KTA, within its sphere of delegated authority under UNMIK Regulation 2002/12, exercises legislative and executive functions. The SRSG retains the power of veto over KTA decisions. UNMIK Regulation 2002/12 § 24.3 (authorizing SRSG to repeal or modify KTA decisions and to mandate KTA decisions). Judicial deference for acts of state extends to duly authorized agents of the sovereign state acting for governmental purposes.  The Court in Underhill held that the acts of a military commander in Venezuela were subject to immunity.  168 U.S. at 252. “The immunity of individuals from suits brought in foreign tribunals for acts done within their own States, . . . must necessarily extend to the agents of governments ruling by paramount force as matter of fact.”  Id.  “That the acts of the defendant were the acts of the government of Venezuela, . . . are not properly the subject of adjudication in the courts of another government.”  Id. at 254.  The Court broadly extended the protection of the sovereign to all agents acting under its authority.

Agents must have a grant of authority from the sovereign that indicates the intent of the sovereign to have the agent act on its behalf. Dunhill, 425 U.S. at 691-95. But when the facts, alone, are sufficient to show that the agent was acting publicly and within the sovereign’s authority, then those agents are still entitled to the same respect in U.S. courts as the courts would accord to the sovereign.  See Underhill, 168 U.S. 250; Oetjen v. Central Leather Co., 246 U.S. 296 (1918); Ricaud, 246 U.S. 304. 

Here, KTA acted as the UN’s agent, authorized by UNMIK Regulation 2002/12.  The United Nations expressly empowered the KTA to engage in privatization activities its behalf. Because the KTA is a UN-created body that is granted authority to act on behalf of the Kosovo population, its public acts share the same sovereign character as if those acts were performed by the United Nations itself. The KTA’s actions challenged in this lawsuit were authorized by the UN and thus fall within the Act of State Doctrine. 

The Government of Kosovo is not fully recognized on the international stage, but this does not affect legal treatment of the acts performed by the KTA for two reasons: (1) the Government of Kosovo, recognized or not, is not party to this suit; and (2) as an authorized agent of the UN, the KTA is accorded the same sovereign character as its parent.  Because the United States has recognized the sovereignty of the United Nations as an international body, Exec. Ord. 9698, 11 Fed. Reg. 1809 (Feb. 19, 1946), agencies and instrumentalities of the United Nations in Kosovo enjoy the privilege of comity in the United States courts.

The Act of State Doctrine extends to contract cases such as this one. The Second Circuit held in Hewitt that the act of state doctrine applied to contract actions involving sovereign entities as parties. Hewitt v. Speyer, 250 F. 367, 370 (2nd Cir. 1918) (suit challenging contract that diverted monies allegedly due bondholders). And while the Supreme Court has never squarely addressed whether contractual breach implicates the act of state doctrine, other federal courts have applied the Doctrine to such cases, Michael Ramsey, Acts of State and Foreign Sovereigns, 39 Harv. Intl. L. J. 1, 16 (1998). Compare World Wide Minerals, Ltd. v. Republic of Kazakhstan, 296 F. 3d 1154, 1165-1166 (D.C. Cir. 2002) (Act of State Doctrine prevents deciding whether denial of export license was breach of contract); Lybian American Oil Co. v. Socialist People’s Lybian Arab Jamahirya, 482 F. Supp. 1175, 1179 (D. D.C. 1980) (adjudication of contract rights reflected in arbitration award non-justiciable because of Act of State Doctrine), vacated 684 F.2d 1032 (D.C. Cir. 1981); with Walter Fuller Aircraft Sales, Inc. v. Republic of the Philippines, 965 F. 2d 1375, 1388 (5th Cir. 1992) (Act of State Doctrine did not foreclose deciding breach of contract case because court need not question governmental policy decisions). 

Even if the activities of the KTA challenged in this case fall within the commercial activities exception of the FSIA, that does not foreclose judicial deference under the Act of State Doctrine. A commercial activities exception is not part of the Act of State Doctrine. In Dunhill, a majority of the Supreme Court did not accept the idea advanced by four Justices that the Act of State Doctrine extends only to governmental acts and not to commercial ones. “We are in no sense compelled to recognize as  an act of state the purely commercial conduct of foreign governments” Dunhill, 425 U.S. at 697-698. Justice Stevens did not join in this part of the opinion. 425 U.S. at 716 (Stevens, J., concurring). Four dissenting justices  reasoned that even if the restrictive theory of sovereign immunity were adopted (as it subsequently was in the FSIA) “it does not follow that there should be a commercial act exception to the Act of State Doctrine.” 425 U.S. at 724 (Marshall, J., dissenting).

Subsequently, in Machinists v. Org. of Petroleum Exporting Countries (OPEC), 649 F. 2d 1354 (1981), the United States Court of Appeals for the Ninth Circuit observed that “The Act of State doctrine is not diluted by the commercial activity exception which limits the doctrine of sovereign immunity. While purely commercial activity may not rise to the level of an act of state, certain seemingly commercial activity will trigger act of state considerations.” 649 F.2d at 1360. It held that price fixing activity by OPEC fell within the Act of State Doctrine.

The KTA acted to privatize socially-owned enterprises within Kosovo.  While this sort of activity is undoubtedly intended to promote commerce and the development of the institutions of a market economy, the KTA’s role in the endeavor was not commercial in nature.  The KTA assumed a governmental role in privatizing the enterprises, and it did so with proper authorization the United Nations. KTA’s discretion in choosing the means of introducing private investment, whether commercialization or privatization, and its choice of investors is a necessary and legitimate exercise of its discretion and authority.

Even if the KTA’s activities are “seemingly commercial,” a court is not foreclosed from applying the Act of State Doctrine.  Given the ultimate goals the KTA hopes to achieve through privatization and the means it must use to reach those goals, a United States court’s second-guessing of those acts implicates the same policy concerns leading to the act of state doctrine.  Application of the act of state doctrine has always been within the courts’ discretion.  When the activities that a court must judge possess certain commercial characteristics, but still point to greater public objectives as the KTA’s privatization efforts most certainly do, the court must should recognize that applying the act of state doctrine is not only permitted, but also necessary. 

As in the Ninth Circuit OPEC case, granting the relief Wood Industries seeks would “in effect amount to an order from a domestic court instructing a foreign sovereign [the international civil administration of Kosovo] to alter its chosen means” of privatizing industry. 649 F.2d at 1361. This is precisely the kind of interference in affairs within the responsibility of the political branches that the Act of State Doctrine is meant to avoid.

Beyond inserting this court into difficult, interrelated, and ultimately political controversies over the scope of UN administration of Kosovo and approaches to privatization, a decision on the merits in this case would cripple the UN’s, UNMIK’s, and the KTA’s ability to build an efficient market economy in post-conflict Kosovo. Applying the Act of State Doctrine will avoid that result.

In Bigio v. Coca-Cola Co., 239 F.3d 440 (2d Cir. 2001), the United States Court of Appeals for the Second Circuit held that the “function of the court in applying the act of state doctrine is to weigh in balance the foreign policy interests that favor or disfavor its application. . . The doctrine demands a case-by-case analysis of the extent to which in the context of a particular dispute separation of powers concerns are implicated.” 239 F.3d at 452 [internal quotations and citations omitted].

In this case, the foreign policy concerns are paramount, unlike Bigio, where the only identifiable act of state was decades old and had apparently been repudiated by the current foreign government, WMW Machinery, where the court found governmental policy decisions irrelevant to the issue in suit, 960 F. Supp. at 745, or Ampac Group, where the court without much analysis, found the transactions in dispute to be unquestionably commercial in nature, and not linked to any Executive Branch objective. 797 F. Supp. at 978.

This court should follow the example of World Wide Minerals, Ltd. v. Republic of Kazakhstan, 296 F.3d 1154, 1165 (D.C. Cir. 2002), in which the court of appeals affirmed application of the Act of State Doctrine to foreclose consideration of a claim that refusal of an export license breached a contract with the plaintiff. Evaluating KTA’s decision to privatize rather than to execute contracts contemplated by the United Nations before its creation would draw this court into ruling on the validity of KTA’s governmental decisions.

IV. Litigating this case on the merits will undermine nationbuilding activities around the world

This court enjoys substantial discretion in deciding whether to litigate this case on the merits. The novelty of the international civil administration in Kosovo presents a case of first impression in interpreting the UN Privileges and Immunities Treaty and the IOIA. Conflicting caselaw on whether privatization decisions constitute commercial activity require this court to scrutinize the details of privatization in different jurisdictions, compared with Kosovo. The court enjoys well-recognized discretion in applying the forum non conveniens doctrine. See DiRienzo II, 294 F.3d at 280 (noting wide discretion in applying forum non conveniens). All of these characteristics of this case suggest substantial reliance on policy considerations and care in evaluating the effect this decision will have on the capacity of the international community to engage in nationbuilding in Kosovo and elsewhere.

In Weltover, Inc. v. Republic of Argentina, 941 F.2d 145, 153 (2d Cir. 1991), the Court of Appeals held that policy considerations (there the impact of the challenged conduct on New York’s status as a financial center) should inform application of the FSIA and its exceptions. While the Supreme Court found that impact on New York’s status as a financial center was too remote and attenuated to satisfy the direct effects test, 504 U.S. at 618, it did not reject the idea that policy considerations influence FSIA interpretation.

In this case, policy considerations militate against litigation in U.S. courts. International civil administration is infeasible without governmental immunity. Kosovo is the first instance since the completion of the United Nations Trusteeship System, in which the international community imposed an international civil administration over part of the territory of a foreign nation. UNMIK is the supreme governmental authority in Kosovo, albeit a temporary one, obligated to hand over power to local governmental institutions as they develop and eventually to settle “final status” for Kosovo, which may terminate its mission.

Since the adoption of Security Council Resolution 1244, the international community has authorized similar missions in three other places – East Timor, Afghanistan and Iraq – and strengthened the legislative authority of the UN representative in Bosnia. While differing in structure and in the identity of the entity or entities exercising governmental authority, all of the instances involve the exercise of governmental authority by non-native bodies.

In all of these cases, including Kosovo, the governing authorities must be able to exercise legislative, executive and judicial authority without the constraints that would result from subjecting them to private lawsuits in national courts of foreign countries.

If the UNMIK Regulations are not effective in foreclosing national court jurisdiction over privatization disputes, no international intervention could protect itself from a proliferation of national-court lawsuits. How else could an international civil administration privatize socialist enterprise but by setting up an agency such as KTA? How else could it shield its decisions from litigation in national courts around the world except to create a special tribunal, with fair procedure, and expressly to give it exclusive jurisdiction?

Indeed, the implications of this case go far beyond economic reconstruction under international civil administration; they extend to the far corners of nationbuilding. No international intervention could succeed if its every decision with economic impact exposes civil administration agencies to potential liability in many different national courts. Rejecting all of the many independent grounds for avoiding merits litigation in this case in this case would undermine the capacity of the international community to impose temporary governmental arrangements to protect against threats to international peace and security and to end human rights abuses.

Dated this 19th day of December, 2003

Henry H. Perritt, Jr.

Professor of Law

Chicago-Kent College of Law

565 West Adams Street

Chicago, IL 60661

(312) 906-5098

hperritt@kentlaw.edu

NOTE: This brief was not filed with the court because the plaintiff voluntarily dismissed KTA as a defendant before KTA filed a motion to dismiss

Professor Perritt’s students, Jill Wechtler, Stephen Komonytsky, Nicole Thibodeau, Carson Block, Tim Grochocinski, and Kate Todryk, assisted in conducting research and drafting language for this brief. Dean Harold J. Krent and Professor David J. Gerber provided helpful comments.



[1]  The Rambouillet Accords, brokered by the United States and signed by representatives of political and the guerilla resistance entities in Kosovo, but not by the Federal Republic of Yugoslavia, envisioned, among other things, a plebiscite after three years to determine future status.”  

[2] The Constitutional Framework was set forth in UNMIK Regulation 2001/9, Section 8.1 (q), of which, reserved to UNMIK (as distinct from the provisional institutions of self government set up by that UNMIK Regulation) “authority to administer public, state and socially owned property in accordance with the relevant UNMIK legislation and force, and to regulate “public and socially owned enterprises after having consulted the Economic and Fiscal Council and the PISG established by that UNMIK Regulation.”