Prejudgment Attachments: Treaty Waivers of Immunity - Part 2 Chapter 5 - The Practice of International Litigation - 2nd Edition
Lawrence W. Newman has been a partner in the New York office of Baker & McKenzie since 1971, when, together with the late Professor Henry deVries, he founded the litigation department in that office. He is the author/editor of 4 works on international litigation/arbitration.
Michael Burrows, Formerly, Of Counsel, Baker & McKenzie, New York.
Following Iran’s taking of the fifty-two Americans as hostages on November 4, 1979, over 200 lawsuits were commenced in United States courts by American companies against Iran, its agencies and instrumentalities. In many cases, prejudgment attachments were obtained as security for expected judgments.
These attachments were premised almost exclusively on the theory that Article XI(4) of the 1955 Treaty of Amity, Economic Relations, and Consular Rights Between the United States of America and Iran (the “Iran-U.S. Treaty”) constituted a waiver of the immunity from prejudgment attachment otherwise conferred on foreign states by the Foreign Sovereign Immunities Act of 1976 (the “FSIA”).2 Article XI(4) provides:
No enterprise of either High Contracting Party, including corporations, associations, and government agencies and instrumentalities, which is publicly owned or controlled shall, if it engages in commercial, industrial, shipping or other business activities within the territories of the Other High Contracting Party, claim or enjoy, either for itself or its property, immunity therein from taxation, suit, execution of judgment or other liability to which privately owned and controlled enterprises are subject therein.
The question of whether Article XI(4) permitted prejudgment attachments under the FSIA has been twice brought before the Court of Appeals for the Second Circuit, but never decided because of changed circumstances. The issue of the attachments was subsequently rendered moot by the Algerian Declarations entered into on January 19, 1981, and upheld by the United States Supreme Court in Dames & Moore v. Regan. Were the Iranian attachments valid? According to the Second Circuit’s decision on April 26, 1983, in S&S Machinery Co. v. Masinexportimport and the Romanian Bank for Foreign Trade, the answer is no.