Yugoimport v. Republic of Croatia, Republic of Slovenia
745 F.3d 599
2d Cir.2014Background
- During the Bosnian War the FDSP (Federal Directorate of Supply and Procurement), an entity created and governed by SFRY laws to procure and trade armaments for national defense, opened an account at the Bank of New York; that account was frozen by a 1992 U.S. executive order.
- The Bank deposited $2,551,785.37 (plus interest) into court registry and brought an interpleader action after competing claims by Yugoimport (a Serbian successor entity claiming sole ownership) and the Republics of Croatia and Slovenia.
- The successor states had concluded the 2001 Succession Agreement allocating SFRY assets among five successor states; Annex C divides foreign financial assets held in the names of SFRY federal departments and agencies.
- The district court held FDSP was an SFRY agency and therefore its foreign-held funds were subject to division under Annex C; it granted summary judgment for Croatia and Slovenia.
- On appeal the Second Circuit applied the Vienna Convention rules for treaty interpretation, analyzed FDSP’s statutory organization, functions, control, and governance, and affirmed that FDSP was an SFRY agency so the funds must be divided under the Succession Agreement.
Issues
| Issue | Plaintiff's Argument (Yugoimport) | Defendant's Argument (Croatia/Slovenia) | Held |
|---|---|---|---|
| 1. Is FDSP an "agency" of the SFRY for purposes of Annex C? | FDSP was a corporate juridical person whose funds were private/corporate, not state assets. | FDSP was created, controlled, staffed, supervised, and funded as a government instrumentality performing core national defense functions. | FDSP is an SFRY agency; its funds are subject to distribution under Annex C. |
| 2. Which interpretive rules govern the Succession Agreement? | (implied) Domestic contract-law rules should apply. | Vienna Convention/international law governs treaty interpretation; parties are treaty states. | Apply Vienna Convention; interpret treaty terms by ordinary meaning and specified contextual materials. |
| 3. May extrinsic drafting history and unilateral state statements be used to reinterpret "agency"? | Extrinsic materials (drafting history, affidavits, letters) show parties intended a narrower meaning. | Vienna Convention limits external materials to instruments agreed or accepted by all parties; unilateral drafts or partial materials are not admissible unless Article 32 standards are met. | Extrinsic evidence not considered because it was not an agreement or accepted instrument of all parties and text is not ambiguous. |
| 4. Does Bancec/alter-ego federal common-law analysis shield FDSP from Annex C because it is a separate juridical entity? | Bancec presumption of corporate independence means FDSP cannot be treated as an agency absent alter-ego showing. | Bancec concerns domestic alter-ego for liability and does not control treaty interpretation; corporate form does not preclude being an "agency" for treaty allocation. | Bancec inapplicable to treaty interpretation; FDSP’s corporate form does not prevent treating it as an SFRY agency for the Succession Agreement. |
Key Cases Cited
- First Nat’l City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611 (U.S. 1983) (presumption of juridical separateness for state instrumentalities; alter-ego veil-piercing under federal common law)
- Bank of New York v. Yugoimport SDPR J.P., 780 F. Supp. 2d 344 (S.D.N.Y. 2011) (district court opinion holding FDSP an SFRY agency and granting successor-states summary judgment)
- Frontera Res. Azerbaijan Corp. v. State Oil Co. of the Azerbaijan Republic, 582 F.3d 393 (2d Cir. 2009) (discussing alter-ego analysis in sovereign-instrumentality context)
- Barkanic v. General Admin. of Civil Aviation of the People’s Republic of China, 923 F.2d 957 (2d Cir. 1991) (applying forum choice-of-law rules in FSIA cases)