Parsley as garnish in the non-legal sense.

A decision today out of the Ninth Circuit — on garnishment of a foreign sovereign’s U.S. assets — reminded Blawgletter of a comment from law school days, On Third World Debt, 25 Harv. Int’l L.J. 83 (1984).  The piece discusses the ballooning of third world countries’ borrowings during the 1970s and early 1980s, the difficulty of collecting after default, and the futility of U.S.-only solutions.  The IMF Survey described the comment’s proposals for an international approach to third world debt as "very ambitious" and "path-breaking".

So Blawgletter paid attention to the Ninth Circuit’s opinion (here) in Af-Cap, Inc. v. Chevron Overseas (Congo) Ltd., Nos. 04-16387, 04-16388 & 04-16788 (9th Cir. Jan. 25, 2007), as it highlights the trouble that creditors of a foreign sovereign may expect in efforts to collect against the sovereign’s American property.  Af-Cap had recovered a judgment (in London) against the Republic of Congo in 1984 for defaulting on a 1984 loan agreement.  Af-Cap registered the judgment in California and Texas federal courts.  The California court held that royalties and other funds that Chevron entities owed to Congo fell within the protections of the Foreign Sovereign Immunities Act and that Af-Cap therefore could not get at the money.  Affirming, the court of appeals concluded that Congo had not used the assets "for a commercial activity in the United States" under section 1610(a) of the FSIA despite Congo’s explicit waiver of immunity.

Got that?  The foreign sovereign must actually have "used" its assets in a domestic "commercial activity" before its waiver of immunity kicks in.  Blawgletter’s advice to private creditors:  don’t lend money to Congo in the first place.

Barry Barnett

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