Arbitration of Contract Claim by Private Commercial Bank Against the Export-Import Bank ( 1979 )

May 22, 1979
79-36 MEMORANDUM OPINION FOR THE
ASSISTANT ATTORNEY GENERAL, CIVIL
DIVISION
Arbitration—Export-Import Bank—Sovereign
Immunity—Representation of Bank by Department
of Justice
This responds to your request for our opinion whether arbitration o f a
contract claim by a private commercial bank against the Export-Im port
Bank (hereinafter “ Exim bank” ) is authorized by law and, if so, whether
this Departm ent is authorized to represent Eximbank before the arbitral
tribunal.
We understand the facts to be as follows: Eximbank agreed with the
First National Bank o f Oregon (FNBO) to guarantee FNBO loans financ­
ing certain exports. The master guarantee agreement included a clause
providing that disputes under the agreement “ would be settled by arbitra­
tion in accordance with the Rules o f the American Arbitration Associa­
tio n ,” and that any arbitration award may be judicially enforced. The
FNBO has dem anded arbitration o f its claim o f $976,514.23.
Eximbank’s Authority to Arbitrate
The issue is whether the claim is one against the United States and, if so,
whether the United States has waived its sovereign immunity in a way that
permits arbitration.
For the purpose o f sovereign immunity, FNBO’s claim against Exim­
bank is one against the United States. Under 12 U.S.C. § 635, Eximbank is
a wholly owned Governm ent corporation and an agency o f the United
States. The Bank concededly has authority under 12 U.S.C. § 635(a) to
guarantee loans it has made. The A ttorneys General have repeatedly ruled
that a guaranty by a Governm ent corporation contracted within its
statutory powers is a general obligation o f the United States, payable from
the Treasury as well as from the corporation’s assets. 42 Op. A tt’y Gen.
429 (1971); id., 327 (1966); c f , id., 21 (1961); 41 Op. A tt’y Gen. 365
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(1958); id., 403 (1959). Accordingly, claims arising under such guarantees
are contract claims against the United States to which sovereign immunity
applies unless waived. See generally, FHA v. Burr, 309 U.S. 242 (1940);
Keifer & Keifer v. Reconstruction Finance Corp., 306 U.S. 381 (1939);
Federal Land Bank v. Priddy, 295 U.S. 229 (1935).
It is well settled that the immunity o f the United States from suit on
monetary claims may only be waived by statute. See, e.g., Affiliated Ute
Citizens v. United States, 406 U.S. 128 (1972); United States v. Shaw, 309
U.S. 495 (1940). No Executive officer may waive sovereign immunity
without statutory authority. See, e.g., United States v. United States
Fidelity & Guaranty Co., 309 U.S. 506 (1940). W hether Eximbank could
lawfully consent to have claims against it resolved by an award o f an ar­
bitral tribunal is thus a question o f statutory construction.
Exim bank’s powers in this area are derived from 12 U .S.C . § 635(a)(1),
providing in pertinent part as follows:
(1) There is created a corporation with the name Export-Im port
Bank o f the United States, which shall be an agency o f the
United States o f America. The objects and purposes o f the bank
shall be to aid in financing and to facilitate exports and imports
and the exchange o f commodities between the United States or
any o f its Territories or insular possessions and any foreign coun­
try or the agencies or nationals thereof. In connection with and
in furtherance o f its objects and purposes, the bank is authorized
and empowered to do a general banking business * * * to
guarantee notes, drafts, checks, bills o f exchange, acceptances,
including bankers’ acceptances, cable transfers, and other
evidences o f indebtedness; to guarantee, insure, coinsure, and
reinsure against political and credit risks o f loss * * * to sue
and to be sued, to complain and to defend in any court o f com pe­
tent jurisdiction; to represent itself or to contract for representa­
tion in all legal and arbitral proceedings outside the United
States; and the enum eration o f the foregoing powers shall not be
deemed to exclude other powers necessary to the achievement o f
the objects and purposes o f the bank * * *.
This provision has an unusual history. According to the historical and
revision note in the United States Code, the Bank was chartered as a District
o f Columbia banking corporation by Executive order and in 1935 made an
agency o f the United States by statute. Its status as a Governm ent corpora­
tion was conferred by the enactment o f the present version o f 12 U .S.C .
§ 635(a) in 1947.1 T hat statute also added the “ sue and be sued” phrase.
Its legislative history states that the purpose was to continue unimpaired
1 See Act o f June 9, 1947, ch. 101, § 1, 61 Stat. 130.
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Exim bank’s powers as a District o f Columbia banking corporation while
making express its previously implicit power to sue and to be sued.2
We know o f no direct authority dealing with the question whether a
wholly owned Governm ent corporation with Exim bank’s powers may re­
solve contract claims by arbitration. It is our opinion, however, that 12
U.S.C. § 635(a)(1) authorizes the Bank to do so. First, the statute is a
grant o f power to engage in the business o f banking in essentially the same
manner as a private corporation;3 it states that it is to be construed in a
m anner that will not exclude the powers necessary to achieve the B ank’s
function, and its legislative history indicates that the Bank retained the
powers o f a District o f Columbia banking corporation. Second, the Na­
tional Railroad Passenger C orporation (Am trak), a wholly owned Gov­
ernment corporation with statutory powers similar to Exim bank’s,4 has
employed arbitration o f contract claims connected with its functions. See,
National Railroad Passenger Corp. v. Chesapeake & Ohio Rwy., 551 F.
(2d) 136 (7th Cir. 1977). Finally, the Supreme Court has stated as a general
rule o f construction that where Congress has authorized a corporate
instrumentality to engage in commercial transactions, statutory authority
to “ sue and be sued” should be construed as a complete waiver of
sovereign immunity for any suit not clearly shown to be inconsistent with
the instrum entality’s function. “ In the absence o f such showing,” the
C ourt stated, “ it must be presumed that when Congress launched a gov­
ernmental agency into the commercial world and endowed it with author­
ity to ‘sue or be sued,’ that agency is not less amenable to judicial process
than a private enterprise under like circumstances would b e.” FHA v.
Burr, 309 U.S. 242, 245 (1940); accord, Reconstruction Finance Corp. v.
Menihan Corp., 312 U.S. 81 (1941); Keifer & Keifer v. Reconstruction
Finance Corp., 306 U .S. 381 (1939).
Presumably, a banking corporation in the District o f Columbia would
be free to submit contract claims arising from its banking operations to ar­
bitration. Eximbank was intended to have similar powers and the agree­
ment in this case has clearly arisen out o f its normal banking operations.
We are aware o f no reason why arbitration would be inconsistent with Ex­
im bank’s functions. Accordingly, when 12 U.S.C. § 635(a)(1) is read in
the light o f Burr, it is our opinion that the statute authorized Eximbank to
enter into the arbitration agreement.
We must point out, however, that this opinion is primarily a construc­
tion o f Exim bank’s statutory authority. As your opinion request states,
the judicial authorities and opinions o f the A ttorney General do not agree
! See H. Rept. 393, 80th C ong., 1st sess., at 2 (1947); S. Rept. 104, 80th C ong., 1st sess., at
2 (1947).
1 Eximbank is, o f course, subject to the budgetary and auditing controls imposed on whol­
ly owned Governm ent corporations by the G overnm ent C orporation C ontrol Act. 31 U .S.C.
§§ 846-852.
4 See 45 U .S.C . §§ 545(a), 562(a). '
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on the circumstances in which an agency o f the United States may submit
claims against it to arbitration.5 In addition, the Com ptroller General has
held that clear statutory authority is required to arbitrate contract claims
against the United States.6 The power o f each Government agency or in­
strumentality to submit a claim to arbitration must be considered on the
facts o f the particular case.
Participation by the Department o f Justice
In a memorandum o f December 20, 1977 to the Associate Attorney
General, we expressed the opinion that 28 U.S.C. §§ 516, 519 required the
Department o f Justice to conduct the litigation o f Eximbank within the
United States. Your second question is thus whether this extends to ar­
bitration proceedings. We conclude that the Department is authorized by
the above statutes and 28 U.S.C. § 517 to represent Eximbank in any ar­
bitration involving FNBO.
Section 517 reads as follows:
The Solicitor General, or any officer o f the Departm ent of
Justice, may be sent by the Attorney General to any State or
district in the United States to attend to the interests o f the
United States in a suit pending in a court o f the United States, or
in a court o f a State, or to attend to any other interest o f the
United States.
An arbitration proceeding is not, strictly, a suit pending in any court.
However, any arbitration award against Eximbank would be judicially en­
forceable. See generally, FHA v. Burr, 309 U.S. 242 (1941). As you have
pointed out, the award is ultimately payable by the United States. By
representing the Bank in the arbitration, the Department will therefore be
acting to protect a direct financial interest o f the United States. Moreover,
taking part in the arbitration may be crucial in protecting that interest.
Although we have not considered the m atter in detail, we note that judicial
review o f arbitration awards for errors o f law, fact, or interpretation o f
the contract is extremely narrow. See, e.g., National Railroad Passenger
Corp. v. Chesapeake & Ohio Rwy., 551 F. (2d) 136, 141-44 (7th Cir.
1977); see also 9 U.S.C. §§ 10-11. In order effectively to represent Exim­
bank in court, it may be necessary for this Department to take part in the
prelitigation proceedings that will essentially decide the controversy. We
1 Compare, George J. Grant Construction Co. v. United States, 109 F. Supp. 245 (Ct. C l.
1953), and United States v. Ames, 24 Fed. Cas. No. 14,441 (C.C. Mass. 1845); 33 O p. A tt’y
Gen. 160 (1922); 17 O p. A tt’y Gen. 486 (1882).
6 See 32 Com p. Gen. 333 (1953); 19 Com p. Gen. 700 (1940); 8 Com p. Gen. 96 (1928).
229
therefore conclude that 28 U .S.C . §§ 516-17, 519 authorize the D epart­
ment to represent Eximbank in the arbitral proceeding.’
M ary C. Law ton
Deputy Assistant A ttorney General
Office o f Legal Counsel
7 This opinion does not consider the question whether or to what extent Eximbank is re­
quired to be represented by this Departm ent in an arbitration.