Af-Cap Inc. v. Chevron Overseas (Congo) Ltd.

Corrected 1/30/07
FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
AF-CAP INC., 
Plaintiff-counter-
defendant-Appellant,
v.
CHEVRON OVERSEAS (CONGO) LIMITED;
CHEVRON INTERNATIONAL (CONGO)
LIMITED; CABINDA GULF OIL No. 04-16387
COMPANY LIMITED; THE REPUBLIC OF
CONGO,
 D.C. No.
CV-03-01963-PJH
Defendants-Appellees,
CHEVRON TEXACO CORPORATION;
CHEVRON TEXACO GLOBAL ENERGY
INC.; CHEVRON TEXACO OVERSEAS
PETROLEUM INC.,
Defendants-counter-
claimants-Appellees. 
AF-CAP INC., 
Plaintiff-Appellant,
v.
THE REPUBLIC OF CONGO,
Defendant-Appellee, No. 04-16388
v.  D.C. No.
CHEVRON TEXACO CORPORATION; CV-01-01548-PJH
CHEVRON TEXACO GLOBAL ENERGY
INC.; CHEVRON TEXACO OVERSEAS
PETROLEUM INC.,
Third-party-defendants-Appellees. 
979
980 AF-CAP v. CHEVRONTEXACO
AF-CAP INC., 
Plaintiff-counter-
defendant-Appellant,
v.
CHEVRON OVERSEAS (CONGO) LIMITED;
CHEVRON INTERNATIONAL (CONGO)
LIMITED; CABINDA GULF OIL No. 04-16788
COMPANY LIMITED; THE REPUBLIC OF
CONGO,
 D.C. No.
CV-03-01963-PJH
Defendants-Appellees,
CHEVRON TEXACO CORPORATION;
CHEVRON TEXACO GLOBAL ENERGY
INC.; CHEVRON TEXACO OVERSEAS
PETROLEUM INC.,
Defendants-counter-
claimants-Appellees. 
AF-CAP INC., 
Plaintiff-Appellant,
v.
THE REPUBLIC OF CONGO,
Defendant-Appellee, No. 04-16810
v.  D.C. No.
CV-01-01548-PJH
CHEVRON TEXACO CORPORATION;
CHEVRON TEXACO GLOBAL ENERGY OPINION
INC.; CHEVRON TEXACO OVERSEAS
PETROLEUM INC.,
Third-party-defendants-
Appellees. 
AF-CAP v. CHEVRONTEXACO 981
Appeal from the United States District Court
for the Northern District of California
Phyllis J. Hamilton, District Judge, Presiding
Argued and Submitted
April 3, 2006—San Francisco, California
Filed January 25, 2007
Before: Marsha S. Berzon, Johnnie B. Rawlinson, and
Consuelo M. Callahan, Circuit Judges.
Opinion by Judge Rawlinson
984 AF-CAP v. CHEVRONTEXACO
COUNSEL
Adam C. Belsky (briefed), Terry Gross (argued), Gross &
Belsky, San Francisco, California, for plaintiff-appellant-
counterdefendant Af-Cap.
Neil A.F. Popovic (briefed and argued), Heller Ehrman LLP,
San Francisco, California; Jonathan Blackman and Boaz S.
Morag, Cleary, Gottlieb, Steen & Hamilton, LLP, New York,
New York, for defendant-appellee The Republic of Congo.
Douglas G. Boven, Reed Smith LLP, San Francisco, Califor-
nia, for third-party defendants-appellees ChevronTexaco Cor-
poration, et al.
OPINION
RAWLINSON, Circuit Judge:
In this consolidated action, Af-Cap Inc. (Af-Cap), the judg-
ment creditor, appeals the district court’s judgment dissolving
and vacating garnishments and liens filed against any property
of the Republic of Congo (the Congo), the judgment debtor,
held by third party ChevronTexaco Corporation (CT Corp)
and domestic ChevronTexaco subsidiaries (collectively
ChevronTexaco), and dismissing Af-Cap’s writ of execution
action filed against ChevronTexaco, three ChevronTexaco
foreign subsidiaries, and the Congo, a sovereign country.
The Congo asserts a sovereign immunity defense against
Af-Cap’s attempted execution of its judgment against the
Congo’s property allegedly held by ChevronTexaco. The
property sought to be garnished includes intangible obliga-
tions of ChevronTexaco owed to the Congo for various
bonuses, taxes, and royalties related to the extraction of
hydrocarbons, oil, and other of the Congo’s natural resources.
AF-CAP v. CHEVRONTEXACO 985
Because these obligations were not “used for a commercial
activity in the United States,” they are protected from execu-
tion or collection under the Foreign Sovereign Immunity Act
(FSIA) codified at 28 U.S.C. § 1610(a). We therefore affirm
the dismissal of this garnishment action.
I. BACKGROUND
This case involves a garnishment action against the
Congo’s property in execution of a judgment for a defaulted
$6.5 million loan made to the Congo by Af-Cap’s predeces-
sor, Equator Bank.
On December 18, 1984, pursuant to a loan agreement (the
1984 Loan Agreement), Equator Bank loaned $6.5 million to
the Congo for the construction of a highway. The Congo con-
sented to “execution against any property whatsoever (irre-
spective of its use or intended use),” based on any action
arising out of the 1984 Loan Agreement. The Congo also
agreed to waive its “[sovereign] immunity from suit, execu-
tion, attachment . . . or other legal process.” However, in
1985, the Congo defaulted on the loan. In 1986, the Connecti-
cut Bank of Commerce (CBC), Equator Bank’s assignee,
obtained an English judgment against the Congo, which it
converted into a United States judgment in New York. CBC
subsequently registered the judgment in Texas and California.
The California action was removed to federal district court in
the Northern District of California, Case No. 01-1548, where
the litigation was stayed pending a final decision in the Texas
case.
Meanwhile, parallel litigation based on the Texas judgment
proceeded. In Connecticut Bank of Commerce v. Republic of
Congo, 309 F.3d 240 (5th Cir. 2002) (CBC), the Fifth Circuit
addressed the parallel garnishment action filed by CBC
against property held by CMS, a third party oil company that
owed tax and royalty obligations to the Congo. CBC recog-
nized the validity of the judgment, but remanded for a deter-
986 AF-CAP v. CHEVRONTEXACO
mination of whether the Congo “used” the CMS obligations
“in a commercial activity in the United States.” Id. at 249,
260-61. Af-Cap v. Republic of Congo, 383 F.3d 361 (5th Cir.
2004), addressed the appeal from the district court decision
after remand, and held that tax and royalty obligations owed
to the Congo that were used to pay a commercial loan from
a United States bank were used for commercial purposes in
the United States, thereby rendering them amenable to execu-
tion. Id. at 368, 371.
In addition to the pending action in the Northern District of
California seeking to enforce the registered judgment, Af-Cap
filed a creditor’s suit, Case No. 03-1963, against the Congo
and six ChevronTexaco corporations: CT Corp, Chevron Tex-
aco Global Energy Inc. (CTGEI), ChevronTexaco Overseas
Petroleum Inc. (CTOPI), Chevron Overseas Congo Ltd.
(COCL), Chevron International Congo Limited (CICL), and
Cabinda Gulf Oil Co. (CABGOC).
Af-Cap identified the following intangible obligations that
it alleged were the property of the Congo:
(1) Certain obligations used to offset prepayments
made by ChevronTexaco to the Congo, includ-
ing a $3.8 million participation bonus payable
by CABGOC, a $3.5 million signature bonus
previously transferred by COCL for the devel-
opment of the K/AIMI oil field located on the
border of the Congo and Angola, and a $5 mil-
lion operator bonus previously transferred by
COCL for the development of the K/AIMI oil
field;
(2) CTGEI’s $7 million payment to the Congo for
the acquisition of Society Commune de Logis-
tique (SCLOG), a Congolese joint venture for
the distribution of oil within the Congo;
AF-CAP v. CHEVRONTEXACO 987
(3) COCL’s and CICL’s various fees and tax obli-
gations payable to the Congo;
(4) COCL’s contingent obligation for a portion of
a $10 million signing bonus if a permit is
issued for the Moho and Bilondo oil fields;
(5) In-kind royalties payable by COCL and CICL
to the Congo and SNPC for extractions from
the N’Kossa, Marine VII and Kitina fields; and
(6) $2 million payable by COPCL directly to third-
party contractors for social programs within the
Congo, including the construction of a univer-
sity and a high school.
The district court entertained a motion based solely on the
second prong of FSIA § 1610(a): whether the Congo’s prop-
erty, represented by the above-described obligations, was
“used for a commercial activity in the United States.” For pur-
poses of the dispositive motion, the parties stipulated that: (1)
the offshore ChevronTexaco subsidiaries were in the United
States; (2) the district court had personal jurisdiction over all
of the ChevronTexaco corporations involved in this action;
(3) SNPC is the alter ego of the Congo; and (4) “all disputed
facts [would] be presumed in favor of Af-Cap.”
The district court ruled that none of the ChevronTexaco
obligations identified by Af-Cap was property used by the
Congo in a commercial activity in the United States. Thus, the
obligations were not amenable to execution under the sover-
eign immunity exception described in § 1610(a). The district
court therefore dissolved and vacated all garnishments and
liens. This appeal followed.
II. GENERAL STANDARDS OF REVIEW
“The existence of sovereign immunity and subject matter
jurisdiction under the [FSIA] are questions of law that [this
988 AF-CAP v. CHEVRONTEXACO
Court] review[s] de novo.” Park v. Shin, 313 F.3d 1138, 1141
(9th Cir. 2002) (citation omitted). “The availability of issue
preclusion is also reviewed de novo on appeal.” Dias v.
Elique, 436 F.3d 1125, 1128 (9th Cir. 2006) (citation omit-
ted). “Discovery rulings are reviewed for an abuse of discre-
tion,” Surfvivor Media, Inc. v. Survivor Prods., 406 F.3d 625,
630 (9th Cir. 2005) (citation omitted), as is the district court’s
decision to conclude discovery. Villegas-Valenzuela v. INS,
103 F.3d 805, 813 (9th Cir. 1996).
III. DISCUSSION
A. We Are Not Collaterally Estopped By The Texas
Judgment From Analyzing The Scope Of The
Congo’s Waiver Of Immunity.
[1] As a general proposition, “[t]he doctrine of collateral
estoppel (or issue preclusion) prevents relitigation of issues
actually litigated and necessarily decided, after a full and fair
opportunity for litigation, in a prior proceeding.” Kourtis v.
Cameron, 419 F.3d 989, 994 (9th Cir. 2005) (citation and
internal quotation marks omitted). We have applied the doc-
trine “where (1) the issue necessarily decided at the previous
proceeding is identical to the one which is sought to be reliti-
gated; (2) the first proceeding ended with a final judgment on
the merits; and (3) the party against whom collateral estoppel
is asserted was a party or in privity with a party at the first
proceeding.” Id. (citation omitted). Although “[i]ssue preclu-
sion generally refers to the effect of a prior judgment in fore-
closing successive litigation of an issue of fact or law . . . ,”
New Hampshire v. Maine, 532 U.S. 742, 748-49 (2001)
(emphasis added) (citations omitted), “[i]ssue preclusion has
never been applied to issues of law with the same rigor as to
issues of fact,” Segal v. Am. Tel. & Tel. Co., Inc., 606 F.2d
842, 845 (9th Cir. 1979) (citations omitted). Considering
whether to grant preclusive effect to a legal determination is
constrained in a case like this one where “[i]f the rule of issue
preclusion is applied . . . [we are] foreclosed from an opportu-
AF-CAP v. CHEVRONTEXACO 989
nity to reconsider the applicable rule, and thus to perform
[our] function of developing the law.” Restatement (Second)
of Judgments § 29 cmt. i (1982); see also Montana v. United
States, 440 U.S. 147, 163 (1979) (cautioning that the
“[u]nreflective invocation of collateral estoppel . . . could
freeze doctrine in areas of the law where responsiveness to
changing patterns of conduct or social mores is critical”);
Coeur D’Alene Tribe of Idaho v. Hammond, 384 F.3d 674,
690 (9th Cir. 2004) (declining to apply nonmutual collateral
estoppel where it would “substantially thwart the develop-
ment of important questions of law”) (citations omitted).
“This consideration is especially pertinent when [as is the
case here] . . . the issue was determined in an appellate court
whose jurisdiction is coordinate with . . . that of [our court];
[and] the issue is of general interest and has not been resolved
by the United States Supreme Court.” Restatement (Second)
of Judgments § 29 cmt. i (1982). We conclude that Af-Cap
deserves a “fresh determination of [the] law” regarding the
extent of the Congo’s waiver of immunity under the FSIA,
and whether the Congo’s obligations were used in connection
with commercial activity in the United States pursuant to the
FSIA. See id. Accordingly, we will not apply the doctrine of
collateral estoppel in deciding this case.
B. The Congo’s Waiver Of Immunity From Execution
Subjects The 1984 Loan Agreement To 28 U.S.C.
§ 1610(a)’s Provisions.
The 1984 Loan Agreement provides:
To the extent that the Borrower may in any jurisdic-
tion claim for itself or its assets immunity from suit,
execution, attachment (whether in aid of execution,
before judgment or otherwise) or other legal process
and to the extent that in any such jurisdiction there
may be attributed to itself or its assets such immu-
nity (whether or not claimed) the Borrower agrees
990 AF-CAP v. CHEVRONTEXACO
not to claim and waives such immunity to the fullest
extent permitted by the laws of that jurisdiction . . .
[2] Af-Cap argues that the Congo’s agreement not to assert
immunity from execution renders § 1610(a)’s provisions inap-
plicable to the 1984 Loan Agreement. We disagree. In fact,
the opposite is true. Under § 1609, “the property in the United
States of a foreign state shall be immune from attachment[,]
arrest and execution except as provided in section[ ] 1610
. . .” 28 U.S.C. § 1609. In turn, § 1610(a), the exception at
issue in this case, provides: “The property in the United States
of a foreign state . . . used for a commercial activity in the
United States, shall not be immune from attachment in aid of
execution, or from execution, upon a judgment entered by a
court of the United States or of a State . . . if: (1) the foreign
state has waived its immunity from attachment in aid of exe-
cution, or from execution . . .” 28 U.S.C. § 1610(a) (emphasis
added). Af-Cap’s contention that the Congo’s waiver renders
28 U.S.C. § 1610(a) inapplicable is self-defeating because, in
the absence of a waiver, the property of the Congo would be
immune from attachment under § 1609. We agree with the
Fifth Circuit that the waiver merely triggers the exception to
the immunity from execution that would otherwise be in
effect. See Atwood Turnkey Drilling, Inc. v. Petroleo Bra-
sileiro (Atwood), 875 F.2d 1174, 1176-77 (5th Cir. 1989).
Rather than end our inquiry, the Congo’s waiver requires that
we turn to the second requirement at issue in this case:
whether the property was “used for a commercial activity in
the United States.” CBC, 309 F.3d at 251 (citation omitted)
(emphasis removed).
[3] The parties dispute the meaning of “used for” in
§ 1610(a), and the precise meaning of the term is an issue of
first impression in this Circuit. The Congo asks us to adopt
the Fifth Circuit’s interpretation of the term. According to the
Fifth Circuit: “To use property for a commercial activity,
within the ordinary meaning of ‘use,’ would be to put the
property in the service of the commercial activity, to carry out
AF-CAP v. CHEVRONTEXACO 991
the activity by means of the property.” CBC, 309 F.3d at 254.
“What matters under the statute is what the property is ‘used
for,’ not how it was generated or produced,” id. at 251, and
not whether the property merely has a “nexus or connection
to a commercial activity in the United States.” Id. at 254. In
contrast, Af-Cap asks us to expand the Fifth Circuit’s defini-
tion and determine whether property was used for a commer-
cial activity in the United States by examining the entire
underlying activity that generated the property in question.
We agree with the Fifth Circuit that “[t]he phrase ‘used for’
in § 1610(a) is not a mere syntactical infelicity that permits
courts to look beyond the ‘use’ of property, and instead try to
find any kind of nexus or connection to a commercial activity
in the United States.” Id. We are also mindful that we must
construe the waiver provisions in the FSIA narrowly. See
Corporacion Mexicana de Servicios Maritimos, S.A. De C.V.
v. The M/T Respect, 89 F.3d 650, 655 (9th Cir. 1996) (analyz-
ing the waiver exception in 28 U.S.C. § 1605(a)(1)).
[4] “In interpreting the FSIA, we first look to the plain
meaning of the language employed by Congress.” Phaneuf v.
Republic of Indonesia, 106 F.3d 302, 307 (9th Cir. 1997)
(citation omitted). When determining the plain meaning of
language, we may consult dictionary definitions. See San Jose
Christian Coll. v. City of Morgan Hill, 360 F.3d 1024, 1034
(9th Cir. 2004). The American Heritage College Dictionary,
1486 (3d ed. 2000) defines use as: “To put into service or
apply for a purpose; employ.” This definition is very similar
to the way we have defined “use” in applying a different stat-
ute. In Konop v. Hawaiian Airlines, Inc., 302 F.3d 868 (9th
Cir. 2002), we stated: “The statute does not define the word
‘use,’ so we apply the ordinary definition, which is ‘to put
into action or service, avail oneself of, employ.’ ” Id. at 880
(quoting Webster’s Ninth New Collegiate Dictionary, 1299
(1985)) (parallel citation omitted). The United States Supreme
Court has similarly defined “use” as being “most sensibly
read to mean active employment for commercial purposes,
992 AF-CAP v. CHEVRONTEXACO
and not merely a passive, passing, or past connection to com-
merce . . . . [T]he word ‘use,’ in legislation as in conversation,
ordinarily signifies ‘active employment.’ ” Jones v. United
States, 529 U.S. 848, 855 (2000) (citations omitted).
[5] The legislative history of § 1610(a) reiterates that “[t]he
property in question must be used for a commercial activity
in the United States.” H.R. Rep. No. 94-1487, at 28 (1976),
as reprinted in 1976 U.S.C.C.A.N. 6604, 6627; see also
Argentine Republic v. Amerada Hess Shipping Corp., 488
U.S. 428, 435 n.3 (1989) (noting that the legislative history of
the FSIA, as presented in H.R. Rep. No. 94-1487, supported
the Court’s conclusion). The structure of the FSIA also sup-
ports our definition of “used for.” See Ocean Advocates v.
U.S. Army Corps of Eng’rs, 402 F.3d 846, 872 (9th Cir.
2005), as amended, (interpreting statutory text in the context
of the overall statutory scheme). As the Fifth Circuit noted:
Two subsections of the FSIA spell out the exceptions
to immunity from execution. 28 U.S.C. § 1610(a)
governs the immunity from execution of property
belonging to foreign states. 28 U.S.C. § 1610(b) gov-
erns the immunity from execution of property
belonging to an “agency or instrumentality” of a for-
eign state engaged in commercial activity in the
United States. Subsection (a), regarding property
belonging directly to a foreign state, permits execu-
tion only narrowly, when the property is “in the
United States” and “used for a commercial purpose
in the United States.” Subsection (b) is broader; it
permits execution of “any property in the United
States” belonging to the agency or instrumentality,
regardless of how the agency or instrumentality uses
the property . . . .
CBC, 309 F.3d at 252-53 (emphasis in the original).
We agree with the Fifth Circuit’s analysis: § 1610(a) is a
narrower exception by operation of the phrase “used for,” a
AF-CAP v. CHEVRONTEXACO 993
conclusion well supported in the case law. See, e.g., Ministry
of Def. & Support for the Armed Forces of Iran v. Elahi
(MOD), 126 S. Ct. 1193, 1194 (2006) (distinguishing
§ 1610(a) from § 1610(b) by highlighting the phrase “used for
a commercial activity” in § 1610(a)); De Letelier v. Republic
of Chile, 748 F.2d 790, 798-99 (2d Cir. 1984) (“The FSIA
distinguishes between execution against property of an
agency or instrumentality of a foreign state, which may be
executed against regardless of whether the property was used
for the activity on which the claim is based under
§ 1610(b)(2), and the property of the foreign state itself,
which may be executed against only when the property was
used for the commercial activity on which the claim is based
under § 1610(a)(2). In making the distinction, Congress
sharply restricted immunity from execution against agencies
and instrumentalities, but was more cautious when lifting
immunity from execution against property owned by the State
itself.”); see also Working Group of the A.B.A., Reforming
the Foreign Sovereign Immunities Act, 40 Colum. J. Trans-
nat’l L. 489, 584 (2002) (“Several factors combine to make
execution against foreign states extremely restrictive. First is
the threshold requirement in section 1610(a) that the property
against which attachment in aid of execution or execution is
sought must be ‘used for a commercial activity in the United
States.’ At the outset, this eliminates large classes of property
that might be candidates for execution in satisfaction of a
judgment against a foreign sovereign.”).
In sum, the statutory structure and construction reflect a
pivotal purpose of the FSIA: to “limit[ ] execution against
property directly belonging to a foreign state . . .” CBC, 309
F.3d at 253.
“As the Restatement explains, [f]or purposes of post-
judgment attachment and execution, the Foreign
Sovereign Immunities Act draws a sharp distinction
between the property of states and the property of
state instrumentalities. The property of states may be
994 AF-CAP v. CHEVRONTEXACO
attached only if it is or was used in commercial
activity; the property of state instrumentalities may
be attached without any such limitation, so long as
the instrumentality itself is engaged in commercial
activity in the United States.”
Id. (quoting Restatement (Third) of the Foreign Relations
Law of the United States § 460 cmt. b (1987)) (alteration and
internal quotation marks omitted). According the phrase “used
for” its ordinary meaning helps preserve this distinction. Id.
We also agree with the Fifth Circuit’s observation that the
FSIA’s separate commercial activity exception to immunity
informs our analysis. Section 1605(a)(2) provides: “A foreign
state shall not be immune from the jurisdiction of courts of
the United States [when] . . . the action is based upon . . . an
act performed in the United States in connection with a com-
mercial activity of the foreign state elsewhere . . .” 28 U.S.C.
§ 1605(a)(2). As the Fifth Circuit noted, “used for a commer-
cial activity” in § 1610(a) and “in connection with a commer-
cial activity” in § 1605(a)(2) are very different phrases. “Used
for” is “more specific” and narrower than “in connection
with,” which is akin to the alternative interpretation of “used
for” proposed by the appellant in CBC — “integral to” or “re-
lated to.”1 CBC, 309 F.3d at 254-55. Accordingly, the Fifth
Circuit reasoned, if it were to interpret “used for” to mean “in-
1
The Fifth Circuit’s conclusion that the phrases “in connection with”
and “related to” are largely synonymous is supported by the legislative
history of the FSIA, which uses the phrases interchangeably. See H.R.
Rep. No. 94-1487, at 19, as reprinted in 1976 U.S.C.C.A.N. at 6617 (“The
second situation, an ‘act performed in the United States in connection with
a commercial activity of the foreign state elsewhere,’ looks to conduct of
the foreign state in the United States which relates . . . to a regular course
of commercial conduct elsewhere or to a particular commercial transaction
concluded or carried out in part elsewhere.”) (emphases added); id. at
6618 (“[I]t has seemed advisable to provide expressly for the case where
a claim arises out of a specific act in the United States which is commer-
cial or private in nature and which relates to a commercial activity
abroad.”) (emphasis added).
AF-CAP v. CHEVRONTEXACO 995
tegral to” or “related to,” it would “interpret away the differ-
ence in phrasing between [§ 1610(a) and § 1605(a)(2)].” Id. at
255. The Fifth Circuit observed that if Congress had intended
to equate “used for” with “integral to” or “related to,” Con-
gress likely would have used the phrase “in connection with,”
as it did in § 1605. Id. We agree.
Af-Cap contends that we should not adopt the Fifth Cir-
cuit’s definition of “used for” because “[c]ourts have tradi-
tionally applied an interpretation consistent with [Af-Cap’s]
view and contrary to the Fifth Circuit . . .” In support of this
contention, Af-Cap relies on a number of cases, including
Libra Bank Ltd. v. Banco Nacional de Costa Rica, S.A., 676
F.2d 47 (2d Cir. 1982); Ned Chartering & Trading, Inc. v.
Republic of Pakistan, 130 F. Supp. 2d 64 (D.D.C. 2001); Itel
Containers International Corp. v. Companhia de Navegacao
Lloyd Brasileiro, No. 90 Civ. 8191, 1991 WL 12131
(S.D.N.Y. Jan. 25, 1991); Triton Container International v.
M/S Itaite, No. 90 Civ. 7725, 1991 WL 255613 (S.D.N.Y.
Jan. 24, 1991); National Union Fire Insurance Co. of Pitts-
burgh, PA v. People’s Republic of the Congo, No. 91 C 3172
confirmed, 1991 U.S. Dist. LEXIS 21581 (N.D. Ill. Dec. 26,
1991); Red Mountain Finance, Inc. v. Democratic Republic of
Congo, No. CV-00-0164R (C.D. Cal. June 8, 2001), and LNC
Investments, Inc. v. Democratic Republic of Congo, No. CV-
99-02529R (C.D. Cal. June 28, 1999).
However, this litany of cases fails to enlighten our discus-
sion because none of them analyze the pivotal phrase at issue
in this case — “used for a commercial activity in the United
States.” Only two of the cited cases appear to support Af-
Cap’s argument. See Lloyd’s Underwriters v. AO Gazsnab-
tranzit, No. CIVA1:00-MI-0242-CAP, 2000 WL 1719493, at
*1-2 (N.D. Ga. Nov. 2, 2000) (concluding, without elabora-
tion, that license fees owed by United States companies to the
Republic of Moldova were used by Moldova for a commer-
cial activity in the United States); Alejandre v. Republic of
Cuba, 42 F. Supp. 2d 1317, 1339-41 (S.D. Fla. 1999) (hold-
996 AF-CAP v. CHEVRONTEXACO
ing, without analysis, that because payments by United States
companies to a Cuban entity “are monetary property that this
Court has determined exist in the United States for jurisdic-
tional purposes, they by definition are used by [the Cuban
entity] . . . for commercial activity in the United States”),
vacated on other grounds sub nom. Alejandre v. Telefonica
Larga Distancia de Puerto Rico, Inc., 183 F.3d 1277, 1283
n.15 (11th Cir. 1999) (“The district court held that the
amounts owed [the Cuban entity] were both within the United
States and used for a commercial activity therein. We express
no opinion on the correctness of this holding.”) (citation omit-
ted).
Both decisions, from district courts in the Eleventh Circuit,
pre-date Venus Lines Agency v. CVG Industria Venezolana de
Aluminio, C.A., 210 F.3d 1309 (11th Cir. 2000) (per curiam).
In that case, “Venus [Lines] claim[ed] that the Mexico cargo
was used for the commercial activity of facilitating [CVG’s]
sale of the [Alabama] cargo.” Id. at 1313. The Eleventh Cir-
cuit concluded: “If true, the Mexico cargo would indeed have
been ‘used for a commercial activity in the United States.’ ”
Id. (emphasis added). Because a question of fact existed, the
Eleventh Circuit was not called upon to fully analyze the
“used for” requirement. However, it does not appear that the
Eleventh Circuit’s approach differs radically from that of the
Fifth Circuit.
[6] The Fifth Circuit emphasized that “what matters under
the statute is how the foreign state uses the property, not how
private parties may have used the property in the past . . .”
CBC, 309 F.3d at 256 n.5 (emphasis in the original) (citation
omitted), reasoning that, “[i]f we were to allow a private
party’s commercial use of the property to count for § 1610(a),
we would erase the commercial/noncommercial use distinc-
tion for almost all of a foreign state’s tangible property.” Id.
We agree that to allow a private party’s commercial use of the
property to waive a foreign sovereign’s immunity would not
only frustrate “one of the principal goals of the FSIA” — to
AF-CAP v. CHEVRONTEXACO 997
restrain, to the extent practicable, “judicial interference with
the jus imperii, or sovereign acts, of a foreign state,” id. at 257
n.6 (citing H.R. Rep. No. 94-1487, at 7, as reprinted in 1976
U.S.C.C.A.N. at 6605) — but would also effectively eviscer-
ate the protections of the FSIA by essentially placing the
power to waive the foreign sovereign’s immunity in the hands
of private parties.
Other sections of the FSIA, as well as the legislative his-
tory, suggest that it is indeed the foreign sovereign’s use of
the property that is determinative. Congress’s “Findings and
declaration of purpose,” for example, clarify that “[foreign]
states are not immune from the jurisdiction of foreign courts
insofar as their commercial activities are concerned, and their
commercial property may be levied upon for the satisfaction
of judgments rendered against them in connection with their
commercial activities.” 28 U.S.C. § 1602 (emphasis added).
[7] In sum, we adopt in principle the test articulated by the
Fifth Circuit in CBC to determine whether property was “used
for a commercial activity in the United States,” as that term
is used in the FSIA. Like the Fifth Circuit, we conclude that
property is “used for a commercial activity in the United
States” when the property in question is put into action, put
into service, availed or employed for a commercial activity,
not in connection with a commercial activity or in relation to
a commercial activity.
The FSIA does not contemplate a strained analysis of the
words “used for” and “commercial activity,” and neither do
we. See Corporacion Mexicana, 89 F.3d at 655 (instructing
that the FSIA provisions should be narrowly construed).
Rather, we anticipate that this determination will be made by
considering the use of the property in question in a straight-
forward manner, with a proper appreciation of the fact that the
further removed the property is from the referenced commer-
cial transaction, the less likely it is that the property was used
for that transaction. See id.
998 AF-CAP v. CHEVRONTEXACO
We expressly decline, however, to incorporate the Fifth
Circuit’s articulated “reservations about defining property use
as commercial in nature solely by reference to past single and/
or exceptional commercial uses.” Af-Cap, 383 F.3d at 369. In
our view, attempting to quantify the number of commercial
uses associated with the property, or to embark upon charac-
terizing property use as exceptional or unexceptional, would
unnecessarily complicate the determination to be made under
§ 1610(a).
C. Application Of § 1610(a) To The Obligations.
Having defined the meaning of “used for a commercial
activity,” we now turn to the application of § 1610(a) to the
property claimed by Af-Cap.
1. Af-Cap’s Global Argument Regarding The
Obligations At Issue.
[8] Af-Cap first argues that all the obligations at issue were
used for a commercial activity in the United States because
the Congo and SNPC pledged the obligations as security for
the 1984 Loan Agreement. However, Af-Cap’s reliance on the
1984 Loan Agreement is misplaced. That Loan Agreement
was between the Congo and a bank located in the Bahamas
for the financing and construction of a highway in the Congo,
to be managed by an English contractor. None of the obliga-
tions presently at issue and purportedly used for a commercial
activity in the United States was in existence in 1984. For
these reasons, Atwood, 875 F.2d 1174, is inapposite. In
Atwood, Petrobras, a Brazilian entity and foreign sovereign
under the FSIA, entered into a contract with Atwood, a United
States company, for Atwood to drill oil wells off the coast of
Brazil. Id. at 1175-76. As security for the money due Atwood
under the contract, Petrobras provided a letter of credit issued
by a United States bank. Id. at 1175. Examining Atwood, the
CBC court noted that “[a]lthough Atwood did not explicitly
consider the ‘used for’ requirement, Petrobras plainly used the
AF-CAP v. CHEVRONTEXACO 999
letter of credit for a commercial purpose within the ordinary
meaning of the phrase ‘used for.’ Petrobras used the letter of
credit to secure the services of an American corporation to do
drilling work . . . . Petrobas put the letter of credit in service
of the commercial activity, it ‘spent’ the letter of credit on that
activity.” 309 F.3d at 258. The facts of Atwood — a United
States party to the contract, a contract requiring services to be
provided by the United States company, services secured by
a letter of credit from a United States bank, and a letter of
credit in existence at the time of the contract — are far differ-
ent from the details pertinent to the 1984 Loan Agreement in
this case.
2. The Obligations Used To Offset Prepayments
Made By ChevronTexaco To The Congo.2
Based on a “Participation Agreement” between the parties,
COCL is obligated to pay certain bonuses to the Congo
because the Congo selected it to develop an oil field.3 A sepa-
rate agreement between the Congo and COCL — a “$25 Mil-
lion Prepaid Crude Oil Sales Contract” — provided that
COCL would make a prepayment to the Congo for oil in the
amount of $25 million, and also specified that: (1) “[t]he
value of cargoes lifted by [COCL would] be credited by
2
Although our discussion revolves around the $25 million prepayment
and the obligations purportedly used to secure it, our discussion applies
with equal force to the $5 million prepayment and its attendant obliga-
tions.
3
The Participation Agreement contemplated three participation bonuses
that Participants such as COCL were obligated to pay. First, “a signature
bonus of twenty million Dollars . . . upon the due execution and proper
approval of [the Participation] Agreement . . .” Second, “a project sanction
bonus of four million Dollars . . . upon the final approval of the Develop-
ment Plan.” Finally, “a production bonus, [that varied] based on the gross
production of Crude Oil [once the field began producing oil].” The record
reflects that COCL has paid $8.5 million in bonus payments, and that Af-
Cap seeks to execute only on those payments, not on any bonus payments
that may be due in the future, including any beyond the prepayment
amount.
1000 AF-CAP v. CHEVRONTEXACO
[COCL] against the outstanding Prepayment Amount,” and
(2) “in the event a participation bonus [was] payable by
[COCL to the Congo], the amount of such participation bonus
[would be] . . . applied as a credit against the [Congo’s] obli-
gation to reimburse the [$25 million] Prepayment Amount.”
Af-Cap maintains that the obligation of COCL4 to pay
bonuses to the Congo is the Congo’s property, which the
Congo used as collateral for the $25 million “loan”5 from
COCL, an entity that the district court presumed was present
in the United States for purposes of the dispositive motion.
Relying on CBC, Af-Cap postulates that this obligation was
therefore used for a commercial activity in the United States.6
See id. at 259 (“[T]he royalty and tax obligations would be
used for a commercial activity in the United States if the
Congo used them as collateral for loans obtained from United
States banks.”).
The district court disagreed, finding that the obligation was
COCL’s property, not the Congo’s, because “the parties pre-
viously agreed that the money that would otherwise be used
to pay the bonuses be credited instead to the Congo’s preex-
isting $25 million debt to COCL, as a setoff payment.”
Because “Af-Cap only has the right to attach the Congo’s
4
Af-Cap asserts that CABGOC is likewise obligated to pay bonuses to
the Congo. Disagreeing with Af-Cap, the district court found that CAB-
GOC is not obligated to pay bonuses to the Congo; “CABGOC is respon-
sible only for [bonus] payments to Angola . . .” We discern no clear error
in this finding, which is adequately supported by evidence in the record.
5
The Congo asserts that the $25 million prepayment is not a loan, but
the district court found to the contrary. This finding is not clearly errone-
ous because it is reasonably supported by evidence in the record. For
example, at least two declarations, which were provided by the Congo,
indicate that the “$25 Million Prepaid Oil Sales Contract” is a “loan or
credit agreement[ ] . . .”
6
To be clear, Af-Cap does not seek to attach the $25 million prepay-
ment; it seeks to attach the obligations purportedly used as collateral for
the prepayment, up to $8.5 million.
AF-CAP v. CHEVRONTEXACO 1001
assets, not ChevronTexaco’s,” 28 U.S.C. § 1610(a); CBC, 309
F.3d at 251, the district court concluded that Af-Cap could not
garnish the obligation.
[9] Regardless of whether the obligation was previously
used as collateral for the $25 million prepayment, when the
$25 Million Prepaid Oil Sales Contract was consummated, the
obligation was transferred to COCL and became the property
of COCL up to the prepayment amount, which had not yet
been satisfied. Given the unique structure of this transaction,
which among other things allowed for other companies owing
participation bonuses to the Congo to put their payments into
COCL’s designated bank account rather than paying the
Congo directly, the district court did not clearly err in finding
that the obligation is COCL’s property. See United States v.
Perez-Lopez, 348 F.3d 839, 845 (9th Cir. 2003) (“Even if
other judges might have reached a different conclusion, if the
district court’s account of the evidence is plausible in light of
the record viewed in its entirety, the court of appeals may not
reverse it even though convinced that had it been sitting as the
trier of fact, it would have weighed the evidence differently.
Where there are two permissible views of the evidence, the
factfinder’s choice between them cannot be clearly errone-
ous.”) (citation, alteration, and internal quotation marks omit-
ted). Because only “[t]he property in the United States of a
foreign state” is subject to garnishment, 28 U.S.C. § 1610(a)
(emphasis added); CBC, 309 F.3d at 251 (“Under the FSIA,
courts may attach only a foreign state’s property . . .”)
(emphasis added) (internal quotation marks omitted), Af-Cap
cannot garnish the obligation to pay bonuses or the bonus
payments up to the prepayment amount.7
7
This conclusion is not inconsistent with Af-Cap. There, a 1979 agree-
ment obligated the garnishees to make periodic tax and royalty payments
to the Congo. 383 F.3d at 364-65. In the early 1990s, the Congo assigned
a percentage of its tax and royalty obligation to an insurance company in
the United States to repay a commercial debt which, in August 2002, was
fully repaid. Id. at 368. Unlike Af-Cap, we do not read Af-Cap to hold that
1002 AF-CAP v. CHEVRONTEXACO
[10] Af-Cap also contends that the operator bonus was used
for a commercial activity in the United States as “COCL paid
the bonus to the Congo . . . by wire transferring funds from
COCL’s Citibank New York account . . .” However, the
method of payment is not determinative. The appropriate
inquiry is whether the property in question was used for a
commercial activity in the United States. Cf. Af-Cap, 383 F.3d
at 368, 371 (holding that the Congo put property in the service
of a commercial activity in the United States when the Congo
used tax and royalty obligations to repay a commercial debt
owed to an insurance company in the United States). At best,
Af-Cap’s evidence indicates that the obligation or bonus pay-
ment is related to, or has a connection with, a commercial
activity in the United States. Yet, in order to satisfy § 1610(a),
the property must have been “used”; the mere fact that the
property has a “nexus or connection to a commercial activity
in the United States” is insufficient. CBC, 309 F.3d at 254.
3. CTGEI’s $7 Million Payment To The Congo For
The Acquisition Of SCLOG.
According to Af-Cap, CTGEI’s obligation “to make pay-
ments of over $7 million to the Congo in exchange for 25%
of the shares in the commercial joint venture” was “integral
to the commercial activity” and, therefore, used for it. Af-Cap
also declares that the joint venture was formed as a result of
“substantial activities” in the United States and that substan-
the appellant could garnish the tax and royalty obligation previously
assigned to the insurance company. Instead, we read Af-Cap to hold that
the post-August 2002 obligation did not belong to the insurance company;
it was the Congo’s property, and, as “[t]he property . . . of a foreign state,”
it was subject to garnishment. 28 U.S.C. § 1610(a). In this case, by con-
trast, the district court found that the property at issue is not the Congo’s,
but COCL’s, a determination in which we perceive no clear error. There-
fore, the property may not be garnished under § 1610(a).
AF-CAP v. CHEVRONTEXACO 1003
tial activities pertaining to the operation of the joint venture
took place in the United States.8
We reject Af-Cap’s contention that the joint venture,
located entirely in the Congo, constitutes commercial activity
in the United States. Property that is “integral to” but not
“used for” commercial activity in the United States does not
meet the requirements of § 1610(a). See id. (explaining that
the phrase “used for” is different from, and more specific
than, the phrase “integral to”). In addition, “[w]hat matters
under the statute is what the property is ‘used for,’ not how
it was generated or produced,” id. at 251, and not whether the
property has a “nexus or connection to a commercial activity
in the United States.” Id. at 254. Accordingly, whether the
joint venture was formed as a result of substantial activities in
the United States or whether substantial activities involving
the operation of the joint venture took place in the United
States is of no import.
4. $2 Million Payable by COPCL Directly To Third-
Party Contractors For Social Programs Within
The Congo.
Af-Cap argues that the obligations to pay for social pro-
grams, or the payments themselves, constitute Congolese
property used for a commercial activity in the United States
because under the agreement, “the obligations were paid for
the benefit of, and at the direction of, the Congo.” This argu-
ment is not convincing.
8
Af-Cap makes a very similar argument with respect to the tax and roy-
alty obligations and the Moho/Bilondo bonuses, contending, for example,
that they were used for a commercial activity in the United States “since
they are an integral part of oil exploration operations conducted in sub-
stantial part in the U.S.” However, as the district court noted, no oil has
been discovered in those fields. Therefore, any demand for execution on
royalties and bonuses attributable to those fields is premature.
1004 AF-CAP v. CHEVRONTEXACO
Assuming, without deciding, that the obligations or pay-
ments are Congolese property, “there was no commercial
activity separate from the transaction that generated the prop-
erty in the first place,” Walker Int’l Holdings Ltd., 395 F.3d
at 236, and, as we have held, supra, how that property was
generated is irrelevant. See id. at 235 (“[T]he fact that the
property was generated by commercial activity, namely, oil
exploration, is irrelevant.”). The decisive point is that Af-Cap
has presented no evidence that the Congo put the obligations
or payments in the service of a commercial activity in the
United States. Cf. CBC, 309 F.3d at 258 (concluding that by
using a letter of credit provided by a United States bank to
secure the services of a United States company, the foreign
sovereign used the letter of credit for a commercial activity in
the United States).
D. The “Used For a Commercial Activity” Immunity
Standard Applies to Property of SNPC as the
Congo’s Stipulated Alter Ego.
Af-Cap asserts that as an instrumentality of the Congo,
SNPC’s immunity from execution is governed by the standard
prescribed in 28 U.S.C. § 1610(b), providing an exception
from immunity for the property of an “instrumentality of a
foreign state engaged in a commercial activity in the United
States,” rather than the more restrictive standard of § 1610(a),
excepting from immunity only property of a sovereign “used
for a commercial activity in the United States.”
Af-Cap’s contention is unavailing because, as part of the
dispositive motion procedure, the parties stipulated that SNPC
was an alter ego of the Congo, and an alter ego is not a “sepa-
rate legal entity.” See First Nat’l City Bank v. Banco Para El
Comercio Exterior de Cuba, 462 U.S. 611, 618, 632-33
(1983) (holding that the instrumentality was the alter ego of
the sovereign, and refusing to give effect to the instrumentali-
ty’s separate juridical status).9
9
The § 1610(b) standard would be inapplicable even if SNPC had sepa-
rate legal status because § 1610(b)(1) requires that the instrumentality
AF-CAP v. CHEVRONTEXACO 1005
E. The District Court Did Not Abuse Its Discretion in
Limiting Discovery.
Af-Cap asserts that immunity from discovery is more lim-
ited in an execution action than in a liability action, and sug-
gests that the district court misinterpreted the law on this
point, abusing its discretion when it “den[ied] ‘full discovery’
once it ha[d] determined that a sovereign has no immunity
from suit.” See First City, Texas-Houston, N.A. v. Rafidain
Bank, 150 F.3d 172, 177 (2d Cir. 1998). Af-Cap contends
specifically that the district court abused its discretion when
it accepted the Congo’s declarations in lieu of “meaningful
discovery” into how the Congo used the ChevronTexaco pay-
ment obligations. Af-Cap also argues that de novo review,
rather than the abuse of discretion standard, applies to the lim-
itation on discovery, because the district court misinterpreted
the FSIA preemption of California’s general debtor statute,
California Civil Procedure Code § 708.110.
Af-Cap points to no evidence in the record that any misap-
prehension of the appropriate scope of discovery impacted the
district court’s discovery orders. Rather, the district court
acted consistently with CBC’s admonition that discovery
against a foreign sovereign should be ordered “circumspectly
and only to verify allegations of specific facts crucial to the
immunity determination.” CBC, 309 F.3d at 260 n.10 (citation
and alteration omitted) (emphasis added).
Af-Cap also fails to acknowledge that the district court per-
mitted Af-Cap more than fifteen months of discovery from
both the Congo and ChevronTexaco, and that the district court
did not restrict discovery because of the Congo’s sovereign
immunity, but because Af-Cap’s discovery requests had
“gone too far.” The district court “has extensive control over
the discovery process.” Flatow v. Islamic Republic of Iran,
waive its immunity. As SNPC was not a party to the original 1984 Loan
Agreement, there is no evidence in the record that SNPC waived immu-
nity.
1006 AF-CAP v. CHEVRONTEXACO
308 F.3d 1065, 1074 (9th Cir. 2002) (citation and internal
quotation marks omitted). The district court did not abuse this
broad discretion when it limited discovery related to whether
there was personal jurisdiction over the foreign subsidiaries,
whether SNPC’s assets belonged to the Congo, or whether the
obligations were located in the United States, because the
court and the parties stipulated, for purposes of the dispositive
motion, that Af-Cap had proven all of these allegations. Ter-
minating discovery related to how the Congo “used” the obli-
gations was likewise not an abuse of discretion because Af-
Cap has not specified what additional discovery was war-
ranted. See Theis Research, Inc. v. Brown & Bain, 400 F.3d
659, 666 (9th Cir. 2005) (concluding that the district court did
not abuse its discretion when it refused to permit additional
discovery because “the movant failed to show how allowing
additional discovery would have precluded summary judg-
ment”) (emphasis omitted).
None of the court’s discovery rulings was based on an
interpretation of FSIA preemption; thus, de novo review is not
required. Nevertheless, de novo review of the district court’s
interpretation of the interaction between the FSIA discovery
procedures and California’s general creditor discovery rules
reveals that FSIA, a federal law, preempts state law provi-
sions. See Fed. R. Civ. P. 69(a).
IV. CONCLUSION
[11] The obligations identified by Af-Cap are not property
of the Congo used for commercial activity in the United
States and are, therefore, not subject to execution or collection
under § 1610(a) of the FSIA. Accordingly, the district court’s
judgments dissolving and vacating garnishments and liens and
dismissing the actions for execution and the creditor’s suit are
AFFIRMED.