Provides for orders of attachment against a foreign state

Summary of provisions

OF BILL: Section 1 - Section 6205 of the Civil Practice Law and Rules is amended by adding a new provision allowing a court to issue an order of attachment upon the application of a judgment creditor of a foreign state. The amendment would give a post-judgment creditor who has reason to delay issuance of an execution the chance to obtain in a post-judgment attachment the same priority rights as exist- ing attachments and executions.

Section 2 - This would amend section 6211 of the CPLR to permit such orders of attachment of be issued.

Justification

Because many loan documents or debt instruments involv- ing foreign sovereigns designate New York as the place of payment and the venue where the foreign sovereign waives sovereign immunity and consents to jurisdiction to be sued in the case of a default, the state and federal courts in New York are frequently the courts where actions under the Foreign Sovereign Immunities Act ("FSIA.") are brought. Pursuant to Section 1610(c) of the FSIA, a judgment creditor may not issue an execution against the foreign sovereign judgment debtor "until the court has ordered such ...execution after having determined that a reasonable period of time has elapsed following the entry of judgment ..." Even when the court has determined that "a reasonable period of time has elapsed following the entry of judgment," execution may only issue against property of a foreign sovereign "used for a commercial activity in the United States." (28 U.S.C. §1610(a)).

Years of experience have established that courts typically will not allow the issuance of executions against foreign sovereigns until they have made a determination that the property against which execution is sought meets the commercial activity test of the FSIA. However, it is exceedingly difficult to locate property of foreign sovereign judgment debtors in the United States because defaulting sovereigns habitually attempt to make themselves judgment-proof by removing their property

from the United States. Even where diligent and costly efforts have succeeded in identifying property of the foreign sovereign, litigation with respect to whether it meets the standards for execution under the FSIA is also lengthy and costly. At most, courts are only willing to issue to judgment creditors restraining orders against the removal of such property by the sovereign or the garnishee holding the property while the underlying commercial activity question is litigated through the court system. Because restraining notices or orders do not present- ly afford the diligent judgment creditor priority under the CPLR, the judgment creditor who has expended the time, effort and cost of locating assets in the United States of its foreign sovereign judgment debtor may lose priority to another creditor who learns through monitoring foreign sovereign debt litigation of the existence of such property, and secures a prejudgment attachment against it before the judgment creditor can get an order authorizing it to execute against the property. The amendment proposed by this legislation would remedy this unfair situation and secure priority for the judgment creditor whose time, efforts and expenditures have located the property in question by authorizing the court to issue post judgment attachments.

Legislative history

New bill, 2010

Fiscal implications for state and local governments

None.

Effective date

Immediately