Provides for orders of attachment against a foreign state

Summary of provisions

Section 1 - Section 6205 of the Civil Practice Law and Rules is amended by adding a new provision allowing a court to order a post-judgment 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-judg- ment attachment the same priority rights as existing attachments and executions.

Section 2 - Section 6211 of the CPLR is amended to permit such orders of attachment to be issued.

Section 3 - Effective Date.

Justification

Because many loan documents or debt instruments involving foreign sover- eigns 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 sover-

eign "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 in question is litigated through the court system. Because restraining notices or orders do not presently 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 monitor- ing foreign sovereign debt litigation of the existence of such property, and secures a pre-judgment attachment against it before the judgment creditor can get an order authorizing it to execute against the proper- ty. 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

This bill amends Assembly Bill Number 8647-C and Senate 3166-F which in May, 2008, was vetoed by Governor Paterson by Veto Message No. 6. In his veto message Governor Paterson expressed concern about the possible over breadth of the prior version of this bill but "recognize that there is a specific problem that may need to be addressed here - delays in the execution of judgments against foreign sovereigns - and so I encourage the sponsors and other proponents of this legislation to work...to determine whether there is a more narrowly-tailored way to address this specific problem, without creating other collateral consequences." This bill addresses these concerns by limiting the post-judgment order of attachment to actions in which a money judgment has been procured against a foreign state.

Fiscal implications

None.

Effective date

Immediately.