Theodore Kassinger,
Karl Thompson
On July 31, 2008, both the Senate and the House of Representatives approved S.3370, the Libyan Claims Resolution Act (“LCRA”). President Bush is expected to sign the bill, which passed the Senate with unanimous consent and the House without objection.
The LCRA will effectively eliminate the risk that private corporations doing business with Libya would have payments to or from Libya (or assets jointly held with Libya) subject to attachment in terrorism-related cases against Libya or its instrumentalities—assuming the United States and Libya reach a claims agreement and Libya makes a payment under that agreement.
This risk of attachment arose from an amendment to the Foreign Sovereign Immunities Act that Congress enacted as part of the National Defense Authorization Act for Fiscal Year 2008 (“NDAA”). The amendment authorized plaintiffs in terrorism-related cases to file pre-judgment liens and post-judgment attachment actions against property of Libyan state instrumentalities, even where such instrumentalities were not otherwise involved in the underlying lawsuits. The LCRA will eliminate that exception to the FSIA with respect to Libya, if Libya and the United States carry through, as expected, on a claims settlement agreement.
In so doing, the LCRA will eliminate the risk of
corporate asset attachment in terrorism-related lawsuits against Libya. It will do this in two ways: by barring terrorism-related suits against Libya (assuming certain pre-conditions are met), and by prohibiting attachment of Libyan assets to satisfy terrorism-related judgments. Although the Act only speaks in terms of the property of Libya and its instrumentalities, the payment streams owed by corporations to Libya and the assets jointly held by corporations and Libya were only ever at risk of attachment because they might have been considered “property” of Libya or its instrumentalities. Further, the NDAA only exposed such assets to attachment in terrorism-related cases. Thus, by removing the risk that Libyan “property” may be attached to satisfy terrorism-related judgments, and by re-instating Libya’s immunity from terrorism-related lawsuits, the Act removes the risk that corporate payment streams and jointly-held assets will be attached.
Specifically:
--Section 5(a)(1)(A) of the LCRA provides that, upon submission of a certification from the Secretary of State, Libya, a Libyan agency or instrumentality, and any property of Libya or a Libyan agency or instrumentality will not be subject to the exceptions to immunity set forth in the terrorism-related provisions of the FSIA. This essentially means that, once a certification is submitted, Libya and its instrumentalities cannot be sued based on terrorism-related claims, and the property of Libya and its instrumentalities cannot be attached to satisfy such claims.
--Section 5(a)(1)(C) of the LCRA confirms that “any attachment, decree, lien execution, garnishment, or other judicial process brought against property of Libya” or its agencies or instrumentalities in connection with a terrorism-related judgment or lawsuit “shall be void.”
These provisions in effect remove the threat that payment streams flowing between private corporations and Libya or its instrumentalities (or other jointly held assets) may be attached to satisfy terrorism-related judgments. The purported liens and potential attachment actions that might have been filed against such corporations were all formally directed at “property” of Libya or its instrumentalities that corporations happened to hold. And these liens and attachment actions were mechanisms for satisfying judgments (or potential judgments) in terrorism-related actions filed against Libya or its instrumentalities—not against corporations themselves. Thus, corporate assets were at risk only by virtue of the fact that they might have been considered “property” of Libya or its instrumentalities, and were at risk only in the context of terrorism-related lawsuits against Libya. As noted above, the LCRA removes both of these preconditions to potential attachment: it eliminates plaintiffs’ ability both to sue Libya for terrorism-related injuries, and to attach Libyan property in connection with such lawsuits.
Finally, two important caveats should be emphasized.
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First, and critically, none of these immunities enter force until and unless the Secretary of State certifies to Congress that the U.S. Government has “received funds pursuant to [a] claims agreement that are sufficient to ensure” (i) payment of settlements to the victims of the Lockerbie and La Belle disco bombings, and (ii) fair compensation for U.S. nationals who are plaintiffs in certain other terrorism-related lawsuits pending against Libya. Thus,
there is no change to the status quo until and unless the U.S. and Libya reach a claims agreement, the appropriate U.S. Government entity receives payment under that agreement, and the Secretary of State issues the appropriate certification.
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Second, the Act only applies “with respect to” conduct and events “occurring before June 30, 2006.” So, as to any alleged acts of terrorism that occurred after that date, it appears to have no effect.
This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Ted Kassinger, an O'Melveny partner licensed to practice law in the District of Columbia and Georgia, and Karl Thompson, an O'Melveny counsel licensed to practice law in the District of Columbia and New York, have contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.
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