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Congo Tax Garnished in US
The garnishment of taxes accrued in the United States for the benefit of the Rupublic of Congo under oil transaction contracts is subject to the commercial exception of the Foreign Sovereign Immunities Act of the United States, the United States Court of the Appeals for the Firth Circuit held in the matter of Af-Cap Inc. v. The Republic of Congo, case number 03-50506, on September 17, 2004.
The case involves a highway construction contract and a bank loan which comprises a contractual waiver of sovereign immunity for the collateral which involves revenues from oil transactions, among others, which are to secure payment for the bank loan. The bank loan was made with Equator Bank Ltd. and assigned to a Connecticut, USA, bank which obtained a default judgment on it against the Congo in a London court. That judgment was recognized and enforced by a court in New York. On that basis, a garnishment was had in Texas on obligations by certain companies to pay taxes and royalties to the Republic.
The appeals court held that these payment obligations constituted commercial property of the Congo and are not protected by the Foreign Sovereign Immunities Act, as their situs is also the United States.
- by Clemens Kochinke, partner with Berliner, Corcoran & Rowe, LLP in Washington.
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