CONFLICT OF LAWS | ISLAMIC REPUBLIC OF IRAN V. PAHLAVI, 62 NY 2D. 474, 5 JULY 1984

ISLAMIC REPUBLIC OF IRAN V. PAHLAVI,

62 NY 2D. 474, 5 JULY 1984

 

TOPIC/DOCTRINE

Act of state doctrine and jurisdiction over the subject matter.

Forum non conveniens is court's discretionary power to decline to exercise its jurisdiction where another court may more conveniently hear a case.

 

FACTS

Plaintiff, the Islamic Republic of Iran, brings this action against Iran's former ruler, Shah Mohammed Reza Pahlavi, and his wife, Empress Farah Diba Pahlavi. It alleges in its complaint that defendants accepted bribes and misappropriated, embezzled or converted 35 billion dollars in Iranian funds in breach of their fiduciary duty to the Iranian people and it seeks to recover those funds and 20 billion dollars in exemplary damages. It asks the court to impress a constructive trust on defendants' assets located throughout the world, for an accounting of all moneys and property received by the defendants from the government of Iran, and for other incidental relief.

Thereafter, defendants moved to dismiss the complaint alleging that it raised nonjusticiable political questions, that the court lacked personal jurisdiction due to defective service of process on them and that the complaint should be dismissed on grounds of forum non conveniens. Special Term granted defendants' motion based on forum non conveniens concluding that the parties had no connection with New York other than a claim that the Shah had deposited funds in New York banks, a claim which it found insufficient under the circumstances to justify the court in retaining jurisdiction.

On this appeal plaintiff claims that the courts below erred, that the New York courts must entertain this action because the record does not indicate that there is any alternative forum available and because the United States Government undertook to guarantee plaintiff an American forum to litigate its claims against the former royal family in the hostage settlement agreements between it and plaintiff known as the Algerian Accords.

 

ISSUE

May the trial court and the Appellate Division in the exercise of their discretion, dismiss the action on grounds of forum non conveniens?

Is the availability of an alternative forum merely an additional factor for the court to consider or is an absolute precondition to dismissal on conveniens grounds?

 

RULING

Yes.

The court ruled that the common-law doctrine of forum non conveniens permits a court to stay or dismiss such actions where it is determined that the action, although jurisdictionally sound, would be better adjudicated elsewhere. Among the factors to be considered are the burden on the New York courts, the potential hardship to the defendant, and the unavailability of an alternative forum in which plaintiff may bring suit. The court may also consider that both parties to the action are nonresidents and that the transaction out of which the cause of action arose occurred primarily in a foreign jurisdiction. No one factor is controlling. The great advantage of the rule of forum non conveniens is its flexibility based upon the facts and circumstances of each case. The rule rests upon justice, fairness and convenience.

Here, the court ruled that arrayed against this case is the possibility that its judgment may be ineffectual because of the inability [of the courts of this State] to impose a constructive trust on defendant's assets if they are not in New York. Moreover, defendant probably cannot defend this claim in any realistic way because the witnesses and evidence are located in Iran under plaintiff's control and are not subject to the mandate of New York's courts. The complainant also seeks a sweeping review of the political and financial management of the Iranian government during the several years of the late Shah's reign with the object of accounting for and repossessing the nation's claimed lost wealth wherever it may be located throughout the world. The taxpayers of this State should not be compelled to assume the heavy financial burden attributable to the cost of administering the litigation contemplated when their interest in the suit and the connection of its subject matter to the State of New York is so ephemeral. This is litigation by a foreign government against its own national who happened to be within the State of New York at the time this suit was commenced. It involves an internal dispute, not normally a matter considered in the exercise of treaty powers and a matter which does not generally engage the national interest to the same extent as claims by nationals of one signatory nation against the other signatory nation. If the action cannot be maintained in Iran under laws which result in judgments cognizable in the United States or other foreign jurisdictions where the Shah's assets may be found, then that failure must be charged to plaintiff. It is, after all, the government in power, not a hapless national victimized by its country's policies. Any infirmity in plaintiff's legal system should weigh against its claim of venue, not impose disadvantage on defendant or the judicial system of this State. The United States has met its commitment to "facilitate" this lawsuit by freezing the Shah's assets and by advising the courts that the Act of State doctrine and sovereign immunity principles are not to apply to plaintiff's claim. Nothing in the record or in its communication to the trial court suggests that a promise was made that it or the courts would do more.

 

Alternative forum is merely an additional factor, as to the second case.

The court ruled that the although the existence of a suitable alternative forum is a most important factor to be considered in applying the forum non conveniens doctrine, its alleged absence does not require the court to retain jurisdiction.

Here, the court held that plaintiff has failed to establish that no alternative forum exists and, even if it were assumed that normally an alternative forum is a prerequisite and that plaintiff has none, a forum non conveniens dismissal is still warranted when plaintiff's chosen forum is unable to afford the parties appropriate relief.







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