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Milena Ship Management Co. v. Newcomb

decided as corrected: July 21, 1993.

MILENA SHIP MANAGEMENT COMPANY, ET AL., PLAINTIFFS-APPELLANTS,
v.
R. RICHARD NEWCOMB, DIRECTOR, OFFICE OF FOREIGN ASSETS CONTROL OF THE DEPARTMENT OF THE TREASURY, ET AL., DEFENDANTS-APPELLEES.



Appeal from the United States District Court for the Eastern District of Louisiana. D.C. DOCKET NUMBER 92-CV-2535. JUDGE Martin L. C. Feldman

Before Smith, Duhe and Wiener, Circuit Judges.

Author: Wiener

WIENER, Circuit Judge.

Plaintiff-Appellant Milena Ship Management Company, Ltd. (Milena) appeals the district court's grant of summary judgment in favor of Defendants-Appellees, the Office of Foreign Assets Control (OFAC) of the Department of the United States Treasury, and the United States Customs Service (collectively, the government). Milena challenges the blocking of four of its vessels pursuant to two Executive Orders and the denial of its petition to unblock the ships. As we find no reversible error in the district court's rulings, we affirm.

I

FACTS AND PROCEEDINGS

The International Emergency Economic Powers Act (IEEPA)*fn1 grants the President authority to regulate or prohibit international economic transactions in case of a national emergency "which has its source in whole or substantial part outside the United States."*fn2 Included in this authority is the power to prevent "transactions involving[ ] any property in which any foreign country or a national thereof has any interest[ ] by any person, or with respect to any property, subject to the jurisdiction of the United States."*fn3 Another Act of Congress, the United Nations Participation Act (UNPA)*fn4 authorizes the President to implement measures adopted by the U.N. Security Council pursuant to Article 41 of the U.N. Charter.

Operating under the authority of these two statutes, then President Bush issued two executive orders in reaction to growing civil unrest in former Yugoslavia. Both orders, Executive Orders 12808 and 12810, impose U.N. mandated economic sanctions against the unrecognized Federal Republic of Yugoslavia (FRY or Yugoslavia), consisting of the provinces of Serbia and Montenegro. Executive Order 12808 blocks "all property and interests in property in the name of the Government of Yugoslavia, that hereafter come within the United States, or that are or hereafter come within the possession or control of United States persons." Executive Order 12810 reiterates this restriction and additionally prohibits all imports to the United States from the FRY and all exports from the United States to the FRY.

These Executive Orders also direct the Secretary of the Treasury (Secretary) to promulgate regulations necessary to "block" all property in which the FRY has an interest. On that authority, OFAC immediately issued General Notice No. 1, stating that all entities located or organized in the FRY are presumed to be owned or controlled by the Yugoslavian government. This presumption was based on the history of that government's involvement in business corporations and other enterprises, and its residual interest in those companies. Included in this category was Jugosloanska Oceanska Plovidba (JOP), a commercial shipping company headquartered in Kotor, Montenegro. Under OFAC's order, foreign subsidiaries of Yugoslavian companies are also presumed to be owned or controlled by the Yugoslavian government.

In the course of implementing the Executive Orders, United States Customs agents detained four vessels owned and operated by various JOP subsidiaries--the M/V ZETA and the M/V MOSLAVINA in the port of New Orleans, the M/V DURMITOR in Baltimore, and the M/V MARTINOVIC in Savannah.*fn5 Milena, which manages and operates all four vessels, denies that JOP is connected with the FRY government. Accordingly, Milena applied to OFAC for an order unblocking JOP's frozen assets. While this application was pending before OFAC, Milena sought declaratory and injunctive relief in the District Court for the Eastern District of Louisiana. That court denied the request, finding that a preliminary injunction would not serve the public interest.

Subsequently, OFAC denied Milena's petition to unblock the vessel, citing three bases for that decision. First, OFAC cited the U.N. Sanctions Committee ruling that the "continued operation and associated transfers of funds or resources to the owners of four ships controlled and managed by the Milena Ship Management Company of Malta ... would be in violation of the sanctions established under [Security Council] Resolution 757." OFAC interpreted this language as meaning "that the release of the vessels would constitute a prohibited transfer of an economic resource of both the Government of [the FRY] and a "person' within [that country], namely, JOP."

Second, OFAC interpreted the law of the FRY, considering affidavits and articles submitted by various experts. According to the affidavit of Dr. Branko Vukmir, a legal advisor to the U.N., the government of the FRY retains an interest in business enterprises by virtue of the system of "social capital" as opposed to internal (personal) shares. In addition, the government determines and limits the issuance of internal shares and has established a governmental fund to receive the proceeds from the sale of the "social capital." Finally, OFAC concluded that the interest retained by the government under this system justified the Conclusion that all Yugoslavian vessels were owned by the government.

Soon afterwards, Milena again filed a motion in the district court, this one being for declaratory and injunctive relief by way of a Motion for Summary Judgment, arguing that OFAC erred in denying Milena's application to have the vessels unblocked. Milena also sought appointment of a custodian to maintain the blocked vessels. Reviewing OFAC's order, the district court agreed with OFAC's interpretation of Yugoslavian law that led OFAC to conclude that JOP is in fact owned or controlled by the Yugoslavian government. In addition, the district court reviewed and accepted OFAC's factual findings regarding the Yugoslavian government's control over the economy in general and an enterprise's social capital specifically. Consequently, the district court denied the motion for summary judgment.

Ultimately, the district court granted summary judgment in favor of the government, dismissing Milena's claim. Milena ...


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