[Page 1]
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------------x
DR. AHMED DIAA ELDIN ALI MOHAMED :
HUSSEIN, :
:
Plaintiff, : 22-cv-2592 (JSR)
:
-v- : MEMORANDUM ORDER
:
DR. MOHAMED AHMED MAAIT, in his :
official capacity as MINISTER OF :
FINANCE OF THE ARAB REPUBLIC OF :
EGYPT, :
:
Defendant. :
----------------------------------------x
JED S. RAKOFF, U.S.D.J.
Plaintiff, Dr. Ahmed Diaa Eldin Ali Mohamed Hussein, filed a
motion for summary judgment in lieu of complaint in New York state
court seeking enforcement of an “Egyptian judgment” against
defendant Dr. Mohamed Ahmed Maait in Maait's official capacity as
Minister of Finance of the Arab Republic of Egypt. ECF No. 1. After
Maait removed the case to federal court, Hussein filed a motion to
remand. On April 18, 2022, the Court denied Hussein's motion to
remand on the ground that Egypt is the real party-in-interest and
that the Foreign Sovereign Immunity Act (“FSIA”), 28 U.S.C. §§ 1602
et seq., applies.
Now before the Court is Maait's motion to dismiss Hussein's
motion for summary judgment in lieu of complaint and to dismiss
the case pursuant to Federal Rules of Civil Procedure 12(b)(1) and
[Page 2]
12(b)(6). For the reasons set out below, the Court finds that it
lacks jurisdiction and accordingly grants the motion to dismiss
pursuant to Rule 12(b)(1).
Unless otherwise indicated, the following factual allegations
are taken from the motion for summary judgment in lieu of complaint
that Hussein filed in New York state court pursuant to N.Y.
C.P.L.R. § 3213. That motion was supported by Hussein's
affirmation, ECF No. 3-3, as well as three attached exhibits, ECF
Nos. 303, Ex. A, ECF No. 3-11, and ECF No. 3-12. In response, Maait
also references Hussein′s arbitration demand against Egypt, ECF
No. 22-1, various other of Hussein's judicial and regulatory
filings, and a declaration of an expert on Egyptian law, Bahielden
Elibrachy, ECF No. 23.1
Hussein is a dual Egyptian and American citizen who resides
in Egypt, though he also owns a residence in New York. Hussein
alleges that in 1994, he partnered with the National Bank of Egypt
to found an investment bank in Egypt, the National Investment
Company (“NIC”), which is incorporated under the laws of Egypt. In
1 On a 12(b)(1) motion to dismiss for lack of jurisdiction, ↩
the Court may consider additional factual materials outside the
complaint. See Amidax Trading Grp. v. S.W.I.F.T. SCRL, 671 F.3d
140, 145 (2d Cir. 2011) (per curiam).
-2-
[Page 3]
a proxy statement filed with the U.S. Securities & Exchange
Commission in 2012, Hussein described his occupation as Chairman
of the Board of Directors of NIC. Hussein further alleges that in
1997, he purchased all shares of NIC and transferred them to an
unnamed holding company in Egypt.
Hussein alleges that in 1997, he or the unnamed holding
company purchased shares amounting to about 72% of SIMO, an
Egyptian company that manufactures and sells paper products in
Egypt, in an open-market transaction. This purchase of shares was
made in connection with the privatization of SIMO, which was
formerly owned by the Egyptian government. Hussein asserts that
when he purchased the SIMO shares, he used funds from his personal
accounts in New York as well as funds borrowed from banks in the
U.S. leveraged with his investments in the U.S. Hussein asserts
that his purchase of the SIMO shares, made on the Egyptian Stock
Exchange, was equivalent to approximately $15.714 million at the
time it was made.
Hussein further alleges that in 1999, the Chairman of the
Egyptian Companies' Regulatory Authority gave control of SIMO to
the Egyptian government, under the auspices of the Chemical Holding
Company, “effectively expropriating all of the shares of SIMO.”
Hussein does not allege that the Egyptian government actually took
ownership of the SIMO shares then or at any later point, and
-3-
[Page 4]
Hussein affirms that he continued to acquire SIMO shares from 2000
through 2014.
Hussein alleges that he “immediately” began to pursue
compensation for the alleged expropriation of shares by filing a
lawsuit in the Egyptian courts “to return the Company to the
rightful owners, and obtain compensation for the damage caused by
this illegal taking.” ECF No. 3-3. ¶ 11. While Hussein asserts
that in 2005 and 2006, the Egyptian courts ruled that SIMO should
be returned to its “rightful owners” and awarded damages, he does
not provide copies of those rulings and his motion pursuant to
N.Y. C.P.L.R. § 3213 does not seek to enforce those rulings.
Instead, Hussein's motion pursuant to N.Y. C.P.L.R. § 3213
seeks recognition and enforcement of the “Egyptian Judgment,”
which Hussein characterizes as a foreign money judgment, but which
consists of two components: an executive decree issued on June 2,
2014, by the Egyptian Prime Minister (Decree 961), and a judgment
issued in a case brought in 2011 in Egypt's Administrative Justice
Court (Judgment 6193). Decree 961 directs that SIMO be “returned
back to sector of public businesses” and directs the Minister of
Finance to “provide all necessary financial credits related to the
shareholders' rights . . .” ECF No. 3-12. Decree 961 does not
define “necessary financial credits” or provide for how they are
to be calculated; neither does it identify the shareholders who
-4-
[Page 5]
are to be paid. Decree 961 leaves its execution to “the concerned
agencies.” Id.
Judgment 6193 was issued on April 8, 2014, in a case, brought
by plaintiffs who were mostly former SIMO employees, that named
Hussein as a defendant, along with the Egyptian Stock Exchange and
various Egyptian government officials in their official
capacities. ECF No. 3-11. The plaintiffs sought to annul SIMO’s
privatization as well as to annul disposing of the shares sold to
Hussein, his family members, and his companies -- i.e., it did not
seek compensation on behalf of Hussein, but rather against him.
Hussein did not present any crossclaim for compensation. In
Judgment 6193, Egypt's Administrative Justice Court ruled that the
privatization of SIMO was not properly authorized and thus in
contradiction with the law, and should be annulled. The judgment
cancelled the decision to privatize SIMO, “particularly the
annulment of disposition by selling of the shares of the company,”
and directed that SIMO was to be returned to the state “free from
encumbrances and mortgages . . .” Id. Judgment 6193 mentions
only compensation as to the plaintiff former employees, not as to
defendant Hussein. Hussein did not appeal Judgment 6193 to any
Egyptian appellate court.
One of Hussein's holding companies asked the Ministerial
Committee for Investment Disputes to hear his claims, but the
-5-
[Page 6]
authority declined. He also sought to commence an investment
arbitration against Egypt, but the authority declined to hear the
claim.
On December 13, 2021, Hussein filed a motion for summary
judgment in lieu of complaint pursuant to C.P.L.R. § 3213 in New
York state court, seeking recognition of Judgment 6193 and Decree
961 as the “Egyptian Judgment.” He then filed an amended summons
and amended notice of motion for summary judgment in lieu of
complaint on December 27, 2021. Service was effectuated on February
3, 2022. On March 30, 2022, Maait filed a notice of removal;
Hussein subsequently moved to remand the case to state court. On
April 18, 2022, the Court denied Hussein's motion to remand on the
ground that Egypt is the real party-in-interest and that the FSIA
applies. On April 20, 2022, the Court stayed merits discovery
pending the disposition of defendant's instant motion to dismiss.
The plaintiff bears the burden of proving the Court's
jurisdiction by a preponderance of the evidence in order to survive
a 12(b)(1) motion to dismiss for lack of subject matter
jurisdiction. Makarova v. United States, 201 F.3d 110, 113 (2d
Cir. 2000). Once a defendant has established that it enjoys
immunity under the FSIA, the plaintiff must adduce sufficient facts
-6-
[Page 7]
to show that his claims fall within one of the FSIA’s statutory
exceptions to immunity. Kensington Int'l Ltd. v. Itoua, 505 F.3d
147, 153 (2d Cir. 2007).
Maait's motion to dismiss contends, first, that the court
lacks subject matter jurisdiction because Hussein has not
established that any of the FSIA's statutory exceptions to immunity
applies in this case, and second, that Hussein fails to state a
claim upon which relief can be granted. Because the Court agrees
with the first contention, it need not address the second.
The FSIA provides the sole basis for a U.S. court's exercise
of jurisdiction over a foreign sovereign. See Rukoro v. Federal
Rep. of Germany, 976 F.3d 218, 223 (2d Cir. 2020). Under the FSIA,
the Arab Republic of Egypt -- the “real party in interest” in this
case -- is immune from suit in the U.S. unless the plaintiff can
establish that his claim falls within one of the FSIA's statutory
exceptions.
Hussein argues that his summary judgment motion in lieu of
complaint under New York's Article 53 falls within the third prong
of the “commercial activity” exception to the FSIA. The FSIA's
commercial activity exception to foreign sovereign immunity
applies to cases “in which the action is based upon . . . an act
-7-
[Page 8]
outside the territory of the United States in connection with a
commercial activity of the foreign state elsewhere and that act
causes a direct effect in the United States.” 28 U.S.C.
§ 1605(a)(2). Consequently, to qualify for the exception, Hussein
must establish that the action (1) is “based . . . upon an act
outside the territory of the United States; (2) [] was taken in
connection with a commercial activity of [Egypt] outside this
country; and (3) [] cause[d] a direct effect in the United States.”
Republic of Argentina v. Weltover, Inc., 504 U.S. 607, 611 (1992)
(fourth alteration in original) (internal quotation marks
omitted).
Applying these requirements to this case, the Court must
first “identify the act” of the foreign state that serves as the
basis for a claim, Garb v. Republic of Poland, 440 F.3d 579, 586
(2d Cir. 2006), that is, identify the “particular conduct” that
constitutes the "gravamen” or "core" of the suit, OBB
Personenverkehr AG v. Sachs, 577 U.S. 27, 33, 35 (2015).
Hussein argues that the relevant acts are those that underly
the Egyptian judgment, not the elements of a claim to recognize a
foreign judgment under New York state law. Hussein argues that to
hold otherwise would prevent a plaintiff from enforcing any foreign
judgments against foreign sovereigns in U.S. courts under
§ 1605(a)(2), because the elements of that enforcement action
-8-
[Page 9]
would never be based upon the underlying commercial activity.
Hussein argues that because his lawsuit arose out of Egypt's
cancellation of the sale of SIMO shares, the case is based upon an
act of a foreign state that is truly the gravamen of his suit. But
the Second Circuit subsequently clarified that the case on which
Hussein relies for this proposition, International Housing Ltd. v.
Rafidain Bank Iraq, 893 F.2d 8, 11-12 (2d Cir. 1989), is in tension
with the Supreme Court's subsequent decision in Nelson. See
Transatlantic Shiffahrtskontor GmbH v. Shanghai Foreign Trade
Corp., 204 F.3d 384, 389 n.4 (2d Cir. 2000) (observing that there
is “some tension” but declining to take a position on the impact
of Nelson on the Second Circuit's approach in International Housing
Limited).
Hussein argues that the sale of the SIMO shares is commercial
in nature because it is the type of activity commonly performed by
private citizens within the private market, and so Egypt's
obligation to repay the price after cancellation of the sale is
itself commercial in nature. The claim is not, however, Egypt's
“cancellation of the shares of SIMO,” but instead a straightforward
taking. Indeed, Hussein's motion for summary judgment in lieu of
complaint nowhere mentions the claim as being about Egypt's
cancellation of the SIMO shares. Moreover, Hussein's own
declaration concedes that the “cancellation” of the SIMO shares
-9-
[Page 10]
was the mechanism by which SIMO was returned to the government-
owned holding company -- and any emphasis on the cancellation that
ignores the return to government ownership misses the mark.2
In an action seeking recognition of a foreign money judgment,
the claim must be “based upon" the judgment itself, not the conduct
giving rise to the judgment, because identifying the gravamen of
the suit requires identifying “those elements of a claim that, if
proven, would entitle a plaintiff to relief under his theory of
the case.” Saudia Arabia v. Nelson, 507 U.S. 349, 357 (1993). Even
if the court were to look at the conduct underlying the “Egyptian
Judgment," the gravamen of the claim would still be Egypt's alleged
expropriation of private property, (namely, Hussein's shares in
SIMO) -- a sovereign, and not commercial act. See Barnet as Tr. of
2012 Saretta Barnet Revocable Tr. v. Ministry of Culture & Sports
of the Hellenic Republic, 961 F.3d 193, 201 (2d Cir. 2020)
(“Nationalizing property is a distinctly sovereign act.”); Garb,
2 Hussein's reliance on Petersen Energia Inversora S.A.U. v. ↩
Argentine Republic & YPF S.A. is misplaced. 895 F.3d 194, 199
(2d Cir. 2018). In that case, the Second Circuit held that a
suit to enforce contractual by-law provisions, triggered by the
Argentinian government's acquisition of a majority stake in a
company, fell within the FSIA's commercial activity exception.
Id. at 207. Unlike this case, the gravamen of the claim in
Petersen was to enforce the by-law obligation where the investor
still held shares in the company, in stark contrast to
expropriation based on the rescission of Hussein's purchases of
SIMO shares that returned the shares to a government-owned
holding company.
-10-
[Page 11]
440 F.3d at 586-87 (“Expropriation is a decidedly sovereign-rather
than commercial-activity.”).
Hussein has thus not met its burden to establish by a
preponderance of the evidence that the action upon which his claim
is based was taken in connection with commercial activity.
Hussein has also failed to meet his burden to establish that
the action had any direct effect on the U.S. An effect is “direct”
for purposes of § 1605(a)(2) “if it follows as an immediate
consequence of the defendant's activity.” Weltover, 504 U.S. at
618 (internal citations and quotation marks omitted). The effect
need not be “substantial” nor “foreseeable,” but it cannot be
“purely trivial” or “remote and attenuated.” Id. at 611.
Hussein argues that he purchased the SIMO shares using funds
from his personal accounts in New York, and funds borrowed from
banks in the U.S. leveraged with his investments in the U.S. He
further argues that his ability to repay the borrowed amounts from
U.S. banks, as well as the value and ownership of his investments
in the U.S., were negatively affected because Egypt cancelled the
sale of SIMO shares and did not compensate Hussein, which Hussein
argues Egypt was required to do by the “Egyptian Judgment.”
But these effects are contingent on the actions of Hussein
himself, not on any act by Egypt. The fact that Hussein's ability
to repay borrowed amounts from U.S. banks and the value and
-11-
[Page 12]
ownership of his U.S. investments are impacted by nonpayment are
because Hussein decided to borrow against his U.S. assets to buy
the SIMO shares and then to forego making payment on those loans.
Because of this contingency, independent of any act by Egypt, the
effect is not sufficiently “direct”: it is not an immediate
consequence of Egypt's nonpayment because the effect depends on
circumstances independent of Egypt's actions. See Guirlando v.
T.C. Ziraat Bankasi A.S., 602 F.3d 69, 75 (2d Cir. 2010) (holding
that “the requisite immediacy is lacking where the alleged effect
depend[s] crucially on variables independent of the conduct of the
foreign state (internal quotation marks omitted, alteration in
original)).3
In addition, because Hussein cannot establish that the
“Egyptian Judgment” called for payment in the U.S., he cannot
3 Furthermore, any loss that Hussein suffered as an “American ↩
investor” is not sufficient to constitute a “direct effect" on the
U.S. Hussein's argument is based on Atlantica Holdings v. Sovereign
Wealth Fund Samruk-Kazyna JSC, 813 F.3d 98, 112 (2d Cir. 2016),
but this reliance is misplaced. In that case, the Second Circuit
held that a court assessing the “direct effect” in the U.S. of an
alleged tort should consider the tort′s locus, or place of wrong.
Id. at 109-10. Hussein does not assert that Egypt committed any
tort, but instead seeks recognition of a foreign money judgment.
In any event, the locus of any tort would likely be in Egypt, where
any action or inaction of Egypt occurred and where Hussein resides.
Hussein, an Egyptian citizen and resident, cannot claim that any
financial loss he suffered was to “an American investor,” and thus
cannot argue that any such financial loss has a “direct effect” in
the U.S.
-12-
[Page 13]
establish a direct effect in the U.S. from the alleged nonpayment.
See, e.g., Valambhia v. United Republic of Tanzania, 964 F.3d 1135,
1142 (D.C. Cir. 2020), cert. denied, 141 S. Ct. 2512 (2021). Not
only do Decree 961 and Judgment 6193 contain no indication that
shareholders would be paid in the U.S., Hussein makes no allegation
that Egypt undertook to pay any purported obligation in the U.S.
Hussein fails establish that Egypt's action had any direct effect
in the U.S.
Because Hussein has not met his burden to establish that any
of the FSIA exceptions apply in this case, the Court grants the
Rule 12(b)(1) motion to dismiss for lack of jurisdiction.4
For the reasons above, the Court hereby grants Maait's motion
to dismiss the summary judgment motion in lieu of complaint. The
Clerk of Court is directed to enter judgment dismissing the
complaint for want of jurisdiction and to close the case.
Dated: New York, NY
June 13, 2022
Signature
JED S. RAKOFF, U.S.D.J.
4 Because the lack of jurisdiction is sufficient grounds to ↩
dismiss Hussein′s motion for summary judgment in lieu of complaint,
the Court declines to address the arguments to dismiss pursuant to
Rule 12(b)(6).
-13-