Eleventh Circuit Clarifies an Airline’s Qualification as a Government-Owned Entity

On August, 20, 2015, in Singh v. Caribbean Airlines Ltd., the United States Court of Appeals for the Eleventh Circuit affirmed the United States District Court for the Southern District of Florida’s holding that Caribbean Airlines is a foreign state within the meaning of the Foreign Sovereign Immunities Act (“FSIA”) and, therefore, entitled to immunity from a jury trial.  In so doing, the Eleventh Circuit affirmed the district court’s Final Judgment in favor of Caribbean Airlines in an alleged failure to divert case.

The FSIA defines a foreign state to include not only the government itself, but also commercial entities majority-owned by the foreign government, such as air carriers.  The foreign government’s ownership, however, must be direct.  In other words, if Company A is majority-owned by the foreign government, Company A is a foreign state for purposes of the statute.  If Company A, in turn, majority-owns Company B, Company B does not qualify for the protections afforded under the FSIA.

Plaintiffs argued on appeal that this extra level of “corporate tiering” exists in the ownership structure of Caribbean Airlines because the majority of its shares are held by the Minister of Finance of the Republic of Trinidad and Tobago.  It was plaintiffs’ position that, because the Minister – and not the Ministry of Finance – owns a majority of the carrier’s shares, and because the Minister’s political office is organized as a corporation, he is not the foreign government itself, but is instead a commercial entity.

Caribbean Airlines pointed out that the Minister’s core functions are predominantly governmental (as opposed to commercial) and, therefore, the Minister is merely a political subdivision of the government of Trinidad and Tobago.  In fact, the Minister is incorporated so that, as with many governmental treasury departments, he may fulfill his function of holding and administering all state property.

The Eleventh Circuit agreed with Caribbean Airlines that the Minister of Finance is a political subdivision of the government and its majority ownership of the airline affords it the protections of the FSIA, namely a nonjury trial.

The Singh decision has benefit to foreign air carriers whose shares are owned by departments of their government by providing binding precedent within the Eleventh Circuit and persuasive authority beyond its borders against plaintiffs who seek to challenge their status as a foreign state within the meaning of the FSIA.