State Bank of IndiaDownload PDFNational Labor Relations Board - Board DecisionsMay 20, 1977229 N.L.R.B. 838 (N.L.R.B. 1977) Copy Citation DECISIONS OF NATIONAL LABOR RELATIONS BOARD State Bank of India and Chicago Joint Board, Amalgamated Clothing and Textile Workers Union, AFL-CIO, Petitioner.' Case 13-RC-14061 May 20, 1977 DECISION ON REVIEW AND DIRECTION OF ELECTION On July 15, 1976, the Regional Director for Region 13 issued his Decision and Order in the above- entitled proceeding in which, relying on the Board's established policy of declining to assert jurisdiction over enterprises that are owned and operated by foreign governments, he concluded that "it is appropriate to decline to assert jurisdiction over this Employer because of its close relationship to the Central Government of India." Thereafter, the Petitioner filed a timely request for review, submitting that there are compelling reasons for reconsidering the Board's policy of declining to assert discretionary jurisdiction over employers engaged in commercial activities within the United States of America solely because of their "close relationship" to a foreign government. The Employer opposed review. By telegraphic order dated November 4, 1976, the Board granted Petitioner's request for review. There- after, both parties filed briefs. On January 17, 1977, the Board's Executive Secretary notified the parties that the Board would hear oral argument. 2 Oral arguments were held before all five Members of the Board on February 15, 1977. Having duly considered the entire record in this case, including the briefs and oral arguments, the Board finds: This case affords the Board the opportunity to reexamine its past policy of refusing to exercise jurisdiction over commercial activities of foreign governments or their agents occurring within the United States. There are two questions: whether the Board has the power to assert jurisdiction and whether the Board should exercise that power. Since 1967, the Board has consistently declined to assert jurisdiction over such employers and usually found it unnecessary to reach the question whether it had jurisdiction. We now conclude that both questions are to be answered in the affirmative. Accordingly, for the reasons set forth hereafter, we shall reverse the Regional Director, overrule the authorities upon which he relied, and direct an election herein. 'The name of the Petitioner appears as amended at the hearing to reflect the merger of the Amalgamated Clothing Workers of Amenca with the Textile Workers Union. 2 Thereafter, the Board denied Petitioner's request for a postponement of the oral argument. It also denied requests from counsel in SK Products Corp., Case 13-RC-14229, for oral argument in that case and its 229 NLRB No. 137 The Petitioner seeks to represent a stipulated unit of employees employed in the State Bank of India's branch office in Chicago, Illinois. The State Bank of India (herein sometimes called State Bank) took the position that the petition should be dismissed on the grounds that the Board does not have, or should not assert, jurisdiction over it because it is a foreign corporation substantially owned and operated by the Indian Government as an integral part of the monetary policy of that country. In support of these contentions, the State Bank cited McCulloch v. Sociedad Nacional de Marineros, de Honduras [United Fruit Co.], 372 U.S. 10 (1963); British Rail-Interna- tional, Inc., 163 NLRB 721 (1967), which compared Sociedad Nacional de Marineros; and AGIP, USA, Inc., 196 NLRB 1144 (1972), which depended upon British Rail-International. In the cited Board cases, the Board majority, in the exercise of its discretion, declined to assert jurisdiction over American corpo- rations operating within the territorial limits of the United States on the basis of such employers' "close relationship" with an "agency" or "an instrumentali- ty" of a foreign government, without reaching the question whether, in fact, the Board had legal jurisdiction over the employers' operations with respect to the employees involved therein.3 The Nature of the Employer's Operations The Employer, which was at one time India's largest privately owned bank, was nationalized in 1955 and incorporated under a special act as the State Bank of India. By law, the government must hold at least 55 percent of the State Bank's shares. At present over 92 percent of the State Bank's stock is owned by the Reserve Bank of India, which in turn is a wholly owned and controlled agency of the Indian Government. The State Bank is run by 18 directors, of whom 16 are appointed by, or subject to approval by, the Indian Government. By law, no fewer than nine must be directly appointed by the Central Government. At present, 8 percent of the State Bank's stock is held by, and two of its directors were elected by, private persons of unspecified nationality in India. The goals of the State Bank are largely determined by the State Bank Act, orders of the Reserve Bank, and direct requests by the Indian Central Government. In addition, Indian law pro- vides that the State Bank must act as agent for the Reserve Bank of India (herein sometimes called RBI). RBI performs many of the functions per- consolidation for argument herewith. The instant Employer opposed such consolidation. 3 Chairman Fanning in his dissenting opinion in AGIP, USA, supra, did reach the question of the Board's legal jurisdiction, and would have asserted jurisdiction over the employer therein. He did not participate in British Rail- Inlernational. 838 STATE BANK OF INDIA formed by the Federal Reserve Bank, the Treasury, and other Federal Government agencies in the United States, e.g., collects taxes, holds Central Government moneys, pays checks for Central Gov- ernment employees, determines and holds required reserves of banks, prints bank notes which are legal tender, and so on. The State Bank, with central offices in Bombay, India, does approximately one-third of the total banking business in India and acts as agent for the RBI in any location where it is established and RBI is not, performing such functions as listed above. In addition, its directors and officers have such govern- mental functions as the authority to authenticate official documents, to attest pension applications by Indian government employees and to certify passport applications of Indian citizens. In addition to its domestic Indian banking busi- ness, the State Bank of India carries on international banking throughout the world. In 1974, it had overseas branch offices in the United States, the United Kingdom, West Germany, Sri Lanka, and the Republic of Maldives, and representative offices for the Middle East in Lebanon and for Eastern and Western Europe in West Germany. In 1975, it opened branch offices in the Bahamas, Pakistan, and added another branch in London and opened the branch involved herein, in Chicago. It announced arrangements in hand to set up representative offices of Bahrain, Moscow, and Manila. The State Bank has been closely associated with the financial arrangements required for assisting the country's traditional exports of a wide variety of capital goods to various countries, Indian merchants, overseas investors, importers, and multinationals operating in India or in the location of the branch office. As part of its foreign banking business, the State Bank buys and sells foreign exchange, promotes the flow of moneys from persons of Indian descent resident in a foreign country to persons in India in order to make foreign exchange more available in India, carries lines of credit with the Indian Government as its official bank in such country, and engages in the usual international monetary transactions relating to international trade and investment. The Chicago branch, the facility in issue, was licensed "to engage in a general banking business" in Chicago, Illinois, by virtue of a certificate of authority issued by the Commissioner of Banks and Trust Companies of the State of Illinois on May 6, 1975, under the Foreign Banking Office Act of 1973. 4 That Act permitted branches of foreign banks to engage in a full spectrum of banking functions, subject to essentially the same restrictions and 4 ll. Rev. Stat. Ch. 16 1/2 §501. et seq. At the oral argument, counsel for the State Bank indicated that both requirements as Illinois-chartered domestic banks. According to exhibits in evidence, foreign bankers have long frequented New York City, an important financial center, and Japanese bankers have had major establishments on the West Coast for many years. As recently as 1973, there were no foreign bank branches in Chicago. Today there are 24 foreign banks in Chicago, with a grand total of assets which have more than doubled: from $686 million at the end of 1974 to $1,555 million at the end of 1975, according to figures maintained by the Federal Reserve Board. We take official notice that this figure increased to $2.1 billion by late 1976. This influx of foreign financial institutions has significant- ly contributed to the development of Chicago as a major international banking center, due to a great number of the Nation's largest corporations as well as those of foreign countries doing business in the Chicago area. Neither the Illinois Act nor the statistics included in the record distinguish between foreign banks on the basis of ownership, i.e., between privately and publicly or state-owned foreign banks.5 The Employer's Chicago branch began operations on December 29, 1975. Although overall policy decisions regarding overseas operations are made by the international division of the central office and its overseas branch section, the day-to-day operations and personnel decisions are the responsibility of local branch officers. The Chicago branch has a manager, an assistant manager, and an accountant, all of whom were sent from India. The manager or, in his absence, the assistant manager has the authority to interview, hire, and fire employees. At the time of the hearing, there were 11 locally hired employees, of whom 2 were Indian nationals. The branch manager may initiate recommendations based on local condi- tions as to hours, fringe benefits, and all other conditions of employment, subject to approval by the central office. However, the record indicates that the central office relies heavily on the discretion of the officers in the branch. As the Regional Director found, at the present time the branch is operating without even a personnel policies manual and the branch officers are "effectively free to formulate and pursue their own determined policies on an ad hoc basis." For the most part, such policies have been based on the customary practices of domestic banks in the Chicago area. The Question of the Board's Statutory Jurisdiction In declining to assert jurisdiction, the Regional Director did not consider whether the Employer is Italy and France are currently operating state-owned banks in the Chicago area under the Foreign Banking Act. 839 DECISIONS OF NATIONAL LABOR RELATIONS BOARD operating in interstate commerce or its impact thereon. However, at the hearing herein, the parties entered into the following stipulation concerning the Employer's commerce statement: State Bank of India, organized under the laws of India and licensed to do business in the State of Illinois, is a financial institution located at 10 South LaSalle Street, Chicago, Illinois. During the past year, a representative period, it had a gross volume of business in excess of $1 million; and, during the same period engaged in interstate financial transactions from its location at Chica- go, Illinois, in excess of one hundred thousand dollars. These stipulated facts are enough to warrant finding, as we do, that the Employer is engaged in commerce within the meaning of Section 2(6) and (7) of the Act. The Employer's operation from its Chicago branch office "partakes of the nature of an instrumentality of commerce"6 and meets the Board's present jurisdictional standards for the assertion of jurisdic- tion thereover. 7 The fact that the Employer was organized under the laws of a foreign nation is immaterial to the Board's statutory authority to assert jurisdiction when, as here, such corporation is authorized to and does engage in business operations within the sovereign jurisdiction of the United States and the Board.8 We turn briefly to the argument that the State Bank of India is an instrumentality of a foreign government or state or a government-owned corporation, hence is not an employer as defined in the Act. Section 2(2), as amended in 1947, provides that the term "employer" shall not include "the United States or any wholly owned Government corporation, or any Federal Reserve Bank, or any State or political subdivision thereof .... " On this point it seems enough to observe that the Employer is not within the terms of the exclusions. 9 According- ly, we find that we have the statutory power to assert jurisdiction herein. 8 Amalgamated Bank of New York, 92 NLRB 545 (1950). In N.LR.B. v. Bank of America National Trust A Savings Association, 130 F.2d 624, 626 (1942), cert. denied 318 U.S. 791, enforcing an early Board Order appearing in 14 NLRB 207 (1939), and 26 NLRB 198 (1940), the Ninth Circuit stated: The impact upon commerce of the partial or complete cessation of its banking operations would be felt immediately throughout the country, and indeed the world. ... The dependence of commerce upon the continuity of credit furnished by these great banking institutions is as marked as was its dependence upon the electric energy furnished by the intrastate utilities involved in Consolidated Edison Co. v. N.LR.B., 305 U.S. 197. A $50,000 standard is applicable to this type of enterprise. H P O Service, Inc., 122 NLRB 394 (1958). 8 See The Royal Bank of Canada (San Juan Branch), 67 NLRB 403 (1946). In that case jurisdiction was asserted over a foreign corporation conducting In so finding, we are not unmindful that the Employer contends that the Supreme Court's deci- sion in McCulloch v. Sociedad Nacional de Marineros contains an "explicit admonition that the Board not extend its jurisdiction into areas of international significance without a clear Congressional mandate" in the following statement: We therefore conclude, as we did in Benz, [v. Compania Naviera Hidalgo, 353 U.S. 138 (1957)], that for us to sanction the exercise of local sovereignty under such conditions in this "delicate field of international relations there must be present the affirmative intention of the Congress clearly expressed" 353 U.S., at 147. Since neither we nor the parties are able to find any such clear expression, we hold that the Board was without jurisdiction to order the election. [Emphasis supplied.] [372 U.S. at 21-22.1 The Employer asserts that the Petitioner herein has failed to demonstrate an " 'affirmative intention of the Congress' to confer jurisdiction over an employer that is virtually the alter ego of the Government of India and an integral part of that country's national and international monetary policies." Under our construction of the jurisdictional provisions of the Act, it is the Employer who has failed to demonstrate any congressional intent to exclude such employers from the coverage of the Act or to preclude the Board from exercising jurisdiction. We recognize that "The canon of construction which teaches that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States, Blackmer v. United States, [284 U.S. 421, 437 (1932)1, is a valid approach whereby unexpressed congres- sional intent may be ascertained."10 In both Benz and McCulloch, the Court searched for specific statutory language clearly expressing an affirmative intent to apply the Act to crews working foreign-flag ships, at least while temporarily within the "local sovereignty" of the United States by coming within a general banking business in the Territory of Puerto Rico by virtue of a certificate of registration issued by the Puerto Rican Government. The decision also noted that the unfair labor practices involved had occurred within the Territory of Puerto Rico over which the Board had plenary jurisdiction. See also Delta Match Corporation, 102 NLRB 1400, fn. 2 (1953), deeming immaterial the fact that the employer was a wholly owned subsidiary of a Swedish corporation, as it was authorized to and does engage in business in the State of Louisiana. No further inquiry was made in either case into ownership or control. 9 See N.L.RB. v. Bank of America National Trust & Savings Association, 130 F.2d 624, 626-627. Expressio unius est exclusio alterius. 10 Foley Bros., Inc. v. Fllardo, 336 U.S. 281, 285 (1948). In that case, the Supreme Court found that there was no language in the Eight Hour Law in question that gives "any indication of a congressional purpose to extend its coverage beyond places over which the United States has sovereignty or has some measure of legislative control." 840 STATE BANK OF INDIA American waters. In McCulloch, the Board had asserted jurisdiction over foreign-flag vessels because the foreign corporate owner was a wholly owned subsidiary of an American corporation and the two corporations were held to be joint employers. The Court held that the Board had no jurisdiction, discretionary or otherwise, over the "internal man- agement and affairs" of the foreign-flag vessels, relying on the absence of language clearly expressing an affirmative intention to cover such vessels." Neither case dealt with the issue of foreign govern- ments or their agents as employers doing business within the Territorial United States. In finding that the Board lacked jurisdiction, the Court cautioned that its holding was not to imply "any impairment of our own soverignty, or limitation of the power of Congress' in this field." The holdings merely reaffirm that "[a]ll legislation is prima facie territorial" and "extraterritorial effect may not be given to laws by implication."12 Thus, the Act was to be given this normal territorial interpretation and construed as applying generally only to conduct taking place within, or having effect within, the territory of the United States. The Court explained (372 U.S. at 18): We held [in Benz] that the Act did not apply, searching the language and the legislative history and concluding that the latter "inescapably des- cribes the boundaries of the Act as including only the workingmen of our own country and its possessions. " Id., at 144. [Emphasis supplied.] Within these boundaries, there is no basis for believing that the Act was intended to exclude any employees in our country whose employer in this country is an "employer" engaged in "commerce" within the meaning of the Act. There is no question of our sovereignty,l3 merely an assertion that "sovereign immunity" must be implied.14 Such a contention is addressed to our discretion to decline, not our power to assert, jurisdiction. I The Court also relied on the "law of nations" and the particular Treaty of Friendship, Commerce and Consular Rights which provided that merchant vessels flying the flags and having the papers of either country "shall, both within the territorial waters of the other High Contracting Party and on the high seas, be deemed to be the vessels of the Party whose flag is flown." is Amercan Banana Company v. United Fruit Company, 213 U.S. 347, 357 (1909); 50 Am. Jur. Statutes, 510, par. 487. See also Restatement of the law Second: Foreign Relations Law of the United States, sec. 38. Territorial Interpretation of United States Law (American Law Institute Publishers, 1965). 13 Chief Justice Marshall, in an early case regarding the doctrine of sovereign immunity, stated: "The jurisdiction of the nation within its own territory is necessarily exclusive and absolute. It is susceptible of no limitation not imposed by itself. Any restriction upon it, deriving validly The Question of the Board's Exercise of Discretionary Jurisdiction As noted above, the Employer argued that the Board has an established policy of exercising its discretion not to assert jurisdiction over employers who are found to have a "close relationship" with an "agency" or "an instrumentality" of a foreign government. The Regional Director found that "the ownership and management of the Employer can be traced directly to the Central Government of India" and that, "in addition to performing all the usual functions of a commercial bank, the Employer performs a variety of functions as agent for the Reserve Bank of India or the Central Government." On the basis of "strong similarities in ownership, management, and function" between the Employer herein and that in AGIP, USA, Inc., he was "convinced that the factors relied on by the Board in reaching its conclusion in AGIP are equally applica- ble to the present case, and that it would be inappropriate to assert jurisdiction herein." There- fore, he concluded that "it is appropriate to decline to assert jurisdiction over this Employer because of its close relationship to the Central Government of India." Urging reexamination of the Board's policy of declination of jurisdiction over enterprises found to be "related to a foreign government" but doing business in the United States, the Petitioner argued that in the light of the ever growing nationalization of industry abroad and the expansion of such nationalized industries to this country, whatever may have been the policy considerations behind the Board not asserting jurisdiction are clearly outweighed by the possible relegation of an important . . . segment of the American work force to a group of second class citizens. No public policy or policy of the Act supports such a disenfranchisement of a group. We have carefully examined the precedent. In the previous cases, the Board has deemed it inappropri- from an external source, would imply a diminution of its sovereignty to the extent of the restriction, and an investment of the sovereignty to the same extent in that power which could impose such restriction." The Schooner Exchange v. M'Faddon, 7 Cranch 116, 135 (1812), upholding a plea of immunity supported by an executive branch suggestion, by noting that in the circumstances involved a recognition of immunity was supported by the law and practice of nations. t4 Herbert Harvey, Inc., 171 NLRB 238 (1968), relied upon by the Employer, is not germane. Although the Board indicated that it could not assert jurisdiction over the World Bank because that international organization enjoys "the privileges and immunities from the laws of the sovereignty in which it is located customarily extended to such organiza- tions," the immunity was not merely implied. There is a specific statutory basis in the International Organization Immunities Act, 22 U.S.C. I 288, et seq., which grants a type of "sovereign immunity" to such organizations. 841 DECISIONS OF NATIONAL LABOR RELATIONS BOARD ate to assert jurisdiction affecting certain employees working in the United States for an American corporation "because that employer was a wholly owned subsidiary of . . . an agency" of a foreign government. 15 The first such case, British Rail- International, Inc., set forth no reason beyond a citation to McCulloch v. Sociedad Nacional, which we have considered at lenght above. The second, AGIP, USA, Inc., relied upon by the Regional Director, merely concluded from "the existence of a close relationship" between the Employer and "an instru- mentality" of a foreign government that the assertion of jurisdiction would be inappropriate, citing British Rail. In both cases, the Board found it unnecessary to reach the question of whether, in fact, the Board had statutory jurisdiction over the employers involved. Having done so here, we now conclude that there is no public policy or policy of the Act which, on the ground that the employer is discolsed to be an "agency" or "instrumentality" of a foreign state, justifies us to continue to decline jurisdiction in cases affecting employees in our own country whose employer engages in commercial activity which meets the Board's jurisdictional standards for such enterprises. Our conclusion that there is no valid justification for declining jurisdiction is reinforced by Congress' recent enactment of the Foreign Sovereign Immuni- ties Act of 1976.16 That act manifests a congressional intent to deny "sovereign immunity" to a "foreign state's private or commercial acts" occurring within the United States. That act, which became effective January 19, 1977, defines a "foreign state" to include "an agency or instrumentality of a foreign state," defines such terms,17 and provides that there is no l' See C. P. Clare and Company, 191 NLRB 589, 590 (1971), explicating British Rail on the sole ground of ownership by an agency of the British Goverment. Although the American corporation in British Rail was a wholly owned subsidiary, that in AGIP was 97-percent foreign government owned. The State Bank of India is presently 92-percent foreign government owned. '6 P.L. 94-583, enacted Oct. 21, 1976, 90 Stat. 2891, amending Title 28 of the United States Code to add "Chapter 97-Jurisdictional Immunities of Foreign States," and defining the jurisdiction of the United States courts in suits against foreign states, including political subdivisions of a foreign state or an agency or instrumentality thereof. 7 Sec. 1603(b) defines an "agency or instrumentality of a foreign state" as any entity- (1) which is a separate legal person, corporate or otherwise, and (2) which is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof, and (3) which is neither a citizen of a State of the United States as defined in section 1332(c) and (d) of this title, nor created under the laws of any third country. Under 28 U.S.C. § 1332(c) "a corporation shall be deemed a citizen of any State by which it has been incorporated and of the State where it has its principal place of business." 1is Sec. 1603(d) states: "A 'commercial activity' means either a regular immunity from the jurisdiction of the courts of the United States or of the States in any case in which the action is based upon a "commercial activity carried on in the United States by a foreign state." 1 8 Excepting punitive damages, the foreign state "shall be liable in the same manner and to the same extent as a private individual under like circumstances." The bill, which was drafted over many years and had involved extensive consultations within the adminis- tration, among bar associations, and in the academic community, was sponsored by the Departments of State and Justice. It was regarded as urgently needed "in a modem world where foreign state enterprises are every day participants in commercial activi- ties."1 9 While we recognize that the Foreign Sover- eign Immunities Act of 1976 affords judicial, not administrative, determinations of rights growing out of such activities, we believe that it is further support for our decision to treat foreign state enterprises coming within our jurisdiction as we would private individuals under like circumstances.20 Therefore, we find from the above, that it will better effectuate the policies of the Act for the Board to assert, rather than in our discretion decline, jurisdiction in any case involving employees em- ployed within the territorial jurisdiction of the United States by any "agency" or "instrumentality" of a foreign state, engaged in commercial activity which meets the Board's jurisdictional standards for such enterprises. Accordingly, British Rail-Interna- tional, Inc., AGIP, USA, Inc., and related cases are hereby overruled.2 1 Inasmuch as the employees involved in this proceeding are employed within the United States by the State Bank of India and such Employer is engaged in commerce within the meaning of the Act, course of commercial conduct or a particular commercial transaction or act. The commercial character of an activity shall be determined by reference to the nature of the course of conduct or particular transaction or act, rather than by reference to its purpose." 19 H. Rept. 94-1487, House Committee on the Judiciary, 94th Cong., 2d Sess., p. 7. The legislative history also recognizes that 'As a general matter, entities which meet the definition of an 'agency or instrumentality of a foreign state' could assume a variety of forms, including a state trading corporation, a mining enterprise, a transport organization such as a shipping line or airline, a steel company, a central bank, an export association, a governmentalprocurement agency or a department or ministry which acts and is suable in its own name." (Emphasis supplied.) Ibid, pp. 15-16. The emphasized examples indicate entities similar to those which have been involved in NLRB cases in this area, e.g., British Rail-nternational, Inc., the instant case, and AGIP, USA, Inc. We note, but find it unnecessary to discuss herein, the fact that both British Rail and AGIP involved American corporations. 20 Although Member PeneUlo dissented from the grant of review in this case, he joins in the Board's opinion asserting jurisdiction over the Employer. In view of the enactment of the Foreign Sovereign Immunities Act of 1976, which did not become effective until January of this year, Member Penello believes that declining jurisdiction over the Employer or discretionary grounds is no longer appropriate. 21 Chairman Fanning joins in overruling AGIP, USA, Inc., for the same reasons that led him to dissent therefrom and for such additional considerations as are expressed in this decision. 842 we find that it will effectuate the purposes of the Act to assert jurisdiction herein. The Appropriate Bargaining Unit At the hearing, the parties stipulated, and accord- ingly we find, that the following employees constitute a unit appropriate for the purposes of collective bargaining within the meaning of the Act: All full-time and regular part-time employees, including tellers, new account clerks, reception- 843 ists, Telex and Mail-room employees, bookkeep- ing employees, and typists employed at the Employer's branch office in Chicago, Illinois, but excluding all officers, managerial employees, professional employees, confidential employees, temporary employees, maintenance employees, guards and supervisors as defined in the Act. [Direction of Election and Excelsior footnote omitted from publication.] STATE BANK OF INDIA Copy with citationCopy as parenthetical citation