June 29, 2007
In a 7-2 decision that allows U.S. Courts to decide New York City's property tax disputes with foreign governments that is well over $100 million, it cleared the way for New York City to press claims against India, Mongolia and possibly other nations.
The city is targeting countries for property tax, that house their U.N. mission or Consulate employees in the same buildings where they operate diplomatic offices. The city says they must pay house taxes for the space that houses employees.
New York city sued India and Mongolia in 2003 claiming 16.4 million dollars in city property taxes from India and 2.1 million dollars from Mongolia for letting staff members stay in midtown Manhattan properties that are part of their diplomatic missions. Since then, the interest on the disputed amount has grown to 18 percent a year, raising the property tax rates for India and spiraling the amount to $37 million and for Mongolia $4.1 million.
Both countries put forth the argument that a 1976 US law provides for house tax exemptions to foreign governments for the diplomatic mission section of their New York properties. New York City snubbed this claim saying that when a foreign government offers accommodation to less-than-top-level diplomats, it is engaging in "commercial activity" not covered by the US law's diplomatic immunity.
Justice Clarence Thomas made a written statement that Federal law "does not immunize a foreign sovereign" in such cases as they fell under an exception to the U.S. Foreign Sovereign Immunities Act, sending out the message loud and clear that Diplomats are not above the law.
The Philippines is also embroiled in a court battle with the city, which is seeking $17.7 million from it. Turkey settled the city's claims against it for more than $5 million in 2003.
However, the Bush administration has apparently backed India and Mongolia and informing that the city's lawsuits have invited retaliation by foreign countries against U.S. property overseas.
The ruling by Justice Clarence Thomas that ``The city's lawsuits here directly implicate rights in property" upheld a Federal Appeals Court decision.