FSM SUPREME COURT TRIAL DIVISION

Tropic Helicopters, et al. v. Pohnpei, et al., 15 FSM Intrm. 330 (Pon. 2007)

HELICOPTER AERIAL SURVEY, PTY., LTD., dba

TROPIC HELICOPTERS and BARRY JONES,

Plaintiffs,

vs.

STATE OF POHNPEI; MARCELO PETERSON, in his

official capacity as Chairman of the Pohnpei State

Foreign Investment Board; NELSON ARNOLD,

AKILINA SORAM, ALBERT FALCAM, and RONALD

ETSCHEIT, in their official capacities as members of

the Pohnpei State Foreign Investment Board; EDWEL

SANTOS, in his official capacity as Attorney General

for the Pohnpei State Government; and PAULINO

LAMBERT, in his official capacity as Chief of the

Division of Personnel, Labor, and Manpower of the

Pohnpei State Government,

Defendants.

CIVIL ACTION NO. 2006-030

ORDER GRANTING AND DENYING SUMMARY JUDGMENT MOTIONS; MEMORANDUM

Andon L. Amaraich

Chief Justice

Decided: October 3, 2007

APPEARANCES:

For the Plaintiffs:  Fredrick L. Ramp, Esq.

                               P.O. Box 1480

                               Kolonia, Pohnpei   FM   96941

For the Defendants:  L.M. Bacalando, Jr.

                                    Pohnpei Department of Justice

                                    P.O. Box 1555

                                    Kolonia, Pohnpei   FM   96941

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HEADNOTES

Civil Procedure ) Summary Judgment

       When the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law, when the moving papers present a single issue ) whether the plaintiff, which has obtained a national foreign investment permit, is also required to obtain a state foreign investment permit ) and when the parties agree that the facts are not in dispute, and that the case may be decided on summary judgment, summary judgment is appropriate. Helicopter Aerial Survey Pty., Ltd. v. Pohnpei, 15 FSM Intrm. 329, 332 (Pon. 2007).

Banks and Banking; Foreign Investment Laws; Insurance

        The Foreign Investment Act of 1997 establishes a system of Categories of economic sectors for the purposes of implementing the FSM policy to welcome foreign investment in all sectors of the FSM economy. Three of these categories are made up of economic sectors that are of special national significance and therefore fall within the national governmentís jurisdiction in respect of foreign investment regulation. The first is the National Red List. No foreign investment is permitted in the activities specified on this list, which includes the minting of money and arms manufacture. The second is the National Amber List. Banking (other than as defined in Title 29 of the FSM Code) and insurance are included on this list. Certain criteria specified in the FSM Foreign Investment Regulations must be met before investment is permitted in these areas. A third category of activities that fall within the jurisdiction of the national government appear on the National Green List. Helicopter Aerial Survey Pty., Ltd. v. Pohnpei, 15 FSM Intrm. 329, 333-34 (Pon. 2007).

Foreign Investment Laws

       Foreign investment Category C (National Green List) comprises the set of economic sectors that are subject to national government regulation but as to which no special criteria need to be met before a foreign investment permit is to be issued. It includes banking, as defined in title 29 of the FSM Code; telecommunications; fishing in the FSMís Exclusive Economic Zone; international and interstate air transport; international shipping; and such other economic sectors as the Secretary may, after consultation with States, designate in the FSM Foreign Investment Regulations as being on the National Green List. Helicopter Aerial Survey Pty., Ltd. v. Pohnpei, 15 FSM Intrm. 329, 334 (Pon. 2007).

Foreign Investment Laws

       In contrast to the three areas subject to national regulation, economic sectors that are not of special national significance are delegated to the jurisdiction of the state governments in respect of foreign investment regulation, which are to be established separately by each state, except that an economic sector included in any of the categories for national regulation cannot appear in any of the categories for state regulation. Helicopter Aerial Survey Pty., Ltd. v. Pohnpei, 15 FSM Intrm. 329, 334 (Pon. 2007).

Aviation; Foreign Investment Laws; Marine Resources

       Fishing and international air transport are areas of foreign investment regulation that are subject to exclusive regulation by the national government. Helicopter Aerial Survey Pty., Ltd. v. Pohnpei, 15 FSM Intrm. 329, 334 (Pon. 2007).

Aviation; Foreign Investment Laws; Marine Resources

       The Marine Resources Act of 2002 amended the prior fisheries law for the purpose of ensuring the sustainable development, conservation and use of the marine resources in the exclusive economic zone by promoting development of, and investment in, fishing and related activities. Included in the definition of "fishing" under the Act is the actual or attempted searching for fish; the placing of any fish

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aggregating device or associated electronic equipment such as radio beacons; and the use of an aircraft in relation to any activity described in this subsection. "Fishing gear" is equipment or other thing that can be used in the act of fishing, including any aircraft or helicopter. Helicopters, which are used to search for fish and to place radio devices near schools of fish to assist fishing boats in locating fish, fall within the express definition of fishing equipment. Therefore, since fishing in the FSMís EEZ is subject to the exclusive national government jurisdiction and regulation, and since a companyís helicopters, based on fishing vessels and piloted by the companyís employees, are used to search for fish within the FSMís EEZ, those helicopters are engaged in fishing for purposes of the statutory definition and thus the helicopters, which the company charters to the purse seine operators, and their pilots are subject to the national governmentís exclusive regulation, Helicopter Aerial Survey Pty., Ltd. v. Pohnpei, 15 FSM Intrm. 329, 334-35 (Pon. 2007).

Agency

       A principal is bound by the acts of the agent that the agent performs with the principalís actual or apparent authority. Helicopter Aerial Survey Pty., Ltd. v. Pohnpei, 15 FSM Intrm. 329, 335 (Pon. 2007).

Foreign Investment Laws

      Since helicopter pilots engaged in fishing are thus subject to the national governmentís exclusive jurisdiction for foreign investment purposes, it follows that the company which is the pilotsí principal, is bound by that conduct. Thus, that companyís fishing activities in the FSMís EEZ are also subject to the FSMís exclusive regulation. Helicopter Aerial Survey Pty., Ltd. v. Pohnpei, 15 FSM Intrm. 329, 335 (Pon. 2007).

Federalism ) National/State Power; Foreign Investment Laws; Marine Resources

      Since engaging in business is defined as carrying out any activity relating to the conduct of a business and expressly includes leasing property of any kind for commercial purposes, when a foreign investment permittee engaged in the business of providing operational and maintenance support to helicopters servicing fishing vessels in the FSM, its leasing helicopters is one aspect of its business that relates to its fishing activity and is therefore that leasing activity is subject to the FSMís exclusive jurisdiction and regulation for foreign investment purposes. Thus Pohnpei may not require it to apply for a foreign investment permit. Helicopter Aerial Survey Pty., Ltd. v. Pohnpei, 15 FSM Intrm. 329, 335 (Pon. 2007).

Marine Resources

       The fishing permit requirement attaches to vessels, not helicopters. "Vessel" is defined as any water-going craft, and does not include helicopters. Thus the fact that a helicopter company does not have a fishing permit is not dispositive with regard to whether its helicopters engage in "fishing" as that term is defined by 24 F.S.M.C. 102(32). Helicopter Aerial Survey Pty., Ltd. v. Pohnpei, 15 FSM Intrm. 329, 335 (Pon. 2007).

Federalism ) National/State Power; Foreign Investment Laws

       Since, by statute, an economic sector included in any of the Categories for National Regulation must not appear in any of the Categories for State Regulation, the statutory provision contemplates that state and national regulation will be mutually exclusive, and works hand in glove with the stated purpose of the Foreign Investment Act, which is to encourage foreign investment. Helicopter Aerial Survey Pty., Ltd. v. Pohnpei, 15 FSM Intrm. 329, 335-36 (Pon. 2007).

Foreign Investment Laws

      When a company has obtained a national foreign investment permit in an area in which the FSMís jurisdiction is exclusive and the company has complied with national laws and regulations in this regard,

[15 FSM Intrm 332]

Pohnpei may not require it to obtain a state foreign investment permit in addition to the FSM permit that it already has. Helicopter Aerial Survey Pty., Ltd. v. Pohnpei, 15 FSM Intrm. 329, 336 (Pon. 2007).

Civil Procedure ) Summary Judgment; Foreign Investment Laws

       When the court has granted summary judgment on the basis that the plaintiffís helicopters are engaged in fishing, the court need not address the plaintiffís further contention that it is also subject to exclusive national regulation by virtue of the fact that its helicopters are engaged in interstate and international air transport and international shipping. Helicopter Aerial Survey Pty., Ltd. v. Pohnpei, 15 FSM Intrm. 329, 336 (Pon. 2007).

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COURTíS OPINION

ANDON L. AMARAICH, Chief Justice:

      On February 23, 2007, the plaintiffs (collectively "Tropic") filed their motion for summary judgment. On March 16, 2007, the defendants (collectively "Pohnpei") filed their response and counter motion for summary judgment. On March 27, 2007, the Tropic filed its reply, and also its response to Pohnpeiís counter motion for summary judgment. For the reasons that follows, Tropicís motion is granted, and Pohnpeiís is denied.

       Summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FSM Civ. R. 56.

      The moving papers present a single issue. Tropic operates a business in Pohnpei that provides operational and maintenance support to helicopters servicing purse seine operators, who use the helicopters at sea to locate tuna. Tropic, which has obtained a national foreign investment permit, contends that its business is subject to the exclusive regulation of the FSM national government. Pohnpei contends that it may also require Tropic to obtain a state foreign investment permit. The parties agree that the facts are not in dispute, and that the case may be decided on summary judgment.

I.  Undisputed facts

       Helicopter Aerial Survey Pty., Ltd., known by its trading name Tropic Helicopters, is a corporation organized under the laws of New South Wales, Australia. It holds an FSM foreign investment permit, and is licensed to do business in the FSM. It charters helicopters to the owners and operators of purse seine vessels who fish in the waters of the FSMís exclusive economic zone. In accordance with its foreign investment permit, Tropic provides operational and maintenance support to its helicopters that service fishing vessels in the FSM. It does not engage in aerial surveying in the FSM, as its full name might suggest. Tropic provides the pilots for the helicopters, and the pilots are employees of Tropic.

      Tropic issues a comprehensive operations manual that covers every aspect of the operation of its helicopters. The manual requires that the operation of the helicopters be in accordance with the manual. The helicopter is part of the vesselís fishing equipment, and is under the vesselís control. The pilot operates the vessel under the control of the fish captain. The helicopter pilot is the final authority with regard to whether a helicopter may be flown. The vessel owners rely upon the helicopter pilotís judgment to contribute the maximum to the fishing operation. The pilots are required to have excellent, unaided eyesight, and the pilots themselves are a key factor in the long range spotting of schools of fish. Although the vessel captain may ground the helicopter if he determines that it is not safe to fly, the

[15 FSM Intrm 333]

vessel captain may not force the helicopter to be flown if the pilot determines it is not airworthy. The pilot commands the helicopter with regard to all questions of operational authority.

       Tropicís Pohnpei facility provides maintenance and parts support for the helicopters, including hardware and consumables. The engineers who perform maintenance for Tropic are Tropicís employees. The Pohnpei facility is also a distribution center for other ports in the region. Maintenance is performed on the helicopters at Tropicís hangar facility in Nett, Pohnpei.

      The helicopters are located on the purse seine vessels, which are engaged in fishing in the FSMís Exclusive Economic Zone ("EEZ"). The helicopters take off from the purse seiners, and conduct an aerial search for fish. If fish are located, the helicopter then drops radio buoys from the helicopters to assist the fishing boats to locate the fish. The contracts between Tropic and the vessel operators specifically limit the use of the vessels to fish spotting and search and rescue. Flights for maintenance testing are included as part of normal use.

      Most purse seine fishing vessels use helicopters to search for fish. The usual arrangement is for the entity engaged in fishing to lease the helicopters from a concern that specializes in the business of providing helicopters, such as Tropic. One of the reasons that Tropic did not apply for a state foreign investment permit was the risk that the application would be denied, thus terminating its business operations in the FSM. A second reason was the risk of the imposition of conflicting requirements by the state and national governments. Tropic has been advised by national foreign investment officials, including Akillino Susaia, Secretary of the Department of Economic Affairs, and Valerio Hallens, Registrar of Corporations, that Tropic falls within the exclusive jurisdiction of the national government for foreign investment permit purposes.

      On September 4, 2006, the Pohnpei State Foreign Investment Board issued a cease and desist order to Tropic until such time as it had obtained a foreign investment permit. Pohnpeiís requirement that Tropic obtain a foreign investment permit has also created personnel difficulties for Tropic. Tropic needs work and immigration permits for technical people involved in the operation and maintenance of its helicopters. The process for obtaining those permits begins with the Pohnpei Department of Finance, where the applications must be originally submitted and approved before forwarding it to the Division of Immigration and Labor of the national government for further processing. The Pohnpei Department of Finance declined to act on an application submitted by Tropic because of its requirement that Tropic first obtain a state foreign investment permit.

II.  Discussion

      Tropic argues that the FSM national governmentís jurisdiction over fishing in the FSMís EEZ, and over international and interstate air transportation and international shipping, is exclusive. Tropic asserts that since Tropic engages in both fishing activities and international air transport, it is subject to only the national governmentís exclusive regulation. It contends that only the national government may issue Tropic a foreign investment permit, and that the Pohnpei may not require Tropic to obtain a state foreign investment permit. In its response and cross motion, Pohnpei contends that Tropicís business is leasing helicopters, and that as such Tropic is subject to regulation by Pohnpei. Pohnpei urges that once a helicopter is leased to a vessel operator, the helicopter is under the control of the vesselís fishing master, and that Tropic does not engage directly in fishing.

      The Foreign Investment Act of 1997, codified at chapter 2 of Title 32 of the FSM Code, establishes "a system of Categories of economic sectors . . . for the purposes of implementing the policy of the FSM to welcome foreign investment in all sectors of the FSM economy." 32 F.S.M.C. 205. Three of these categories are made up of "economic sectors that are of special national significance and

[15 FSM Intrm 334]

therefore fall within the jurisdiction of the National Government in respect of foreign investment regulation." Id. ß 205(1). The first is the National Red List. Id. ß 205(1)(a). No foreign investment is permitted in the activities specified on this list, which includes the minting of money and arms manufacture. Id. ß 205(1)(a)(i), (ii). The second is the National Amber List. Id. ß 205(1)(b). Banking (other than as defined in Title 29 of the FSM Code) and insurance are included on this list. Id. ß 205(1)(b)(i),(ii). Certain criteria specified in the FSM Foreign Investment Regulations must be met before investment is permitted in these areas. Id. ß 205(1)(b).

      At issue here is the third category of activities that fall within the jurisdiction of the national government, and appear on the National Green List as specified in subsection 205(1)(c), which provides as follows:

(c)  Category C (national [sic] Green List) __ the set of economic sectors that are subject to National Government regulation but as to which no special criteria need to be met before a Foreign Investment Permit is to be issued. Economic sectors on the National Green List include the following:

(i)  banking, as defined in title 29 of the FSM Code;

(ii)  telecommunications;

(iii)  fishing in the FSMís Exclusive Economic Zone;

(iv)  international and interstate air transport;

(v)  international shipping; and

(vi)  such other economic sectors as the Secretary may, after consultation with States pursuant to section 206(2) of this chapter, designate in the FSM Foreign Investment Regulations as being on the National Green List.

(emphasis added).

      In contrast to the three areas subject to national regulation specified in subsections 205(1)(a), (b), and (c), subsection 205(2) addresses the subject of state regulation of foreign investment. It states that "economic sectors that are not of special national significance . . . are delegated to the jurisdiction of the State Governments in respect of foreign investment regulation." Id. The categories for state regulation are to be established separately by each state, with the proviso that "an economic sector included in any of the Categories for National Regulation pursuant to subsection (1) above shall not appear in any of the Categories for State Regulation." Id. (emphasis added). Thus, the areas of foreign investment regulation that concern Tropic here, which are fishing and international air transport, are subject to exclusive regulation by the national government.

      The Marine Resources Act of 2002 amended the prior fisheries law for the purpose of "ensur[ing] the sustainable development, conservation and use of the marine resources in the exclusive economic zone by promoting development of, and investment in, fishing and related activities." 24 F.S.M.C. 101(1). Included in the definition of "fishing" under the Act is the "the actual or attempted searching for . . . fish;" the "placing . . . of any fish aggregating device or associated electronic equipment such as radio beacons;" and "the use of an aircraft in relation to any activity described in this subsection." Id. ß 102(32)(a), (c), (e). Further, "fishing gear" is defined as "equipment . . . or other thing that can be used in the act of fishing, including any . . . aircraft or helicopter." Id. ß 102(33). Tropicís

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helicopters, which fall within the express definition of "fishing equipment," are used to search for fish and to place radio devices near schools of fish to assist fishing boats in locating fish.

      That fishing in the FSMís EEZ is subject to the exclusive jurisdiction and regulation by the national government is beyond dispute. Nor is it disputed that Tropicís helicopters, based on fishing vessels and piloted by Tropicís employees, are used to search for fish within the FSMís EEZ. Since searching for fish is expressly defined as "fishing" under 24 F.S.M.C. 102(32)(a), it is likewise beyond dispute that Tropicís helicopters are engaged in fishing for purposes of the statutory definition. Thus the helicopters, which Tropic charters to the purse seine operators, and their pilots are subject to the national governmentís exclusive regulation. The pilots, as employees of Tropic, are Tropicís agents, and Tropic is the pilotsí principal. A principal is bound by the acts of the agent that the agent performs with the principalís actual or apparent authority. Phillip v. Marianas Ins. Co., 12 FSM Intrm. 464, 469 (Pon. 2004). Tropicís pilots act with Tropicís actual authority when they fly the helicopters to search for fish, since that is the purpose for which Tropic hires the pilots. Just as the pilots are engaged in fishing and are thus subject to the exclusive jurisdiction of the national government for foreign investment purposes, it follows that Tropic, which is the pilotsí principal, is bound by that conduct. Thus Tropicís fishing activities in the FSMís EEZ are also subject to the FSMís exclusive regulation.

       Further, the Foreign Investment Act of 1997 governs the issuance of national foreign investment permits to "foreign investors," which is defined as "a noncitizen who is engaging in business in the FSM." 32 F.S.M.C. 203(7). "Engaging in business" is defined as "carrying out any activity relating to the conduct of a business," Id. ß 203(4) (emphasis added), and expressly includes "leasing . . . property of any kind for commercial purposes." Id. ß 203(4)(a)(i). Tropicís FSM foreign investment permit "authorizes the permittee to engage in the business of providing operational and maintenance support to helicopters servicing fishing vessels in the FSM any operaional [sic] role provided for in the Companyís approved Operations Manual." Pohnpei contends that it may require Tropic to apply for a Pohnpei foreign investment because Tropic is engaged in the business of leasing helicopters. However, leasing helicopters is related to Tropicís ongoing function of providing operational and maintenance support for the helicopters that it charters to the operators of fishing vessels. The leasing of the helicopters, as recognized by subsection 203(4)(a)(i), is one aspect of Tropicís business that "relat[es] to" its fishing activity, and the leasing activity is subject to the exclusive jurisdiction and regulation of the FSM for foreign investment purposes. Thus Pohnpei may not require Tropic to apply for a foreign investment permit.

       Pohnpei contends that Tropic is not engaged in fishing because it does not have a fishing permit. However, the fishing permit requirement attaches to vessels, not helicopters. "No foreign fishing vessel shall be issued a permit to fish in the exclusive economic zone unless an applicable access agreement is in force." 24 F.S.M.C. 105(1). "Vessel" is defined as "any boat, ship, canoe or other water-going craft," Id. ß 102(66), and does not include helicopters. Thus the fact that Tropic does not have a fishing permit is not dispositive with regard to whether its helicopters engage in "fishing" as that term is defined by 24 F.S.M.C. 102(32).

      Section 202 of Title 32 of the FSM Code provides that "[t]he purpose of this chapter is to encourage foreign investment within the territory of the FSM in a manner that serves the economic, social, and cultural interests of its citizens. This purpose shall be borne in mind in the implementation and interpretation of this chapter." (emphasis added). Tropic has encountered obstacles to its business as a result of Pohnpeiís requirement that it obtain a state foreign investment permit. Pohnpei issued Tropic a cease and desist order, and also has not processed work permit applications submitted by Tropic. As noted supra, "[a]n economic sector included in any of the Categories for National Regulation shall not appear in any of the Categories for State Regulation." 32 F.S.M.C. 205(2) (emphasis added). This provision contemplates that state and national regulation will be mutually exclusive, and works hand

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in glove with the stated purpose of the Foreign Investment Act, which is to encourage foreign investment. Regulation by the national government in this case combined with attempted regulation by the state government has served to discourage, not encourage, the foreign investment in the FSM represented by Tropicís business. Tropic has obtained a national foreign investment permit and has complied with national laws and regulations in this regard. Since the FSMís jurisdiction in this area is exclusive, Pohnpei may not require Tropic to obtain a state foreign investment permit in addition to the FSM permit that it already has.

      The court has granted Tropicís summary judgment on the basis that its helicopters are engaged in fishing. It need not address Tropicís further contention that it is also subject to exclusive national regulation by virtue of the fact that its helicopters are engaged in interstate and international air transport and international shipping under 32 F.S.M.C. 207(1)(c)(iv) and (v). It bears noting, however, that in ruling on a motion for summary judgment, the court is limited to the evidence that it may consider under Rule 56(c). The affidavit of Barry Jones, Tropicís managing director, attached to Tropicís motion for summary judgment, recites that Tropic provides operational and maintenance support "to its own helicopters servicing fishing vessels in the FSM." Jones Aff. ∂ 4. This statement does not support Tropicís claim that it is engaged in international shipping or international air transport, since it references only the FSM. Nor does it necessarily support Tropicís contention that it is involved in interstate air transport, since it is not apparent whether the helicopters fly from one state to another, as opposed to being transported from one state to another aboard the fishing vessels to which they are assigned. Thus even if the court were to consider this question, there is insufficient evidence before the court to permit the determination whether Tropic engages in interstate and international air transport, and international shipping.

III.  Conclusion

       Based on the foregoing, no genuine issue of material fact exists, and Tropic is entitled to judgment as a matter of law. Tropicís business is subject to the exclusive regulation of the national government. Tropicís motion for summary judgment is granted, and Pohnpeiís cross motion for summary judgment is denied. Judgment in Tropicís favor granting the declaratory and injunctive relief sought in the complaint issues herewith.

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