government. In S K Products Corp. the Board found that a U.S. subsidiary "wholly owned, controlled and managed by Slovenijales, an integral part of the Yugoslav Government," slip op. at 2, was engaged in commerce within the meaning of the National Labor Relations Act (Act). Accordingly, the Board asserted jurisdiction to order an election by secret ballot to ascertain if the petitioning union, the Warehouse, Mail Order, Office, Technical and Professional Employees Union, Local No. 743, affiliated with the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America, should represent a stipulated unit of employees working for S K Products Corporation (Employer) at its furniture factory in Alsip, Illinois.

In arriving at its decision, the Board, inter alia, relied upon the definition of agency or instrumentality of a foreign state contained in the Foreign Sovereign Immunities Act of 1976, rejected the Employer's argument that "ultimate control and direction of all major policy decisions by the Government of Yugoslavia or one of its instrumentalities" should exempt the Employer from the U.S. rules of collective bargaining, slip op. 2, and denied that the assertion of jurisdiction by the Board would create a potential conflict with the Charter of the United Nations or the Constitution of the Socialist Federal Republic of Yugoslavia. Portions of the decision follow:

Slovenijales is Yugoslavia's second largest producer of wood products. It is the fifth largest Yugoslav "enterprise" in the category of "catering, tourism and related materials" and accounts for approximately one-third of the revenues of the Republic of Slovenia, one of six Yugoslav republics. It is the leading Yugoslav exporter of commodities manufactured by one of the most important industries in the country. S K Products Corp. acts as Slovenijales' distribution arm in the United States. It imports, assembles, and distributes furniture components produced by Slovenijales.

Slovenijales is a United Organization of Associated Labor (UOAL) consisting of two Organizations of Associated Labor (OAL), one concerned with production and the other with trade, comprised of approximately 35 Basic Organizations of Associated Labor (BOAL) at 35 "socially owned" plants which manufacture wood products and furniture in Yugoslavia. It produced over $500 million in revenue in 1975. Because of its importance to the Yugoslav economy and polity, it participates in policy decisions affecting the wood product industry at the highest levels of government and sends delegates to the Industrial Association for Wood Products, the Federal Department of Foreign Trade, the Federal Department of Industrial Standards, and the like. Its officers are not considered to be governmental officials and the representatives to the federal bureaucracies are compensated by their individual BOAL or OAL...

BOAL Foreign Trade is responsible for establishing, monitoring, and controlling facilities outside of Yugoslavia which deal exclusively with Slovenijales wood products. The Employer is such an entity.

SK Products Corp. was created in 1968 as a step toward Slovenijales' goal of vertical integration. Prior to that year, Slovenijales had sold furniture components in the United States through a sales agent to American manufacturers who would assemble the product. SK Products Corp. holds a license from the Yugoslav Department of Trade and Commerce and is incorporated in the State of New Jersey. Established as the American arm of Slovenijales to both assemble and distribute finished goods, it is headquartered in Atlanta, Georgia, and has factories in four United States locations: Atlanta; Wallington, New Jersey; Houston, Texas; and Alsip, Illinois.

The Employer's board of directors consists of eight individuals, two of whom are U.S. citizens and the other six Yugoslav nationals. The U.S. citizens are under employment contracts which required approval by the Workers' Council. Currently the proxies for all shares are held by the Employer's president, Branko Malus, a Yugoslav national who must report to the Workers' Council of OAL Slovenijales Trade. He does this by telex, letter, or direct visit. S K Products is wholly owned by Slovenijales, which in turn is "socially owned" by the workers for the benefit of the state.

Although overall policy decisions regarding overseas operations are made by the Workers' Council of Slovenijales' BOAL Foreign Trade and the "direktur" of Slovenijales Trade, the record establishes that the Employer's president has "final domestic authority" for both the operations and the planning of the Employer's operations in the United States. Each facility of the Employer has a production manager who reports directly to a plant manager who, in turn, reports directly to the Employer's president, Malus. The dayto-day operations and personnel decisions are the full responsibility of these local plant officials. The manager has the authority to hire and fire.

Pursuant to a certificate permitting it to do business in the State of Illinois, the Employer opened its facility in Alsip, Illinois, the sole location involved in this case, sometime in August 1976, with approximately three to five assembly employees. At the time of the hearing in December 1976, there were approximately 25 nonsupervisory employees at Alsip and the Employer projected 50 production and maintenance employees at such time as the facility operated at its capacity. Both the plant manager and production manager are Yugoslav nationals. Approximately 30 percent of the Employer's nonsupervisory employees nationally are Yugoslav nationals, with the remaining 70 percent presumed to be United States citizens. However, the record is silent with respect to the nationalities of the nonsupervisory work force at Alsip.

Counsel for the Employer classified it as "an assembler and wholesaler of furniture" dealing with unidentified American retail concerns. The parties agreed upon a stipulation that the Employer "sells and distributes furniture in excess of $50,000 plus they have products valued at $50,000 coming from points outside of the State of

Illinois and across State lines." Thus, the parties stipulated that the Employer's commercial activities within Illinois meet the Board's nonretail jurisdictional standards. . .

The Employer argues ... that Congress' recent enactment of the Foreign Sovereign Immunities Act of 1976 (Public Law 94-583), 90 Stat. 2891,... is limited to granting Federal and State courts jurisdiction over foreign states or their instrumentalities in connection with "a commercial activity carried on in the United States by [a] foreign state," and does not purport to extend or expand the authority of administrative agencies. We agree that that act did not require the Board to modify its established policy to refrain from taking jurisdiction over domestic firms wholly owned or closely related to foreign governments or their instrumentalities. However, it did reinforce our decision to do so, prompted by our similar recognition that we administer an Act applicable to all workingmen of our own country "in a modern world where foreign state enterprises are every day participants in commercial activities" within this country.

Insofar as Congress was concerned, the mere fact that the Employer is an American corporation suffices to defeat any possible contention that it is entitled to foreign sovereign immunity. The fact that the Employer is an American corporation licensed to do business in several States of the United States makes this case an even stronger one for the assertion of jurisdiction than the State Bank of India which involved a foreign corporation. The rationale behind distinguishing between American and foreign corporations is simple: "if a foreign state acquires or establishes a company or other legal entity in a foreign country, such entity is presumptively engaging in activities that are either commercial or private in nature." Such presumption negates any possible claim that a foreign government exercises its sovereignty as such when it becomes a stockholder in a business corporation in another country. On the contrary, as an incorporator it has consented to the corporation being treated, under our laws, as a citizen of the State of incorporation, invested with such rights, privileges, immunities, and duties as other corporate citizens and entitled to "equal protection under the law." Such status is a reason for, not against, our asserting jurisdiction and treating such corporations as we would any other American corporation whose corporate veil had not been pierced to reveal some foreign government connection.

Finally, the Employer contends that "it would be extremely prejudicial for the Board to reconsider and reverse its established abstention policy without affording the Employer a full opportunity to litigate" and "to adduce proof on" the "international political consequences" of such a decision. We find no warrant for a remand here. There is no question that the Employer is engaged in commercial activity within a State within the definition of commerce in the National Labor Relations Act, as amended. There is no question that labor-management relations within a country's territorial sover

eignty are generally regarded to be matters of "internal management and [internal] affairs." We are bound to ensure the enforcement of the Federal statute we administer and to afford employees in this country the freedom and rights and duties specified by that statute. By asserting jurisdiction herein, we are exercising national sovereignty in accord with generally accepted rules of international law. We see no possible conflict, under the Charter of the United Nations or the Constitution of the Socialist Federal Republic of Yugoslavia, with the Yugoslav Government.

At the hearing, the parties stipulated, and accordingly we find, that the following employees constitute a unit appropriate for the purposes of collective bargaining within the meaning of section 9 (b) of the Act:

All full-time and regular part-time production, maintenance, and warehouse employees employed at the Employer's factory in Alsip, Illinois, but excluding all office clerical employees, professional employees, truckdrivers, guards and supervisors as defined in the Act.

230 N.L.R.B. No. 186, slip op. 3-11. Footnotes omitted. To support the assertion that the "mere fact that the Employer is an American corporation suffices to defeat any possible contention that it is entitled to foreign sovereign immunity,” the Board quoted in footnote 12 from the Foreign Sovereign Immunities Act of 1976 as follows:

... Sec. 1603(b) of the Foreign Sovereign Immunities Act of 1976 defines as "agency or instrumentality of a foreign state" as an "entity" "(3) which is neither a citizen of a State of the United States as defined in section 1332 (c) and (2) 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."

The Board relied upon the legislative history of the Foreign Sovereign Immunities Act of 1976, which was cited in footnote 13, for its quotation concerning the rationale for distinguishing between American and foreign corporations:

H. Rept. 94-1487, House Committee on the Judiciary, 94th Cong., 2d sess. 15 (1976). The legislative history gives as an example a "corporation organized and incoroporated under the laws of the State of New York but owned by a foreign state. (See Amtorg Trading Corp. v. United States, 71 F.2d 524 (C.C.P.A. 1934)." At the time of Amtorg the United States Government had not recognized the Union of Soviet Socialist Republics of Russia which owned the stock of the New York corporation involved. Since the corporation was a citizen of New York, the court was not concerned with the identity of the ownership of the stock nor where stockholders resided.

$4

Foreign Agents

Foreign Agents Registration Act

In a note bearing a 1977 date, an embassy in Washington objected to a notice by the Department of Justice of the latter's intention to in

spect their tourism office in New York pursuant to provisions of the Foreign Agents Registration Act. The note read in part as follows:

1. The... Tourism Office in New York should be considered as an agency of this Embassy, inasmuch as its head has consular status. Consequently, this Embassy does not consider it acceptable that the aforesaid Tourism Office should be inspected by the Department of Justice.

2. The... Tourism Office in New York complies strictly with its obligation to transmit information every six months to the Department of Justice.

3. Unlike tourism offices of other countries which have been inspected, the aforesaid Tourism Office of New York does not engage in any commercial activity.

4. If the Department of Justice considers it appropriate, this Embassy is willing to furnish any clarification concerning the operating procedures and noncommercial nature of the... Tourism Office in New York.

At a later date the embassy supplemented its objection with another note which read in part as follows:

1. The Tourism Offices [of our embassy] in the United States are of purely governmental character and their activities should be considered among the functions of a diplomatic mission or consular post, in accordance with the provisions of the Vienna Diplomatic and Consular Conventions. .

2. [Our] Government has ordered. . . all... Tourism Offices in the United States, which, on account of their purely governmental character, enjoy in any case immunity from jurisdiction and execution in accordance with existing international law, be made part of [our] diplomatic mission inasmuch as it is considered that in this way the friendly relations between [our Government] and the United States will be fostered more appropriately and knowledge between the two peoples will be facilitated.

At a later date in 1977, the Department of State informed the embassy in a note that the Department of Justice had reaffirmed the necessity of an inspection by giving the following advice concerning this matter:

*

1. The . . . Tourism Office in New York has been properly registered in the United States as an agent of a foreign principal, the Government of . . ., in accordance with the United States Foreign Agents Registration Act, 22 U.S.C. Sec. 611 et seq. Since the head of the Tourism Office is registered with the United States Government as an employee of the Government of . . . and is not accredited to the U.S. Government, he does not enjoy consular status.