Top court allows lawsuits on U.N. property taxes

The U.S. Supreme Court ruled on Thursday that foreign governments can be sued in an effort to collect unpaid local property taxes on residences for their diplomats at the United Nations.

The high court, by a 7-2 vote, sided with New York City and ruled the foreign governments are not shielded from such lawsuits on sovereign immunity grounds.

The case involved the city's efforts to collect $16.4 million in unpaid property taxes and interest from India and $2.1 million from Mongolia for their missions at the United Nations.

Under New York law, foreign governments have tax exemptions for the diplomatic mission section of their properties used exclusively for diplomatic offices and for the quarters of certain diplomats.

But the city says the government must pay taxes for the space that houses lower-level employees. The two governments refused to pay the taxes and the city sued. The foreign governments sought to dismiss the lawsuits.

Justice Clarence Thomas concluded in the court's majority opinion that the two foreign governments are not immune from the lawsuits under a 1976 federal law, a decision that allows the cases to go forward.

Justices John Paul Stevens and Stephen Breyer dissented. "If Congress had intended the statute to waive sovereign immunity in tax litigation, I think it would have said so," Stevens wrote.

(Published by Reuters, June 14, 2007)