A property tax dispute between New York City and two diplomatic missions to the UN - India and Mongolia - wound up in the highest US court, spotlighting a case that could have broader international implications.
New York authorities on Tuesday approached the Supreme Court to claim $16.4 million in city property taxes from India and $2.1 million from Mongolia because both countries let staff members live in midtown Manhattan properties that are part of their missions.
The nine-member high court is being asked to rule whether US courts have jurisdiction in the case. The city, which sued India and Mongolia in 2003, believes they do and has won two federal court decisions in its favour.
The US state department argues that international treaties back a "longstanding exception" for taxes on foreign government property and has urged the Supreme Court to reject the case.
At issue are the Vienna Conventions on diplomatic relations and a US law known as the Foreign Sovereign Immunities Act (FSIA).
"Under the Vienna conventions...they are immune from tax," John Howley, a lawyer for India and Mongolia, told the court during a one-hour hearing.
He suggested the case should be settled between US and foreign governments, not by US courts, to avoid diplomatic fallout.
New York City argues that when a foreign government offers housing to less-than-top-level diplomats, it is engaging in "commercial activity" not covered by the FSIA law's diplomatic immunity.
"We believe that we have a right in the Indian and Mongolian premises," New York lawyer Michael A Cardozo told the court.
New York bases its claims on a 1958 state law that exempts from real property taxes only diplomatic offices and the residence of its top envoy, such as an ambassador.
Two lower courts supported the city's position that there is jurisdiction for this case to be heard.
"We are very hopeful that the Supreme Court will agree," Cardozo said in a statement.
It may take several months for the court to issue a ruling.