2003
International Law Update, Volume 9, Number 12 (December)
Legal Analyses published by Mike Meier,
Attorney at Law. Copyright 2017 Mike Meier. www.internationallawinfo.com.
ARBITRATION
In
international contract arbitration matter, Third Circuit rules that U.S.
defendant’s unheeded jurisdictional objections to Chinese arbitration
proceedings based on claim that someone had forged contracts with arbitration
clauses showed that district court had failed to carry out its independent duty
to make factual findings on defendant’s jurisdictional claims
Chi
Mei (defendant) is a New Jersey corporation and China Minmetals Materials
Import and Export Co., Ltd. (Minmetals) (plaintiff) is a corporation formed
under the laws of the People’s Republic of China (PRC). Also involved in this
litigation is Production Goods and Materials Trading Corp. of Shantou S.E.Z.
(Shantou), a PRC corporation.
All
three parties played some role in this much disputed business transaction. In
Chi Mei’s view, it at no time agreed to sell anything to Minmetals, claiming
that the “contracts” relied on by the latter were forgeries. The arrangement
merely involved an oral agreement with Shantou to discount a certain amount of
U.S. dollars for which Chi Mei would get a .7% commission. Minmetals was to
obtain the funds by way of a letter of credit secured from the Bank of China.
In
opposition, Minmetals asserted that it had issued millions in letters of credit
to Chi Mei as the price of some electrolytic nickel cathode alloy. Chi Mei had
then submitted phony documents to a New York bank so that it could get hold of
the money. Ultimately, the defendant had failed to deliver the goods it had
agreed to sell.
At
the core of this case are two documents Chi Mei had supposedly sent to a PRC
bank which purported to be contracts for the sale of the alloy to Minmetals for
an amount equivalent to the sums specified in the letters of credit (the “Sale
of Goods” contracts). Defendant claimed that the two contracts were wholly
deceitful, bearing a forged signature of a nonexistent Chi Mei employee as well
as a phony corporate stamp. Chi Mei further avers that it had never even heard
of these alleged “contracts” until they turned up at the contested arbitration.
Defendant
also contended that it had carried out its duties under the currency
discounting arrangement and had forwarded the funds to Shantou after collecting
its .7% commission. Declining to send any of them along to Minmetals, Shantou
illegally held onto the funds.
In
November 1997, Minmetals filed an arbitration proceeding against Chi Mei before
the China International Economic and Trade Arbitration Commission (CIETAC)
pursuant to the arbitration clauses contained in the questioned Sale-of-Goods
contracts. Defendant appeared and repeatedly challenged CIETAC’s jurisdiction
as resting on forged arbitration clauses.
The
arbitrators ultimately found that Chi Mei had failed to prove the forgeries.
Moreover, it held, even if someone had forged defendant’s signature and stamp,
its own behavior (such as sending documents to the New York bank and drawing on
the letters of credit) confirmed the validity of the arbitration clauses. In
August 2000, the CIETAC panel awarded Minmetals more than $4 million.
In
July 2001, plaintiff petitioned the New Jersey federal court to uphold and
enforce the arbitration award. Defendant resisted. In a cross‑motion to deny
relief to Minmetals, Chi Mei introduced many documents and affidavits, among
them the affidavit of its CEO, Jiaxiang Luo. Minmetals put in the alleged
agreements but filed no opposing affidavits. Instead of holding an evidentiary
hearing, the district court merely heard oral argument on the motions. In June
2002, the court confirmed and enforced the award, denying Chi Mei’s cross‑motion.
Without ever filing an explanatory opinion, the district court entered judgment
in favor of Minmetals two months later for $4,040,850.41.
Defendant
duly noted an appeal. The U.S. Court of Appeals for the Third Circuit vacates
and remands for further proceedings consistent with this opinion.
Chi
Mei contended that the Court of Appeals should read the 1958 Convention on the
Recognition and Enforcement of Foreign Arbitral Awards (the Convention) [21
U.S.T. 2517; T.I.A.S. 6997; 330 U.N.T.S. 3] as a whole. One major part of the
Convention deals with motions to preclude arbitration and the other with
judicial review of past arbitration rulings. In its view, Convention Article V
both expressly and impliedly embodies Article II’s requirement for a valid
written agreement.
In
contrast, plaintiff suggested that the panel’s decision as to the validity of
the arbitration agreement is conclusive unless an Article V exception applies,
which, it argued, is not the case here. For its part, defendant consistently
maintained that the district court had an independent duty to determine the
validity of the agreement. The Court of Appeals agrees with defendant.
Since
chapter 1 of the domestic Federal Arbitration Act (FAA), applies to
international actions brought under the Convention (see FAA, chapter 2) to the
extent they are not in conflict, 9 U.S.C. Section 208, Chi Mei relies heavily
on the Supreme Court’s decision in First Options of Chicago, Inc. v. Kaplan,
514 U.S. 938 (1995). Although First Options involved the domestic FAA, not the
Convention, it was dealing with closely analogous facts.
“In
First Options, as here, the district court had confirmed an arbitration award
where the parties against whom the award was enforced had contended both in the
arbitration proceedings and before the district court that they had never
signed the document that bore the arbitration clause. Id. at 941. In that case,
the Supreme Court had ruled that the district court, and not the arbitration
panel, must decide the question of arbitrability – that is, the question
whether a certain dispute is subject to arbitration under the terms of a given
agreement ‑‑ unless the parties clearly and unmistakably have agreed that the
arbitrator should decide arbitrability. Id. at 943.”[281]
As
the Third Circuit sees it, “if this case had arisen under the domestic FAA,
First Options clearly would have settled in Chi Mei’s favor both the question
of the need for a valid agreement to arbitrate and the question of the district
court’s role in reviewing an arbitrator’s determination of arbitrability when
an award is sought to be enforced. We, therefore, must determine whether First
Options provides the rule of decision in a case involving enforcement of a
foreign arbitration award under the Convention.”
“Our
cases involving enforcement under the Convention largely have arisen under
Article II, with one party seeking an order compelling another party to
arbitrate a dispute. Under those cases, it is clear that, if Minmetals had
initiated proceedings in the district court to compel arbitration, the court
would have been obligated to consider Chi Mei’s allegations that the
arbitration clause was void because the underlying contract was forged.
[Cite.]”
“It
is, of course, true that the FAA, of which the Convention is a part,
establishes a strong federal policy in favor of arbitration and that the
presumption in favor of arbitration carries ‘special force’ when international
commerce is involved. [Cites.] Nonetheless, we have stated that the ‘liberal
federal policy favoring arbitration agreements ... is at bottom a policy
guaranteeing the enforcement of private contractual arrangements,’ [Cite.] and
that because ‘arbitration is a matter of contract, ... no arbitration may be
compelled in the absence of an agreement to arbitrate.’ [Cites.] [Id.]
“
... This narrow interpretation of the Convention is in keeping with 9 U.S.C.
Section 207 which unequivocally provides that a court in which enforcement of a
foreign arbitration award is sought ‘shall confirm the award unless it finds
one of the grounds for refusal or deferral of recognition or enforcement of the
award specified in the said Convention.’ (emphasis added). The absence of a
written agreement is not articulated specifically as a ground for refusal to
enforce an award under Article V of the Convention. In fact, the Convention
only refers to an ‘agreement in writing’ in Article II, which requires a court
of a contracting state to order arbitration when presented with an agreement in
writing to arbitrate, unless it finds that agreement to be void, inoperative,
or incapable of being performed.” [283]
“
... On the other hand, the crucial principles common to all of these decisions
... suggest that the district court here had an obligation to determine
independently the existence of an agreement to arbitrate even though an
arbitration panel in a foreign state already had rendered an award, unless
Minmetals’ argument concerning the exclusive nature of Article V or some other
principle provides a meaningful reason to distinguish the cases we have cited.”
[283-84]
After
the Court analyzes the authorities cited by plaintiff, it concludes as follows.
“Indeed, although only Article II contains an ‘agreement in writing’
requirement, Article IV requires a party seeking to enforce an award under
Article V to supply ‘[t]he original agreement referred to in article II’ along
with its application for enforcement. Furthermore, Article V expressly provides
that the party opposing enforcement may furnish ‘to the competent authority
where the recognition and enforcement is sought proof that ... the said
agreement is not valid ....’ Read as a whole, therefore, the Convention
contemplates that a court should enforce only valid agreements to arbitrate and
only awards based on those agreements.” [284]
Next
the Court inquires whether the international context of the arbitration at
issue affects First Options’ principle that the district court should determine
whether there was a valid agreement to arbitrate. “... [D]espite the
principle’s presumption in favor of allowing arbitrators to decide their own
jurisdiction, it appears that every country adhering to the competence‑competence
principle allows some form of judicial review of the arbitrator’s
jurisdictional decision where the party seeking to avoid enforcement of an
award argues that no valid arbitration agreement ever existed. Even the
traditional German model allowed for judicial review when the very making of
the competence‑competence agreement was challenged. [Cite.]” [286]
“It
therefore seems clear that international law overwhelmingly favors some form of
judicial review of an arbitral tribunal’s decision that it has jurisdiction
over a dispute. ... International norms of competence‑competence are therefore
not inconsistent with ... First Options, at least insofar as the holding is
applied in a case where, as here, the party resisting enforcement alleges that
the contract on which arbitral jurisdiction was founded is, and always has
been, void.”
“In
sum, First Options holds that a court asked to enforce an arbitration award, at
the request of a party opposing enforcement, may determine independently the
arbitrability of the dispute. Although First Options arose under the FAA, the
Court’s reasoning in the case is based on the principle that ‘arbitration is
simply a matter of contract between the parties; it is a way to resolve those
disputes ‑‑ but only those disputes ‑‑ that the parties have agreed to submit
to arbitration.’ First Options, 514 U.S. at 943. This rationale is not specific
to the FAA.” [289]
The
need for a valid agreement to arbitrate thus remains vital, in the Court’s
view. “Indeed, even international laws and rules of arbitration that
traditionally grant arbitrators more leeway to decide their own jurisdiction
have allowed a party objecting to the validity of the agreement to arbitrate to
seek judicial review of an arbitral panel’s decision that it has jurisdiction
under the alleged agreement.”
“For
these reasons, we hold that, under the rule of First Options, a party that
opposes enforcement of a foreign arbitration award under the Convention on the
grounds that the alleged agreement containing the arbitration clause on which
the arbitral panel rested its jurisdiction was void ab initio is entitled to
present evidence of such invalidity to the district court, which must make an
independent determination of the agreement’s validity and, therefore, of the
arbitrability of the dispute, at least in the absence of a waiver precluding
the defense.”[Id.]
Alternatively
to asking the Third Circuit to enter judgment in its favor, Chi Mei asks it to
send the case back to the district court for further proceedings to ascertain
the validity of the contracts. Given the obvious dispute as to the facts, the
Court agrees that a remand is called for.
Plaintiff
also maintained that, by voluntarily taking part in the arbitration
proceedings, Chi Mei had waived its jurisdictional objections. The Court,
however, is not persuaded. “The record in this case makes clear that Chi Mei’s
participation in the CIETAC proceedings largely was limited to arguing the
forgery issue. Although it appears to have presented at least one alternative
argument, it consistently objected to the arbitral panel’s jurisdiction both in
the arbitration proceedings and before the district court.”
“Furthermore,
its decision to proceed with the arbitration despite its jurisdictional
objection was likely necessary to prevent an award being entered against it in
its absence; it appears that Minmetals may not have had sufficient contacts
with New Jersey or the United States for it to have been subject to the
jurisdiction of the federal district court in New Jersey or elsewhere, so that
Chi Mei likely would not have been able to initiate suit against [Minmetals] to
enjoin the arbitration, at least not in the United States. [Cite.]” [290]
“Thus,
whether we apply federal law or New Jersey law, the result is the same: Chi Mei
did not waive its objection to CIETAC’s jurisdiction inasmuch as it
participated in the arbitration primarily to argue the forgery/jurisdiction
issue and consistently objected to CIETAC’s jurisdiction throughout the
proceedings.” [291-92]
Citation:
China Minmetals Materials Import and Export Co., Ltd. v. Chi Mei Corporation,
334 F.3d 274 (3rd Cir. 2003).
CRIMES
AGAINST HUMANITY
U.N.
International Criminal Tribunal for Rwanda (ICTR) convicts and sentences three
media personnel, holding them accountable for their role in repeatedly using
airwaves during 1994 to incite Rwandans to commit genocide
The
U.N. International Criminal Tribunal for Rwanda (ICTR) has found three
influential radio personalities guilty for their involvement in the Rwandan
genocide. The mass killings began on April 7, 1994, lasted for more than 100
days and left about 800,000 minority Tutsis and moderate Hutus dead. According
to the Amended Indictment (AI) in this case, prominent Hutus had long planned
and prepared for the genocide.
One
of the convicted persons was Ferdinand Nahimana, the founder and ideologue
behind the Radio Television Libre des Mille Collines (RTLM) (nicknamed by some
“Radio Machete”). Nahimana himself broadcast messages to incite ethnic hatred
and murders of Tutsis. The AI also alleged that he knew, or had reason to know,
that his subordinates, including reporters and announcers, were airing similar
hate messages and had done nothing to stop them.
Another
was Jean-Bosco Bayaragwiza. He was a high-ranking RTLM board member and a
founding member of the Coalition for the Defense of the Republic (CDR).
Bayaragwiza allegedly presided over several meetings to organize the murder of
Tutsis and moderate Hutus in the Mutura commune, Gisenyi prefecture. He also
took part in RTLM broadcasts that called for the murder and persecution of
Tutsis. Finally, the AI charged that Barayagwiza had supervised certain
roadblocks where Hutus had summarily slaughtered Tutsis.
The
third guilty party was Hassan Ngeze, the Chief Editor of the Hutu extremist
newspaper, Kangura. Ngeze allegedly let the Kangura newspaper be used to
publish comments and articles aimed at stirring up ethnic hatred.
The
ICTR stated that, because of the media’s power to create and destroy
fundamental human values, a great responsibility attaches to it. Like everyone,
those who control the media are responsible for the consequences of their
actions. Presiding Judge Navanethem Pillay characterized the media as having
done the equivalent of spreading gasoline throughout Rwanda little by little so
as to eventually make it easier to set the whole country on fire. The Tribunal
sentenced Nahimana and Ngeze to life (the maximum sentence the ICTR can
impose), and Bayaragwiza to 35 years imprisonment.
Citation:
U.N. International Criminal Tribunal for Rwanda, The Prosecutor v. Jean-Bosco
Bayaragwiza, Hassan Ngeze and Ferdinand Nahimana; Press Release ICTR/INFO-9-2-372.
EN; Indictment of April 14, 2000. [All documents are available on website
“www.ictr.org”; see also The Washington Post, December 4, 2003, page A20.]
CULTURAL
PROPERTY
Cambodia
and United States have entered into Memorandum Of Understanding designed to
preserve Cambodian archeological materials by restricting their importation
into U.S.
In
December 1999, the U.S. had imposed emergency import restrictions on Cambodian
stone sculpture and architectural elements unless accompanied by an export
permit from the Kingdom of Cambodia. On September 19, 2003, in the Cambodian
Capital of Phnom Penh, the U.S. Ambassador to Cambodia and the Cambodian
Minister of Culture and Fine Arts, signed a Memorandum of Understanding (MOU)
limiting the importation of Khmer archeological material into the United
States.
The
MOU incorporates the 1999 emergency constraints and extends them to metal and
ceramic material. [Editors’ Note: The term “Khmer” is often used
interchangeably with “Cambodian,” and refers to the language of Cambodia, and
to its majority population.]
The
MOU rests upon the U.S. Convention on Cultural Property Implementation Act
[Pub. Law 97-446, 19 U.S.C. Section 1960]. The Act in turn has put into effect
as U.S. domestic law the 1970 UNESCO Convention on the Means of Prohibiting and
Preventing the Illicit Import, Export and Transfer of Ownership of Cultural
Property [823 U.N.T.S. 231 (1972)].
On
September 22, 2003, the U.S. Department of Homeland Security, Bureau of Customs
and Border Protection, issued a final rule to amend the Customs Regulations to
include import restrictions on Cambodian archeological materials. See 2003
International Law Update 158. It added Cambodia to the list of countries from
which the U.S. has agreed to limit cultural imports and describes the
restricted items. The covered material includes archeological material from the
6th century A.D. through the 16th century A.D.
The
present agreement stems from an intergovernmental conference that took place in
November 2003 in Paris. Its main goal was to protect Cambodia’s Angkor Wat
temple complex. Located about 195 miles from Phnom Penh, this world-class
landmark adjoins the ancient capital of the Khmer Empire.
Citation:
U.S. Department of State Media Note of November 19, 2003; 68 Fed. Reg. 55000
(Sept. 22, 2003) [import restrictions on Cambodian archeological material]; 64
Fed. Reg. 67479 (Dec. 2, 1999) [import restrictions on Khmer material made of
stone]; see also Agence France Presse (Nov. 20, 2003) and website
“exchanges.state.gov/culprop”.
PATENTS
English
Chancery Court dismisses infringement suit by U.S. pharmaceutical company
because narrow wording of its U.K. patent for osteoporosis medication left way
open for defendant’s lawful use of different form of sulphonic acid in similar
manufacturing process
The
plaintiff (or claimant), Merck & Co. Inc., is a pharmaceutical company
incorporated in the United States. It owned patents in the U.S. and U. K.
describing a way to make monosodium alendronate or MA. MA had proved useful in
suppressing bone resorption. So many physicians worldwide were prescribing it
to treat bone diseases such as osteoporosis that it may well be the most widely
used treatment for that condition.
Generics
(U.K.) Ltd. (the defendant) was in the business of supplying pharmaceutical
products in the United Kingdom. At some point, it notified the plaintiff that
it intended to market a medication in the U.K. in which MA made in India by a
company called CIPLA would be the active ingredient.
It
also furnished the plaintiff with a confidential explanation of the CIPLA
process for making its product and gave the plaintiff a limited time to admit
non‑infringement under the U.K. patent. Absent such a concession, defendant
assured plaintiff that it planned to go to court to obtain a declaration to
that effect.
Within
the time limit, the plaintiff itself filed suit in the Chancery Division, an
English court of first instance. The suit claimed infringement of claim 1 of
its English Patent by the CIPLA method as depicted by the defendant. In effect,
plaintiff urges that the CIPLA process appropriates the entire value of its
invention. The Chancery Court, however, ends up dismissing plaintiff’s claim.
Under
the U. K. Patents Act of 1977 (the Act) and the European Patent Convention of
1973 (EPC) [13 I.L.M. 271(1974), 15 I.L.M. 5(1976)], the monopoly sought by a
patentee clearly has to be comprehensible to the patent reader, the Court
notes. The reader has to be able to define the limits of the prohibited field
before he sets out to make a rival product or to install a competing process.
“A
patent is a document written by the patentee for publication to the world at
large and designed not only to set out clearly what the invention is but to
describe the monopoly sought in unambiguous terms. It is supposed to be comprehensible
to members of the relevant trade simply on reading.” [¶ 34]
In
the instant case, however, the notional reader of the Patent could not have
been sure of the protective scope the plaintiff intended. For example, he would
be uncertain whether that protection reached the use of any sulphonic acid in
the manufacturing process as well as the methanesulfonic acid (MSA) specified
in claim 1 of the Patent.
“[Plaintiff]
was keen to focus on the CIPLA process and to say that, whatever the Patent’s
scope, that process fell within it. However, as noted above, the proper
approach is to construe the Patent and its claims in the absence of the
infringement and only when this has been done, to look at the [alleged]
infringement. One of the advantages of this is that it allows one to appreciate
the full breadth of the monopoly asserted.” [¶ 23]
“A
patent is a document written by the patentee for publication to the world at
large and designed not only to set out clearly what the invention is but to
describe the monopoly sought in unambiguous terms. It is supposed to be
comprehensible to members of the relevant trade simply on reading. If our law
has reached the stage where [as here] experiments and extensive expert evidence
is admissible to aid in construing patents, then it suggests that something has
gone wrong.” [¶ 34]
“Whatever
the judicial attempts to give guidance, the bedrock on which construction must
be based consists of the statutory provisions which determine the form of a
patent and the function of its parts. They are to be found in the Act ... and
the ... EPC.”
“The
Act provides in part as follows: ‘Article 69 [of the EPC] should not be
interpreted in the sense that the extent of the protection conferred by a
European patent is to be understood as that defined by the strict, literal
meaning of the wording used in the claims, the description and drawings being
employed only for the purpose of resolving an ambiguity found in the claims.
Neither should it be interpreted in the sense that the claims serve only as a
guideline and that the actual protection conferred may extend to what, from a
consideration of the description and drawings by a person skilled in the art,
the patentee has contemplated. On the contrary, it is to be interpreted as defining
a position between these extremes which combines a fair protection for the
patentee with a reasonable degree of certainty for third parties.” [¶ 35]
“It
is [the patentee’s] duty to communicate his invention and his assertion of
monopoly to the public in language it will understand. He is warned by the
Protocol that his exclusive rights will not necessarily extend to everything
which, from a reading of the specification, it can be seen that he
contemplated.”
“Furthermore
the drafting of the specification and claims has to be considered against the
background that no one is forced to apply for a patent or to seek as wide
protection as possible. The patentee can be taken to be aware of the fact that
there is always a balance to be achieved between width of protection and
validity. It is up to the patentee to choose the level of risk he wishes to
run.” [¶ 38]
“Notwithstanding
the adaptability of scientific language, the patentee is not expected to be
omniscient or to exhibit super human thoroughness in drafting. He may not be
able to foresee future developments which will be useable with his invention
but which make no material difference to the way it works.”
“Furthermore
the patentee may choose a form of language which emphasises which features of
an invention are important and which are not. ... If there is a variant to the
latter, which obviously does not affect the way in which the invention works,
the notional reader may be reasonably confident that the inventor wanted to
cover this variant as well. In these types of cases, the monopoly is likely to
extend to the new variant.” [¶ 42]
“The
courts are not a branch of social services whose job it is to help the infirm
or the unwise and the Protocol does not require them to be so. There is no
cannon [sic] of construction which would justify the courts in granting a
patentee more protection than that which, objectively assessed, he indicated he
wanted. Indeed to do so would not be ‘fair’ to the patentee. It could expose
him to a greater risk of invalidity than he was prepared to shoulder [cite].”
[¶ 47]
“
... I am not persuaded that the patent should be construed so as to give
protection for the wider family of sulphonic acids. The claimant is caught on
the horns of a dilemma. If, as the claimant asserts, it is obvious that other
sulphonic acids besides MSA would work in the same way, then there are only two
possibilities. Either the patentee, sharing the knowledge and skills of the
notional addressee, must have been aware of this or he was not.”
“In
the former case, the decision to refer only to MSA in the specification and
claims is likely to have involved a decision on his part not to seek protection
for all the other sulphonic acids. In the latter case, he was not aware of the
possibility of using any other sulphonic acid and in this respect the claim
accurately reflects what he wanted a monopoly for.”
“It
is not necessary to consider which of these two possibilities is the most
likely, but it is noticeable that the patentee not only does not refer to any
other sulphonic acid or even hint that any other acid might work, but he
ventures no opinion as to why MSA works and why the prior art failed.”
“That
lacuna is not filled by looking at the prior art referred to expressly in the
patent. In particular, as noted above, [plaintiff’s] U.S. Patent No 4,407,761,
which uses chlorobenzene as the solvent and in which the product goes solid,
does not refer to this as a defect, does not address the question of why it
solidifies nor does it touch upon the reason why the solvent does not work
(assuming, of course, that solution of the end product was something which that
inventor was trying to achieve ‑ which is not what the U.S. patent suggests).”
“In
my view the notional reader could not be reasonably confident that the inventor
wanted to cover sulphonic acids other than MSA. ... [T]he reader is entitled to
assume that the patentee thought at the time of the specification that he had
good reason for limiting his monopoly to MSA and intended to do so. In those
circumstances, to widen out the protection is not an act of fairness to the
patentee, nor does it give reasonable certainty to third parties.” [¶ 60].
For
the above reasons, the Court holds that the importation of products made to the
CIPLA process would not infringe the claimant’s Patent. It therefore dismisses
claimant’s petition.
Citation:
Merck & Co Inc. v. Generics (U.K.) Ltd., [2003] E.W.H.C. 2842 (PAT.),
[2003] All E.R. (D) 418 (Nov.) (Chancery Division, Nov. 27).
RECIPROCITY
Federal
Circuit remands case to redetermine applicability of Reciprocity Act to Federal
Claims Court suits brought by residents of Cuba because U.S. government’s 1963
embargo had suspended payment of their pensions for World War II service
Several
Cuban nationals who had served in the U.S. armed forces during World War II and
their surviving spouses brought an action in the U.S. Court of Federal Claims
to obtain pension benefits under the Civil Service Retirement System from the
U.S. Government. They had been regularly getting retirement annuity checks from
the U.S. until a letter from the U.S. Treasury Department (USTD) arrived in
1963.
Part
of the Cuban embargo program, it declared that the USDT had “determined that
there is no reasonable assurance that a payee living in Cuba will actually
receive United States Government checks or be able to negotiate them for full
value. Therefore, since the United States Treasury Department Regulations now
prohibit payments to persons residing in Cuba, Civil Service annuity payments
are being suspended.” The referenced regulations were the Cuban Asset Control
Regulations at 31 C.F.R. Part 515 (1963).
The
Reciprocity Act (the Act) [28 U.S.C. Section 2502(a); originally Act of July
27, 1868, Section 2, 15 Stat. 243.] generally limits the jurisdiction of the
Court of Federal Claims over actions against the U.S. brought by aliens. It
does, however, allow these suits to the extent that the alien’s home country
would let U.S. citizens bring similar suits against that government in the
alien’s home tribunals.
The
current Act provides in part that: “Citizens or subjects of any foreign
government which accords to citizens of the United States the right to
prosecute claims against their government in its courts may sue the United
States in the Court of Claims if the subject matter of the suit is otherwise
within such court’s jurisdiction.” (In 1992, Congress updated the lower Court’s
title to “U.S. Court of Federal Claims.”)
As
evidence of reciprocity under the Act, plaintiffs submitted an affidavit of
Jorge Cobask. He was a Cuban attorney who had represented U.S. citizens in
actions against the Cuban government. It put U.S. citizens on an equal footing
with Cuban citizens in suing that government.
Supporting
the defense side, the U.S. Department of State (DOS) issued a judicially
requested opinion letter declaring that “any right of a U.S. citizen to pursue
a claim against the Cuban government in Cuban courts is subject to the political
interference of the Cuban government and, thus, there are serious impediments
to the ability of a U.S. citizen to pursue effectively a lawsuit against the
Cuban government.”
Based
solely on the DOS’s opinion, the court dismissed the action for lack of subject
matter jurisdiction under the Act. The court also noted that it considered the
total quantum of evidence put in by the parties “wholly inadequate.” Plaintiffs
duly appealed. The U.S. Court of Appeals for the Federal Circuit vacates and
remands.
When
judicial reciprocity under the Act is at issue, the first question is whether
the foreign court treats U.S. citizens differently from local citizens when
they sue their foreign sovereign. In the Court’s view, the mere political
oversight of foreign courts, or the fact that a foreign sovereign has not
consented to the same kind of suits that U.S. law allows against the U.S.
government, does not necessarily preclude a finding of reciprocity under the Act.
The
Circuit Court sees the DOS’s opinion as not enough, without more, to show the
absence of reciprocity. “The ultimate conclusion of the State Department
opinion is grounded on little more than an assertion of political interference.
The document observes that Cuban lawyers are under the same pressures as Cuban
judges to refrain from acting against the interests of their government, and
consequently, are deterred from rendering favorable assistance to American
citizens. It also states that there are some $6.3 billion in outstanding claims
for compensation against the Cuban government for property it has appropriated
from the United States and its citizens since the administration of Fidel
Castro came to power in 1959. ...”
“While
this evidence reveals a Cuban judicial system that may not be very fair, it
does not, in and of itself, buttress a finding of no reciprocity. Absent
additional findings that Cuban citizens are excused from shouldering the
aforementioned disabilities along with American citizens, the State Department
opinion cannot, as a matter of law, serve as the sole basis for the lower
court’s dismissal.”
“For
example, the State Department opinion does not indicate whether or not the
Cuban system offers the same disincentives to Cuban lawyers to file claims
against the Cuban government when their clients are Cuban nationals. It is
impossible to discern whether it is the client’s nationality or the nature of
the suit, i.e., that it is directed at the government, or some combination of
the two, that gives rise to interference from the Cuban government. ... More
was required under the Act to support the State Department’s determination of
no reciprocity.” [Slip op. 19-21] Therefore, the Court remands for a “more
complete assessment” of whether the plaintiffs can meet the requirements of the
Reciprocity Act.
Citation:
Ferreiro v. United States, 2003 WL 22862350 (Fed. Cir. Dec. 4, 2003).
TERRORISM
Ninth
Circuit reviews constitutionality of AEDPA provisions that permit designation of
“foreign terrorist organizations” finding serious Fifth Amendment due process
concerns and concluding that ban on providing support in the form of “training”
and “personnel” is overbroad
Sections
302 and 303 of the Antiterrorism and Effective Death Penalty Act of 1996
(AEDPA) [8 U.S.C. Section 1189 and 18 U.S.C. Section 2339B] authorize the
Secretary of State (Secretary) to designate “foreign terrorist organizations.”
This labeling makes it a crime for any person to knowingly provide “material
support or resources” to such an organization.
Specifically,
the Secretary may designate a foreign terrorist organization “... if the
Secretary finds that (A) the organization is a foreign organization; (B) the
organization engages in terrorist activity ...; and ( C) the terrorist activity
or terrorism of the organization threatens the security of United States
nationals of [sic] the national security of the United States.” 8 U.S.C.
Section 1189(a)(1).
Noteworthily,
Section 1189 neither requires notice to such an organization nor gives the
outfit a chance to submit or review evidence during the designation process. In
fact, the classification may rest, in whole or in part, on “classified
information” to which the designated organization cannot gain access. 8 U.S.C.
Section 1189(a)(3)(B).
The
key issue here is whether a criminal prosecution under 18 U.S.C. Section 2339B
requires the government to prove as an element of the offense that the
defendant knew that the Secretary had applied the “terrorist” designation or,
at least, knew about the organization’s allegedly unlawful activities that led
up to its stigmatization.
Section
2339B provides that “[w]hoever, within the United States or subject to the
jurisdiction of the United States, knowingly provides material support or
resources to a foreign terrorist organization, or attempts or conspires to do
so, shall be fined ... or imprisoned not more than 15 years, or both ...” The
statute defines the term “material support” as “currency or other financial securities,
financial services, lodging, training, safehouses, false documentation or
identification, communications, equipment, facilities, weapons, lethal
substances, explosives, personnel, transportation, and other physical assets,
except medicine or religious materials.” 18 U.S.C. Section 2339A(b). The law
also bars a criminal defendant in such a proceeding from raising the issue of
whether the U.S. had properly labeled the organization as “terrorist.”
Six
legal and social service organizations and two U.S. citizens brought an action
to support the peaceful activities of certain Kurdish and Tamil groups which
the U.S. has set down as “foreign terrorist organizations”. Examples are The
Kurdistan Workers Party a.k.a. Partiya Karkeran Kurdistan (PKK), and the
Liberation Tigers of Tamil Eelam (LTTE). These organizations have reportedly
supported a range of activities that include both terrorism and humanitarian
aid. They have been on the terrorist list since 1997. (See 62 Fed. Reg. 52650,
October 8, 1997).
Plaintiffs
had previously presented their constitutional arguments in Humanitarian Law
Project v. Reno, 205 F.3d 1130 (9th Cir. 2000), cert. denied, 532 U.S. 904
(2001). There, the Court found that Section 2339B did not violate the First
Amendment by allegedly imposing “guilt by association” and restricting
“symbolic speech.” The Court had also held that the designation process of
Section 2339B did not confer an overbroad discretion on the Secretary and thus
did not violate the Fifth Amendment. On remand, the district court had
permanently enjoined the Government from enforcing Section 2339B against
plaintiffs to the extent that they provide material support in the form of
“training” and “personnel” to designated organizations. The Government appealed
but the U.S. Court of Appeals for the Ninth Circuit affirms.
First,
the Court addresses the plaintiffs’ argument that Section 2339B violates the
Fifth Amendment because it does not require that the Government prove personal
guilt. “In light of the text of Section 2339B, the [Supreme] Court’s
longstanding principles interpreting the word ‘knowingly’ to indicate Congress’
intent to include a mens rea requirement, and the due process concern ..., we
read Section 2339B to require proof of knowledge, either of an organization’s
designation or of the unlawful activities that caused it to be so designated.
... Thus, to sustain a conviction under Section 2339B, the government must
prove beyond a reasonable doubt that the donor had knowledge that the
organization was designated by the Secretary as a foreign terrorist
organization or that the donor had knowledge of the organization’s unlawful
activities that caused it to be so designated.” [Slip op. 55-56]
Also,
the Court re-affirms its decision in Humanitarian Human Law Project II [HHLP
II] that the ban on providing “training” and “personnel” in Section 2339B is
overbroad, and therefore void for vagueness under the First and Fifth
Amendments. “In [HHLP II], we correctly concluded that the term ‘personnel’ was
impermissibly vague because it is open to a highly subjective construction that
endangers lawful conduct protected by the First Amendment. As we stated in
[HHLP II], ‘it is easy to see how someone could be unsure about what AEDPA
prohibits with the use of the term ‘personnel,’ as it blurs the line between
protected expression and unprotected conduct.’ [Cite] We observed that ‘someone
who advocates the cause of the PKK could be seen as supplying them with
personnel ... But advocacy is pure speech protected by the First Amendment.’
Id.”
“Indeed,
the term ‘personnel’ could be understood to cover some of plaintiffs’
activities most safely guarded by the First Amendment. ‘Personnel,’ for
example, could be understood to bring into its scope Humanitarian Law Project’s
members’ efforts to urge members of Congress to support the release of Kurdish
political prisoners in Turkey. ... Because ‘personnel’ could be construed to
include unequivocally pure speech and advocacy protected by the First
Amendment, we decline to depart from our legal ruling in [HHLP II] that the
term ‘personnel’ is void for vagueness. Id.”
“We
also reaffirm our legal conclusion in [HHLP II] that the term ‘training’ is
unconstitutionally vague. Reasonable people could easily assume that the use of
the word ‘training’ in Section 2339B encompasses First Amendment protected
activities. As we observed in [HHLP II] ‘a plaintiff who wishes to instruct
members of a designated group on how to petition the United Nations to give aid
to their group could plausibly decide that such protected expression falls
within the scope of ‘training.’‘ Id. At 1138. Indeed, Humanitarian Law
Project’s efforts to show PKK members how to use humanitarian and international
human rights laws to seek a peaceful resolution to the conflict in Turkey could
reasonably fall within the scope of ‘training.’” [Slip op. 60-62]
The
bottom line is that, if the government accuses someone of breaching Section
2339B, it has to prove beyond a reasonable doubt either (a) that the accused
knew that the U.S. has classified its group as a foreign terrorist organization
or (b) that he or she knew about the outfit’s unlawful activities that led it
to be so labeled. Moreover, the terms “personnel” and “training” in the
definition of “material support” are constitutionally void for vagueness.
Citation:
Humanitarian Law Project v. United States Department of Justice, 2003 WL
22871899 (9th Cir. 2003).
WORLD
TRADE ORGANIZATION
United
States prevails before WTO Appellate Body in dispute with Japan because its
restrictions on U.S. apple imports are inconsistent with requirements of WTO
Agreement on Sanitary and Phytosanitary Measures
A
WTO Panel Report of July 2003, had found that Japan’s quarantine measures that
allegedly protected Japan from the plant disease, fire blight, did not rest on
scientific evidence or risk assessment as required by the WTO Agreement on
Sanitary and Phytosanitary Measures (SPS Agreement). See 2003 International Law
Update 111. “Fire blight” is a bacterial plant disease that causes fruits to
exude bacterial ooze which wind, rain, insects and birds can then broadcast.
The
U.S. maintained that there is no evidence that mature apples transmit fire
blight. Agreeing, the Panel found that scientific evidence points to a
negligible risk that apples relay the disease. A press release by the U.S.
Trade Representative notes that U.S. farmers export more than $390 million
worth of apples. Exports to Japan in the year 2001 amounted to only $377,000.
Both the U.S. and Japan appealed.
The
Appellate Body concludes first that Japan maintained the contested
phytosanitary measures “without sufficient scientific evidence” within the
meaning of Article 2.2 of the SPS Agreement. In the second place, Japan did not
impose the phytosanitary measures at issue for a situation “where relevant
scientific evidence is insufficient” and thus they do not qualify as
justifiable provisional measures under Article 5.7 of the SPS Agreement.
Finally,
to justify its protective measures, Japan relied heavily on its 1999 Pest Risk
Analysis (PRA). The PRA, however, does not qualify as a proper “risk
assessment” pursuant to paragraph 4 of Annex A to the SPS Agreement for two
reasons. First, it did not “evaluate the likelihood of entry, establishment or
spread of” fire blight. Secondly, the PRA failed to conduct such an evaluation
“according to the SPS measures which might be applied.” As a result, Japan’s
measures are not “based on” the sort of risk assessment that Article 5.1 of the
SPS Agreement demands. In conclusion, the Appellate Body recommends that Japan
bring its phytosanitary measures into compliance with the SPS Agreement.
Citation:
Japan - Measures Affecting Importation of Apples (WT/DS245/AB/R) (26 November
2003); Report is available on website “www.wto.org”; U.S. Trade Representative
press release 2003-80 (December 1, 2003); Agence France Presse (December 1,
2003).
U.S.
President formally rescinds U.S. steel tariffs before official expiration date;
European Union follows suit as to its retaliatory measures
With
Proclamation No. 7529 of March 5, 2002, the U.S. had imposed steel tariffs to
reduce the flood of cheap steel from Europe and Asia. The World Trade
Organization (WTO) Appellate Body issued a decision in the dispute on November
10, 2003. It found that the U.S. steel tariffs were inconsistent with the
Agreement on Safeguards and GATT 1994 because the U.S. failed to provide a
reasoned and adequate showing as to the alleged injuries to its domestic
industry. See 2003 International Law Update 172.
According
to the President’s proclamation on the discontinuance of the tariffs, changed
economic circumstances have impaired the effectiveness of the safeguard
measures. The U.S. has left the licensing and monitoring of certain steel imports
in effect until March 21, 2005, but it may replace them sooner if the Secretary
of Commerce sets up a replacement program.
In a
related matter, the EU terminated the definitive safeguard measures on certain
imported steel products imposed by Regulation No. 1694/2003 which applied
regardless of where the steel came from. See 2002 International Law Update 158.
Regulation No. 2142/2003 calling a halt to the safeguard measures notes that a
“change of circumstances has occurred ... Since the imposition of the safeguard
measures by the Commission, the European steel market has stabilised ...
Further, on 4 December 2003, the United States of America announced the
withdrawal of the U.S. safeguard measures on steel.”
Citation:
Presidential Proclamation No. 7741 of December 4, 2003, 68 Fed. Reg. 68483
(Dec. 8, 2003); see also The Washington Post, Dec. 5, page A1; 2003 O.J. of
European Union (L 321) 11, 6 Dec. 2003 [EU termination of safeguard measures].
U.S.
signs Inter-American agreement to protect Pacific tuna resources. On
November 14, 2003, the U.S. Department of State hosted a ceremony to sign the
revised Inter-American Tropical Tuna Convention (IATTC). The U.S.
Under-Secretary of State for Global Affairs signed for the U.S. Costa Rica,
France, Mexico and Peru also signed the Convention. The revised Convention
reflects changes in international law including the 1982 Law of the Sea
Convention, the 1995 U.N. Fish Stocks Agreement and other fisheries agreements.
The purpose is the long-term conservation and sustainable use of tuna stocks in
the Eastern Pacific Ocean. On the same occasion, Taiwan joined the IATTC. Citation:
U.S. Department of State Media Note of Nov. 18, 2003 [Tuna Convention].
Canada
and U.S. reach agreement on Hake/Whiting fisheries of Pacific. On November
21, 2003, the U.S. and Canada signed an agreement in Seattle to resolve their
long-standing dispute over Pacific Hake/Whiting fisheries. Last Fall, the U.S.
had declared the Hake/Whiting stock “overfished.” The Agreement allocates
approximately 74% of each year’s harvest to the U.S., and the remainder to
Canada. Fishermen catch Hake/Whiting off the coasts of Northern California,
Oregon, Washington, and British Columbia. Processors use it primarily to make
imitation crab and shrimp (surimi). Citation: U.S. Department of State
Media Note of Nov. 20, 2003 [Pacific Hake/Whiting Agreement] Asia Pulse (Nov.
19, 2003) [Taiwan as IATTC member].
United
Nations formally denounces “shark finning.” On November 24, 2003, the U.N.
General Assembly adopted a Resolution that strongly condemns the depletion of
the world’s shark population and calls for a ban on the practice of shark
finning. “Shark finning” involves killing sharks solely for their fins and
discarding the carcasses. Shark fins are used for a traditional Asian soup that
can cost as much as $100 a bowl. Sponsored by the U.S., the Resolution urges
countries to consider banning the practice of catching sharks solely to harvest
their fins. As a key predator, sharks play a vital role in balancing marine
ecosystems. The Resolution comports with the Shark Finning Prohibition Act
(Public Law 106‑557). The Act bans the practice in federal waters and directs
the Executive Branch to promote international constraints on finning. Citation:
U.S. State Department Media Note #2003/1205, Office of Spokesman,
Washington, D.C., Monday, Nov. 24, 2003; Gannett News Service (Nov. 28, 2003).
U.S.
signs U.N. Anti-Corruption Convention. On December 9, 2003, the U.S.
Attorney General signed the United Nations Convention Against Corruption at an
international meeting in Merida, Mexico (December 9-11, 2003). It will enter
into force once 30 countries have ratified it, and a Conference of the States
parties will be set up to monitor compliance. Specifically, the Convention
requires signatory states (a) to criminalize corruption such as bribery,
embezzlement and money laundering; (b) to prevent corruption and promote
integrity among its officials; and (c) to cooperate in enforcing the Convention
through sharing of information and expertise. It also provides for the return
of assets looted from one nation and taken abroad. Citation: U.S.
Department of State Press Statement of Dec. 10, 2003; see also Agence France
Press (Dec. 11, 2003). [For added information on Convention, including its text
and Traveaux Preparatoires, see websites http://www.un.org and
http://www.unodc.org].
China
and U.S. sign agreement on sharing bank data. On December 10, 2003, The
China Banking Regulatory Commission (CBRC) and the U.S. Comptroller of the
Currency entered into an informal agreement to improve information-sharing. The
goal is to enhance international cooperation in bank regulation and to prevent
illegal behavior by the banks of the respective nations. Two years ago, Chinese
and U.S. regulators worked together during a important inquiry into unlawful
lending and bribery by the state‑run Bank of China in New York. It produced a
$20 million fine against the Bank and the sentencing Wednesday of its former
New York CEO, to twelve years in prison. Citation: The Associated Press
(New York Times online), Shanghai, Wednesday, Dec. 10, 2003, filed 9:45 a.m.
ET.
EU
issues Decision on health certificates for U.S. gelatin(e) and collagen
products. The EC Commission has published Decision 2003/863/EC dealing with
Health Certificates for the importation of animal products from the U.S. This
action stems from the 1998 “Agreement between the European Community and the
United States of America on sanitary measures to protect public and animal
health in trade in live animals and animal products” (1998 O.J. (L 118) 1, 24
April 1998). Title V in that Agreement laid down sanitary measures for imported
fresh meat, meat products and other animal products. The instant Decision
requires the EU Member States to allow the import of U.S. gelatin(e) and
collagen for human consumption when accompanied by an official health
certificate that complies with the models provided in the Decision. Citation:
Commission Decision 2003/863/EC, 2003 O.J. of European Union (L 325) 46, Dec.
12, 2003.
U.S.
Commerce Department takes steps to carry out changes to Wassenaar Arrangement. The
U.S. Department of Commerce, Bureau of Industry and Security (BIS), has issued
a final rule to implement the December 2002 Wassenaar Arrangement Plenary
Agreement [15 C.F.R. Parts 740, 743, 772 and 774]. The BIS maintains the
Commerce Control List (CCL) which itemizes those materials subject to export
controls. The 1996 Wassenaar Arrangement on Export Controls for Conventional
Arms and Dual-Use Goods and Technologies concerns the international control of
dual-use goods that have both civil and military applications. The final rules
make many changes to the technical specifications of the controlled products. Citation:
68 Fed. Reg. 68976 (Dec. 10, 2003).
U.S.
Treasury permits financial institutions to transfer claims against Iraq.
The Foreign Assets Control Office (OFAC) of the U.S. Treasury Department has
issued an interim final rule to authorize U.S. financial institutions to
transfer certain claims against the Government of Iraq for unpaid loans and
other debts [31 C.F.R. Part 575]. It amends the Iraqi Sanctions Regulations to
include a general license authorizing the transfer of such claims to the main
office or other foreign offices of the same financial institutions (Section
575.534]. Citation: 68 Fed. Reg. 65844 (Nov. 24, 2003); see also “Firms
Face OFAC Compliance Amid Shifting Policies,” Security Industry News (Nov. 3,
2003).
U.S.
and Vietnam sign counter-narcotics agreement. On December 11, 2003, during
a U.S. visit of the Vietnamese Deputy Prime Minister, the U.S. and the
Socialist Republic of Vietnam signed a bilateral Letter of Agreement on
Counternarcotics Cooperation in Los Angeles. The purpose is to establish and
support projects to control the production and trafficking of illicit narcotics
and other criminal activities. Citation: U.S. Department of State Press
Statement (Dec. 12, 2003); see also Agence France Presse (Dec. 13, 2003).