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Saturday, December 31, 2016

2003 International Law Update, Volume 9, Number 12 (December)

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).