2004 International Law Update, Volume 10, Number 9 (September)

2004 International Law Update, Volume 10, Number 9 (September)

Legal Analyses published by Mike Meier, Attorney at Law. Copyright 2017 Mike Meier. www.internationallawinfo.com. 

ALIENS

Ninth Circuit holds that application of Nonresident Workers Act in Commonwealth of Northern Mariana Islands which are politically united to United States did not violate nonresident plaintiff’s rights under U.S. Constitution and statutes

After World War II, the United Nations classified most of the Micronesian Islands, including the Northern Mariana Islands, as the “Trust Territory of the Pacific Islands” (TTPI). The United States was to administer the TTPI under the obligation of “promoting the development of the inhabitants of the trust territory toward self‑government or independence.”

The Marshall Islands, Palau, and Federated States of Micronesia eventually became independent states. Unlike the other Pacific states, the Northern Mariana Islands worked out a permanent political union with the U.S.

On February 15, 1975, the parties signed The Covenant to Establish a Commonwealth of the Northern Mariana Islands in Political Union with the United States of America (the Covenant). Congress’s Joint Resolution on March 24, 1976 brought it into force [Pub. L. No. 94‑241, 90 Stat. 263 (1976), 48 U.S.C. Section 1801 note].

Under Article 101 of the Covenant, the U.S. acquired sovereignty and “ultimate political authority” over the Commonwealth of the Northern Mariana Islands (CNMI). The Covenant explicitly makes certain portions of the U. S. Constitution, and most statutes in effect at the time of the Covenant’s enactment, apply to the CNMI. In addition, Congress can enact laws that affect the CNMI by naming the CNMI in any legislation not inconsistent with the Covenant.

The authority of the U.S. over the CNMI is not plenary, however, but arises only from the Covenant. In general, the Covenant confirms to the CNMI a substantial measure of self‑government, granting the people of the CNMI control over its internal affairs.

Germane to this case, the Covenant exempts the CNMI from U.S. immigration and naturalization laws as well as from its minimum wage laws. The immigration exemption allegedly arose from the CNMI’s fears that large numbers of Asian immigrants would migrate to the CNMI under U.S. numerical quotas. The exemption from American minimum wage laws rested on sensitivity to the CNMI’s stagnant economic condition.

In 1983, the CNMI passed the Nonresident Workers Act (NWA), 3 N. Mar. I. Code Section 4411 et seq. (1999). The Court summarizes its basic provisions as follows. “When applying to work under the NWA, a nonresident worker must submit an affidavit stating that he or she meets the qualifications of the job being sought, ... and has not been convicted of a felony or crime of moral turpitude. [Cites]”

“The worker must also disclose his or her marital status and the existence of any dependents, [cite] and undergo a physical examination once he or she arrives in the CNMI [cite]. A nonresident is not allowed to work in the CNMI without a contract preapproved by the [local] Department of Labor. [Cite].” [Slip op. 6-7]

In 1991, Bonifacio Vitug Sagana (plaintiff) entered the CNMI as a nonresident worker. After he had served as a security guard for three years, his employer fired him. Plaintiff later filed a successful suit for wrongful termination and unpaid wages. Between 1994 and 2000, plaintiff worked under temporary permits or as an unapproved nonresident worker.

In November 2000, a Department of Labor and Immigration official determined that, lacking valid work status, plaintiff had to leave the CNMI within twenty days. Plaintiff’s appeal of the order did not succeed.

The following month, plaintiff filed an action in the CNMI Superior Court against Joaquin A. Tenorio, in his official capacity as Secretary of the Department of Labor and Immigration, CNMI. It sought declaratory and injunctive relief, monetary damages and attorney fees. Defendants removed the case to the local federal court.

The district court dismissed some of plaintiff’s claims and the parties settled all but one of the remaining claims. The Settlement Agreement left it open for plaintiff to seek a declaration as to whether he “has the right to freely market his labor in the common occupations of life to any prospective employer without restriction and on equal terms as any citizen for so long a period as Plaintiff is lawfully admitted to the CNMI as a nonresident worker.” [Slip op. 8-9]

The court gave summary judgment to defendant and plaintiff filed an appeal. The U.S. Court of Appeals for the Ninth Circuit affirms.

Despite the district court’s belief to the contrary, the Circuit Court finds that plaintiff’s pleadings and motions sufficiently invoked 42 U.S.C. Section 1981(a). It provides that “all persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts ... and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens ...”

The right to dispose of one’s labor freely by contract is basic to the protections guaranteed by Section 1981. See Jones v. Alfred H. Mayer Co., 392 U.S. 409, 441 n. 78 (1968). Congress, in reenacting the 1866 Civil Rights Act, ... extended the safeguards of the civil rights statutes to aliens. [Cite] In Graham v. Richardson, 403 U.S. 365 (1971), the Supreme Court determined that states could not restrict the eligibility for welfare benefits solely on the basis of alienage.”

“The question of who can claim the protections of Section 1981 is different from that which asks what protections it affords. ... The guarantee that ‘all persons’ may enjoy the same rights that ‘white citizens’ enjoy’ does not protect against discrimination on the basis of gender or religion, [cite]; disability, [cite]; age, [cite]; or political affiliation, [cite]. We hold that Section 1981 prohibits governmental discrimination on the basis of alienage.”

Defendant tried to persuade the Court that Section 1981 does not apply to the CNMI’s immigration laws. The Court, however, is not convinced. “Immigration authority controls, who, where, when, how, and for how long, and the conditions under which, a visitor may enter and remain in a territory, but it does not necessarily deal with all the rights and duties of persons in a given jurisdiction after the entry has taken place.”

“The Covenant provides that, with a few exceptions, all laws in existence at the time of the Covenant’s passage apply in the CNMI. [Cite] The CNMI [has] agreed to be bound by ... the Thirteenth and Fourteenth Amendments and the statutes enforcing them. [Cite].” [Slip op. 22-23]

With respect to the Equal Protection Clause of the Fourteenth Amendment, plaintiff takes issue with both the lower court’s choice of “rational basis” scrutiny and its application to him. The appellate court points out that the Amendment “applies to the CNMI ‘as if [it] were one of the several states.’ [Cites] Aliens who are in the jurisdiction of the United States under any status, even as illegal entrants or under a legal fiction, are entitled to the protections of the Fourteenth Amendment.” [Cites]

“Equal protection claims are considered under a two‑step analysis. First, an appellant must show that the statute in question ‘results in members of a certain group being treated differently from other persons based on membership in that group.’ [Cite]. This hurdle is easily cleared. It is uncontested that the NWA is a discriminatory statute, treating nonresidents differently from residents and citizens. ....”

“In the second step, a court assesses the legitimacy of a discriminatory statute under the appropriate level of scrutiny. ... The CNMI government argues that we should exercise rational basis review rather than intermediate scrutiny, ... We need not reach the question ..., as the NWA survives under either rational or intermediate levels of review.”

“When enacting the NWA, the CNMI legislature stated that ‘it is essential to a balanced and stable economy in the Commonwealth that residents be given preference in employment and that any necessary employment of nonresident workers in the Commonwealth not impair the wages and working conditions of resident workers.’ [Cite]. The legislature also recognized that the stagnant CNMI economy needed temporary alien labor because the small resident working force was substantially occupied in public sector employment.” [Slip op. 23-26]

“The CNMI legislature has seen fit to create a temporary class of employees for the purpose of bolstering the CNMI economy, giving job preference to its residents, and protecting the wages and conditions of resident workers while enforcing a system to control and regulate its visiting laborers. These are reasonable, important purposes.”

In the Court’s view, the NWA has also set up procedures adequate to ensure that the government will fairly administer its provisions. “[Plaintiff] has not shown that the NWA is not closely related to the CNMI’s important governmental goals of boosting its economy, giving preference to its resident workers, and providing a system of regulating and accounting for its nonresident workforce. The limitation of [plaintiff’s] ability to contract his labor under the NWA does not violate his equal protection rights.” [Slip op. 26]

The Court also rejects plaintiff’s due process objections. “The Due Process Clause prohibits restraints on liberty that are arbitrary and purposeless. ... ‘The ... Clause specially protects those fundamental rights and liberties which are, objectively, deeply rooted in this Nation’s history and tradition, and implicit in the concept of ordered liberty, such that neither liberty nor justice would exist if they were sacrificed.’ Washington v. Glucksberg, 521 U.S. 702, 720‑21 (1997).

As early as 1915, the federal courts have held that “[r]estrictions on selecting and pursuing work are recognized by the Fourteenth Amendment’s Due Process Clause. ... More recently, the Supreme Court stated that ‘the ... Clause includes some generalized due process right to choose one’s field of private employment.’ Conn v. Gabbert, 526 U.S. 286, 291‑92 (1999).”

“However, the [Supreme] Court has never held that the right to pursue work is a fundamental right. The Court has stated that the ‘generalized’ right to choose one’s employment ‘is nevertheless subject to reasonable government regulation.’ Conn, 526 U.S. at 292. Our court has described the judicial review which applies to laws infringing on nonfundamental rights as a very narrow one.” [Slip op. 31-32]

Citation: Sagana v. Tenorio, No. 03‑15779, 2004 U.S. App. LEXIS 18824 (9th Cir. Sept. 7, 2004).

AVIATION

Where defendant’s negligence damaged plaintiff’s telecommunications cargo while en route between Melbourne airport and plaintiff’s bonded warehouse, High Court of Australia rules that neither Treaty nor waybill limitations on liability apply and restores trial court’s award of substantial damages

During December of 1996, the Siemens group of companies and the Schenker group of companies renewed their long-standing arrangement dealing with the latter’s carriage of Siemens products by air from Germany to Australia. Later, Schenker Germany agreed to transport a large shipment of telecommunications gear via Singapore Airlines and thence by truck to Schenker’s bonded warehouse about 2.5 miles from the Melbourne airport.

Schenker International Deutschland GmbH (SID) consolidated this consignment with cargo from its other customers and forwarded it on Singapore Airlines to Tullamarine Airport in Melbourne. Two days after it got to Tullamarine, an employee of Schenker International (Australia) Pty. Ltd. (SIA) collected the consignment and placed it on a truck for delivery to its bonded warehouse. As a result of the conceded negligence of SIA’s driver, however, part of the consignment fell off the truck on the way and was damaged.

Siemens Ltd. sued SIA and SID for damages in the New South Wales Supreme Court. The decisive issue was whether a limitation-of-liability clause in the standard form of air waybill applies during the road transport of cargo to a bonded warehouse located outside the perimeter of Melbourne Airport. If so, the defendant’s liability for damages drops from almost A$1.7 million inclusive of interest to US$ 74,680 plus interest.

The primary judge held that the limitation provisions contained in either the Convention for the Unification of Certain Rules relating to International Carriage by Air as Amended [49 Stat. 3000; T.S. 876; 137 L.N.T.S. 11 (Warsaw, 1929)] and/or the waybills did not apply. He then found the Schenker Companies jointly and severally liable to Siemens Australia in the amount of $ 1,688,059.50 including interest.

The Court of Appeal agreed with the primary judge’s holding that the Warsaw Convention did not apply. That Court did rule, however, that the waybill governed the rights and obligations of the parties with respect to the accident and that this included the limitation on liability contained in Clause 4. The Court set aside the orders of the trial judge and, instead entered judgment for Siemens Australia in the limited amount of $US 74,680 plus interest. Siemens Australia then obtained review by the High Court. In a 3 to 2 vote, the High Court allows the appeal and reinstates the judgment of the primary court.

The Court first notes that, under their century-old Richtungsverkehr (literally, “direct traffic”), SID and SIA were to be the exclusive transporters of Siemens equipment to Australia and that SIA’s bonded warehouse was to be the end point of the transportation. The Richtungsverkehr it did not contain a liability-limitation clause. At the trial, it was assumed that the provisions of the air waybill itself operated as a part of, or adjunct to, the overall contract of carriage.

Article 18 of the Warsaw Convention, as Amended offers a scheme of presumptive air carrier liability for damaged goods, inter alia, during its transport by air of goods between the territories of two High Contracting Parties. The Convention is in force for both Germany and Australia. With respect to damaged cargo, Article 22 limits the liability of the air carrier to 250 Francs per kilogramme unless modified by specific agreement.

The “air carriage” to which the Amended Convention applies ends when the air carrier ceases to be in the charge of the cargo or when the cargo is no longer within an aerodrome, whichever happens first. Here, the damage took place outside the Melbourne airport. In the Court’s view, this rebuts the general presumption that the accident occurred during “carriage by air.”

Under Article 2 of the Convention, Supplementary to the Warsaw Convention, for the Unification of Certain Rules Relating to International Carriage by Air Performed by a Person Other than the Contracting Carrier, (Guadalajara, 1961) which partially supplements the Warsaw Convention, SID was the “contracting carrier” whereas Singapore Airlines was the “actual carrier.” Both Germany and Australia are also parties to the Guadalajara Convention.

In addition, air waybills act as prima facie evidence of the contract terms, the receipt of the cargo and the conditions of the air carriage. In the absence of an air waybill, a negligent carrier is not entitled to avail itself of the liability limitation under the Amended Convention.

The Master Air Waybill was the standard form required by the International Air Traffic Association (IATA). The Bill listed the airport of departure as “Frankfurt” and the airport of destination as “Melbourne Tullamarine.” It also noted that the cargo was “bond delivery approved”, suggesting that it allowed SIA to carry the cargo to a bonded warehouse prior to customs clearance. SID also issued a standard form of air waybill used by freight forwarders; it also generally tracks the required language of the IATA form.

The Schenker Companies did not dispute their liability for the accident. They sought to limit its scope, however, by citing the Amended Warsaw Convention as incorporated into Australian law by statute in 1959. In the alternative, they relied on the house air waybill (the waybill) issued by SID in connection with this consignment.

Article 18.1 of the Warsaw Convention provides in relevant part: “The carrier is liable for damages sustained in the event of destruction or loss of, or damage to, any cargo, if the occurrence which caused the damage so sustained took place during the carriage by air.” Article 18.2 of the Convention defines “carriage by air” in part as follows: “The carriage by air within the meaning of [Art 18.1] comprises the period during which the baggage or cargo is in charge of the carrier, whether in an aerodrome or on board an aircraft, ...”

Finally, Article 18.3 declares that: “The period of the carriage by air does not extend to any carriage by land, by sea or by river performed outside an aerodrome.” The primary judge held, and the Court of Appeal agreed, that the Convention did not apply ex proprio vigore to the equipment once it had left the physical boundaries of Tullamarine Airport. The High Court unanimously concurs on this point.

The Court then addresses the effect of the waybill. “The primary judge ... held that the waybill was ‘confined to air carriage’ and, ... did not purport to cover any ‘land element’. Critical to his Honour’s reasoning was the relationship between [Clauses] 4 and 2.1. The latter provides that: ‘Carriage hereunder is subject to the rules relating to liability established by the Warsaw Convention unless such carriage is not ‘international carriage’ as defined by that Convention.”

“Clause 2.1, when read with [Clause] 4, was said to evidence an assumption that the carriage ‘as a whole’ will, or will not, fall within the Warsaw Convention’s definition of ‘international carriage’. In other words, the waybill, including [Clause] 4, would only operate in circumstances where the entire carriage performed pursuant to that waybill did not fall within the Convention. Given that the Convention applied prior to the point in time at which the consignment was removed from the boundaries of Tullamarine, [Clause] 4 could not be relied upon by the Schenker Companies.” [¶ 89]

“The limitation of liability contained in [Clause] 4 as noted earlier, is only available in respect of ‘carriage’. ‘Carriage’ is not defined in the waybill. However,‘carrier’ is defined to mean any air carrier which undertakes to carry goods pursuant to the waybill ‘or perform any other services incidental to such air carriage’. Siemens Australia relies on the emphasised phrase as supporting its contention that ‘carriage’ within the meaning of [Clause] 4 is limited to carriage by air. However, several factors suggest a different construction.” [¶ 91]

“First, ... [Clause] 4 itself operates only in respect of carriage to which the Warsaw Convention does not apply. In so providing, the waybill contemplates a disjunction between carriage to which the Convention applies (international carriage by air) and carriage which is governed solely by the terms of the waybill itself. It must follow that ‘carriage’ in [Clause] 4 has a meaning different from that contained in Article 18 of the Warsaw Convention.” [¶ 92]

“Secondly, the definition of ‘carrier’ relied upon by Siemens Australia speaks of the carriage of goods ‘hereunder’, i.e., pursuant to the terms of the waybill. Importantly, the terms of the waybill provide for the transportation of goods other than through carriage by air.” [¶ 93]

“In the present case, the terms of the Richtungsverkehr appear to have included the transportation of the consignment to Schenker Australia’s bonded warehouse. So much is suggested by the [parties’ correspondence] .... Evidence from ... the shipping officer at Siemens Australia, was to similar effect. It follows that delivery to the Schenker Australia bonded warehouse was contemplated by Siemens Germany, the Schenker Companies and, most importantly, Siemens Australia in its capacity as consignee.” [¶ 94]    

“Thirdly, the statutory regime in effect at the time of the consignment’s arrival at Tullamarine permitted no other possibility. Evidence before the primary judge indicated that Schenker Australia was permitted by an officer of the Australian Customs Service (Customs), from at least April 1991, to transport consolidated cargo from Tullamarine to its warehouse for deconsolidation without being required to submit that cargo to customs inspections prior to its removal from the airport.” [¶ 95]

After finding support in two not dissimilar Ninth Circuit cases, the majority concludes that: “[t]he result is that, on the proper construction of the waybill, the damage sustained to the consignment in the course of complying with requirements necessary in order to effect delivery of that consignment fell within the terms of [Clause] 4 of the waybill.” [¶ 99]

Citation: Siemens Ltd. v. Schenker International(Australia) Pty. Ltd., 205 A.L.R. 232, 78 A.L.J.R. 508, [2004] H.C.A. 11.

COPYRIGHTS

Canadian Supreme Court rules that Internet provider that downloads copyrighted music onto cache to speed up transmission and reduce costs does not thereby lose its status as neutral conduit of data and become content provider open to liability for infringement

Invoking the Canadian Copyright Act, the Society of Composers, Authors and Music Publishers of Canada (SOCAN) filed with the Canadian Copyright Board a proposed tariff that would apply to Internet transmissions of copyrighted music. The tariff sought to impose liability for royalties on Internet Service Providers (ISPs) for copyrighted music downloaded in Canada irrespective of whence the original transmission came. The Board approved the tariff. The Canadian Association of Internet Providers (CAIP), along with the United States Internet Industry Association and others challenged the tariff in court.

The Internet is a giant communications system involving a worldwide network of computers. Content providers upload their data, usually in the form of a Web site, to a host server which end users can access. End users look for the data available from content providers and the latter sends the requested data to the end users. Content providers and end users link up to the Internet with modems under contract with ISPs. End users may download musical works posted on host servers from anywhere in the world via the Internet.

Usually, ISPs are neither aware of, nor control, the content of the files stored on their host servers. Contracts with providers, however, sometimes allow ISPs to review posted content and to remove infringing files.

ISPs may also operate “cache servers.” Once an end user asks to access content on a Web site, the user’s ISP forwards the content to the end user. The ISP may also store a temporary copy of the content on its cache server. The ISP may carry out its end users’ next request for that content either from the copy posted on the original host server or from the ISP’s cache server. It is undisputed that caching speeds up data transmission over the Internet and prunes transmission costs.

In dismissing SOCAN’s tariff application, the Board reasoned that, to the extent that ISP’s were merely electronic conduits, they benefitted from the exemption in Section 2.4(1)(b) of the Act. This provision exempts parties who only furnish the means of telecommunication from liability for infringing activity.

The Federal Court of Appeal generally upheld the Board as to the applicability of the exemption. However, in a 2‑1 majority decision, it also held that where an ISP in Canada creates a “cache” of Internet material, even for purely technical reasons, it stops being a mere intermediary and becomes a content provider. [See preliminary report on this case in July issue.]

Upon review, the Supreme Court of Canada in part allows the appeal on the status of cached material. It also dismisses SOCAN’s cross‑appeal seeking to have the Court rule that ISPs may be liable for copyright royalties even where serving only as a neutral conduit.

As the Court sees it, Parliament’s exemption in Section 2.4(1)(b) represented its effort to strike a fair balance between protecting copyright and fostering the evolution of computer and Internet technology. It saw a public interest in promoting the development of telecommunications operations without the constant risk of copyright infringement.

The Court first questions the Board’s ruling that the situs of the host server is the only relevant link between Canada’s legal regime and the communication. As a matter of international law and practice, as well as of the Parliament’s legislative reach, Canada’s jurisdiction is not so limited.

“The applicability of our Copyright Act to communications that have inter-national participants will depend on whether there is a sufficient connection between this country and the communication in question for Canada to apply its law consistent with the principles of order and fairness.” [¶ 57]

“So also ... a telecommunication from a foreign state to Canada, or a telecommunication from Canada to a foreign state, ‘is both here and there’. Receipt may be no less ‘significant’ a connecting factor than the point of origin (not to mention the physical location of the host server, which may be in a third country).” [¶ 59]

“In terms of the Internet, relevant connecting factors would include the situs of the content provider, the host server, the intermediaries and the end user. The weight to be given to any particular factor will vary with the circumstances and the nature of the dispute.” [¶ 61]

“Generally speaking, this Court has recognized as a sufficient ‘connection’ for taking jurisdiction, situations where Canada is the country of transmission [Cite] or the country of reception.[Cite] This jurisdictional posture is consistent with international copyright practice.” [¶ 63]

“At present there is authority in the United States for taking copyright jurisdiction over both the sender of the transmission out of the United States and the receiver in the United States of material from outside that country.” [¶ 69]

The Court then takes up the impact of the Act’s exemption. “Section 2.4(1)(b) is not a loophole but an important element of the balance struck by the statutory copyright scheme. It finds its roots, perhaps, in the defence of innocent dissemination sometimes available to bookstores, libraries, news vendors, and the like who, generally speaking, have no actual knowledge of an alleged libel, are aware of no circumstances to put them on notice to suspect a libel, and committed no negligence in failing to find out about the libel.” [¶ 89]

“Interpretation of Section 2.4(1)(b) in this way is consistent with art. 8 of the WIPO Copyright Treaty, 1996 [Ed.-- to which the U.S. is also a party.]. In the accompanying Agreed Statements, the treaty authority states: ‘It is understood that the mere provision of physical facilities for enabling or making a communication does not in itself amount to communication within the meaning of this Treaty or the Berne Convention.’” [¶ 97]

“I conclude that the Copyright Act, as a matter of legislative policy established by Parliament, does not impose liability for infringement on intermediaries who supply software and hardware to facilitate use of the Internet. The attributes of such a ‘conduit’, as found by the Board, include a lack of actual knowledge of the infringing contents, and the impracticality (both technical and economic) of monitoring the vast amount of material moving through the Internet, which is prodigious. We are told that a large on‑line service provider like America Online delivers in the order of 11 million transmissions a day.” [¶ 101]

SOCAN et al. also contended that the making of caches by an ISP deprives it of being a mere conduit. The Court, however, is not persuaded. “Parliament has decided that there is a public interest in encouraging intermediaries who make telecommunications possible to expand and improve their operations without the threat of copyright infringement. To impose copyright liability on intermediaries would obviously chill that expansion and development, as the history of caching demonstrates.”

“In the early years of the Internet, as the Board found, its usefulness for the transmission of musical works was limited by ‘the relatively high bandwidth required to transmit audio files.’ This technical limitation was addressed in part by using ‘caches’. As the Board noted, ‘Caching reduces the cost for the delivery of data by allowing the use of lower bandwidth than would otherwise be necessary.’”

“The velocity of new technical developments in the computer industry, and the rapidly declining cost to the consumer, is legendary. Professor Takach has unearthed the startling statistic that, if the automobile industry was able to achieve the same performance‑price improvements as has the computer chip industry, a car today would cost under five dollars and would get 250,000 miles to the gallon of gasoline. Section 2.4(1)(b) reflects Parliament’s priority that this entrepreneurial push is to continue despite any incidental effects on copyright owners.” [¶ 114]

“A comparable result has been reached under the U.S. Digital Millennium Copyright Act, 17 U.S.C. Section 512 (1998) ... which in part codified the result in Religious Technology Center v. Netcom On‑line Communication Services, Inc., 907 F.Supp. 1361, 1369-70 (N.D. Cal. 1995), where it was observed: ‘These parties, who are liable under plaintiffs’ theory, do no more than operate or implement a system that is essential if Usenet messages are to be widely distributed. There is no need to construe the Act to make all of these parties infringers. Although copyright is a strict liability statute, there should still be some element of volition or causation which is lacking where a defendant’s system is merely used to create a copy by a third party.’” [¶ 117]

“In my opinion the Copyright Board’s view that caching comes within the shelter of Section 2.4(1) is correct, and I would restore the Board’s conclusion in that regard.” [¶ 119]

“The knowledge that someone might be using neutral technology to violate copyright is not necessarily sufficient to constitute authorization, which requires a demonstration that the defendant did ‘[g]ive approval to; sanction, permit; favour, encourage’ the infringing conduct. I agree that notice of infringing content, and a failure to respond by ‘taking it down’ may in some circumstances lead to a finding of ‘authorization’.”

“However, that is not the issue before us. Much would depend on the specific circumstances. An overly quick inference of ‘authorization’ would put the Internet Service Provider in the difficult position of judging whether the copyright objection is well founded, and to choose between contesting a copyright action or potentially breaching its contract with the content provider. A more effective remedy to address this potential issue would be the enactment by Parliament of a statutory ‘notice and take down’ procedure as has been done in the European Community and the United States.” [¶ 127]

Citation: SOCAN v. Canadian Assn. of Internet Providers, 2004 A.C.W.S.J. 8181; 132 A.C.W.S. (3d) 142 (Can. Sup. Ct. June 30).

ECONOMIC SANCTIONS

By Executive Order, the U.S. President has removed many non-statutory economic sanctions against Libya in light of latter’s cooperation in disclosing and eliminating its nuclear and chemical weapons programs

According to the U.S. State Department, the President issued an Executive Order on January 20, 2004 that takes away a number of restrictions he had imposed on Libya. For example, the Order ends the National Emergency announced in 1986 under the International Emergency Economic Powers Act (IEEPA).

It also abolishes economic curbs on aviation services with Libya, allowing direct scheduled air service and regular passenger charter flights. In addition, the Order unblocks about $1.3 billion in assets frozen under the Libya sanctions program as it applied to both Libyan and non‑Libyan entities.

During 2004, Libya has been working closely with several international organizations such as the International Atomic Energy Agency (IAEA) and the Organization for the Prohibition of Chemical Weapons (OPIC). Furthermore, Libya has asked the United States and the United Kingdom for their help in “transparently and verifiably” doing away with its weapons of mass destruction and its MTCR‑class missile programs.

On the nuclear front, Libya has enabled the removal of all critical elements of its hitherto undeclared nuclear programs. It has also started cooperating with the international community to remove its highly enriched uranium and has agreed to alter its reactor at Tajura to run on low‑enriched uranium fuel. Finally, Libya has signed and is carrying out the IAEA Additional Protocol and has agreed to allow unimpeded site access by international personnel.

Furthermore, Libya has acceded to the Convention on the Prohibition of the Development, Production, Stockpiling and Use of Chemical Weapons and on their Destruction with Annexes of April 29, 1997 [Jan 13, 1993, 32 I.L.M. 800, entered into force April 29, 1997] Moreover, it has presented a declaration of its chemical agents to the Organization for the Prohibition of Chemical Weapons (OPC).

On the other hand, ending the national emergency will not affect a wide variety of statutory sanctions imposed on Libya. For instance, it remains labeled as a “State Sponsor of Terrorism” under Section 620A of the Foreign Assistance Act. Moreover, strictures laid down by Section 40 of the Arms Export Control Act and Section 6(j) of the Export Administration Act of 1979 (exports of certain items on the Commodity Control List), as well as other similar constraints, continue to apply to Libya.

Citation: Fact Sheet No. 2004/1001, U.S. State Department, Office of Spokesman, Washington, D.C.; Monday, September 20, 2004.

IMMUNITY (HEAD-OF-STATE)

Seventh Circuit holds that Falun Gong practitioners cannot sue Chinese President based on U.S.’s recognition of his head-of-state immunity; such immunity extends to all service of process for same suit, even if intended for other parties

Shortly before his visit to Chicago in October 2002, several practitioners of the Chinese spiritual movement Falun Gong (FG) filed a civil action in an Illinois federal court against the former President of China, Jiang Zemin, and the Falun Gong Control Office (FGCO). The complaint alleged torture, genocide and other human rights violations under the Alien Tort Claims Act, 28 U.S.C. Section 1350.

The FGCO is an office set up in 1999 within the Chinese Communist Party allegedly to suppress the FG. Founded in 1992 by former Chinese soldier, Li Hongzhi, the FG movement claims that it promotes a peaceful philosophy combining Buddhist teachings, meditation and martial arts.

The Chinese Government, however, considers the FG a subversive cult. In July 1999, President Jiang issued an edict outlawing FG. This edict was followed by mass arrests, allegedly farcical trials, torture, forced labor, “re‑education,” and the killing of members.

Plaintiffs then moved ex parte for leave to serve Jiang in Chicago, in his own right and as agent for the FGCO. The district court granted the motion, and plaintiffs delivered the summons and complaint to a U.S. Secret Service officer stationed at Jiang’s hotel. Neither Jiang nor the FGCO answered the suit.

After plaintiffs moved for a default, the U.S. government intervened pursuant to 28 U.S.C. Section 517 to vacate the service or, in the alternative, to assert Jiang’s head-of-state immunity. The district court then dismissed the action (1) against Jiang based on head-of-state immunity, and (2) against the FGCO for lack of personal jurisdiction. Plaintiffs filed the present appeal. The U.S. Court of Appeals for the Seventh Circuit affirms.

The plaintiffs first argued that a head of state is not immune for violations of jus cogens norms of international law. The Court, however, is not persuaded. “The obligation of the Judicial Branch is clear - a determination by the Executive Branch that a foreign head of state is immune from suit is conclusive and a court must accept such a determination without reference to the underlying claims of a plaintiff.”

“Our deference to the Executive Branch is motivated by the caution we believe appropriate of the Judicial Branch when the conduct of foreign affairs is involved. ... Just as the [Foreign Sovereign Immunities Act] is the Legislative Branch’s determination that a nation [with several exceptions] should be immune from suit in the courts of this country, the immunity of foreign leaders remains the province of the Executive Branch.”

“The Executive Branch’s determination that a foreign leader should be immune from suit even when the leader is accused of acts that violate jus cogens norms is established by a suggestion of immunity. We are no more free to ignore the Executive Branch’s determination than we are free to ignore a legislative determination concerning a foreign state. ... The district court was correct to accept this recognition as conclusive.” [Slip op. 15-19]

Furthermore, because the Executive Branch has recognized Jiang as immune from suit, plaintiffs could not use him as an involuntary agent to effect service on the FGCO. This authoritative recognition of Jiang’s head-of-state immunity precludes the service of process upon him even though it is aimed at another party.

“The Executive Branch has stated it is working to persuade the government of China to put an end to the human rights violations it has inflicted on its people for more than half a century. Success depends on diplomacy, not United States courts.” [Slip op. 26]

The Court also made this observation. “We express some concern at the enlistment of agents of the Executive Branch, particularly those charged with providing security for President Jiang’s visit, to effectuate service. Our concern is grounded in separation of powers principles as well as the policy ramifications inherent in requiring a Secret Service agent to serve simultaneously as a security guard for a foreign dignitary and a de facto process server.” [Slip op. 4, n. 5.]

Citation: Wei Ye v. Jiang Zemin, No. 03-3989 (7th Cir. Sept. 8, 2004).

JURISDICTION (PERSONAL)

In dispute over marketing of Nazi memorabilia on Yahoo! internet sites, Ninth Circuit finds that there was no personal jurisdiction over defendants in Yahoo!’s declaratory suit against French anti-Nazi organizations which had obtained French court order against Yahoo! to expunge Nazi material from its U.S. site

Yahoo! Inc. (defendant) is a prominent internet service provider (ISP) based in Santa Clara, California. In its internet “chat rooms”, discussions of Nazi doctrines have taken place and defendant’s action website has featured Nazi memorabilia. In April 2000, the French “Ligue Contre Le Racisme et L’Antisemitisme” (LICRA) and the L’Union Des Etudiants Juifs De France (UEJF) sued defendant in a French court and served it in California.

Section R645-2 of the French Criminal Code bans the marketing of Nazi propaganda materials. In response, defendant had taken all such materials off of its French website, but they are still available through its American site. The French court also ordered defendant to remove such materials from all of its internet sites.

In turn, defendant filed an action in California federal court for a declaratory judgment that the French court’s orders were not recognizable by, or enforceable in, U.S. courts. The district court found that it had personal jurisdiction over LICRA and UEJF (1) because of the cease-and-desist letter that LICRA had sent to defendant’s California headquarters, (2) because it had used the U.S. Marshals Service to perfect process, and (3) because LICRA and UEJF had asked the French court to order defendant to stop doing certain acts within the U.S.

In the court’s view, these actions had constituted “express aiming” within the meaning of Calder v. Jones, 465 U.S. 783 (1984), and were enough of a basis for personal jurisdiction. The district court eventually declared that the French court’s orders were unenforceable in the U.S. and gave summary judgment to defendant. See 2001 International Law Update 184.

LICRA and UEJF appealed the district court’s judgment. The U.S. Court of Appeals for the Ninth Circuit affirms, however, finding that the district court was unable to obtain personal jurisdiction over LICRA and UEJF.

The Court admits that it cannot directly review the French court’s determination that defendant was breaching French law. Defendant, however, submitted that the enforcement of the French court’s order in the U.S. would violate its U.S. First Amendment rights. An American court which has personal jurisdiction over LICRA and UEJF could review such a constitutional claim.

So far, however, LICRA and UEJF have not subjected themselves to personal jurisdiction in the U.S. Nor have the two organizations themselves invoked the jurisdiction of the U.S. courts to enforce the French court orders.

Here, none of LICRA’s and UEJF’s activities constitute a foreign wrongful action aimed at an American defendant within Calder. “France is within its rights as a sovereign nation to enact hate speech laws against the distribution of Nazi propaganda in response to its terrible experience with Nazi forces during World War II. Similarly, LICRA and UEJF are within their rights to bring suit in France against Yahoo! for violation of French speech law.”

“The only adverse consequence experienced by Yahoo! as a result of the acts with which we are concerned is that Yahoo! must wait for LICRA and UEJF to come to the United States to enforce the French judgment before it is able to raise its First Amendment claim. However, it was not wrongful for the French organizations to place Yahoo! in this position.” [Slip op. 15]

Citation: Yahoo! Inc. v. La Ligue Contre Le Racisme at L’Antisemitisme, No. 01-17424 (9th Cir. August 23, 2004).

SOVEREIGN IMMUNITY

In assault suit by U.S. citizen against United Kingdom and its servicemen, Ninth Circuit holds that Foreign Sovereign Immunity Act provisions are subject to “existing international agreements” such as NATO-SOFA and that, in case of conflict, Agreement prevails; as to military defendants, proper remedy is under Federal Tort Claims Act

According to the complaint, in January 1997, a fight erupted in a bar in Tacoma, Washington, between Robert Moore (plaintiff) and several members of the British military (defendants). Plaintiff was injured and brought the present action. It sought more information about the incident from the British Government under the Freedom of Information Act (FOIA), as well as damages under the “non-commercial tort” exception of the FSIA.

The defendants include an individual named Kenneth Southall, ten unnamed individuals, and the United Kingdom; they did not appear. The U.S. filed an amicus curiae brief suggesting a lack of subject matter jurisdiction. The district court agreed and dismissed the case on that ground. Plaintiff noted an appeal. The U.S. Court of Appeals for the Ninth Circuit affirms.

The Court first analyzes subject matter jurisdiction under the FSIA. Federal courts have jurisdiction over foreign states as defendants only in situations when the state is not entitled to immunity. See 28 U.S.C. Section 1330(a). The FSIA’s noncommercial tort exception applies to actions where plaintiff seeks money damages for personal injury or death, or property damage, caused by the foreign state’s tortious act or omission. See 28 U.S.C. Section 1605(a)(5). Further, such a plaintiff has to show (1) that the foreign state’s employee committed the torts within the scope of his or her employment, and (2) that the claim does not stem from the exercise of, or failure to exercise, a discretionary function.

The North Atlantic Treaty Organization Status of Forces Agreement (NATO-SOFA) [June 19, 1951, 4 U.S.T. 1792, T.I.A.S. No. 2846] regulates the bringing of lawsuits against members of British and other NATO military forces arising out of their activities within the U.S.

The Foreign Sovereign Immunities Act (FSIA) [28 U.S.C. Sections 1602ff] provides in Section 1604 that: “Subject to existing international agreements to which the United States is a party ... a foreign state shall be immune from jurisdiction ... except as provided in sections 1605 to 1607 of this chapter.” The question here is how to interpret the italicized phrase.

In Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428 (1989), the Court explained that the “treaty exception” applies when international agreements “expressly conflict” with the FSIA’s immunity provisions.

“This ‘conflict reading’ of Section 1604 is the only sensible one. Under this interpretation of the FSIA, preexisting international agreements could either expand or contract a foreign nation’s amenability to suit as compared to that provided under the FSIA. To read Section 1604 otherwise, as permitting pre-existing international agreements only to expand a foreign state’s exposure to suit but not to limit it, would allow the FSIA implicitly to trump treaties precluding certain kinds of suits against foreign nations.”

“Given the lack of any specific indication that Congress intended this alternate construction, we follow the canon of statutory interpretation that ‘acts of Congress should not be construed to conflict with international obligations.’ ... We therefore hold that the FSIA in its entirety is subject to such ‘existing international agreements.’ If there is a conflict between the FSIA and such an agreement regarding the availability of a judicial remedy against a contracting state, the agreement prevails.” [Slip op. 12-13]

Article VIII, paragraph 5(a), of the NATO-SOFA provides that claims “shall be filed, considered and settled or adjudicated in accordance with the laws and regulations of the receiving state with respect to claims arising from the activities of its own armed forces.” Daberkow v. United States, 581 F.2d 785, 789 (9th Cir. 1978), suggested that, under NATO-SOFA, the Court should consider foreign servicemen, in effect, as members of the U.S. military for purposes of determining claims arising out of acts or omissions of the servicemen within the U.S.

The NATO-SOFA ratification history supports this interpretation. Finally, the International Agreement Claims Act of 1954 (Pub. Law No. 83-734, 68 Stat. 1006), authorizes payment for SOFA claims. This enables the courts to treat the NATO-SOFA claims procedures as federal law.

Since plaintiff alleged that the British servicemen acted within the scope of their official activity, Article VIII, paragraph 5, of the NATO-SOFA governs. Based on it, plaintiff’s exclusive tort remedy is a suit against the U.S. under the Federal Tort Claims Act (FTCA). Thus, the Court (1) upholds the district court’s dismissal of plaintiff’s FSIA claim for lack of jurisdiction and (2) holds that court properly dismissed the FOIA claim because it does not allege a viable cause of action.

Citation: Moore v. The United Kingdom, No. 01-36146 (9th Cir. September 23, 2004).

WORLD TRADE ORGANIZATION

In Brazil-U.S. dispute over subsidized cotton, WTO Dispute Settlement Panel recommends that U.S. conform to Agreement on Agriculture and remove its cotton subsidies

On September 8, 2004, a Dispute Settlement Panel (DSP) of the World Trade Organization (WTO) issued its 351-page report in the matter of Brazil’s complaint against U.S. subsidies on upland cotton. The U.S. support mechanisms for the cotton industry, include direct payments, export-credit guarantees, production-flexibility contract payments, crop-insurance payments, marketing loans, market loss assistance, and so-called Step 2 payments.

Brazil mainly contended that (1) U.S. domestic subsidies for cotton cause serious prejudice by depressing or suppressing world cotton prices, and (2) U.S. export credit guarantees for all commodities constitute export subsidies.

According to the press release of the U.S. Trade Representative, “the panel agreed with the United States that income support provided to U.S. cotton farmers and others that is fully decoupled from production and prices – that is, a recipient does not have to produce cotton to get the payment and can choose to produce nothing at all – has not suppressed or depressed world cotton prices.” The U.S. Trade Representative also interprets the Report in a way that the U.S. domestic support programs did not by themselves cause serious prejudice to Brazil’s interests in the years 2003-2007.

The DSP makes two recommendations. The first is that the U.S. bring the disputed measures into conformity with the Agreement on Agriculture. The second is that the U.S. withdraw the prohibited subsidies as required by the Agreement on Subsidies and Countervailing Measures (SCM) within six months of the adoption of the Panel Report upon review or July 1, 2005 (whichever is earlier).

Citation: United States - Subsidies on Upland Cotton (WT/DS267/R) (8 September 2004); U.S. Trade Representative Press Release 09/08/2004; The Washington Times, September 9, 2004. [Panel Report is available on WTO website “www.wto.org.”]

WORLD TRADE ORGANIZATION

WTO Appellate Body publishes its report in U.S.-Canada wheat dispute, concluding that U.S. failed to prove its allegations that Canadian wheat regulators were violating GATT 1994 and Agreement on Trade-Related Investment Measures

On August 30, 2004, the Appellate Body of the World Trade Organization (WTO) issued its report on the U.S. complaint entitled: “Canada - Measures Relating to Exports of Wheat and Treatment of Imported Grain.” In its Report, the Dispute Settlement Panel (DSP) addressed the U.S. claim that the export regime of the Canadian Wheat Board (CWB) is inconsistent with GATT 1994, and that certain aspects of Canada’s bulk grain handling system and the rail transport clash with GATT 1994 and the Agreement on Trade-Related Investment Measures (TRIMs).

The Panel concluded, however, that the U.S. “has failed to establish its claim that Canada has breached its obligations under Article XVII:1 of the GATT 1994 because the CWB Export Regime necessarily results in the CWB making export sales that are not in accordance with the principles of subparagraphs (a) or (b) of Article XVII:1.” (Paragraph 7.4(a)). The U.S. appealed, raising procedural and substantive issues.

The Appellate Body now essentially affirms. It holds, inter alia, that the Panel did not err in not considering the “proper” relationship between subparagraphs (a) and (b) of Article XVII:1 of GATT 1994. Nor did the Panel fail to examine the CWB Export Regime in its entirety. Finally, it was correct in deciding that the U.S. had failed to prove its claim that Canada has been breaching its obligations under Article XVII:1 of GATT 1994.

Citation: Canada - Measures Relating to Exports of Wheat and Treatment of Imported Grain (WT/DS276/AB/R) (30 August 2004). [Report is available on WTO website “www.wto.org.”]

Japanese regulators penalize Citibank. On September 17, the Financial Services Agency (FSA) of Japan reported that it has halted private banking operations at Citibank Japan’s (part of Citigroup, Inc.) Marunouchi branch in Tokyo and at its Nagoya, Osaka and Fukuoka satellite offices for one year starting on September 29. As of the same date, the FSA also ordered Citibank to decline foreign currency deposits from new customers for 30 days. The FSA will revoke their private banking licenses effective on September 30, 2005. The Japanese Securities and Exchange Surveillance Commission (SESC) had asked the FSA to take the above actions; a recent inspection of Citibank Japan’s private banking operations turned up many “severe legal violations” and “extremely inappropriate transactions” going on at the four Citibank offices. Article 27 of Japan’s Banking Law empowers the government to cancel banking licenses when an institution behaves in a way that is harmful to the public interest. After apologizing for the problems, Citibank Japan pointed out that the sanctions will not impact upon bank services for its retail customers. It subsequently announced that it would comply with FSA directives. Citation: Associated Press (via Findlaw), Tokyo, Friday, September 17, 2004 at 13:04:42 G.M.T.; The Asian Banker Journal, September 30, 2004.

Paris appellate court upholds acquittals of Diana paparazzi. After the crash that killed Diana Spencer and Dodi Fayed in a Paris traffic tunnel, Mr. Fayed’s father, Mohammed al Fayed, filed a criminal complaint for invasion of privacy against three photographers who had taken pictures of the crash scene. (Diana’s relatives and the British royal family were not plaintiffs in the case.) The three men, whose photos were seized and not published, were among the crowd of photographers who followed the car carrying Diana and Mr. Fayed as it sped through the streets of Paris on August 31, 1997. In November 2003, a court of first instance found them not guilty. The trial court notably ruled that, under French law, a crashed vehicle on a public highway is not a private area. It also noted that the couple knew they would be photographed when they left the Ritz hotel for the fatal ride. Mr. Fayed senior had then filed an appeal. On September 14 last, a Paris appellate court affirmed the acquittals. Citation: Associated Press (via Findlaw), Paris, Tuesday, September 14, 2004 at 17:02:21 G.M.T. (byline of Verena von Derschau of AP); Press Association report of September 14, 2004.