2005 International Law Update, Volume 11, Number 2 (February)

2005 International Law Update, Volume 11, Number 2 (February)

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

ACT OF STATE DOCTRINE

Ninth Circuit finds that district court violated Act of State Doctrine when it pursued contempt and discovery proceedings against bank which had transferred funds to Philippine government pursuant to judgment of Philippine Supreme Court

A class of plaintiffs obtained a large judgment against the Marcos estate in Hawaii district court for human rights violations suffered under the Marcos regime. The judgment also enjoined the estate and its abettors from transferring any of the estate’s assets. These plaintiffs, however, were not the only ones looking for Marcos’ money. The Republic of the Philippines itself was trying to bring about the forfeiture of the Marcos’ estate because Marcos had purloined the assets from the Philippine government and its people.

The plaintiffs in the Hawaiian action eventually received an injunction from the court ordering those Swiss banks that held Marcos’ funds to hold the assets for that class of plaintiffs. The Swiss government later released these funds to The Philippine National Bank (hereinafter “Bank”), to be held in an escrow account at its branch in Singapore pending a final court determination. The Philippine Supreme Court eventually held these funds forfeited to the Republic of the Philippines. The Bank accordingly transferred the funds to the Philippine government.

The Hawaii district court then ruled that the Philippine Supreme Court had violated “due process by any standard” and issued an Order to Show Cause against the Bank (which was not a party to the Hawaii action) to show why it should not be held in contempt for violating the court’s injunction against the transfer of Marcos’ assets.

Before that contempt proceeding could be completed, the Bank petitioned the U.S. Court of Appeals for a writ of mandamus to prevent the district court from pursuing contempt and discovery proceedings. The U.S. Court of Appeals for the Ninth Circuit ruled that the district court orders had indeed violated the Act of State Doctrine (ASD), and issues the writ. The ASD reflects the policy that the Judicial Branch should not pass judgment on foreign acts of state to avoid interfering with the conduct of foreign affairs by the political branches.

“The district court’s orders in issue violated this principle. In order to obtain assets from the Philippine Bank, or to hold the Bank in contempt for the transfer of those assets to the Republic, the district court necessarily (and expressly) held invalid the forfeiture judgment of the Philippine Supreme Court. ... [T]his action of the district court violated the [ASD].”

“The class plaintiffs ... argue that the [ASD] is directed at the executive and legislative branches of foreign governments, and does not apply to judicial decisions. Although the [ASD] is normally inapplicable to court judgments arising from private litigation, there is no inflexible rule preventing a judgment sought by a foreign government from qualifying as an act of state. ...”

“There is no question that the judgment of the Philippine Supreme Court gave effect to the public interest of the Philippine government. The forfeiture action was not a mere dispute between private parties; it was an action initiated by the Philippine government pursuant to its ‘statutory mandate to recover property allegedly stolen from the treasury.’ ... We have earlier characterized the collection efforts of the Republic to be governmental. ... The subject matter of the forfeiture action thus qualifies for treatment as an act of state.” [Slip op. 7-9]

Neither does the fact that the funds were located outside the Philippines render the [ASD] inapplicable. The Philippine Supreme Court issued its judgment on Philippine territory, and the Republic of the Philippines had power over the Bank in Singapore because it was a Philippine corporation. Even if the funds had been located in a non-Philippine entity in Singapore, the underlying considerations of the [ASD] would still apply. A foreign state’s interest in enforcing its laws does not end at its borders. Finally, to affirm the district court’s actions would frustrate the procedure chosen by the Swiss and Philippine governments to adjudicate Marcos’ assets.

Citation: In re: Philippine National Bank v. United States District Court for the District of Hawaii, No. 04-71843 (9th Cir. Feb. 4, 2005).

FAMILY LAW

Where Irish applicant married Irish man in Ireland based on his fraudulent representations as to validity of his Ohio divorce from another, Irish Supreme Court rules that applicant for separation and benefits cannot invoke equitable estoppel to prevent wrongdoer from challenging their invalid marriage but two Justices suggest other civil remedies she might have against wrongdoer under facts found by lower court

In 1968, the first respondent (Mr. R) married the notice party (Ms. N) in Dublin. Both were citizens and residents of the Irish Republic where the marriage took place. One child was born of this marriage. About four years later, the marriage broke up and the parties thereafter lived apart with N economically self-sufficient.

R later met and worked with the applicant (Ms. A) and fell in love with her. He was anxious to marry A and therefore wanted to end his Irish marriage to N. In 1982, while in Ohio on one of several short training trips to his Irish company’s parent, an attorney acquaintance offered to obtain R an Ohio divorce from N. Based on false information that R had an Ohio residence and spent much time in the State, R secured a divorce from the Ohio court. N did get notice of the Ohio proceedings but saw no reason to take part in them or to ask for maintenance, or to have any further dealings with R.

A believed that the Ohio divorce was valid and that R was now free to marry her. When R tried to arrange a registry office marriage in England, however, this office told R that the English registrar general could not recognize the purported Ohio divorce.

In March, 1983, A and R were married at the registry office in Dublin. At no time did R tell A (or the Irish registrar) the unvarnished truth about the Ohio decree. The application to the registrar asserted that R was single. Thereafter, R and A lived together as husband and wife for about seventeen years and had two children. The relationship between the parties later fell apart.

A then issued a family law civil bill in an Irish Circuit Court seeking a judicial separation and ancillary forms of relief. In his defense and counterclaim, R asked (1) for a declaration pursuant to Section 29(1) of the Family Law Act of 1995 that the divorce obtained by him from the court in Ohio was invalid and (2) for a declaration that the purported marriage entered into between himself and A was therefore null and void.

When the matter came before the Circuit Court, the trial judge directed that, as a preliminary issue, there should be a hearing as to whether the Ohio divorce had been valid. A argued, inter alia, that, given the length of the marriage, and R’s fraud as to the Ohio divorce, the court ought to equitably estop R from attacking its validity. She urged that the court could only do justice in the case by barring R’s challenge to her marriage to R.

The Circuit Court found that A was not aware of any problem with the alleged divorce. Based on her reading of what seemed, on its face, to be a judicially approved Ohio decree, A honestly believed that the Ohio divorce was fully effective at the time she married R.

The Circuit Court was inclined to agree with A that estoppel might be the only way to bring some sort of justice to her situation. Pursuant to Irish procedure, however, the Circuit Court Judge decided to refer the following legal question for the opinion of the Supreme Court: “Am I entitled to hold in these proceedings as a matter of law, having regard to the findings of facts made by me, that [R] is estopped from denying that he is married to [A]?” The Supreme Court of Ireland unanimously answers in the negative, with several opinions.

All the Justices seem to agree that the Court’s ruling in Gaffney v. Gaffney [1975] I. R. 133 has laid down the relevant law.. “Thus, arising from Gaffney ... and subsequent decisions of this Court, the law is well established that estoppel may not be used to change a person’s status when that has not occurred, [or] to prevent a party [from] demonstrating that a foreign divorce decree was given without jurisdiction. Therefore, unless Gaffney v. Gaffney is overruled by this court it is a governing authority on this issue.” [¶ 19] This appears to preclude A from having R estopped from showing that he had fraudulently gotten a foreign divorce decree from a court without jurisdiction.

Noting that divorce was unavailable under Irish law until 1996, the Court then examines the viability of Gaffney in today’s world. “A decision of the full Supreme Court ... , given in a fully‑argued case and on a consideration of all the relevant materials, should not normally be overruled merely because a later Court inclines to a different conclusion. Of course, if possible, error should not be reinforced by repetition or affirmation, and the desirability of achieving certainty, stability, and predictability should yield to the demands of justice.”

“However, a balance has to be struck between rigidity and vacillation, and to achieve that balance the later Court must, at the least, be clearly of opinion that the earlier decision was erroneous . . . Even if the later Court is clearly of opinion that the earlier decision was wrong, it may decide in the interests of justice not to overrule it if it has become inveterate and if, in a widespread or fundamental way, people have acted on the basis of its correctness to such an extent that greater harm would result from overruling it than from allowing it to stand. In such cases the maxim communis error facit jus applies.” [¶ 31]

Moreover, allowing the use of estoppel in suits relating to marital status would generate both theoretical and practical anomalies and problems. For example, it would mean that the Irish courts could end up treating people as married for some purposes but not for others.

“The possible effect of the use of an estoppel is highlighted by the potential order of the Circuit Court should estoppel be used. First, there would be a decree based on judicial separation (which is a decree grounded on the parties being spouses) which would be based on the use of estoppel. Yet, on the counterclaim, there would be a decree of nullity, which is grounded on the parties not being spouses. Both these orders would relate to the same ‘marriage’. Thus, the one order would have separate portions effectively recognising a different status for the parties.” [¶ 34]

Here, the case rested on the issue of A’s marriage to R. As precedent and policy dictate, A may not rely on estoppel to prevent a court from recognizing and relying up R’s true legal status as invalidly divorced from N.

Nor is A’s argument persuasive that the case involves purely private arrangements between A and R. On the contrary, a judicial ruling on matrimonial status, such as a decree of divorce, addresses the public at large and is a decision in rem. In addition, many of the financial and property provisions ancillary to a decree may concern third parties such as pension trustees as well as public bodies such as the Land Registry or the Revenue Commissioners.

Justice John Murray (formerly a member of the European Court of Justice), agrees with his colleagues that the governing precedent is Gaffney v. Gaffney [1975] I. R. 133, 152. He quotes a key passage from that opinion:

“The plaintiff was either his wife or she was not. Apart from other legal incidents in this country, certain constitutional rights may accrue to a woman by virtue of being a wife which would not be available to her if she were not. The matter cannot, therefore, by any rules of evidence be left in a position of doubt nor could the Courts countenance a doctrine of estoppel if such existed, which had the effect that a person would be estopped from saying that he or she is the husband or wife, as the case may be, of another party when in law the person making the claim has that status.”

In obiter dicta concurred in by Justice McCracken, Justice Murray looks at possible alternative legal remedies which A might pursue to right the wrong done to her by R’s deceptions. “In a society based on the rule of law it would certainly be a major gap in its fabric if persons who have been wronged in the manner in which [A] has been in this case were to be left without remedy. In such a society, the system of law is intended to be complete, that is to say that within its framework it provides, in principle, a remedy for any denial of rights conferred by law or its constitution (the extent of the remedy may be constrained by public policy considerations in the interests of the common good or, where the right is conferred by law, by the limited nature of the right, but none of these extra considerations seem to me to arise in this context). Either [A] has some remedy against [R] or she has not.” [¶ 74]

“If the law permitted a person to induce, by deceit or fraudulent misrepresentation, another to enter into an otherwise lawful marriage and, after many years of ostensible marriage, to cut himself adrift without any obligation to the other person, it would in my view undermine the status of the marriage contract itself and the constitutional rights which that person was entitled to have protected by virtue of that status. A prosecution for bigamy where a person enters into a second marriage in the full knowledge that a first marriage is valid and subsisting may be a means of protecting the public interest but it is not a remedy which vindicates or protects the rights of the injured party.”

“A declaration as to status can afford protection to the legitimate spouse of the first marriage. In my view it is a direct attack on the constitutional rights of a person for another to induce them or cause them to enter into a duly solemnised marriage contract by deceit when the latter knows that he lacks the capacity to enter into a valid marriage by reason of a pre‑existing and subsisting marriage.” [¶ 83]

“For the purposes of this case stated, on the basis of the facts as found by the Circuit Court Judge, I am quite satisfied that [A] would have a remedy in law for actionable deceit grounded on the fraudulent misrepresentations of [R]. I emphasise that this is based on the facts as found by the Circuit Court Judge in the proceedings before him because, should [A] initiate other proceedings against [R], the onus would be on her, in the ordinary way, to establish the necessary facts entitling her to any relief claimed.” [¶¶ 94-95]

“It seems to me that in any action for deceit based on the kind of facts which have been found by the Circuit Court Judge in these proceedings, a court would be entitled, in awarding damages, to take into account the statutory and other entitlements of a plaintiff who was separated from her ostensible husband and to which she would have been so entitled if in fact there had been a valid marriage.” [¶ 98]

“It has not been relevant to consider whether any conduct of [R] as found by the Circuit Court Judge could amount to a breach of the criminal law. The Circuit Court still has seisin of the final determination of this case and it is in my view a matter for the Circuit Court Judge whether, in the exercise of his discretion, he considers there are any grounds for directing that the papers in this case be sent to the Director of Public Prosecutions.” [¶ 104]

Citation: C.K. v. J.K. and Attorney General et al., [2004] I.E.S.C. 21, [2004] 1 I.R. 224 (Sup. Ct. Ireland).

FAMILY LAW

Citing various international conventions and domestic laws on DNA sampling in other countries, German High Court holds in two decisions that paternity cannot be challenged based on secretly collected DNA evidence without violating children’s fundamental rights to personality and informational self-determination

The German High Court [Bundesgerichtshof, BGH] has issued two related decisions with which the Court rejects the use of surreptitiously collected DNA evidence in paternity proceedings. The two cases decided by the XII. Chamber of the Court, which deals with family law, involve identical facts.

The purported fathers of children born out of wedlock first acknowledged paternity, and paid child support for years. Later on, however, they got the idea to secretly collect DNA specimens from the children (such as hair and chewing gum), and used DNA analyses to challenge paternity. The respective State Supreme Courts in Celle and Jena rejected the challenges.

The German High Court affirms both decisions. In German paternity proceedings, a purported father must more than merely claim that he is not the biological father. He must present evidence showing facts and circumstances that raise doubts about the paternity. This may justify a judicial investigation of the matter where competent experts may collect DNA samples under the court’s supervision.

Legal considerations bar the use of secretly collected DNA evidence in Germany. Germany is considering a general prohibition against the use of secretly collected DNA evidence (see discussion in Germany about the “Gendiagnostikgesetz”), without express consent. Moreover, German law already recognizes that every human being has a fundamental right to informational self-determination [“Grundrecht auf informationelle Selbstbestimmung,” see Article 2, paragraph 1, of the German Basic Law (Grundgesetz, GG)]. If the Court were to admit such secretly collected DNA evidence, it would eviscerate that fundamental right. Further, this fundamental right is closely related to the fundamental right of human dignity (Article 1, paragraph 1 GG).

The Court also points out that Section 2 of the DNA Identity Determination Law (DNA-Identitätsfeststellungsgesetz vom 7. September 1998 BGBl. I 2646) permits the determination and recordation of DNA patterns only in cases where a convicted criminal is deemed likely to commit other major crimes.

The following international sources recognize a protection against DNA collection without consent: the UNESCO Declaration on the Human Genome and Human Rights of 11 November 1997, Article II-68 of the Constitution of the European Union, Article 8 of the European Human Rights Convention , and Article 8 of the United Nations Convention on the Rights of the Child of 20 November 1989. Other countries, including Belgium, France, Great Britain, Canada and Switzerland have similar legal restrictions on the use of DNA samples.

Here, the children at issue possess such a fundamental right, and it prevails over the putative father’s right to ascertain paternity. Thus, German courts may not admit such evidence in paternity proceedings, not even as the basis for allegations. Neither can the child’s refusal to provide DNA samples form the basis of adverse inferences.

Citation: German High Court [Bundesgerichtshof] press release Number 4/2005; Court Decisions “Urteil des XII. Zivilsenats vom 12.1.2005 - XII ZR 227/03" and “Urteil des XII. Zivilsenats vom 12.1.2005 - XII ZR 60/03.” [The decisions are available in German on the Court’s website at www.bundesgerichtshof.de.]

FOREIGN LAW, PROOF OF

On review by Delaware Supreme Court of international contract litigation where Saudi Arabian law applied, Court upholds trial court’s thorough study of experts on that law as applied to Saudi tort law of ghasb or usurpation

Saudi Basic Industries Corporation (SABIC) is a Saudi Arabian corporation which is now 70 percent owned by the Saudi government. SABIC was set up in the late 1970s to work jointly with several firms to use petroleum‑based feedstocks in making polyethylene, a type of plastic. SABIC later began looking into the possibility of forming joint ventures to manufacture polyethylene.

The result was the formation, in April 1980, of two separate 50‑50 joint ventures. One was between SABIC and Mobil Yanbu Petroleum Company (Mobil) (the Yanpet venture), and the other came about between SABIC and Exxon Chemical Arabia, Inc. (Exxon) (the Kemya venture). The aim of both ventures was to turn out polyethylene in Saudi Arabia.

A carefully negotiated premise of both joint ventures was one restricting each partner’s profits to the profits earned by its venture. The goal was to prevent any partner from profiting at the venture’s expense. In line with that policy, the joint venture agreements barred any partner from charging a “mark‑up” on technology obtained from a third party and sublicensed to the joint venture.

In order to manufacture polyethylene, Yanpet soon found that it needed technology that it did not own. Initially, the parties thought that Yanpet would license Unipol ( R ) PE technology directly from Union Carbide Corporation (UCC). After a Spring 1980 meeting in Riyadh, Saudi Arabia, however, SABIC notified its partner, Mobil, that SABIC itself would license the technology directly from UCC and then sublicense it to Yanpet.

SABIC vowed to Mobil that SABIC would pass through to Yanpet at its cost, the amounts SABIC paid to UCC for Yanpet’s use of the Unipol ( R ) PE technology. In fact, SABIC really intended to supply the technology to Yanpet at a mark‑up above SABIC’s cost.

In September 1980, SABIC and UCC executed an agreement granting SABIC an exclusive license to the Unipol ( R ) PE technology within the Kingdom of Saudi Arabia (the SABIC/UCC License Agreement). Neither SABIC nor UCC allowed either Mobil or Yanpet to come to any of the meetings where SABIC and UCC talked about the financial terms of the SABIC/UCC License Agreement. Ultimately, SABIC and Yanpet executed the SABIC‑Yanpet Unipol ( R ) PE Technology License Agreement, effective in October 1980.

Over the following twenty years, SABIC charged Yanpet sublicense fees and royalties that were quite a bit higher than what SABIC was paying to UCC under the SABIC/UCC License Agreement. During that entire time, Mobil thought that SABIC was passing its royalties through to Yanpet at cost.

Ultimately, as with Yanpet, SABIC told Exxon, in a March 1980 meeting in Riyadh, that it (SABIC) would license that technology directly from UCC, and then sublicense the technology to Kemya. As with Mobil, Exxon was kept out of the negotiations over the financial terms of the SABIC/UCC license. Finally, SABIC never intended to do anything except charge a big markup for the Unipol ( R ) Technology.

Not until the year 2000 did Exxon or Mobil find out about the overcharge. It came about when the Saudis decided to tax the royalties.

The claims at issue formally emerged in litigation brought by SABIC against Exxon/Mobil in the New Jersey federal court. In that court, SABIC asked for a declaratory judgment that Exxon/Mobil had used technology, previously developed for Kemya, to obtain proprietary information (including patent and trade secrets) in breach of Exxon/Mobil’s service agreement with Kemya. SABIC sought a ruling that Kemya owned the patents, and an injunction ordering Exxon/Mobil to transfer legal title to those patents to Kemya.

Against SABIC’s claim, Exxon/Mobil raised the defense of “unclean hands.” It urged that SABIC had improperly overcharged Kemya for the royalty payments at issue here. During the discovery stage, SABIC agreed to a consent order that would have demanded that SABIC respond to discovery about the overcharge issues. SABIC, however, failed to comply with that order. Instead, it filed the Delaware Superior Court action that is the subject of this appeal.

In its Delaware action, SABIC sought a declaratory judgment that Kemya’s and Yanpet’s royalty payments to SABIC did not amount to anticontractual overcharges. In response, Exxon/Mobil filed counterclaims for damages. These rested upon SABIC’s alleged breaches of the joint venture agreements; breaches of fiduciary duty and of the implied duty of good faith; and the doctrines of unjust enrichment and promissory estoppel. Exxon/Mobil also demanded a jury trial.

During the trial, it was generally agreed that Saudi law governed a number of critical issues. SABIC, however, lodged a post-verdict challenge to the methodology which the trial court had used to determine Saudi law. By its very nature, this objection assailed the procedural foundation of all of the trial judge’s substantive rulings on Saudi law. In essence, SABIC claims that the ijtihad process that the trial judge employed to determine Saudi law was “free wheeling,” “standardless,” and a “bare ‘guess’ as to the correct content of Saudi law.”

On March 21, 2003, at the conclusion of a two-week trial, the jury returned a verdict awarding compensatory damages of $220,238,108 to Mobil and $196,642,656 to Exxon. The jury found (1) that SABIC had breached both the Yanpet and Kemya joint venture agreements, and (2) that SABIC had committed the Saudi tort of usurpation (ghasb) against both Mobil and Exxon.

Defendants appealed. In a January 14 opinion by Justice Jack B. Jacobs, the Supreme Court of Delaware unanimously affirmed.

Pursuant to Del. R. Civ. P. 44.1, the content of foreign law is no longer for the jury as under the common law rule; it presents a question of law for the court which an appellate court reviews de novo. In Justice Jacobs view, SABIC’s challenge lacks merit. “We reject [SABIC’s] contentions, because the record clearly establishes that the trial judge went to extraordinary lengths to understand the applicable Saudi law and to make rulings that were consistent with the numerous Saudi law sources presented to her. To understand how and why that is so, a prefatory discussion of the Saudi system of jurisprudence, and of the Saudi ijtihad analytical approach, is helpful.”

“In Saudi Arabia, Islamic law (shari’a), which is a fundamentally religious law based on both the Q'uran and the model behavior of the Prophet Muhammed, is the law of the land. Although early Islamic law scholars eventually coalesced into various guilds or schools, only four of those guilds have survived in modern times: the Hanbali, the Hanafi, the Shafi’i and the Maliki. In Saudi Arabia, the judges are instructed to rule exclusively in accordance with the teachings of the Hanbali guild.”

“The Saudi law system differs in critically important respects from the system of legal thought employed by the common law countries, including the United States. Perhaps most significant is that Islamic law does not embrace the common‑law system of binding precedent and stare decisis. Indeed, in Saudi Arabia, judicial decisions are not in themselves a source of law, and with minor exceptions, court decisions in Saudi Arabia are not published or even open to public inspection.”

“The trial judge was keenly mindful of this distinctive characteristic of Saudi law and of the problems that it created for defining the elements of, and remedies for, ghasb and for how to instruct the jury on those issues.” [Slip op. 21]

“Instead of relying upon statutes or decisional precedent to discern the law applicable to a particular case, judges in Saudi Arabia must ‘first and last ... navigate within the boundaries’ of the Hanbali school’s authoritative works, which are the scholarly treatises primarily consulted by Saudi judges. Using these scholarly writings as guides, Saudi judges identify a ‘spectrum of possibilities on any given question, rather than a single ‘correct’ answer.’”

“Thus, in this highly different legal environment, the predominate factor in determining the Saudi law on a given issue is the study and analysis, or ijtihad, that a judge brings to bear in each particular case. To state it in different terms, the critical inquiry is whether ‘the proper analytical procedures are followed in reaching the results.’”

“The trial judge so recognized, observing that ‘[w]hen faced with the daunting task of determining the elements of ghasb and the damages available for this tort, the Court, weighing the credibility of each Saudi law expert, exercised, as best it could under the circumstances, ijtihad, to reach the ‘right’ result.’”

“... [T]he trial judge made exceptional efforts to ensure that she was fully informed of the Hanbali teachings upon which to ground her legal rulings. Before trial, the parties presented the trial judge with seven reports from four Saudi law experts (two expert witnesses for each side), as well as each expert’s lengthy deposition.”

“Perceiving a conflict in the experts’ opinions, the trial judge also retained an independent expert, Mr. Herbert S. Wolfson, [cf. Federal Evidence Rule 706] and obtained his advice on critical issues, including the elements of, and the damage remedies available for, usurpation. Mr. Wolfson prepared an initial report and the trial court permitted him to conduct additional research in Saudi Arabia, after which Wolfson prepared a supplemental report and was deposed for a full day.”

“After reviewing a total of nine reports and over one thousand pages of deposition testimony, the trial judge then held a day‑long pretrial hearing, to permit the parties to present live testimony from Professor Hallaq, Dr. Vogel and Mr. Wolfson. Only after this extensive process did the trial court undertake to determine the disputed elements of ghasb. Even after that comprehensive inquiry, the court considered (over Exxon/Mobil’s objection) two additional reports of Dr. Vogel submitted post‑trial.” [Slip op. 22]

“It is notable that only after SABIC received the adverse jury verdict did it attack the trial court’s ijtihad process, even going so far as to contend, in a post‑trial affidavit of Dr. Vogel, that the trial judge ‘was simply not qualified to practice ijtihad.’ SABIC advances that same position on appeal. Confronting that contention, the trial judge made the following observations which, in our view, afford a complete answer to SABIC’s position: ‘What troubles the Court even more is that Dr. Vogel opines that this Court cannot credibly engage in the ijtihad process.”

“According to Dr. Vogel, ‘ijtihad requires, for its credibility, qualifications which on the very face of things, neither Prof. Hallaq, myself or, with respect, any U.S. Court possesses.’ If Dr. Vogel is correct, then why did SABIC choose to file this dispute in a United States Court? If Dr. Vogel is correct in that neither he nor Dr. Hallaq possess the qualifications to engage in the ijtihad process, then what Saudi law ‘expert’ would be able to assist this United States Court in determining the applicable Saudi law?” [Slip op. 22-23]

“As we view it, the careful, painstaking inquiry that the trial judge conducted puts to rest SABIC’s contention that she engaged in a standardless, ‘seat of the pants’ determination of the disputed Saudi law issues. It is one thing for SABIC to argue that one or more specific decisions resulting from the trial judge’s inquiry are legally erroneous. On this record, however, it is not fair for SABIC to contend that the trial court’s analytical process itself was arbitrary, unprincipled or lawless.” [Slip op. 24].

“In short, the record supports the trial judge’s foreign law determination that the Hanbali sources do not require that the wrongful exercise of ownership or possessory rights over the property of another must be ‘open and obvious.’”

“Nor do the Hanbali texts support SABIC’s second argued‑for element, that the taking must be ‘intentional.’ SABIC bases that argument upon the (rejected) testimony of Dr. Vogel, who never identified any Hanbali source that supports a definition of usurpation which includes an element of intentional transgression.”

“Mr. Wolfson [the trial court’s appointed expert], ... opined that ‘the intent to infringe cannot possibly be a necessary element’ of a civil claim for usurpation, based on numerous examples of usurpation in the authoritative texts that demonstrate that even an innocent purchaser of wrongfully taken property can be held liable. Although the usurper must ‘inten[d] to exercise ownership, he need not inten[d] to infringe the rights of the true owner.’”

“The trial judge’s determination of Saudi law, based entirely on expert testimony, is entitled to deference, as no basis has been shown to overturn it. Accordingly, we find that the trial court committed no error in submitting the usurpation claim to the jury or in denying SABIC’s motion for judgment as a matter of law.” [Slip op. 25]

Citation: Saudi Basic Industries Corp. v. Mobil Yanbupetrochemical Co., Inc., 2005 WL 120789 (Del . Supr. 2005).

JUDGMENT, FINALITY OF

Third Circuit dismisses appeal of order that quashed garnishment against third party that owes money to Nicaragua because district court decision was non-final under 28 U.S.C. Section 1291

In the 1980s, Nicaragua defaulted on payments for an $86 million loan. LNC Investments (LNC) later bought a portion of the debt on the secondary market, and obtained a judgment against the Republic of Nicaragua in New York. While looking for Nicaragua’s assets in the U.S., LNC came upon Megatel, a company that owed $50 million to Nicaragua.

LNC registered its out-of-state judgment with the Delaware district court, and promptly filed a writ of attachment against Megatel and its two (former) parent companies with the goal of garnishing the funds. A Swedish and a Honduran company had formed Megatel to buy forty percent of the state-owned Nicaraguan telecommunications company Enitel.

Next, LNC voluntarily dismissed its writs of attachment on Megatel’s former parent companies. Megatel moved to quash the writ of attachment because of potential double liability, the sovereign immunity of Nicaragua, and the district court’s lack of jurisdiction. The district court quashed the writ of attachment because Megatel would probably suffer a double liability if a court enforced the writ. LNC appealed.

The U.S. Court of Appeals for the Third Circuit, however, has to dismiss the appeal because it lacks appellate jurisdiction. The district court’s order quashing the writ of attachment against Megatel was not a final disposition of the case as demanded by 28 U.S.C. Section 1291.

“The finality requirement of 28 U.S.C. Section 1291 is grounded ... on a policy ‘against piecemeal litigation.’ ... Thus, we have ‘adhered consistently to the general rule that we lack appellate jurisdiction over partial adjudications when certain of the claims before the district court have been dismissed with prejudice.’” [Slip op. 8-9]

There is nothing in the record that eliminates the possibility that Megatel’s former parent companies may have assumed some of its liabilities. It is thus irrelevant on the finality issue that the former parent companies claimed that they did not hold any of Nicaragua’s property.

Citation: LNC Investments LLC v. The Republic of Nicaragua, No. 03-1224 (3rd Cir. February 1, 2005).

JURISDICTION, PERSONAL

Federal Circuit vacates jurisdictional dismissal in patent dispute between French government research agency and major international manufacturers, and remands for allowance of jurisdictional discovery denied by lower court

Commissariat a L’Energie Atomique (CEA) is a French government research agency that develops new technologies for sale and licensing to the private sector. CEA owns, inter alia, two patents dealing with the manufacture of liquid crystal displays (LCDs) used in the latest computer monitors and television screens. Chi Mei Optoelectronics Corporation (CMO) is the third largest LCD module manufacturer in the world and one of the manufacturers whom CEA had sued for alleged patent infringement in Delaware federal court during 2003.

CMO moved to dismiss CEA’s case for lack of personal jurisdiction. CEA had submitted data showing that CMO sells over $1 billion of products worldwide, of which about 30 percent are sold in the U.S. through distributors, including in Delaware. In support of its motion, CMO submitted documents showing that it had no direct connection with Delaware.

The district court then dismissed CEA’s action for lack of personal jurisdiction because it had failed to show that CMO was deriving substantial revenue specifically from Delaware. CEA appealed the district court’s jurisdictional dismissal. The U.S. Court of Appeals for the Federal Circuit, however, vacates and remands because the district court erred in denying CEA’s request for jurisdictional discovery.

The Court emphasizes that, for personal jurisdiction under case precedent, the tortious injury caused by the patent infringement must take place within the state where the allegedly infringing sales are made.

“In order to establish personal jurisdiction in a patent infringement case over a non-resident defendant whose products are sold in the forum state, a plaintiff must show both that the state long arm statute applies and that the requirements of due process are satisfied. ...”

“Contrary to the district court’s holding, the evidence already presented by plaintiff is sufficient to demonstrate that CMO sells a very large volume of LCDs to companies which incorporate these displays into their final product and that these products are likely sold in Delaware in substantial quantities. ...”

“The district court imposed too high a burden of proof on CEA. Based on the allegations in the complaint, the evidence submitted by CEA, and CMO’s failure to rebut the factual inference that devices incorporating its LCDs were sold in Delaware, the district court should have found CEA’s showing sufficient to establish that substantial revenues could be derived by CMO from the sales of products in Delaware incorporating CMO’s LCDs.” [Slip op. 11-12]

The Court then turns to the “stream of commerce” theory. “The scope of the stream of commerce theory under Delaware law is not clear, and the issue has yet to be directly addressed by the Delaware Supreme Court. In [Boone v. Oy Partek Ab, 724 A.2d 1150 (Del. Super. Ct. 1997)], the Court held that the stream of commerce theory is available under [Del. Code Ann. Tit. 10, Section 3104( c)(4)]. ... However, it is not clear 1) whether proof of an ‘intent or purpose to serve the Delaware market’ is required ..., and 2) whether the Delaware long arm statute extends to the full extent that the due process clause would permit.”

“On the existing record, this case thus presents a factual scenario which would require us to determine whether or not additional conduct, beyond a showing of use of established distribution channels, is required to meet the demands of due process under the stream of commerce theory of personal jurisdiction. We have not had occasion to resolve that question, and we conclude that we should not do so on the inadequate record presented here.”

“Delaware law is unclear as to whether the proper interpretation of the long arm statute accords with Justice O’Connor’s or Justice Brennan’s view as expressed in [Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102 (1987)]. Delaware law is also unclear as to whether or not the long arm statute is coextensive with the due process clause. ... The regional circuits, as well, remain divided on the proper due process standard. ...”

“We conclude that there is substantial uncertainty concerning both the scope of the Delaware law and that of the due process clause, and that these issues should not be resolved on the present record because the district court declined to order jurisdictional discovery.” [Slip op. 13-19]

CEA, however, clearly made a sufficient threshold showing to merit a remand for jurisdictional discovery. Further, CEA has already gone beyond factual allegations and made a prima facie case for CMO’s use of an established distribution network that likely results in substantial sales of its products in Delaware. The Court, therefore, holds that the district court should have granted CEA’s discovery request; it seems likely to turn up evidence as to whether or not defendant intended to serve the Delaware market.

Citation: Commissariat a L’Energie Atomique v. Chi Mei Optoelectronics Corp., 395 F.3d 1315 (Fed. Cir. 2005).

WORLD TRADE ORGANIZATION

WTO Panel finds largely in favor of South Korea in U.S.-Korea dispute over U.S. restrictions on imports of Dynamic Random Access Memory Semiconductors (DRAMS) from Korea

On February 21, 2005, a Dispute Settlement Panel of the World Trade Organization (WTO) issued its report in the matter of Korea’s complaint against the U.S. regarding the latter’s restrictive measures on Korean Dynamic Random Access Memory Semiconductors (DRAMS). The dispute arose out of a U.S. countervailing duty investigation regarding Korean DRAMS and DRAM modules. Micron Technology, Inc. had sparked the dispute by alleging that Korea was improperly subsidizing these products. The specific Korean exporters at issue were Hynix Semiconductor, Inc., and Samsung Electronics Co., Ltd.

The U.S. Department of Commerce (DOC) had issued preliminary and final subsidy determinations regarding Korean DRAMS, the U.S. International Trade Commission (ITC) had issued a final determination of material injury in this regard, and finally the DOC had published a final countervailing duty order imposing a 44.29 percent duty on Korean DRAMS (except Samsung entries).

Korea urged that the U.S. findings of a countervailable subsidy and the determination of material injury were inconsistent with U.S. obligations under the Subsidies and Countervailing Measures (SCM) Agreement and GATT 1994. Korea first sought consultations with the U.S. under WTO auspices, but the parties failed to reach agreement. In November 2003, after unsuccessful discussions, Korea asked the WTO to convene a dispute settlement panel.

Korea alleged numerous errors in U.S. procedures that violate, inter alia, Article 15 of the SCM Agreement, such as the ITC’s failure to make its final injury determinations based on positive evidence, and the ITC’s improper assessment of the volume effects of the imports in question.

The Panel holds, in particular, that the DOC’s “Final Subsidy Determination,” the ITC’s “Final Injury Determination,” as well as the “Final Countervailing Duty Order” based thereon, are inconsistent with Articles 1, 2 and 15.5 of the SCM Agreement. On the other hand, in the context of Article 15, the U.S. did not improperly assess the significance of the volume effects of the subject imports and the price effects. Nor did it fail to consider all relevant facts as to the overall condition of the domestic industry, nor did it improperly define the domestic industry.

Citation: United States - Countervailing Duty Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from Korea (DS 296) (21 February 2005). Panel report is available on WTO website at “www.wto.org.” U.S. submissions to WTO panel are available on website of U.S. Trade Representative “www.ustr.gov”. See also “WTO reaffirms ruling for S. Korea in chip dispute with U.S.,” Asia Pulse, February 22, 2005.

EU modifies punitive customs duties on certain U.S. products which resulted from WTO disputes. With Council Regulation No. 171/2005 (which is directly applicable), the European Union (EU) has modified the additional customs duties on certain U.S. products initially imposed by Regulation No 2193/2003. The World Trade Organization (WTO) dispute settlement body authorized these duties in May of 2003, permitting European countermeasures valued up to $4 billion in the form of ad valorem duties. See 2003 International Law Update 78. Based on recent U.S. corrective action, Regulation No. 171/2005 suspends the additional duties and may only take effect on January 1, 2006 (or 60 days after a WTO finding), if the American Jobs Creation Act of 2004 is found incompatible with WTO trading rules. The Act repeals certain export-related tax benefits for U.S. companies, which included over the years the extraterritorial income exclusions through the domestic international sales corporation (DISC) regime, the foreign sales corporate (FSC) regime, and the extraterritorial income (ETI) regime. The WTO has found all of these regimes contrary to WTO trading rules. Regulation No 171/2005 also contains a new Annex with a list of the products to which the additional duties would apply. Citation: Regulation No 171/2005, 2005 O.J. of European Union (L 28) 31, 1 February 2005; Notice to Importers, 2005 O.J. of European Union (C25) 2, 1 February 2005 [Suspension of additional duties]; Description of H.R. 4520, The “American Jobs Creation Act of 2004" prepared by Staff of Joint Committee on Taxation, June 10, 2004, JCX-41-04; European Union in U.S. News Releases Nos. 34/03 (March 1, 2004) [EU countermeasures because of FSC] & 139/04 (October 12, 2004) [Commission to study new U.S. Tax Legislation]; “EU ends tariffs on U.S. products,” The Washington Times, January 22, 2005, page C11.

United States and EU agree on ending subsidies for large civil aircraft. On January 11, 2005, the U.S. and the European Union (EU) agreed to negotiate civil aircraft subsidies. The purpose is to eliminate different kinds of subsidies and to create fair competition between Boeing and Airbus. The Terms set as the objective a comprehensive agreement to end large civil aircraft subsidies (as defined in the WTO Agreement on Subsidies and Countervailing Duties), which is to include dispute settlement procedures. The parties expect to reach final agreement within three months. – In the Fall of 2004, the U.S. unilaterally withdrew from the 1992 bilateral Agreement on Trade in Large Civil Aircraft, and brought an action before the WTO regarding EU subsidies to Airbus. At the same time, the EU brought a WTO action complaining of U.S. subsidies to Boeing. Citation: European Union in US News Release No. 03/05 (January 11, 2005); “EU/US: Airbus-Boeing Row to be Negotiated Away from WTO,” European Report, January 12, 2005; “US and EU seek to avoid bumpy landing: Washington and Brussels to hold talks on government support for Airbus and Boeing,” Financial Times (London), January 12, 2005, page 6.

EU approves Convention to support Inter-American Tropical Tuna Commission. With Council Decision 2005/26/EC, the European Union (EU) has approved the signing of the 2003 Convention for the Strengthening of the Inter-American Tropical Tuna Commission established by the 1949 Convention between the U.S. and the Republic of Costa Rica (“Antigua Convention”). The Decision notes that EU fishermen operate in the Antigua Convention area, and that the EU should thus join the Convention to help conserve and manage the marine resources. - The text of the Antigua Convention is attached to the Council Decision. Citation: 2005 O.J. of European Union (L 15) 9, 19 January 2005; “International Commission launched to protect Pacific Tuna,” Global News Wire PacNews, December 14, 2004.

United States accedes to global coffee agreement. On February 5, 2005, the U.S. Department of State (DOS) announced that the U.S. has acceded to the 2001 International Coffee Agreement, and has joined the International Coffee Organization (ICO) as of February 3, 2005. The DOS had declared its intention to rejoin in September 2004 and has perfected the process by depositing its instrument of accession with the Secretary General of the United Nations. The ICO has undertaken significant reforms in recent years to strengthen its market orientation, to set up programs to help coffee farmers improve quality, efficiency and access to markets, and to streamline the global trade in coffee. According to the DOS, the ICO provides a worthwhile assembly in which to discuss the full range of issues relating to coffee production, trade and consumption. The DOS says that it looks forward to cooperating with our trading partners in the ICO to amplify development efforts and to increase the number of open markets. Citation: Press Release, U.S. Department of State, Washington, D. C. , Released on February 5, 2005.

After murder of American nun, Brazil sets aside large preserves in Amazon forest areas. Over the years, Brazilian logging companies and wealthy landowners have steadily encroached more deeply into the world’s largest rain forest. It encompasses more than 1.6 million square miles or over half the country. In the often violent struggle for its rich natural resources, development, logging and farming have already gutted as much as 1/5 of this global resource. On February 12 last, four gunmen murdered Sister Dorothy Stang, an American Catholic nun who was in her 70's. For many years, Sister Dorothy had been defending the poor and striving to preserve the Amazon rain forest. In response to the public outcry, the Brazilian government has launched an extensive police and military search for the killers. Moreover, on Thursday, February 17, 2005, President Luiz Inácio Lula da Silva issued several decrees. They established two new forest reserves in the state of Para: one of 8.15 million acres and the other a national park covering 1.1 million acres. Lawlessness has long been rampant in Pará State which is almost twice the size of Texas; ranchers, backed by hired gunmen, reportedly bind poor workers to an interminable cycle of debt not unlike slavery. The situation had recently became more agitated when the government ordered ranchers to surrender land they were occupying but could not prove they owned. Citation: The New York Times (online) from Associated Press, Napu, Brazil, Friday, February 18, 2005.

India and United States initial Open Skies Aviation agreement. The U.S. Department of State (DOS) reports the initialing, ad referendum, of a landmark “Open Skies” air transport agreement with India which took place on January 15, 2005. This agreement constitutes a major modernization of U.S.‑Indian aviation relations. For example, it allows airlines of both nations to make commercial decisions with minimal government involvement. The agreement also provides for the arrangement of open routes, capacity, frequencies, designations, and pricing, and increases occasions for cooperative marketing deals, including code‑sharing. Finally, it includes all‑cargo “seventh freedom” rights, which permit American and Indian airlines to take part in international cargo operations which have no connection to their respective homelands. In the long run, instituting Open Skies as the basis of U.S.‑Indian aviation relations should spur trade, investment, tourism, and cultural exchanges between the world’s two largest democracies. With this initialing, India becomes the 67th bilateral U.S. Open Skies partner. Citation: Media Note, Office of Spokesman, U.S. Department of State, Washington, D.C., Tuesday, January 18, 2005.

Six CAFTA nations sign supplemental agreements with United States on environment and trade. On February 18, 2005, a high level U.S. Department of State (DOS) representative and senior representatives from Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua plus the Dominican Republic signed an Environmental Cooperation Agreement (ECA) in Washington, D.C. At the same ceremony, the Assistant U.S. Trade Representative signed an Understanding Regarding the Establishment of a Secretariat for Environmental Matters under the Dominican Republic‑Central America‑United States Free Trade Agreement along with her counterparts representing the six countries. Among other things, the Agreements will bolster sustainable development in the region through public‑private partnerships, using market‑based techniques to more efficiently improve the environment. They also seek to advance democratic principles and good governance relating to environmental safeguards such as by enforcing effective laws, maintaining transparency, and providing more public access to information and justice. The Trade Understanding sets up a Secretariat via the Organization for Central American Economic Integration to help carry out the environmental provisions of the Dominican Republic‑Central America‑United States Free Trade Agreement. United States has recently entered into similar Free Trade Agreements with Australia, Chile, Jordan, Morocco, Bahrain and Singapore. Citation: Office of Spokesman, U.S. Department of State, Washington, D.C., Friday, February 18, 2005. See also U.S. Trade Representative press release of same date.