2005 International Law Update, Volume 11, Number 10 (October)

2005 International Law Update, Volume 11, Number 10 (October)

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

JURISDICTION (GENOCIDE)

Constitutional Court of Spain rules that its courts may hear genocide cases even if they do not involve Spanish citizens, and holds that principle of “universal jurisdiction” takes precedence over alleged national interests

In 1999, Guatemalan Nobel Peace Prize winner Rigoberta Menchu filed a lawsuit in Spain against Guatemalan officials, including the former Minister of the Interior, alleging injuries from crimes of genocide, torture, terrorism, murder and illegal detention committed in Guatemala between 1978 and 1986. The underlying events included the 1980 military assault on the Spanish embassy in Guatemala in which 37 people died, as well as the assassination of Menchu’s father and several Spanish priests.

The Spanish court of first instance dismissed the case in 2000, opining that the Guatemalan courts should try the alleged crimes. The Spanish Supreme Court, in a 2003 decision, agreed with plaintiff’s jurisdictional theory, but only for crimes involving Spanish victims. Menchu obtained review in the Constitutional Tribunal of Spain. The Tribunal reverses the Supreme Court decision, and holds that it violated Menchu’s constitutional rights.

The Tribunal considers that the Supreme Court’s determination that universal unilateral jurisdiction is only legitimate when treaty law expressly authorizes it, constitutes an “extremely rigorous” interpretation of the Convention on the Prevention and Punishment of the Crime of Genocide (in effect for U.S. on February 23, 1989). The Tribunal holds that the Convention does not bar countries from enacting internal legislation and other measures to prosecute these crimes. It “leaves open to the signatory countries the possibility of establishing further mechanisms for the prosecution of genocide.” [Slip op. 28]

The Tribunal also analyzes the “radically restrictive interpretation” by the Supreme Court of Article 23.4 of the Spanish Organic Law of the Judiciary [SOLJ] [Ley Organica del Poder Judicial], which defines the international jurisdiction of the Spanish courts. In its 2003 decision, the Supreme Court had ruled that SOLJ Article 23.4 requires certain “bonds of connection” in order to justify the exercise of international jurisdiction by Spanish courts. These include (1) the Spanish nationality of the victim, (2) the presence of the alleged criminal on Spanish territory or (3) the existence of other contacts to its national interests.

Such a restrictive interpretation of Article 23.4 of the SOLJ, according to the Tribunal, “... [i]mplies an infringement of the right of access to process,” [Slip op. 26] which Article 24.1 of the Spanish Constitution recognizes. Of these three “bonds of connection,” only the presence of the wrongdoer in Spanish territory is an “absolute requirement.” [Slip op. 32] This nexus, however, is not a sine qua non basis for jurisdiction.

As to the Spanish nationality of the victim, the Tribunal finds that it “incorporates an added requirement that is not contemplated in the law” and that it “contradicts the very nature of the crime [genocide] and the aspiration of its universal prosecution.” [Slip op. 33] The Tribunal points out that “...[t]o invoke universal extraterritorial jurisdiction, there must be serious and reasonable indications of judicial inactivity to show an unwillingness, either intentional or by lack of ability to effectively prosecute the crimes." [Slip op. 26]

In the opinion of the newspaper The Washington Post, the ruling could boost the filing of cases in Spain over human rights abuses in other countries.

Citation: Second Senate of Spanish Constitutional Tribunal, Appeals of cases 1744/2003, 1755/2003 and 1773/2003, STC xxx/2005 [La Sala Segunda del Tribunal Constitucional ... Sentencia En los recursos de amparo nums. 1744/2003, 1755/2003 y 1773/2003 ...]. [Excerpts in this article translated by Maria Julia Bocca]. The opinion is available on website of University of Barcelona at “http://www.ub.es/dpenal/”; The Washington Post, October 6, 2005, page A20.

INSURANCE, MARINE

Applying New York law, English Court of Appeal (Civil Division) dismisses Exxon’s appeal from adverse rulings on coverage of insurance policies having to do with Alaskan oil spill of 1989

Early in the morning of March 24, 1989, the tanker Exxon Valdez ran aground on Bligh Reef in Prince William Sound, Alaska. The incident spilled some 11 million gallons of North Slope crude oil. At the time, Exxon Shipping Corp. (ESC), an Exxon subsidiary, owned the tanker while Exxon (plaintiff) had title to its cargo. By September, 1989, investigators had identified 790 miles of shoreline within Prince William Sound as having been “oiled” along with more than 2,400 miles of shoreline in Western Alaska.

ESC and Exxon took various steps to contain the spill, and to clean‑up the polluted shorelines. These included: the lightering of the Exxon Valdez; the skimming of oil from the surface of the water; the booming off of sensitive areas of shoreline; the burning of oil on the surface of the water; the washing of the shoreline, coupled with the skimming of oil washed off the shoreline into the sea; and the moving of rocks/pebbles etc. into the tidal zone to allow natural tidal flushing. Plaintiff also used “bioremediation” by adding compounds to the environment that amplified the natural process by which bacteria and other microorganisms transformed the organic molecules in oil into other substances; and the cleaning up of animals, including otters and birds. Exxon spent $1.25 billion and ESC spent $885 million on these remedies.

Not surprisingly, Exxon and ESC had a number of claims filed against them. Claims by the U.S. Government and the State of Alaska led to Exxon’s agreed payment of some $900 million in October 1991. Additionally, there were claims by commercial fishermen, Alaska Natives, seafood processors and their employees, and private landowners. Exxon settled some of these claims for about $267 million. The consolidated claims of 30,000 other plaintiffs went to trial, producing a jury award of $287 million in compensatory damages, and $4.5 billion in approved punitives.

Exxon and its affiliates had three primary policies, the largest of which was the Exxon Global Corporate Excess (GCE) Policy with its deductibles. The GCE Policy had three different sections: Section I respecting loss of, or damage to, property; Section IIIA dealing with Marine Liabilities; and Section IIIB having to do with Public and Third Party Liability.

Service-of-Suit clauses provided that, in the case of a dispute over payments, the insurers agreed to submit to the jurisdiction of any court of competent jurisdiction within the State of New York or (under Section IIIB) in the United States, all matters to be decided pursuant to the law and practice of the relevant court. Each of the three sections also contained an arbitration clause. Under Sections I and IIIA, the arbitrators could abstain from following the rules of law strictly. To the extent the arbitrators did follow them, however, they were to apply New York law. The arbitration clause under Section IIIB was otherwise the same as the preceding although it did not specify New York law.

Some relevant provisions of the policies were as follows. Art. VII, par. 4(b) of Section I (property damage) covered: “Removal of, or attempted removal of, debris or wreck of property and/or residual structure covered hereunder.” Section I, inter alia, provided that “Notwithstanding anything contained as above, there shall be no recovery hereon for liabilities as described under the insured’s Liabilities Policy(ies).”

In August 1993, Exxon sued insurers in a Texas court under Section IIIA of the policy. Three years later, the court awarded Exxon $238,473,752, plus interest of $161,106,406 and fees and costs of over $10 million. In March 1996, the parties settled all claims under the Section I policy for $300 million. Ten months later, the parties negotiated all of Exxon’s claims under the Sections IIIA and IIIB policies (including the claims in the Texas judgment) for $480 million. The agreement did not allocate the payment as between Section IIIA and Section IIIB.

Exxon’s insurers had reinsured their liabilities with the claimant reinsurers making the defendants the retrocessionaires of the claimants. It was common ground that, under the terms of the retrocessions, the claimants had to prove that the primary policies and the outward retrocessions covered the losses. All the retrocession contracts, except certain Lloyd’s policies, included the following language: “This contract excludes any loss arising from seepage, pollution or contamination on land unless such risks are insured solely on a sudden and accidental basis.” The exclusion did not apply to liability under the 1986 Offshore Pollution Liability Agreement.

In the English insurance litigation, one issue for the trial Court was whether Exxon had been entitled to recover under either Section I or Section IIIB. If they were not, claimants could not bring the payments under Section I into the calculation of the ultimate net loss in the retrocession agreement, nor could they apportion any part of the Section IIIA and Section IIIB settlement to Section IIIB for the purposes of computing the ultimate net loss as between the claimants and defendants. A further question was whether ESC could recover from the Section I primary insurers and, if so, whether there had been a settlement of the insurers’ liability to ESC. There was also an issue as to whether, on the proper construction of the retrocession, the defendants were entitled to rely upon exclusion of liability under the “Seepage and Pollution” clause.

Exxon appealed certain adverse rulings on these points. The English Court of Appeal (Civil Division), however, dismisses the appeal. In its view, New York law, not English law, governed the GCE. The arbitration and service-of-suit clauses indicated the parties’ agreement that New York law applied to the GCE. For purposes of interpretation, the Court recalls that the background of such agreements lies in pertinent international agreements and implementing statutes.

“If the arbitration and service-of-suit clauses are viewed as a whole, and in isolation ..., it seems to be beyond doubt that they point to an inferred choice of New York law as the proper law of the GCE. Certainly, there is nothing in them which points to English law.”

“The question is whether there is enough in those clauses to displace the consequences of the major placement in the London market, the location there of the leading insurers and so forth. In our opinion, the key provision is that with which we started, i.e., the New York arbitration clause in Section IIIB. It is difficult, if not impossible, to infer a choice of English law as the law to govern a contract, a substantial part of which provides for any difference between the parties (if either requests it) necessarily to be determined by an arbitration to which the law of New York applies.”

“That view of the contract as a whole is consistent with the New York arbitration clauses in Sections IIIA, even though, in those sections, the agreement of both parties is required. It is also consistent with the service-of-suit clauses in those sections. Moreover, as we have already observed, it is not inconsistent with the service-of-suit clause in Section IIIB.” [¶ 47]

The Court then addresses whether the words “removal of debris” in Section I of the GCE covered clean‑up costs. “... [A]lthough foreign law is a question of fact, it is, in our view, rather different from other findings of fact. Indeed there is, as it seems to us, a special feature of a case such as the present.” [¶ 67]

“The New York court ... would, particularly in the area of marine insurance, find decisions of the English Court persuasive. We further suspect that, although it may be possible to say that different courts in different states and indeed different courts in different parts of the world will enjoy different ranges of respect, most courts will ultimately be most influenced by the reasoning of ‘persuasive’ decisions which attract it most. If the position is that, under New York law, the decision of an English Court as a matter of English law on the terms of this policy would have some persuasive effect, it would seem unreal to ignore that decision in reaching a view as to what New York law would hold.”

“The role of [a foreign law] expert, unless the court is concerned with special meanings, is to prove the rules of construction of the foreign law, and it is then for the court to interpret the contract in accordance with those rules. In other words the view of the expert as to the meaning which would be given to the word ‘debris’ is not admissible evidence unless he is saying that it has a special meaning under New York law.[Cite]. That again points to the Court of Appeal being entitled to review a question of construction simply being guided by the rules of construction of the foreign law including that court’s attitude to persuasive authorities.” [¶ 68]

“ ... [W]e find it difficult to accept that a New York court and [an] English Court would reach a different conclusion on the construction of a policy negotiated, as this one was, between organisations well‑versed in what they were seeking to cover and well versed in the risks that were likely to materialize from the business being carried on by the various assureds. Both systems of law are seeking to identify what the parties agreed, and both systems of law use similar pointers to ascertaining that intention. On the Judge’s findings ... a New York court [would have been unlikely] to find that removal of debris in Section I was intended to cover the clean‑up costs of an oil spill, unless the Notwithstanding clauses excluded the same.” [¶ 116]

“We think furthermore that [the lower court’s] view as to the proper construction of the Notwithstanding clauses primarily reinforced his view that ‘removal of debris’ in Section I was not intended to cover clean‑up costs.... Debris is not the natural way in which to describe ‘spilled oil’ or pollution from spilled oil, and it would need some significant feature or other provision of the policies if it was to have that meaning in this policy. ... [D]uring the course of argument, Lord Justice Rix asked [counsel for claimants] how he would describe oil spilt onto a beach, he could not reply and absolutely properly could not reply, ‘debris’.” [¶ 117]

“Significantly, as there is more to clean‑up than ‘removal’, and where oil pollution is dealt with both in the Conventions which form the background and in the policy itself, the words which describe the clean‑up are not ‘removal of debris’. It follows that the starting point for consideration of the Notwithstanding clauses is that ‘removal of debris’ does not cover clean‑up costs for an oil spill, and, whatever difficulties there may be in construing the Notwithstanding clauses, no point can be made which points to ‘removal of debris’ acquiring some special meaning for the purposes of this policy.” [¶¶ 118-19]

“We accordingly would uphold the Judge’s construction of removal of debris simply on the basis that under neither New York law nor, if it be relevant, English law, do the words ‘removal of debris’ in Section I of the GCE cover clean‑up costs as described ... above.” [¶ 121]

The Court summarizes its conclusions as follows. “The proper law of the GCE was New York law, although in the end our opinion on that question does not matter. As a matter of New York law and English law, Section I of the GCE on its true construction did not cover pollution clean‑up costs. The claimants cannot recover on the basis of ESC’s putative claim under Section I. As a matter of New York law and English law, Section III(B) of the GCE [also] provides no cover for pollution clean‑up cost. ... The appeal must accordingly be dismissed.” [¶ 158]

Citation: King v. Brandywine Reinsurance Co., [2005] 1 Lloyd’s Rep. 655, [2005] 1 C.L.C. 283, [2005] Env. L. R. 33, [2005] 2 All E.R. (Comm) 1, [2005] E.W.C.A. Civ. 235 (Eng. Ct. App. Civ. Div.).

SOVEREIGN IMMUNITY

Australian appellate court upholds dismissal of United States as third-party defendant, finding that mutual cooperation agreement between U.S. and Nauru was mainly political not commercial, thus rendering U.S. immune from suit under Australian state immunity statute

Wells Fargo Bank Northwest, National Assn. (Fargo), a Utah company, filed suit in an Australian [provincial] court to repossess a Boeing 737-400 aircraft from the Nauru Aircraft Corporation (NAC). Fargo was acting as the security trustee for the mortgagee of the plane, the Export Import Bank (Eximbank), an agency of the U.S. Government. Victoria Aircraft Leasing Ltd. (VALL) had bought the plane relying on an Eximbank loan. When VALL defaulted, Eximbank carried out its guarantor’s duty to pay the loan, thus putting itself in the lender’s shoes.

NAC was using the aircraft in an airline called “Air Nauru”. The Republic of Nauru (Nauru) guaranteed to Eximbank the due performance of the obligations of VALL as borrower. VALL and NAC are agencies of Nauru, a small independent island state in the central Pacific (collectively defendants). Fargo alleged that VALL failed to repay the loan and took part in other acts of mortgage default.

The defendants did not contest the debt owed to Eximbank or the mortgage but pleaded that the court lacked the power to enforce the obligations. They claimed that Nauru had orally agreed: (1) to help in the defection of a North Korean scientist to the U.S.; (2) to work with the U.S. to look into the possible involvement of Nauruan organizations in the transfer of money in support of international terrorism; and (3) to reform Nauru’s laws so as to ban money laundering and the forgery of Nauruan passports.

Defendants also claimed that, if Nauru co-operated with the American agenda, the U.S. had agreed to: (a) ensure that Eximbank would give Nauru enough additional time to pay its debts to Eximbank to assure the operational viability of Air Nauru; (b) come up with enough money for Nauru to erase any problems Nauru might have in relation to re-payment of the Eximbank financing; and (c) prevent Eximbank from enforcing any strict contractual rights which it might otherwise have to seize and sell the aircraft.

Defendants alleged, inter alia, that the U.S. had agreed to have Nauru taken off a list of non-co-operative countries drawn up by the Financial Action Task Force, an arm of the Organization for Economic Cooperation and Development (OECD). Nauru’s inclusion on the list was allegedly making it very hard for Nauruan companies to do business with U.S. and OECD banks. The U.S. had also assertedly agreed to provide substantial assistance, monetary and otherwise, to enable Nauru to set up a modern international banking facility.

It was further claimed that, relying on the U.S.’s representations and promises, Nauru had appointed representatives of the U.S. as diplomatic officials, had taken steps to reform its off-shore banking regime and had enacted laws to repress the misuse of Nauruan passports.

Entering a conditional appearance, the U.S. moved to dismiss on the ground that the U.S. was entitled to immunity pursuant to Section 9 of the Foreign States Immunities Act of 1985 (NSW) (the Act). It provides generally that a foreign State is immune from the jurisdiction of the Australian courts in a civil action except: “...as the proceeding concerns a commercial transaction.”

Solely for the purposes of the motion, the U.S. assumed that the allegations contained in the third party statement of claim were true. It argued that it was entitled to immunity unless the arrangement between Nauru and the U.S. was a “commercial” transaction within the meaning of Section 11. The U.S. also contended that, even if the arrangement were a commercial transaction, Section 11(2)(a)(I) reinstated its immunity. It was submitted that the clear intention of this section was to preserve immunity where (as here) all the parties to a transaction were foreign states.

The first instance court granted the U.S.’s motion on the basis that, under the Act, the U.S. was not amenable to the jurisdiction of the Australian courts. The defendants appealed. The Victoria Supreme Court (Court of Appeal), however, dismisses the defendants’ appeal.

The lead opinion explains. “In the United Kingdom, the State Immunity Act of 1978 supplanted the common law. Subject to a residual provision preserving the test of restrictive immunity, transactions were classified [as commercial] according to their objective effects, for example, contracts for the supply of services, transactions for the provision of finance. Immunity was conferred or withheld for each type of transaction. If a foreign state entered into a specified transaction, it was a commercial transaction whether or not the foreign state exercised sovereign authority.”

“While I think there is some force in the contention that, despite its different structure, Section 11 of [our] Act was intended to ‘adopt the substance of the United Kingdom provision’, it is not necessary to decide whether paras (a), (b) and (c) are qualified by an additional requirement of commerciality. In my view, the transaction entered into by Nauru and the United States did not meet any of the descriptions set out in the paragraphs.”

“Paragraph (a) had no operation. Paragraph (b) contemplates a loan or like transaction. In my view it does not extend to a promise to influence the creditor to give his debtor extra time to pay or [to] refrain from exercising rights under a security. Nor do I think that the paragraph extends to a promise to pay money which could be used by the recipient to repay a debt to another. Paragraph (c) is concerned with a guarantee of the performance of another’s obligation. I think that the indemnity with which it is coupled connotes the assumption of a primary liability whether or not another makes default. The paragraph does not embrace a promise to prevent a creditor [from] exercising rights under a security.” [¶¶ 21-23]

“Each of the promises alleged to have been made by Nauru and each of the acts which it is alleged to have performed in reliance upon the representations said to have been made by the United States concerned governmental functions of Nauru. None of the promises or acts related to a contract for the supply of goods or services, an agreement for a loan or other transaction for, or in respect of, the provision of finance or a guarantee or indemnity in respect of a financial transaction.”

“The actions to be undertaken by Nauru comprised activities relating to its diplomatic and foreign relations, national security, intelligence, terrorism and the reform of banking laws and passport abuse. The promises made by the United States did include an offer to assist Nauru to deal with its obligations to repay a loan and may have involved the provision of money to Nauru. The context in which that promise was made was that it was but one component in a number of measures answering the description of economic assistance to the government of Nauru.”

“In my opinion the vagueness of the terms alleged ... tells against the contention that the transaction amounted to an agreement in respect of the provision of finance or a guarantee or indemnity in respect of a financial obligation. The additional time to pay which the United States was alleged to have promised was no more specific than the time sufficient to ensure the operational viability of Air Nauru. Neither the amount of the funds to be provided to Nauru nor the time when that provision was to be made was stated.”

“[Moreover], the promises were somewhat inconsistent. Was the United States to pay the sums owing to Eximbank or was it to arrange time for Nauru to pay those sums? The obligations in commercial agreements are generally expressed in definite, quantifiable terms. The transaction between Nauru and the United States was expressed in terms more akin to political arrangements between states.” [¶¶ 24-26]

“In my view, the promises by the United States to deal with Nauru’s difficulties in meeting its obligations to Eximbank were not the most significant or substantial element in the United States’ offer of assistance. In the third party statement of claim, those promises were alleged as the only consideration for the promises made by Nauru, and counsel for Nauru in his submissions described the promises as those regarded by Nauru as the most important component of the transaction. ... ”

“Those promises were part of a package or program of assistance in return for political favours. In my opinion, the transaction taken as a whole is not be (sic) accurately described as one for, or in respect of, the provision of finance or as a guarantee or indemnity in respect of a financial obligation. For the foregoing reasons I am of the opinion that the trial judge correctly held that Section 11 of the Act did not apply, and thus the immunity conferred by Section 9 was not displaced.” [¶¶ 27-29]

Citation: Victoria Aircraft Leasing, Ltd. v. United States, BC 200501898, 2005 V.S.C.A. 76 (Vict. Ct. App.).

SOVEREIGN IMMUNITY

In victims’ suit against Libya over 1986 bombing of West Berlin discotheque, D.C. Circuit dismisses for lack of appellate jurisdiction Libya’s interlocutory appeal from district court’s order allowing jurisdictional discovery

On April 5, 1986, a bomb exploded in the “La Belle” discotheque in West Berlin, Germany, killing three people and injuring more than two hundred. The plaintiffs in this case are victims and estate representatives of dead victims. Their complaint alleged that defendant, Colonel Muammar Al-Ghaddafi, head of the Libyan government, directed Libyan agents to plan, prepare, and carry out the attack. Supporting evidence included telex communications between Libyan intelligence in Tripoli and the Libyan embassy in East Berlin confirming defendants’ role in the attack.

Plaintiffs invoked the district court’s subject matter jurisdiction under the Foreign Sovereign Immunities Act of 1976, 28 U.S.C. Section 1605(a)(7) [FSIA] which itemizes several exceptions to the immunity of foreign states. Pertinent here, the FSIA allows for lawsuits against foreign states that involve damages “for personal injury or death that was caused by an act of torture, extra-judicial killing . . . or the provision of material support or resources . . . for such an act if officials, employees or agents of the foreign state engaged in these actions while acting within the scope of their office or employment.” 28 U.S.C. Section 1605(a)(7). Libya moved to dismiss the complaint stating that the plaintiffs had not sufficiently alleged Libya’s liability for the harm plaintiffs suffered from the bombing. In response to Libya’s motion, plaintiffs moved for “jurisdictional discovery,” which Libya opposed.

The district court considered the allegations of the complaint to be legally sufficient and ordered the parties to “confer and submit a joint report proposing a plan for conducting discovery limited to facts bearing upon the court’s subject matter jurisdiction.” [Slip op. 3]. Libya appealed. The District of Columbia Circuit, however, dismisses the appeal for lack of appellate jurisdiction under 28 U.S.C. Section 1291.

Libya argued that, based on In re Minister Papandreou, 139 F.3d 247 (D.C. Cir. 1998), a federal appellate court can exercise jurisdiction over interlocutory orders comparable to those under Fed. R. Civ. Pro. 24(f) requiring the parties to confer and submit a joint jurisdictional discovery plan as a prelude to actual discovery. The Court disagrees.

The Court has taken jurisdiction to review a district court’s order denying a foreign state’s motion to dismiss on the ground of sovereign immunity based on the “collateral order” doctrine since such orders finally determine the foreign state’s right to be immune from the burdens of a lawsuit. In Papandreou, it has also exercised mandamus jurisdiction to review the scope of a district court’s jurisdictional discovery order because the demands of international comity counsel against requiring foreign officials to subject themselves to contempt and then to appeal the contempt. The Court in Papandreou also stated that a jurisdictional discovery order comes with litigation burdens not unlike those the sovereign immunity defense seeks to protect against.

The Court, however, distinguishes Papandreou from the matter at hand. Orders to take part in discovery conferences are not among those limited class of interlocutory order that may be considered “final decisions” under 28 U.S.C. Section 1291. Papandreou got before the Appeals Court on a petition for a writ of mandamus - not via 28 U.S.C. Section 1291 - and the modes of review differ. Furthermore, the burdens of discovery on the foreign state, which existed in Papandreou, are not present in this case. Here, the district court merely ordered a conference like the ones contemplated in Rule 26(f), not any particular type or scope of discovery.

Libya argued that the law should not force a foreign state to breach the district court’s order and be held in contempt in order to gain access to a federal appeals court. The Court noted, however, that it is unclear whether the district court would hold Libya in contempt for violating its order. This being so, its jurisdiction cannot rest on the mere possibility of contempt. Moreover, “[t]he law of this circuit now is that ‘a civil contempt order against a party in a pending proceeding is not appealable as a final order under 28 U.S.C. Section 1291.’” [Slip op. 4].

“This litigation currently is several steps removed from Papandreou ... Only if the court orders jurisdictional discovery and clearly abuses its discretion in determining the scope of discovery could mandamus possibly lie.” [Slip op. 5]. As it is unknown whether the district court will actually order specific discovery to take place, the Court finds that it lacks jurisdiction.

Citation: Beecham v. Socialist People’s Libyan Arab Jamahiriya, et al., 424 F.3d 1109 (D. C. Cir. 2005).

TREATIES

In reviewing dispute over loss of air cargo involving Warsaw Convention, Second Circuit holds that United States’ 1998 ratification of Montreal Protocol of 1975 did not result in ratification of Hague Protocol of 1955

The subrogated underwriter of Asco Industries, N.V. (Asco) attempted to recover damages from American Airlines, Inc. for its loss of four crates of goods on a flight from Belgium to Tulsa, Oklahoma. American Airlines argued that the Warsaw Convention limited its liability to $20 per kilogram. It cited Article 22(2) of the original Convention for the Unification of Certain Rules Relating to International Transportation by Air, October 12, 1929, 49 Stat. 3000 (1934), T.S. 876; 137 L.N.T.S. 11; as amended: by the Hague Protocol of 28 September 1955 [478 U.N.T.S. 371]; and by the Montreal Protocol No. 4 of 1975.

The insurance company claimed that American Airlines had failed to comply with Articles 9 of the Hague Protocol (no limitation on liability if particulars not stated on waybill) and 8(c) (agreed stopping places must be listed on waybill). American Airlines responded that, when the waybill was issued on March 9, 2001, both the U.S. and Belgium adhered to the Convention as amended by The Hague Protocol of 1955, and that Article VI of the Protocol deleted most of the “air consignment note” requirements, including the listing of “agreed stopping places.” The Court thus has to decide whether, as of that date, the U.S. was a party to The Hague Protocol of 1955 which amended the original Warsaw Convention of 1929.

The district court held that the U.S. had in fact acceded to The Hague Protocol when it ratified Montreal Protocol No. 4 in 1998, and denied the insurer’s motion for partial summary judgment. The Second Circuit reverses and remands; it holds that the U.S. did not become a party to The Hague Protocol until after the Senate had consented to the Protocol’s ratification after the issuance of the present waybill.

In determining whether a particular international agreement is binding upon the U.S., the Court looks mainly at two factors: (1) whether the U.S. has consented to be bound by that agreement, and (2) whether that agreement, by its terms, has entered into force for the U.S. as of the date in question. An otherwise “self-executing” treaty becomes the law of the land only after the Senate has consented and the President has ratified it.

“The Vienna Convention on the Law of Treaties, May 23, 1969, 1155 U.N.T.S. 331 ..., which we rely upon ‘as an authoritative guide to the customary international law of treaties,’ ..., defines ratification as one of ‘the international act[s] ... whereby a State establishes on the international plane its consent to be bound by a treaty,’ 1155 U.N.T.S. at 333, art. 2(b) ...” Article 14 of the Vienna Convention provides in relevant part that: The consent of a State to be bound by a treaty is expressed by ratification when: (a) the treaty provides for such consent to be expressed by means of ratification; (b) it is otherwise established that the negotiating States were agreed that ratification should be required; (c) the representative of the State has signed the treaty subject to ratification; or (d) the intention of the State to sign the treaty subject to ratification appears from the full powers of its representative or was expressed during the negotiation. 1155 U.N.T.S. at 335‑36.”

The Court then explains further. “The ratification process, in whatever form it may take, ... serves several functions. First and foremost, ‘it affords a state the chance to scrutinize closely the provisions of a complicated agreement’ after signing it. ... In addition, in the time between signing and ratification, States are able, inter alia, (1) to effect changes in domestic law that may be necessary for the implementation of a treaty, (2) to seek and obtain the consent of legislative bodies as may be required, and (3) to re‑examine the relevant provisions before committing to them. ...” [Slip op. 6-7]

Because a State is bound by a treaty only after ratification, the next issue is whether the U.S. has ratified a treaty, or otherwise acceded to its provisions and, if so, as of what date. In addition to the consent to be bound, a treaty must have entered into force to bind a State. “ ... Article 28 of the Vienna Convention confirms that, ‘[u]nless a different intention appears from the treaty or is otherwise established, its provisions do not bind a party in relation to any act or fact which took place or any situation which ceased to exist before the date of the entry into force of the treaty with respect to that party.’ 1155 U.N.T.S. at 339 ... Accordingly, we have recognized that, ‘[o]rdinarily, a particular treaty does not govern conduct that took place before the treaty entered into force.’ ...”

“Upon ratification, an international agreement comes into force in accordance with its terms. ... In all cases, however, we will look to see whether a treaty ratified by the President of the United States has entered into force in order to determine whether that treaty is binding on the United States and, by its terms or pursuant to action of the Senate and the President, enforceable in our courts.” [Slip op. 7-8]

Applying these principles to the international agreements at issue, it is undisputed that the U.S. had not explicitly ratified The Hague Protocol as of March 9, 2001. The question then becomes whether the U.S. had implicitly acceded to this Protocol through its 1998 ratification of the Montreal Protocol.

The language of the Montreal Protocol is the best evidence. “‘[T]the Warsaw Convention as amended at The Hague, 1955, and by Protocol No. 4 of Montreal, 1975' is clearly defined in Article XV as constituting ‘one single instrument.’ Applying that definition to Article XVII(2), it appears that ratification of Montreal Protocol No. 4 ‘by [a] State which is not a Party to the Warsaw Convention as amended at The Hague [in] 1955, such as the United States, ‘[has] the effect of accession to’ ‘one single instrument,’ namely, ‘the Warsaw Convention as amended at The Hague, 1955, and by Protocol No. 4 of Montreal, 1975.’ Therefore, according to the plain terms of the treaty, by ratifying Montreal Protocol No. 4, a State consents to be bound by one instrument consisting of the combination of three related treaties (and not by an additional instrument consisting of a combination of two related treaties ‑ The Hague Protocol and Montreal Protocol No. 4).” [Slip op. 11]

Thus, according to the plain language of the Montreal Protocol, the U.S. did not consent to be bound to The Hague Protocol (as a separate treaty) through the ratification of the Montreal Protocol. Here, the Senate consented to The Hague Protocol’s ratification on July 31, 2003. See S. Treaty Doc. No. 107-14 (2003). Thus, when the waybill was issued, the U.S. was not bound by that Protocol.

Citation: Avero Belgium Ins. v. American Airlines, Inc., 423 F.3d 73 (2d Cir. 2005).

VIENNA CONVENTION

In matter of first impression, Seventh Circuit holds that Vienna Convention on Consular Relations creates individual rights which may form basis of civil actions independently of criminal proceedings

Tejpaul Jogi (plaintiff), an Indian citizen, pled guilty to charges of aggravated battery in Illinois, and served six years of his twelve-year sentence. In 2002, U.S. immigration authorities returned him to India. While in prison, he had filed a number of lawsuits. In the present case, based on the Alien Tort Statute (ATS) [28 U.S.C. Section 1350], plaintiff is seeking damages from various Illinois law enforcement officials for alleged violations of his rights.

Plaintiff alleged that no U.S. official ever told him about his right under Article 36 of the Vienna Convention on Consular Relations [April 24, 1963, 21 U.S.T. 77, T.I.A.S. No. 6820, 596 U.N.T.S. 261] to contact the Indian consulate when he needed assistance. Both the U.S. and India are parties to the Convention. Section 1350 provides that “[t]he district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.”

The district court dismissed plaintiff’s case for lack of subject matter jurisdiction, finding that he had failed to sufficiently plead a tort under the ATS. Plaintiff appealed and persuades the Seventh Circuit to reverse.

The Court first decides whether the Convention is self-executing. Under Section 111(4) of the Restatement (Third) of the Foreign Relations Law of the United States (1987), a treaty requires national implementation (1) if it manifests an intention to that effect, or (2) if the Senate, in giving consent, so requires, or (3) if Congress, by resolution, so requires, or (4) if implementing legislation is constitutionally required. Here, based on the Restatement, commentators, and statements of the U.S. Department of State, the Court concludes that the Vienna Convention is a self-executing treaty.

The next step in the inquiry is whether Article 36 creates enforceable private rights. The Sixth and the Seventh Circuits have held, in the context of criminal proceedings, that the Convention does not confer individual rights.

“Our inquiry begins, naturally, with the text of Article 36. ... A number of judges have noted that ‘the text emphasizes that the right of consular notice and assistance is the citizen’s’ and that this language is ‘mandatory and unequivocal.’ ...”

“... [T]he Supreme Court [has] stated ‘a treaty should generally be construed ... liberally to give effect to the purpose which animates it and that [e]ven where a provision of a treaty fairly admits of two constructions, one restricting, the other enlarging, rights which may be claimed under it, the more liberal interpretation is to be preferred.’ ...”

“Particularly in this light, we conclude that even though many, if not most, parts of the Vienna Convention address only state-to-state matters, Article 36 confers individual rights on detained nationals. Although international treaties as a rule do not create individual rights, [Sosa v. Alvarez-Machain, 124 S.Ct. 2739, 2756 (2004)] recognizes that international law in general, and thus treaties in particular, occasionally do so.”

“Although two of our sister circuits have issued opinions in which they reject this conclusion, two considerations persuade us that we should not follow their lead: first, they were both addressing the specific argument that Article 36 provided some kind of shield against criminal enforcement – a position that we too have rejected, and second, these decisions both predated Sosa. ...” [Slip op. 15-17]

The International Court of Justice (ICJ), too, has declared that Article 36 gives rise to individually enforceable rights even in criminal cases... In LaGrand (Germany v. United States of America), 2001 I.C.J. 104, paragraph 77 (June 27), the ICJ held that “Article 36, paragraph 1, creates individual rights, which ... may be invoked in this Court by the national State of the detained person.” Further, the ICJ clarified in the Case Concerning Avena and Other Mexican Nationals (Mexico v. United States), 2004 I.C.J. No. 128 (March 31), that the U.S. had an obligation to permit the Mexican detainees to raise their Article 36 claims in the national courts.

Citation: Jogi v. Voges, 425 F.3d 367 (7th Cir. 2005).

WORLD TRADE ORGANIZATION

U.S. prevails before WTO in challenge to Mexican taxes on beverages sweetened with imported sweeteners other than cane sugar

Mexico imposed several taxes on various drinks imported from the United States. These include (1) a 20 percent tax on the transfer or importation of soft drinks and other beverages that use sweeteners other than cane sugar (such as beet sugar and High Fructose Corn Syrup (HFCS)); (2) a 20 percent tax on services related to the transfer of such beverages (such as commissions and brokerage); and (3) specific book-keeping requirements as to such taxes. These taxes are set forth in the Ley del Impuesto Especial Sobre Producción y Servicios (Law on the Special Tax on Production and Services, or LIEPS), as amended. See 2002 International Law Update 47. LIEPS exempts beverages sweetened with Mexican cane sugar from these requirements.

The U.S. complained of these taxes before a panel of the World Trade Organization (WTO). The Panel issued its Report on October 7, 2005, reaching five major conclusions. The first is that Mexico taxes imported beet sugar sweetener more heavily than like domestic sweeteners, and that is inharmonious with Article III:2, first sentence, of GATT 1994.

Second, the Panel found that Mexico taxes imported HFCS dissimilarly compared with directly competitive or substitutable products to protect Mexican domestic cane sugar production, and that does not square with Article III:2, second sentence, of GATT 1994. In the third place, Mexico accords less favorable treatment for imported beet sugar and HFCS than for like national products, and this is incompatible with Article III:4 of GATT 1994.

Fourth, Mexican taxes on soft drinks and syrups, imported soft drinks and syrups sweetened with non-cane sugar sweeteners (including HFCS and beet sugar) are higher than on like domestic products; and that conflicts with Article III:2, first sentence, of GATT 1994. Finally, the related book-keeping requirements, likewise, clash with Article III:2, first sentence, of GATT 1994.

Citation: Mexico – Tax Measures on Soft Drinks and Other Beverages (WT/DS308/R) (7 October 2005). The Panel Report is available on WTO website at www.wto.org; U.S. Trade Representative press release of October 7, 2005, is available at www.ustr.gov.

WORLD TRADE ORGANIZATION

WTO Dispute Settlement Panel finds U.S “zeroing” methodology for calculating dumping margins inconsistent with GATT obligations

A Dispute Settlement Panel of the World Trade Organization (WTO) has ruled that the U.S. methodology for calculating dumping margins (“zeroing”) does not comply with trading rules. Broadly speaking, zeroing means to set certain price comparisons that do not show dumping as “zero values” in the calculation of a weighted average dumping margin.

In June 2003, the Europan Union (EU) requested the WTO for consultations with the U.S. regarding its zeroing methodology, alleging, inter alia, violations of the Antidumping Agreement (AD Agreement). Article 2.4.2 of the AD Agreement provides that “... the existence of margins of dumping during the investigation phase shall normally be established on the basis of a comparison of a weighted average normal value with a weighted average of prices of all comparable export transactions or by a comparison of normal value and export prices on a transaction-to-transaction basis. A normal value established on a weighted average basis may be compared to prices of individual export transactions if the authorities find a pattern of export prices which differ significantly among different purchasers, regions or time periods, and if an explanation is provided as to why such differences cannot be taken into account appropriately by the use of a weighted average-to-weighted average or transaction-to-transaction comparison.”

Specific provisions of the Tariff Act of 1930 and the implementing regulations and methodology of the U.S. Department of Commerce are at issue. In particular, the methodology affects EU steel products.

Eventually, the matter was referred to a Dispute Settlement Panel. In its Report, the Panel concludes, among other things, that:

(1) The U.S. acted inconsistently with Article 2.4.2 of the AD Agreement when, in the specified antidumping investigations, it did not include in the numerator used to calculate weighted average dumping margins any amounts by which average export prices in individual averaging groups exceeded the average normal value for such groups.

(2) The U.S. zeroing methodology, as it relates to specified investigations, is inconsistent with Article 2.4.2 of the AD Agreement.

The Panel therefore recommends that the U.S. bring its zeroing methodology into compliance with WTO requirements.

Citation: United States – Laws, Regulations and Methodology for Calculating Dumping Margins (“Zeroing”) (WT/DS294/R) (31 October 2005). The Report is available on WTO website www.wto.org. Additional information on website of U.S. Trade Representative at www.ustr.gov.

United Kingdom creates new Supreme Court. Reportedly effective in the Spring of 2006, the Constitutional Reform Act 2005 (CRA) will set up a Supreme Court of the United Kingdom to take the place of the Judicial Committee of the House of Lords. It will consist of at least twelve judges appointed by the reigning monarch who may increase the number from time to time by Order in Council with the approval of each House of Parliament. CRA Section 23. Upon the effective date, the persons who immediately before that date were Lords of Appeal in Ordinary become Judges of the new Supreme Court. CRA Section 24. A judge of the new Court may hold that office during good behavior, but may be removed from it on the address of both Houses of Parliament. CRA Section 33. An appeal may come to the Supreme Court from any order or judgment of the Court of Appeal for England and Wales in civil proceedings. The appropriate Criminal Justice Act will be amended to take into account the new appellate judicial system. CRA Section 40. An appeal in civil proceedings lies only with the permission of the Court of Appeal or the Supreme Court and may be subject to other statutory restrictions. Under subsection (5), “[t]he Court has power to determine any question necessary to be determined for the purposes of doing justice in an appeal to it under any enactment.” Citation: Sweet & Maxwell, United Kingdom Law in Force; Constitutional Reform Act 2005: Chapter 4; Part 3, The Supreme Court; U. K. St. 2005, C. 4, Pt. 3. For comments on new Court system, see Joshua Rozenberg (Legal Editor), A reform to rival Magna Carta: Lord Woolf has rewritten the constitution ‑ but what will the judges do with their new powers? Daily Telegraph (London), Saturday, September 22, 2005 at page 27.

China relaxes ban on direct marketing. After banning almost all direct marketing for over seven years, the State Council of the People’s Republic of China has relented in view of its commitments to the World Trade Organization. The new Administration Regulations for Direct Marketing came out on September 1 of this year. Effective on December 1, the Regulations strictly define qualifications, require a past record of honesty and set other conditions for direct marketing in China to prevent fraud, to protect customers and the general public interest. Under the Regulations, direct marketing is a business model involving the recruitment of direct marketing sales agents or promoters and the selling of products to end consumers outside fixed business locations or outlets, (as practiced, e.g., by the multi-nationals, Amway and Avon). To prevent “pyramid” selling, Article 14 of the Regulations bans direct marketing companies from hiring sales persons on condition of payment of fees or purchase of goods. Citation: Memorandum of Solicitors Angela Wang & Co., Hong Kong, Thursday, September 20, 2005. To inquire further, see http://www.mondaq.com.

Netherlands court denies U.S. extradition request. On October 12, a Dutch court declined to extradite terror suspect, M.A., to the United States on the grounds that it could not warrant that the U.S. would respect his immediate legal rights to a defense lawyer and access to a judge. M. A. is a man of Egyptian descent whom the U.S. wants to prosecute for fraud and conspiracy to commit fraud, presumably in aid of the al-Qaida terrorist network. When the Dutch court asked for these guarantees from U.S. prosecutors, however, the response was “the United States views such a request as unwarranted and unnecessary.” Citation: The Associated Press (via Findlaw), The Hague, Netherlands, Wednesday, October 12, 2005 (byline of Anthony Deutsch, AP writer).

Nicaragua joins CAFTA. The Nicaraguan General Assembly has ratified the Central America Free Trade Agreement (CAFTA-DR), thus joining the U.S., the Dominican Republic and three other Central American countries in this cooperative economic enterprise. The U.S. predicts that this move will give Nicaragua its best chance to benefit from increases in trade and investment that will boost employment for, and the prosperity of, the people. The U.S. also announces that it will continue to monitor internal political attacks on the presidential term of Mr. Enrique Bolanos. Citation: Press Statement #2005/937 by Adam Ereli, Deputy State Department Spokesman, Washington, D. C., Tuesday, October 11, 2005 at 5:08 pm EDT; CNN news report of October 11, 2005, available at www.cnn.com.

EU gives green light to Verizon’s purchase of MCI. On October 7, European Union competition regulators authorized Verizon Communications Inc.’s acquisition of MCI Inc. They decided that the $8.4 billion deal between the two large U.S. telecommunications companies would not damage competition in Europe. A EU Commission spokesperson declared that “[t]he combined firm will continue to face several strong and effective competitors.” During its investigation, the Commission learned that the overlaps between the two companies in European Internet connectivity markets were “very limited.” On the preceding day in the U.S., MCI shareholders had voted overwhelmingly to consent to the acquisition. Nevertheless, U.S. antitrust authorities have not yet acted on the deal. Citation: The Associated Press (via Findlaw), Brussels, Belgium, Friday, October 7 at 16:37:28Z; PR Newswire of October 7, 2005, available at www.prnewswire.com.

U.S. and Sweden agree on tax protocol. On September 30, the U.S. Assistant Secretary of State for Economic and Business Affairs and the Swedish Ambassador signed a new Protocol to amend the existing bilateral income tax treaty between the United States and Sweden. See Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, with Exchange of Letters [Signed at Stockholm September 1, 1994; entered into force October 26, 1995; Tax Treaties (CCH) ¶8801, Tax Treaties (WGL) ¶81,030]. The Protocol will greatly lower tax‑related barriers to trade and investment flows between the U.S. and Sweden. It would also update the treaty to take account of changes in the laws and policies of both countries since they entered into the current treaty. The Protocol would bring the tax treaty relationship with Sweden into closer conformity with U.S. treaty policy. The most significant aspect of the Protocol deals with the taxation of cross‑border dividend payments. The Protocol is one of a few recent U.S. tax agreements that would do away with the withholding tax on dividends arising from certain direct investments. Citation: Media Note #2005/906; U.S. Department of State, Office of the Spokesman, Friday, September 30, 2005.

U.S. State Department puts business visa center online. On October 4, 2005, the U.S. Department of State (DOS) announced that it has put its Worldwide Business Visa Center on the Internet. Launched in July 2005, the Center has been helping businesses in the U.S. and their employees, clients, business partners, customers and colleagues around the world in their business-related visitor travel to the U.S. The web site outlines the role of the Center and the visa application procedure. It also provides answers to some Frequently Asked Questions (FAQs) including how to get in touch with the Visa Center. On the Internet, the web site address is at “http://travel.state.gov/visa/temp/types/types_2664.html”. Citation: Media Note, U.S. Department of State, Office of Spokesman, Washington, D. C., Tuesday, October 4, 2005 at 1:17 pm.

Saudi Arabia endorsed for WTO entry. On October 28, a working party of major WTO trading nations has voted to recommend the entry of Saudi Arabia - with its long-protected economy - into the WTO. The approval goes next to that body’s ruling General Council which meets on November 11. After twelve years of hard negotiations, Council approval is seen as foregone. Final approval of China would bring WTO membership to 149. Citation: The Washington Post (online via Reuters), Geneva, Switzerland, Friday, October 28, 2005 at 1:43 pm (byline of Robert Evans). Additional information is available on website of WTO at www.wto.org.