2006 International Law Update, Volume 12, Number 9 (September)

2006 International Law Update, Volume 12, Number 9 (September)

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

ARBITRATION

Third Circuit, in deciding whether to enforce arbitral award while appeal is pending in South African High Court, affirms dismissal without prejudice based on New York Arbitration Convention ruling; holds, as matter of first impression, that proper standard of review for deferring to foreign annulment proceedings under Article VI is “abuse of discretion”

Tech, Inc., a New Jersey company (Appellant), entered into a large contract to provide customized telecommunications software to Telkom (Appellee), a South African telecommunications company. When disputes arose over contract performance, the companies began binding arbitration proceedings in South Africa. During the arbitration, Appellee requested the South African High Court (SAHC) to intervene to correct alleged arbitration errors. Before the SAHC could do so, the International Court of Arbitration issued its final award to Appellant.

Appellant then sued to confirm its award in District of Columbia federal court pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards [21 U.S.T. 2517; T.I.A.S. 6997; 330 U.N.T.S. 3; in force for U.S., Dec. 29, 1970] (“The New York Convention”). Appellee filed an action in the SAHC to have the award set aside. Article V of the New York Convention would deprive Appellant of any enforcement right if the SAHC set aside or annulled the award.

The District Court dismissed Appellant’s case without prejudice for lack of personal jurisdiction and on grounds of forum non conveniens. Appellant appealed. The District of Columbia Circuit affirmed the district court. It did hold, however, that the lower court should have adjourned the proceeding pending the outcome of Appellee’s action in the SAHC.

The SAHC next set aside the award. While Appellant’s appeal was pending in the Supreme Court of Appeal of South Africa, [SCASA], Appellant brought a petition to enforce the award in the New Jersey federal court. That court also dismissed the petition, this time with prejudice, “based on estoppel vis-a-vis the D.C. Circuit Court decision and, alternatively and cryptically, dismissed without prejudice pursuant to the New York Convention.” [Slip op. 27] The New Jersey Court also entered an order dismissing the petition for lack of personal jurisdiction over Appellee. Appellant timely appealed.

The U.S. Court of Appeals for the Third Circuit reviews the dismissal for lack of personal jurisdiction de novo. The standard of review of a district court’s decision to defer to foreign annulment proceedings under Article VI of the New York Convention is a matter of first impression in this Circuit. Agreeing with the Second Circuit on this point, the Court adopts an abuse of discretion standard for review.

The Court holds that the district court did have personal jurisdiction over Appellee. It then directs the lower court to dismiss the petition without prejudice based on the proper interpretation of the New York Convention and on comity grounds.

The Court finds, first, that the district court had jurisdiction to enforce the arbitral award. New Jersey’s long-arm statute provides for jurisdiction up to the limits of protection provided to non-residents by the Due Process Clause of the Fourteenth Amendment. The minimum contacts required for jurisdiction depend on the circumstances. In a breach of contract matter, the district court must consider the totality of the circumstances.

“In regard to Appellee’s contacts with New Jersey, it is undisputed that Appellee and Appellant entered into a relationship to exchange customized merchandise. Put another way, their contract did not constitute the isolated interaction of a supplier putting an item into the stream of commerce to be fished out by a consumer. As such, Appellee’s lack of a physical presence in New Jersey becomes less determinative. ...”

“It is also undisputed that Appellee’s representatives traveled into New Jersey pursuant to the business relationship. For example, representatives visited New Jersey to participate in testing-related matters once problems arose in the contract. Such consultations, when they constitute a significant part of the business relationship, represent purposeful availment. ...”

“Given the specific nature of the requested goods, the close relationship and resulting consultations were a significant part of the business arrangement. Moreover, the breach of contract, i.e., the failure to pay for contractually compliant software, occurred when the payment was not placed in a New Jersey bank pursuant to the parties’ course of dealings. ...”

“Finally, the fact that the proceeding was for the enforcement of an arbitral award, rather than adjudication on the merits, rightly colors our analysis. Although the New York Convention does not diminish the Due Process constraints in asserting jurisdiction over a nonresident alien, the desire to have portability of arbitral awards prevalent in the Convention influences the answer as to whether Appellee ‘reasonably anticipate(d) being haled into’ a New Jersey court. World-wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980).”

“Moreover, the fact that the arbitration at issue was between a New Jersey corporation and the former government-owned state telecommunications monopoly illustrates New Jersey’s interest in adjudicating this dispute. Id. ... Thus, the totality of the circumstances points toward sufficient contacts by Appellee with New Jersey.” [Slip op. 5]

The Court then turns to the Article VI issue. The district court chose to exercise its discretion not to enforce the award. The Circuit Court reads the district court’s order as one for adjournment pursuant to Article VI of the Convention. It provides that: “If an application for the setting aside or suspension of the award has been made to a competent authority referred to in article V (1) (e), the authority before which the award is sought to be relied upon may ... adjourn the decision on the enforcement of the award and may also ... order the other party to give suitable security.”

Here, an appeal is pending before the SCASA. In effect, that is an application to set aside the award. The district court’s decision of dismissing without prejudice is consistent with this Circuit’s notions of comity in the international arena. The Court, however, declines to analyze the complex interplay of Articles V and VI of the Convention. The Court notes that Appellant can re-file the case when the SCASA has handed down its judgment.

Citation: Telcordia Tech Inc. v. Telkom SA Ltd., 458 F.3d 172 (3rd Cir. 2006).

ATTORNEY-CLIENT PRIVILEGE

Supreme Court of Canada affirms removal of counsel for plaintiff who failed to protect defendant’s attorney-client privilege in papers seized during court-ordered civil search

The underlying litigation in this case involves charges of industrial espionage. Celanese Canada Inc. (Plaintiff) had been operating a plant in Edmonton to produce vinyl acetate. For business reasons, Plaintiff chose to raze the facility rather than to sell it. Plaintiff ended up hiring Murray Demolition (Defendant), to undertake the demolition. Plaintiff took certain safeguards to hinder the unauthorised disclosure of valuable proprietary data inferable from the plant’s design and processes.

In April 2003, Plaintiff found out that certain Defendants, including Canadian Bearings Ltd., Farrokh Khalili, Hossein Banijamali and Canadian Petroleum Processing & Equipment Inc. were apparently on the premises, trying to copy Plaintiff’s proprietary processes and equipment.

Plaintiff therefore had Canadian Bearings and others to whom Defendant had given site access ordered off the site. Plaintiff next sued Defendant, inter alios, for allegedly purloining technology discovered during the demolition and making unauthorized use of it to build a vinyl acetate facility in Iran.

Early on, the Plaintiffs obtained an Anton Piller order ex parte to enter Defendants’ premises to search, inspect, remove, detain and retain certain documents. See Anton Piller KG v. Manufacturing Process Ltd. (1975), [1976] 1 Ch. 55 (Eng. C.A.).

This was done in the presence of police plus two employees of an independent accounting firm plus an independent attorney in phone contact with Defendants’ law firm. In the mild chaos, Plaintiffs’ agents inadvertently seized electronic versions of privileged solicitor-and-client communications of Defendants under the Order. The plaintiffs’ counsel in Canada was Cassels Brock and Kasowitz (CBK). Local firm members and one of the CBK lawyers in Texas reviewed these protected items. Although the Order required it, the Plaintiffs’ solicitors neither made nor kept a document list.

Next, the Defendants moved for an order to have the Plaintiffs’ solicitors of record removed from the case and to have the privileged material returned. The lower court, however, denied the motion. It deemed that the Defendants had failed to meet their burden of showing relevance plus pressing and substantial prejudice.

The Plaintiffs then went to the Court of Appeal. In allowing the appeal, the Court held that the lower courts had applied the wrong test for removing solicitors of record. On final appeal to the Supreme Court of Canada, that Court, in a July 27 judgment, allows the appeal and orders the removal of Plaintiffs’ solicitors.

This appeal presents a collision between two competing values_the solicitor-client privilege and the right to select counsel of one’s choice. In the Court’s view, it must resolve the conflict “on the basis that no one has the right to be represented by counsel who has had access to relevant solicitor-client confidences in circumstances where such access ought to have been anticipated and, without great difficulty, avoided and where such counsel has failed to rebut the presumption of a resulting risk of prejudice to the party against whom the Anton Piller order was made.” [¶ 2].

Despite the absence of egregious behavior, the high Court concluded that the Plaintiffs’ solicitors caused the disclosure of privileged material. It came about through a combination of carelessness, overzealousness, failure to focus on the limited purpose of preserving relevant evidence and by an inability to appreciate the potential dangers of Anton Piller orders.

“Experience has shown that despite their draconian nature, there is a proper role for Anton Piller orders to ensure that unscrupulous defendants are not able to circumvent the court’s processes by, on being forewarned, making relevant evidence disappear. Their usefulness is especially important in the modern era of heavy dependence on computer technology, where documents are easily deleted, moved or destroyed. The utility of this equitable tool in the correct circumstances should not be diminished.”

“However, such orders should only be granted in the clear recognition of their exceptional and highly intrusive character and, where granted, the terms should be carefully spelled out and limited to what the circumstances show to be necessary. Those responsible for their implementation should conform to a very high standard of professional diligence. Otherwise, the moving party, not its target, may have to shoulder the consequences of a botched search.” [¶ 32].

One of the lower courts correctly found that lawyers who undertake searches under the authority of an Anton Piller order and thereby get hold of relevant confidential information attributable to solicitor-client relationships, bear the burden of showing that there is no real risk that someone will exploit such confidences to Defendant’s prejudice. It was error for the Court of Appeal to interpret the relevant test as applying only in the context of removing solicitors who have had substantial exposure to important solicitor-client confidences. Even assuming arguendo that there could be a workable distinction between “substantial” exposure and “inadvertent” disclosure, it would not shift the burden to the defendant to prove that the risk of significant prejudice is present. Moreover, to require the revelation of the confidential information for which protection is sought would nullify the whole purpose of the application.

“Whether through advertence or inadvertence the problem is that solicitor-client information has wound up in the wrong hands. Even granting that solicitor-client privilege is an umbrella that covers confidences of differing centrality and importance, such possession by the opposing party affects the integrity of the administration of justice. Parties should be free to litigate their disputes without fear that their opponent has obtained an unfair insight into secrets disclosed in confidence to their legal advisors.”

“The defendant’s witnesses ought not to have to worry in the course of being cross-examined that the cross-examiner’s questions are prompted by information that had earlier been passed in confidence to the defendant’s solicitors. Such a possibility destroys the level playing field and creates a serious risk to the integrity of the administration of justice. To prevent such a danger from arising, the courts must act ‘swiftly and decisively’.... Remedial action in cases such as this is intended to be curative not punitive.” [¶ 34].

“There are four essential conditions for the making of an Anton Piller order. First, the plaintiff must demonstrate a strong prima facie case. Second, the damage to the plaintiff of the defendant’s alleged misconduct, potential or actual, must be very serious. Third, there must be convincing evidence that the defendant has in its possession incriminating documents or things, and fourthly it must be shown that there is a real possibility that the defendant may destroy such material before the discovery process can do its work. [Cites].”

“Both the strength and the weakness of an Anton Piller order is that it is made ex parte and [is] interlocutory: there is thus no cross-examination on the supporting affidavits. The motions judge necessarily reposes faith in the candour and complete disclosure of the affiants, and, as much or more so, on the professional responsibility of the lawyers participating in carrying out its terms. (We are advised that such orders are not available in the United States).” [¶¶ 34- 36].

The Court then spells out in detail a series of protective procedures which the lower courts ought to consider in all proper Anton Piller orders. [See ¶ 40] “It is evident that the draft order placed before the motions judge in this case was deficient in many respects. At issue here is the absence of any provision to deal with solicitor-client confidences.”

“The absence of specific terms in the Anton Piller order does not relieve the searching solicitors from the consequences of gaining inappropriate access. Such consequences may include removal. A precisely drawn and clearly thought out order therefore will not only protect the defendant’s right to solicitor-client privilege, but also protect the plaintiff’s right to continue to be represented by counsel of choice by helping to ensure that such counsel do not stumble into possession of privileged information.” [¶ 41].

The Supreme Court then addresses the burden of proof question in cases such as this. “Firstly, in an Anton Piller situation, as in MacDonald Estate v. Martin (1990), 285 W.A.C. 241, [1991] 1 W.W.R. 705, 77 D.L.R. (4th) 249, 121 N.R. 1 [1990], [1990] 3 S.C.R. 1235, 1260 to ‘require the very confidential information for which protection is sought to be revealed ... would have the effect of defeating the whole purpose of the application.’”

“Placing the onus on [Plaintiff] accords with the usual practice that the party best equipped to discharge a burden is generally required to do so. [Plaintiff’s] lawyers know what they looked at. Canadian Bearings’ lawyers do not. The latter should not have to reveal the universe of potential confidences to the former who, at this point, refuse (or have rendered themselves unable) to identify precisely what they have seen.”

“Secondly, putting the onus on the party in receipt of the confidential information rather than on the party being searched, increases the incentive on its part to take care to ensure that privileged information is not reviewed in the first place.”

“Thirdly, it seems to me procedurally unfair not only to subject the defendant to the intrusion of a surprise search under an exceptional order in the course of which its solicitor-client confidences are disclosed to its opponent, but then to throw on it the onus of clearing up the problem created by the plaintiff’s carelessness. The principal source of the present difficulty lies in the post-search conduct of [Plaintiff’s] solicitors. Having created the problem, the searching party should bear the burden of resolving it.” [¶¶ 49-51].

Finally, the Supreme Court reviews the problem of remedy. “In helpful submissions, the interveners Advocates’ Society and the Canadian Bar Association suggest a number of factors to be considered in determining whether solicitors should be removed: (i) how the documents came into the possession of the plaintiff or its counsel; (ii) what the plaintiff and its counsel did upon recognition that the documents were potentially subject to solicitor-client privilege; (iii) the extent of review made of the privileged material; (iv) the contents of the solicitor-client communications and the degree to which they are prejudicial; (v) the stage of the litigation; (vi) the potential effectiveness of a firewall or other precautionary steps to avoid mischief.” [¶ 59].

“In view of all the circumstances, I agree ... that Cassels Brock and Kasowitz have not produced sufficient evidence to satisfy the MacDonald Estate test, namely ‘that the public represented by the reasonably informed person would be satisfied that no use of confidential information would occur.’”

“I also agree ... that the right of [Plaintiff] to choose counsel yields to what occurred in the execution of the Anton Piller order in this case and its aftermath, and that ‘[t]he reasonable perception of the integrity of the administration of justice would be adversely affected were Cassels Brock ... permitted to remain solicitors of record for [Celanese]’. As to [the] future role of Mr. Kasowitz however, I think the Divisional Court went too far in holding that ‘[Celanese] should be precluded in this litigation or any related proceeding from receiving advice or information directly and/or indirectly from the firm’ (emphasis added).”

“[Plaintiff] has worldwide interests and Kasowitz is its primary legal advisor. As the vinyl acetate plant is to be built in Iran, there may well be related litigation outside Canada. I think [Defendant] will be sufficiently protected if [Plaintiff] is ordered not to seek or receive advice or information directly or indirectly from Kasowitz in connection with any litigation in Canada arising out of the matters referred to in the amended statement of claim, or related thereto, provided Kasowitz files affidavit(s) satisfactory to the case management judge confirming that the firewalls it had undertaken to install were and are in place, and sworn confirmation that all of the material for which privilege is claimed that came into Kasowitz’s possession as a result of the Anton Piller order has been returned or destroyed.” [¶¶ 66-67].

Citation: Celanese Canada Inc. v. Murray Demolition Corp., 2006 S.C.C. 36, J.E. 2006-1518, 2006 Carswell Ont. 4623 (Sup. Ct. Can. 2006).

COMPETITION

On appeal from fines imposed for engaging in worldwide cartel in graphite electrodes in violation of EC competition laws, European Court of Justice holds, inter alia, that principle of non bis in idem does not require EC tribunals to factor into their fines those imposed by non-member states for same anticompetitive conduct within their territories

This appeal to the European Court of Justice (ECJ) concerns the propriety of fines imposed upon various makers of graphite electrodes in the world market for running a cartel in this product in violation of the European Community laws and regulations dealing with competition.

On appeal from an adverse ruling by the Court of First Instance (CFI) in reviewing a Decision of the EC Commission, the main appellant is Showa Denko KK (SDK), established in Tokyo (Japan), other parties to the proceedings below were, inter alios, GrafTech International Ltd., (formerly UCAR International Inc.), a Delaware corporation, and the Carbide/Graphite Group Inc., incorporated in Pennsylvania.

Steel companies use graphite electrodes mainly to make steel in electric arc furnaces. Graphite is a crystalline form of carbon. Electric arc furnace steelmaking is basically a recycling process; it converts scrap steel into new steel; it differs from the traditional blast furnace plus oxygen process of producing steel from iron ore. A typical arc furnace uses nine electrodes, joined in columns of three, to melt scrap steel. So intense is the melting process, that it uses up an electrode in about eight hours. There are no product substitutes for graphite electrodes in this process.

About 85% of the demand for graphite electrodes depends on the quantity of steel produced in electric arc furnaces. In 1998, for example, world crude steel production was 900 million short tons, of which 315 million short tons (or about 35%) came out of electric arc furnaces.

During the 1980s, technological improvements brought about a substantial drop in the consumption of electrodes per ton of steel produced. This decline caused the restructuring of the world electrodes industry, and the closing of a number of factories.

In 2001, nine Western producers supplied the European market with graphite electrodes. On June 5, 1997, the EC Commission officials, relying on Article 14(3) of Council Regulation No 17, carried out simultaneous and unannounced investigations at the premises of certain graphite electrode producers. On the same date, Federal Bureau of Investigation (FBI) agents executed judicial search warrants at the U.S. premises of a number of producers.

These investigations led the U.S. to bring criminal proceedings for conspiracy against SDK and others. All the accused pleaded guilty to the charges and agreed to pay fines; for SDK, the fine amounted to $32.5 million. A class of carbon electrodes buyers filed civil actions in the U.S. courts against SDK claiming treble damages. In June 1998, steel buyers filed civil proceedings in Canada against SDK based on conspiracy allegations.

The EC Commission sent a statement of objections to the companies concerned in January 2000. The administrative procedure culminated in the adoption, on July 18, 2001, of the contested Decision. It found that the applicant undertakings are involved, on a worldwide scale, in price fixing and also in sharing the national and regional markets in electrodes according to the “home producer” principle. SDK, for instance, was responsible for Japan and for certain sectors of the Far East. Applicants then went to the CFI which ruled against them.

On further appeal, SDK argued to the ECJ that the CFI had committed legal error when it ruled that the Commission (1) could rely upon worldwide turnover to calculate the basic fine and the deterrence multiplier and, (2) did not have to take into account the fact that criminal proceedings in the United States, Canada and Japan had already imposed fines on it for the same behavior.

According to the appellant, if worldwide turnover was relevant for deterrence, the Commission and the CFI had erred in declining to take into account the fines which appellant has to pay in non-member states in setting the amount of the additional EC fine necessary to achieve adequate deterrence.

Since deterrence turns on the worldwide cost of the illegal conduct, SDK contended, it should take into account not only the fines imposed in the European Economic Area (EEA), but also fines imposed by non-member states. Otherwise, the CFI would be double-counting fines and that makes the worldwide fines disproportionate to any reasonable deterrent effect. Appellant also relied on the time-honored principle of non bis in idem.

The ECJ disagrees with SDK’s contentions. “It should be noted, first of all, that the principle of non bis in idem, also enshrined in Article 4 of Protocol No 7 to the European Convention for the Protection of Human Rights and Fundamental Freedoms,[E.T.S. 117] (ECPHR) constitutes a fundamental principle of Community law the observance of which is guaranteed by the judicature.” [Cites]. [¶ 50]

Article 4 provides in relevant part as follows: “Right not to be tried or punished twice. No one shall be liable to be tried or punished again in criminal proceedings under the jurisdiction of the same State for an offence for which he has already been finally acquitted or convicted in accordance with the law and penal procedure of that State..... No derogation from this Article shall be made under Article 15 of the [ECPHR].”

“With regard to examining the substance of the plea regarding infringement of that principle, it should also be noted, ... that the Court of Justice has not yet decided the question whether the Commission is required to set off a penalty imposed by the authorities of a non-member State where the facts with which the Commission and those authorities charge an undertaking are the same, but it has made the identical nature of the facts alleged by the Commission and the authorities of a non-member State a precondition of doing so.”

“As regards the scope of application of the principle of non bis in idem in situations in which the authorities of a non-member State have taken action pursuant to their power to impose penalties in the field of competition law applicable in that State, it should be borne in mind that the context of the cartel at issue is an international one, characterised in particular by actions of legal systems of non-member States [taken] within their respective territories.”

“In that regard, the exercise of powers by the authorities of those States responsible for protecting free competition under their territorial jurisdiction meets requirements specific to those States. The elements forming the basis of other States’ legal systems in the field of competition not only include specific aims and objectives but also result in the adoption of specific substantive rules and a wide variety of legal consequences, whether administrative, criminal or civil, when the authorities of those States have established that there have been infringements of the applicable competition rules.”

“On the other hand, the legal situation is completely different where an undertaking is caught exclusively - in competition matters - by the application of Community law and the law of one or more Member States on competition, that is to say, where a cartel is confined exclusively to the territorial scope of application of the legal system of the European Community.”

“It follows that, when the Commission imposes sanctions on the unlawful conduct of an undertaking, even conduct originating in an international cartel, it seeks to safeguard the free competition within the common market which constitutes a fundamental objective of the Community under Article 3(1)(g) EC. On account of the specific nature of the legal interests protected at Community level, the Commission’s assessments pursuant to its relevant powers may diverge considerably from those by authorities of non-member States.”

“Accordingly, the [CFI] was fully entitled to hold ... that the principle of non bis in idem does not apply to situations in which the legal systems and competition authorities of non-member States intervene within their own jurisdiction. Moreover, the [CFI] was also fully entitled to hold that there is no other principle of law obliging the Commission to take account of proceedings and penalties to which the appellant has been subject in non-member States.”

“[Moreover] there is no principle of public international law that prevents the public authorities, including the courts, of different States from trying and convicting the same natural or legal person on the basis of the same facts as those for which that person has already been tried in another State. In addition, there is no public international law convention under which the Commission could be obliged, upon setting a fine under Article 15(2) of Regulation No 17, to take account of fines imposed by the authorities of non-member States pursuant to their competition law powers.”

“It should be added that the agreements between the European Communities and the Government of the United States of America of 23 September 1991 and 4 June 1998 on the application of positive comity principles in the enforcement of their competition laws [see 1998 International Law Update 62] are confined to practical procedural questions like the exchange of information and cooperation between competition authorities and are not in the least related to the offsetting or taking into account of penalties imposed by one of the parties to those agreements.”

“Finally, as regards failure by the [CFI] to have regard to the principles of proportionality and equity, pleaded in the alternative by the appellant, it should be observed that any consideration concerning the existence of fines imposed by the authorities of a non-member State can be taken into account only under the Commission’s discretion in setting fines for infringements of Community competition law. Accordingly, although it cannot be ruled out that the Commission may take into account fines imposed previously by the authorities of non-member States, it cannot be required to do so.” [¶¶ 51-60]

Citation: Showa Denko KK v. EC Commission, [2006] ECR 00; Case C-289/04 P (Eur. Ct. Just.[2d Ch.] June 29, 2006).

CONTRACTS

On appeal of pretrial rulings in English suit by licensor of “Jerry Springer” TV shows that seeks to prevent licensee from dissolving their contract based on alleged decline in acceptability of recent shows, English Court of Appeal, applying Dutch law, affirms trial judge’s interpretation of key contract language which requires similarity of content to 1998 shows

Universal Studios International BV (Plaintiff) is a Dutch company, part of the Universal Studios Group (USG), headquartered in the United States. It is the international licensor of the TV programs, “The Jerry Springer Show” (Springer) and “Maury Povich” (Povich). Flextech Rights Ltd. (Defendant), is an English corporation. Through a “1998 Agreement”, Defendant had obtained from Plaintiff the U. K. rights to broadcast many of these programs. (Since the pretrial issues addressed here are identical for both shows, the Court generally limits its discussion to Springer.)

Springer is a well known talk show named after its regular host. It mainly shows to an American audience but Plaintiff and others have licensed it for broadcasting in many countries. Defendant broadcast Springer in the U. K. from 1995 to 1998 under a series of one-year licenses. In April 1998, Plaintiff invited bids for future seasons of the show. Plaintiff wanted a “run of series” deal for Springer. Negotiations led to the 1998 Agreement.

The controversial nature of Springer created a risk of conflict between Springer’s shock value and the standards set by England’s Independent Television Commission (ITC). It had drawn up a TV program code. It regulates the type of material (1) which a licensee could not show at all, (2) which the licensee could show only after 9 pm, and (3) which a licensee could only show during the school day but not on school holidays (NSH).

In the ITC’s opinion, there is a legitimate role for programs that cover difficult social and emotional issues, and some editions of Springer have even been educational. “There has been some public debate, however, about the exploitational aspects of the show. Springer often gets its participants from the poorer segments of American society, and invites them to parade their faults and misfortunes for public entertainment. Many are inarticulate and unable to make a proper case for themselves. Guests frequently resort to persistent verbal abuse or physical violence.” [¶ 5]

The 1998 Agreement provided that the programs would remain substantially similar in form and substance to the 1997/1998 U.S. season. In a letter dated December 30, 2002, however, Defendant’s solicitors wrote to Plaintiff claiming that the contents of Springer had drifted significantly downhill over the last few years, The letter alleged that this constituted a major breach of the 1998 Agreement. Defendant, therefore, was “dissolving” the 1998 Agreement as of January 1, 2003 on the basis of Article 6:245 of the Dutch Civil Code (DCC). (The parties agree that Dutch law governed the 1998 Agreement).

Plaintiff denies the validity of this dissolution, insisting that the 1998 Agreement remains in force. Therefore, it retains its rights to receive license payments due (1) with respect to programs supplied before the purported dissolution and (2) with respect to payments that fall due under the 1998 Agreement on an installment basis until the end of the series run.

In July 2004, the Court decided prior to trial that it would determine certain preliminary matters. Excepted were those issues dealing with assessing the content of the individual episodes of Springer and some other limited issues.

There are two main disputes between the parties. The first is whether, and in what respect and to what extent, Plaintiff was breaching any of its obligations under the 1998 Agreement. Assuming there were breaches, the second is whether Defendant was entitled to terminate (or, in Dutch law, to “dissolve”) the 1998 Agreement. Central to the dispute is the interpretation of Clause 4(a) of the 1998 Agreement requiring that each licensed episode of Springer was to be “similar in content and overall production value to the episodes in the 1997/1998 U.S. broadcast season”.

In deciding the preliminary issues, the trial Judge was to assume the truth of certain allegations set forth in Defendant’s Defence. For example, this document alleged that, in the 1997/98 season out of a total of 194 new Springer episodes, about 31% had run into compliance problems. Moreover, the ITC barred plaintiff from broadcasting about 7% of the episodes because of their content (incurable by editing). On the other hand, by the 2001/2002 season, out of a total of 190 new episodes, about 93% had ITC compliance problems. In addition, the ITC banned about 22% of the episodes as incurable by editing.

The Record contains the following synopsis of “Cheaters’ Bazaar,” one of the milder (but ITC-restricted) examples of a Springer program. “Phil reveals that he is gay and is only sleeping with Tiffany to get close to her boyfriend Danny. Tami reveals to her boyfriend Mike that she has been prostituting herself with their mutual friend Jason in order to pay the bills. Kelly reveals that she has been cheating on her husband Mike with his best friend.”

Plaintiff sued Defendant in the U.K. to enforce the 1998 Agreement. Disappointed by some of the pretrial rulings, Defendant appealed to the English Court of Appeal (Civil Division). That Court unanimously upholds the rulings of the lower court.

The principal appellate issue centers on the meaning of the words “similar in content” in Clause 4(a). Dutch law governs any disputes on this point. To a greater extent than under English law, the Dutch courts can, in principle, look to the actions of the parties and the negotiations leading up to the execution of the contract, plus the actions of the parties after the execution, as an aid to construction. In this case, the Court notes, the applicable approach is practically the same as under English law.

Plaintiff contends that compliance (or lack of same) with the ITC Code was legally irrelevant, and that the contents of the Defence schedules were inadmissible on the issue of similarity of content under Clause 4(a). Conversely, Defendant’s chief claim is that the Judge was at least entitled to conclude that, if they make good at trial the facts they now allege, they show (1) that very many of the episodes of the 2001/2002 series were not “similar in content ... to the episodes in the 1997/1998 [series]”, and (2) that Dutch law, therefore, entitled Defendant to dissolve the 1998 Agreement.

“Content” is a conveniently broad concept. It could include, inter alia, the format, the nature and detail of the subject-matter, the manner of presentation (e.g. prepared or impromptu, judgmental or dispassionate, academic or vulgar), the degree and nature of contribution by, and interaction between, presenter, participants, and audience, as well as the language used (sophisticated or basic, foul or polite, etc).

In determining the specific nature of content, the Court notes, appellate review is limited. “Similarity of content is, in my view, a question of fact, albeit not of primary fact; it is more a question of inference from primary facts, a ‘Jury question’... Accordingly, it is very much a question for the fact-finding tribunal, which, in this case, will ... be the judge at the final hearing. [As a result], the trial Judge’s ... ultimate duty is to apply the words of the 1998 Agreement. The role of [this] court at this stage is to give as much helpful guidance as possible.” [¶ 32].

“There is no question ... of Plaintiff being in breach of contract simply because of an episode, or even a large number of episodes ... of a series being untransmissible because it, or they, failed to comply with the ITC Code (or could only be shown at certain times under that Code). The risk under the 1998 Agreement lay ... with Defendant. ... to ensure compliance with regulatory provisions such as the ITC Code.’”

“Clause 8 and Rider 8 do indeed make reference to compliance with regulations such as the ITC Code, but only in order to permit Defendant to edit episodes to achieve compliance. If an episode, which would otherwise be non-compliant, could reasonably be edited so as to render it compliant, then ... Defendant could not rely on it as a non-compliant episode. ... While the extent of non-compliance in the case of many of the 2001/2002 episodes cannot be relied on per se to establish dissimilarity of content, it does not follow that the extent of such non-compliance cannot be relied on as evidence of such dissimilarity.” [¶ 34].

“[Another] argument ... on behalf of Plaintiff (which is an argument which would not have been open, even in principle, if English law was applicable) was that Defendant’s expressed concern in the negotiations leading up to the 1998 Agreement was that [Springer] would become less controversial and ‘edgy’, not more so. It was because of that concern that the requirement of similarity with the episodes in the 1997/1998 series was included in Clause 4(a). The fact that a provision is included in a contract because of a concern expressed by one of the parties does not by any means lead to the conclusion that it was included to deal only with that concern.” [¶¶ 37, 38]

In sum, the Court of Appeal’s conclusions so far are as follows. “First, a comparison by reference to the compliance, or degree of compliance, with the ITC Code is admissible, and, indeed, relevant, evidence on the issue of similarity of content. The fact that an aspect of an episode goes to compliance does not in any way prevent it being within the ambit of the ‘content’ of the episode, either as a matter of ordinary language or for the purposes of Clause 4(a). Further, the fact that some of the episodes of the 1997/1998 series were non-compliant does not invalidate this point, although it certainly is not irrelevant to the issue of similarity of content; on the contrary, it is a point upon which Plaintiff can properly rely.”

“Secondly, the weight to be given to non-compliance, ... is very much a matter for the judge who determines the final issues between the parties. It is of questionable value for [an appellate] court to indicate at this stage ... what weight, is to be given to the issue of non-compliance with the ITC Code ..., when determining whether an episode complies with Clause 4(a), and whether DCC Article 6.245 entitled Defendant to dissolve the 1998 Agreement.”

“Accordingly, it appears to me that the Judge approached the issues of infringement of Clause 4(a) and of Defendant’s right to dissolve the 1998 Agreement on the correct basis as a matter of law. ...” [¶¶ 46-48].

“... [T]he hearing [below] proceeded on the basis of the assumed facts as set out in the Defence. These assumed facts are not admitted by Plaintiff. Further, they are almost certain not to be the only facts raised at the final trial, relating to the question of the similarity of content of the relevant episodes. The former aspect speaks for itself. As to the latter aspect, [an] example should suffice.” [¶ 51].

“...[T]he contents of many of the episodes of the two series may have many more aspects than those contained in the brief synopses and reasons for certification contained in the schedules to the Defence. It does not appear that [the trial Judge] saw any of the episodes; unfortunately for the trial judge, it is inevitable that he will have to watch a number (probably many) of the episodes of the two series in question. He will therefore have a much fuller ... assessment of the contents of many of the episodes than is possible at this stage.” [¶ 53].

“It must be necessary for the judge who determines such issues to see at least some of the episodes of the two series (although I would strongly encourage the parties to agree a sensible basis upon which the trial judge can reach a conclusion on the two ultimate issues without having to view anything like the totality of all the episodes of both series).” [¶ 57].

“In these circumstances, I would uphold the Judge’s decision without reservations ... in relation to Rider 8. That renders it unnecessary to revisit the conclusions I have reached [on] the issues arising in relation to Clause 4(a). So far as those issues are concerned, I would substantially uphold the Judge’s decision.” [¶ 80].

Citation: Universal Studios International BV v. Flextech Rights Ltd., Case No: A3/2005/2476, [2006] E.W.C.A. Civ. 1036, 2006 WL 2133138 (Ct. of App. Civ. Div. 2006).

SOVEREIGN IMMUNITY

Fourth Circuit affirms denial of Republic of Sudan’s motion to dismiss case brought by families of sailors killed in bombing of U.S.S. Cole on grounds that “terrorist exception” of Foreign Sovereign Immunities Act conferred subject matter jurisdiction

On October 12, 2000 the Islamic terrorist group Al-Qaeda planned and carried out the bombing of the destroyer U.S.S. Cole, berthed at Aden Harbor in Yemen, killing seventeen American sailors. In July 2004, Olivia Rux and more than fifty other surviving family members (Plaintiffs) sued the Republic of Sudan (Defendant) seeking damages for the deaths of the American sailors. Defendant moved to dismiss primarily for lack of subject matter jurisdiction under the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C.A. Sections 1602-1611 (West 1994 & Supp. 2006).

In opposition, Plaintiffs invoked the “terrorism exception” set forth in Section 1605(a)(7) of FSIA “by allegations that [Defendant] had provided various forms of support to Al-Qaeda both during the years preceding and in the orchestration of the bombing of the U.S.S. Cole.” [Slip op. 21] Section 1605(a)(7) allows plaintiffs damaged by acts of terrorism to sue the state sponsors thereof in federal court.

A Virginia federal court held that Plaintiffs’ pleadings were enough to deny Defendant’s motion to dismiss. Defendant timely appealed. The U.S. Court of Appeals for the Fourth Circuit upholds the district court’s exercise of subject matter jurisdiction. It orders the dismissal of Defendant’s other claims.

To establish subject matter jurisdiction under Section 1605(a)(7), Plaintiffs must satisfy three elements: (1) that Sudan provided Al-Qaeda with material support; (2) that an official agent of Sudan provided such support “‘while acting within the scope of his or her office, employment, or agency’”; and (3) that a causal link exists between the material support and the damage resulting from the terrorist acts.” [Slip op. 28].

First, the term “material support” in Section 1605(a)(7) incorporates 18 U.S.C.A. Section 2339A(b)(1) (West Supp. 2006); the latter defines “material support or resources” as “any property, tangible or intangible, or service, including currency or monetary instruments or financial securities, financial services, lodging, training, expert advice or assistance, safe-houses, false documentation or identification, communications equipment, facilities, weapons, lethal substances, explosives, personnel¼, and transportation.” [Slip op. 38].

Defendant claims that Plaintiffs are construing the term “safe houses” too broadly, and advocates a narrower reading, limited to buildings or structures. The Fourth Circuit disagrees, using a dictionary definition to find Defendant’s limited interpretation of the term unwarranted: “The underlying purpose of Section 1605(a)(7), which guides our analysis, supports the more expansive construction of the term.” [Slip op. 43] The Court concludes that Defendant did provide Al Qaeda with material support by furnishing locations for terrorists to run training camps.

In addition, Plaintiffs’ pleadings cover the “financial services” and “transportation” requirements. Plaintiffs allege that Sudan formed a trading company and bank with Al-Qaeda. Furthermore, “[Defendant] allowed Al-Qaeda to use its diplomatic pouch, authorized entry of members of Al-Qaeda into the country, allowed a company run by Osama bin Laden unrestricted shipping, and allowed a member of Al-Qaeda to ship explosives to Yemen.” [Slip op. 47].

The Court finds that Plaintiffs also satisfy the second element. They do this “with their allegation that ‘Omar Hassan Ahmad al Bashir, president of the [Defendant] authorized the entry into the [Defendant] by Al-Qaeda operatives and gave Al-Qaeda special authority to avoid paying taxes and duties ordinarily due to’ Defendant.” [Slip op. 51] Moreover, President Bashir was “‘an official, employee, or agent’ of [Defendant] by virtue of his elected position¼” and his action fell within the purview of his office. [Slip op. 51].

Finally, the Fourth Circuit rejects [Defendant’s] argument that Plaintiffs failed to show a sufficient causal connection between the material support provided to Al-Qaeda and the damage arising from the deaths of the U.S.S. Cole sailors. The Court cites a line of cases which create a distinct ‘jurisdictional causation’ requirement to overcome sovereign immunity-based challenges to subject matter jurisdiction under Section 1605(a)(7).”

“Jurisdictional causation carries a lesser burden than substantive causation elements, requiring only a showing of proximate cause; a plaintiff need not make a showing of but-for causation. Plaintiffs’ pleadings do allege a “‘reasonable connection between the act or omission of the Defendant and the damages which the Plaintiff has suffered.’” [Slip op. 59].

Citation: Rux v. Republic of Sudan, 2006 WL 2521556 (4th Cir. 2006).

SOVEREIGN IMMUNITY

Fifth Circuit reverses turnover order issued against Republic of Congo holding that Congo did not implicitly waive FSIA immunity and did not fall under “commercial activity” exception

In 1984, Af-Cap Inc.’s [Plaintiff’s] predecessor-in-interest, Equator Bank, granted a construction loan to the Republic of Congo [Defendant] on which Defendant later defaulted. In 2000, an assignee of Equator Bank, Connecticut Bank of Commerce (CBC), obtained a money judgment in New York state court against Defendant for $13,628,340. To satisfy this judgment the court permitted attachment and execution against the Defendant’s assets.

In 2001, CBC registered their New York judgment in a Texas state court followed up by a garnishment action against Defendant’s debtors. The Texas court issued writs of garnishment against royalty obligation and taxes which CMS Nomeco Congo, Inc., The Nuevo Congo Company, and Nuevo Congo Ltd. (CMS Companies) owed the Defendant. The CMS Companies held interests in oil production in Defendant’s waters and paid royalties for oil taken. The agreement governing the oil production provided for royalty payments in cash or “in kind” that is, in oil. [Defendant ] has opted to receive 100% of its payments in kind.

The Defendant removed the action to a federal court in Texas; in an order dated March 16, 2001, the court “held that the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. Section 1602 (2000), prohibited garnishment of the in-kind royalties and tax obligations.” [Slip op. 14]. On appeal, the U.S. Court of Appeals for the Fifth Circuit vacated the decision. It ruled that the Defendant may fall within an exception to FSIA by engaging in “commercial activity” in the United States.

On remand, the district court dissolved the writs of garnishment, and found that the Defendant did not engage in commercial activity in the United States. The Fifth Circuit again vacated the decision, holding that the Defendant’s use of the obligations received from the CMS Companies to settle a lawsuit in the United States, amounted to “commercial activity.”

On remand the court decided that “the non-monetary obligations owed by the CMS Companies were not proper subjects of garnishment under Texas law.” [Slip op. 16]. Instead, the district court applied a Texas “turnover” law, providing for an alternative type of attachment.

The turnover order of February 2005, purported to: “(1) take ‘possession and control of all future royalty obligations owed to the [Defendant]; (2) ‘order[ed] the [Defendant] to turn over such royalty payments into the registry of the Court,’ and (3) order[ed] the [Defendant] ‘to execute in three originals within three days the attached letter of instruction¼from the [Defendant] to the parties who pay royalties to the [Defendant].” [Slip op. 16].

In response, the Defendant’s Ministry of Foreign Affairs wrote to the court stating their intent to disobey the order, believing it violated the Defendant’s sovereignty. Disagreeing, the district court found the Defendant in contempt for failure to comply. The parties timely appealed (1) the order dissolving the writs of garnishment, (2) the turnover order, and (3) the contempt order. The Circuit Court consolidated the three appeals for oral argument and for disposition, and vacates the orders below.

First, the Fifth Circuit examines the dissolution of the writs of garnishment. It decides that Texas Rule of Civil Procedure 668 does not allow garnishment of non-monetary obligations and that Texas case law requires strict construction of Texas garnishment statutes.

Next the court discussed the turnover order. Since the district court did not have in personam jurisdiction over the [Defendant] under FSIA, which “‘provides the sole basis for obtaining in personam jurisdiction over a foreign state’,” the turnover order is invalid. [Slip op. 38]. In personam jurisdiction under FSIA over a foreign state can exist only where the state has waived its immunity, explicitly or implicitly, Section 1605(a)(1), or where that foreign state engaged in commercial activity in the United States, Section 1605(a)(2).

The Court then disposes of the Section 1605(a)(2) commercial activity argument. It rules that the [Defendant’s] only commercial activities related to the CMS Companies; without writs of attachment, however, the CMS Companies’ location in the United States becomes irrelevant and the commercial activities exception does not apply.

The Court then addresses Section 1605(a)(1) on waiver. The Court finds that the loan agreement does not explicitly waive immunity to suit in Texas. To find whether the Congo implicitly waived immunity the Court applies Rodriguez v. Transnave Inc., 8 F.3d 284, 287 (5th Cir. 1993). It “identified three circumstances in which a waiver is ordinarily implied: ‘(1) a foreign state agrees to arbitration in another country; (2) the foreign state agrees that a contract is governed by the laws of a particular country; (3) the state files a responsive pleading without raising the immunity defenses.’” [Slip op. 40].

None of the above circumstances exist in the instant case. The Defendant never entered into an arbitration agreement, the loan agreement states that English law governs it, and Af-Con has consistently raised an immunity defense in its pleadings.

Since the commercial activity exception under Section 1605(a)(2) does not apply and since the Congo never waived immunity under Section 1605(a)(1), the district court did not have the requisite in personam jurisdiction to enter a turnover order.

The Fifth Circuit also refuses to apply the “Fugitive Disentitlement Doctrine” to dismiss the appeal on grounds that the Defendant disrespected the United States legal process by refusing to obey the district court’s orders. The [Defendant] did not show disrespect for the court order but raised sovereignty concerns and “correctly believed that under the FSIA the district court lacked in personam jurisdiction.” [Slip op. 44]. Furthermore, [Plaintiff] points to no precedent in which an American court has applied the doctrine against a foreign state.

Finally, the Fifth Circuit finds that FSIA bars contempt orders: “The legislative history surrounding the FSIA specifically discusses contempt orders and states that they ‘may be unenforceable if immunity exists.’” [Slip op. 53]. In issuing the contempt order, the district court abused its discretion, requiring the Circuit court to vacate the order.

Citation: Af-Cap, Inc. v. Republic of Congo, 2006 WL 2424778 (5th Cir. 2006).

WORLD TRADE ORGANIZATION

WTO Appellate Body issues compliance report for U.S.-Canada lumber dispute, finding that U.S. still has not fully implemented WTO trading requirements

The Appellate Body of the World Trade Organization issued its final determination on a dispute between Canada and the United States regarding the dumping of softwood lumber, after Canada appealed certain issues of law and legal interpretations of the United States – Final Dumping Determination on Softwood Lumber from Canada – Recourse to Article 21.5 of the DSU by Canada. See 2006 International Law Update 77.

The original WTO report dealt with a dispute originating in 2001 over duties imposed by the U.S. Department of Commerce (DOC) on Canadian softwood lumber exporters. Canada assigned error to the DOC’s method of calculating the average margin of dumping, claiming the DOC failed to comply with Article 2.4.2 of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1996 (Anti-Dumping Agreement or ADA ).

In response to a ruling in Canada’s favor, the DOC calculated new rates in accordance with WTO recommendations. In the original report, the WTO panel ruled that the DOC had acted consistently with the ADA and properly implemented the recommendations and rulings of the Dispute Settlement Body (DSB). See 2006 International Law Update 77.

On appeal, the Appellate Body reverses. It decides that the Panel erred in finding that the DOC’s Section 129 Determination using a zeroing method was consistent with Article 2.4.2 of the ADA. It also reverses the Panel’s finding that the DOC Section 129 determination is not at odds with Article 2.4 of the ADA. The use of zeroing by the DOC in the Section 129 Determination clashes with the “fair comparison” requirement of Article 2.4.

The bottom line is that the U.S. had failed to carry out the prior recommendations to bring its measures into conformity with WTO trading rules. The Appellate Body again recommends that the U.S. bring its dumping rules into conformity with these rules.

Citation: World Trade Organization (WTO), “United States_Final Dumping Determination of Softwood Lumber from Canada” (DS264) (15 August 2006). The report is available on website “www.wto.org.”

IN BRIEF

EU approves updated Antigua Fisheries Convention. On August 16, 2006, the European Union approved the Convention for the Strengthening of the Inter-American Tropical Tuna Commission [1 U.S.T. 230; T.I.A.S. 2044; 80 U.N.T.S. 3] established by the 1949 Convention between the United States of America and the Republic of Costa Rica (Antigua Convention). The member states had adopted the revised Antigua Convention at the June 2003 meeting of the Inter-American Tropical Tuna Commission (IATTC), and they intend it to replace the 1949 Convention with enhanced measures. The stated objective of the Antigua Convention is to ensure the long-term conservation and sustainable use of the fish stocks in specified areas of the Pacific Ocean (see Articles II & III). Citation: Council Decision 2006/539/EC, 2006 O.J. of the European Union (L 224) 22, 16 August 2006. (Convention is reprinted in Official Journal following this Decision).

Russian government withdraws oil and gas authorization in Far East. On September 18, Rosprirodnadzor (Russian Nature Supervision), a Russian government agency, canceled its 2003 environmental approval for the world’s largest combined oil and natural gas project. Led by Royal Dutch Shell, its site is on Sakhalin Island in the Sea of Okhotsk, north of Hokkaido, Japan. In futures contracts, Shell has already sold the liquefied natural gas that should come online in mid 2008 to companies serving Japan, Korea and the U.S. West Coast. Exxon Mobil and Total of France run the two other fields. The change of Russian policy arose during a sharp business dispute between Shell and Gazprom, Russia’s state-owned natural gas monopoly, which is seeking to join the consortium. Energy gurus in Moscow look upon the environmental ruling as a device to pressure Shell into selling to Gazprom. Russian authorities, however, did allege construction damage to salmon-bearing rivers and excessive logging along a pipeline route. Citation: The International Herald Tribune, Moscow, Tuesday, September 19, 2006, issue 2, page 1 (byline of Andrew E. Kramer); 2006 WLNR 16245722.

Belgian court orders Google to cease local copyright violations. On September 18, a Belgian Court of First Instance (BCFI) ordered Google of California to take out all links to reports from local newspapers in the French and German languages. A group of Belgian publishers called Copiepresse had filed the suit alleging violations of Belgian copyright laws. They consisted of publishing unlicensed and uncompensated summaries of the news stories online with a citation to each newspapers’ website. The news industry has been complaining that this practice is reducing its advertising income. The BCFI notified Google that its failure to remove all Belgian newspaper stories from Google News would lead to daily fines of $1.27 million. Google, however, claims that the fair-use provisions of copyright law protect its service. Google plans to appeal. Citation: The New York Times, (Late Edition, Final), Brussels, Tuesday, September 19, 2006, section C, page 2; 2006 WLNR 16227354 (byline of Paul Meller).

Japan’s highest court rejects appeal of former cult leader. On September 15, 2006, an official of the Japanese Supreme Court reported that the court has turned down an appeal by doomsday cult founder, Shoko Asahara. This ruling may finalize his death sentence for the cult’s 1995 nerve-gas attack in the Tokyo subways. A trial court had convicted Asahara in 2004 of masterminding the attack; his followers had released sarin nerve gas on crowded commuter trains in Tokyo’s government district, killing 12 and injuring thousands of others. The blind defendant, who once led a powerful group with about 40,000 members, often mumbled incoherently, sometimes interfering with court sessions with bizarre outcries. Last month, however, a court-appointed psychiatrist found that Asahara was competent to stand trial. Citation: Kitchener-Waterloo Rec. (Copyright 2006 TDNG Inc.), Tokyo, Saturday, September 16, 2006 at page A18, 2006 WLNR 16093910.

Russia and United States sign Plutonium conversion Protocol. The U.S. Department of State (USDOS) announced that, on September 15, 2006, the United States and the Russian Federation have signed a Protocol that sets up a framework for resolving liability issues in a significant nonproliferation program. This program seeks to convert 34 metric tons each of excess weapon-grade Plutonium (Pu), enough for 16,000 weapons, into nonweapon forms. Pu is a naturally radioactive element found in uranium ores. A radiological poison, it is specifically absorbed by bone marrow. Pu 239 can be used as a reactor fuel and in nuclear weapons. Eliminating this weapon-grade Plutonium supports the U.S.’s national security strategy to combat weapons of mass destruction. Citation: U.S. Federal News (HT Syndication) (online), Washington, D. C., Friday, September 15, 2006, 2006 WLNR 16099637 (USDOS Statement).

Chile ratifies pioneer trade deal with China. On August 21, 2006, Chilean President Michelle Bachelet signed into law a free trade agreement (FTA) with China. The parties initialled the arrangement (the first of its kind between China and a Latin American nation) in November of 2005, shortly before the start of the Asia Pacific Economic Cooperation summit. Ratified by Chile’s parliament on Aug. 9, the FTA will initially render 92 % of Chile’s exports to China tariff-free. After a decade, the figure will rise to 99 % while about 97 % of Chinese exports to Chile will be tariff-free after the same time period. Annual trade between the two countries increased from $3.5 billion in 2003 to $7.14 billion in 2005. In the first quarter of 2006, bilateral trade rose to over $3.6 billion. China is already Chile’s second largest trading partner, after the United States. Citation: Xinhua English Newswire (via COMTEX), Santiago, Tuesday, August 22, 2006, filed at 02:22:10.

Indian governments complain of alleged contaminants in Coke and Pepsi. In 2003, and in 2006, the Center for Science and the Environment (CSE) came out with a study showing excessive levels of pesticides in India’s most popular soft drink brands, Coca-Cola and Pepsi. The U.S. companies then pointed out that the official tolerance limit of pesticides in food items like tea, eggs, rice, apple and milk products ranged between 6,000 and 34,000 times higher than the prescribed limits set by the Ministry of Health. Even the CSE, they point out, said the Coke and Pepsi violations were only about five to 25 times the limit. Nevertheless, Parliament not only banned such bottled drinks from being served in its canteen, but also set up a Joint Parliamentary Committee to look into the charges. Moreover, the state governments in Gujarat, Punjab, Madhya Pradesh, Rajasthan, Kerala and Karnataka soon announced that they were asking educational institutions and hospitals to stop stocking these soft drinks. Most stringently, the State of Kerala imposed a total ban on their production and sale. Both Pepsi and Coca-Cola claim that the water and sugar they use have recently undergone exacting tests by established laboratories to ensure that any contaminants are well below the prescribed levels. Citation: India Today (copyright Living Media India Ltd.), Saturday, August 12, 2006, 2006 W.L.N.R. 13898709 (byline of Raj Chengappa).

Five Central Asian nations create nuclear-free zone. On September 8, five Central Asian nations signed a treaty that sets up a nuclear-free-zone. The signatories are the former Soviet republics of Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan and Turkmenistan. The pact dedicates the region’s rich uranium deposits to peaceful uses. On the other hand, it apparently leaves in force a 1992 agreement which permits Russia to transport and deploy nuclear weapons in Central Asia under certain circumstances. Seemingly because of this shortcoming, the United States, Britain and France decided not to attend the signing ceremony; only Russia and China sent observers. The major nuclear powers are often cool toward “nuclear-free zones” because they could restrict the movement of military resources and subject foreign military bases to invasive searches. The U.S. has an air base in Kyrgyzstan, and Tajikistan permits NATO fighter planes to use its territory to fly missions into Afghanistan. Others believe that these zones can help to build trust among formerly truculent neighbors. Citation: The New York Times, Semipalatinsk, Kazakhstan, Sunday, September 10, 2006, Section 1, page 118 (byline of Ilan Greenberg); 2006 WLNR 15688858.

Chinese court rules for Motorola in copyright case. On August 25, the Shanghai No 2 Intermediate People’s Court dismissed one of two complaints for copyright infringement filed by mobile phone maker, Shanghai DBTEL Industry, against Motorola China Electronics. It rejected all of DBTEL’s contentions, including a demand for a public apology and 99. 3 million yuan (US$12 million) in damages. Eight years ago, DBTEL, based in Taiwan, started to work with Motorola and Shanghai DBTEL under an original equipment manufacturer (OEM) contract, which terminated in April 2002. In January 2000, DBTEL undertook a project at Motorola’s request to update one of its products. Designated the T189, DBTEL was to handle the designs of the interior, the printed circuit-board and the mechanicals. The T189 came on the market in April 2001. A year later, DBTEL found out that another Motorola product, the C289, resembled the T189. It then filed two copyright infringement suits against Motorola in Shanghai, and suits in Taiwan and the U.S. In Shanghai, DBTEL sought damages of almost US$25 million. The Shanghai Court rejected all of DBTEL’s claims, including a demand for a public apology and damages. Citation: China Daily via Financial Times Ltd., Shanghai, Saturday, August 26, 2006, 2006 WLNR 14826840.

U.S. accords diplomatic recognition to Montenegro. Following an exchange of presidential letters between the two nations, the U.S. has established diplomatic relations with Montenegro. The U.S. Department of State has expressed pleasure in the fact that Montenegro and Serbia are working in good faith to peacefully carry out the changes brought about by the termination of the union between these states in accordance with the May 21, 2006 referendum in Montenegro. Citation: Press Statement #2006/754 by U.S. State Department Spokesman, Sean McCormack, Washington, D.C., Tuesday, August 15, 2006 at 2:24 pm.

U.S. court dismisses some Vioxx cases for trial abroad. Plaintiffs from 11 foreign nations have sued Merck & Co. in Louisiana federal court, claiming that the painkiller Vioxx had caused heart attacks and strokes and that Merck had omitted to warn them of those risks. The plaintiffs reside in France, Italy, England, Australia, South Africa, Canada, Germany, Israel, New Zealand, the Netherlands, and Poland. Defendant moved for dismissal based on forum non conveniens and the court grants the motion. The judge said the foreign plaintiffs may be correct in arguing that U.S. court jurisdiction is proper since the global distribution of Vioxx started out in Defendant’s New Jersey headquarters. But he said that Defendant had persuasively argued that these cases involved the prescription and use of Vioxx in foreign lands under each nation’s distinctive regulatory and legal regimes. Plaintiffs also suffered their alleged injuries and had been treated abroad. Moreover, the Plaintiffs’ medical records are located abroad and that it is often difficult, expensive and time consuming for American courts to gain access to the foreign documents and witnesses having to do with the medical claims. Moreover, trying the plaintiffs’ claims here could interfere with the judgments of foreign regulatory bodies by substituting an American jury’s view of the proper standards of safety and labeling on companies that sell drugs abroad. The court conditioned its dismissal on Defendant’s agreement to accept any final judgment rendered by the foreign courts. More than 6,200 federal Vioxx-related cases against Defendant are pending in the Eastern District of Louisiana. Citation: Drug Recall Litigation Reporter (Andrews Publication), Volume 10, issue 04, Tuesday, September 26, 2006 (byline of Ronald V. Baker, Andrews Staff Writer); see also In re Vioxx Products Liability Litigation, 2006 WL 2504353 (E.D. La. Aug. 30, 2006).